Segment Information and Geographic Data

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information and Geographic Data

9. Segment Information and Geographic Data

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal reporting used by the chief operating decision making group (“CODM”) to allocate resources and evaluate operating segment performance. Our CODM is comprised of our Chief Executive Officer and Chief Financial Officer. The CODM group is focused on assessment and resource allocation among the Industrial Inkjet, Productivity Software, and Fiery businesses.

Our operating segments are integrated through their reporting and operating structures, shared technology and practices, shared sales and marketing, and combined production facilities. Our enterprise management processes use financial information that is closely aligned with our three operating segments at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments, which is used by the CODM to allocate resources and assess the performance of each operating segment.

We classify our revenue, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our operating segments as follows:

Industrial Inkjet, which consists of our VUTEk and Matan super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration industrial digital inkjet printers; digital ultra-violet (“UV”), light emitting diode (“LED”), ceramic, and thermoforming ink, as well as a variety of textile inks including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing inks; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, and many other flexible and rigid substrates.

Productivity Software, which consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of: (i) a Packaging Productivity Suite with Radius at its core, (ii) a Commercial Print Productivity Suite with Monarch at its core, for enterprise print customers (iii) an SMB Productivity Suite with Pace at its core, for small and medium size print businesses (“SMB”), and (iv) Value Add Products (available with the suite and standalone) such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers.

Fiery, which consists of digital front ends (“DFEs”) that transform digital copiers and printers into high performance networked printing devices for the office and commercial printing market. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Command WorkStation, (iv) Fiery Self Serve, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Our CODM evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, amortization of identified intangibles, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the three and nine months ended September 30, 2015 and 2014 is summarized as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Industrial Inkjet
Revenue	$	122,566		$	95,472		$	305,815		$	277,315
Gross profit		42,428			37,693			104,863			106,643
Gross profit percentages		34.6	%		39.5	%		34.3	%		38.5	%
Productivity Software
Revenue	$	31,706		$	33,622		$	96,497		$	96,075
Gross profit		23,142			24,294			70,173			69,325
Gross profit percentages		73.0	%		72.3	%		72.7	%		72.2	%
Fiery
Revenue	$	74,422		$	68,580		$	223,657		$	205,937
Gross profit		51,500			47,590			157,562			141,471
Gross profit percentages		69.2	%		69.4	%		70.4	%		68.7	%

A reconciliation of our segment gross profit to our condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Segment gross profit	$	117,070		$	109,577		$	332,598		$	317,439
Stock-based compensation expense		(785	)		(780	)		(2,357	)		(1,894	)
Other items excluded from segment profit		—			—			(113	)		—
Gross profit	$	116,285		$	108,797		$	330,128		$	315,545

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

September 30, 2015	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net  Assets		Total
Goodwill	$	148,524	$	116,463		$	63,630	$	—	$	328,617
Identified intangible assets, net		108,270		24,230			665		—		133,165
Tangible assets, net of liabilities		101,552		(14,433	)		24,133		250,349		361,601
Net tangible and intangible assets	$	358,346	$	126,260		$	88,428	$	250,349	$	823,383
December 31, 2014
Goodwill	$	59,124	$	121,486		$	64,833	$	—	$	245,443
Identified intangible assets, net		26,935		34,425			1,211		—		62,571
Tangible assets, net of liabilities		97,994		(8,808	)		23,017		368,472		480,675
Net tangible and intangible assets	$	184,053	$	147,103		$	89,061	$	368,472	$	788,689

Corporate and unallocated assets consist of cash and cash equivalents, short-term investments, corporate headquarters facility, convertible notes, imputed financing obligation, taxes receivable, and taxes payable.

Geographic Regions

Our revenue originates in the U.S., China, the Netherlands, Germany, Italy, France, the U.K., Spain, Israel, Brazil, Australia, and New Zealand. We report revenue by geographic region based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the three and nine months ended September 30, 2015 and 2014 was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Americas	$	121,116	$	116,137	$	337,050	$	318,685
Europe, Middle East, and Africa (“EMEA”)		79,934		54,212		205,191		181,652
Asia Pacific (“APAC”)		27,644		27,325		83,728		78,990
Total revenue	$	228,694	$	197,674	$	625,969	$	579,327