Segment Information

9 Months Ended

Oct. 01, 2023

Segment Reporting [Abstract]

Segment Information

Note 11. Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its CEO as the CODM. The Company operates and reports in two segments: Connected Home and SMB:

•Connected Home: Focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi internet networking solutions such as recently released WiFi 7, WiFi 6 and WiFi 6E Tri-band and Quad-band mesh systems, and routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services that provide consumers a range of value-added services focused on security, performance, privacy, and premium support; and

•SMB: Focuses on small and medium sized businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price.

The Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial discipline. The leadership team of each segment is focused on product and service development efforts, both from a product marketing and engineering standpoint, to service the unique needs of their customers.

The results of the reportable segments are derived directly from the Company's management reporting system. The results are based on the Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income (loss). Segment contribution income (loss) includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income (loss) 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 indirect costs include corporate costs, such as corporate research and development, corporate marketing expense and general and administrative costs, amortization of intangibles, stock-based compensation expense, goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

Financial information for each reportable segment and a reconciliation of segment contribution income (loss) to loss before income taxes is as follows:

	Three Months Ended						Nine Months Ended
(In thousands)	October 1, 2023			October 2, 2022			October 1, 2023			October 2, 2022
Net Revenue:
Connected Home	$	127,335		$	150,581		$	328,487		$	409,787
SMB		70,510			99,006			223,679			273,582
Total net revenue	$	197,845		$	249,587		$	552,166		$	683,369
Contribution Income (loss):
Connected Home	$	11,885		$	(512	)	$	9,558		$	(3,033	)
Contribution margin		9.3	%		(0.3	)%		2.9	%		(0.7	)%
SMB	$	14,913		$	23,683		$	43,382		$	53,844
Contribution margin		21.2	%		23.9	%		19.4	%		19.7	%
Total segment contribution income	$	26,798		$	23,171		$	52,940		$	50,811
Corporate and unallocated costs		(21,546	)		(21,392	)		(65,495	)		(62,532	)
Amortization of intangibles (1)		—			(129	)		(257	)		(386	)
Stock-based compensation expense		(4,285	)		(3,440	)		(13,637	)		(13,266	)
Goodwill impairment		—			—			—			(44,442	)
Intangibles impairment		(1,071	)		—			(1,071	)		—
Restructuring and other charges		(366	)		(361	)		(2,703	)		(911	)
Litigation reserves, net		(178	)		—			(178	)		(20	)
Other income (expenses), net (2)		2,280			638			11,685			(1,164	)
Income (loss) before income taxes	$	1,632		$	(1,513	)	$	(18,716	)	$	(71,910	)

(1)Amounts exclude amortization expense related to patents within purchased intangibles in cost of revenue.

(2)Amounts included gain/(loss), net from litigation settlements of $6.0 million for the nine months ended October 1, 2023, and gain/(loss), net from derivatives not designated as hedging instruments of $1.3 million and $2.2 million, for the three and nine months ended October 1, 2023, respectively, and $3.4 million and $6.9 million for the three and nine months ended October 2, 2022, respectively.

The CODM does not evaluate operating segments using discrete asset information.

Operations by Geographic Region

For reporting purposes, revenue is generally attributed to each geographic region based on the location of the customer.

The following table shows net revenue by geography:

	Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
United States (U.S.)	$	138,013	$	164,890	$	368,772	$	445,170
Americas (excluding U.S.)		3,005		4,470		10,779		12,866
EMEA (1)		35,684		44,827		111,023		126,643
APAC (1)		21,143		35,400		61,592		98,690
Total net revenue	$	197,845	$	249,587	$	552,166	$	683,369

(1) No individual foreign country represented more than 10% of the Company's total net revenue in the periods presented.

Long-lived assets by Geographic Region

The following table presents the Company's long-lived assets located in geographic areas, which consist of property and equipment, net, and operating lease right-of-use assets:

(In thousands)	October 1, 2023		December 31, 2022
United States (U.S.)	$	26,640	$	32,142
Americas (excluding U.S.)		4,805		2,367
EMEA		3,897		3,564
Singapore		6,364		4,032
APAC (excluding Singapore) (1)		6,341		7,988
Total	$	48,047	$	50,093

(1)No individual country represented more than 10% of the Company's total long-lived assets in the periods presented.