Business Segments and International Operations

9 Months Ended

Aug. 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						Nine Months Ended
	August 31, 2019			August 31, 2018			August 31, 2019			August 31, 2018
(In thousands)				As Adjusted⁽¹⁾						As Adjusted⁽¹⁾
Segment revenue:
OpenEdge	$	78,607		$	68,519		$	211,679		$	204,789
Data Connectivity and Integration	8,754			4,563			27,686			17,466
Application Development and Deployment	19,355			19,521			56,895			58,622
Total revenue	106,716			92,603			296,260			280,877
Segment costs of revenue and operating expenses:
OpenEdge	22,711			16,419			60,123			47,194
Data Connectivity and Integration	1,943			1,520			5,249			4,823
Application Development and Deployment	6,093			7,071			17,067			20,068
Total costs of revenue and operating expenses	30,747			25,010			82,439			72,085
Segment contribution margin:
OpenEdge	55,896			52,100			151,556			157,595
Data Connectivity and Integration	6,811			3,043			22,437			12,643
Application Development and Deployment	13,262			12,450			39,828			38,554
Total contribution margin	75,969			67,593			213,821			208,792
Other unallocated expenses⁽²⁾	60,009			48,490			167,711			152,008
Income from operations	15,960			19,103			46,110			56,784
Other expense, net	(3,718		)	(1,961		)	(8,038		)	(4,830		)
Income before income taxes	$	12,242		$	17,142		$	38,072		$	51,954
⁽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				Nine Months Ended
	August 31, 2019		August 31, 2018		August 31, 2019		August 31, 2018
(In thousands)			As Adjusted⁽¹⁾				As Adjusted⁽¹⁾
Performance obligations transferred at a point in time:
Software licenses	$	30,686	$	22,852	$	83,216	$	71,432
Performance obligations transferred over time:
Maintenance	67,611		62,170		190,138		187,412
Services	8,419		7,581		22,906		22,033
Total revenue	$	106,716	$	92,603	$	296,260	$	280,877
⁽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				Nine Months Ended
	August 31, 2019		August 31, 2018		August 31, 2019		August 31, 2018
(In thousands)			As Adjusted⁽¹⁾				As Adjusted⁽¹⁾
North America	$	61,816	$	49,756	$	165,374	$	149,305
EMEA	35,109		32,663		102,114		101,008
Latin America	3,862		4,600		12,431		13,785
Asia Pacific	5,929		5,584		16,341		16,779
Total revenue	$	106,716	$	92,603	$	296,260	$	280,877
⁽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 nine months ended August 31, 2019 and August 31, 2018. As of August 31, 2019 and November 30, 2018, no individual customer accounted for 10% or more of our net accounts receivable balance. As of August 31, 2019 and November 30, 2018, no individual foreign country accounted for 10% or more of total consolidated assets.