Segment Reporting, Geographic Information and Major Customers

9 Months Ended

Sep. 30, 2011

Segment Reporting, Geographic Information and Major Customers

10. Segment Reporting, Geographic Information and Major Customers

ASC Topic 280 — Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way that management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available. The Company’s chief operating decision makers (“CODM”) are considered to be its Chief Executive Officer and Chief Financial Officer.

The Company currently has two business segments that reflect the Company’s current organizational structure and focus on providing secure identification solutions. The Company’s reportable segments are Identity Management and ID Products. Each business segment is comprised of two or more businesses within the Company that focus on specific markets and technologies. Business units in the Identity Management segment include Hirsch, idOnDemand, Multicard and polyright; the ID Products segment includes the results of our SCM Microsystems and Syscan ID business units and our Transponder division.

The CODM reviews financial information and business performance along the Identity Management and ID Products segments. The Company evaluates the performance of its segments at the revenue and gross margin level. The Company’s reporting systems do not track or allocate operating expenses by segment.

Summary information by segment for the three and nine months ended September 30, 2011 and 2010 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Identity Management:
Revenues from external customers	$	15,148		$	12,231		$	42,248		$	33,572
Intersegment revenue		(2	)		—			314			152
Total revenue for reportable segment		15,146			12,231			42,562			33,724
Elimination of intersegment revenues		2			—			(314	)		(152	)
Total Identity Management revenue	$	15,148		$	12,231		$	42,248		$	33,572
Gross profit		6,816			6,174			18,971			17,451
Gross profit %		45	%		50	%		45	%		52	%
ID Products:
Revenues from external customers	$	11,604		$	8,280		$	32,536		$	23,463
Intersegment revenue		1,991			—			5,699			317
Total revenue for reportable segment		13,595			8,280			38,235			23,780
Elimination of intersegment revenues		(1,991	)		—			(5,699	)		(317	)
Total ID Product revenue	$	11,604		$	8,280		$	32,536		$	23,463
Gross profit		5,014			2,774			12,453			8,078
Gross profit %		43	%		34	%		38	%		34	%
Total:
Net revenue	$	26,752		$	20,511		$	74,784		$	57,035
Gross profit	$	11,830		$	8,948		$	31,424		$	25,529
Gross profit %		44	%		44	%		42	%		45	%

Geographic net revenue is based on selling location. Information regarding net revenue by geographic region is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net revenue
Europe and Middle-East	$	11,943		$	5,717		$	30,587		$	16,050
Americas		11,673			12,749			33,465			35,336
Asia-Pacific		3,136			2,045			10,732			5,649
Total	$	26,752		$	20,511		$	74,784		$	57,035
% of net revenue
Europe and Middle-East		45	%		28	%		41	%		28	%
Americas		43	%		62	%		45	%		62	%
Asia-Pacific		12	%		10	%		14	%		10	%

No customers exceeded 10% of total revenue during the three and nine months ended September 30, 2011 or 2010. No customer represented 10% of the Company’s accounts receivable balance at September 30, 2011 or December 31, 2010.

Long-lived assets by geographic location as of September 30, 2011 and December 31, 2010, are as follows (in thousands):

	September 30,		December 31,
	2011		2010
Property and equipment, net:
Europe	$	3,412	$	3,695
Americas		669		411
Asia-Pacific		1,325		1,267
Total	$	5,406	$	5,373