Revenue

Significant Accounting Policy

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606), which we adopted on January 1, 2018, using the modified retrospective method. Revenue is measured based on the consideration specified in a contract with a customer. Most of our contracts with customers contain transaction prices with fixed consideration, however, some contracts may contain variable consideration in the form of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and other similar items. When a contract includes variable consideration, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. This can result in recognition of revenue over time as we perform services or at a point in time when the deliverable is transferred to the customer, depending on an evaluation of the criteria for over time recognition in ASC Topic 606. Further details regarding our revenue recognition for various revenue streams are discussed below.

Nature of goods and services

Over 90% of our revenue is derived from services provided to our customers for training, consulting, technical, engineering and other services. Less than 10% of our revenue is derived from various other offerings including custom magazine publications and assembly of glovebox portfolios for automotive manufacturers, licenses of software and other intellectual property, and software as a service (SaaS) arrangements.

Our primary contract vehicles are time-and-materials, fixed price (including fixed-fee per transaction) and cost-reimbursable contracts. Each contract has different terms based on the scope, deliverables and complexity of the engagement, requiring us to make judgments and estimates about recognizing revenue.

Under time-and-materials and cost-reimbursable contracts, the contractual billing schedules are based on the specified level of resources we are obligated to provide. Revenue under these contract types are recognized over time as services are performed as the client simultaneously receives and consumes the benefits provided by our performance throughout the engagement. The time and materials incurred for the period is the measure of performance and, therefore, revenue is recognized in that amount.

For fixed price contracts which typically involve a discrete project, such as development of training content and materials, design of training processes, software implementation, or engineering projects, the contractual billing schedules are not necessarily based on the specified level of resources we are obligated to provide. These discrete projects generally do not contain milestones or other measures of performance. The majority of our fixed price contracts meet the criteria in ASC Topic 606 for over time revenue recognition. For these contracts, revenue is recognized using a percentage-of-completion method based on the relationship of costs incurred to total estimated costs expected to be incurred over the term of the contract. We believe this methodology is a reasonable measure of proportional performance since performance primarily involves personnel costs and services provided to the customer throughout the course of the projects through regular communications of progress toward completion and other project deliverables. In addition, the customer is required to pay us for the proportionate amount of our fees in the event of contract termination. A small portion of our fixed price contracts do not meet the criteria in ASC Topic 606 for over time revenue recognition. For these projects, we defer revenue recognition until the performance obligation is satisfied, which is generally when the final deliverable is provided to the client. The direct costs related to these projects are capitalized and then recognized as cost of revenue when the performance obligation is satisfied.

For fixed price contracts, when total direct cost estimates exceed revenues, the estimated losses are recognized immediately. The use of the percentage-of-completion method requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed, and anticipated changes in estimated salaries and other costs. Estimates of total contract costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. When revisions in estimated contract revenues and costs are determined, such adjustments are recorded in the period in which they are first identified. Adjustments to our contracts were not material, individually or in the aggregate, to our unaudited condensed consolidated financial statements for the three or six-month periods ended June 30, 2018 and 2017.

For certain fixed-fee per transaction contracts, such as delivering training courses or conducting workshops, revenue is recognized during the period in which services are delivered in accordance with the pricing outlined in the contracts.

For certain fixed-fee per transaction and fixed price contracts in which the output of the arrangement is measurable, such as for the shipping of publications and print materials, revenue is recognized at the point in time at which control is transferred which is upon delivery.

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. As of June 30, 2018, we had $268.8 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize over 95 percent of our remaining performance obligations as revenue within the next twelve months. We did not apply any of the practical expedients permitted by ASC Topic 606 in determining the amount of our performance obligations as of June 30, 2018.

Revenue by Category

The following series of tables presents our revenue disaggregated by various categories (dollars in thousands).



	Three Months Ended June 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2018			2017			2018			2017			2018			2017
Revenue by type of service:
Managed learning services	$	50,418		$	49,213		$	—		$	—		$	50,418		$	49,213
Engineering & technical services	29,838			26,819			—			—			29,838			26,819
Sales enablement	—			—			27,799			28,371			27,799			28,371
Organizational development	—			—			25,636			26,758			25,636			26,758
	$	80,256		$	76,032		$	53,435		$	55,129		$	133,691		$	131,161

Revenue by geographic region:
Americas	$	51,509		$	47,718		$	47,174		$	50,911		$	98,683		$	98,629
Europe Middle East Africa	24,605			26,019			8,538			5,846			33,143			31,865
Asia Pacific	8,489			6,943			117			145			8,606			7,088
Eliminations	(4,347		)	(4,648		)	(2,394		)	(1,773		)	(6,741		)	(6,421		)
	$	80,256		$	76,032		$	53,435		$	55,129		$	133,691		$	131,161

Revenue by client market sector:
Automotive	$	2,818		$	2,411		$	28,476		$	28,440		$	31,294		$	30,851
Financial & Insurance	22,010			20,017			4,292			4,920			26,302			24,937
Manufacturing	8,662			8,978			3,978			4,917			12,640			13,895
Energy / Oil & Gas	10,701			8,657			953			555			11,654			9,212
U.S. Government	6,468			5,802			2,361			2,368			8,829			8,170
U.K. Government	4,947			8,202			—			—			4,947			8,202
Information & Communication	3,811			4,033			2,850			3,706			6,661			7,739
Aerospace	6,834			5,307			970			1,657			7,804			6,964
Electronics Semiconductor	3,822			3,961			234			95			4,056			4,056
Life Sciences	2,903			2,273			2,602			2,497			5,505			4,770
Other	7,280			6,391			6,719			5,974			13,999			12,365
	$	80,256		$	76,032		$	53,435		$	55,129		$	133,691		$	131,161



	Six Months Ended June 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2018			2017			2018			2017			2018			2017
Revenue by type of service:
Managed learning services	$	99,320		$	94,542		$	—		$	—		$	99,320		$	94,542
Engineering & technical services	55,367			53,033			—			—			55,367			53,033
Sales enablement	—			—			51,649			52,988			51,649			52,988
Organizational development	—			—			52,387			53,045			52,387			53,045
	$	154,687		$	147,575		$	104,036		$	106,033		$	258,723		$	253,608

Revenue by geographic region:
Americas	$	96,949		$	92,658		$	91,356		$	97,309		$	188,305		$	189,967
Europe Middle East Africa	49,562			49,610			17,035			11,599			66,597			61,209
Asia Pacific	16,200			14,073			189			257			16,389			14,330
Eliminations	(8,024		)	(8,766		)	(4,544		)	(3,132		)	(12,568		)	(11,898		)
	$	154,687		$	147,575		$	104,036		$	106,033		$	258,723		$	253,608

Revenue by client market sector:
Automotive	$	5,656		$	4,669		$	52,822		$	53,297		$	58,478		$	57,966
Financial & Insurance	43,113			38,603			8,362			10,379			51,475			48,982
Manufacturing	17,341			17,253			8,587			9,178			25,928			26,431
Energy / Oil & Gas	18,343			17,707			2,428			1,542			20,771			19,249
U.S. Government	12,922			11,955			4,747			4,911			17,669			16,866
U.K. Government	10,433			14,932			—			—			10,433			14,932
Information & Communication	7,110			8,013			5,225			6,428			12,335			14,441
Aerospace	14,432			10,346			1,731			3,170			16,163			13,516
Electronics Semiconductor	7,505			8,324			285			490			7,790			8,814
Life Sciences	4,752			3,997			5,310			4,992			10,062			8,989
Other	13,080			11,776			14,539			11,646			27,619			23,422
	$	154,687		$	147,575		$	104,036		$	106,033		$	258,723		$	253,608

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenue (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheet. Amounts charged to our clients become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. When billings occur after the work has been performed, such unbilled amounts will generally be billed and collected within 60 to 120 days but typically no longer than over the next twelve months. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within the next twelve months. These assets and liabilities are reported on the condensed consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the six-month period ended June 30, 2018 were not materially impacted by any other factors.

Revenue recognized for the six months ended June 30, 2018, that was included in the contract liability balance at the beginning of the year was $16.3 million, and primarily represented revenue from services performed during the current period for which we received advance payment from clients in a prior period.

Contract Costs

Costs to fulfill contracts which do not meet the over time revenue recognition criteria are capitalized and recognized to cost of revenue when the performance obligation is satisfied and revenue is recognized. Such costs are included in prepaid expenses and other current assets on the condensed consolidated balance sheet and totaled $1.2 million as of June 30, 2018. Recognition of such contract costs totaled $4.1 million for the six months ended June 30, 2018 and is included in cost of revenue on the condensed consolidated statements of operations.

Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Substantially all of our sales commission arrangements have an amortization period of one year or less. As of June 30, 2018, we did not have any capitalized sales commissions.