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Segment Information
 9 Months Ended
Sep. 29, 2019
Segment Reporting [Abstract]  
Segment Information Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is regularly evaluated 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 and operates and reports in two segments: Connected Home, and SMB:

•
Connected Home: Focused on consumers and consists of high-performance, dependable and easy-to-use WiFi internet networking solutions, 4G/5G mobile products, and smart devices such as Orbi Voice smart speakers and Meural digital canvasses; and

•
SMB: Focused on small and medium-sized businesses and consists of business networking, storage, wireless LAN and security solutions that bring enterprise-class functionality to small and medium-sized businesses at an affordable price.

The Company believes that this structure reflects its current operational and financial management, and 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 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. Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income 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, separation expense, change in fair value of contingent consideration, restructuring and other charges, litigation reserves, net, interest income, net and other income (expense), net. The CODM does not evaluate operating segments using discrete asset information.

Financial information for each reportable segment and a reconciliation of segment contribution income to income before income taxes is as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 29, 2019
 
September 30, 2018
 
September 29, 2019
 
September 30, 2018
 
(In thousands, except percentage data)
Net revenue:
 
 
 
 
 
 
 
Connected Home
$
190,672

 
$
194,683

 
$
527,532

 
$
555,422

SMB
75,186

 
74,728

 
218,260

 
214,466

Total net revenue
$
265,858

 
$
269,411

 
$
745,792

 
$
769,888

Contribution income:
 
 
 
 
 
 
 
Connected Home
$
18,934

 
$
30,071

 
$
52,257

 
$
67,222

Contribution margin
9.9
%
 
15.4
%
 
9.9
%
 
12.1
%
SMB
$
18,750

 
$
20,593

 
$
52,855

 
$
51,750

Contribution margin
24.9
%
 
27.6
%
 
24.2
%
 
24.1
%
Total segment contribution income
$
37,684

 
$
50,664

 
$
105,112

 
$
118,972

Corporate and unallocated costs
(16,901
)
 
(22,391
)
 
(51,609
)
 
(69,727
)
Amortization of intangibles (1)
(1,520
)
 
(1,922
)
 
(5,212
)
 
(5,967
)
Stock-based compensation expense
(6,986
)
 
(6,118
)
 
(20,183
)
 
(20,228
)
Separation expense
—

 
(379
)
 
(264
)
 
(379
)
Change in fair value of contingent consideration
(199
)
 
—

 
(199
)
 
—

Restructuring and other charges
77

 
(1
)
 
(1,146
)
 
(1,368
)
Litigation reserves, net
(90
)
 
—

 
(100
)
 
(5
)
Interest income, net
639

 
985

 
2,122

 
2,806

Other income (expense), net
(403
)
 
955

 
425

 
425

Income before income taxes
$
12,301

 
$
21,793

 
$
28,946

 
$
24,529

_________________________
(1) 
Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue.


Operations by Geographic Region

The Company conducts business across three geographic regions: Americas, EMEA, and APAC. Net revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of net revenue per the authoritative guidance for revenue recognition, and net changes in deferred revenue. 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 for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
 
September 29,
2019
 
September 30,
2018
 
September 29,
2019
 
September 30,
2018
 
(In thousands)
United States (U.S.)
$
174,805

 
$
173,580

 
$
473,381

 
$
501,153

Americas (excluding U.S.)
3,874

 
2,352

 
10,497

 
9,205

EMEA
49,554

 
53,158

 
149,608

 
148,801

APAC
37,625

 
40,321

 
112,306

 
110,729

Total net revenue
$
265,858

 
$
269,411

 
$
745,792

 
$
769,888



Long-lived assets by Geographic Region
Long-lived assets include purchased intangibles, goodwill and property and equipment. The Company's property and equipment are located in the following geographic locations:
 
As of
 
September 29,
2019
 
December 31,
2018
 
(In thousands)
United States
$
4,698

 
$
4,993

Canada
3,641

 
4,359

EMEA
344

 
95

China
4,389

 
7,652

APAC (excluding China)
6,599

 
3,078

Total property and equipment, net
$
19,671

 
$
20,177