REVENUE

Nature of Goods and Services

Our revenues are substantially derived from sales of our products.

In our Cinch Connectivity Solutions product group, we provide connectors and cable assemblies to the aerospace, military/defense, commercial, rugged harsh environment and communication markets. This group also includes passive jacks, plugs and cable assemblies that provide connectivity in networking equipment, as well as modular plugs and cable assemblies used within the structured cabling system, known as premise wiring.

In our Power Solutions and Protection group, we provide AC-DC and DC-DC power conversion devices and circuit protection products. Applications range from board-mount power to system-level architectures for servers, storage, networking, industrial and transportation.

In our Magnetic Solutions group, we provide an extensive line of integrated connector modules (ICM), where an Ethernet magnetic solution is integrated into a connector package. Products within the Company's magnetic solutions group are primarily used in networking and industrial applications.

The Company also provides incremental services to our customers in the form of training, technical support, special tooling, and other support as deemed necessary from time to time. For purposes of ASC

606,

all such incremental services were concluded to be immaterial in the context of the contracts.

Types of Contracts

Substantially all of the Company's revenue is derived from contracts with its customers under

one

of the following types of contracts:

•

Direct with customer:

This includes contracts with original equipment manufacturers (OEMs), original design manufacturers (ODMs), and contract manufacturers (CMs). The nature of Bel's products are such that they represent components which are installed in various end applications (

e.g.,

servers, aircraft, missiles and rail applications). The OEMs, ODMs or CMs that purchase our product for further installation are our end customers. Contracts with these customers are broad-based and cover general terms and conditions. Details such as order volume and pricing are typically contained in individual purchase orders, and as a result, we view each product on each purchase order as an individual performance obligation. Incremental services included in the contracts, such as training, tooling and other customer support are determined to be immaterial in the context of the contract, both individually and in the aggregate. Revenue under these contracts is generally recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.

•

Distributor:

Distribution customers buy product directly from Bel and sell it in the marketplace to end customers. Bel contracts directly with the distributor. These contracts are typically global in nature and cover a variety of our product groups. Similar to contracts with OEMs, ODMs and CMs, each product on each purchase order is considered an individual performance obligation. Revenue is recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.

•

Consignment:

These customers operate under a type of concession agreement whereby the Company ships goods to a warehouse or hub, where they will be pulled by the customer at a later date. The terms specified in the consignment contracts specify that the Company will

not

invoice the customer for product until it is pulled from the warehouse or hub. Once product arrives at the hub, it is generally

not

returned to Bel unless there is a warranty issue (see "Warranties" section below). Similar to the contracts described above, each product on each purchase order is considered an individual performance obligation. Under ASC

606,

it was determined that the majority of these hubs are customer-controlled, and therefore control transfers to the customer upon either delivery from Bel's warehouse, or arrival at the customer-controlled hub, depending upon the applicable shipping terms. Effective

January 1, 2018,

revenue is recognized as control of the product is transferred to the customer (for customer-controlled hubs, this is at the time product is shipped to the hub). This gave rise to an unbilled receivable balance, as we do

not

have the right to invoice the customer until product is pulled from the hub.

•

Licensing Agreements:

License agreements are only applicable to our Power Solutions and Protection product group, and include provisions for Bel to receive sales-based royalty income related to the licensing of Bel's patents or other intellectual property (IP) utilized by a

third

-party entity. Income related to these agreements is tracked by the licensee throughout the year based on their sales of product that utilize Bel's IP, and that data is reported to Bel either on a quarterly or annual basis, with payment generally received within

days of the reporting date. Our performance obligation is satisfied upon delivery of the IP at the beginning of the license period, as the licenses are functional in nature. However, the recognition of revenue associated with these licenses is subject to the sales- or usage-based constraint on variable consideration. As such, the Company records a constrained estimate of this variable consideration as royalty income in the period of the underlying customers' product sales, with adjustments made as actual licensee sales data becomes available.

Significant Payment Terms

Contracts with customers indicate the general terms and conditions in which business will be conducted for a set period of time. Individual purchase orders state the description, quantity and price of each product purchased. Payment for products sold under direct contracts with customers or contracts with distributors is typically due in full within

days from the transfer of title to customer. Payment for products sold under consignment contracts is typically due within

days of the customer pulling the product from the hub. Payment due related to our licensing agreements is generally within

days of receiving the licensee sales data, which is either on a quarterly or annual basis.

Since the customer agrees to a stated price for each product on each purchase order, the majority of contracts are

not

subject to variable consideration. However, the "ship and debit" arrangements with distributors, royalty income associated with our licensing agreements, and the product returns described above are each deemed to be variable consideration which requires the Company to make constrained estimates based on historical data.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by product group and sales channel, and includes a reconciliation of the disaggregated revenue to our reportable segments:

	Year Ended December 31, 2019
	Cinch Connectivity		Power Solutions		Magnetic
	Solutions		and Protection		Solutions		Consolidated

By Product Group:
North America	$	128,096	$	93,540	$	34,408	$	256,044
Europe		33,099		41,016		7,507		81,622
Asia		11,153		28,972		114,621		154,746
	$	172,348	$	163,528	$	156,536	$	492,412

By Sales Channel:
Direct to customer	$	113,115	$	110,587	$	132,911	$	356,613
Through distribution		59,233		52,941		23,625		135,799
	$	172,348	$	163,528	$	156,536	$	492,412

	Year Ended December 31, 2018
	Cinch Connectivity		Power Solutions		Magnetic
	Solutions		and Protection		Solutions		Consolidated

By Product Group:
North America	$	135,454	$	98,432	$	37,805	$	271,691
Europe		34,130		45,556		9,604		89,290
Asia		17,140		32,065		137,998		187,203
	$	186,724	$	176,053	$	185,407	$	548,184

By Sales Channel:
Direct to customer	$	120,333	$	120,787	$	157,539	$	398,659
Through distribution		66,391		55,266		27,868		149,525
	$	186,724	$	176,053	$	185,407	$	548,184

Contract Assets and Contract Liabilities

A contract asset results when goods or services have been transferred to the customer but payment is contingent upon a future event, other than passage of time. In the case of our consignment arrangements, we are unable to invoice the customer until product is pulled from the hub by the customer, which generates an unbilled receivable (a contract asset) when revenue is initially recognized.

A contract liability results when cash payments are received or due in advance of our performance obligation being met. We have certain customers who provide payment in advance of product being shipped, which results in deferred revenue (a contract liability).

The balances of the Company's contract assets and contract liabilities at

December 31, 2019

and

January 1, 2019

are as follows:

	December 31,		January 1,
	2019		2019

Contract assets - current (unbilled receivable)	$	16,318	$	15,799
Contract liabilities - current (deferred revenue)	$	653	$	1,036

The change in balance of our unbilled receivables from

January 1, 2019

December 31, 2019

primarily relates to a timing difference between the Company's performance (i.e. when our product is shipped to a customer-controlled hub) and the point at which the Company can invoice the customer per the terms of the customer contract (i.e. when the customer pulls our product from the customer-controlled hub).

A tabular presentation of the activity within the deferred revenue account for the year ended

December 31, 2019

is presented below:

	Year Ended
	December 31, 2019
Balance, January 1	$	1,036
New advance payments received		3,204
Recognized as revenue during period		(3,598	)
Currency translation		11
Balance, December 31	$	653

Transaction Price Allocated to Future Obligations

The aggregate amount of transaction price allocated to remaining performance obligations that have

not

been satisfied as of

December 31, 2019

related to contracts that exceed

one

year in duration amounted to

$16.9

million, with expected contract expiration dates that range from

2021

2025.

It is expected that

76%

of this aggregate amount will be recognized in

2021,

20%

will be recognized in

2022

and the remainder will be recognized in years beyond

2022.

The majority of the Company's total backlog of orders at

December 31, 2019

is related to contracts that have an original expected duration of

one

year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered to our customers. The transaction price related to these future obligations also excludes variable consideration consisting of sales or usage-based royalties earned on licensing agreements. The variability related to these sales or usage-based royalties will be resolved in the periods when the licensee generates sales related to the licensed intellectual property.

Other Practical Expedients:

In the application of the recognition and measurement principles of ASC

606,

the Company elected to utilize the following additional practical expedients which are provided for within the guidance:

	•	Financing Components : Bel has elected the practical expedient which enables management to disregard the effects of a financing component if the time difference between delivery of goods or services and payment for the goods or services is within one year.

	•	Costs to Obtain a Contract : As part of negotiations, Bel may incur incremental costs to obtain a contract. Incremental costs are only those costs that would not have been incurred if the contract had not been obtained (e.g. sales commissions). Bel has elected the practical expedient that allows incremental costs to obtain a contract to be expensed as incurred when the expected amortization period is one year or less.