Business Segments and International Operations

6 Months Ended

May 31, 2019

Business Segments and International Operations

Operating segments are components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and assess performance. Our chief operating decision maker is our Chief Executive Officer.

We operate as three distinct business segments: OpenEdge, Data Connectivity and Integration, and Application Development and Deployment. Ipswitch became part of our OpenEdge business segment as of the date of acquisition.

We do not manage our assets or capital expenditures by segment or assign other income (expense) and income taxes to segments. We manage and report such items on a consolidated company basis. Further, the following expenses are not allocated to our segments as we also manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization of intangibles, stock-based compensation, fees related to shareholder activist, restructuring expenses, and acquisition-related expenses.

The following table provides revenue and contribution margin from our reportable segments and reconciles to our consolidated income from continuing operations before income taxes:



	Three Months Ended						Six Months Ended
	May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
(In thousands)				As Adjusted⁽¹⁾						As Adjusted⁽¹⁾
Segment revenue:
OpenEdge	$	67,820		$	69,607		$	133,072		$	136,270
Data Connectivity and Integration	12,932			3,411			18,932			12,903
Application Development and Deployment	19,243			19,846			37,540			39,101
Total revenue	99,995			92,864			189,544			188,274
Segment costs of revenue and operating expenses:
OpenEdge	19,097			15,013			37,412			30,775
Data Connectivity and Integration	1,806			1,674			3,306			3,303
Application Development and Deployment	5,547			6,199			10,974			12,997
Total costs of revenue and operating expenses	26,450			22,886			51,692			47,075
Segment contribution margin:
OpenEdge	48,723			54,594			95,660			105,495
Data Connectivity and Integration	11,126			1,737			15,626			9,600
Application Development and Deployment	13,696			13,647			26,566			26,104
Total contribution margin	73,545			69,978			137,852			141,199
Other unallocated expenses⁽²⁾	58,804			51,428			107,702			103,518
Income from operations	14,741			18,550			30,150			37,681
Other expense, net	(2,317		)	(1,284		)	(4,320		)	(2,869		)
Income before income taxes	$	12,424		$	17,266		$	25,830		$	34,812
⁽¹⁾The Company adopted ASC 606 effective December 1, 2018 using the full retrospective method. See Note 1. Nature of Business and Basis of Presentation for further information.
⁽²⁾The following expenses are not allocated to our segments as we manage and report our business in these functional areas on a consolidated basis only: certain product development and corporate sales and marketing expenses, customer support, administration, amortization of intangibles, stock-based compensation, fees related to shareholder activist, restructuring expenses, and acquisition-related expenses.

Our revenues are derived from licensing our products, and from related services, which consist of maintenance, hosting services, and consulting and education. Information relating to revenue from customers by revenue type is as follows (in thousands):



	Three Months Ended				Six Months Ended
	May 31, 2019		May 31, 2018		May 31, 2019		May 31, 2018
(In thousands)			As Adjusted⁽¹⁾				As Adjusted⁽¹⁾
Performance obligations transferred at a point in time:
Software licenses	$	29,728	$	22,526	$	52,530	$	48,580
Performance obligations transferred over time:
Maintenance	62,528		63,058		122,527		125,242
Services	7,739		7,280		14,487		14,452
Total revenue	$	99,995	$	92,864	$	189,544	$	188,274
⁽¹⁾The Company adopted ASC 606 effective December 1, 2018 using the full retrospective method. See Note 1. Nature of Business and Basis of Presentation for further information.

In the following table, revenue attributed to North America includes sales to customers in the U.S. and sales to certain multinational organizations. Revenue from EMEA, Latin America and the Asia Pacific region includes sales to customers in each region plus sales from the U.S. to distributors in these regions. Information relating to revenue from external customers from different geographical areas is as follows (in thousands):



	Three Months Ended				Six Months Ended
	May 31, 2019		May 31, 2018		May 31, 2019		May 31, 2018
(In thousands)			As Adjusted⁽¹⁾				As Adjusted⁽¹⁾
North America	$	57,060	$	47,351	$	103,558	$	99,549
EMEA	33,633		35,049		67,005		68,345
Latin America	4,108		4,243		8,569		9,185
Asia Pacific	5,194		6,221		10,412		11,195
Total revenue	$	99,995	$	92,864	$	189,544	$	188,274
⁽¹⁾The Company adopted ASC 606 effective December 1, 2018 using the full retrospective method. See Note 1. Nature of Business and Basis of Presentation for further information.

No single customer, partner, or country outside of the U.S. has accounted for more than 10% of our total revenue for the three or six months ended May 31, 2019 and May 31, 2018. As of May 31, 2019 and November 30, 2018, no individual customer accounted for 10% or more of our net accounts receivable balance. As of May 31, 2019 and November 30, 2018, no individual foreign country accounted for 10% or more of total consolidated assets.