NOTE 5—REVENUE

The majority of our revenue is derived from contracts that can span from a few months to several years. We enter into contracts that can include various combinations of services, which, depending on contract type, are sometimes capable of being distinct. If services are determined to be distinct, they are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using our best estimate of the standalone selling price, or SSP, of each distinct product or service in the contract. The Company establishes SSP based on management’s estimated selling price or observable prices of products or services sold separately in comparable circumstances to similar clients.

Our contracts may include promises to transfer multiple services and products to a client. Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require judgment.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities). Our clients are billed based on the type of arrangement. A portion of our services is billed monthly based on hourly or daily rates. There are also client engagements in which we bill a fixed amount for our services. This may be one single amount covering the whole engagement or several amounts for various phases, functions or milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities. Contract assets and liabilities are generally reported in the current assets and current liabilities sections of our consolidated balance sheet, at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s). For multi-year sales contracts with annual invoicing, we perform a significant financing component calculation and recognize the associated interest income throughout the duration of the financing period. In addition, we reclassify the resulting contract asset balances as current and noncurrent receivables as receipt of the consideration is conditional only on the passage of time and there are no performance risk factors present. See the table below for a breakdown of our contract assets and contract liabilities.

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Non-current contract assets of $0.5 million as of June 30, 2026 and $1.3 million as of December 31, 2025 are included in “Other assets” on our consolidated balance sheet.

Revenue recognized for the three and six months ended June 30, 2026 that was included in the contract liability balance at January 1, 2026 was $2.6 million and $8.6 million, respectively, primarily representing revenue from the Company’s subscription, fixed-fee, and research contracts.

Remaining Performance Obligations

As of June 30, 2026, the Company had $121.4 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

Accounts Receivable and Contract Assets

During the fourth quarter of 2023, a client that had engaged the Company for two multi-year projects commencing in 2021 and 2022, respectively, failed to make payments in accordance with the contracted schedule. As a result, the Company ceased performing services under the agreement. After unsuccessful negotiations, the Company provided the client with notice that it would be terminating the respective projects. Accordingly, during the fourth quarter of 2023, the Company recorded through bad debt expense an allowance for doubtful accounts reserve of $4.9 million associated with this client. The specific reserve recorded as of December 31, 2024 represented management’s best estimate of the probable amount of non-collection on the outstanding receivables under these agreements.

During the three months ended June 30, 2025, after exhausting all collection efforts on the first of the two multi-year projects, the Company wrote off $3.6 million of outstanding receivables against the previously established reserve. As all amounts written off were previously fully reserved, there was no incremental impact to our consolidated statements of income and comprehensive income for that period.

In April 2024, the Company commenced legal action against the client to collect outstanding receivables on the other multi-year project. On September 3, 2025, the court issued a final, non-appealable judgment holding the client liable to the Company for approximately $5.6 million, plus legal interest at 5% per annum until full payment is made. The Company subsequently commenced aggressive collection efforts.

After exhausting all collection efforts on the judgment, including through asset discovery authorized by court orders, the Company fully wrote off the remaining outstanding accounts receivable balance of $5.6 million during the quarter ended June 30, 2026.  As such, the Company recorded an additional $4.3 million of bad debt expense in selling, general and administrative expenses. Concurrently, the Company wrote off $4.3 million of the remaining accrued subcontractor costs directly related to this project.  This reversal was recorded in direct costs and expenses for advisors, where it had originally been recorded. Under the subcontractor agreement related to this project, amounts owed to the subcontractor are not payable unless and until the related receivables are collected from the client. These write-offs offset, and thus have no net impact on the Company's results of operations for the period ended June 30, 2026.

Separately, the Company is currently engaged in litigation with a client over a disputed accounts receivable balance for services rendered. The Company is pursuing collection of the full outstanding balance of $4.7 million in litigation. As of June 30, 2026, we have not recorded material reserves against this balance. The Company will continue to reassess ultimate collectability and the need for reserves in future periods.