Note 3 - Revenue Recognition

9 Months Ended

Sep. 30, 2023

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, Life Sciences and Information Technology 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 thirty-nine weeks ended September 30, 2023 and October 1, 2022:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Specialty Health Care:
Time and Material	$	24,485	$	27,495	$	98,595	$	122,563
Permanent Placement Services		410		502		958		1,075
Total Specialty Health Care	$	24,895	$	27,997	$	99,553	$	123,638
Engineering:
Time and Material	$	10,625	$	11,774	$	32,652	$	31,601
Fixed Fee		11,827		9,148		29,304		30,125
Total Engineering	$	22,452	$	20,922	$	61,956	$	61,726
Life Sciences and Information Technology:
Time and Material	$	8,898	$	8,249	$	25,757	$	26,506
Permanent Placement Services		121		167		368		531
Fixed Fee		1,683		817		4,575		2,058
Total Life Sciences and Information Technology	$	10,702	$	9,233	$	30,700	$	29,095
	$	58,049	$	58,152	$	192,209	$	214,459

Time and Material

The Company’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences and Information Technology segments recognize 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.  From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.  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 and 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. The Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate. In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client. An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements.

Deferred Revenue

There was $0.3 million of deferred revenue as of September 30, 2023. Deferred revenue was $1.1 million as of December 31, 2022. 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, although this is an infrequent occurrence. For the thirteen weeks ended September 30, 2023 and October 1, 2022, the Company recognized revenue of $0.1 million and $0.5 million, respectively, that was included in deferred revenue at the beginning of the reporting period. For the thirty-nine weeks ended September 30, 2023 and October 1, 2022, the Company recognized revenue of $1.1 million and $3.4 million, respectively, that was included in deferred revenue at the beginning of the reporting period.

Concentration

During the thirty-nine weeks ended September 30, 2023, the Company had one customer exceed 10% of consolidated revenue, representing 16.2% of consolidated revenue. During the thirty-nine weeks ended October 1, 2022, the Company had two customers exceed 10% of consolidated revenue, representing 16.1% and 12.3% of consolidated revenue. In both periods presented, the customers are included in the Company’s Specialty Health Care segment.