Revenue

Disaggregation of Revenue

In the following table, revenue, shown net of grants and scholarships, is disaggregated by type of service provided. The table also includes a reconciliation of the disaggregated revenue with the reportable segments (in thousands):



	Three Months Ended September 30, 2019
	(Unaudited)
	APEI		HCN		Intersegment			Consolidated
Instructional services, net of grants and scholarships	$	60,668	$	5,722	$	(25	)	$	66,365
Graduation fees	352		—		—			352
Textbook and other course materials	—		854		—			854
Other fees	197		120		—			317
Total Revenue	$	61,217	$	6,696	$	(25	)	$	67,888



	Three Months Ended September 30, 2018
	(Unaudited)
	APEI		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	63,406	$	7,901	$	—	$	71,307
Graduation fees	244		—		—		244
Textbook and other course materials	—		1,113		—		1,113
Other fees	199		129		—		328
Total Revenue	$	63,849	$	9,143	$	—	$	72,992



	Nine Months Ended September 30, 2019
	(Unaudited)
	APEI		HCN		Intersegment			Consolidated
Instructional services, net of grants and scholarships	$	188,839	$	18,735	$	(81	)	$	207,493
Graduation fees	936		—		—			936
Textbook and other course materials	—		2,515		—			2,515
Other fees	611		334		—			945
Total Revenue	$	190,386	$	21,584	$	(81	)	$	211,889



	Nine Months Ended September 30, 2018
	(Unaudited)
	APEI		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	191,816	$	23,887	$	—	$	215,703
Graduation fees	816		—		—		816
Textbook and other course materials	—		3,290		—		3,290
Other fees	577		371		—		948
Total Revenue	$	193,209	$	27,548	$	—	$	220,757

Effective January 1, 2019, the APEI Segment began charging the HCN Segment for the value of courses taken by HCN Segment employees at American Public University System. The intersegment revenue elimination is the elimination of this intersegment revenue in consolidation.

Contract Balances and Performance Obligations

The Company has no contract assets or deferred contract costs as of September 30, 2019 and December 31, 2018.

The Company recognizes a contract liability, or deferred revenue, when a student begins an online course or term, in the case of APUS, or starts a term, in the case of HCN. Deferred revenue at September 30, 2019 was $20.6 million and includes $11.9 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $8.7 million in consideration received in advance for future courses or terms, or student deposits. Deferred revenue at December 31, 2018 was $18.3 million and includes $9.9 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $8.4 million in student deposits. Deferred revenue represents the Company’s performance obligation to transfer future instructional services to students. The Company’s remaining performance obligations represent the transaction price allocated to future reporting periods.

The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less.

When the Company begins providing the performance obligation, a contract receivable is created, resulting in accounts receivable on the Company’s Consolidated Balance Sheets. The Company accounts for receivables in accordance with ASC 310, Receivables. The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience. Contracts are subsequently reviewed for collectability if significant events or circumstances indicate a change.

The allowance for doubtful accounts is based on management’s evaluation of the status of existing accounts receivable. Among other factors, management considers the age of the receivable, the anticipated source of payment and the historical allowance considerations. Consideration is also given to any specific known risk areas among the existing accounts receivable balances. Recoveries of receivables previously written off are recorded when received. The Company does not charge interest on past due receivables.