11. Segment and Geographic Information

The Company’s operations consist of two operating segments and two reportable segments: the Graduate Program Segment and the Short Course Segment. The Company’s Graduate Program Segment provides services to well-recognized nonprofit colleges and universities, primarily in the United States, to enable the online delivery of graduate programs. The Company’s Short Course Segment provides premium online short courses to working professionals around the world through relationships with leading universities in the United States, the United Kingdom and South Africa.

During the three months ended June 30, 2018, three university clients in the Graduate Program Segment each accounted for 10% or more of the Company’s consolidated revenue, as follows: $20.4 million, $13.1 million and $10.2 million, which equals 21%, 13% and 10% of the Company’s consolidated revenue, respectively. During the three months ended June 30, 2017, four university clients in the Graduate Program Segment each accounted for 10% or more of the Company’s consolidated revenue, as follows: $19.1 million, $12.1 million, $6.9 million and $6.8 million, which equals 29%, 19%, 11% and 10% of the Company’s consolidated revenue, respectively.

During the six months ended June 30, 2018, three university clients in the Graduate Program Segment each accounted for 10% or more of the Company’s consolidated revenue, as follows: $41.1 million, $26.5 million and $19.8 million, which equals 22%, 14% and 10% of the Company’s consolidated revenue, respectively. During the six months ended June 30, 2017, four university clients in the Graduate Program Segment each accounted for 10% or more of the Company’s consolidated revenue, as follows: $38.8 million, $23.8 million, $13.8 million and $13.2 million, which equals 30%, 18%, 11% and 10% of the Company’s consolidated revenue, respectively.

As of June 30, 2018, two university clients in the Graduate Program Segment accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $26.5 million and $7.5 million, which equals 53% and 15% of the Company’s consolidated accounts receivable, net balance, respectively. As of December 31, 2017, two university clients in the Graduate Program Segment each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $9.4 million and $2.0 million, which equals 67% and 14% of the Company’s consolidated accounts receivable, net balance, respectively.

For the Company’s Short Course Segment, there were no customers that accounted for 10% or more of the Company’s consolidated revenue for the three and six month periods ending June 30, 2018 and 2017, or accounts receivable, net balance, as of June 30, 2018 and December 31, 2017, as such amounts are derived from individual students or third parties paying on their behalf, rather than directly from university clients. For the three months ended June 30, 2018, revenue associated with the short courses offered with the Company’s three largest university clients in this segment accounted for approximately 83% of the segment’s revenue and approximately 14% of the Company’s consolidated revenue. For the six months ended June 30, 2018, revenue associated with the short courses offered with the Company’s three largest university clients in this segment accounted for approximately 83% of the segment’s revenue and approximately 12% of the Company’s consolidated revenue. In this segment, no individual university client had revenue associated with it that accounted for 10% or more of the Company’s consolidated revenue for the three and six months ended June 30, 2018.

Segment Performance

The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Revenue by segment*
Graduate Program Segment	$	81,209		$	64,995		$	161,768		$	129,824
Short Course Segment	16,214			—			27,943			—

Total revenue	$	97,423		$	64,995		$	189,711		$	129,824


Segment profitability**
Graduate Program Segment	$	(5,905	)	$	(1,497	)	$	(6,179	)	$	2,411
Short Course Segment	350			—			(898		)	—

Total segment profitability	$	(5,555	)	$	(1,497	)	$	(7,077	)	$	2,411


Segment profitability margin***
Graduate Program Segment	(6.1		)%	(2.3		)%	(3.2		)%	1.9		%
Short Course Segment	0.4			—			(0.5		)	—

Total segment profitability margin	(5.7		)%	(2.3		)%	(3.7		)%	1.9		%

* The Company did not have any material intersegment revenues for any periods presented.

** The Company evaluates segment profitability as net income or net loss, as applicable, before net interest income (expense), taxes, depreciation and amortization, foreign currency gains or losses, acquisition-related gains or losses and stock-based compensation expense. Some or all of these items may not be applicable in any given reporting period.

*** The Company defines segment profitability margin as segment profitability as a percentage of consolidated revenue.

The following table reconciles net loss to total segment profitability:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(in thousands)
Net loss	$	(18,347	)	$	(11,754	)	$	(33,218	)	$	(15,193	)
Adjustments:
Interest income	(912		)	(53		)	(1,254		)	(249		)
Interest expense	27			1			54			1
Foreign currency loss	825			1,031			1,220			1,031
Depreciation and amortization expense	7,408			3,783			14,783			7,431
Income tax benefit	(3,565		)	—			(4,793		)	—
Stock-based compensation expense	9,009			5,495			16,131			9,390

Total adjustments	12,792			10,257			26,141			17,604

Total segment profitability	$	(5,555	)	$	(1,497	)	$	(7,077	)	$	2,411

The Company’s total assets by segment are as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Total assets
Graduate Program Segment	$	711,291	$	359,597
Short Course Segment	114,173		122,465

Total assets	$	825,464	$	482,062

Contract Assets and Liabilities

The Company’s contract assets and liabilities in each segment are as follows:

	June 30, 2018		December 31, 2017
	(in thousands)
Contract assets
Graduate Program Segment accounts receivable, net	$	34,758	$	12,520
Graduate Program Segment unbilled revenue	13,776		666
Short Course Segment accounts receivable, net	1,277		988

Total contract assets	$	49,811	$	14,174


Contract liabilities
Graduate Program Segment deferred revenue	$	22,829	$	2,523
Short Course Segment deferred revenue	8,033		4,501

Total contract liabilities	$	30,862	$	7,024

For the Graduate Program Segment, revenue recognized during the three and six months ended June 30, 2018 that was included in the deferred revenue balance at the beginning of the year was $0.0 million and $2.5 million, respectively. For the Short Course Segment, revenue recognized during the three and six months ended June 30, 2018 that was included in the deferred revenue balance at the beginning of the year was $0.0 million and $4.5 million, respectively.

Contract Acquisition Costs

The Graduate Program Segment had $0.3 million of net capitalized contract acquisition costs as of June 30, 2018. For the three months ended June 30, 2018, the Company capitalized $0.2 million and recorded no amortization expense in the Graduate Program Segment. For the six months ended June 30, 2018, the Company capitalized $0.3 million and recorded no amortization expense in the Graduate Program Segment.

Geographical Information

The Company’s non-U.S. revenue for the three and six months ended June 30, 2018, determined based upon the university client’s functional currency, was $9.8 million and $17.2 million, respectively, entirely from the Short Course Segment’s operations outside of the U.S. The Company did not have non-U.S. revenue for the three and six months ended June 30, 2017. The Company’s long-lived assets in non-U.S. countries as of June 30, 2018 and December 31, 2017 totaled approximately $1.1 million and $0.7 million, respectively.