Segment and Geographic Information

The Company’s operations consist of two operating segments, which are also its 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.

Graduate Program Segment

For the three months ended September 30, 2018, three university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $24.0 million, $13.0 million and $10.8 million which equaled 22%, 12% and 10% of the Company’s consolidated revenue, respectively. For the three months ended September 30, 2017, four university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $19.6 million, $10.8 million, $7.2 million and $7.1 million, which equaled 28%, 15%, 10% and 10% of the Company’s consolidated revenue, respectively.

For the nine months ended September 30, 2018, three university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $65.0 million, $39.5 million and $30.6 million, which equaled 22%, 13% and 10% of the Company’s consolidated revenue, respectively. For the nine months ended September 30, 2017, four university clients each accounted for 10% or more of the Company’s consolidated revenue, as follows: $58.4 million, $34.6 million, $21.0 million and $20.3 million, which equaled 30%, 17%, 11% and 10% of the Company’s consolidated revenue, respectively.

As of September 30, 2018, two university clients each accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as follows: $13.4 million and $7.0 million, which equaled 27% and 14% of the Company’s consolidated accounts receivable, net balance, respectively. As of December 31, 2017, two university clients 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 equaled 67% and 14% of the Company’s consolidated accounts receivable, net balance, respectively.

Short Course Segment

For the three and nine months ended September 30, 2018 and 2017, there were no customers or individual university clients that had revenue associated with it that accounted for 10% or more of the Company’s consolidated revenue. In addition, as of September 30, 2018 and December 31, 2017, no customers had accounts receivable, net balances that accounted for 10% or more of the Company’s consolidated accounts receivable, net balance, as customers are individual students or third parties paying on their behalf, rather than university clients.

For the three months ended September 30, 2018, offerings associated with four university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 91% of the segment’s revenue. For the three months ended September 30, 2017, offerings associated with two university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue.

For the nine months ended September 30, 2018, offerings associated with three university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue. For the nine months ended September 30, 2017, offerings associated with two university clients each accounted for 10% or more of the segment’s revenue, and when combined, accounted for approximately 82% of the segment’s revenue.

Segment Performance

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Revenue by segment*
Graduate Program Segment	$	89,719		$	65,924		$	251,487		$	195,748
Short Course Segment	17,244			4,326			45,187			4,326
Total revenue	$	106,963		$	70,250		$	296,674		$	200,074

Segment profitability**
Graduate Program Segment	$	5,564		$	(718	)	$	(615	)	$	1,693
Short Course Segment	(889		)	(3,002		)	(1,787		)	(3,002		)
Total segment profitability	$	4,675		$	(3,720	)	$	(2,402	)	$	(1,309	)

Segment profitability margin***
Graduate Program Segment	5.2		%	(1.0		)%	(0.2		)%	0.8		%
Short Course Segment	(0.8		)	(4.3		)	(0.6		)	(1.5		)
Total segment profitability margin	4.4		%	(5.3		)%	(0.8		)%	(0.7		)%


*	The Company has excluded approximately $44,000 of intersegment revenues from the three and nine months ended September 30, 2018.


**	The Company defines 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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Net loss	$	(9,944	)	$	(14,739	)	$	(43,162	)	$	(29,932	)
Adjustments:
Interest income	(1,799		)	(18		)	(3,053		)	(267		)
Interest expense	27			36			81			37
Foreign currency loss (gain)	273			(59		)	1,493			972
Depreciation and amortization expense	8,599			5,887			23,382			13,318
Income tax benefit	(414		)	(974		)	(5,207		)	(974		)
Stock-based compensation expense	7,933			6,147			24,064			15,537
Total adjustments	14,619			11,019			40,760			28,623
Total segment profitability	$	4,675		$	(3,720	)	$	(2,402	)	$	(1,309	)

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



	September 30, 2018		December 31, 2017
	(in thousands)
Total assets
Graduate Program Segment	$	700,978	$	359,597
Short Course Segment	110,513		122,465
Total assets	$	811,491	$	482,062

Trade Accounts Receivable and Contract Liabilities

The Company’s trade accounts receivable and contract liabilities in each segment are as follows:



	September 30, 2018		December 31, 2017
	(in thousands)
Trade accounts receivable
Graduate Program Segment accounts receivable, net	$	22,397	$	12,520
Graduate Program Segment unbilled revenue	25,583		666
Short Course Segment accounts receivable, net	1,435		988
Total trade accounts receivable	$	49,415	$	14,174

Contract liabilities
Graduate Program Segment deferred revenue	$	9,607	$	2,523
Short Course Segment deferred revenue	9,346		4,501
Total contract liabilities	$	18,953	$	7,024

For the Graduate Program Segment, revenue recognized during the three and nine months ended September 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 nine months ended September 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 September 30, 2018. For the three months ended September 30, 2018, the Company capitalized no amounts and recorded an immaterial amount of amortization expense in the Graduate Program Segment. For the nine months ended September 30, 2018, the Company capitalized $0.3 million and recorded an immaterial amount of amortization expense in the Graduate Program Segment.

Geographical Information

The Company’s non-U.S. revenue for the three and nine months ended September 30, 2018, determined based upon the currency of the country in which the university client primarily operates, was $8.8 million and $26.0 million, respectively, and was sourced entirely from the Short Course Segment’s operations outside of the U.S. The Company’s non-U.S. revenue for both the three and nine months ended September 30, 2017, determined based upon the currency of the country in which the university client primarily operates, was $3.0 million, and was sourced entirely from the Short Course Segment’s operations outside of the U.S. The Company’s long-lived assets in non-U.S. countries as of September 30, 2018 and December 31, 2017 totaled approximately $1.3 million and $0.7 million, respectively.