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Segment Information
9 Months Ended
Oct. 03, 2021
Segment Reporting [Abstract]  
Segment Information

Note 11. Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its CEO as the CODM. The Company operates and reports in two segments: Connected Home and SMB:

 

Connected Home: Focused on consumers and consists of high-performance, dependable and easy-to-use WiFi internet networking solutions such as WiFi 6 and WiFi 6E Tri Band mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services, offering consumers a range of value added services focused on performance, security, privacy and premium support; and

 

SMB: Focused on small and medium-sized businesses and consists of business networking, wireless LAN, audio and video over Ethernet for Pro AV applications, security and remote management solutions that bring enterprise-class functionality to small and medium-sized businesses at an affordable price.

The Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial discipline. The leadership team of each segment is focused on product and service development efforts, both from a product marketing and engineering standpoint, to service the unique needs of their customers.

 

The results of the reportable segments are derived directly from the Company's management reporting system. The results are based on the Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income. Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income is used, in part, to

evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated indirect costs include corporate costs, such as corporate research and development, corporate marketing expense and general and administrative costs, amortization of intangibles, stock-based compensation expense, change in fair value of contingent consideration, restructuring and other charges, litigation reserves, net, and other income (expense), net.

Financial information for each reportable segment and a reconciliation of segment contribution income to income before income taxes is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 3,

2021

 

 

September 27,

2020

 

 

October 3,

2021

 

 

September 27,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

208,539

 

 

$

316,739

 

 

$

679,320

 

 

$

711,419

 

SMB

 

 

81,611

 

 

 

61,375

 

 

 

237,566

 

 

 

176,710

 

Total net revenue

 

$

290,150

 

 

$

378,114

 

 

$

916,886

 

 

$

888,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

22,558

 

 

$

55,964

 

 

$

101,189

 

 

$

105,738

 

Contribution margin

 

 

10.8

%

 

 

17.7

%

 

 

14.9

%

 

 

14.9

%

SMB

 

$

17,137

 

 

$

8,721

 

 

$

49,831

 

 

$

26,573

 

Contribution margin

 

 

21.0

%

 

 

14.2

%

 

 

21.0

%

 

 

15.0

%

Total segment contribution income

 

$

39,695

 

 

$

64,685

 

 

$

151,020

 

 

$

132,311

 

Corporate and unallocated costs

 

 

(20,203

)

 

 

(23,293

)

 

 

(62,744

)

 

 

(61,744

)

Amortization of intangibles (1)

 

 

(145

)

 

 

(1,470

)

 

 

(1,768

)

 

 

(4,508

)

Stock-based compensation expense

 

 

(6,210

)

 

 

(7,218

)

 

 

(20,072

)

 

 

(22,726

)

Change in fair value of contingent consideration

 

 

 

 

 

(187

)

 

 

3,003

 

 

 

(276

)

Restructuring and other charges

 

 

(222

)

 

 

(329

)

 

 

(3,378

)

 

 

(1,311

)

Litigation reserves, net

 

 

 

 

 

(22

)

 

 

(315

)

 

 

(44

)

Other income (expense), net (2)

 

 

(132

)

 

 

(417

)

 

 

15

 

 

 

(4,378

)

Income before income taxes

 

$

12,783

 

 

$

31,749

 

 

$

65,761

 

 

$

37,324

 

 

(1)

Amounts excluded amortization expense related to patents within purchased intangibles in cost of revenue.

(2)

Amounts included gain/loss on investments, net, of $(166,000) and $(174,000) for the three and nine months ended October 3, 2021, respectively, and $(0.9) million and $(5.4) million for the three and nine months ended September 27, 2020, respectively.

The CODM does not evaluate operating segments using discrete asset information.

Operations by Geographic Region

For reporting purposes, revenue is generally attributed to each geographic region based on the location of the customer.

The following table shows net revenue by geography for the periods indicated:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 3,

2021

 

 

September 27,

2020

 

 

October 3,

2021

 

 

September 27,

2020

 

 

 

(In thousands)

 

United States (U.S.)

 

$

188,009

 

 

$

271,683

 

 

$

606,735

 

 

$

624,321

 

Americas (excluding U.S.)

 

 

7,114

 

 

 

6,208

 

 

 

20,172

 

 

 

14,006

 

EMEA

 

 

56,940

 

 

 

63,705

 

 

 

179,802

 

 

 

154,212

 

APAC

 

 

38,087

 

 

 

36,518

 

 

 

110,177

 

 

 

95,590

 

Total net revenue

 

$

290,150

 

 

$

378,114

 

 

$

916,886

 

 

$

888,129

 

 

 

Long-lived assets by Geographic Region

The following table presents the Company's long-lived assets located in geographic areas, which consist of property and equipment, net and operating lease right-of-use assets, net:

 

 

 

As of

 

 

 

October 3,

2021

 

 

December 31,

2020

 

 

 

(In thousands)

 

United States (U.S.)

 

$

15,787

 

 

$

19,173

 

Americas (excluding U.S.)

 

 

3,563

 

 

 

2,845

 

EMEA

 

 

2,762

 

 

 

3,215

 

Singapore

 

 

4,870

 

 

 

5,964

 

APAC (excluding Singapore) (1)

 

 

12,904

 

 

 

14,294

 

Total

 

$

39,886

 

 

$

45,491

 

 

(1)

No individual country, other than disclosed above, represented more than 10% of the Company's total long-lived assets in the periods presented.