| Segment Reporting Disclosure |
Segment Reporting
The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of its reportable segments. The Company's Chief Operating Decision Maker ("CODM") function is comprised of its chief executive officer. Effective in the fourth quarter of 2014, the Company defined two reportable segments based on factors such as how management manages the operations and how the chief operating decision maker views results. Prior to the fourth quarter of 2014, the Company reported as a single operating and reportable segment. Accordingly, the Company has recasted its financial information and disclosures for prior periods to reflect the segment disclosures as if the current operating structure had been in effect throughout all periods presented.
The CODM function uses gross profit to evaluate the performance of the segments and allocate resources. Management considers gross margin to be the appropriate metric to evaluate and compare the ongoing performance of each reportable segment as it is the level which direct costs associated with the performance of the segment are monitored. Cost of revenue for the Consumer segment consists of costs directly attributable to the production of personalized products for all of the Company's brands, including direct materials, shipping charges, and payroll and related expenses for direct labor; rent for production facilities, and depreciation of production equipment and facilities where the Company is the deemed owner. Cost of net revenues for the Enterprise segment consists of costs which are direct and incremental to the Enterprise business. These include production costs of Enterprise products, such as materials, labor and printing costs and costs associated with third-party production of goods. They also include shipping costs and indirect overhead.
Due to the nature of the Company's operations, a majority of its assets are utilized across all segments. In addition, segment assets are not reported to, or used by, the CODM to allocate resources or assess performance of the Company's segments. Accordingly, the Company has not disclosed asset information by segment. The Company’s segments are determined based on the products and services it provides and how the CODM evaluates the business. The Company has the following reportable segments: Consumer - Includes sales from the Company's brands and are derived from the sale of photo-based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo prints, and the related shipping revenues as well as rental revenue from its BorrowLenses brand. Enterprise - Includes revenues primarily from variable, four-color direct marketing collateral manufactured and fulfilled for business customers.
In addition to the above reportable segments, the Company has a corporate category that includes activities that are not directly attributable or allocable to a specific segment. This category consists of stock-based compensation and amortization of intangible assets.
| | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | | | | 2015 | | 2014 | | 2015 | | 2014 | | | (in thousands) | Consumer | | | | | | | Net revenues | | $ | 171,274 |
| | $ | 150,152 |
| | $ | 320,062 |
| | $ | 280,773 |
| Cost of net revenues | | 83,387 |
| | 72,250 |
| | 164,165 |
| | 138,658 |
| Gross profit | | $ | 87,887 |
| | $ | 77,902 |
| | $ | 155,897 |
| | $ | 142,115 |
| Gross profit as a percentage of net revenues | | 51 | % | | 52 | % | | 49 | % | | 51 | % | | | | | | | | | | Enterprise | | | | | | | | | Net revenues | | $ | 12,605 |
| | $ | 8,996 |
| | $ | 23,795 |
| | $ | 15,474 |
| Cost of net revenues | | 10,245 |
| | 7,368 |
| | 20,133 |
| | 13,478 |
| Gross profit | | $ | 2,360 |
| | $ | 1,628 |
| | $ | 3,662 |
| | $ | 1,996 |
| Gross profit as a percentage of net revenues | | 19 | % | | 18 | % | | 15 | % | | 13 | % | | | | | | | | | | Corporate | | | | | | | | | Net revenues | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Cost of net revenues | | 3,015 |
| | 3,717 |
| | 7,056 |
| | 7,542 |
| Gross profit | | $ | (3,015 | ) | | $ | (3,717 | ) | | $ | (7,056 | ) | | $ | (7,542 | ) | | | | | | | | | | Consolidated | | | | | | | | | Net revenues | | $ | 183,879 |
| | $ | 159,148 |
| | $ | 343,857 |
| | $ | 296,247 |
| Cost of net revenues | | 96,647 |
| | 83,335 |
| | 191,354 |
| | 159,678 |
| Gross profit | | $ | 87,232 |
| | $ | 75,813 |
| | $ | 152,503 |
| | $ | 136,569 |
| Gross profit as a percentage of net revenues | | 47 | % | | 48 | % | | 44 | % | | 46 | % |
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