What does customer concentration mean?
Customer concentration is how much of a company's revenue comes from its few biggest customers.
A soda maker sells through thousands of stores. A chip designer may sell to a handful of buyers.
What must a public US company disclose about big customers?
If one outside customer brings in 10% or more of revenue, the company says so. It gives the amount and the segment, or part of the business, that earned it.[S1]
It does not have to name the customer, so some filings use letters such as "Customer A".[S1][S5]
Companies under common control count as one customer. So does the federal government, and each state, local or foreign government.[S1]
FASB, which writes US accounting rules, has asked for this since Statement 14 in 1976. Statement 131 kept it in 1997, and it now sits in Topic 280, the segment rules.[S1][S2] Companies with a single segment give it too.[S1]
Where do you find it in a 10-K or 10-Q?
Look in the notes to the financial statements, often under segments or "concentration of risk".[S5][S6] In a 10-K the notes are in Item 8.[S7]
NVIDIA also repeats it in Item 1A, Risk Factors.[S4]
SEC rules also ask the business description to cover dependence on key customers, including government ones, when material.[S3]
What does the major-customer disclosure leave out?
- Smaller customers, which are not listed.[S1]
- The end user. The paying customer may be a distributor or computer maker that resells.[S4]
- The customer's name, unless the company chooses to give it.[S1]
Some companies also give the share of their five or ten biggest customers. Each row below shows what that company reports.