Segment Information

12 Months Ended

Dec. 31, 2021

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 WiFi internet networking solutions such as WiFi 6, WiFi 6E Tri-band and Quad-band mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services that provide consumers with a range of value-added services focused on performance, security, 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. 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, and other income (expenses), net.

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

	Year ended December 31,
	2021			2020			2019
	(In thousands, except percentage data)
Net Revenue:
Connected Home	$	853,472		$	1,007,545		$	711,391
SMB		314,601			247,657			287,372
Total net revenue	$	1,168,073		$	1,255,202		$	998,763
Contribution Income:
Connected Home	$	116,889		$	152,512		$	67,775
Contribution margin		13.7	%		15.1	%		9.5	%
SMB	$	62,136		$	42,174		$	67,282
Contribution margin		19.8	%		17.0	%		23.4	%
Total segment contribution income	$	179,025		$	194,686		$	135,057
Corporate and unallocated costs		(83,883	)		(83,867	)		(70,525	)
Amortization of intangibles (1)		(1,897	)		(5,952	)		(6,731	)
Stock-based compensation expense		(25,995	)		(30,505	)		(29,137	)
Separation expense		—			—			(264	)
Change in fair value of contingent consideration		3,003			2,928			25
Restructuring and other charges		(3,341	)		(1,702	)		(2,077	)
Litigation reserves, net		(315	)		(44	)		(160	)
Other income (expenses), net (2)		(1,093	)		(4,741	)		3,383
Income before income taxes	$	65,504		$	70,803		$	29,571

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

⁽²⁾ Amounts included gain/loss on investments, net, of $(1.4) million, $(6.2) million and $(0.2) million for the years ended December 31, 2021, 2020 and 2019, 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:

	Year Ended December 31,
	2021		2020		2019
	(In thousands)
United States (U.S.)	$	759,865	$	866,161	$	637,566
Americas (excluding U.S.)		26,461		31,810		15,440
EMEA		229,829		221,665		200,099
APAC		151,918		135,566		145,658
Total net revenue	$	1,168,073	$	1,255,202	$	998,763

Long-lived assets by Geographic Region

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

	As of
	December 31, 2021		December 31, 2020
	(In thousands)
United States (U.S.)	$	14,564	$	19,173
Americas (excluding U.S.)		3,283		2,845
EMEA		2,465		3,215
Singapore		4,767		5,964
APAC (excluding Singapore) (1)		11,432		14,294
Total	$	36,511	$	45,491

^{_______________________}

^{(1) No individual country, other than disclosed above, represented more than 10% of the Company’s total long-lived assets in the periods presented.}

Significant Customers

For the year ended December 31, 2021, the Company had two customers, primarily within the Connected Home segment, that each individually accounted for 15% and 13% of net revenue, respectively. The Company had two customers, primarily within the Connected Home segment, that each individually accounted for 15% and 14% of net revenue for the year ended December 31, 2020, and 16% of net revenue for the year ended December 31, 2019, respectively.