Segment Information

6 Months Ended

Feb. 28, 2021

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 income (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.

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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
February 28, 2021		Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	35,738	$	29,084	$	6,131
International licensees		2,429		2,100		1,505
		38,167		31,184		7,636
Education practice		8,478		5,344		(858)
Corporate and eliminations		1,517		812		(1,655)
Consolidated	$	48,162	$	37,340	$	5,123
Quarter Ended
February 29, 2020
Enterprise Division:
Direct offices	$	37,973	$	28,702	$	4,734
International licensees		2,691		2,237		1,384
		40,664		30,939		6,118
Education practice		10,893		6,460		(1,068)
Corporate and eliminations		2,188		1,267		(994)
Consolidated	$	53,745	$	38,666	$	4,056
Two Quarters Ended
February 28, 2021
Enterprise Division:
Direct offices	$	72,481	$	58,523	$	12,827
International licensees		5,026		4,385		2,795
		77,507		62,908		15,622
Education practice		15,975		9,331		(3,142)
Corporate and eliminations		3,004		1,487		(3,641)
Consolidated	$	96,486	$	73,726	$	8,839
Two Quarters Ended
February 29, 2020
Enterprise Division:
Direct offices	$	80,085	$	60,113	$	10,444
International licensees		6,411		5,357		3,419
		86,496		65,470		13,863
Education practice		21,974		13,117		(2,171)
Corporate and eliminations		3,887		2,108		(2,675)
Consolidated	$	112,357	$	80,695	$	9,017

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

	Quarter Ended				Two Quarters Ended
		February 28,		February 29,		February 28,		February 29,
		2021		2020		2021		2020
Segment Adjusted EBITDA	$	6,778	$	5,050	$	12,480	$	11,692
Corporate expenses		(1,655)		(994)		(3,641)		(2,675)
Consolidated Adjusted EBITDA		5,123		4,056		8,839		9,017
Stock-based compensation		(1,599)		(1,793)		(2,757)		(3,644)
Increase (decrease) in the fair value of
contingent consideration liabilities		16		182		(46)		91
Government COVID-19 assistance		27		-		234		-
Knowledge Capital wind-down costs		-		-		-		(389)
Gain from insurance settlement		150		-		150		-
Depreciation		(1,740)		(1,653)		(3,481)		(3,273)
Amortization		(1,133)		(1,170)		(2,265)		(2,340)
Income (loss) from operations		844		(378)		674		(538)
Interest income		16		13		40		18
Interest expense		(540)		(557)		(1,108)		(1,162)
Income (loss) before income taxes		320		(922)		(394)		(1,682)
Income tax benefit (provision)		(366)		2,019		(544)		2,235
Net income (loss)	$	(46)	$	1,097	$	(938)	$	553

Revenue by Category

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

	Quarter Ended				Two Quarters Ended
		February 28,		February 29,		February 28,		February 29,
		2021		2020		2021		2020
Americas	$	38,828	$	42,721	$	77,155	$	86,756
Asia Pacific		6,622		7,089		13,428		17,228
Europe/Middle East/Africa		2,712		3,935		5,903		8,373
	$	48,162	$	53,745	$	96,486	$	112,357

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

Quarter Ended		Services and						Leases and
February 28, 2021		Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	17,912	$	17,132	$	694	$	-	$	35,738
International licensees		522		-		1,907		-		2,429
		18,434		17,132		2,601		-		38,167
Education practice		1,797		5,731		950		-		8,478
Corporate and eliminations		-		-		373		1,144		1,517
Consolidated	$	20,231	$	22,863	$	3,924	$	1,144	$	48,162
Quarter Ended
February 29, 2020
Enterprise Division:
Direct offices	$	21,644	$	15,172	$	1,157	$	-	$	37,973
International licensees		410		-		2,281		-		2,691
		22,054		15,172		3,438		-		40,664
Education practice		2,950		6,192		1,751		-		10,893
Corporate and eliminations		-		-		935		1,253		2,188
Consolidated	$	25,004	$	21,364	$	6,124	$	1,253	$	53,745
Two Quarters Ended
February 28, 2021
Enterprise Division:
Direct offices	$	37,323	$	33,747	$	1,411	$	-	$	72,481
International licensees		854		-		4,172		-		5,026
		38,177		33,747		5,583		-		77,507
Education practice		3,721		10,805		1,449		-		15,975
Corporate and eliminations		-		-		708		2,296		3,004
Consolidated	$	41,898	$	44,552	$	7,740	$	2,296	$	96,486
Two Quarters Ended
February 29, 2020
Enterprise Division:
Direct offices	$	48,895	$	29,461	$	1,729	$	-	$	80,085
International licensees		1,000		-		5,411		-		6,411
		49,895		29,461		7,140		-		86,496
Education practice		6,535		13,010		2,429		-		21,974
Corporate and eliminations		-		-		1,314		2,573		3,887
Consolidated	$	56,430	$	42,471	$	10,883	$	2,573	$	112,357