SEGMENT INFORMATION, GEOGRAPHIC INFORMATION AND CUSTOMER CONCENTRATION

Segment Information

Operating segments are defined as components of an enterprise that engage in business activities for which separate financial information is available and evaluated by the Company’s CODM, which for the Company is its Chief Executive Officer, in deciding how to allocate resources and assess performance. Based on our internal reporting structure, the Company consists of two operating segments: Video and Cable Edge. The operating segments were determined based on the nature of the products offered. The Video segment sells video processing and production and playout solutions and services worldwide to broadcast and media companies, streaming new media companies, cable operators, and satellite and telecommunications (telco) Pay-TV service providers. The Cable Edge segment sells CableOS, cable edge solutions and related services to cable operators globally.

The Company does not allocate amortization of intangibles, stock-based compensation, restructuring and related charges, TVN acquisition- and integration-related costs, and certain other non-recurring charges to the operating income (loss) for each segment because management does not include this information in the measurement of the performance of the operating segments. A measure of assets by segment is not applicable as segment assets are not included in the discrete financial information provided to the CODM.

On February 29, 2016, the Company completed its acquisition of 100% of the outstanding equity of TVN and assigned TVN to its Video operating segment.

The following table provides summary financial information by reportable segment (in thousands):



	Year ended December 31,
	2017⁽¹⁾			2016			2015
Video
Revenue	$	319,473		$	351,489		$	291,779
Gross profit	173,414			194,044			167,573
Operating income (loss)	(2,024		)	11,963			13,529
Cable Edge
Revenue	$	38,773		$	54,422		$	85,248
Gross profit	8,892			21,174			37,832
Operating loss	(23,154		)	(12,131		)	(1,599		)
Total
Revenue	$	358,246		$	405,911		$	377,027
Gross profit	182,306			215,218			205,405
Operating income (loss)	(25,178		)	(168		)	11,930

(1) The Company has historically employed an aggregate allocation methodology based on total revenues to attribute professional services revenue and sales expenses between its Video and Cable Edge segments. Beginning in the fourth quarter of 2017, the Company has prospectively changed to a more precise attribution methodology as the activities of selling and supporting the CableOS solution have become increasingly distinct from those of Video solutions. The impact of making this change in the fourth quarter of 2017 compared to the Company’s historical approach was a reduction in operating income of $2.4 million from the Video segment and a corresponding increase to the operating income of the Cable Edge segment. The Company believes that the updated allocation methodology will provide greater clarity regarding the operating metrics of the Video and Cable Edge business segments.

A reconciliation of the Company’s consolidated segment operating income (loss) to consolidated loss before income taxes is as follows (in thousands):



	Year ended December 31,
	2017⁽¹⁾			2016			2015
Total segment operating income (loss)	$	(25,178	)	$	(168	)	$	11,930
Unallocated corporate expenses ⁽¹⁾	(20,767		)	(38,972		)	(2,794		)
Stock-based compensation	(16,610		)	(13,060		)	(15,582		)
Amortization of intangibles	(8,322		)	(14,836		)	(6,502		)
Consolidated loss from operations	(70,877		)	(67,036		)	(12,948		)
Non-operating expense, net	(13,830		)	(13,394		)	(3,120		)
Loss before income taxes	$	(84,707	)	$	(80,430	)	$	(16,068	)

(1) For the years ended December 31, 2017 and 2016, the unallocated corporate expenses included TVN acquisition- and integration-related costs, TVN VDP costs (see Note 10, “Restructuring and Related charges-TVN VDP,” for more information on TVN VDP ) and Cable Edge product line inventory obsolescence costs, totaling $7.9 million and $32.2 million, respectively. In addition, in fiscal year 2017, the unallocated corporate expenses included $8.0 million of Avid litigation settlement cost and associated legal fees (see Note 19, “Legal Proceedings,” for more information). The remaining unallocated corporate expenses for all years presented above include primarily other restructuring charges and excess facilities charges.

Geographic Information

The geographic distribution of Harmonics’ revenue and property and equipment, net is summarized in the tables below (in thousands):



	Year ended December 31,
	2017		2016		2015
Net revenue ⁽¹⁾:
United States	$	131,773	$	171,016	$	175,466
Other countries	226,473		234,895		201,561
Total	$	358,246	$	405,911	$	377,027

(1) Revenue is attributed to countries based on the location of the customer.

Other than the U.S., no single country accounted for 10% or more of the Company’s net revenues for the years ended December 31, 2017, 2016 and 2015.



	As of December 31,
	2017		2016
Property and equipment, net:
United States	$	13,786	$	15,197
Israel	8,904		9,966
France	4,573		4,872
Other countries	2,002		2,129
Total	$	29,265	$	32,164

Customer Concentration

During the years ended December 31, 2017 and 2016, no single customer accounted for more than 10% of our net revenue. Net revenue from Comcast accounted for 12% of the Company’s total net revenue during the year ended December 31, 2015. Other than Comcast, no single customer accounted for 10% or more of the Company’s total net revenue for fiscal year 2015.