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 increases to revenue of $0.4 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively, and net increases to revenue of $1.3 million for both of the nine months ended September 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 September 30, 2019, we had $338.1 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 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 September 30, 2019.

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
	2019			2018			2019			2018			2019			2018
Revenue by type of service:
Managed learning services	$	55,901		$	51,387		$	—		$	—		$	55,901		$	51,387
Engineering & technical services	26,589			29,129			—			—			26,589			29,129
Sales enablement	—			—			33,826			19,944			33,826			19,944
Organizational development	—			—			22,689			23,106			22,689			23,106
	$	82,490		$	80,516		$	56,515		$	43,050		$	139,005		$	123,566

Revenue by geographic region:
Americas	$	58,469		$	56,064		$	43,625		$	35,380		$	102,094		$	91,444
Europe Middle East Africa	21,721			21,153			12,560			8,906			34,281			30,059
Asia Pacific	9,558			8,205			4,753			109			14,311			8,314
Eliminations	(7,258		)	(4,906		)	(4,423		)	(1,345		)	(11,681		)	(6,251		)
	$	82,490		$	80,516		$	56,515		$	43,050		$	139,005		$	123,566

Revenue by client market sector:
Automotive	$	2,354		$	2,738		$	32,143		$	20,531		$	34,497		$	23,269
Financial & Insurance	24,450			22,364			2,890			2,692			27,340			25,056
Manufacturing	9,001			7,558			4,945			3,734			13,946			11,292
Energy / Oil & Gas	7,910			9,113			1,488			1,188			9,398			10,301
U.S. Government	9,282			7,673			2,002			2,102			11,284			9,775
U.K. Government	4,654			4,456			—			—			4,654			4,456
Information & Communication	2,909			3,315			1,961			2,330			4,870			5,645
Aerospace	8,644			6,705			1,317			1,160			9,961			7,865
Electronics Semiconductor	3,229			3,719			389			241			3,618			3,960
Life Sciences	5,091			4,892			1,321			1,932			6,412			6,824
Other	4,966			7,983			8,059			7,140			13,025			15,123
	$	82,490		$	80,516		$	56,515		$	43,050		$	139,005		$	123,566



	Nine Months Ended September 30,
	Workforce Excellence						Business Transformation Services						Consolidated
	2019			2018			2019			2018			2019			2018
Revenue by type of service:
Managed learning services	$	159,972		$	156,244		$	—		$	—		$	159,972		$	156,244
Engineering & technical services	83,027			82,800			—			—			83,027			82,800
Sales enablement	—			—			115,754			71,593			115,754			71,593
Organizational development	—			—			69,138			71,652			69,138			71,652
	$	242,999		$	239,044		$	184,892		$	143,245		$	427,891		$	382,289

Revenue by geographic region:
Americas	$	170,953		$	158,935		$	142,581		$	120,814		$	313,534		$	279,749
Europe Middle East Africa	66,418			70,253			36,680			27,408			103,098			97,661
Asia Pacific	24,393			23,400			16,583			298			40,976			23,698
Eliminations	(18,765		)	(13,544		)	(10,952		)	(5,275		)	(29,717		)	(18,819		)
	$	242,999		$	239,044		$	184,892		$	143,245		$	427,891		$	382,289

Revenue by client market sector:
Automotive	$	6,176		$	8,614		$	111,855		$	73,134		$	118,031		$	81,748
Financial & Insurance	62,847			67,522			7,784			9,010			70,631			76,532
Manufacturing	25,395			25,621			17,029			11,606			42,424			37,227
Energy / Oil & Gas	27,972			27,769			4,290			3,318			32,262			31,087
U.S. Government	28,768			20,704			5,891			6,742			34,659			27,446
U.K. Government	13,066			14,889			—			—			13,066			14,889
Information & Communication	10,372			11,027			6,338			6,953			16,710			17,980
Aerospace	22,198			21,619			3,350			2,408			25,548			24,027
Electronics Semiconductor	11,444			11,228			983			521			12,427			11,749
Life Sciences	14,799			9,743			5,060			7,143			19,859			16,886
Other	19,962			20,308			22,312			22,410			42,274			42,718
	$	242,999		$	239,044		$	184,892		$	143,245		$	427,891		$	382,289

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, 2019 were not materially impacted by any other factors.

We recognized revenue of $1.5 million and $2.3 million for the three months ended September 30, 2019 and 2018, respectively, and $17.2 million and $18.6 million for the nine months ended September 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.