| Revenue | 2. Revenue Revenue is recognized upon the transfer of control of promised products
or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We apply the following five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract
with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating
the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligation
is satisfied. On occasion we enter into contracts that can include various combinations of products and services, which are generally
capable of being distinct and accounted for as separate performance obligations. Revenue is recognized exclusive of (i) any taxes collected from customers,
which are subsequently remitted to governmental authorities and (ii) shipping and handling costs collected from customers. Products Most of our product revenue is recognized as a distinct single performance
obligation when products are tendered to a carrier for delivery, which represents the point in time that our customer obtains control
of the promised products. A smaller portion of our product revenue is recognized when our customer receives delivery of the promised products. A significant portion of our products are sold to distributors under
agreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted
for as variable consideration when estimating the amount of revenue to recognize. We base our estimates for returns and price adjustments
primarily on historical experience; however, we also consider contractual allowances, approved pricing adjustments and other known or
anticipated returns and price adjustments in a given period. Such estimates are generally made at the time of shipment to the customer
and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable
that a significant reversal of any incremental revenue will not occur. Our estimates of accrued variable consideration are included in
other current liabilities in the accompanying unaudited condensed consolidated balance sheets. Services Revenues from our extended warranty, technical support and maintenance
services are generally recognized ratably over the applicable service period. Although not significant to date, revenues from sales of
our software-as-a-service (“SaaS”) solutions are recognized ratably over the applicable service period as well. We prepay sales commissions related to certain of these contracts,
which are incremental costs of obtaining the contract. We capitalize these costs and expense them ratably on a straight-line basis over
the life of the contract. At March 31, 2024, prepaid sales commissions included in prepaid expenses and other current assets totaled $ 171,000 172,000 Engineering Services We derive a portion of our revenues from engineering and related consulting
service contracts with customers. Revenues from professional engineering services are generally recognized as services are performed.
These contracts generally include performance obligations in which control is transferred over time because the customer either simultaneously
receives and consumes the benefits provided or our performance on the contract creates or enhances an asset that the customer controls.
These contracts typically provide services on the following basis:
· Time & Materials (“T&M”) – services consist of revenues from software modification, consulting implementation, training and integration services. These services are set forth separately in the contractual arrangements such that the total price of the customer arrangement is expected to vary depending on the actual time and materials incurred based on the customer’s needs.
· Fixed Price – arrangements to render specific consulting and software modification services which tend to be more complex. Performance obligations for T&M contracts qualify for the "Right
to Invoice" practical expedient within the revenue guidance. Under this practical expedient, we may recognize revenue, over time,
in the amount to which we have a right to invoice. In addition, we are not required to estimate variable consideration upon inception
of the contract and reassess the estimate each reporting period. We have determined that this method best represents the transfer of services
as, upon billing, we have a right to consideration from a customer in an amount that directly corresponds with the value to the customer
of our performance completed to date. We recognize revenue on fixed price contracts, over time, using an
input method based on the proportion of our actual costs incurred (generally labor hours expended) to the total costs expected to complete
the contract performance obligation. We have determined that this method best represents the transfer of services as the proportion closely
depicts the efforts or inputs completed towards the satisfaction of a fixed price contract performance obligation. Multiple Performance Obligations From time to time, we may enter into contracts with customers that
include promises to transfer multiple deliverables that may include sales of products, professional engineering services and other product
qualification or certification services. Determining whether the deliverables in such arrangements are considered distinct performance
obligations that should be accounted for separately versus together often requires judgment. We consider performance obligations to be
distinct when the customer can benefit from the promised good or service on its own or by combining it with other resources readily available
and when the promised good or service is separately identifiable from other promised goods or services in the contract. In such arrangements,
we allocate revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone
selling price for each performance obligation. Net Revenue by Product Line and Geographic Region We organize our products and solutions into three product lines: Embedded
IoT Solutions, IoT System Solutions, and Software & Services. Our Embedded IoT products are normally embedded into new designs. These
products include application processing that delivers compute to meet customer needs for data transformation, computer vision, machine
learning, augmented / virtual reality, audio / video aggregation and distribution, and custom applications at the edge. Our IoT System
products include wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing
secure network connectivity, power for IoT end devices through Power over Ethernet (“PoE”), application hosting, protocol
conversion, media conversion, secure access for distributed IoT deployments and many other functions. Our Software & Services products
can be classified as either (i) our SaaS platform, which enables customers to easily deploy, monitor, manage, and automate across their
global deployments, all from a single platform login, virtually connected as though directly on each device, (ii) engineering services,
which is a flexible business model that allows customers to select from turnkey product development or team augmentation for accelerating
complex areas of product development or (iii) extended warranty, support and maintenance. We conduct our business globally and manage our sales teams by three
geographic regions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific Japan (“APJ”). The following tables present our net revenue by product line and by
geographic region. Net revenues by geographic region are based on the “bill-to” location of our customers:
Schedule of net revenue by product lines
Three Months Ended March 31, Nine Months Ended March 31,
2024 2023 2024 2023
(In thousands) (In thousands)
Embedded IoT Solutions $ 12,452 $ 16,055 $ 35,589 $ 44,818
IoT System Solutions 26,789 14,034 68,847 43,568
Software & Services 1,942 2,875 6,816 7,879
$ 41,183 $ 32,964 $ 111,252 $ 96,265
Schedule of net revenue by geographic region
Three Months Ended March 31, Nine Months Ended March 31,
2024 2023 2024 2023
(In thousands) (In thousands)
Americas $ 17,543 $ 19,095 $ 61,077 $ 59,713
EMEA 18,354 6,380 37,831 16,486
Asia Pacific Japan 5,286 7,489 12,344 20,066
$ 41,183 $ 32,964 $ 111,252 $ 96,265 The following table presents product revenues and service revenues
as a percentage of our total net revenue:
Schedule of percentage of our total net revenues
Three Months Ended March 31, Nine Months Ended March 31,
2024 2023 2024 2023
Product revenues 96 91 94 92
Service revenues 4 9 6 8 Service revenues are comprised primarily of professional services,
software license subscriptions, and extended warranties. Contract Balances In certain instances, the timing of revenue recognition may differ
from the timing of invoicing to our customers. We record a contract asset receivable when revenue is recognized prior to invoicing, and
a contract or deferred revenue liability when revenue is recognized subsequent to invoicing. With respect to product shipments, we expect
to fulfill contract obligations within one year and so we have elected not to separately disclose the amount nor the timing of recognition
of these remaining performance obligations. For contract balances related to contracts that include services and multiple performance
obligations, refer to the deferred revenue discussion below. Deferred Revenue Deferred revenue is primarily comprised of unearned revenue related
to our extended warranty, support and maintenance services and certain software services. These services are generally invoiced at the
beginning of the contract period and revenue is recognized ratably over the service period. Current and non-current deferred revenue balances
represent revenue allocated to the remaining unsatisfied performance obligations at the end of a reporting period and are respectively
included in other current liabilities and other non-current liabilities in the accompanying unaudited condensed consolidated balance sheets. The following table presents the changes in our deferred revenue balance
for the nine months ended March 31, 2024 (in thousands):
Schedule of changes in deferred revenue
Balance, June 30, 2023 $ 3,381
New performance obligations 5,493
Recognition of revenue from satisfying performance obligations (3,723 )
Balance, March 31, 2024 5,151
Less: non-current portion of deferred revenue (2,420 )
Current portion, March 31, 2024 $ 2,731 We currently expect to recognize substantially all of the non-current
portion of deferred revenue over the next 2 to 5 years. |
