Note 3 - Revenue Recognition

6 Months Ended

Jun. 27, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. Revenue Recognition

The Company records revenue under Accounting Standards Codification ("ASC") Topic

606,

 

Revenue from Contracts with Customers

. Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.

We evaluate our revenue contracts with customers based on the

five

-step model under ASC

606:

(

1

) Identify the contract with the customer; (

2

) Identify the performance obligations in the contract; (

3

) Determine the transaction price; (

4

) Allocate the transaction price to separate performance obligations; and (

5

) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenue from several sources. The Company's Engineering Services and Information Technology Services segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others. All of the Company's segments perform staff augmentation services and derive revenue from permanent placement fees. The majority of the Company's revenue is invoiced on a time and materials basis.

The following table presents our revenue disaggregated by revenue source for the

thirteen

and

twenty-six

week periods ended

June 27, 2020

and

June 29, 2019:

	Thirteen Week Periods Ended					Twenty-Six Week Periods Ended
	June 27, 2020		June 29, 2019			June 27, 2020		June 29, 2019
Engineering:
Time and Material	$	10,784	$	13,528		$	23,611	$	27,371
Fixed Fee		3,189		5,098			4,503		10,267
Permanent Placement Services		65		(43	)		87		-
Total Engineering	$	14,038	$	18,583		$	28,201	$	37,638
Specialty Health Care:
Time and Material		10,601	$	23,140		$	32,654	$	47,046
Permanent Placement Services		83		230			227		494
Total Specialty Health Care	$	10,684	$	23,370		$	32,881	$	47,540
Information Technology:
Time and Material	$	7,779	$	8,641		$	16,336	$	16,950
Permanent Placement Services		151		111			267		172
Total Information Technology	$	7,930	$	8,752		$	16,603	$	17,122
	$	32,652	$	50,705		$	77,685	$	102,300

Time and Material

The Company's IT and Healthcare segments predominantly recognize revenue through time and material work while its Engineering segment recognizes revenue through both time and material and fixed fee work. The Company's time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenue associated with these time and materials contracts are recognized based on hours worked at contracted rates. 

Fixed fee

From time to time and predominantly in our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables.  The Company has master services agreements with many of its customers that broadly define terms and conditions. Actual services performed under fixed fee arrangements are typically delivered under purchase orders that more specifically define terms and conditions related to that fixed fee project. While these master services agreements can often span several years, the Company's fixed fee purchase orders are typically performed over

six

to

nine

month periods.  In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.  In certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract.  Revenue under these arrangements are recognized as the costs on these contracts are incurred.  On an infrequent basis, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying balance sheets.  In other instances, revenue is billed and recorded based upon contractual rates per hour.  Additionally, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget.  Performance Fees, if any, are recorded when earned.  Some contracts also limit revenue and billings to specified maximum amounts.  Provisions for contract losses, if any, are made in the period such losses are determined.  For contracts where there is a specific deliverable, the work is

not

complete and the revenue is

not

recognized, the costs incurred are deferred as a prepaid asset.  The associated costs are expensed when the related revenue is recognized.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services. These fees are typically based on a percentage of the compensation paid to the person placed with the Company's client.

Deferred revenue was

$0.3

million and

$0.4

million at

June 27, 2020

and

December 28, 2019,

respectively and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet at those dates.  Revenue is recognized when the service has been performed. Deferred revenue

may

be recognized over a period exceeding

one

year from the time it was recorded on the balance sheet. For the

twenty-six

week periods ended

June 27, 2020

and

June 29, 2019,

respectively, the Company recognized revenue of

$0.4

million and

$0.1

million that was included in deferred revenue at the beginning of each respective reporting period. For the

thirteen

week periods ended

June 27, 2020

and

June 29, 2019,

the Company did

not

recognize any revenue that was included in deferred revenue at the beginning of each respective reporting period.