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Segment Information
6 Months Ended
Jul. 03, 2022
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: Focuses on consumers and provides high-performance, dependable, and easy-to-use premium WiFi internet networking solutions such as WiFi 6, WiFi 6E Tri-band and Quad-band mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services that provide consumers with a range of value-added services focused on performance, security, privacy and premium support; and

 

SMB: focuses on small and medium sized businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality 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 (loss). Segment contribution income (loss) includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income (loss) 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, goodwill impairment charge, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(In thousands)

 

July 3, 2022

 

 

June 27, 2021

 

 

July 3, 2022

 

 

June 27, 2021

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

128,864

 

 

$

229,863

 

 

$

259,206

 

 

$

470,781

 

SMB

 

 

94,360

 

 

 

78,948

 

 

 

174,576

 

 

 

155,955

 

Total net revenue

 

$

223,224

 

 

$

308,811

 

 

$

433,782

 

 

$

626,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution Income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

(546

)

 

$

31,328

 

 

$

(2,521

)

 

$

78,631

 

Contribution margin

 

 

(0.4

)%

 

 

13.6

%

 

 

(1.0

)%

 

 

16.7

%

SMB

 

$

16,665

 

 

$

16,410

 

 

$

30,161

 

 

$

32,694

 

Contribution margin

 

 

17.7

%

 

 

20.8

%

 

 

17.3

%

 

 

21.0

%

Total segment contribution income

 

$

16,119

 

 

$

47,738

 

 

$

27,640

 

 

$

111,325

 

Corporate and unallocated costs

 

 

(20,339

)

 

 

(21,251

)

 

 

(41,140

)

 

 

(42,541

)

Amortization of intangibles (1)

 

 

(128

)

 

 

(178

)

 

 

(257

)

 

 

(1,623

)

Stock-based compensation expense

 

 

(5,129

)

 

 

(6,902

)

 

 

(9,826

)

 

 

(13,862

)

Change in fair value of contingent consideration

 

 

 

 

 

3,003

 

 

 

 

 

 

3,003

 

Goodwill impairment charge

 

 

 

 

 

 

 

 

(44,442

)

 

 

 

Restructuring and other charges

 

 

(573

)

 

 

(886

)

 

 

(550

)

 

 

(3,156

)

Litigation reserves, net

 

 

 

 

 

(20

)

 

 

(20

)

 

 

(315

)

Other income (expenses), net (2)

 

 

(820

)

 

 

699

 

 

 

(1,802

)

 

 

147

 

Income (loss) before income taxes

 

$

(10,870

)

 

$

22,203

 

 

$

(70,397

)

 

$

52,978

 

 

 

(1)Amounts exclude amortization expense related to patents within purchased intangibles in cost of revenue.

(2)Amounts include gain/(loss) on investments, net, of $216,000 and $(303,000) for the three and six months ended July 3, 2022, respectively, and $41,000 and $(8,000) for the three and six months ended June 27, 2021, respectively. Amounts also included gain/(loss), net from derivatives not designated as hedging instruments of $2.3 million and $3.5 million, for the three and six months ended July 3, 2022, respectively, and $(0.4) million and $1.1 million for the three and six months ended June 27, 2021, 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:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(In thousands)

 

July 3, 2022

 

 

June 27, 2021

 

 

July 3, 2022

 

 

June 27, 2021

 

United States (U.S.)

 

$

139,275

 

 

$

205,108

 

 

$

280,280

 

 

$

418,726

 

Americas (excluding U.S.)

 

 

4,752

 

 

 

7,526

 

 

 

8,396

 

 

 

13,058

 

EMEA (1)

 

 

44,951

 

 

 

61,772

 

 

 

81,816

 

 

 

122,862

 

APAC (1)

 

 

34,246

 

 

 

34,405

 

 

 

63,290

 

 

 

72,090

 

Total net revenue

 

$

223,224

 

 

$

308,811

 

 

$

433,782

 

 

$

626,736

 

 

 

(1)No individual foreign country represented more than 10% of the Company's total net revenue in the periods presented.

 

 

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:

 

(In thousands)

 

July 3, 2022

 

 

December 31, 2021

 

United States (U.S.)

 

$

32,179

 

 

$

14,564

 

Americas (excluding U.S.)

 

 

3,017

 

 

 

3,283

 

EMEA

 

 

1,449

 

 

 

2,465

 

Singapore

 

 

4,202

 

 

 

4,767

 

APAC (excluding Singapore) (1)

 

 

10,448

 

 

 

11,432

 

Total

 

$

51,295

 

 

$

36,511

 

 

 

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