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 decrease to revenue of $0.2 million and a net increase to revenue of $0.5 million for the three months ended June 30, 2019 and 2018, respectively, and a net increase to revenue of $0.9 million and $1.0 million for the six months ended June 30, 2019 and 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 June 30, 2019, we had $330.5 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, 2019.

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
	2019			2018			2019			2018			2019			2018
Revenue by type of service:
Managed learning services	$	52,253		$	53,080		$	—		$	—		$	52,253		$	53,080
Engineering & technical services	28,806			29,002			—			—			28,806			29,002
Sales enablement	—			—			44,764			27,799			44,764			27,799
Organizational development	—			—			23,590			23,810			23,590			23,810
	$	81,059		$	82,082		$	68,354		$	51,609		$	149,413		$	133,691

Revenue by geographic region:
Americas	$	57,799		$	54,171		$	52,974		$	44,513		$	110,773		$	98,684
Europe Middle East Africa	22,468			24,466			12,437			9,258			34,905			33,724
Asia Pacific	8,693			7,908			6,696			117			15,389			8,025
Eliminations	(7,901		)	(4,463		)	(3,753		)	(2,279		)	(11,654		)	(6,742		)
	$	81,059		$	82,082		$	68,354		$	51,609		$	149,413		$	133,691

Revenue by client market sector:
Automotive	$	2,129		$	2,962		$	43,631		$	28,357		$	45,760		$	31,319
Financial & Insurance	19,770			23,042			2,400			3,251			22,170			26,293
Manufacturing	8,416			8,887			5,774			3,760			14,190			12,647
Energy / Oil & Gas	8,687			10,862			1,619			800			10,306			11,662
U.S. Government	9,870			6,513			1,981			2,318			11,851			8,831
U.K. Government	4,357			4,947			—			—			4,357			4,947
Information & Communication	4,002			4,091			2,073			2,570			6,075			6,661
Aerospace	7,102			7,110			872			569			7,974			7,679
Electronics Semiconductor	4,093			3,826			340			229			4,433			4,055
Life Sciences	4,996			2,977			1,624			2,527			6,620			5,504
Other	7,637			6,865			8,040			7,228			15,677			14,093
	$	81,059		$	82,082		$	68,354		$	51,609		$	149,413		$	133,691



	Six Months Ended June 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2019			2018			2019			2018			2019			2018
Revenue by type of service:
Managed learning services	$	104,071		$	104,857		$	—		$	—		$	104,071		$	104,857
Engineering & technical services	56,438			53,671			—			—			56,438			53,671
Sales enablement	—			—			81,928			51,649			81,928			51,649
Organizational development	—			—			46,449			48,546			46,449			48,546
	$	160,509		$	158,528		$	128,377		$	100,195		$	288,886		$	258,723

Revenue by geographic region:
Americas	$	112,484		$	102,871		$	98,956		$	85,434		$	211,440		$	188,305
Europe Middle East Africa	44,697			49,100			24,120			18,502			68,817			67,602
Asia Pacific	14,835			15,195			11,830			189			26,665			15,384
Eliminations	(11,507		)	(8,638		)	(6,529		)	(3,930		)	(18,036		)	(12,568		)
	$	160,509		$	158,528		$	128,377		$	100,195		$	288,886		$	258,723

Revenue by client market sector:
Automotive	$	3,822		$	5,876		$	79,712		$	52,603		$	83,534		$	58,479
Financial & Insurance	38,397			45,158			4,894			6,318			43,291			51,476
Manufacturing	16,394			18,063			12,084			7,872			28,478			25,935
Energy / Oil & Gas	20,062			18,656			2,802			2,130			22,864			20,786
U.S. Government	19,486			13,031			3,889			4,640			23,375			17,671
U.K. Government	8,412			10,433			—			—			8,412			10,433
Information & Communication	7,463			7,712			4,377			4,623			11,840			12,335
Aerospace	13,554			14,914			2,033			1,248			15,587			16,162
Electronics Semiconductor	8,215			7,509			594			280			8,809			7,789
Life Sciences	9,708			4,851			3,739			5,211			13,447			10,062
Other	14,996			12,325			14,253			15,270			29,249			27,595
	$	160,509		$	158,528		$	128,377		$	100,195		$	288,886		$	258,723

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, 2019 were not materially impacted by any other factors.

We recognized revenue of $4.6 million and $7.3 million for the three months ended June 30, 2019 and 2018, respectively, and $15.7 million and $16.3 million for the six months ended June 30, 2019 and 2018, respectively, that was included in the contract liability balance at the beginning of the year and primarily represented revenue from services performed during the current period for which we received advance payment from clients in a prior period.