Segment Information

6 Months Ended

Jun. 30, 2022

Segment Information

Segment Information

Note 16 – Segment Information

In May 2022, we announced a three-year strategic transformation plan that we believe will enable us to build on our strong solution portfolio and market position, enhance our enterprise go-to-market strategy, accelerate revenue growth, and drive efficiencies to support margin expansion and increased profitability. In conjunction with the strategic transformation plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, we will begin reporting under the following two lines of business, which will be our reportable operating segments: Digital Agreements and Security Solutions. We expect to manage Digital Agreements for accelerated growth and market share gains and Security Solutions for cash flow given its more modest growth profile.

Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker (CODM), in deciding how to allocate resources and in assessing performance. Our chief operating decision maker, who is our chief executive officer, manages the business under two operating segments, which are our reportable segments: Digital Agreements and Security Solutions.

● Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include our e-signature solution and our Virtual Room solution. As our transformation plan progresses, we expect to include other cloud-based security modules associated with the secure transaction lifecycle of identity verification, authentication, virtual interaction, e-transactions and e-vaulting (storage) in the Digital Agreements segment. This segment also includes costs attributable to our transaction cloud platform.

● Security Solutions. Security Solutions consist of our broad portfolio of software products and/or software development kits (SDKs) that are used to build applications designed to defend against attacks on digital transactions across online environments, devices and applications. These solutions, which are largely on-premises software products, include identity verification, multi-factor authentication and transaction signing, such as mobile application security, mobile software tokens, and Digipass tokens that are not cloud connected devices.

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue, sales and marketing, and research and development expenses that are incurred directly by a segment. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment.

The tables below set forth information about our operating segments for the three and six months ended June 30, 2022 and 2021, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Digital Agreements
Revenue	$	10,454	$	9,527	$	23,755	$	19,591
Gross profit	$	7,647	$	6,626	$	17,933	$	14,080
Gross margin		73%		70%		75%		72%
Operating income (loss)	$	101	$	(795)	$	1,789	$	(731)
Security Solutions
Revenue	$	42,336	$	42,750	$	81,482	$	83,461
Gross profit	$	27,859	$	28,205	$	54,251	$	54,993
Gross margin		66%		66%		67%		66%
Operating income	$	8,631	$	10,035	$	17,118	$	16,599
Total Company:
Revenue	$	52,790	$	52,277	$	105,237	$	103,052
Gross profit	$	35,506	$	34,831	$	72,184	$	69,073
Gross margin		67%		67%		69%		67%
Statements of Operations reconciliation:
Segment operating income	$	8,732	$	9,240	$	18,907	$	15,868
Operating expenses not allocated at the segment level:
Corporate operating expenses	$	15,753	$	16,573	$	33,789	$	30,922
Amortization		1,217		1,526		2,599		3,099
Operating loss	$	(8,238)	$	(8,859)	$	(17,481)	$	(18,153)
Interest income, net		35		2		18		6
Other income (expense), net		(675)		1,029		14,972		667
Loss before income taxes	$	(8,878)	$	(7,828)	$	(2,491)	$	(17,480)

The following tables illustrate the disaggregation of revenues by products and services, including a reconciliation of the disaggregated revenues to revenues from our two operating segments for the three and six months ended June 30, 2022 and 2021.

		Three Months Ended
		June 30, 2022				June 30, 2021
		Digital Agreements		Security Solutions		Digital Agreements		Security Solutions
Subscription	$	8,736	$	11,093	$	7,780	$	7,966
Maintenance and support		1,408		10,770		1,512		11,522
Professional services and other		310		1,690		235		3,811
Hardware products		-		18,783		-		19,451
Total Revenue	$	10,454	$	42,336	$	9,527	$	42,750

		Six Months Ended
		June 30, 2022				June 30, 2021
		Digital Agreements		Security Solutions		Digital Agreements		Security Solutions
Subscription	$	20,407	$	22,691	$	15,939	$	16,189
Maintenance and support		2,760		21,364		2,889		22,668
Professional services and other		588		3,293		718		7,530
Hardware products		-		34,134		45		37,074
Total Revenue	$	23,755	$	81,482	$	19,591	$	83,461

We allocate Goodwill by reporting unit, in accordance with ASC 350. Refer to Note 5 – Goodwill for additional information. All other assets and liabilities are unallocated, as the CODM does not evaluate these items at the segment level when addressing segment performance or allocating resources.