NOTE 8 – SEGMENT INFORMATION

Segment Information

Our sales are primarily comprised of training and consulting services. Our internal reporting and operating structure is currently organized around two divisions. The Enterprise Division, which consists of our Direct Office and International Licensee segments and the Education Division, which is comprised of our Education practice. Based on the applicable guidance, our operations are now comprised of three reportable segments and a corporate services group. The following is a brief description of our reportable segments:

Direct Offices – Our Direct Office segment has a depth of expertise in helping organizations solve problems that require changes in human behavior, including leadership, productivity, execution, trust, and sales performance. We have a variety of principle-based offerings that help build winning and profitable cultures. 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 – Centered around the principles found in The Leader in Me, the Education practice is dedicated to helping educational institutions build a culture that will produce great results. We believe these results are manifested by increases in student performance, improved school culture, decreased disciplinary issues, and increased teacher engagement and parental involvement. This segment includes our domestic and international Education practice operations, which are focused on sales to educational institutions such as elementary schools, high schools, and colleges and universities.

International Licensees – Our independently owned international licensees provide our offerings and services in countries where we do not have a directly-owned office. These licensee partners allow us to expand the reach of our services to large multinational organizations as well as smaller organizations in their countries. This segment’s results are primarily comprised of royalty revenues received from these licensees.

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

We determined that the Company’s chief operating decision maker is the Chief Executive Officer (CEO), and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts disclosed by other companies. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as our income or loss from operations excluding stock-based compensation, depreciation expense, amortization expense, and certain other charges such as adjustments for changes in the fair value of contingent 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 reportable segments 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.

We account for the following segment information on the same basis as the accompanying condensed consolidated financial statements (in thousands).



		Sales to
Quarter Ended		External				Adjusted
November 30, 2018		Customers		Gross Profit		EBITDA

Enterprise Division:
Direct offices	$	38,471	$	27,082	$	4,111
International licensees		3,677		2,854		1,683
		42,148		29,936		5,794
Education practice		10,347		6,389		(18)
Corporate and eliminations		1,334		458		(2,607)
Consolidated	$	53,829	$	36,783	$	3,169

Quarter Ended
November 30, 2017

Enterprise Division:
Direct offices	$	34,197	$	24,561	$	3,078
International licensees		3,320		2,503		1,412
		37,517		27,064		4,490
Education practice		9,176		5,430		(670)
Corporate and eliminations		1,239		374		(3,218)
Consolidated	$	47,932	$	32,868	$	602

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



	Quarter Ended
		November 30,		November 30,
		2018		2017
Segment Adjusted EBITDA	$	5,776	$	3,820
Corporate expenses		(2,607)		(3,218)
Consolidated Adjusted EBITDA		3,169		602
Stock-based compensation expense		(946)		(956)
Increase in contingent consideration liabilities		(24)		(176)
Licensee transition costs		(60)		-
ERP system implementation costs		-		(426)
Depreciation		(1,554)		(901)
Amortization		(1,238)		(1,395)
Loss from operations		(653)		(3,252)
Interest income		28		61
Interest expense		(632)		(549)
Loss before income taxes		(1,257)		(3,740)
Income tax benefit (provision)		(100)		1,348
Net loss	$	(1,357)	$	(2,392)

Revenue by Category

The following table presents our revenue disaggregated by geographic region (in thousands).



		November 30,		November 30,
		2018		2017

Americas	$	40,918	$	35,965
Asia Pacific		9,280		8,780
Europe/Middle East/Africa		3,631		3,187
	$	53,829	$	47,932

The following table presents our revenue disaggregated by type of service (in thousands).



Quarter Ended		Services and						Leases and
November 30, 2018		Products		Subscriptions		Royalties		Other		Consolidated

Enterprise Division:
Direct offices	$	25,009	$	12,675	$	787	$	-	$	38,471
International licensees		872		-		2,805		-		3,677
		25,881		12,675		3,592		-		42,148
Education practice		3,917		5,713		717		-		10,347
Corporate and eliminations		-		-		-		1,334		1,334
Consolidated	$	29,798	$	18,388	$	4,309	$	1,334	$	53,829

Quarter Ended
November 30, 2017

Enterprise Division:
Direct offices	$	24,873	$	9,117	$	207	$	-	$	34,197
International licensees		491		-		2,829		-		3,320
		25,364		9,117		3,036		-		37,517
Education practice		4,786		3,733		657		-		9,176
Corporate and eliminations		-		-		-		1,239		1,239
Consolidated	$	30,150	$	12,850	$	3,693	$	1,239	$	47,932