| Segment Information |
15. Segment Information:
The Company distributes software developed by others through resellers indirectly to customers worldwide. We also resell computer software and hardware developed by others and provide technical services directly to customers worldwide.
FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer.
The Company is organized into two reportable operating segments. The “Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. The “Solutions” segment is a cloud solutions provider and value-added reseller of software, hardware and services to customers worldwide.
As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada, Europe and the United Kingdom with the domestic segments as the international operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources.
Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit. The Company only identifies accounts receivable, vendor prepayments and inventory by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment. The following segment reporting information of the Company is provided:
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Three months ended |
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March 31, |
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2022 |
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2021 |
Net Sales: |
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|
|
|
|
|
Distribution |
|
$ |
65,784 |
|
$ |
54,820 |
Solutions |
|
|
5,535 |
|
|
7,993 |
|
|
|
71,319 |
|
|
62,813 |
Gross Profit: |
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|
|
|
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Distribution |
|
$ |
9,593 |
|
$ |
7,874 |
Solutions |
|
|
2,388 |
|
|
2,969 |
|
|
|
11,981 |
|
|
10,843 |
Direct Costs: |
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|
|
|
|
Distribution |
|
$ |
3,664 |
|
$ |
3,913 |
Solutions |
|
|
1,138 |
|
|
1,408 |
|
|
|
4,802 |
|
|
5,321 |
Segment Income Before Taxes: (1) |
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|
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Distribution |
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$ |
5,929 |
|
$ |
3,961 |
Solutions |
|
|
1,250 |
|
|
1,561 |
Segment Income Before Taxes |
|
|
7,179 |
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|
5,522 |
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General and administrative |
|
$ |
3,447 |
|
$ |
3,091 |
Amortization and depreciation expense |
|
|
357 |
|
|
399 |
Interest, net |
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(10) |
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|
10 |
Foreign currency transaction gain (loss) |
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|
143 |
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(91) |
Income before taxes |
|
$ |
3,508 |
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$ |
1,951 |
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| (1) |
Excludes general corporate expenses including interest and foreign currency transaction gain (loss). |
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As of |
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As of |
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March 31, |
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December 31, |
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Selected Assets by Segment: |
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2022 |
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2021 |
|
|
|
|
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|
|
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Distribution |
|
$ |
123,762 |
|
$ |
133,506 |
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Solutions |
|
|
19,586 |
|
|
18,895 |
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Segment Select Assets |
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|
143,348 |
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|
152,401 |
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Corporate Assets |
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|
45,422 |
|
|
38,351 |
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Total Assets |
|
$ |
188,770 |
|
$ |
190,752 |
|
Geographic areas and net sales mix related to operations for the three months ended March 31, 2022 and 2021 were as follows. Revenue is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.
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Three months ended |
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March 31, 2022 |
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Distribution |
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Solutions |
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Total |
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Geography |
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USA |
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$ |
53,116 |
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$ |
2,512 |
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$ |
55,628 |
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Europe and United Kingdom |
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|
7,437 |
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|
2,557 |
|
|
9,994 |
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Canada |
|
|
5,231 |
|
|
466 |
|
|
5,697 |
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Total net sales |
|
$ |
65,784 |
|
$ |
5,535 |
|
$ |
71,319 |
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|
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Timing of Revenue Recognition |
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Transferred at a point in time where the Company is principal (1) |
|
$ |
59,140 |
|
$ |
4,010 |
|
$ |
63,150 |
|
Transferred at a point in time where the Company is agent (2) |
|
|
6,644 |
|
|
1,525 |
|
|
8,169 |
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Total net sales |
|
$ |
65,784 |
|
$ |
5,535 |
|
$ |
71,319 |
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|
|
|
|
|
|
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Three months ended |
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March 31, 2021 |
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Distribution |
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Solutions |
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Total |
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Geography |
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USA |
|
$ |
41,084 |
|
$ |
4,979 |
|
$ |
46,063 |
|
Europe and United Kingdom |
|
|
7,246 |
|
|
2,743 |
|
|
9,989 |
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Canada |
|
|
6,490 |
|
|
271 |
|
|
6,761 |
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Total net sales |
|
$ |
54,820 |
|
$ |
7,993 |
|
$ |
62,813 |
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|
|
|
|
|
|
|
|
|
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Timing of Revenue Recognition |
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|
|
|
|
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|
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|
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Transferred at a point in time where the Company is principal (1) |
|
$ |
49,357 |
|
$ |
6,150 |
|
$ |
55,507 |
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Transferred at a point in time where the Company is agent (2) |
|
|
5,463 |
|
|
1,843 |
|
|
7,306 |
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Total net sales |
|
$ |
54,820 |
|
$ |
7,993 |
|
$ |
62,813 |
|
| (1) |
Includes net sales from third-party hardware and software products. |
| (2) |
Includes net sales from third-party maintenance, software support and services. |
Geographic identifiable assets related to operations as of March 31, 2022 and December 31, 2021 were as follows.
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March 31, |
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December 31, |
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Identifiable Assets by Geographic Areas |
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2022 |
|
2021 |
|
USA |
|
$ |
115,823 |
|
$ |
122,445 |
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Canada |
|
|
25,614 |
|
|
24,923 |
|
Europe and United Kingdom |
|
|
47,333 |
|
|
43,384 |
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Total |
|
$ |
188,770 |
|
$ |
190,752 |
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