Segments

9 Months Ended

Sep. 30, 2019

The Company has three reportable segments: (i) Franchise; (ii) Corporate-owned stores; and (iii) Equipment.

The Company’s operations are organized and managed by type of products and services and segment information is reported accordingly. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM reviews financial performance and allocates resources by reportable segment. There have been no operating segments aggregated to arrive at the Company’s reportable segments.

The Franchise segment includes operations related to the Company’s franchising business in the United States, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico, including revenues and expenses from the NAF beginning on January 1, 2018 (see Note 15). The Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment includes the sale of equipment to our United States franchisee-owned stores.

The accounting policies of the reportable segments are the same as those described in Note 2. The Company evaluates the performance of its segments and allocates resources to them based on revenue and earnings before interest, taxes, depreciation, and amortization, referred to as Segment EBITDA. Revenues for all operating segments include only transactions with unaffiliated customers and include no intersegment revenues.

The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.



	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Franchise segment revenue - U.S.	$	65,494	$	53,528	$	200,111	$	164,225
Franchise segment revenue - International	1,215		1,294		4,172		3,359
Franchise segment total	66,709		54,822		204,283		167,584
Corporate-owned stores - U.S.	39,637		34,323		115,178		99,020
Corporate-owned stores - International	1,105		1,083		3,303		3,345
Corporate-owned stores total	40,742		35,406		118,481		102,365
Equipment segment - U.S.	59,364		46,428		174,528		128,589
Equipment segment total	59,364		46,428		174,528		128,589
Total revenue	$	166,815	$	136,656	$	497,292	$	398,538

Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.

Franchise revenue includes revenue generated from placement services of $4,277 and $2,518 for the three months ended September 30, 2019 and 2018, respectively, and $12,112 and $7,694 for the nine months September 30, 2019 and 2018, respectively.



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Segment EBITDA
Franchise	$	44,328		$	37,075		$	141,548		$	113,793
Corporate-owned stores	16,799			15,279			50,505			42,115
Equipment	13,741			9,654			40,920			28,579
Corporate and other	(10,036		)	(9,599		)	(33,968		)	(27,576		)
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911

The following table reconciles total Segment EBITDA to income before taxes:



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911
Less:
Depreciation and amortization	11,832			8,863			32,316			25,947
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income from operations	53,061			43,573			171,513			131,302
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income before income taxes	$	40,001		$	27,662		$	128,082		$	97,719

The following table summarizes the Company’s assets by reportable segment:



	September 30, 2019		December 31, 2018
Franchise	$	189,192	$	185,899
Corporate-owned stores	390,101		243,221
Equipment	195,022		210,462
Unallocated	645,917		713,834
Total consolidated assets	$	1,420,232	$	1,353,416

The table above includes $1,204 and $1,892 of long-lived assets located in the Company’s corporate-owned stores in Canada as of September 30, 2019 and December 31, 2018, respectively. All other assets are located in the U.S.

For the segment footnote disclosure as of December 31, 2018, an immaterial error of $133,523 has been corrected to appropriately classify assets from the franchise segment to the unallocated segment at December 31, 2018. This correction does not impact the Company’s previously reported consolidated balance sheets, consolidated statements of cash flow or statements of operations.

The following table summarizes the Company’s goodwill by reportable segment:



	September 30, 2019		December 31, 2018
Franchise	$	16,938	$	16,938
Corporate-owned stores	97,148		89,909
Equipment	92,666		92,666
Consolidated goodwill	$	206,752	$	199,513