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 fixed price contracts in the aggregate resulted in a net increase to revenue of $0.3 million and $1.3 million for the three and nine months ended September 30, 2018 respectively.

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 September 30, 2018, we had $264.4 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 September 30, 2018.

Revenue by Category

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



	Three Months Ended September 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2018			2017			2018			2017			2018			2017
Revenue by type of service:
Managed learning services	$	51,387		$	52,524		$	—		$	—		$	51,387		$	52,524
Engineering & technical services	29,129			24,498			—			—			29,129			24,498
Sales enablement	—			—			19,944			22,768			19,944			22,768
Organizational development	—			—			23,106			24,307			23,106			24,307
	$	80,516		$	77,022		$	43,050		$	47,075		$	123,566		$	124,097

Revenue by geographic region:
Americas	$	56,064		$	48,382		$	35,380		$	40,641		$	91,444		$	89,023
Europe Middle East Africa	21,153			25,540			8,906			7,183			30,059			32,723
Asia Pacific	8,205			8,255			109			76			8,314			8,331
Eliminations	(4,906		)	(5,155		)	(1,345		)	(825		)	(6,251		)	(5,980		)
	$	80,516		$	77,022		$	43,050		$	47,075		$	123,566		$	124,097

Revenue by client market sector:
Automotive	$	2,738		$	2,399		$	20,531		$	22,777		$	23,269		$	25,176
Financial & Insurance	22,364			23,583			2,692			3,929			25,056			27,512
Manufacturing	7,558			8,874			3,734			3,428			11,292			12,302
Energy / Oil & Gas	9,113			8,457			1,188			465			10,301			8,922
U.S. Government	7,673			6,220			2,102			2,352			9,775			8,572
U.K. Government	4,456			6,858			—			—			4,456			6,858
Information & Communication	3,315			3,785			2,330			2,509			5,645			6,294
Aerospace	6,705			5,582			1,160			1,678			7,865			7,260
Electronics Semiconductor	3,719			4,016			241			150			3,960			4,166
Life Sciences	4,892			1,822			1,932			2,273			6,824			4,095
Other	7,983			5,426			7,140			7,514			15,123			12,940
	$	80,516		$	77,022		$	43,050		$	47,075		$	123,566		$	124,097



	Nine Months Ended September 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2018			2017			2018			2017			2018			2017
Revenue by type of service:
Managed learning services	$	156,244		$	152,713		$	—		$	—		$	156,244		$	152,713
Engineering & technical services	82,800			75,523			—			—			82,800			75,523
Sales enablement	—			—			73,566			75,756			73,566			75,756
Organizational development	—			—			69,679			73,713			69,679			73,713
	$	239,044		$	228,236		$	143,245		$	149,469		$	382,289		$	377,705

Revenue by geographic region:
Americas	$	158,935		$	147,423		$	120,814		$	131,567		$	279,749		$	278,990
Europe Middle East Africa	69,248			73,078			27,408			20,854			96,656			93,932
Asia Pacific	24,405			22,328			298			332			24,703			22,660
Eliminations	(13,544		)	(14,593		)	(5,275		)	(3,284		)	(18,819		)	(17,877		)
	$	239,044		$	228,236		$	143,245		$	149,469		$	382,289		$	377,705

Revenue by client market sector:
Automotive	$	8,614		$	7,175		$	73,134		$	75,967		$	81,748		$	83,142
Financial & Insurance	67,522			64,066			9,010			12,438			76,532			76,504
Manufacturing	25,621			26,762			11,606			11,970			37,227			38,732
Energy / Oil & Gas	27,769			26,275			3,318			1,896			31,087			28,171
U.S. Government	20,704			18,528			6,742			6,910			27,446			25,438
U.K. Government	14,889			21,789			—			—			14,889			21,789
Information & Communication	11,027			12,785			6,953			7,948			17,980			20,733
Aerospace	21,619			16,003			2,408			4,774			24,027			20,777
Electronics Semiconductor	11,228			12,371			521			610			11,749			12,981
Life Sciences	9,743			5,912			7,143			7,171			16,886			13,083
Other	20,308			16,570			22,410			19,785			42,718			36,355
	$	239,044		$	228,236		$	143,245		$	149,469		$	382,289		$	377,705

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 nine-month period ended September 30, 2018 were not materially impacted by any other factors.

Revenue recognized for the nine months ended September 30, 2018, that was included in the contract liability balance at the beginning of the year was $18.6 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 $1.6 million as of September 30, 2018. Recognition of such contract costs totaled $0.7 million and $4.7 million for the three and nine months ended September 30, 2018, respectively, 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 September 30, 2018, we did not have any capitalized sales commissions.