Segment Information

9 Months Ended

May 31, 2022

Segment Information [Abstract]

Segment Information

NOTE 9 – SEGMENT INFORMATION

Segment Information

Our sales are primarily comprised of training and consulting services and 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 comprised of three reportable segments and one 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, Australia, Germany, Switzerland, and Austria; our government services sales channel; and our book and audio sales.

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.

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.

Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, royalty revenues from Franklin Planner Corp., and the cost of certain corporate administrative functions.

We have determined that the Company’s chief operating decision maker is the Chief Executive Officer, 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. Adjusted EBITDA is a non-GAAP financial measure. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as net income excluding interest expense, income taxes, depreciation expense, intangible asset amortization expense, stock-based compensation, and certain other charges such as adjustments for changes in the fair value of contingent liabilities arising from business acquisitions. We reference this non-GAAP financial measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and we believe it provides investors with greater transparency to evaluate operational activities and financial results.

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
May 31, 2022		Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	47,416	$	38,144	$	9,978
International licensees		2,610		2,340		1,303
		50,026		40,484		11,281
Education practice		14,439		9,790		1,887
Corporate and eliminations		1,711		858		(2,292)
Consolidated	$	66,176	$	51,132	$	10,876
Quarter Ended
May 31, 2021
Enterprise Division:
Direct offices	$	42,704	$	34,678	$	8,894
International licensees		2,395		2,069		821
		45,099		36,747		9,715
Education practice		11,899		8,179		1,132
Corporate and eliminations		1,738		981		(2,284)
Consolidated	$	58,736	$	45,907	$	8,563
Three Quarters Ended
May 31, 2022
Enterprise Division:
Direct offices	$	134,037	$	108,294	$	28,664
International licensees		8,196		7,344		4,418
		142,233		115,638		33,082
Education practice		37,202		24,749		1,798
Corporate and eliminations		4,600		2,458		(6,030)
Consolidated	$	184,035	$	142,845	$	28,850
Three Quarters Ended
May 31, 2021
Enterprise Division:
Direct offices	$	115,185	$	93,201	$	21,729
International licensees		7,421		6,454		3,608
		122,606		99,655		25,337
Education practice		27,874		17,510		(2,010)
Corporate and eliminations		4,743		2,469		(5,925)
Consolidated	$	155,223	$	119,634	$	17,402

‎

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

	Quarter Ended				Three Quarters Ended
		May 31,		May 31,		May 31,		May 31,
		2022		2021		2022		2021
Segment Adjusted EBITDA	$	13,168	$	10,847	$	34,880	$	23,327
Corporate expenses		(2,292)		(2,284)		(6,030)		(5,925)
Consolidated Adjusted EBITDA		10,876		8,563		28,850		17,402
Stock-based compensation		(2,369)		(2,370)		(5,987)		(5,127)
Increase in the fair value of
contingent consideration liabilities		(12)		(118)		(60)		(164)
Business acquisition costs		-		(300)		-		(300)
Government COVID-19 assistance		-		-		-		234
Gain from insurance settlement		-		-		-		150
Depreciation		(1,217)		(1,423)		(3,686)		(4,904)
Amortization		(1,329)		(1,238)		(4,106)		(3,503)
Income from operations		5,949		3,114		15,011		3,788
Interest income		21		16		48		56
Interest expense		(405)		(525)		(1,274)		(1,633)
Income before income taxes		5,565		2,605		13,785		2,211
Income tax benefit (provision)		1,597		10,149		(933)		9,605
Net income	$	7,162	$	12,754	$	12,852	$	11,816

Revenue by Category

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

	Quarter Ended				Three Quarters Ended
		May 31,		May 31,		May 31,		May 31,
		2022		2021		2022		2021
Americas	$	56,081	$	47,524	$	151,283	$	124,679
Asia Pacific		5,609		7,922		19,896		21,351
Europe/Middle East/Africa		4,486		3,290		12,856		9,193
	$	66,176	$	58,736	$	184,035	$	155,223

‎

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

Quarter Ended		Services and						Leases and
May 31, 2022		Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	24,647	$	22,101	$	668	$	-	$	47,416
International licensees		87		331		2,192		-		2,610
		24,734		22,432		2,860		-		50,026
Education practice		5,780		8,185		474		-		14,439
Corporate and eliminations		-		-		315		1,396		1,711
Consolidated	$	30,514	$	30,617	$	3,649	$	1,396	$	66,176
Quarter Ended
May 31, 2021
Enterprise Division:
Direct offices	$	23,266	$	18,752	$	686	$	-	$	42,704
International licensees		412		-		1,983		-		2,395
		23,678		18,752		2,669		-		45,099
Education practice		4,298		7,171		430		-		11,899
Corporate and eliminations		-		-		345		1,393		1,738
Consolidated	$	27,976	$	25,923	$	3,444	$	1,393	$	58,736
Three Quarters Ended
May 31, 2022
Enterprise Division:
Direct offices	$	68,710	$	63,167	$	2,160	$	-	$	134,037
International licensees		299		936		6,961		-		8,196
		69,009		64,103		9,121		-		142,233
Education practice		11,850		23,157		2,195		-		37,202
Corporate and eliminations		-		-		879		3,721		4,600
Consolidated	$	80,859	$	87,260	$	12,195	$	3,721	$	184,035
Three Quarters Ended
May 31, 2021
Enterprise Division:
Direct offices	$	60,589	$	52,499	$	2,097	$	-	$	115,185
International licensees		1,267		-		6,154		-		7,421
		61,856		52,499		8,251		-		122,606
Education practice		8,018		17,977		1,879		-		27,874
Corporate and eliminations		-		-		1,053		3,690		4,743
Consolidated	$	69,874	$	70,476	$	11,183	$	3,690	$	155,223