Annual report pursuant to Section 13 and 15(d)

Industry, Segment and Geographic Financial Information

v3.22.0.1
Industry, Segment and Geographic Financial Information
12 Months Ended
Dec. 31, 2021
Industry, Segment and Geographic Financial Information  
Industry, Segment and Geographic Financial Information

13. Industry, Segment and Geographic Financial 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 net sales less the respective segment’s cost of sales 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:

Year ended

December 31,

  

2021

  

2020

Net Sales:

Distribution

$

259,360

$

233,740

Solutions

 

23,222

 

17,828

 

282,582

 

251,568

Gross Profit:

Distribution

$

36,526

$

29,136

Solutions

 

9,190

 

3,904

 

45,716

 

33,040

Direct Costs:

Distribution

$

14,610

$

12,453

Solutions

 

4,741

 

1,767

 

19,351

 

14,220

Segment Income Before Taxes: (1)

Distribution

$

21,916

$

16,683

Solutions

 

4,449

 

2,137

Segment Income Before Taxes

 

26,365

 

18,820

General and administrative

$

12,785

$

9,709

Legal and financial advisory expenses, net - unsolicited bid and related matters

1,586

Acquisition related costs

1,518

Amortization and depreciation expense

1,529

704

Interest, net

359

121

Foreign currency transaction (loss) gain

 

(46)

 

796

Income before taxes

$

12,364

$

6,220

(1) Excludes general corporate expenses including legal and financial advisory expenses, net – unsolicited bid and related matters, acquisition related costs, amortization and depreciation expense, interest, and foreign currency transaction (loss) gain.

    

    

    

As of

As of 

December 31,

December 31,

Selected Assets by Segment:

2021

2020

Distribution

$

133,506

$

106,930

Solutions

 

18,895

 

20,807

Segment Select Assets

 

152,401

 

127,737

Corporate Assets

 

38,351

 

37,796

Total Assets

$

190,752

$

165,533

Geographic areas and net sales mix related to operations for the year ended December 31, 2021 and 2020 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, 2021

Distribution

  

Solutions

Total

Geography

              

              

USA

$

210,247

$

11,057

$

221,304

Europe and United Kingdom

 

26,055

 

10,652

 

36,707

Canada

 

23,058

 

1,513

 

24,571

Total net sales

$

259,360

$

23,222

$

282,582

Timing of Revenue Recognition

              

              

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

$

234,322

$

16,360

$

250,682

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

 

25,038

 

6,862

 

31,900

Total net sales

$

259,360

$

23,222

$

282,582

    

Year ended

    

December 31, 2020

Distribution

  

Solutions

Total

Geography

              

              

USA

$

207,362

$

13,991

$

221,353

Europe and United Kingdom

 

14,787

 

2,060

 

16,847

Canada

 

11,591

 

1,777

 

13,368

Total net sales

$

233,740

$

17,828

$

251,568

Timing of Revenue Recognition

              

              

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

$

214,403

$

16,059

$

230,462

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

 

19,337

 

1,769

 

21,106

Total net sales

$

233,740

$

17,828

$

251,568

(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 December 31, 2021 and 2020 were as follows.

    

December 31,

December 31,

 

Identifiable Assets by Geographic Areas

2021

    

2020

USA

$

122,445

$

114,126

Canada

24,923

18,514

Europe and United Kingdom

43,384

32,893

Total

$

190,752

$

165,533

The Company had two customers that each accounted for more than 10% of total consolidated net sales for the year ended December 31, 2021. For the year ended December 31, 2021, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 18%, and 17%, respectively, of consolidated net sales and as of December 31, 2021, 18% and 22%, respectively, of total net accounts receivable. For the year ended December 31, 2021, Sophos and SolarWinds accounted for 20% and 10%, respectively of our consolidated purchases.

For the year ended December 31, 2020, CDW Corporation (“CDW”) and Software House International Corporation (“SHI”), accounted for 24%, and 14%, respectively, of consolidated net sales and as of December 31, 2020, 19% and 9%, respectively, of total net accounts receivable. For the year ended December 31, 2020, Sophos and SolarWinds accounted for 20% and 12%, respectively of our consolidated purchases.

Our top five customers accounted for 51% and 52% of consolidated net sales for the years ended December 31, 2021 and 2020, respectively.