Note N - Segment Information

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE N—SEGMENT INFORMATION

Description of segments:

The Company operates under three reportable segments.

The Company's segment information has been prepared in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the Company's chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company's CODM is its Chief Executive Officer, who evaluates the Company's performance and allocates resources based on segment revenues and operating income.

The Company's operating segments are as follows: Home, Unified Communications and SmartVoice. The classification of the Company’s business segments is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customer base, homogeneity of products and technology. Prior to fiscal year 2019, the Unified Communications segment was titled the Office segment.

A description of the types of products provided by each business segment is as follows:

Home - Wireless chipset solutions for converged communication at home. Such solutions include integrated circuits targeted for cordless phones sold in retail or supplied by telecommunication service providers, home gateway devices supplied by telecommunication service providers which integrate the DECT/CAT-iq functionality, integrated circuits addressing home automation applications, as well as fixed-mobile convergence solutions. During 2017, the Company consolidated its home gateway and home automation products into a new product line called SmartHome. In this segment, (i) revenues from cordless telephony products exceeded 10% of the Company’s total revenues, and amounted to 39% of the Company’s total revenues for both the first nine months of 2020 and 2019, and 48% and 40% of the Company’s total revenues for the third quarter of 2020 and 2019, respectively, and (ii) revenues from SmartHome products amounted to 14% and 13% of the Company’s total revenues for the first nine months of 2020 and 2019, respectively, and 14% and 12% of the Company’s total revenues for the third quarter of 2020 and 2019, respectively.

Unified Communications - Comprehensive solution for unified communications products, including office solutions that offer businesses of all sizes VoIP terminals with converged voice and data applications. Revenues from the Company’s unified communications products represented 28% and 32% of its total revenues for the first nine months of 2020 and 2019, respectively, and 10% and 32% of the Company’s revenues for the third quarter of 2020 and 2019, respectively. No revenues derived from other products in the Unified Communications segment exceeded 10% of the Company’s total consolidated revenues for both the first nine months and the third quarter of 2020 and 2019.

SmartVoice Products for the SmartVoice market that provide voice activation and recognition, voice enhancement, always-on and far-end noise elimination targeted for mobile phones, mobile headsets, hearables  and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. Revenues from the business associated with the SoundChip acquisition are included in the SmartVoice segment. Revenues derived from products in the SmartVoice segment represented 18% and 16% of the Company’s total revenues for the first nine months of 2020 and 2019, respectively, and 28% and 16% of the Company’s total revenues for the third quarter of 2020 and 2019, respectively. No revenues derived from other products in the SmartVoice segment exceeded 10% of the Company’s total consolidated revenues for either the first nine months or the third quarter of 2020 and 2019.

Segment data:

The Company derives the results of its business segments directly from its internal management reporting system and by using certain allocation methods. The accounting policies the Company uses to derive business segment results are substantially the same as those the Company uses for consolidation of its financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. The Company does not allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the three and nine months ended September 30, 2020 and 2019 (unaudited):

	Three months ended September 30,
	Revenues				Income (loss) from operations
	2020		2019		2020			2019
Home	$	16,235	$	16,124	$	5,096		$	4,699
Unified Communications	$	2,585	$	9,955	$	304		$	3,592
SmartVoice	$	7,200	$	4,963	$	(3,986	)	$	(6,101	)
Total	$	26,020	$	31,042	$	1,414		$	2,190

Selected operating results information for each business segment was as follows for the nine months ended September 30, 2020 and 2019 (unaudited):

	Nine months ended September 30,
	Revenues				Income (loss) from operations
	2020		2019		2020			2019
Home	$	44,496	$	45,772	$	12,935		$	12,936
Unified Communications	$	22,968	$	28,161	$	7,341		$	9,143
SmartVoice	$	15,131	$	14,419	$	(18,236	)	$	(17,628	)
Total	$	82,595	$	88,352	$	2,040		$	4,451

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and nine months periods ended September 30, 2020 (unaudited):

	Three months			Nine months
Income from operations	$	1,414		$	2,040
Unallocated corporate, general and administrative expenses		(628	)		(1,729	)
Equity-based compensation expenses		(2,433	)		(6,546	)
Intangible assets amortization expenses		(427	)		(636	)
Amortization of employee’s retention expenses related to the acquisition of SoundChip		(250	)		(250	)
Financial income, net		343			1,535
Total consolidated loss before taxes	$	(1,981	)	$	(5,586	)

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and nine months ended September 30, 2019 (unaudited):

	Three months			Nine months
Income from operations	$	2,190		$	4,451
Unallocated corporate, general and administrative expenses		(480	)		(1,480	)
Equity-based compensation expenses		(1,873	)		(5,838	)
Intangible assets amortization expenses		(104	)		(312	)
Financial income, net		416			1,129
Total consolidated income (loss) before taxes	$	149		$	(2,050	)