Segment Information

9 Months Ended

Sep. 30, 2022

Segment Information

Segment Information

Note 16 – Segment Information

In May 2022, the Company announced a three-year strategic transformation plan that will enable it to build on its strong solution portfolio and market position, enhance its enterprise go-to-market strategy, accelerate revenue growth, and drive efficiencies to support margin expansion and increased profitability. In conjunction with the strategic transformation plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, the Company began reporting under the following two lines of business, which are its reportable operating segments: Digital Agreements and Security Solutions. The Company expects to manage Digital Agreements for accelerated growth and market share gains and Security Solutions for cash flow given its more modest growth profile.

Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker (CODM), in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

● Digital Agreements. Digital Agreements consists of solutions that enable clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include our e-signature solution and our Virtual Room solution. As the transformation plan progresses, the Company expects to include other cloud-based security modules associated with the secure transaction lifecycle of identity verification, authentication, virtual interaction, e-transactions and e-vaulting (storage) in the Digital Agreements segment. This segment also includes costs attributable to its transaction cloud platform.

● Security Solutions. Security Solutions consist of a broad portfolio of software products and/or software development kits (SDKs) that are used to build applications designed to defend against attacks on digital transactions across online environments, devices and applications. These solutions, which are largely on-premises software products, include identity verification, multi-factor authentication and transaction signing, such as mobile application security, mobile software tokens, and Digipass tokens that are not cloud-connected devices.

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue, sales and marketing, and research and development expenses that are incurred directly by a segment. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment.

The tables below set forth information about the Company’s operating segments for the three and nine months ended September 30, 2022 and 2021, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands, except percentages)	2022		2021		2022		2021
Digital Agreements
Revenue	$	12,200	$	10,129	$	35,955	$	29,720
Gross profit	$	9,736	$	7,280	$	27,669	$	21,303
Gross margin		80%		72%		77%		72%
Operating income (loss)	$	2,160	$	79	$	2,823	$	(2,027)
Security
Revenue	$	44,947	$	42,147	$	126,429	$	125,608
Gross profit	$	28,695	$	29,115	$	82,946	$	84,165
Gross margin		64%		69%		66%		67%
Operating income	$	5,711	$	10,689	$	21,399	$	25,610
Total Company:
Revenue	$	57,147	$	52,276	$	162,384	$	155,328
Gross profit	$	38,431	$	36,395	$	110,615	$	105,468
Gross margin		67%		70%		68%		68%
Statements of Operations reconciliation:
Segment operating income	$	7,871	$	10,768	$	24,222	$	23,583
Corporate operating expenses not allocated at the segment level		13,496		12,784		47,328		43,752
Total Company operating loss	$	(5,625)	$	(2,016)	$	(23,106)	$	(20,169)

The following tables illustrate the disaggregation of revenues by category and services, including a reconciliation of the disaggregated revenues to revenues from the Company’s two operating segments for the three and nine months ended September 30, 2022 and 2021:
​

		Three Months Ended
		September 30, 2022				September 30, 2021
		Digital Agreements		Security Solutions		Digital Agreements		Security Solutions
(In thousands)
Subscription	$	10,321	$	11,941	$	8,262	$	9,545
Maintenance and support		1,693		11,158		1,580		11,154
Professional services and other		186		2,034		267		3,560
Hardware products		—		19,814		20		17,888
Total Revenue	$	12,200	$	44,947	$	10,129	$	42,147

		Nine Months Ended
		September 30, 2022				September 30, 2021
		Digital Agreements		Security Solutions		Digital Agreements		Security Solutions
(In thousands)
Subscription	$	30,728	$	34,632	$	24,201	$	25,734
Maintenance and support		4,453		32,522		4,469		33,822
Professional services and other		774		5,327		985		11,090
Hardware products		—		53,948		65		54,962
Total Revenue	$	35,955	$	126,429	$	29,720	$	125,608

The Company allocates goodwill by reporting unit, in accordance with ASC 350 – Goodwill and Other. Asset information by segment is not reported to or reviewed by the CODM to allocate resources, and therefore, the Company has not disclosed asset information for the segments.