Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Significant Accounting Policy

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (ASC Topic 606). 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 $0.4 million and $0.2 million for the three months ended June 30, 2020 and 2019 respectively. It also resulted in a net decrease to revenue of $0.5 million and a net increase to revenue of $0.9 million for the six months ended June 30, 2020 and 2019 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, 2020, we had $327.0 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.

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, 2020 were not materially impacted by any other factors.

We recognized revenue of $3.2 million and $4.6 million for the three months ended June 30, 2020 and 2019, respectively, and $11.4 million and $15.7 million for the six months ended June 30, 2020 and 2019, 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.

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
	2020		2019		2020		2019		2020		2019
Revenue by type of service:
Managed learning services	$	38,326	$	44,789	$	—	$	—	$	38,326	$	44,789
Engineering & technical services	27,485		39,114		—		—		27,485		39,114
Sales enablement	—		—		23,368		42,113		23,368		42,113
Organizational development	—		—		16,965		23,397		16,965		23,397
	$	65,811	$	83,903	$	40,333	$	65,510	$	106,144	$	149,413
Revenue by geographic region:
Americas	$	51,781	$	64,468	$	27,218	$	46,305	$	78,999	$	110,773
Europe Middle East Africa	14,413		18,643		12,451		16,262		26,864		34,905
Asia Pacific	5,586		8,693		3,818		6,696		9,404		15,389
Eliminations	(5,969)		(7,901)		(3,154)		(3,753)		(9,123)		(11,654)
	$	65,811	$	83,903	$	40,333	$	65,510	$	106,144	$	149,413
Revenue by client market sector:
Automotive	$	1,180	$	3,668	$	22,195	$	42,092	$	23,375	$	45,760
Financial & Insurance	16,027		19,931		1,914		2,239		17,941		22,170
Manufacturing	5,858		9,610		2,247		4,580		8,105		14,190
Energy / Oil & Gas	6,078		8,850		878		1,456		6,956		10,306
U.S. Government	10,698		10,060		1,437		1,791		12,135		11,851
U.K. Government	—		—		4,182		4,369		4,182		4,369
Information & Communication	4,795		5,563		566		512		5,361		6,075
Aerospace	6,141		4,684		1,714		3,290		7,855		7,974
Electronics Semiconductor	2,084		3,994		213		439		2,297		4,433
Life Sciences	5,830		5,083		992		1,537		6,822		6,620
Other	7,120		12,460		3,995		3,205		11,115		15,665
	$	65,811	$	83,903	$	40,333	$	65,510	$	106,144	$	149,413

	Six Months Ended June 30,
	Workforce Excellence				Business Transformation Services				Consolidated
	2020		2019		2020		2019		2020		2019
Revenue by type of service:
Managed learning services	$	80,824	$	89,431	$	—	$	—	$	80,824	$	89,431
Engineering & technical services	59,365		75,950		—		—		59,365		75,950
Sales enablement	—		—		55,856		77,664		55,856		77,664
Organizational development	—		—		38,380		45,841		38,380		45,841
	$	140,189	$	165,381	$	94,236	$	123,505	$	234,425	$	288,886
Revenue by geographic region:
Americas	$	108,344	$	124,132	$	64,067	$	86,925	$	172,411	$	211,057
Europe Middle East Africa	32,085		37,921		28,612		31,279		60,697		69,200
Asia Pacific	11,031		14,835		8,557		11,830		19,588		26,665
Eliminations	(11,271)		(11,507)		(7,000)		(6,529)		(18,271)		(18,036)
	$	140,189	$	165,381	$	94,236	$	123,505	$	234,425	$	288,886
Revenue by client market sector:
Automotive	$	3,633	$	7,266	$	51,897	$	76,268	$	55,530	$	83,534
Financial & Insurance	35,183		39,137		3,385		4,154		38,568		43,291
Manufacturing	15,016		18,880		5,205		9,598		20,221		28,478
Energy / Oil & Gas	12,353		20,380		2,051		2,484		14,404		22,864
U.S. Government	21,904		19,855		3,019		3,520		24,923		23,375
U.K. Government	—		—		9,449		8,412		9,449		8,412
Information & Communication	8,910		10,869		1,195		971		10,105		11,840
Aerospace	14,437		12,194		2,731		3,393		17,168		15,587
Electronics Semiconductor	4,707		8,124		430		685		5,137		8,809
Life Sciences	10,938		9,977		2,206		3,470		13,144		13,447
Other	13,108		18,699		12,668		10,550		25,776		29,249
	$	140,189	$	165,381	$	94,236	$	123,505	$	234,425	$	288,886