Segment Reporting, Geographic Information, and Concentration of Credit Risk

9 Months Ended

Sep. 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 nine months ended September 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Premises:
Net revenue	$	12,938		$	9,364		$	32,939		$	25,691
Gross profit		7,212			5,363			17,573			14,336
Gross profit margin		56	%		57	%		53	%		56	%
Identity:
Net revenue		10,088			10,658			31,846			31,153
Gross profit		3,314			3,121			11,540			8,809
Gross profit margin		33	%		29	%		36	%		28	%
Total:
Net revenue		23,026			20,022			64,785			56,844
Gross profit		10,526			8,484			29,113			23,145
Gross profit margin		46	%		42	%		45	%		41	%
Operating expenses:
Research and development		2,125			1,860			6,229			5,384
Selling and marketing		4,470			3,915			13,689			12,176
General and administrative		2,591			2,641			7,492			7,952
Increase in fair value of earnout liability		175			—			175			—
Restructuring and severance		(87	)		223			(101	)		591
Total operating expenses:		9,274			8,639			27,484			26,103
Income (loss) from operations		1,252			(155	)		1,629			(2,958	)
Non-operating income (expense):
Interest expense, net		(246	)		(291	)		(766	)		(1,239	)
Loss on extinguishment of debt, net		—			—			—			(1,369	)
Foreign currency gains, net		168			200			96			354
Income (loss) before income taxes and noncontrolling interest	$	1,174		$	(246	)	$	959		$	(5,212	)

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 nine months ended September 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Americas	$	17,825		$	15,035		$	48,495		$	44,172
Europe and the Middle East		2,436			2,161			8,790			6,992
Asia-Pacific		2,765			2,826			7,500			5,680
Total	$	23,026		$	20,022		$	64,785		$	56,844

Percentage of net revenue:
Americas		77	%		75	%		75	%		78	%
Europe and the Middle East		11	%		11	%		14	%		12	%
Asia-Pacific		12	%		14	%		11	%		10	%
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 nine months ended September 30, 2019 or 2018. No customer accounted for 10% of net accounts receivable at September 30, 2019 or December 31, 2018.

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

	September 30,		December 31,
	2019		2018
Property and equipment, net:
Americas	$	918	$	1,060
Europe and the Middle East		58		43
Asia-Pacific		1,226		1,521
Total property and equipment, net	$	2,202	$	2,624

Operating lease ROU assets:
Americas	$	4,636	$	—
Europe and the Middle East		117		—
Asia-Pacific		380		—
Total operating lease right-of-use assets	$	5,133	$	—