16.SEGMENT INFORMATION

Reportable Segments

Our sales are primarily comprised of training and consulting services and our internal reporting structure is comprised of three reportable operating segments and a corporate services group. Our internal reporting structure and reportable segments are organized primarily around the client channels which produce the Company’s revenues. The following is a brief description of our reportable segments:

Direct Offices – 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 governmental sales channel; our coaching operations; and our books and audio sales channel.

International Licensees – This segment is primarily comprised of our international licensees’ royalty revenues.

Education Practice – This group includes our domestic and international Education practice operations, which are focused on sales to educational institutions.

Corporate and Other – Our corporate and other information includes royalty revenue from Franklin Planner Corporation (Note 17), leasing operations, shipping and handling revenues, and certain corporate administrative expenses.

We have determined that the Company’s chief operating decision maker continues to be the CEO, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts calculated by other companies. For reporting purposes, our consolidated Adjusted EBITDA can be calculated as our income or loss from operations excluding stock-based compensation, changes in the fair value of contingent consideration liabilities from business acquisitions, restructuring charges, depreciation expense, amortization expense, and certain other unusual or infrequent items.

Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the divisions 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.

All prior period segment information has been revised to conform to our current organizational structure, assigned responsibilities, and primary internal reports. We account for our segment information on the same basis as the accompanying consolidated financial statements (in thousands).



		Sales to
Fiscal Year Ended		External				Adjusted
August 31, 2020		Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	139,780	$	108,144	$	17,694
International licensees		8,451		6,679		2,406
		148,231		114,823		20,100
Education Division		43,405		27,099		(90)
Corporate and eliminations		6,820		3,448		(5,726)
Consolidated	$	198,456	$	145,370	$	14,284

Fiscal Year Ended
August 31, 2019
Enterprise Division:
Direct offices	$	157,754	$	116,755	$	19,455
International licensees		12,896		10,231		6,072
		170,650		126,986		25,527
Education Division		48,880		30,373		3,553
Corporate and eliminations		5,826		1,955		(8,474)
Consolidated	$	225,356	$	159,314	$	20,606

Fiscal Year Ended
August 31, 2018
Enterprise Division:
Direct offices	$	145,890	$	108,140	$	13,254
International licensees		13,226		10,031		5,081
		159,116		118,171		18,335
Education Division		45,272		28,654		2,710
Corporate and eliminations		5,370		1,464		(9,167)
Consolidated	$	209,758	$	148,289	$	11,878

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



YEAR ENDED
AUGUST 31,		2020		2019		2018
Segment Adjusted EBITDA	$	20,010	$	29,080	$	21,045
Corporate expenses		(5,726)		(8,474)		(9,167)
Consolidated Adjusted EBITDA		14,284		20,606		11,878
Stock-based compensation		573		(4,789)		(2,846)
Reduction (increase) in
contingent consideration liabilities		49		(1,334)		(1,014)
Restructuring costs		(1,636)		-		-
Gain from insurance settlement		933		-		-
Government COVID assistance		514		-		-
Knowledge Capital wind-down costs		(389)		-		-
ERP system implementation costs		-		-		(855)
Licensee transition costs		-		(488)		-
Depreciation		(6,664)		(6,364)		(5,161)
Amortization		(4,606)		(4,976)		(5,368)
Income (loss) from operations		3,058		2,655		(3,366)
Interest income		56		37		104
Interest expense		(2,318)		(2,358)		(2,676)
Accretion of discount on related
party receivable		-		258		418
Income (loss) before income taxes		796		592		(5,520)
Provision for income taxes		(10,231)		(1,615)		(367)
Net loss	$	(9,435)	$	(1,023)	$	(5,887)

Disaggregated Revenue

Our revenues are derived primarily from the United States. However, we also operate directly-owned offices or contract with licensees to provide our services in various countries throughout the world. Our consolidated revenues were derived from the following countries/regions (in thousands):



YEAR ENDED
AUGUST 31,		2020		2019		2018
Americas	$	160,989	$	173,784	$	159,595
Asia Pacific		11,845		14,457		12,715
Europe/Middle East/Africa		25,622		37,115		37,448
	$	198,456	$	225,356	$	209,758

The following table presents our revenue disaggregated by our significant revenue generating activities. Sales of services and products include training and consulting services and related products such as training manuals. Subscription sales include revenues from our subscription services such as the All Access Pass and Leader in Me membership. We receive royalty revenue from our international licensees and from other sources such as book publishing arrangements. Corporate royalties are amounts received from Franklin Planner Co. pursuant to a new licensing arrangement obtained in fiscal 2020 (Note 17). Leases and other revenue is primarily comprised of lease revenues from sub-leases for space at our corporate headquarters campus and from shipping and handling revenues (in thousands).



Fiscal Year Ended		Services and						Leases and
August 31, 2020		Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	75,580	$	60,954	$	3,246	$	-	$	139,780
International licensees		1,411		-		7,040		-		8,451
		76,991		60,954		10,286		-		148,231
Education Division		15,107		25,587		2,711		-		43,405
Corporate and eliminations		-		-		1,985		4,835		6,820
Consolidated	$	92,098	$	86,541	$	14,982	$	4,835	$	198,456

Fiscal Year Ended
August 31, 2019
Enterprise Division:
Direct offices	$	102,557	$	52,536	$	2,661	$	-	$	157,754
International licensees		2,439		-		10,457		-		12,896
		104,996		52,536		13,118		-		170,650
Education Division		23,779		22,151		2,950		-		48,880
Corporate and eliminations		-		-		-		5,826		5,826
Consolidated	$	128,775	$	74,687	$	16,068	$	5,826	$	225,356

Fiscal Year Ended
August 31, 2018
Enterprise Division:
Direct offices	$	100,730	$	42,465	$	2,695	$	-	$	145,890
International licensees		2,484		-		10,742		-		13,226
		103,214		42,465		13,437		-		159,116
Education Division		26,061		15,587		3,624		-		45,272
Corporate and eliminations		-		-		-		5,370		5,370
Consolidated	$	129,275	$	58,052	$	17,061	$	5,370	$	209,758

Inter-segment sales were immaterial for the periods presented and were eliminated in consolidation.

Other Geographic Information

At August 31, 2020, we had wholly owned direct offices in Australia, China, Japan, the United Kingdom, Germany, Switzerland, and Austria. Our long-lived assets, excluding intangible assets and goodwill, were held in the following locations for the periods indicated (in thousands):



AUGUST 31,		2020		2019
United States/Canada	$	28,327	$	31,129
Japan		1,537		1,456
China		1,307		441
United Kingdom		720		207
Germany, Switzerland, and Austria		240		10
Singapore		158		370
Australia		139		164
	$	32,428	$	33,777