Annual report [Section 13 and 15(d), not S-K Item 405]

Note 13 - Industry, Segment and Geographic Financial Information

v3.25.0.1
Note 13 - Industry, Segment and Geographic Financial Information
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

13. Industry, Segment and Geographic Financial Information

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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.

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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 Chief Executive Officer, who has been identified as the Company’s CODM, evaluates the performance of both reportable segments based on operating income. Net sales, gross profit, and operating expenses are also monitored closely. This information is used to measure segment profitability, allocate resources, and make budgeting and forecasting decisions about the reportable segments. The CODM also uses these measures to monitor trends in year over year performance comparisons, sequential quarter performance comparisons, and to compare actual results to forecasts. More disaggregated information about operating expense is generally only reviewed by the CODM on a consolidated basis. Operating income represents net sales less costs of sales, excluding depreciation and amortization expense and operating expenses. Net sales and cost of sales, excluding depreciation and amortization expense are directly attributed to each segment. The majority of operating expenses are also directly attributed to each segment, while certain other operating expenses are allocated to the segments in a reasonable manner considering the specific facts and circumstances of the expenses being allocated.

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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 provider of cloud solutions and value-added reseller of software, hardware and services to customers worldwide. The Company's reportable segments are based on products and services delivered, and the Company's CODM decides how to assess performance and allocate resources based on segment.

 

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, inventory, goodwill and intangible assets 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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Year ended

  

​

  

December 31,

  

​

  

2024

    

2023

  

Net Sales:

  

​

    

​

  

Distribution

   $ 441,940     $ 325,262  

Solutions

     23,667       26,751  

​

     465,607       352,013  

Cost of Sales:

  

​

    

​

  

Distribution

   $ 363,648     $ 271,899  

Solutions

     10,879       15,867  

​

     374,527       287,766  

Direct Costs:

  

​

    

​

  

Distribution

   $ 31,888     $ 22,467  

Solutions

     5,455       5,238  

​

     37,343       27,705  

Segment Income: (1)

  

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Distribution

   $ 46,404     $ 30,896  

Solutions

     7,333       5,646  

Segment Income

     53,737       36,542  

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​

    

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General and administrative

   $ 19,165     $ 16,625  

Acquisition related costs

     2,311       629  

Depreciation and amortization expense

     4,269       2,798  

Interest, net

     917       927  

Foreign currency transaction loss

     (273 )     (636 )

Change in fair value of acquisition contingent consideration

     3,618       —  

Income before taxes

   $ 25,018     $ 16,781  

 

(1)

Excludes general corporate expenses including acquisition related costs, amortization and depreciation expense, interest, foreign currency transaction (loss) gain, and change in fair value of acquisition contingent consideration.

 

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As of

    

As of

  

​

  

December 31,

    

December 31,

  

Selected Assets by Segment:

  

2024

    

2023

  

​

  

​

    

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Distribution

   $ 394,809     $ 242,927  

Solutions

     21,882       37,992  

Segment Select Assets

     416,691       280,919  

Corporate Assets

     52,488       54,179  

Total Assets

   $ 469,179     $ 335,098  

 

Geographic areas and net sales mix related to operations for the year ended December 31, 2024 and 2023 were as follows. Net sales is allocated to a geographic area based on the location of the sale, which is generally the customer’s country of domicile.

 

​

  

Year ended

  

​

  

December 31, 2024

  

​

  

Distribution

    

Solutions

    

Total

  

Geography

                  

​

  

USA

   $ 333,197     $ 8,652     $ 341,849  

Europe and United Kingdom

     82,039       13,889       95,928  

Canada

     26,704       1,126       27,830  

Total net sales

   $ 441,940     $ 23,667     $ 465,607  

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​

    

​

    

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Timing of Revenue Recognition

                  

​

  

Transferred at a point in time where the Company is principal (1)

   $ 399,360     $ 15,847     $ 415,207  

Transferred at a point in time where the Company is agent (2)

     42,580       7,820       50,400  

Total net sales

   $ 441,940     $ 23,667     $ 465,607  

 

​

  

Year ended

  

​

  

December 31, 2023

  

​

  

Distribution

    

Solutions

    

Total

  

Geography

                  

​

  

USA

   $ 244,261     $ 15,425     $ 259,686  

Europe and United Kingdom

     57,253       10,167       67,420  

Canada

     23,748       1,159       24,907  

Total net sales

   $ 325,262     $ 26,751     $ 352,013  

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​

    

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Timing of Revenue Recognition

                  

​

  

Transferred at a point in time where the Company is principal (1)

   $ 286,051     $ 19,853     $ 305,904  

Transferred at a point in time where the Company is agent (2)

     39,211       6,898       46,109  

Total net sales

   $ 325,262     $ 26,751     $ 352,013  

 

(1)

Includes net sales from third-party hardware and software products.

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(2)

Includes net sales from third-party maintenance, software support and services.

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Geographic identifiable assets related to operations as of December 31, 2024 and 2023 were as follows.

 

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December 31,

    

December 31,

  

Identifiable Assets by Geographic Areas

  

2024

    

2023

  

USA

   $ 278,957     $ 171,080  

Canada

     34,352       23,994  

Europe and United Kingdom

     155,870       140,024  

Total

   $ 469,179     $ 335,098  

 

For the year ended December 31, 2024, the Company had three customers that accounted for 18%, 14% and 11%, respectively, of consolidated net sales and as of December 31, 2024, 12%, 6% and 19%, respectively, of total net accounts receivable. For the year ended December 31, 2024, the Company had one vendor that accounted for 10% of our consolidated purchases. These customers and vendors are all in the Company's Distribution segment.

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For the year ended December 31, 2023, the Company had two customers that accounted for 20%, and 15%, respectively, of consolidated net sales and as of December 31, 2023, 15% and 6%, respectively, of total net accounts receivable. For the year ended December 31, 2023, the Company had one vendor that accounted for 14% of our consolidated purchases. These customers and vendors are all in the Company's Distribution segment. 

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Our top five customers accounted for 54% and 51% of consolidated net sales for the years ended December 31, 2024 and 2023, respectively.