SEGMENT INFORMATION AND GEOGRAPHIC DATA

9 Months Ended

Nov. 30, 2019

NOTE 17 - SEGMENT INFORMATION AND GEOGRAPHIC DATA

Our business activities are organized into two reportable segments – Telematics Systems and Software & Subscription Services. Our organizational structure is based on a number of factors that our CEO, the Chief Operating Decision Maker (“CODM”), uses to evaluate and operate the business, which include, but are not limited to, customer base, homogeneity of products and technology.

Our Telematics Systems segment offers a portfolio of wireless data communications products, which includes asset tracking units, mobile telematics devices, fixed and mobile wireless gateways and routers. These wireless networking devices underpin a wide range of our own, as well as third-party software and service solutions worldwide and are critical for applications demanding secure, reliable and business-critical communications. Telematics Systems segment revenues consist primarily of stand-alone product sales.

Our Software & Subscription Services segment offers cloud-based, application enablement and telematics service platforms that facilitate integration of our own applications, as well as those of third parties, through open Applications Programing Interfaces (“APIs”) to deliver full-featured IoT solutions to a wide range of customers and markets. Our scalable proprietary SaaS offerings enable rapid and cost-effective deployment of high-value solutions for customers all around the globe. Software & Subscription Services segment revenues include SaaS, professional services, devices sold with monitoring services, accessories, and amortization of deferred revenue for customized devices functional only with application subscriptions that are not sold separately.

Segment information for the three and nine months ended November 30, 2019 and 2018 is as follows (in thousands):

	Three Months Ended November 30, 2019												Three Months Ended November 30, 2018
	Operating Segments												Operating Segments
	Telematics Systems			Software & Subscription Services			Corporate Expenses			Total			Telematics Systems			Software & Subscription Services			Corporate Expenses			Total
Revenues	$	63,192		$	33,405					$	96,597		$	68,552		$	19,943					$	88,495
Gross profit	$	20,956		$	15,928					$	36,884		$	26,284		$	10,097					$	36,381
Gross margin		33	%		48	%					38	%		38	%		51	%					41	%
Adjusted EBITDA	$	4,518		$	7,254		$	(867	)	$	10,905		$	9,276		$	3,612		$	(1,465	)	$	11,423

	Nine Months Ended November 30, 2019												Nine Months Ended November 30, 2018
	Operating Segments												Operating Segments
	Telematics Systems			Software & Subscription Services			Corporate Expenses			Total			Telematics Systems			Software & Subscription Services			Corporate Expenses			Total
Revenues	$	188,782		$	90,121					$	278,903		$	222,004		$	57,416					$	279,420
Gross profit	$	70,277		$	39,688					$	109,965		$	86,189		$	28,104					$	114,293
Gross margin		37	%		44	%					39	%		39	%		49	%					41	%
Adjusted EBITDA	$	19,025		$	13,575		$	(3,479	)	$	29,121		$	31,772		$	9,907		$	(4,390	)	$	37,289

The amount shown for each period in the “Corporate Expenses” column above consists of expenses that are not allocated to the business segments. These non-allocated corporate expenses include salaries and benefits of certain corporate staff and expenses such as audit fees, investor relations, stock listing fees, director and officer liability insurance, and director fees and expenses.

Our CODM evaluates each segment based on earnings before interest, taxes, depreciation, amortization and certain other charges (“Adjusted EBITDA”) and we therefore consider Adjusted EBITDA to be a primary measure of operating performance of our operating segments. The adjustments to our net income (losses) prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) to calculate Adjusted EBITDA are itemized below (in thousands):

	Three Months Ended November 30,						Nine Months Ended November 30,
	2019			2018			2019			2018
Net income (loss)	$	(7,415	)	$	(522	)	$	(23,477	)	$	7,135
Investment income		(1,108	)		(1,398	)		(4,445	)		(3,258	)
Interest expense		4,987			5,134			15,998			11,566
Income tax provision		(2,637	)		(778	)		(6,236	)		496
Depreciation		5,018			2,261			14,054			6,602
Amortization of intangible assets		3,325			2,893			9,683			8,534
Stock-based compensation		3,652			2,941			9,378			8,088
Loss on extinguishment of debt		2,408			—			2,408			2,033
Impairment loss and equity in net loss of affiliate		—			445			530			1,414
Restructuring charges		848			1,247			3,120			5,196
Non-recurring legal expenses		957			2,116			5,541			5,253
Acquisition and integration related expenses		382			—			1,572			—
Gain on LoJack battery performance legal Settlement		—			(2,500	)		-			(15,833	)
Other		488			(416	)		995			63
Adjusted EBITDA	$	10,905		$	11,423		$	29,121		$	37,289

We do not have significant long-lived assets outside the United States.

Revenues by geographic area are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	November 30,				November 30,
	2019		2018		2019		2018
United States	$	69,961	$	67,088	$	201,678	$	208,152
Europe, Middle East and Africa		14,818		10,328		41,625		37,460
Latin America		1,044		832		4,307		4,961
Canada		2,236		3,249		7,553		6,951
Asia and Pacific Rim		3,044		3,465		7,394		10,704
All other		5,494		3,533		16,346		11,192
	$	96,597	$	88,495	$	278,903	$	279,420

Revenues by geographic area are based upon the country of billing. The geographic location of distributors and OEM customers may be different from the geographic location of the ultimate end users of the products and services provided by us. No single non-U.S. country accounted for more than 10% of our revenue in the three and nine months ended November 30, 2019 and 2018.