Note N - Segment Information

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE N—SEGMENT INFORMATION

Description of segments:

The Company operates under two reportable segments.

The Company’s segment information has been prepared in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the Company’s chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its Chief Executive Officer, who evaluates the Company’s performance and allocates resources based on segment revenues and operating income.

The Company’s reporting segments up until December 31, 2020 were: Home, Unified Communications and SmartVoice.

As a result of an organization change that took place starting in 2021 and the way management views the Company’s business operations, as of January 1, 2021, the Company’s reporting segments were changed to Cordless and IoAT. The classification of the Company’s business segments is based on a number of factors that management uses to evaluate, view and run the Company’s business operations, which include, but are not limited to, customer base, homogeneity of products and technology.

A description of the types of products provided by each business segment is as follows:

Cordless – This segment includes integrated circuit products targeted for cordless phones sold in retail or supplied by telecommunication service providers. Revenues from this segment amounted to 31% and 39% of the Company’s total revenues for the first nine months of 2021 and 2020, respectively, and 28% and 48% of the Company’s total revenues for the third quarter of 2021 and 2020, respectively.

IoAT (Internet of Audio Things) – This segment includes the following products:

(i)    SmartHome (home gateways and home automation) – Wireless chipset solutions for converged communication at home. Target applications include: home gateway devices supplied by telecommunication service and security providers with DECT/CAT-iq and ULE functionality for data and two-way voice; home automation and home security. Revenues from SmartHome products amounted to 16% and 14% of the Company’s total revenues for the first nine months of 2021 and 2020, respectively, and 18% and 14% of the Company’s revenues for the third quarter of 2021 and 2020, respectively.

(ii)    Unified Communications — Comprehensive suite of solutions for Unified Communications products, including office solutions for businesses of all sizes, from low-cost VoIP terminals with converged voice and data applications, to high-end conferencing systems. Revenues from the Company’s Unified Communications products represented 34% and 28% of its total revenues for the first nine months of 2021 and 2020, respectively, and 38% and 10% of the Company’s revenues for the third quarter of 2021 and 2020, respectively.

(iii)    SmartVoice — SmartVoice hardware and software solutions provide voice activation and recognition, sound event detection (SED), voice enhancement, always-on wake-word detection, far-end noise elimination targeted for mobile phones, mobile headsets/hearables, wearables, tablets, consumer home electronics, security systems and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. SmartVoice includes an active noise cancellation (ANC) solution for hearables (headphones and true wireless stereo (TWS) earbud) applications. Revenues from the Company’s SmartVoice products represented 18% of the Company’s total revenues for both the first nine months of 2021 and 2020, and 16% and 28% of the Company’s revenues for the third quarter of 2021 and 2020, respectively.

Segment data:

The Company derives the results of its business segments directly from its internal management reporting system and by using certain allocation methods. The accounting policies the Company uses to derive business segment results are substantially the same as those the Company uses for consolidation of its financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. The Company does not allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the three months ended September 30, 2021 and 2020 (unaudited):

	Three months ended September 30,
	Revenues				Income (loss) from operations
	2021		2020		2021		2020
Cordless	$	10,518	$	12,542	$	4,460	$	4,449
IoAT	$	27,238	$	13,478	$	549	$	(3,035	)
Total	$	37,756	$	26,020	$	5,009	$	1,414

Selected operating results information for each business segment was as follows for the nine months ended September 30, 2021 and 2020 (unaudited):

	Nine months ended September 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	33,436	$	32,538	$	13,512		$	11,223
IoAT	$	72,774	$	50,057	$	(2,559	)	$	(9,184	)
Total	$	106,210	$	82,595	$	10,953		$	2,039

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and nine months periods ended September 30, 2021 (unaudited):

	Three months			Nine months
Income from operations	$	5,009		$	10,953
Unallocated corporate, general and administrative expenses		(1,648	)		(2,897	)
Equity-based compensation expenses		(2,677	)		(8,212	)
Intangible assets amortization expenses		(349	)		(1,197	)
Amortization of employee retention expenses related to the acquisition of SoundChip		(34	)		(534	)
Financial income, net		216			951
Total consolidated income (loss) before taxes	$	517		$	(936	)

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and nine months ended September 30, 2020 (unaudited):

	Three months			Nine months
Income from operations	$	1,414		$	2,039
Unallocated corporate, general and administrative expenses		(628	)		(1,728	)
Equity-based compensation expenses		(2,433	)		(6,546	)
Intangible assets amortization expenses		(427	)		(636	)
Amortization of employee retention expenses related to the acquisition of SoundChip		(250	)		(250	)
Financial income, net		343			1,535
Total consolidated loss before taxes	$	(1,981	)	$	(5,586	)