Note 13 - Industry, Segment and Geographic Financial Information

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

13. Industry, Segment and Geographic Financial Information

The Company distributes software developed by others through resellers indirectly to customers worldwide.  We also resell computer software and hardware developed by others and provide technical services directly to customers worldwide.

FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s Chief Executive Officer, who has been identified as the Company’s CODM, evaluates the performance of both reportable segments based on operating income. Net sales, gross profit, and operating expenses are also monitored closely. This information is used to measure segment profitability, allocate resources, and make budgeting and forecasting decisions about the reportable segments. The CODM also uses these measures to monitor trends in year over year performance comparisons, sequential quarter performance comparisons, and to compare actual results to forecasts. More disaggregated information about operating expense is generally only reviewed by the CODM on a consolidated basis. Operating income represents net sales less costs of sales, excluding depreciation and amortization expense and operating expenses. Net sales and cost of sales, excluding depreciation and amortization expense are directly attributed to each segment. The majority of operating expenses are also directly attributed to each segment, while certain other operating expenses are allocated to the segments in a reasonable manner considering the specific facts and circumstances of the expenses being allocated.

The Company is organized into two reportable operating segments. The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. The “Solutions” segment is a provider of cloud solutions and value-added reseller of software, hardware and services to customers worldwide. The Company's reportable segments are based on products and services delivered, and the Company's CODM decides how to assess performance and allocate resources based on segment.

Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit. The Company only identifies accounts receivable, vendor prepayments, inventory, goodwill and intangible assets by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment. The following segment reporting information of the Company is provided:

	Year ended
	December 31,
	2024			2023
Net Sales:
Distribution	$	441,940		$	325,262
Solutions		23,667			26,751
		465,607			352,013
Cost of Sales:
Distribution	$	363,648		$	271,899
Solutions		10,879			15,867
		374,527			287,766
Direct Costs:
Distribution	$	31,888		$	22,467
Solutions		5,455			5,238
		37,343			27,705
Segment Income: (1)
Distribution	$	46,404		$	30,896
Solutions		7,333			5,646
Segment Income		53,737			36,542
General and administrative	$	19,165		$	16,625
Acquisition related costs		2,311			629
Depreciation and amortization expense		4,269			2,798
Interest, net		917			927
Foreign currency transaction loss		(273	)		(636	)
Change in fair value of acquisition contingent consideration		3,618			—
Income before taxes	$	25,018		$	16,781

(1) Excludes general corporate expenses including acquisition related costs, amortization and depreciation expense, interest, foreign currency transaction (loss) gain, and change in fair value of acquisition contingent consideration.

	As of		As of
	December 31,		December 31,
Selected Assets by Segment:	2024		2023
Distribution	$	394,809	$	242,927
Solutions		21,882		37,992
Segment Select Assets		416,691		280,919
Corporate Assets		52,488		54,179
Total Assets	$	469,179	$	335,098

Geographic areas and net sales mix related to operations for the year ended December 31, 2024 and 2023 were as follows. Net sales is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.

	Year ended
	December 31, 2024
	Distribution		Solutions		Total
Geography
USA	$	333,197	$	8,652	$	341,849
Europe and United Kingdom		82,039		13,889		95,928
Canada		26,704		1,126		27,830
Total net sales	$	441,940	$	23,667	$	465,607
Timing of Revenue Recognition
Transferred at a point in time where the Company is principal (1)	$	399,360	$	15,847	$	415,207
Transferred at a point in time where the Company is agent (2)		42,580		7,820		50,400
Total net sales	$	441,940	$	23,667	$	465,607

	Year ended
	December 31, 2023
	Distribution		Solutions		Total
Geography
USA	$	244,261	$	15,425	$	259,686
Europe and United Kingdom		57,253		10,167		67,420
Canada		23,748		1,159		24,907
Total net sales	$	325,262	$	26,751	$	352,013
Timing of Revenue Recognition
Transferred at a point in time where the Company is principal (1)	$	286,051	$	19,853	$	305,904
Transferred at a point in time where the Company is agent (2)		39,211		6,898		46,109
Total net sales	$	325,262	$	26,751	$	352,013

(1) Includes net sales from third-party hardware and software products.

(2) Includes net sales from third-party maintenance, software support and services.

Geographic identifiable assets related to operations as of December 31, 2024 and 2023 were as follows.

	December 31,		December 31,
Identifiable Assets by Geographic Areas	2024		2023
USA	$	278,957	$	171,080
Canada		34,352		23,994
Europe and United Kingdom		155,870		140,024
Total	$	469,179	$	335,098

For the year ended December 31, 2024, the Company had three customers that accounted for 18%, 14% and 11%, respectively, of consolidated net sales and as of December 31, 2024, 12%, 6% and 19%, respectively, of total net accounts receivable. For the year ended December 31, 2024, the Company had one vendor that accounted for 10% of our consolidated purchases. These customers and vendors are all in the Company's Distribution segment.

For the year ended December 31, 2023, the Company had two customers that accounted for 20%, and 15%, respectively, of consolidated net sales and as of December 31, 2023, 15% and 6%, respectively, of total net accounts receivable. For the year ended December 31, 2023, the Company had one vendor that accounted for 14% of our consolidated purchases. These customers and vendors are all in the Company's Distribution segment. 

Our top five customers accounted for 54% and 51% of consolidated net sales for the years ended December 31, 2024 and 2023, respectively.