SEGMENT AND GEOGRAPHIC INFORMATION

The Company reports its financial results within two reportable segments: (1) Product Licensing and (2) Semiconductor and IP Licensing. There are certain corporate overhead costs that are not allocated to these reportable segments because these operating amounts are not considered in evaluating the operating performance of the Company’s business segments.

The Chief Executive Officer is also the Chief Operating Decision Maker (“CODM”) as defined by the authoritative guidance on segment reporting.

The Product Licensing segment, including the Company's DTS and FotoNation subsidiaries, licenses its technologies and intellectual property related to audio, digital radio and imaging solutions under the brands DTS, HD Radio and FotoNation. The Product Licensing solutions typically include the delivery of software or hardware-based solutions, combined with various other intellectual property, including know how, patents, trademarks, and copyrights. Product Licensing represents revenue derived primarily from the consumer electronics market and related applications servicing the home, automotive and mobile markets.

The Semiconductor and IP Licensing segment develops and licenses semiconductor technologies and IP to manufacturers, foundries, subcontract assemblers and others. The segment includes revenue generated from the technology and IP portfolios of Tessera, Inc., Invensas and Invensas Bonding Technologies, Inc. (formally Ziptronix, Inc.). Tessera, Inc. pioneered chip-scale packaging solutions. Invensas develops advanced semiconductor packaging and 3D interconnect solutions, including wafer bonding solutions, for applications such as smartphones, tablets, laptops, PCs, data centers and automobiles. The Company expands its technology and IP offerings in this segment through a combination of internal R&D and acquisitions. The Company also provides engineering services to customers in the form of technology demonstrations and technology transfers to assist their evaluation and adoption of the Company's technologies. Through the Company’s technology transfer service, the Company provides detailed documentation outlining design guidelines, process specifications, recommended equipment and process parameters as well as hands-on engineering support to assist its licensees in bringing up and qualifying its technologies at their facilities. This service allows licensees to readily leverage the Company’s years of experience and expertise in direct and hybrid bonding.

The Company does not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information. Reportable segments do not record inter-segment revenue and accordingly there are none to report. The Company does not allocate other income and expense to reportable segments. Although the CODM uses operating income to evaluate reportable segments, operating costs included in one segment may benefit other segments.

The following table sets forth the Company’s segment revenue, operating expenses and operating income (loss) for the three and six months ended June 30, 2018 and 2017 (in thousands):



	Three Months Ended,						Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Revenue:
Product licensing segment	$	51,161		$	46,362		$	104,377		$	74,063
Semiconductor and IP licensing segment	12,793			44,960			25,109			84,514
Total revenue	63,954			91,322			129,486			158,577
Operating expenses:
Product licensing segment	42,142			42,619			86,036			85,801
Semiconductor and IP licensing segment	18,942			21,374			38,369			44,137
Unallocated operating expenses (1)	30,476			39,829			65,178			87,447
Total operating expenses	91,560			103,822			189,583			217,385
Operating income (loss):
Product licensing segment	9,019			3,743			18,341			(11,738		)
Semiconductor and IP licensing segment	(6,149		)	23,586			(13,260		)	40,377
Unallocated operating expenses (1)	(30,476		)	(39,829		)	(65,178		)	(87,447		)
Total operating loss	$	(27,606	)	$	(12,500	)	$	(60,097	)	$	(58,808	)

(1) Unallocated operating expenses consist primarily of general and administrative expenses, such as administration, human resources, finance, information technology, corporation development and procurement. These expenses are not allocated because these amounts are not considered in evaluating the operating performance of the Company’s business segments.

A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., principally in Asia, and it is expected that this revenue will continue to account for a significant portion of total revenue in future periods. The table below lists the geographic revenue for the periods indicated (in thousands):



	Three Months Ended,								Six Months Ended,
	June 30, 2018				June 30, 2017				June 30, 2018				June 30, 2017
Japan	$	18,199	29	%	$	20,169	22	%	$	37,543	29	%	$	34,059	22	%
Korea	17,459		27		14,103		15		31,887		25		20,990		13
U.S.	13,952		22		33,680		37		25,579		20		67,086		42
Europe and Middle East	10,925		17		5,070		6		16,134		12		6,790		4
China	1,491		2		3,599		4		15,635		12		6,653		4
Other	1,928		3		14,701		16		2,708		2		22,999		15
	$	63,954	100	%	$	91,322	100	%	$	129,486	100	%	$	158,577	100	%

For the three months ended June 30, 2018 and 2017, there were one and three customers, respectively, that each accounted for 10% or more of total revenue. For the six months ended June 30, 2018 and 2017, there were one and three customers, respectively, that each accounted for 10% or more of total revenue. As of June 30, 2018 and December 31, 2017, there were one and three customers that each accounted for 10% or more of total accounts receivable, respectively.