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Note 3 - Revenue
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
3.  REVENUE  

 

Nature of Goods and Services

 

Our revenues are substantially derived from sales of our products.

 

In our 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.

 

 

Customer-Designated Hub Arrangements:  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 customer-designated hub 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 Note 1, "Description of Business and Summary of Significant Accounting Policies - Product Warranties" above).  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.  Revenue is therefore 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).  The accompanying consolidated balance sheet reflects a corresponding 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 30 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 30-90 days from the transfer of title to the customer.  Payment for products sold under our customer-designated hub arrangements is typically due within 60 days of the customer pulling the product from the hub.  Payment due related to our licensing agreements is generally within 30 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 geographic region and sales channel, and includes a reconciliation of the disaggregated revenue to our reportable segments: 

 

  

Year Ended December 31, 2022

 
  

Connectivity

  

Power Solutions

  

Magnetic

     
  

Solutions

  

and Protection

  

Solutions

  

Consolidated

 
                 

By Geographic Region:

                

North America

 $141,585  $217,381  $50,234  $409,200 

Europe

  35,596   42,121   10,903   88,620 

Asia

  9,904   28,864   117,645   156,413 
  $187,085  $288,366  $178,782  $654,233 
                 

By Sales Channel:

                

Direct to customer

 $112,128  $186,439  $135,247  $433,814 

Through distribution

  74,957   101,927   43,535   220,419 
  $187,085  $288,366  $178,782  $654,233 

 

  

Year Ended December 31, 2021

 
  

Connectivity

  

Power Solutions

  

Magnetic

     
  

Solutions

  

and Protection

  

Solutions

  

Consolidated

 
                 

By Geographic Region:

                

North America

 $126,303  $152,799  $38,335  $317,437 

Europe

  30,241   38,068   8,252   76,561 

Asia

  8,483   27,168   113,845   149,496 
  $165,027  $218,035  $160,432  $543,494 
                 

By Sales Channel:

                

Direct to customer

 $99,221  $134,635  $131,300  $365,156 

Through distribution

  65,806   83,400   29,132   178,338 
  $165,027  $218,035  $160,432  $543,494 

 

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 customer-controlled hub 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, 2022 and December 31, 2021 are as follows:

 

  

December 31,

  

December 31,

 
  

2022

  

2021

 
         

Contract assets - current (unbilled receivables)

 $18,244  $28,275 

Contract liabilities - current (deferred revenue)

 $8,847  $2,224 

 

The change in balance of our unbilled receivables from December 31, 2021 to  December 31, 2022 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).  The deferred revenue balance is included within other current liabilities on the accompanying balance sheets.

 

A tabular presentation of the activity within the deferred revenue account for the year ended  December 31, 2022 is presented below:

 

  

Year Ended

 
  

December 31, 2022

 

Balance, January 1

 $2,224 

New advance payments received

  10,624 

Recognized as revenue during period

  (3,944)

Other adjustments

  5 

Currency translation

  (62)

Balance, December 31

 $8,847