Business Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Business Segment Information

16. BUSINESS SEGMENT INFORMATION

The Company conducts its business globally and is managed geographically in three segments: (1) Americas, which consists of North America and Caribbean and Latin America (“CALA”) reporting units, (2) Europe, Middle East and Africa (“EMEA”) and (3) Asia Pacific (“APAC”). The segments are determined in accordance with how management views and evaluates the Company’s business and allocates its resources, and are based on the criteria as outlined in the authoritative guidance.

Segment Revenue and Profit

Segment revenues consist of product and service revenues. Product revenues are attributed to a segment based on the ordering location of the customer. For internal reporting purposes and determination of segment contribution margins, geographic segment product revenues may differ slightly from actual geographic revenues due to internal revenue allocations between the Company’s segments. Service revenues are generally attributed to a segment based on the end-user’s location where services are performed. A significant portion of each segment’s expenses arises from shared services and infrastructure that Polycom has historically allocated to the segments in order to realize economies of scale and to use resources efficiently.

Segment contribution margin includes all geographic segment revenues less the related cost of sales and direct sales and marketing expenses. Management allocates some infrastructure costs, such as facilities and IT costs, in determining segment contribution margins. Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include corporate manufacturing costs, sales and marketing costs other than direct sales and marketing expenses, research and development expenses, general and administrative costs, such as legal and accounting, stock-based compensation costs, transaction-related costs, amortization of purchased intangibles, restructuring costs and interest and other income (expense), net.

Segment Data

The results of the reportable segments are derived directly from Polycom’s management reporting system. The results are based on Polycom’s method of internal reporting and are not reported in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution margin as defined above. Asset data, with the exception of gross accounts receivable, is not reviewed by management at the segment level.

Financial information for each reportable geographical segment as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014, based on the Company’s internal management reporting system and as utilized by the Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, is as follows (in thousands):

	Americas			EMEA			APAC			Total
For the three months ended March 31, 2015:
Revenue	$	157,354		$	93,849		$	79,497		$	330,700
% of total revenue		48	%		28	%		24	%		100	%
Contribution margin		60,850			42,776			36,112			139,738
% of segment revenue		39	%		46	%		45	%		42	%
For the three months ended March 31, 2014:
Revenue	$	163,070		$	89,036		$	76,418		$	328,524
% of total revenue		50	%		27	%		23	%		100	%
Contribution margin		69,973			37,666			31,655			139,294
% of segment revenue		43	%		42	%		41	%		42	%
As of March 31, 2015: Gross accounts receivable	$	99,475		$	59,717		$	55,515		$	214,707
% of total gross accounts receivable		46	%		28	%		26	%		100	%
As of December 31, 2014: Gross accounts receivable		88,316			62,540			63,808			214,664
% of total gross accounts receivable		41	%		29	%		30	%		100	%

During the three months ended March 31, 2015 and 2014, one customer, ScanSource Communications (“ScanSource”), accounted for 16% and 18%, respectively, of the Company’s revenues. ScanSource accounted for  19% of total gross accounts receivable at March 31, 2015 and December 31, 2014.

The reconciliation of segment information to Polycom consolidated totals is as follows (in thousands):

	Three Months Ended
	March 31, 2015			March 31, 2014
Segment contribution margin	$	139,738		$	139,294
Corporate and unallocated costs		(98,339	)		(106,600	)
Stock-based compensation		(9,232	)		(5,647	)
Effect of stock-based compensation cost on warranty expense		(53	)		(129	)
Amortization of purchased intangibles		(3,074	)		(3,333	)
Restructuring costs		(24	)		(30,343	)
Transaction-related costs		—			(156	)
Interest and other income (expense), net		(1,462	)		(695	)
Income (loss) before benefit from income taxes	$	27,554		$	(7,609	)

The following table summarizes the Company’s revenues by groups of similar products and services as follows (in thousands):

	Three Months Ended
	March 31, 2015		March 31, 2014
Revenues:
UC group systems	$	204,651	$	213,372
UC personal devices		67,465		56,474
UC platform		58,584		58,678
Total	$	330,700	$	328,524