Segment and Geographic Information

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segment and Geographic Information

Segment and Geographic Information

The Company has two reportable segments: the Degree Program Segment and the Alternative Credential Segment. The Company’s reportable segments are determined based on (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions. The Company’s Degree Program Segment includes the technology and services provided to nonprofit colleges and universities to enable the online delivery of degree programs. The Company’s Alternative Credential Segment includes the premium online short courses and technical skills-based boot camps provided through relationships with nonprofit colleges and universities.

Significant Customers

For the three months ended March 31, 2021, no university clients accounted for 10% or more of the Company’s consolidated revenue. For the three months ended March 31, 2020, one university client in the Degree Program Segment accounted for 10% or more of the Company’s consolidated revenue, contributing $17.5 million, or approximately 10% of the Company’s consolidated revenue.

As of March 31, 2021, one university client in the Degree Program Segment accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $19.3 million, or approximately 26% of the Company’s consolidated accounts receivable, net balance. As of December 31, 2020, two university clients in the Degree Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, with $5.8 million and $5.2 million, or approximately 12% and 11% of the Company’s consolidated accounts receivable, net balance, respectively.

Segment Performance

The following table presents financial information regarding each of the Company’s reportable segment’s results of operations for each of the periods indicated.

	Three Months Ended March 31,
	2021			2020
	(dollars in thousands)
Revenue by segment*
Degree Program Segment	$	145,875		$	118,457
Alternative Credential Segment	86,598			57,022
Total revenue	$	232,473		$	175,479
Segment profitability**
Degree Program Segment	$	25,888		$	6,460
Alternative Credential Segment	(12,140)			(10,764)
Total segment profitability	$	13,748		$	(4,304)
Segment profitability margin***
Degree Program Segment	17.7		%	5.5		%
Alternative Credential Segment	(14.0)			(18.9)
Total segment profitability margin	5.9		%	(2.5)		%

*	The Company has excluded immaterial amounts of intersegment revenues from the three-month periods ended March 31, 2021 and 2020.
**	The Company defines segment profitability as net income or net loss, as applicable, before net interest income (expense), foreign currency gains or losses, taxes, depreciation and amortization expense, deferred revenue fair value adjustments, transaction costs, integration costs, restructuring-related costs, stockholder activism costs, certain litigation-related costs, consisting of fees for certain non-ordinary course litigation and other proceedings, impairment charges, losses on debt extinguishment, and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period.
***	The Company defines segment profitability margin as segment profitability as a percentage of the respective segment’s revenue.

The following table presents a reconciliation of the Company’s total segment profitability to net loss for each of the periods indicated.

	Three Months Ended March 31,
	2021		2020
	(in thousands)
Net loss	$	(45,564)	$	(60,106)
Adjustments:
Stock-based compensation expense	24,947		20,870
Foreign currency loss	915		2,271
Net interest expense	7,519		4,980
Income tax benefit	(2)		(1,055)
Depreciation and amortization expense	24,987		23,485
Other*	946		5,251
Total adjustments	59,312		55,802
Total segment profitability	$	13,748	$	(4,304)

* Includes (i) transaction and integration expense of $0.1 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively, (ii) restructuring-related expense of $0.5 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively, and (iii) stockholder activism and litigation-related expense of $0.4 million and $4.2 million for the three months ended March 31, 2021 and 2020, respectively.

The following table presents the Company’s total assets by segment as of each of the dates indicated.

	March 31, 2021		December 31, 2020
	(in thousands)
Total assets
Degree Program Segment	$	818,523	$	830,706
Alternative Credential Segment	736,990		713,558
Total assets	$	1,555,513	$	1,544,264

Trade Accounts Receivable and Contract Liabilities

The following table presents the Company’s trade accounts receivable and contract liabilities in each segment as of each of the dates indicated.

	March 31, 2021		December 31, 2020
	(in thousands)
Trade accounts receivable
Degree Program Segment accounts receivable	$	39,572	$	16,424
Degree Program Segment unbilled revenue	10,367		6,072
Alternative Credential Segment accounts receivable	31,906		29,717
Provision for credit losses	(7,101)		(5,936)
Total trade accounts receivable	$	74,744	$	46,277
Contract liabilities
Degree Program Segment deferred revenue	$	25,938	$	1,714
Alternative Credential Segment deferred revenue	82,426		73,779
Total contract liabilities	$	108,364	$	75,493

For the Degree Program Segment, revenue recognized during the three months ended March 31, 2021 and 2020 that was included in the deferred revenue balance at the beginning of each year was $1.7 million and $2.2 million, respectively.

For the Alternative Credential Segment, revenue recognized during the three months ended March 31, 2021 and 2020 that was included in the deferred revenue balance at the beginning of each year was $55.9 million and $34.4 million, respectively.

The amount of financing receivables recorded within other assets on our condensed consolidated balance sheets were $34.7 million and $25.4 million as of March 31, 2021 and December 31, 2020, respectively.

The following table presents the change in provision for credit losses on the Company’s condensed consolidated balance sheets for the period indicated:

	Provision for Credit Losses
	(in thousands)
Balance as of December 31, 2020	$	5,936
Current period provision	2,022
Amounts written off	—
Amounts recovered	(899)
Foreign currency translation adjustments	42
Balance as of March 31, 2021	$	7,101

Contract Acquisition Costs

The Degree Program Segment had $0.5 million and $0.5 million of net capitalized contract acquisition costs recorded primarily within other assets, non-current on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively. For each of the three-month periods ended March 31, 2021 and 2020, the Company capitalized an immaterial amount contract acquisition costs and recorded an immaterial amount of associated amortization expense in the Degree Program Segment.

Geographical Information

The Company’s non-U.S. revenue is based on the currency of the country in which the university client primarily operates. The Company’s non-U.S. revenue was $23.1 million and $11.3 million for the three months ended March 31, 2021 and 2020, respectively. Substantially all of the Company’s non-U.S. revenue for each of the aforementioned periods was sourced from the Alternative Credential Segment’s operations outside of the U.S. The Company’s long-lived tangible assets in non-U.S. countries as of March 31, 2021 and December 31, 2020 totaled approximately $1.5 million and $1.6 million, respectively.