Segment Reporting, Geographic Information, and Concentration of Credit Risk

6 Months Ended

Jun. 30, 2019

Segment Reporting, Geographic Information, and Concentration of Credit Risk

14. Segment Reporting, Geographic Information, and Concentration of Credit Risk

Segment Reporting

ASC 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 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 to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO.

In the fourth quarter of 2018, the Company realigned the way in which it organized its operating segments in making operating decisions and assessing financial performance by combining the Identity and Credential segments. The combined segment is referred to as the Identity segment. All comparative segment information for fiscal 2018 has been reclassified to conform to the fiscal 2019 presentation.

The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.

Net revenue and gross profit information by segment for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Premises:
Net revenue	$	10,671		$	8,821		$	20,001		$	16,327
Gross profit		5,982			4,818			10,361			8,973
Gross profit margin		56	%		55	%		52	%		55	%
Identity:
Net revenue		11,566			11,473			21,758			20,495
Gross profit		3,901			3,335			8,226			5,688
Gross profit margin		34	%		29	%		38	%		28	%
Total:
Net revenue		22,237			20,294			41,759			36,822
Gross profit		9,883			8,153			18,587			14,661
Gross profit margin		44	%		40	%		45	%		40	%
Operating expenses:
Research and development		2,078			1,837			4,104			3,524
Selling and marketing		4,721			4,358			9,219			8,261
General and administrative		2,279			2,756			4,901			5,311
Restructuring and severance		(2	)		258			(14	)		368
Total operating expenses:		9,076			9,209			18,210			17,464
Income (loss) from operations		807			(1,056	)		377			(2,803	)
Non-operating income (expense):
Interest expense, net		(241	)		(472	)		(520	)		(948	)
Loss on extinguishment of debt, net		—			(1,369	)		—			(1,369	)
Foreign currency (losses) gains, net		(70	)		192			(72	)		154
Income (loss) before income taxes and noncontrolling interest	$	496		$	(2,705	)	$	(215	)	$	(4,966	)

Geographic Information

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Americas	$	15,945		$	15,905		$	30,670		$	29,137
Europe and the Middle East		3,423			2,523			6,353			4,831
Asia-Pacific		2,869			1,866			4,736			2,854
Total	$	22,237		$	20,294		$	41,759		$	36,822

Percentage of net revenue:
Americas		72	%		79	%		74	%		79	%
Europe and the Middle East		15	%		12	%		15	%		13	%
Asia-Pacific		13	%		9	%		11	%		8	%
Total		100	%		100	%		100	%		100	%

Concentration of Credit Risk

No customer accounted for 10% or more of net revenue for either of the three or six months ended June 30, 2019 or 2018. No customer accounted for 10% of net accounts receivable at June 30, 2019 or December 31, 2018.

Long-lived assets by geographic location as of June 30, 2019 and December 31, 2018 are as follows (in thousands):

	June 30,		December 31,
	2019		2018
Property and equipment, net:
Americas	$	1,061	$	1,060
Europe and the Middle East		28		43
Asia-Pacific		1,336		1,521
Total property and equipment, net	$	2,425	$	2,624

Operating lease ROU assets:
Americas	$	4,880	$	—
Europe and the Middle East		142		—
Asia-Pacific		503		—
Total operating lease right-of-use assets	$	5,525	$	—