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 $1.8 million, $1.5 million, and $(0.8) million for the years ended December 31, 2019, 2018 and 2017, 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, 2019 we had $349.8 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 85 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, 2019.

Contract Balances

Revenue recognized for the years ended December 31, 2019 and 2018, that was included in the contract liability balance at the beginning of the year was $18.9 million and $20.0 million, respectively, 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 $0.6 million and $1.6 million as of December 31, 2019 and 2018, respectively.

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, 2019 and 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
	2019			2018		2017		2019			2018		2017		2019			2018		2017
Revenue by type of service:
Managed learning services	$	218,730		206,388		207,007		$	—		—		—		$	218,730		206,388		207,007
Engineering & technical services	111,065			110,426		101,252		—			—		—		111,065			110,426		101,252
Sales enablement	—			—		—		161,295			103,740		101,196		161,295			103,740		101,196
Organizational development	—			—		—		92,200			94,606		99,753		92,200			94,606		99,753
	$	329,795		316,814		308,259		$	253,495		198,346		200,949		$	583,290		515,160		509,208

Revenue by geographic region:
Americas	$	230,236		213,938		198,653		$	193,129		165,807		175,027		$	423,365		379,745		373,680
Europe Middle East Africa	91,947			91,764		100,296		50,160			38,171		30,461		142,107			129,935		130,757
Asia Pacific	34,300			30,688		29,828		25,354			2,634		376		59,654			33,322		30,204
Eliminations	(26,688		)	(19,576	)	(20,518	)	(15,148		)	(8,266	)	(4,915	)	(41,836		)	(27,842	)	(25,433	)
	$	329,795		316,814		308,259		$	253,495		198,346		200,949		$	583,290		515,160		509,208

Revenue by client market sector:
Automotive	$	10,024		10,646		10,102		$	155,105		105,431		101,285		$	165,129		116,077		111,387
Financial & Insurance	82,434			87,813		86,718		10,715			12,303		16,339		93,149			100,116		103,057
Manufacturing	34,154			33,055		35,795		21,894			16,156		17,134		56,048			49,211		52,929
Energy / Oil & Gas	35,604			37,088		34,195		5,693			4,752		2,429		41,297			41,840		36,624
U.S. Government	39,432			29,584		25,254		7,964			8,782		9,475		47,396			38,366		34,729
U.K. Government	18,153			18,733		27,734		—			—		—		18,153			18,733		27,734
Information & Communication	14,294			14,083		18,123		7,913			9,510		10,490		22,207			23,593		28,613
Aerospace	27,511			25,989		22,142		7,754			3,683		6,549		35,265			29,672		28,691
Electronics Semiconductor	13,906			15,070		16,449		1,495			857		1,069		15,401			15,927		17,518
Life Sciences	19,560			15,009		8,420		6,370			8,750		9,377		25,930			23,759		17,797
Other	34,723			29,744		23,327		28,592			28,122		26,802		63,315			57,866		50,129
	$	329,795		316,814		308,259		$	253,495		198,346		200,949		$	583,290		515,160		509,208