Segment Information

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Segment Information

17. Segment information

The Company defines its operating segments as components of its business where separate financial information is available and used by the chief operating decision maker (“CODM”) in deciding how to allocate resources to its segments and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The Company has identified two reportable segments for financial reporting purposes: Software and Client Engineering Services. The primary measure of segment operating performance is Adjusted EBITDA, which is defined as net income (loss) adjusted for income tax expense (benefit), interest expense, interest income and other, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairment charges and other special items as determined by management. Adjusted EBITDA includes an allocation of corporate headquarters costs.

The Software reportable segment derives revenue from the sale and lease of software licenses and cloud solutions in the areas of simulation, high-performance computing, and artificial intelligence to design and optimize high-performance, efficient, innovative and sustainable products and processes for improved business performance. The software services and software-related services component of this segment includes consulting, implementation services, training, and software-related services focused on product design and development expertise and analysis from the component level up to complete product engineering at any stage of the lifecycle. To a much lesser extent, the Software segment includes revenue from the sale of hardware products.

The Client Engineering Services reportable segment provides support to the Company’s customers with long-term ongoing expertise. The Company hires simulation specialists, industrial designers, design engineers, materials experts, development engineers, manufacturing engineers, data scientists, and information technology specialists for placement at customer sites for specific customer-directed assignments.

The “All other” represents innovative services and products, including toggled ®, the Company’s LED lighting business. toggled® is focused on developing and selling next-generation solid state lighting technology along with communication and control protocols based, in part, on intellectual property for the direct replacement of fluorescent tubes with LED lighting. Other businesses combined within Other include potential services and product concepts that are still in their development stages.

Inter-segment sales are not significant for any period presented. The CODM does not review asset information by segment when assessing performance, therefore no asset information is provided for reportable segments. The accounting policies of the segments are the same as those described in Note 2—Summary of significant accounting policies.

The following tables are in thousands:

Year ended December 31, 2022	Software		CES		All other			Total
Revenue	$	537,169	$	28,883	$	6,169		$	572,221
Adjusted EBITDA	$	107,638	$	2,576	$	(1,614	)	$	108,600

Year ended December 31, 2021	Software		CES		All other			Total
Revenue	$	485,569	$	39,282	$	7,328		$	532,179
Adjusted EBITDA	$	82,845	$	4,723	$	(2,315	)	$	85,253

Year ended December 31, 2020	Software		CES		All other			Total
Revenue	$	418,165	$	44,320	$	7,436		$	469,921
Adjusted EBITDA	$	53,820	$	5,129	$	(1,661	)	$	57,288

	Year ended December 31,
	2022			2021			2020
Reconciliation of Adjusted EBITDA to GAAP (loss) income    before income taxes:
Adjusted EBITDA	$	108,600		$	85,253		$	57,288
Stock-based compensation expense		(84,787	)		(44,549	)		(21,355	)
Interest expense		(4,377	)		(12,065	)		(11,598	)
Depreciation and amortization		(35,504	)		(25,644	)		(23,806	)
Restructuring expense		—			(5,053	)		—
Special adjustments, interest income and other (1)		(12,145	)		1,770			1,503
(Loss) income before income taxes	$	(28,213	)	$	(288	)	$	2,032

(1)The year ended December 31, 2022, includes $16.6 million expense on repurchase of convertible senior notes, $6.8 million currency losses on acquisition-related intercompany loans, $7.2 million gains from the mark-to-market adjustment of contingent consideration associated with the World Programming acquisition and $4.1 million of interest income. The year ended December 31, 2021, includes $1.2 million currency gains on acquisition-related intercompany loans and the year ended December 31, 2020, includes $1.0 million of proceeds from settlements related to an historical acquisition and $0.6 million of severance expense.

Revenue is attributed to geographic areas based on the country of origin. The following table provides sales to external customers and long-lived assets for each of the geographic areas in which the Company operates (in thousands):

	Revenue						Long-lived assets (1)
	Year ended December 31,						December 31,
	2022		2021		2020		2022		2021
United States	$	274,635	$	259,344	$	233,611	$	56,853	$	54,559
Other countries		13,425		12,249		12,127		5,841		8,777
Total Americas		288,060		271,593		245,738		62,694		63,336
Germany		51,495		52,227		48,559		25,332		7,212
France		19,442		19,694		15,287		740		1,155
Other countries		69,769		52,264		49,403		39,405		48,474
Total Europe, Middle East and Africa		140,706		124,185		113,249		65,477		56,841
Japan		40,335		42,322		41,109		944		1,346
Other countries		103,120		94,079		69,825		5,585		7,112
Total Asia Pacific		143,455		136,401		110,934		6,529		8,458
Total	$	572,221	$	532,179	$	469,921	$	134,700	$	128,635

(1)Includes property and equipment, net and definite-lived intangible assets, net.

Concentrations of credit risk

The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and trade receivables. The risk with respect to trade receivables is partially mitigated by the diversity, both by geography and by industry, of the Company’s customer base. The Company’s accounts receivable is derived from sales to a large number of direct customers and resellers around the world. Sales to customers within the automotive industry accounted for approximately 29%, 33%, and 36% of the Company’s 2022, 2021 and 2020 revenue, respectively, with no other industry representing more than 10% of revenue. No individual customer accounted for 10% or more of revenue in the years ended December 31, 2022, 2021 or 2020.