REVENUE AND MAJOR CUSTOMERS

6 Months Ended

Sep. 26, 2020

REVENUE AND MAJOR CUSTOMERS [Abstract]

REVENUE AND MAJOR CUSTOMERS

REVENUE AND MAJOR CUSTOMERS

The Company designs, manufactures, markets, and sells integrated communications and collaboration solutions that span headsets, open Session Initiation Protocol ("SIP") and native ecosystem desktop phones, conference room phones, video conferencing solutions and peripherals, including cameras, speakers, and microphones, cloud management and analytics software solutions, and services.

Major product categories are Headsets, which includes wired and wireless communication headsets; Voice, Video, and Content Sharing Solutions, which includes open Session Initiation Protocol (“SIP”) and native ecosystem desktop phones, conference room phones, and video conferencing solutions and peripherals, including cameras, speakers, and microphones. All of the Company's solutions are designed to integrate seamlessly with the platform and services of our customers choice in a wide range of Unified Communications & Collaboration ("UC&C"), Unified Communication as a Service ("UCaaS"), and Video as a Service ("VaaS") environments. The Company's cloud management and analytics software enables IT administrators to configure and update firmware, monitor device usage, troubleshoot, and gain a deep understanding of user behavior. In addition, the Company has a broad portfolio of Services including video interoperability, support for our solutions and hardware devices, as well as professional, hosted, and managed services that are grounded in our deep expertise aimed at helping customers achieve their goals for collaboration.

Product revenue is largely comprised of sales of hardware devices, peripherals, and platform software licenses used in communication and collaboration in offices and contact centers, with mobile devices, cordless phones, and computers. Services revenue primarily includes support on hardware devices, professional, hosted and managed services, and solutions to the Company's customers.

The following table disaggregates revenues by major product category for the three and six months ended September 26, 2020 and September 28, 2019:

	Three Months Ended				Six Months Ended
(in thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net revenues from unaffiliated customers:
Headsets1	202,840		206,292		377,590		424,942
Voice2	49,069		98,453		99,750		202,300
Video2	95,768		90,392		161,795		150,640
Services2	63,292		66,572		127,554		131,594
Total net revenues	$	410,969	$	461,709	$	766,689	$	909,476

1 As announced on February 4, 2020, the Company entered into a definitive agreement with Nacon S.A. and closed the transaction on March 19, 2020, completing the sale of the Company's Consumer Gaming assets for a net amount that is not material to the Company's condensed consolidated financial statements. The remaining consumer headsets are included in the Company's Enterprise products and all prior periods have been reclassified to conform to current presentation.

2 Categories were introduced with the acquisition of Polycom on July 2, 2018, and amounts are presented net of purchase accounting adjustments.

For reporting purposes, revenue is attributed to each geographic region based on the location of the customer. Other than the U.S., no country accounted for 10% or more of the Company's net revenues for the three and six months ended September 26, 2020 and September 28, 2019. The following table presents net revenues by geography:

	Three Months Ended				Six Months Ended
(in thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Products
Net revenues from unaffiliated customers:
U.S.	$	159,532	$	187,935	$	303,821	$	386,716
Europe and Africa	114,875		111,672		192,493		212,778
Asia Pacific	52,548		68,821		97,979		126,073
Americas, excluding U.S.	20,722		26,709		44,842		52,315
Total international net revenues	188,145		207,202		335,314		391,166
Product net revenues	$	347,677	$	395,137	$	639,135	$	777,882
Services
Net revenues from unaffiliated customers:
U.S.	$	24,245	$	25,192	$	48,237	$	51,238
Europe and Africa	15,524		17,301		32,012		33,175
Asia Pacific	19,021		18,632		37,854		36,228
Americas, excluding U.S.	4,502		5,447		9,451		10,953
Total international net revenues	39,047		41,380		79,317		80,356
Service net revenues	$	63,292	$	66,572	$	127,554	$	131,594
Total net revenues	$	410,969	$	461,709	$	766,689	$	909,476

Two customers, ScanSource and Ingram Micro Group, accounted for 25.0% and 18.3%, respectively, of net revenues for the three months ended September 26, 2020. Ingram Micro Group and ScanSource, accounted for 19.7% and 18.3%, respectively, of net revenues for the six months ended September 26, 2020. Two customers, ScanSource and Ingram Micro Group, accounted for 21.7% and 16.8% of net revenues for the three months ended September 28, 2019, respectively. ScanSource and Ingram Micro Group accounted for 19.6% and 16.8%, respectively, of net revenue for the six months ended September 28, 2019.

Two customers, ScanSource and Ingram Micro Group accounted for 24.9% and 23.3%, respectively, of total net accounts receivable at September 26, 2020. Three customers, Ingram Micro Group, ScanSource, and Synnex Group, accounted for 22.2%, 17.3%, and 15.6%, respectively, of total net accounts receivable at March 28, 2020.

Revenue is recognized when obligations under the terms of a contract with the Company's customer are satisfied; generally, this occurs with the transfer of control of its products or services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The majority of the Company's business relates to physical product shipments, for which revenue is generally recognized once title and risk of loss of the product are transferred to the customer. The Company believes that transfer of title and risk of loss best represent the moment at which the customer’s ability to direct the use of and obtain substantially all the benefits of an asset have been achieved. The Company has elected to account for shipping and handling as fulfillment cost and recognize the related costs when control over products have transferred to the customer as an expense in Cost of Revenues.

The Company's service revenue is recognized either over-time or at a point-in-time depending on the nature of the offering. Revenues associated with non-cancelable maintenance and support contracts comprise approximately 90% of the Company's overall service revenue and are recognized ratably over the contract term, which typically ranges between one and three years. The Company believes this recognition period faithfully depicts the pattern of transfer of control for maintenance and support as the services are a series of distinct services available and delivered daily over the term. For certain products, support is provided free of charge without the purchase of a separate maintenance contract. If the support is determined to rise to the level of a performance obligation, the Company allocates a portion of the transaction price to the implied support obligation and recognizes service revenue over the estimated implied support period which can range between one month to several years, depending on the circumstances. Revenues associated with Professional Services are recognized when the Company has objectively determined that the obligation has been satisfied, which is usually upon customer acceptance.

The Company's contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company allocates the transaction price of a contract, to each identified performance obligation based on stand-alone selling price (“SSP”). The Company determines if variable consideration is associated with one or many, but not all of the performance obligations and allocates accordingly. Judgment is also required to determine the SSP for each distinct performance obligation. The Company derives SSP for its performance obligations through a stratification methodology and considers a few characteristics including consideration related to different service types, customer and geography characteristics. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

On occasion, the Company will fulfill only part of a purchase order due to lack of current availability for one or more items requested on an order. Its practice is to ship what is on hand, with the remaining goods shipped once the product is in stock. Shipment generally occurs less than one year from the date of the order. Depending on the terms of the contract or operationally, undelivered or backordered items may be canceled by either party at their discretion.

As of September 26, 2020, the Company's deferred revenue balance was $212.8 million. As of March 28, 2020, the Company's deferred revenue balance was $208.5 million. During the three months ended September 26, 2020, the Company recognized $50.9 million in revenues that were reflected in deferred revenue at the beginning of the period.

The table below represents aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of September 26, 2020:

	September 26, 2020
(in millions)	Current		Noncurrent		Total
Performance obligations	$	146.6	$	68.4	$	215.0

Upon establishment of creditworthiness, the Company may extend credit terms to its customers which typically ranges between 30 and 90 days from the date of invoice depending on geographic region and type of customer. The Company typically bills upon product hardware shipment, at time of software activation or upon completion of services. Revenue is not generally recognized in advance of billings. The balance of contract assets as of September 26, 2020 was $4.3 million. As of March 28, 2020, the Company's contract assets balance was $3.7 million. None of the Company's contracts are deemed to have significant financing components.

Sales, value add, and other taxes collected concurrent with revenue producing activities are excluded from revenue.

Commercial distributors and retailers represent the Company's largest sources of net revenues. Sales through its distribution and retail channels are made primarily under agreements allowing for rights of return and include various sales incentive programs, such as back end rebates, discounts, marketing development funds, price protection, and other sales incentives. The Company has an established sales history for these arrangements and the Company records the estimated reserves at the inception of the contract as a reflection of the reduced transaction price. Customer sales returns are estimated based on historical data, relevant current data, and the monitoring of inventory build-up in the distribution channel. Revenue reserves represent a reasonable estimation made by management and are subject to significant judgment. Estimated reserves may differ from actual returns or incentives provided, due to unforeseen customer return or claim patterns or changes in circumstances. For certain customer contracts which have historically demonstrated variability, the Company has considered the likelihood of being under-reserved and has considered a constraint accordingly. Provisions for Sales Returns are presented within accrued liabilities in the Company's condensed consolidated balance sheets. Provisions for promotions, rebates, and other sales incentives are presented as a reduction of accounts receivable unless there is no identifiable right offset, in which case they are presented within accrued liabilities on its condensed consolidated balance sheets. See Note 5, Details of Certain Balance Sheet Accounts above for additional details.For certain arrangements, the Company pays commissions, bonuses and taxes associated with obtaining the contracts. The Company capitalizes such costs if they are deemed to be incremental and recoverable. The Company has elected to use the practical expedient to record the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. Determining the amortization period of costs related to obtaining a contract involves judgment. Capitalized commissions and related expenses, on hardware sales and services recognized at a point in time generally have an amortization period of less than one year. Maintenance-related performance obligations generally have an amortization period greater than one year when considering renewals. Capitalized commissions are amortized to Sales and Marketing Expense on a straight-line basis. The capitalized amount of incremental and recoverable costs of obtaining contracts with an amortization period of greater than one year are $4.7 million as of September 26, 2020. Amortization of capitalized contract costs for the three and six months ended September 26, 2020 was immaterial.