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Item 2. Management’s Discussion and Analysis

2022-12-07 compared with 2022-09-08 · 163 added, 66 removed, 140 unchanged (62% of the section changed)

32 unchanged sentences

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 months ended July 30, 2022 and July 31, 2021, changes in accounting estimates on contracts recognized over time are presented below.

For the three months ended July 30, 2022 and July 31, 2021, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

During the three months ended October 29, 2022 and October 30, 2021, changes in accounting estimates on contracts recognized over time are presented below.

For the three months ended October 29, 2022 and October 30, 2021, 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 (unfavorable) favorable adjustments

For the three months ended July 30, 2022, favorable cumulative catch-up adjustments of $1.3 million were primarily due to final cost adjustments on 14 contracts, which individually were not material.

Net favorable (unfavorable) adjustments

For the three months ended October 29, 2022, favorable cumulative catch-up adjustments of $2.6 million were primarily due to final cost adjustments on eight contracts.

During the three months ended October 29, 2022, we revised our estimates of the total expected costs to complete a TMS variant contract.

The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase to revenue of approximately $1.3 million.

For the same period, unfavorable cumulative catch-up adjustments of $1.5 million were primarily related to higher than expected costs on six contracts, which individually were not material.

Also during the three months ended October 29, 2022, we recognized forward loss reserves on two MUAS ISR contracts totaling $2.3 million related to unfavorable changes in the estimated costs to complete the contracts.

We recorded the forward loss reserves as the total estimated costs to complete the contracts are in excess of the total remaining consideration of the contracts.

The aggregate impact of the change in estimate decreased net income by $1.5 million and diluted loss per share by $0.06.

For the three months ended October 30, 2021, favorable cumulative catch-up adjustments of $0.3 million were primarily due to final cost adjustments on six 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 18 contracts, which individually were not material.

For the six months ended October 29, 2022 and October 30, 2021, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Six Months Ended

Gross favorable adjustments

Gross unfavorable adjustments

Net unfavorable adjustments

For the six months ended October 29, 2022, favorable cumulative catch-up adjustments of $2.0 million were primarily due to final cost adjustments on 20 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $3.4 million were primarily related to higher than expected costs on four contracts.

During the three months ended July 30, 2022, we revised our estimates of the total expected costs to complete a TMS variant contract.

During the six months ended October 29, 2022, we revised our estimates of the total expected costs to complete two TMS variant contracts.

The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was a decrease to revenue of approximately $2.6 million.

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.

Also during the three months ended October 29, 2022, the Company recognized forward loss reserves on three MUAS ISR contracts totaling $2.3 million related to unfavorable changes in the estimated costs to complete the contracts.

The company recorded the forward loss reserves as the total estimated costs to complete the contracts are in excess of the total remaining consideration of the contracts.

The aggregate impact of the change in estimate decreased net income by $1.5 million and diluted loss per share by $0.06.

For the six months ended October 30, 2021, favorable cumulative catch-up adjustments of $0.9 million were primarily due to final cost adjustments on 18 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $1.9 million were primarily related to higher than expected costs on 17 contracts, which individually were not material.

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

Three Months Ended July 30, 2022 Compared to Three Months Ended July 31, 2021

Three Months Ended October 29, 2022 Compared to Three Months Ended October 30, 2021

Three Months Ended

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Research and development

Loss from operations

(Loss) income from operations

Other (loss) income:

Interest expense, net

Other expense, net

Other income (expense), net

Loss before income taxes

Provision for (benefit from) income taxes

Equity method investment loss, net of tax

Benefit from income taxes

Equity method investment (loss) income, net of tax

Net (loss) income

We have identified four reportable segments, Small Unmanned Aircraft Systems (“Small UAS”), Tactical Missile Systems (“TMS”), Medium Unmanned Aircraft Systems (“MUAS”) and High Altitude Pseudo-Satellite Unmanned Aircraft Systems (“HAPS”).

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All corporate and headquarter expenses are allocated to the reportable segments.

Three Months Ended July 30, 2022

Three Months Ended October 29, 2022

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Three Months Ended July 31, 2021

Three Months Ended October 30, 2021

Income (loss) from operations

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Three Months Ended

Six Months Ended

Cost of sales:

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Selling, general and administrative

Revenue for the three months ended July 30, 2022 was $108.5 million, as compared to $101.0 million for the three months ended July 31, 2021, representing an increase of $7.5 million, or 7%.

The increase in revenue was due to an increase in product revenue of $4.9 million and service revenue of $2.6 million.

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

The increase in service revenue was primarily due to an increase in revenue from customer-funded research and development efforts, partially offset by a decrease in TMS service revenue and a decrease in MUAS service revenue.

Revenue for the three months ended October 29, 2022 was $111.6 million, as compared to $122.0 million for the three months ended October 30, 2021, representing a decrease of $10.4 million, or 9%.

The decrease in revenue was due to decreases in product revenue of $8.7 million and service revenue of $1.8 million.

The decrease in product revenue was primarily due to a decrease in small UAS product revenue, partially offset by increases in TMS and MUAS product revenue.

The decrease in service revenue was primarily due to decreases in MUAS, small UAS, and HAPS service revenue, partially offset by increases in TMS service revenue and increases in customer-funded research and development revenue.

We expect a decrease in MUAS service revenues related to the completion of certain MUAS site locations.

Due to the higher backlog, we expect the Small UAS product revenues to be significantly higher in the second half of the year as compared to the first half of the year.

Cost of Sales.

Cost of sales for the three months ended July 30, 2022 was $74.8 million, as compared to $72.3 million for the three months ended July 31, 2021, representing an increase of $2.5 million, or 3%.

Cost of sales for the three months ended October 29, 2022 was $85.7 million, as compared to $79.6 million for the three months ended October 30, 2021, representing an increase of $6.1 million, or 8%.

The increase in cost of sales was a result of an increase in service cost of sales of $5.6 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.

The increase in product costs of sales was primarily due to an increase in product revenue, partially offset by a favorable product mix.

Cost of sales for the three months ended July 30, 2022 included $3.0 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $4.0 million for the three months ended July 31, 2021.

As a percentage of revenue, cost of sales decreased from 72% to 69%, primarily due to a favorable product mix.

The increase in service cost of sales was primarily due to accelerated depreciation charges of certain deployed fixed assets related to the anticipated completion of certain MUAS site locations of $4.5 million.

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

Cost of sales for the three months ended October 29, 2022 included $4.0 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $5.5 million for the three months ended October 30, 2021.

As a percentage of revenue, cost of sales increased from 65% to 75%, primarily due to an unfavorable product mix and the MUAS accelerated depreciation charges.

Gross Margin.

Gross margin for the three months ended July 30, 2022 was $33.7 million, as compared to $28.7 million for the three months ended July 31, 2021, representing an increase of $5.0 million, or 17%.

The increase in gross margin was due to an increase in product margin of $4.5 million and an increase in service margin of $0.4 million.

The increase in product margin was primarily due to the increase in product sales and a favorable product mix.

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

As a percentage of revenue, gross margin increased from 28% to 31%, primarily due to a favorable product mix.

Additionally, we expect inflationary and supply chain constraint trends to continue throughout our fiscal year 2023, which will negatively impact our gross margin across all our segments.

Gross margin for the three months ended October 29, 2022 was $25.9 million, as compared to $42.5 million for the three months ended October 30, 2021, representing a decrease of $16.6 million, or 39%.

The decrease in gross margin was due to a decrease in product margin of $9.2 million and a decrease in service margin of $7.4 million.

The decrease in product margin was primarily due to the decrease in product sales and an unfavorable product mix.

The decrease in service margin was primarily due to a decrease in service revenue and accelerated depreciation charges of certain deployed fixed assets related to the anticipated completion of certain MUAS site locations of $4.5 million.

As a percentage of revenue, gross margin decreased from 35% to 23%, primarily due to an unfavorable product mix and the MUAS accelerated depreciation charges.

Additionally, we expect inflationary and supply chain constraint trends to

continue throughout our fiscal year 2023, which are currently and will continue to negatively impact our gross margin across all our segments.

Selling, General and Administrative .

SG&A expense for the three months ended July 30, 2022 was $21.9 million, or 20% of revenue, as compared to SG&A expense of $27.1 million, or 27% of revenue, for the three months ended July 31, 2021.

The decrease in SG&A expense was primarily due to a decrease in acquisition-related expenses of $2.9

million, a decrease in intangible amortization and other related non-cash purchase accounting expenses of $1.2 million, and a decrease in employee related expenses.

SG&A expense for the three months ended October 29, 2022 was $23.6 million, or 21% of revenue, as compared to SG&A expense of $24.8 million, or 20% of revenue, for the three months ended October 30, 2021.

The decrease in SG&A expense was primarily due to a decrease in commission expenses due to a decrease in sales in which sales representatives were utilized and a decrease in intangible amortization and other related non-cash purchase accounting expenses.

Research and Development.

R&D expense for the three months ended July 30, 2022 was $15.0 million, or 14% of revenue, as compared to R&D expense of $13.7 million, or 14% of revenue, 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 acquired businesses.

R&D expense for the three months ended October 29, 2022 was $16.6 million, or 15% of revenue, as compared to R&D expense of $14.3 million, or 12% of revenue, for the three months ended October 30, 2021, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our acquired businesses.

Interest Expense, net.

Interest expense, net for the three months ended July 30, 2022 was $1.6 million compared to interest expense, net of $1.3 million for the three months ended July 31, 2021.

Interest expense, net for the three months ended October 29, 2022 was $2.3 million compared to interest expense, net of $1.4 million for the three months ended October 30, 2021.

The increase in interest expense, net was primarily due to an increase in interest expense resulting from higher interest rates on our debt facility, partially offset by lower average outstanding balances.

Other Expense, net.

Other expense, net, for the three months ended July 30, 2022 was $0.4 million compared to other expense, net of $0.3 million for the three months ended July 31, 2021.

Provision for (Benefit from) Income Taxes.

Our effective income tax rate was (49.3)% for the three months ended July 30, 2022, as compared to 7.0% for the three months ended July 31, 2021.

The decrease in our effective income tax rate was primarily due to the projected negative full fiscal year 2023 effective tax rate which was primarily driven by our projected pre-tax income combined with federal R&D tax credits and foreign-derived intangible income deductions.

Other Income (Expense), net.

Other income, net, for the three months ended October 29, 2022 was $0.8 million compared to other expense, net of $10.0 million for the three months ended October 30, 2021.

The increase in other income, net is primarily due to a legal accrual of $10.0 million for the settlement of all claims made by the buyers of our former EES business recorded during the three months ended October 30, 2021.

Other income, net for the second quarter of fiscal 2023 includes unrealized gains associated with increases in the fair market value for equity security investments.

Benefit from Income Taxes.

Our effective income tax rate was 66.1% for the three months ended October 29, 2022, as compared to 117.6% for the three months ended October 30, 2021.

Historically, we calculate the provision for income taxes during interim reporting periods by applying an estimate of our annual effective tax rate (“AETR”) for the full fiscal year to the pretax income or loss for the interim reporting period.

For the three months ended October 29, 2022, we calculated the provision for income taxes using a discrete effective tax rate (“ETR”) method.

We determined that since small changes in estimated pretax income or loss would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three months ended October 29, 2022.

The decrease in our effective income tax rate was primarily due to the change to the ETR method during the current quarter.

The effective income tax rate for the three months ended October 29, 2022 was primarily impacted by expected federal R&D tax credits and foreign-derived intangible income deductions.

Equity Method Investment (Loss) Income, net of Tax.

Equity method investment loss, net of tax for the three months ended October 29, 2022 was $1.3 million as compared to equity method investment income, net of tax of $1.1 million for the three months ended October 30, 2021.

In March 2022, the Company sold its 7% equity interest in HAPSMobile to SoftBank.

Subsequent to the equity interest sale in HAPSMobile during the three months ended April 30, 2022, equity method investment loss, net of tax relates to activity related to investments in limited partnership funds.

Six Months Ended October 29, 2022 Compared to Six Months Ended October 30, 2021

The following tables (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.

All corporate and headquarter expenses are allocated to the reportable segments.

Six Months Ended

Cost of sales

Selling, general and administrative

Research and development

Loss from operations

Other (loss) income:

Interest expense, net

Other income (expense), net

Loss before income taxes

Benefit from income taxes

Equity method investment loss, net of tax

Equity method investment loss, net of tax for the three months ended July 30, 2022 was $0.5 million as compared to $1.1 million for the three months ended July 31, 2021.

Six Months Ended October 29, 2022

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Six Months Ended October 30, 2021

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Revenue for the six months ended October 29, 2022 was $220.1 million, as compared to $223.0 million for the six months ended October 30, 2021, representing a decrease of $2.9 million, or 1%.

The decrease in revenue was due to a decrease in product revenue of $3.8 million, partially offset by an increase in service revenue of $0.9 million.

The decrease in product revenue was primarily due to a decrease in small UAS product revenue, partially offset by an

increase in TMS and MUAS product revenue.

The increase in service revenue was primarily due to an increase in revenue from customer-funded research and development efforts and TMS service revenue, partially offset by a decrease in MUAS, small UAS and HAPS service revenue.

We expect a decrease in MUAS service revenues related to the completion of certain MUAS site locations.

Due to the higher backlog, we expect the Small UAS product revenues to be significantly higher in the second half of the year as compared to the first half of the year.

Cost of Sales.

Cost of sales for the six months ended October 29, 2022 was $160.5 million, as compared to $151.8 million for the six months ended October 30, 2021, representing an increase of $8.7 million, or 6%.

The increase in cost of sales was a result of an increase in service cost of sales of $7.8 million and an increase in product costs of sales of $0.8 million.

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

Cost of sales for the six months ended October 29, 2022 included $7.1 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $9.5 million for the six months ended October 30, 2021.

As a percentage of revenue, cost of sales increased from 68% to 73%, primarily due to an unfavorable product mix and the MUAS accelerated depreciation charges.

Gross Margin.

Gross margin for the six months ended October 29, 2022 was $59.6 million, as compared to $71.2 million for the six months ended October 30, 2021, representing a decrease of $11.6 million, or 16%.

The decrease in gross margin was due to a decrease in service margin of $7.0 million and a decrease in product margin of $4.6 million.

The decrease in service margin was primarily due to accelerated depreciation charges of certain deployed fixed assets related to the anticipated completion of certain MUAS site locations of $4.5 million.

The decrease in product margin was primarily due to the decrease in product sales combined with an unfavorable product mix.

As a percentage of revenue, gross margin decreased from 32% to 27%, primarily due to an unfavorable product mix and the MUAS accelerated depreciation charges.

Additionally, we expect inflationary and supply chain constraint trends to continue throughout our fiscal year 2023, which are currently and will continue to negatively impact our gross margin across all our segments.

Selling, General and Administrative .

SG&A expense for the six months ended October 29, 2022 was $45.6 million, or 21% of revenue, as compared to SG&A expense of $51.9 million, or 23% of revenue, for the six months ended October 30, 2021.

The decrease in SG&A expense was primarily due to a decrease in acquisition-related expenses of $3.2 million and a decrease in intangible amortization and other related non-cash purchase accounting expenses of $2.2 million.

Research and Development.

R&D expense for the six months ended October 29, 2022 was $31.6 million, or 14% of revenue, as compared to R&D expense of $28.0 million, or 13% of revenue, for the six months ended October 30, 2021, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our acquired businesses.

Interest Expense, net.

Interest expense, net for the six months ended October 29, 2022 was $3.9 million compared to interest expense, net of $2.7 million for the six months ended October 30, 2021.

Other Income (Expense), net.

Other income, net, for the six months ended October 29, 2022 was $0.4 million compared to other expense, net of $10.4 million for the six months ended October 30, 2021.

Other income, net for the second quarter of fiscal 2023 includes unrealized gains associated with increases in fair market value for equity security investments.

Benefit from Income Taxes.

Our effective income tax rate was 37.2% for the six months ended October 29, 2022, as compared to 48.0% for the six months ended October 30, 2021.

For the six months ended October 29, 2022, we calculated the provision for income taxes using a discrete effective tax rate (“ETR”) method.

We determined that since small changes in estimated pretax income or loss would result in significant changes in the estimated AETR, the historical

method would not provide a reliable estimate for the six months ended October 29, 2022.

The decrease in our effective income tax rate was primarily due to the change to the ETR method during the current quarter.

The effective income tax rate for the six months ended October 29, 2022 was primarily impacted by expected federal R&D tax credits and foreign-derived intangible income deductions.

Equity Method Investment Loss, net of Tax.

Equity method investment loss, net of tax for the six months ended October 29, 2022 was $1.8 million as compared to $8 thousand for the six months ended October 30, 2021.

In March 2022, the Company sold its 7% equity interest in HAPSMobile to SoftBank.

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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 July 30, 2022, our funded backlog was approximately $203.9 million.

In addition to our funded backlog, we also had unfunded backlog of $327.9 million as of July 30, 2022.

As of October 29, 2022, our funded backlog was approximately $293.1 million.

In addition to our funded backlog, we also had unfunded backlog of $339.4 million as of October 29, 2022.

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

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Army IDIQ-type contract for small UAS because values for each of the other domains within the contract have not been disclosed by the customer, and we cannot be certain that we will secure all task orders issued against the contract.

Additionally, unfunded backlog on the SOCOM MEUAS contract reflects only those sites which have been awarded to Arcturus UAV, Inc.

(“Arcturus”) and does not include the remaining potential value associated with the entire SOCOM MEUAV III/IV contract.

Additionally, unfunded backlog on the U.S.

Special Operations Command (“SOCOM”) Mid-Endurance Unmanned Aircraft Systems (“MEUAS”) contract reflects only those sites which have been awarded to Arcturus and does not include the remaining potential value associated with the entire SOCOM MEUAS III/IV contract.

Because of possible future changes in delivery schedules and/or cancellations of orders, backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period, and actual sales for the year may not meet or exceed the backlog represented.

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Liquidity and Capital Resources

On September 8, 2022 we filed an S-3 shelf registration statement to offer and sell shares of our common stock, including a prospectus supplement in relation to an Open Market Sale Agreement SM , also dated September 8, 2022, with Jefferies LLC relating to the proposed offer and sale of shares of our common stock having an aggregate offering price of up to $200.0 million from time to time through Jefferies LLC as our sales agent.

As of October 29, 2022, we have sold 125,441 of our shares for total gross proceeds of $12.7 million, and we have $187.3 million aggregate offering price remaining available under the registration.

On February 19, 2021 in connection with the consummation of the Arcturus acquisition, we entered into the Credit Agreement for (i) the Revolving Facility, and (ii) the Term Loan Facility, and together with the Revolving Credit Facility, the “Credit Facilities”.

The Term Loan Facility requires payment of 5% of the outstanding obligations in each of the first four loan years, with the remaining 80.0% payable in loan year five, consisting of three quarterly payments of 1.25% each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.

maturity date.

Proceeds from the Term Loan Facility were used in part to finance a portion of the cash consideration for the Arcturus acquisition.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $3.8 million as of July 30, 2022.

As of July 30, 2022, approximately $96.2 million was available under the Revolving Facility.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $4.3 million as of October 29, 2022.

As of October 29, 2022, approximately $95.7 million was available under the Revolving Facility.

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

Refer to Note 10—Debt to our unaudited condensed 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 ($5.6 million) available for issuing letters of credit of which €1.7 million ($1.7 million) was outstanding as of July 30, 2022.

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, ISG and Telerob.

In addition, Telerob has a line of credit of €5.5 million ($5.5 million) available for issuing letters of credit of which €1.6 million ($1.6 million) was outstanding as of October 29, 2022.

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

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However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.

In consideration of the impact of the ongoing COVID-19 pandemic, we continue to hold a significant portion of our investments in U.S.

government and U.S.

government agency securities.

In consideration of the impact of the ongoing COVID-19 pandemic, we continue to hold a significant portion of our investments in short term investments or cash and cash equivalents.

During the fiscal year ended April 30, 2022, we made certain commitments outside of the ordinary course of business, including capital contribution commitments to a second limited partnership fund.

Under the terms of the new limited partnership agreement, we have committed to make capital contributions to such fund totaling $20.0 million, inclusive of the expected reinvestment of distributions from our existing limited partnership fund, of which $17.2 million was remaining at July 30, 2022.

Under the terms of a new limited partnership agreement, we have committed to make capital contributions to such fund totaling $20.0 million, inclusive of the expected reinvestment of distributions from our existing limited partnership fund, of which $17.2 million was remaining at October 29, 2022.

The contributions are anticipated to be paid over the next five fiscal years.

As of July 30,

2022, $10 million remains of the obligation under the legal settlement with Webasto which will be paid during the fiscal year ending April 30, 2023.

On August 17, 2022 the Company acquired certain assets of Planck Aerosystems, Inc.

(“Planck”), for $5.1 million plus a $0.5 million holdback, which was financed entirely from existing cash on hand.

The following table provides our cash flow data for the three months ended July 30, 2022 and July 31, 2021 (in thousands):

Three Months Ended

As of October 29, 2022, $10 million remains of the obligation under the legal settlement with Webasto which will be paid during the fiscal year ending April 30, 2023.

The following table provides our cash flow data for the six months ended October 29, 2022 and October 30, 2021 (in thousands):

Six Months Ended

Net cash provided by (used in) operating activities

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Cash Provided by (Used in) Operating Activities.

Net cash provided by operating activities for the three months ended July 30, 2022 increased by $31.2 million to $15.9 million, as compared to net cash used in operating activities of $15.3 million for the three months ended July 31, 2021.

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 $25.3 million, largely related to unbilled receivables and retentions and accounts payable, partially offset by a decrease in accounts receivable and inventories due to year over year timing differences and a decrease in net loss of $5.5 million.

Net cash provided by operating activities for the six months ended October 29, 2022 increased by $35.3 million to $31.9 million, as compared to net cash used in operating activities of $3.3 million for the six months ended October 30, 2021.

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 $34.3 million, largely related to unbilled receivables and retentions and accounts payable, partially offset by a decrease in other liabilities, inventories and accounts receivable due to year over year timing differences.

Cash Provided by (Used in) Investing Activities.

Net cash provided by investing activities increased by $40.1 million to $3.8 million for the three months ended July 30, 2022, as compared to net cash used in investing activities of $36.3 million for the three months ended July 31, 2021.

The increase in net cash provided by investing activities was primarily due to the acquisition of Telerob for $46.2 million in the prior year quarter, partially offset by a decrease in redemptions of available-for-sale investments of $4.6 million.

Net cash provided by investing activities increased by $38.2 million to $3.4 million for the six months ended October 29, 2022, as compared to net cash used in investing activities of $34.8 million for the six months ended October 30, 2021.

The increase in net cash provided by investing activities was primarily due to the acquisition of Telerob for $46.2 million in the prior year, a decrease in acquisition of property and equipment of $5.6 million and a decrease in equity method investments of $3.5 million, partially offset by equity securities investments of $5.1 million and a decrease in redemptions of available-for-sale investments of $4.6 million.

Cash Used in Financing Activities.

Net cash used in financing activities decreased by $6.2 million to $3.3 million for the three months ended July 30, 2022, as compared to net cash used by financing activities of $9.6 million for the three months ended July 31, 2021.

The decrease in net cash used by financing activities was primarily due to a decrease in holdback and retention payments related to business acquisitions of $6.0 million.

Net cash used in financing activities decreased by $1.2 million to $10.9 million for the six months ended October 29, 2022, as compared to net cash used by financing activities of $12.1 million for the six months ended October 30, 2021.

The decrease in net cash used by financing activities was primarily due to proceeds from share issuance net of issuance costs of $11.8 million and a decrease in holdback and retention payments related to business acquisitions of $6.0 million, partially offset by principal payment of the term loan of $17.5 million.

New Accounting Standards

Please refer to Note 1—Organization and Significant Accounting Policies to our unaudited condensed 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 three months ended July 30, 2022.

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.

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.

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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