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 (decrease) to revenue of $1.5 million, $(0.8) million, and $0.6 million for the years ended December 31, 2018, 2017 and 2016, 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 December 31, 2018, we had $318.0 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize over 90 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 December 31, 2018.

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 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 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 year ended December 31, 2018 were not materially impacted by any other factors, except for a significant increase in unbilled contract receivables as of December 31, 2018 compared to 2017 due to a delay in billings at the end of 2018 in connection with the implementation of a new ERP system in the fourth quarter of 2018.

Revenue recognized for the year ended December 31, 2018, that was included in the contract liability balance at the beginning of the year was $20.0 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 consolidated balance sheet and totaled $1.6 million as of December 31, 2018. Recognition of such contract costs totaled $5.4 million for the year ended December 31, 2018, and is included in cost of revenue on the 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 December 31, 2018, we did not have any capitalized sales commissions.

Revenue by Category

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



	Years Ended December 31,
	Workforce Excellence							Business Transformation Services							Consolidated
	2018			2017		2016		2018			2017		2016		2018			2017		2016
Revenue by type of service:
Managed learning services	$	206,388		207,007		204,007		$	—		—				$	206,388		207,007		204,007
Engineering & technical services	110,426			101,252		101,908		—			—				110,426			101,252		101,908
Sales enablement	—			—		—		103,740			101,196		101,939		103,740			101,196		101,939
Organizational development	—			—		—		94,606			99,753		82,705		94,606			99,753		82,705
	$	316,814		308,259		305,915		$	198,346		200,949		184,644		$	515,160		509,208		490,559

Revenue by geographic region:
Americas	$	213,938		198,653		198,393		$	165,807		175,027		164,727		$	379,745		373,680		363,120
Europe Middle East Africa	91,764			100,296		97,274		38,171			30,461		22,603		129,935			130,757		119,877
Asia Pacific	30,688			29,828		30,173		2,634			376		450		33,322			30,204		30,623
Eliminations	(19,576		)	(20,518	)	(19,925	)	(8,266		)	(4,915	)	(3,136	)	(27,842		)	(25,433	)	(23,061	)
	$	316,814		308,259		305,915		$	198,346		200,949		184,644		$	515,160		509,208		490,559

Revenue by client market sector:
Automotive	$	10,646		10,102		7,672		$	105,431		101,285		101,627		$	116,077		111,387		109,299
Financial & Insurance	87,813			86,718		87,102		12,303			16,339		15,792		100,116			103,057		102,894
Manufacturing	33,055			35,795		37,135		16,156			17,134		8,625		49,211			52,929		45,760
Energy / Oil & Gas	37,088			34,195		35,580		4,752			2,429		3,258		41,840			36,624		38,838
U.S. Government	29,584			25,254		25,011		8,782			9,475		10,191		38,366			34,729		35,202
U.K. Government	18,733			27,734		25,487		—			—		—		18,733			27,734		25,487
Information & Communication	14,083			18,123		19,410		9,510			10,490		7,942		23,593			28,613		27,352
Aerospace	25,989			22,142		21,262		3,683			6,549		1,189		29,672			28,691		22,451
Electronics Semiconductor	15,070			16,449		23,253		857			1,069		821		15,927			17,518		24,074
Life Sciences	15,009			8,420		7,113		8,750			9,377		10,433		23,759			17,797		17,546
Other	29,744			23,327		16,890		28,122			26,802		24,766		57,866			50,129		41,656
	$	316,814		308,259		305,915		$	198,346		200,949		184,644		$	515,160		509,208		490,559