16.SEGMENT INFORMATION

Reportable Segments

Our sales are primarily comprised of training and consulting services. Consistent with changes during the first quarter of fiscal 2018 in our organization designed to promote the sale of subscription-based offerings, our internal reporting structure was revised and is now comprised of three operating segments and a corporate services group. The former Strategic Markets operating segment was absorbed by the Direct Office operating segment since its target customers and sales methodologies were essentially identical. The remaining operating segments were determined to be reportable segments under the applicable accounting guidance. The following is a brief description of our reportable segments:

Direct Offices – This segment includes our sales personnel that serve the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; our governmental sales channel; and our public program operations.

Education Practice – This group includes our domestic and international Education practice operations, which are focused on sales to educational institutions.

International Licensees – This segment is primarily comprised of our international licensees’ royalty revenues.

Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, and certain corporate administrative expenses.

We have determined that the Company’s chief operating decision maker continues to be the CEO, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts calculated by other companies. For reporting purposes, our consolidated Adjusted EBITDA can be calculated as our income or loss from operations excluding stock-based compensation, contract termination costs, restructuring charges, depreciation expense, amortization expense, and certain other items such as adjustments for changes in the fair value of contingent consideration liabilities from business acquisitions.

Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the divisions for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes.

All prior period segment information has been revised to conform to our current organizational structure, assigned responsibilities, and primary internal reports. We account for our segment information on the same basis as the accompanying consolidated financial statements.



		Sales to
Fiscal Year Ended		External				Adjusted
August 31, 2018		Customers		Gross Profit		EBITDA

Direct offices	$	145,890	$	108,140	$	15,773
Education practice		45,272		28,654		3,606
International licensees		13,226		10,031		5,087
Total		204,388		146,825		24,466
Corporate and eliminations		5,370		1,464		(12,588)
Consolidated	$	209,758	$	148,289	$	11,878

Fiscal Year Ended
August 31, 2017

Direct offices	$	122,309	$	81,700	$	4,242
Education practice		44,122		27,916		7,195
International licensees		13,571		10,483		6,415
Total		180,002		120,099		17,852
Corporate and eliminations		5,254		2,568		(10,153)
Consolidated	$	185,256	$	122,667	$	7,699

Fiscal Year Ended
August 31, 2016

Direct offices	$	135,954	$	95,211	$	20,610
Education practice		40,844		24,513		5,188
International licensees		17,113		13,152		9,268
Total		193,911		132,876		35,066
Corporate and eliminations		6,144		2,278		(8,172)
Consolidated	$	200,055	$	135,154	$	26,894

A reconciliation of Adjusted EBITDA to consolidated net income (loss) is provided below (in thousands):



YEAR ENDED
AUGUST 31,		2018		2017		2016
Segment Adjusted EBITDA	$	24,466	$	17,852	$	35,066
Corporate expenses		(12,588)		(10,153)		(8,172)
Consolidated Adjusted EBITDA		11,878		7,699		26,894
Stock-based compensation		(2,846)		(3,658)		(3,121)
Reduction (increase) in
contingent consideration liabilities		(1,014)		1,936		(1,538)
Costs to exit Japan publishing business		-		(2,107)		-
Contract termination costs		-		(1,500)		-
Restructuring costs		-		(1,482)		(776)
ERP system implementation costs		(855)		(1,404)		(448)
China office start-up costs		-		(505)		(222)
Business acquisition costs		-		(442)		-
Depreciation		(5,161)		(3,879)		(3,677)
Amortization		(5,368)		(3,538)		(3,263)
Income (loss) from operations		(3,366)		(8,880)		13,849
Interest income		104		223		115
Interest expense		(2,676)		(2,408)		(2,263)
Accretion of discount on related
party receivable		418		156		210
Income (loss) before income taxes		(5,520)		(10,909)		11,911
Benefit (provision) for income taxes		(367)		3,737		(4,895)
Net income (loss)	$	(5,887)	$	(7,172)	$	7,016

Geographic Information

Our revenues are derived primarily from the United States. However, we also operate wholly owned offices or contract with licensees to provide our services in various countries throughout the world. Our consolidated revenues were derived from the following countries/regions (in thousands):



YEAR ENDED
AUGUST 31,		2018		2017		2016
United States	$	151,022	$	136,206	$	155,153
Japan		15,670		14,482		14,997
China		14,176		11,552		3,884
United Kingdom		7,411		4,754		7,716
Canada		4,722		4,372		4,357
Australia		4,148		2,704		3,404
Western Europe		2,016		1,679		1,503
Brazil		1,285		1,423		319
Thailand		1,219		1,147		1,226
Mexico/Central America		872		751		917
Singapore		865		722		1,143
Middle East		840		723		584
Central/Eastern Europe		757		638		644
Denmark/Scandinavia		752		775		863
Indonesia		715		614		579
India		647		701		677
The Philippines		353		324		332
Malaysia		338		364		384
Others		1,950		1,325		1,373
	$	209,758	$	185,256	$	200,055

At August 31, 2018, we had wholly owned direct offices in Australia, China, Japan, and the United Kingdom. Our long-lived assets, excluding intangible assets, goodwill, and the long-term portion of the related party receivable were held in the following locations for the periods indicated (in thousands):



AUGUST 31,		2018		2017
United States/Canada	$	34,237	$	33,146
Japan		1,450		2,350
China		581		301
Singapore		315		152
United Kingdom		276		240
Australia		250		466
	$	37,109	$	36,655

Inter-segment sales were immaterial and were eliminated in consolidation.