18. Segment Reporting
The Company provides advertising services through digital place-based networks and sells enterprise-class digital signage solutions to customers worldwide. The Company has two separate reporting business segments - Media and Enterprise - for the following reasons:
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The segments have different business models. The Media segment sells advertising to major corporate advertisers and the advertising is placed on screens owned by business partners. In return for the use of their screens, the business partners share in the advertising revenue. The Enterprise segment sells intelligent visual solutions that consist of its proprietary software and hardware products and third-party displays. The Enterprise segment also provides installation services and maintenance and support services to corporate customers.
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The segments have different economic characteristics. The Media segment has higher rate of sales growth than the Enterprise segment. The Enterprise segment realizes a higher gross margin on revenues than the Advertising segment.
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Each segment has a different head of operations that manages the segment. Each segment head utilizes discrete financial information about his individual segment and regularly reviews the operating results of that component.
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Since the Company operates as a highly integrated entity which is characterized by substantial inter-segment cooperation and sharing of personnel and assets, it limits its segment reporting to revenues, cost of revenues, and gross profit by segment.
An analysis of the two reporting business segments follows:
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Successor Company
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Predecessor Company
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Three Months Ended
March 31, 2014
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February 1, 2013
through
April 19, 2013
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Advertising
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Enterprise
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Advertising
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Enterprise
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Revenues
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$
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2,546,091
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$
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9,229,038
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-
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$
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7,157,315
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Cost of Revenues
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$
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2,335,743
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4,279,899
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-
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$
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2,971,467
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Gross Profit
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$
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210,348
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4,949,139
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-
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$
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4,185,848
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Gross Profit %
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8.3
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%
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53.6
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%
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-
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58.5
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%
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During the period February 1, 2013 through April 19, 2013, the Enterprise segment realized a gross margin of 58.5%. The Predecessor Company consisted only of the Enterprise segment during this period, and, as a result, there were no advertising segment revenues.
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