Segment Information

6 Months Ended

Jul. 01, 2022

Segment Reporting [Abstract]

Segment Information

13. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance.

The Company provides information technology and related services to its clients. These services include digital IT solutions and services, and staffing services. With digital IT solutions and services, the Company generally takes responsibility for the deliverables and some level of project and staff management, and these services may include high-end advisory or business-related consulting. When providing staffing services, including managed staffing, staff augmentation, and volume staffing, personnel are provided to clients based upon their requirements for specific skills, who then, in turn, take their direction from clients’ managers.

The Company’s strategy throughout its operations is to expand the amount of IT solutions and services it provides to its clients as compared with staffing services, and to focus on delivering digital solutions. IT solutions and services provide significant value to our clients, and drive higher bill rates and margins for the Company.

In prior years, and in 2021 prior to the fourth quarter, the Company reported its results in one segment. This included operating segments for each of North America and Europe. The services the Company provided, regardless of geography or industry, were similar in nature and produced similar results. Additionally, the CEO, who is the Company’s chief operating decision maker, made decisions on investments and allocated resources at the North America or Europe level. Accordingly, given the consistency in the services provided and the results, the Company aggregated those results into one reporting segment.

During the 2021 fourth quarter, the Company further refined its strategy to focus on providing digital services within its IT Solutions business in both North America and in Europe. As part of this process, the Company also determined that there are certain lower margin staffing accounts within its business that are no longer part of the Company’s long-term business plan. The focus includes investing in business development, solutions, delivery, and marketing for IT Solutions. Additionally, the Company is critically evaluating each significant staffing engagement as it comes up for renewal to determine if the Company would continue to provide those services to its client. These decisions are based on, among other factors, evaluating the work performed, the availability of the resources, the client, the long-term opportunities for the services provided at the client, and the revenue and profit associated with the engagement.

Accordingly, the Company now reports its operations in three segments within its business: North America IT Solutions and Services, Europe IT Solutions and Services, and Non-Strategic Technology Services.

The segments are composed of the following:

IT Solutions and Services in North America and Europe

IT Solutions and Services include business, technology, and operations solutions that aid our clients in digitally transforming their company, and ultimately meet the needs of their clients. The digital services the Company delivers includes the Internet of Things, Intelligent Automation, Data and Analytics, Cloud and Automated Testing.

Non-Strategic Technology Services

The Company’s Non-Strategic Technology Services address a range of information and technology resource needs, from filling specific talent gaps to managing high-volume staffing programs. The Company recruits, retains, and manages IT talent for its clients, which are primarily large technology service providers and other companies with multiple locations and a significant need for high-volume professional IT resources. This segment consists of the lowest margin services the Company provides to its clients. This segment consists primarily of staffing services in North America, and a minor amount (less than 5% of revenue in this segment) of such services in Europe.

The Company makes decisions related to resource allocation based upon the contribution income of each of its segments. Contribution profit reflects gross profit less any operating expenses directly related to each respective segment.  Those operating expenses primarily include sales, solutions, delivery, and recruiting expenses. General and administrative expenses are not allocated to the individual segments and primarily include corporate support costs such as finance and accounting, internal IT, human resources, benefits and marketing.

The operating results for the Company’s segments for the quarters ended July 1, 2022 and July 2, 2021 were as follows:

Quarter Ended July 1, 2022	North America IT		Europe IT		Non-Strategic
(amounts in thousands)	Solutions & Services		Solutions & Services		Technology Services		Total
Revenue	$	20,339	$	37,160	$	25,260	$	82,759
Direct costs		13,260		27,578		22,171		63,009
Gross profit		7,079		9,582		3,089		19,750
Operating expenses		3,532		4,855		701		9,088
Contribution profit	$	3,547	$	4,727	$	2,388		10,662
General and administrative expenses								7,489
Operating income							$	3,173

Quarter Ended July 2, 2021	North America IT		Europe IT		Non-Strategic
(amounts in thousands)	Solutions & Services		Solutions & Services		Technology Services		Total
Revenue	$	16,762	$	44,054	$	31,348	$	92,164
Direct costs		10,688		33,306		27,791		71,785
Gross profit		6,074		10,748		3,557		20,379
Operating expenses		3,166		5,136		1,318		9,620
Contribution profit	$	2,908	$	5,612	$	2,239		10,759
General and administrative expenses								7,958
Operating income							$	2,801

Two Quarters Ended July 1, 2022	North America IT		Europe IT		Non-Strategic
(amounts in thousands)	Solutions & Services		Solutions & Services		Technology Services		Total
Revenue	$	40,773	$	79,638	$	51,765	$	172,176
Direct costs		26,832		59,577		45,422		131,831
Gross profit		13,941		20,061		6,343		40,345
Operating expenses		6,663		10,083		1,512		18,258
Contribution profit	$	7,278	$	9,978	$	4,831		22,087
General and administrative expenses								15,715
Operating income							$	6,372

Two Quarters Ended July 2, 2021	North America IT		Europe IT		Non-Strategic
(amounts in thousands)	Solutions & Services		Solutions & Services		Technology Services		Total
Revenue	$	35,216	$	90,061	$	64,016	$	189,293
Direct costs		23,130		68,096		56,921		148,147
Gross profit		12,086		21,965		7,095		41,146
Operating expenses		6,323		10,619		2,633		19,575
Contribution profit	$	5,763	$	11,346	$	4,462		21,571
General and administrative expenses								16,672
Operating income							$	4,899

Depreciation allocated to Europe IT Solutions and Services totaled $0.1 million and $0.2 million in the quarters ended July 1, 2022 and July 2, 2021, respectively and $0.3 million and $0.4 million in the 2022 and 2021 year-to-date periods, respectively. Depreciation allocated to North America IT Solutions and Services totaled $0.1 million and less than $0.1 million in the quarters ended July 1, 2022 and July 2, 2021, respectively, and $0.2 million and $0.1 million in the 2022 and 2021 year-to-date periods, respectively. Depreciation allocated to Non-Strategic Technology Services totaled less than $0.1 million in each of the quarters ended July 1, 2022 and July 2, 2021, and less than $0.1 million in both the 2022 and 2021 year-to-date periods, respectively.

The Company has not provided any other expense or asset information for each of its segments as the Company’s CEO, who is the chief operating decision maker, does not use this information in any way to make resource decisions or to manage the segments. The Company does not prepare balance sheet or statement of cash flow information for its segments.

The Company’s goodwill at July 1, 2022 totaled $18.1 million, including $16.8 million in the Europe IT Solutions and Services segment and $1.3 million in the North America IT Solutions and Services segment. At December 31, 2021, the Company’s goodwill balance totaled $19.7 million, which included $18.3 million in the Company’s Europe IT Solutions and Services segment and $1.4 million in the North America IT Solutions and Services segment.