What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-09-09 compared with 2021-03-10 · 109 added, 125 removed, 100 unchanged (70% of the section changed)

14 unchanged sentences

Our most critical estimates include those related to revenue recognition, inventory reserves for excess and obsolescence, intangible assets acquired in a business combination, goodwill, and income taxes.

We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

Our actual results may differ from these estimates under different assumptions or conditions.

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Topic 606 requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which we expect to be entitled in exchange for those goods or services.

Revenue for small UAS product contracts with both the U.S.

government and foreign governments are recognized at the point in time when the transfer of control passes to the customer, which is generally when title and risk of loss transfer.

Revenue for TMS contracts is recognized over time as costs are incurred.

Revenue for Customer-Funded R&D contracts is recognized over time as costs are incurred.

Revenue for TMS product deliveries and Customer-Funded R&D contracts is recognized over time as costs are incurred.

Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services.

Contract services revenue, including ISR services, is recognized over time as services are rendered.

We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, such as flight hours for ISR services, the entity may recognize revenue in the amount to which the entity has a right to invoice.

Training services are recognized over time using an output method based on days of training completed.

For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress.

Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer.

Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied.

Our small UAS, MUAS and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS, MUAS and UGV systems and spare parts.

Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.

We review cost performance and estimates-to-complete at least quarterly and in many cases more frequently.

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The impact of revisions in estimate of completion for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made.

During the three and nine months ended January 30, 2021 and January 25, 2020, changes in accounting estimates on contracts recognized over time are presented below.

For the three months ended January 30, 2021 and January 25, 2020, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

During the three months ended July 31, 2021 and August 1, 2020, changes in accounting estimates on contracts recognized over time are presented below.

For the three months ended July 31, 2021 and August 1, 2020, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Three Months Ended

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Gross unfavorable adjustments

Net favorable adjustments

For the three months ended January 30, 2021, favorable cumulative catch-up adjustments of $0.4 million were primarily due to final cost adjustments on nine contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $0.2 million were primarily related to higher than expected costs on 12 contracts, which individually were not material.

For the three months ended January 25, 2020, favorable cumulative catch-up adjustments of $1.4 million were primarily due to final cost adjustments on seven contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $0.2 million were primarily related to higher than expected costs on 13 contracts, which individually were not material.

Nine Months Ended

Gross favorable adjustments

Gross unfavorable adjustments

Net favorable adjustments

For the nine months ended January 30, 2021, favorable cumulative catch-up adjustments of $1.9 million were primarily due to final cost adjustments on 15 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $1.1 million were primarily related to higher than expected costs on 23 contracts, which individually were not material.

For the nine months ended January 25, 2020, favorable cumulative catch-up adjustments of $1.9 million were primarily due to final cost adjustments on 17 contracts.

The Company revised its estimates of the total expected costs to complete a contract associated with a design and development agreement, which had a favorable impact of $1.0 million.

Net (unfavorable) favorable adjustments

For the three months ended July 31, 2021, favorable cumulative catch-up adjustments of $0.6 million were primarily due to final cost adjustments on 17 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $0.8 million were primarily related to higher than expected costs on 10 contracts, which individually were not material.

For the three months ended August 1, 2020, favorable cumulative catch-up adjustments of $0.8 million were primarily due to final cost adjustments on nine contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $0.4 million were primarily related to higher than expected costs on eight contracts, which individually were not material.

Fiscal Periods

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Our first three quarters end on a Saturday.

Our 2021 fiscal year ends on April 30, 2021 and our fiscal quarters end on August 1, 2020, October 31, 2020 and January 30, 2021, respectively.

Our 2022 fiscal year ends on April 30, 2022 and our fiscal quarters end on July 31, 2021, October 30, 2021 and January 29, 2022, respectively.

Results of Operations

The following tables set forth our results of operations for the periods indicated (in thousands):

Three Months Ended January 30, 2021 Compared to Three Months Ended January 25, 2020

Three Months Ended July 31, 2021 Compared to Three Months Ended August 1, 2020

Three Months Ended

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Research and development

Loss from operations

Other income:

Interest income, net

(Loss) income from operations

Other (loss) income:

Interest (expense) income, net

Other (expense) income, net

(Loss) income before income taxes

Benefit from income taxes

(Benefit from) provision for income taxes

Equity method investment loss, net of tax

Net income (loss)

Revenue for the three months ended January 30, 2021 was $78.8 million, as compared to $61.9 million for the three months ended January 25, 2020, representing an increase of $16.9 million, or 27%.

The increase in revenue was due to an increase in product revenue of $21.9 million, partially offset by a decrease in service revenue of $5.0 million.

The increase in product revenue was primarily due to an increase in small UAS and TMS revenue.

Within small UAS, increases in product deliveries to customers within the U.S.

Department of Defense were partially offset by decreases in product deliveries to international allied customers.

The decrease in service revenue was primarily due to a decrease in customer-funded R&D revenue.

Net (loss) income

We operate the business as three reportable segments, Small Unmanned Aircraft Systems (“Small UAS”), Tactical Missile Systems (“TMS”) and Medium Unmanned Aircraft Systems (“MUAS”).

The Small UAS segment consists of our existing small UAS product lines.

The TMS segment consists of our existing tactical missile systems product lines.

The MUAS segment consists of our recently acquired Arcturus business.

All other includes HAPS, MacCready Works and the recently acquired ISG and Telerob businesses.

The following table (in thousands) sets forth our revenue, gross margin and adjusted operating income (loss) from operations generated by each reporting segment for the periods indicated.

Adjusted operating income is defined as operating income before intangible amortization, amortization of purchase accounting adjustments, and acquisition related expenses.

Three Months Ended July 31, 2021

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Three Months Ended August 1, 2020

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

The Company recorded intangible amortization expense and other purchase accounting adjustments in the following categories on the accompanying unaudited consolidated statements of operations:

Three Months Ended

Cost of sales:

Cost of sales for the three months ended January 30, 2021 was $50.1 million, as compared to $38.4 million for the three months ended January 25, 2020, representing an increase of $11.7 million, or 31%.

The increase in cost of sales was a result of an increase in product cost of sales of $14.7 million, partially offset by a decrease in service costs of sales of $3.0 million.

The increase in product cost of sales was primarily due to an increase in product sales and an unfavorable mix.

The decrease in service costs of sales was primarily due to the decrease in service revenue.

As a percentage of revenue, cost of sales increased from 62% to 64%, primarily due to an unfavorable product mix, partially offset by an increase in the proportion of product sales to total revenue.

Product sales

Contract services

Selling, general and administrative

Revenue for the three months ended July 31, 2021 was $101.0 million, as compared to $87.5 million for the three months ended August 1, 2020, representing an increase of $13.6 million, or 16%.

The increase in revenue was due to an increase in service revenue of $18.8 million, partially offset by a decrease in product revenue of $5.2 million.

The increase in service revenue was primarily due to an increase in MUAS service revenue, resulting from our acquisition of Arcturus in February 2021, partially offset by a decrease in HAPS service revenue.

The decrease in product revenue was primarily due to a decrease in small UAS revenue, partially offset by an increase in TMS revenue and an increase in UGV revenue, resulting from our acquisition of Telerob in May 2021.

Within small UAS, decreases in product revenue was primarily due to a decrease in product deliveries to customers within the U.S.

Department of Defense.

Cost of Sales.

Cost of sales for the three months ended July 31, 2021 was $72.3 million, as compared to $52.0 million for the three months ended August 1, 2020, representing an increase of $20.2 million, or 39%.

The increase in cost of sales was a result of an increase in service cost of sales of $19.7 million and an increase in product costs of sales of $0.5 million.

The increase in service cost of sales was primarily due to the increase in service revenues resulting from the acquisitions of Arcturus and ISG, and an increase in intangible amortization expense and other purchase accounting adjustments.

The increase in product costs of sales was primarily due to an increase in intangible amortization expense and other purchase accounting adjustments and an unfavorable product mix.

Cost of sales for the first quarter of fiscal 2022 included $4.0 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $0.6 million in the first quarter of fiscal 2021.

As a percentage of revenue, cost of sales increased from 60% to 72%, primarily due to an increase in the proportion of service revenue to total revenues resulting from the acquisitions of Arcturus and ISG, an increase in intangible amortization expense and other purchase accounting adjustments, and an unfavorable product mix.

Gross Margin.

Gross margin for the three months ended January 30, 2021 was $28.6 million, as compared to $23.5 million for the three months ended January 25, 2020, representing an increase of $5.1 million, or 22%.

The increase in gross margin was due to an increase in product margin of $7.2 million, partially offset by a decrease in service margin of $2.1 million.

The increase in product margin was primarily due to the increase in product sales, partially offset by an unfavorable product mix.

The decrease in service margin was primarily due to the decrease in service revenue.

As a percentage of revenue, gross margin decreased from 38% to 36%, primarily due to an unfavorable product mix, partially offset by an increase in the proportion of product sales to total revenue.

Gross margin for the three months ended July 31, 2021 was $28.7 million, as compared to $35.4 million for the three months ended August 1, 2020, representing a decrease of $6.7 million, or 19%.

The decrease in gross margin was due to a decrease in product margin of $5.7 million and a decrease in service margin of $1.0 million.

The decrease in product margin was primarily due to the decrease in product sales, an increase in intangible amortization expense and other purchase accounting adjustments and an unfavorable product mix.

The decrease in service margin was primarily due to an increase in intangible amortization expense and other purchase accounting adjustments, partially offset by the increase in service revenue.

As a percentage of revenue, gross margin decreased from 40% to 28%, primarily due to an increase in the proportion of service revenue to total revenues resulting from the acquisitions of Arcturus and ISG, an increase in intangible amortization expense and other purchase accounting adjustments, and an

unfavorable product mix, partially offset by the increase in service revenue.

With the acquisitions of Arcturus and ISG we expect that we will continue to experience a higher proportion of service revenue, which generally have lower gross margins than our product sales, in future quarters as compared to our historical trends in future quarters.

Selling, General and Administrative .

SG&A expense for the three months ended January 30, 2021 was $15.7 million, or 20% of revenue, as compared to SG&A expense of $13.2 million, or 21% of revenue, for the three months ended January 25, 2020.

The increase in SG&A expense was primarily due to an increase in acquisition related expenses of $3.1 million related to the Arcturus Acquisition, ISG Acquisition and the pending acquisition of Telerob.

SG&A expense for the three months ended July 31, 2021 was $27.1 million, or 27% of revenue, as compared to SG&A expense of $12.0 million, or 14% of revenue, for the three months ended August 1, 2020.

The increase in SG&A expense was primarily due to an increase in headcount and related costs associated with our Arcturus, ISG and Telerob acquisitions and an increase in intangible amortization and acquisition related expenses.

SG&A included $5.1 million and $38 thousand of intangible amortization expenses for the three months ended July 31, 2021 and August 1, 2020, respectively.

Research and Development.

R&D expense for the three months ended January 30, 2021 was $13.6 million, or 17% of revenue, as compared to R&D expense of $11.4 million, or 18% of revenue, for the three months ended January 25, 2020.

R&D expense increased by $2.3 million, or 20%, for the three months ended January 30, 2021, primarily due to an increase in development activities regarding enhanced capabilities for our products and development of new product lines.

Interest Income, net.

Interest income, net for the three months ended January 30, 2021 was $0.1 million compared to interest income, net of $1.1 million for the three months ended January 25, 2020.

The decrease in interest income was primarily due to a decrease in the average interest rate earned on our investment portfolio.

R&D expense for the three months ended July 31, 2021 was $13.7 million, or 14% of revenue, as compared to R&D expense of $11.1 million, or 13% of revenue, for the three months ended August 1, 2020.

R&D expense increased by $2.6 million, or 23%, for the three months ended July 31, 2021, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our recently acquired businesses.

Interest (Expense) Income, net.

Interest expense, net for the three months ended July 31, 2021 was $1.3 million compared to interest income, net of $0.2 million for the three months ended August 1, 2020.

The increase in interest expense was primarily due to an increase in interest expense resulting from the term debt issued concurrent with the acquisition of Arcturus.

Other (Expense) Income, net.

Other expense, net, for the three months ended January 30, 2021 was $37 thousand compared to other income, net of $0.1 million for the three months ended January 25, 2020.

Other expense, net, for the three months ended July 31, 2021 was $0.3 million compared to other income, net of $33 thousand for the three months ended August 1, 2020.

Benefit from Income Taxes.

Our effective income tax rate was 157.9% for the three months ended January 30, 2021, as compared to (28.4)% for the three months ended January 25, 2020.

Our effective income tax rate was 7.0% for the three months ended July 31, 2021, as compared to 9.6% for the three months ended August 1, 2020.

The decrease in the effective income tax rate was primarily due to lower projected annual effective tax rate in the current fiscal year over last fiscal year.

Equity Method Investment Loss, net of Tax.

Equity method investment loss, net of tax for the three months ended January 30, 2021 was $0.1 million compared to $1.2 million for the three months ended January 25, 2020.

Nine Months Ended January 30, 2021 Compared to Nine Months Ended January 25, 2020

Nine Months Ended

Cost of sales:

Selling, general and administrative

Research and development

Income from operations

Other income:

Interest income, net

Other income, net

Income before income taxes

Provision for income taxes

Equity method investment loss, net of tax

Revenue for the nine months ended January 30, 2021 was $258.9 million, as compared to $232.1 million for the nine months ended January 25, 2020, representing an increase of $26.8 million, or 12%.

The increase in revenue was due an increase in product revenue of $22.6 million and an increase in service revenue of $4.2 million.

The increase in product deliveries was primarily due to an increase in TMS revenue and an increase in product deliveries of small UAS.

Within small UAS, increases in product deliveries to customers within the U.S.

Department of Defense were partially offset by decreases in product deliveries to international allied customers.

The increase in service revenue was primarily due to an increase in customer-funded R&D revenue, partially offset by a decrease in engineering services revenue.

Cost of Sales.

Cost of sales for the nine months ended January 30, 2021 was $154.0 million, as compared to $132.1 million for the nine months ended January 25, 2020, representing an increase of $21.9 million, or 17%.

The increase in cost of sales was a result of an increase in product cost of sales of $19.8 million and an increase in service costs of sales of $2.1 million.

The increase in product costs was primarily due to the increase in product deliveries and an unfavorable product mix.

The increase in service costs of sales was primarily due to the increase in service revenue.

As a percentage of revenue, cost of sales increased from 57% to 59%, primarily due to an unfavorable product mix.

Gross Margin.

Gross margin for the nine months ended January 30, 2021 was $104.9 million, as compared to $99.9 million for the nine months ended January 25, 2020.

The increase in gross margin was primarily due to an increase in product margin of $2.8 million and an increase in service margin of $2.2 million.

The increase in product margin was primarily due to an increase in product sales, partially offset by an unfavorable product mix.

The increase in service margin was primarily due to an increase in service revenue.

As a percentage of revenue, gross margin decreased from 43% to 41%, primarily due to an unfavorable product mix.

Selling, General and Administrative .

SG&A expense for the nine months ended January 30, 2021 was $42.6 million, or 16% of revenue, as compared to SG&A expense of $43.1 million, or 19% of revenue, for the nine months ended January 25, 2020.

The decrease in SG&A expense was primarily due to lower advertising, business travel and trade show expenses primarily related to COVID-19 related restrictions, partially offset by an increase in employee related expenses and acquisition related expenses of $3.1 million related to the Arcturus Acquisition, ISG Acquisition and the pending acquisition of Telerob.

Research and Development.

R&D expense for the nine months ended January 30, 2021 was $36.7 million, or 14% of revenue, as compared to R&D expense of $30.9 million, or 13% of revenue, for the nine months ended January 25, 2020.

R&D expense increased by $5.8 million, or 19%, for the nine months ended January 30, 2021, primarily due to an increase in development activities regarding enhanced capabilities for our products and development of new product lines.

Interest Income, net.

Interest income, net for the nine months ended January 30, 2021 was $0.4 million compared to interest income, net of $3.7 million for the nine months ended January 25, 2020.

The decrease in interest income was primarily due to a decrease in the average interest rate earned on our investment portfolio.

Other Income, net.

Other income, net, for the nine months ended January 30, 2021 was $0.1 million compared to other income, net of $0.6 million for the nine months ended January 25, 2020.

The decrease in other income, net was primarily due to a decrease in transition services performed on behalf of the buyer of the discontinued EES Business.

Provision for Income Taxes.

Our effective income tax rate was 10.7% for the nine months ended January 30, 2021, as compared to 10.6% for the nine months ended January 25, 2020.

Equity Method Investment Loss, net of Tax.

Equity method investment loss, net of tax for the nine months ended January 30, 2021 was a loss of $10.9 million compared to equity method investment loss, net of tax of $3.4 million for the nine months ended January 25, 2020.

The increase was primarily due to a loss of $8.4 million for our proportion of HAPSMobile’s impairment of its investment in Loon LLC.

Equity method investment loss, net of tax for the three months ended July 31, 2021 was $1.1 million compared to $1.3 million for the three months ended August 1, 2020.

Consistent with ASC 606, we define funded backlog as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract.

As of January 30, 2021, our funded backlog was approximately $103.9 million.

In addition to our funded backlog, we also had unfunded backlog of $116.1 million as of January 30, 2021.

As of July 31, 2021, our funded backlog was approximately $257.7 million.

In addition to our funded backlog, we also had unfunded backlog of $188.3 million as of July 31, 2021.

Unfunded backlog does not meet the definition of a performance obligation under ASC Topic 606.

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Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes.

Refer to Note 18—Subsequent Events to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those provided by our recent acquisitions of Arcturus UAV and ISG and our pending acquisition of Telerob.

Refer to Note 10—Debt to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

In addition, Telerob has a line of credit of €5.5 million available for issuing letters of credit of which €1.6 million ($1.8 million) was outstanding as of July 31, 2021.

The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers.

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We anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.

Our primary liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services and financing our pending acquisition of Telerob.

Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic,

political, financial, competitive, legislative and regulatory factors that are beyond our control.

Our primary liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, and marketing acceptance and adoption of our products and services.

Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control.

Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in our Credit Facility agreement.

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government agency securities.

Although not material in value alone or in aggregate, during the nine months ended January 30, 2021, we made certain commitments outside of the ordinary course of business, including capital contributions of $2.1 million to a limited partnership fund.

Under the terms of the limited partnership agreement, we have committed to make capital contributions totaling $10.0 million to the fund of which $2.9 million was remaining at January 30, 2021.

The following table provides our cash flow data for the nine months ended January 30, 2021 and January 25, 2020 (in thousands):

Nine Months Ended

Net cash provided by operating activities

Although not material in value alone or in aggregate, we made certain commitments outside of the ordinary course of business.

We made commitments for capital contributions to a limited partnership fund.

Under the terms of the limited

partnership agreement, we have committed to make capital contributions totaling $10.0 million to the fund of which $0.9 million was remaining at July 31, 2021.

We also made commitments to lend HAPSMobile loans to continue the development of Solar HAPS.

The Company committed to lend 500 million yen ($4.6 million) of which 370 million yen (approximately $3.4 million) was remaining at July 31, 2021.

On August 13, 2021, we made the second payment of the loan agreement for 180 million yen ($1.6 million).

Under the terms of the agreement the loans are guaranteed and will be repaid when financing is obtained, or by Softbank.

We currently anticipate repayment within the fiscal year ended April 30, 2022.

The following table provides our cash flow data for the three months ended July 31, 2021 and August 1, 2020 (in thousands):

Three Months Ended

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Cash Provided by Operating Activities.

Net cash provided by operating activities for the nine months ended January 30, 2021 increased by $63.9 million to $79.0 million, as compared to net cash provided by operating activities of $15.1 million for the nine months ended January 25, 2020.

The increase in net cash provided by operating activities was primarily due to an increase in cash as a result of changes in operating assets and liabilities of $64.3 million, largely related to collections of receivables, and losses from equity method investments of $7.5 million, partially offset by a decrease in net income $11.2 million.

Cash (Used in) Provided by Operating Activities.

Net cash used in operating activities for the three months ended July 31, 2021 increased by $42.1 million to $15.3 million, as compared to net cash provided by operating activities of $26.8 million for the three months ended August 1, 2020.

The increase in net cash used in operating activities was primarily due to a decrease in net income of $24.0 million and a decrease in cash as a result of changes in operating assets and liabilities of $30.4 million, largely related to accounts receivable and unbilled retentions and receivables due to year over year timing differences, partially offset by an increase in depreciation and amortization of $10.9 million.

Cash Used in Investing Activities.

Net cash used in investing activities decreased by $44.2 million to $6.2 million for the nine months ended January 30, 2021, as compared to net cash used by investing activities of $50.4 million for the nine months ended January 25, 2020.

The decrease in net cash used in investing activities was primarily due a decrease in cash used in business acquisition of $18.6 million and a decrease in purchases net of redemptions of available-for-sale investments of $22.6 million, partially offset by an increase in purchases net of redemptions of held-to-maturity investments of $4.4 million.

Net cash used in investing activities increased by $2.9 million to $36.3 million for the three months ended July 31, 2021, as compared to net cash used by investing activities of $33.5 million for the three months ended August 1, 2020.

The increase in net cash used in investing activities was primarily due an increase in cash used for the acquisition of Telerob of $46.2 million, a decrease in redemptions of available-for-sale investments of $23.8 million, an increase in equity method investments of $1.5 million and an increase in acquisition of property and equipment of $1.4 million, partially offset by a decrease in purchases of available-for-sale investments of $70.0 million.

Cash Used in Financing Activities.

Net cash used in financing activities increased by $2.4 million to $3.4 million for the nine months ended January 30, 2021, as compared to net cash used by financing activities of $0.9 million for the nine months ended January 25, 2020.

The increase in net cash used by financing activities was primarily due to an increase in holdback and retention payments related to a prior business acquisition of $1.5 million and an increase in tax withholding payments related to net settlement of equity awards of $0.9 million.

Net cash used in financing activities increased by $7.9 million to $9.6 million for the three months ended July 31, 2021, as compared to net cash used by financing activities of $1.7 million for the three months ended August 1, 2020.

The increase in net cash used by financing activities was primarily due to an increase in holdback and retention payments related to a prior business acquisition of $6.0 million and an increase in payments of loan principal of $2.5 million.

Contractual Obligations

During the three months ended January 30, 2021, there were no material changes in our contractual obligations and commercial commitments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.

During the three months ended July 31, 2021, there were no material changes in our contractual obligations and commercial commitments from those disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021.

Off-Balance Sheet Arrangements

As of January 30, 2021, we had no off‑balance sheet arrangements as defined in Item 303(a)(4) of Regulation S‑K.

As of July 31, 2021, we had no off‑balance sheet arrangements as defined in Item 303(a)(4) of Regulation S‑K.

Our operations have not been, and we do not expect them to be, materially affected by inflation.

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New Accounting Standards

Please refer to Note 1—Organization and Significant Accounting Policies to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of new accounting pronouncements and accounting pronouncements adopted during the nine months ended January 30, 2021.

QUANTITATIVE AND QUALITATIV E DISCLOSURES ABOUT MARKET RISK

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dollars, we have not experienced significant foreign exchange gains or losses to date.

On December 3, 2020, we entered into a share purchase agreement to purchase 100% of the issued and outstanding shares of Seller’s wholly-owned subsidiary, Telerob Gesellschaft für Fernhantierungstechnik mbH for €51 million inclusive of certain contingent consideration payments.

In addition, we occasionally engage in forward contracts in foreign currencies to limit our exposure on non-U.S.

We occasionally engage in forward contracts in foreign currencies to limit our exposure on non-U.S.

dollar transactions.

With the acquisition of Telerob, a portion of our cash balance is denominated in Euros which is Telerob’s functional currency.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis