Business Segments

For the year ended December 31, 2018, we operated through two reportable business segments: (i) Workforce Excellence and (ii) Business Transformation Services. In December 2017, we announced a new organizational structure and plan to improve operating results by increasing organic growth and reducing operating costs. Effective January 1, 2018, we re-organized into two operating segments aligned by complementary service lines and supported by a new business development organization aligned by industry sector. The Workforce Excellence segment includes the majority of the former Learning Solutions and Professional & Technical Services segments. The Business Transformation Services segment includes the majority of the former Performance Readiness Solutions and Sandy Training & Marketing segments. Certain business units transferred between the former operating segments to better align with the service offerings of the two new segments. In addition, effective July 1, 2018, we transferred the management responsibility of certain additional business units between the two operating segments primarily to consolidate our non-technical content design and development businesses into one global digital learning strategies and solutions service line. We have reclassified the segment financial information herein for the prior year periods to reflect the changes in our segment reporting during 2018 and conform to the current year's presentation.

Each of our two reportable segments represents an operating segment under ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, Intangibles - Goodwill and Other. In connection with the new organizational structure that went into effect on January 1, 2018, we determined that we have four reporting units for purposes of goodwill impairment testing, which represent our four practices which are one level below the operating segments, as discussed below.

Our two segments each consist of two global practice areas which are focused on providing similar and/or complementary products and services across our diverse customer base and within targeted markets. Within each practice are various service lines having specific areas of expertise. Marketing and communications, sales, accounting, finance, legal, human resources, information systems and other administrative services are organized at the corporate level. Business development and sales resources are aligned by industry sector to support existing customer accounts and new customer development across both segments. Further information regarding our business segments is discussed below.

Workforce Excellence. The Workforce Excellence segment advises and partners with leading organizations in designing, implementing, operating and supporting their talent management and workforce strategies, enabling them to gain greater competitive edge in their markets. This segment consists of two practices:

•

Managed Learning Services - this practice focuses on creating value for our customers by delivering a suite of talent management and learning design, development, operational and support services that can be delivered as large scale outsourcing arrangements, managed services contracts and project-based service engagements. The Managed Learning Services offerings include strategic learning and development consulting services, digital learning content design and development solutions and a suite of managed learning operations services, including: managed facilitation and delivery, managed training administration and logistics, help desk support, tuition reimbursement management services, event management and vendor management.

•

Engineering & Technical Services - this practice focuses on capital intensive, inherently hazardous and/or highly complex technical services in support of both U.S. government and global commercial industries. Our products and services include design, development and delivery of technical work-based learning, CapEx (plant launch) initiatives, engineering design and construction management, fabrication, and management services, operational excellence consulting, chemical demilitarization services, homeland security services, emergency management support services along with all forms of technical documentation. We deliver world-class asset management and performance improvement consulting to a host of industries. Our proprietary EtaPRO® Performance and Condition Monitoring System provides a suite of real-time digital solutions for hundreds of facilities and is installed in power-generating units around the world. We also provide thousands of technical courses in a web-based off the shelf delivery format through our GPiLEARN+™ portal.

Business Transformation Services. The Business Transformation Services segment works with organizations to execute complex business strategies by linking business systems, process and people’s performance to clear and measurable results. We have a holistic methodology to establishing direction and closing the gap between strategy and execution. Our approach equips business leaders and teams with the tools and capability to deliver high-performance results. This segment consists of two practices:

•

Sales Enablement - this practice provides custom product sales training and service technical training, primarily to automotive manufacturers, designed to better educate the customer salesforces as well as the service technicians with respect to new product features and designs, in effect rapidly increasing the salesforce and technicians knowledge base and enabling them to address retail customer needs. Furthermore, this segment helps our clients assess their customer relationship marketing strategy and connect with their customers on a one-to-one basis, including custom print and digital publications. We have been a custom product sales and service technical training provider and leader in serving manufacturing customers in the U.S. automotive industry for over 40 years.

•

Organizational Development - this practice works with organizations to design and execute an integrated people performance system. This translates to helping organizations set strategy, carry that strategy through every level of the organization and ensure that their people have the right skills, knowledge, tools, processes and technology to enable the transformation and achieve business results. Solutions include strategy, leadership, employee engagement and culture consulting, enterprise technology implementation and adoption solutions, and organization design and business performance consulting.

We do not allocate the following items to the segments: general & administrative expenses, sales & marketing expenses, restructuring charges, other (expense) income, interest expense, gain (loss) on change in fair value of contingent consideration and income tax expense.

The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated income before income tax expense (in thousands):



	Years ended December 31,
	2018			2017			2016
Revenue:
Workforce Excellence	$	316,814		$	308,259		$	305,915
Business Transformation Services	198,346			200,949			184,644
	$	515,160		$	509,208		$	490,559
Gross Profit:
Workforce Excellence	$	50,875		$	52,958		$	53,355
Business Transformation Services	26,868			29,069			26,802
Total gross profit	77,743			82,027			80,157
General and administrative expenses	54,848			55,753			47,162
Sales and marketing expenses	4,798			1,666			1,435
Restructuring charges	2,930			3,317			—
Gain (loss) on change in fair value of contingent consideration, net	4,438			1,620			(136		)
Operating income	19,605			22,911			31,424
Interest expense	2,945			3,132			1,568
Other (expense) income	(1,897		)	(90		)	178
Income before income tax expense	$	14,763		$	19,689		$	30,034

Additional information relating to our business segments is as follows (in thousands):



	December 31,
	2018		2017
Identifiable assets:
Workforce Excellence	$	283,039	$	241,277
Business Transformation Services	151,699		123,730
Total assets	$	434,738	$	365,007

Corporate and other assets which consist primarily of cash, other assets, and deferred tax assets and liabilities are allocated to the segments based on their respective percentage of consolidated revenues.



	Years ended December 31,
	2018		2017		2016
Additions to property, plant and equipment:
Workforce Excellence	$	1,321	$	1,609	$	685
Business Transformation Services	625		184		62
Corporate and other	888		941		655
	$	2,834	$	2,734	$	1,402
Depreciation and amortization:
Workforce Excellence	$	3,664	$	2,643	$	3,116
Business Transformation Services	2,827		2,770		1,994
Corporate and other	1,430		1,561		1,352
	$	7,921	$	6,974	$	6,462

Information about our revenue in different geographic regions, which is attributable to our operations located primarily in the United States, United Kingdom and other countries is as follows (in thousands):



	Years ended December 31,
	2018		2017		2016
United States	$	344,720	$	350,632	$	339,329
United Kingdom	92,059		100,466		93,017
Other	78,381		58,110		58,213
	$	515,160	$	509,208	$	490,559

Information about our total assets in different geographic regions is as follows (in thousands):



	December 31,
	2018		2017
United States	$	280,097	$	215,523
United Kingdom	72,048		75,862
Other	82,593		73,622
	$	434,738	$	365,007