Segment Information

3 Months Ended

Nov. 30, 2022

Segment Information [Abstract]

Segment Information

NOTE 7 – 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 the cost of certain corporate administrative functions.

We have determined that the Company’s chief operating decision maker is the Chief Executive Officer, 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 excluding interest, income taxes, depreciation expense, intangible asset 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, 2022		Customers		Gross Profit		EBITDA
Enterprise Division:
Direct offices	$	50,167	$	39,921	$	11,250
International licensees		3,278		2,977		1,831
		53,445		42,898		13,081
Education practice		14,350		9,175		281
Corporate and eliminations		1,574		669		(1,890)
Consolidated	$	69,369	$	52,742	$	11,472
Quarter Ended
November 30, 2021
Enterprise Division:
Direct offices	$	45,119	$	36,202	$	9,954
International licensees		2,997		2,701		1,671
		48,116		38,903		11,625
Education practice		11,697		7,860		235
Corporate and eliminations		1,446		835		(1,928)
Consolidated	$	61,259	$	47,598	$	9,932

‎

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

	Quarter Ended
		November 30,		November 30,
		2022		2021
Segment Adjusted EBITDA	$	13,362	$	11,860
Corporate expenses		(1,890)		(1,928)
Consolidated Adjusted EBITDA		11,472		9,932
Stock-based compensation		(2,735)		(1,649)
Increase in the fair value of
contingent consideration liabilities		(7)		(28)
Depreciation		(1,246)		(1,279)
Amortization		(1,092)		(1,431)
Income from operations		6,392		5,545
Interest income		81		15
Interest expense		(410)		(446)
Income before income taxes		6,063		5,114
Income tax provision		(1,396)		(1,302)
Net income	$	4,667	$	3,812

Revenue by Category

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

	Quarter Ended
		November 30,		November 30,
		2022		2021
Americas	$	56,743	$	48,755
Asia Pacific		7,458		7,797
Europe/Middle East/Africa		5,168		4,707
	$	69,369	$	61,259

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

Quarter Ended		Services and						Leases and
November 30, 2022		Products		Subscriptions		Royalties		Other		Consolidated
Enterprise Division:
Direct offices	$	26,217	$	23,490	$	460	$	-	$	50,167
International licensees		143		352		2,783		-		3,278
		26,360		23,842		3,243		-		53,445
Education practice		4,500		9,183		667		-		14,350
Corporate and eliminations		-		-		315		1,259		1,574
Consolidated	$	30,860	$	33,025	$	4,225	$	1,259	$	69,369
Quarter Ended
November 30, 2021
Enterprise Division:
Direct offices	$	23,851	$	20,512	$	756	$	-	$	45,119
International licensees		404		-		2,593		-		2,997
		24,255		20,512		3,349		-		48,116
Education practice		3,226		7,844		627		-		11,697
Corporate and eliminations		-		-		344		1,102		1,446
Consolidated	$	27,481	$	28,356	$	4,320	$	1,102	$	61,259