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

Note 12 - Industry, Segment and Geographic Financial Information

v3.25.4
Note 12 - Industry, Segment and Geographic Financial Information
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

12.  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, 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:

 

   

Year ended

  
   

December 31,

  
   

2025

    

2024

    

2023

  

Net Sales:

                    

Distribution

   $ 627,443     $ 441,940     $ 325,262  

Solutions

     25,074       23,667       26,751  
      652,517       465,607       352,013  

Cost of Sales:

                  

Distribution

   $ 535,552     $ 363,648     $ 271,899  

Solutions

     11,696       10,879       15,867  
      547,247       374,527       287,766  

Direct Costs:

                  

Distribution

   $ 40,803     $ 31,888     $ 22,467  

Solutions

     6,241       5,455       5,238  
      47,044       37,343       27,705  

Segment Income: (1)

                  

Distribution

   $ 51,088     $ 46,404     $ 30,896  

Solutions

     7,137       7,333       5,646  

Segment Income

     58,226       53,737       36,542  
                         

General and administrative

   $ 20,506     $ 19,165     $ 16,625  

Acquisition related costs

     807       2,311       629  

Depreciation and amortization expense

     7,728       4,269       2,798  

Interest, net

     844       917       927  

Foreign currency transaction loss

     (737 )     (273 )     (636 )

Change in fair value of acquisition contingent consideration

     1,374       3,618       —  

Income before taxes

   $ 27,918     $ 25,018     $ 16,781  

 

(1)

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

 

   

As of

    

As of

  
   

December 31,

    

December 31,

  

Selected Assets by Segment:

  

2025

    

2024

  
             

Distribution

   $ 375,024     $ 394,809  

Solutions

     22,124       21,882  

Segment Select Assets

     397,148       416,691  

Corporate Assets

     63,085       52,488  

Total Assets

   $ 460,233     $ 469,179  

 

Geographic areas and net sales mix related to operations for the year ended December 31, 2025 and 2024 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, 2025

  
   

Distribution

    

Solutions

    

Total

  

Geography

                      

USA

   $ 494,348     $ 8,263     $ 502,611  

United Kingdom

     67,852       15,253       83,105  

Europe

     31,275       855       32,130  

Canada

     33,968       703       34,671  

Total net sales

   $ 627,443     $ 25,074     $ 652,517  
                   

Timing of Revenue Recognition

                      

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

   $ 577,347     $ 18,150     $ 595,497  

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

     50,096       6,924       57,020  

Total net sales

   $ 627,443     $ 25,074     $ 652,517  

 

   

Year ended

  
   

December 31, 2024

  
   

Distribution

    

Solutions

    

Total

  

Geography

                      

USA

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

United Kingdom

     45,808       13,775       59,583  

Europe

     36,231       114       36,345  

Canada

     26,704       1,126       27,830  

Total net sales

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

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  

United Kingdom

     41,641       10,167       51,808  

Europe

     15,612       —       15,612  

Canada

     23,748       1,159       24,907  

Total net sales

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

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, 2025 and 2024 were as follows.

 

   

December 31,

    

December 31,

  

Identifiable Assets by Geographic Areas

  

2025

    

2024

  

USA

   $ 266,238     $ 278,957  

United Kingdom

     125,191       112,720  

Europe

     37,031       43,150  

Canada

     31,773       34,352  

Total

   $ 460,233     $ 469,179  

 

For the year ended December 31, 2025, the Company had two customers that accounted for 24% and 13%, respectively, of consolidated net sales and as of December 31, 2025, 15% and 8%, respectively, of total net accounts receivable. For the year ended December 31, 2025, the Company had no major vendors. These customers and vendors are all in the Company's Distribution segment.

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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. 

 

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 55%, 54% and 51% of consolidated net sales for the years ended December 31, 2025, 2024 and 2023, respectively.