Segment Information

3 Months Ended

Nov. 30, 2020

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 certain corporate administrative functions.

We have determined that the Company’s chief operating decision maker is 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 disclosed by other companies. Adjusted EBITDA is a non-GAAP financial measure. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as net loss excluding interest expense, income taxes, depreciation expense, 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
November 30, 2020		Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	36,743	$	29,439	$	6,693
International licensees		2,596		2,285		1,294
		39,339		31,724		7,987
Education practice		7,498		3,986		(2,285)
Corporate and eliminations		1,487		676		(1,986)
Consolidated	$	48,324	$	36,386	$	3,716
Quarter Ended
November 30, 2019
Enterprise Division:
Direct offices	$	42,111	$	31,411	$	5,710
International licensees		3,721		3,120		2,035
		45,832		34,531		7,745
Education practice		11,082		6,657		(1,102)
Corporate and eliminations		1,699		841		(1,682)
Consolidated	$	58,613	$	42,029	$	4,961

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

	Quarter Ended
		November 30,		November 30,
		2020		2019
Segment Adjusted EBITDA	$	5,702	$	6,643
Corporate expenses		(1,986)		(1,682)
Consolidated Adjusted EBITDA		3,716		4,961
Stock-based compensation		(1,158)		(1,851)
Increase in the fair value of contingent
consideration liabilities		(62)		(91)
Government COVID-19 assistance		207		-
Knowledge Capital wind-down costs		-		(389)
Depreciation		(1,741)		(1,619)
Amortization		(1,131)		(1,170)
Loss from operations		(169)		(159)
Interest income		24		5
Interest expense		(568)		(606)
Loss before income taxes		(713)		(760)
Income tax benefit (provision)		(179)		216
Net loss	$	(892)	$	(544)

Revenue by Category

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

	Quarter Ended
		November 30,		November 30,
		2020		2019
Americas	$	38,327	$	44,036
Asia Pacific		3,191		10,139
Europe/Middle East/Africa		6,806		4,438
	$	48,324	$	58,613

‎

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

Quarter Ended		Services and						Leases and
November 30, 2020		Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	19,412	$	16,614	$	717	$	-	$	36,743
International licensees		331		-		2,265		-		2,596
		19,743		16,614		2,982		-		39,339
Education practice		1,924		5,075		499		-		7,498
Corporate and eliminations		-		-		335		1,152		1,487
Consolidated	$	21,667	$	21,689	$	3,816	$	1,152	$	48,324
Quarter Ended
November 30, 2019
Enterprise Division:
Direct offices	$	27,251	$	14,288	$	572	$	-	$	42,111
International licensees		590		-		3,131		-		3,721
		27,841		14,288		3,703		-		45,832
Education practice		3,585		6,818		679		-		11,082
Corporate and eliminations		-		-		379		1,320		1,699
Consolidated	$	31,426	$	21,106	$	4,761	$	1,320	$	58,613