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Revenues from Contracts with Customers
 3 Months Ended
Mar. 31, 2022
Revenue From Contract With Customer [Abstract]  
Revenues from contracts with customers

Note 16. Revenues from contracts with customers

Revenues consist primarily of revenues from the sale of hardware products with essential embedded software. Revenues also include limited amounts for software products, extended warranty on hardware products and subscription services. Substantially all products are sold through distributors and other channel partners, such as resellers and systems integrators.

The Company recognizes revenue to reflect the transfer of control of promised products or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for products or services.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company identifies its distinct performance obligations under each contract. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. Hardware products with essential embedded software, software products, and purchased extended warranty on hardware products have been identified as separate and distinct performance obligations.

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring products or services to a customer. An adjustment to revenue is made to adjust the transaction price to exclude the consideration related to products expected to be returned. The Company records an asset at the carrying amount of the estimated stock returns and a liability for the estimated amount expected to be refunded to the customer. The transaction price also excludes other forms of consideration provided to the customer, such as volume-based rebates and co-operative marketing allowances.

The Company recognizes revenue when, or as, it satisfies a performance obligation by transferring control of a promised product or service to a customer. Revenue from hardware products with essential embedded software is recognized when control of the asset is transferred, which is typically at the time of shipment. Revenue from perpetual license software is recognized at the point in time that the customer is able to use or benefit from the software. Extended warranty on hardware products is a performance obligation that is satisfied over time, beginning on the effective date of the warranty period and ending on the expiration of the warranty period. The Company recognizes revenue on extended warranties on a straight-line basis over the warranty period. Revenue from software subscriptions is recognized ratably over the term in which the services are provided and the performance obligation is satisfied.

The Company enters into revenue arrangements that may consist of multiple performance obligations, such as hardware products and extended warranty. The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis for each distinct product or service in the contract. The best evidence of standalone selling price is the observable price of a product or service when the Company sells that product or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, the Company estimates the transaction price allocated to each performance obligation using the expected costs plus a margin approach.

Disaggregation of revenues

Revenues by product category were as follows (unaudited and in thousands, except percentages):

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2022

 

Point-to-Multi-Point

 

$

57,799

 

 

 

65

%

 

$

30,926

 

 

 

50

%

Point-to-Point

 

 

17,476

 

 

 

20

%

 

 

14,714

 

 

 

24

%

Wi-Fi

 

 

12,123

 

 

 

14

%

 

 

15,508

 

 

 

25

%

Other

 

 

1,117

 

 

 

1

%

 

 

748

 

 

 

1

%

Total Revenues

 

$

88,515

 

 

 

100

%

 

$

61,896

 

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company’s products are predominately sold through third-party distributors, and distributed through a third-party logistics provider with facilities in the United States, Netherlands and China. The Company has determined the geographical distribution of product revenues based upon the ship-to destinations specified by its distributor customers.

Revenues by geography were as follows (unaudited and in thousands, except percentages):

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2022

 

North America

 

$

54,195

 

 

 

61

%

 

$

28,321

 

 

 

46

%

Europe, Middle East and Africa

 

 

18,690

 

 

 

21

%

 

 

20,332

 

 

 

33

%

Caribbean and Latin America

 

 

10,515

 

 

 

12

%

 

 

5,084

 

 

 

8

%

Asia Pacific

 

 

5,115

 

 

 

6

%

 

 

8,159

 

 

 

13

%

Total Revenues

 

$

88,515

 

 

 

100

%

 

$

61,896

 

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract balances

The following table summarizes contract balances as of December 31, 2021 and March 31, 2022 (in thousands):

 

 

 

December 31,
2021

 

 

March 31,
2022

 

 

 

 

 

 

(unaudited)

 

Trade accounts receivable, net of allowance for
   credit losses

 

$

68,788

 

 

$

63,565

 

Deferred revenue - current

 

 

6,880

 

 

 

6,964

 

Deferred revenue - noncurrent

 

 

5,363

 

 

 

5,647

 

Refund liability

 

$

2,516

 

 

$

2,755

 

 

Deferred revenue consists of amounts due or received from customers in advance of the Company satisfying performance obligations under contractual arrangements. Deferred revenue is classified as current or noncurrent based on the timing of when revenue will be recognized. The changes in deferred revenue were due to normal timing differences between the Company’s performance and the customers’ payment.

The refund liability is the estimated amount expected to be refunded to customers in relation to product exchanges made as part of the Company’s stock rotation program and returns that have been authorized, but not yet received by the Company. It is included within Other current liabilities in the condensed consolidated balance sheets.

Receivables and concentration of credit risk

Trade accounts receivable represents amounts for which the Company has an unconditional right to payment. Amounts are in accordance with contractual terms and are recorded at face amount less an allowance for credit losses. The Company establishes an allowance for credit losses to present the net amount of accounts receivable expected to be collected. The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivables. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity indicators for individual customers.

 

The Company considers the credit risk of all customers and regularly monitors credit risk exposure in its trade receivables. The Company’s standard credit terms with its customers are generally net 30 to 60 days. The Company had one customer representing more than 10% of trade receivables at December 31, 2021 and one customer representing more than 10% of trade receivables at March 31, 2022.

Remaining performance obligations

Remaining performance obligations represent the revenue that is expected to be recognized in future periods related to performance obligations included in a contract that are unsatisfied, or partially satisfied, as of the end of a period. As of December 31, 2021, deferred revenue (current and noncurrent) of $12.2 million represents the Company’s remaining performance obligations, of which $6.9 million is expected to be recognized within one year, with the remainder to be recognized thereafter. As of March 31, 2022, deferred revenue (current and noncurrent) of $12.6 million represents the Company’s remaining performance obligations, of which $7.0 million is expected to be recognized within one year, with the remainder to be recognized thereafter (unaudited).

Revenue recognized during the three-month period ended March 31, 2022 which was previously included in deferred revenues as of December 31, 2021 was $2.2 million, compared to $1.7 million of revenue recognized during the three-month period ended March 31, 2021, which was previously included in deferred revenues as of December 31, 2020 (unaudited).

Cost to obtain a contract

Sales commissions are incremental costs of obtaining a contract. The Company has elected to recognize these expenses as incurred, as the amortization period of these costs is one year or less.