What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2021-02-03 · 190 added, 168 removed, 509 unchanged (41% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) January 1,

(In thousands, except share and par value amounts) April 2,

Current Assets:

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Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 5,563,918 shares issued and outstanding at January 1, 2021;

5,400,487 shares issued and outstanding at July 3, 2020

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,164,194 shares issued and outstanding at April 2, 2021;

10,792,674 shares issued and outstanding at July 3, 2020 (see Note 1 Stock Split)

Treasury stock ( 458 ) —

Additional paid-in-capital 818,155 814,283

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

(In thousands, except per share amounts) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Revenue from product sales $ 45,246 $ 40,930 $ 136,401 $ 111,676

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Total operating expenses 21,543 20,725 58,258 61,578

Operating income (loss) 7,878 ( 1,497 ) 14,443 22

Operating income 4,035 1,236 18,478 1,258

Interest income 128 112 202 318

Interest expense — ( 19 ) ( 1 ) ( 23 )

Income (loss) before income taxes 7,916 ( 1,378 ) 14,516 224

Provision for income taxes 1,275 293 1,939 1,841

Income before income taxes 4,163 1,329 18,679 1,553

(Benefit from) provision for income taxes ( 90,568 ) 598 ( 88,629 ) 2,439

Net income (loss) $ 94,731 $ 731 $ 107,308 $ ( 886 )

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Diluted $ 8.00 $ 0.07 $ 9.31 $ ( 0.08 )

Weighted-average shares outstanding:

Weighted-average shares outstanding (see Note 1 Stock Split):

Basic 11,152 10,790 10,994 10,780

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Net income (loss) $ 94,731 $ 731 $ 107,308 $ ( 886 )

Other comprehensive income (loss):

Other comprehensive (loss) income:

Net change in cumulative translation adjustments

( 284 ) ( 2,374 ) 314 ( 2,477 )

Other comprehensive income (loss) 184 410 598 ( 103 )

Other comprehensive (loss) income ( 284 ) ( 2,374 ) 314 ( 2,477 )

Comprehensive income (loss) $ 94,447 $ ( 1,643 ) $ 107,622 $ ( 3,363 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

(In thousands) January 1,

2021 December 27,

Nine Months Ended

(In thousands) April 2,

2021 April 3,

Operating Activities

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Depreciation and amortization of property, plant and equipment 4,016 3,226

Provision for (recovery from) uncollectible receivables 30 ( 54 )

Provision for uncollectible receivables 46 18

Share-based compensation 2,154 1,315

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Payments for repurchase of common stock — ( 1,772 )

Payments for repurchase of common stock - treasury shares ( 458 ) —

Payments for taxes related to net settlement of equity awards ( 167 ) ( 764 )

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (1)

Three Months Ended January 1, 2021

Common Stock Additional

Three Months Ended April 2, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of October 2, 2020 5,443,362 $ 54 $ 815,203 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

Balance as of January 1, 2021 11,119,536 $ 111 $ — $ 816,988 $ ( 718,164 ) $ ( 14,371 ) $ 84,564

Net income — — — — 94,731 — 94,731

Other comprehensive income, net of tax — — — — 184 184

Other comprehensive loss, net of tax — — — — — ( 284 ) ( 284 )

Issuance of common stock under employee stock plans 54,324 1 — 401 — — 402

Shares withheld for taxes related to vesting of equity awards ( 1,366 ) — — 1 — — 1

Stock repurchase ( 8,300 ) — ( 458 ) — — — ( 458 )

Share-based compensation — — — 765 — — 765

Balance as of January 1, 2021 5,563,918 $ 56 $ 817,042 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

Three Months Ended December 27, 2019

Balance as of April 2, 2021 11,164,194 $ 112 $ ( 458 ) $ 818,155 $ ( 623,433 ) $ ( 14,655 ) $ 179,721

Three Months Ended April 3, 2020

Common Stock Additional

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(In thousands, except share amounts) Shares $

Balance as of September 27, 2019 5,444,671 $ 54 $ 814,113 $ ( 730,944 ) $ ( 13,249 ) $ 69,974

Net loss — — — ( 1,671 ) — ( 1,671 )

Other comprehensive income, net of tax — — — — 410 410

Balance as of December 27, 2019 10,820,660 $ 108 $ 813,813 $ ( 732,615 ) $ ( 12,839 ) $ 68,467

Net income — — — 731 — 731

Other comprehensive loss, net of tax — — — — ( 2,374 ) ( 2,374 )

Issuance of common stock under employee stock plans 13,430 — 1 — — 1

Shares withheld for taxes related to vesting of equity awards ( 3,362 ) — ( 18 ) — — ( 18 )

Stock repurchase ( 52,968 ) — ( 371 ) — — ( 371 )

Share-based compensation — — 507 — — 507

Balance as of December 27, 2019 5,414,480 $ 54 $ 813,867 $ ( 732,615 ) $ ( 12,839 ) $ 68,467

Six Months Ended January 1, 2021

Common Stock Additional

Balance as of April 3, 2020 10,777,760 $ 108 $ 813,932 $ ( 731,884 ) $ ( 15,213 ) $ 66,943

Nine Months Ended April 2, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

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Shares withheld for taxes related to vesting of equity awards ( 13,534 ) — — ( 167 ) — — ( 167 )

Stock repurchase ( 8,300 ) — ( 458 ) — — — ( 458 )

Share-based compensation — — — 2,154 — — 2,154

Balance as of January 1, 2021 5,563,918 $ 56 $ 817,042 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

Six Months Ended December 27, 2019

Balance as of April 2, 2021 11,164,194 $ 112 $ ( 458 ) $ 818,155 $ ( 623,433 ) $ ( 14,655 ) $ 179,721

Nine Months Ended April 3, 2020

Common Stock Additional

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Share-based compensation — — 1,315 — — 1,315

Balance as of December 27, 2019 5,414,480 $ 54 $ 813,867 $ ( 732,615 ) $ ( 12,839 ) $ 68,467

Balance as of April 3, 2020 10,777,760 $ 108 $ 813,932 $ ( 731,884 ) $ ( 15,213 ) $ 66,943

(1) See Note 1 Stock Split.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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In the opinion of our management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods.

The results for the three and six months ended January 1, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The results for the three and nine months April 2, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

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We operate on a 52-week or 53-week year ending on the Friday closest to June 30.

The three months ended January 1, 2021 and December 27, 2019 both consisted of 13 weeks.

The three months ended April 2, 2021 consisted of 13 weeks while the three months ended April 3, 2020 consisted of 14 weeks.

Fiscal year 2021 will be comprised of 52 weeks and will end on July 2, 2021.

Fiscal year 2020 was comprised of 53 weeks and ended on July 3, 2020.

On April 7, 2021 we effected a two -for-one split in the form of a stock dividend to shareholders of record as of April 1, 2021.

Common stock, Additional paid-in-capital, per share and equity award amounts for all periods presented have been retrospectively reclassified to reflect the two -for-one stock split in the form of a stock dividend.

Use of Estimates

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Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of January 1, 2021 and for the six months ended January 1, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

There have been no material changes in our significant accounting policies as of April 2, 2021 and for the nine months ended April 2, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

Accounting Standards Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

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The following table provides a summary of our cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in our unaudited condensed consolidated statement of cash flows:

(In thousands) January 1,

(In thousands) April 2,

Cash and cash equivalents $ 45,808 $ 41,618

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Our net accounts receivable are summarized below:

(In thousands) January 1,

(In thousands) April 2,

Accounts receivable $ 49,365 $ 46,502

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Our inventories are summarized below:

(In thousands) January 1,

(In thousands) April 2,

Finished products $ 15,347 $ 9,055

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$ 4,846 $ 1,324

We increased certain levels of inventory during the three and nine months ended April 2, 2021 primarily to mitigate supply chain constraints.

We currently rely on a few vendors for substantially all of our inventory purchases.

We record charges to adjust our inventory and customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning, or discontinuance.

The charges during the three and six months ended January 1, 2021 and December 27, 2019 were classified in cost of product sales as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Excess and obsolete inventory charges $ 134 $ 23 $ 197 $ 169

The charges during the three and nine months April 2, 2021 and April 3, 2020 were classified in cost of product sales as follows:

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Excess and obsolete inventory charges (recovery) $ 270 $ ( 13 ) $ 467 $ 156

Customer service inventory write-downs 293 250 681 595

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The property held for sale prior to the sale date is separately presented on the balance sheet as Assets held for sale.

During the quarter management initiated the sale of our facility located in the United Kingdom.

We expect to complete the sale within the next twelve months.

The carrying value of this asset held for sale as of January 1, 2021 of $ 2.2 million which represents the lower of the carrying value or fair value, net of estimated costs to sell the assets.

During the second quarter of fiscal 2021 management initiated the sale of our facility located in the United Kingdom.

We expect to complete the sale within twelve months.

The carrying value of this asset held for sale as of April 2, 2021 of $ 2.2 million which represents the lower of 1) the carrying value or 2) fair value of the assets, less estimated costs to sell the assets.

We performed an analysis and determined the estimated fair value of the assets, less estimated selling costs, is higher than the carrying value of the assets.

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Our property, plant and equipment, net are summarized below:

(In thousands) January 1,

(In thousands) April 2,

Land $ 210 $ 710

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Total property, plant and equipment, net $ 12,563 $ 16,911

Included in the total plant, property and equipment above were $ 0.4 million and $ 3.5 million of assets in progress which have not been placed in service as of January 1, 2021 and July 3, 2020, respectively.

Excluded in the total plant, property and equipment above were $ 0.5 million for land, $ 4.9 million for buildings and leasehold improvements and $ 3.2 million for accumulated depreciation in connection with Assets Held for Sale.

Included in the total plant, property and equipment above were $ 0.2 million and $ 3.5 million of assets in progress which have not been placed in service as of April 2, 2021 and July 3, 2020, respectively.

Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Depreciation and amortization $ 1,355 $ 1,111 $ 4,016 $ 3,226

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Our accrued expenses are summarized below:

(In thousands) January 1,

(In thousands) April 2,

Accrued compensation and benefits $ 11,744 $ 11,814

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Changes in our warranty liability, which are included as a component of accrued expenses in our unaudited condensed consolidated balance sheets were as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Balance as of the beginning of the period $ 3,315 $ 3,197 $ 3,196 $ 3,323

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Our advance payments and unearned revenue are summarized below:

(In thousands) January 1,

(In thousands) April 2,

Advance payments $ 3,238 $ 2,529

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Total advance payments and unearned revenue $ 26,954 $ 21,872

Excluded from the balances above are $ 8.3 million and $ 8.1 million in long-term unearned revenue as of January 1, 2021 and July 3, 2020, respectively.

Excluded from the balances above are $ 9.0 million and $ 8.1 million in long-term unearned revenue as of April 2, 2021 and July 3, 2020, respectively.

Fair Value Measurements of Assets and Liabilities

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts, estimated fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of January 1, 2021 and July 3, 2020 were as follows:

January 1, 2021 July 3, 2020 Valuation Inputs

The carrying amounts, estimated fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of April 2, 2021 and July 3, 2020 were as follows:

April 2, 2021 July 3, 2020 Valuation Inputs

(In thousands) Carrying Amount Fair Value Carrying Amount Fair Value

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Our Level 1 items mainly are money market funds.

As of January 1, 2021 and July 3, 2020, these money market funds were valued at $ 1.00 net asset value per share.

As of April 2, 2021 and July 3, 2020, these money market funds were valued at $ 1.00 net asset value per share.

We classify items in Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes, or alternative pricing sources are available with reasonable levels of price transparency.

Our bank certificates of deposit and foreign exchange forward contracts are classified within Level 2.

As of January 1, 2021 and July 3, 2020, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

As of April 2, 2021 and July 3, 2020, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Our policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.

During the first six months of fiscal 2021 and 2020, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

During the first nine months of fiscal 2021 and 2020, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

The Company has facilities under non-cancelable operating lease agreements.

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Our obligations to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our unaudited condensed consolidated balance sheets.

We did not enter into any finance leases during the six months ended January 1, 2021.

We did not enter into any finance leases during the nine months ended April 2, 2021.

The following summarizes our lease costs (in thousands):

Three Months Ended Six Months Ended

2021 December 27, 2019 January 1,

2021 December 27, 2019

Three Months Ended Nine Months Ended

2021 April 3, 2020 April 2,

2021 April 3, 2020

(In thousands) (In thousands)

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$ 894 $ 932 $ 2,487 $ 2,705

The following summarizes our lease term and discount rate for six months ended January 1, 2021:

The following summarizes our lease term and discount rate for the nine months ended April 2, 2021:

Weighted average remaining lease term 8.4 years

Weighted average discount rate 6.5 %

As of January 1, 2021, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

As of April 2, 2021, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

(In thousands)

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We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of January 1, 2021, available credit under the SVB Credit Facility was $ 23.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 1.5 million.

As of April 2, 2021, available credit under the SVB Credit Facility was $ 23.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 1.5 million.

As of July 3, 2020, our outstanding debt balance under the SVB Credit Facility, classified as a current liability, was $ 9.0 million, and the interest rate was 3.75 %.

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or (ii) if we satisfy a minimum adjusted quick ratio, a LIBOR rate determined in accordance with the SVB Credit Facility, plus a spread of 2.75 %.

Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00 % above the

applicable prime or LIBOR rate.

During the first six months of fiscal 2021, the weighted-average interest rate on our outstanding loan was 3.75 %.

Any outstanding Singapore subsidiary borrowed loans shall bear interest at an additional 2.00 % above the applicable prime or LIBOR rate.

During the first nine months of fiscal 2021, the weighted-average interest rate on our outstanding loan was 3.75 %.

The SVB Credit Facility contains quarterly financial covenants including minimum adjusted quick ratio and minimum profitability (EBITDA) requirements.

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Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest equal to 5.00 % above the applicable interest rate.

As of January 1, 2021, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

As of April 2, 2021, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

We also obtained an uncommitted short-term line of credit of $ 0.4 million from a bank in New Zealand to support the operations of our New Zealand subsidiary.

This line of credit provides for up to $ 0.3 million in short-term advances at various interest rates, all of which was available as of January 1, 2021 and July 3, 2020.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $ 0.1 million was outstanding as of January 1, 2021 and July 3, 2020.

This line of credit provides for up to $ 0.3 million in short-term advances at various interest rates, all of which was available as of April 2, 2021 and July 3, 2020.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $ 0.1 million was outstanding as of April 2, 2021 and July 3, 2020.

This line of credit may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

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The following table provides information about receivables and liabilities from contracts with customers (in thousands):

January 1, 2021 July 3, 2020

April 2, 2021 July 3, 2020

Contract Assets

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however, this will have no impact on our future obligation to bill and collect.

As of January 1, 2021, we had $ 34.0 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 50 % is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter.

During the six months ended January 1, 2021 we recognized approximately $ 15.8 million which was included in advance payments and unearned revenue at the beginning of the reporting period.

As of April 2, 2021, we had $ 36 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 27 % is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter.

During the three and nine months ended April 2, 2021 we recognized $ 3.6 million and $ 19.4 million, respectively, of revenue which was included in advance payments and unearned revenue at July 3, 2020.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 77.0 million at January 1, 2021.

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 73 million at April 2, 2021.

Of this amount, we expect to recognize approximately 60 % as revenue during the next 12 months, with the remaining amount to be recognized as revenue within two to five years .

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We report revenue by region and country based on the location where our customers accept delivery of our products and services.

Revenue by region for the three and six months ended January 1, 2021 and December 27, 2019 was as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27, 2019 January 1,

2021 December 27,

Revenue by region for the three and nine months April 2, 2021 and April 3, 2020 was as follows:

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

North America

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Customers accounting for 10% or more of our total revenue was as follows:

Three Months Ended Six Months Ended

2021 December 27, 2019 January 1,

2021 December 27, 2019

State Government Customer 12.5 % * * *

Three Months Ended Nine Months Ended

2021 April 3,

2020 April 2,

2021 April 3,

Motorola Solutions, Inc.

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Customers accounting for 10% or more of our accounts receivable was as follows:

January 1, 2021 July 3, 2020

April 2, 2021 July 3, 2020

State Government Customer 13.9 % *

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In May 2018, our board of directors approved a stock repurchase program, which does not have an expiration date, for the repurchase of up to $ 7.5 million of our common stock.

All repurchased shares were retired.

As of January 1, 2021, $ 3.4 million remained available under our stock repurchase program.

The repurchase program has been suspended temporarily since February 2020.

Therefore, during the first six months of fiscal 2021, we have not repurchased any shares of our common stock in the open market.

As of April 2, 2021, $ 3.0 million remained available under our stock repurchase program.

The repurchase program was suspended temporarily from February 2020 to February 2021.

During the third quarter of fiscal 2021, our Board of Directors voted to re-instate our stock repurchase program and repurchased 8,300 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $ 0.5 million.

These shares were recorded as treasury stock and we do not anticipate retiring them.

Treasury stock did not participate in the two -for-one stock split in the form of a stock dividend paid on April 7, 2021.

Stock Incentive Programs

At January 1, 2021, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

At April 2, 2021, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

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Market-based stock units vest upon meeting certain predetermined share price performance criteria and continued employment through the end of the applicable period.

During the six months ended January 1, 2021, we granted 55,714 restricted stock units, 35,869 performance restricted stock units and 112,732 stock options to purchase shares of our common stock.

During the nine months ended April 2, 2021, we granted 116,396 restricted stock units, 76,706 performance restricted stock units, 72,000 market-based stock units and 243,810 stock options to purchase shares of our common stock.

These amounts reflect the two -for-one stock split in the form of a stock dividend paid on April 7, 2021.

Total compensation expense for share-based awards included in our unaudited condensed consolidated statements of operations was as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

By Expense Category:

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Total share-based compensation expense $ 765 $ 507 $ 2,154 $ 1,315

As of January 1, 2021, there was approximately $ 1.2 million of total unrecognized compensation expense related to non-vested stock options granted which are expected to be recognized over a weighted-average period of 2.1 years.

As of January 1, 2021, there was $ 2.9 million of total unrecognized compensation expense related to non-vested stock awards which are expected to be recognized over a weighted-average period of 1.8 years.

As of April 2, 2021, there was approximately $ 1.2 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.9 years.

As of April 2, 2021, there was $ 3.9 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.7 years.

On September 6, 2016, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share, to our stockholders of record as of the close of business on September 16, 2016 (the “Record Date”).

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Severance and Benefits Facilities and Other Total

(In thousands) Q4 2020 Plan Q3 2020 Plan Fiscal 2020 Fiscal 2018-2019 Plan Prior Years' Plan Fiscal 2015-2016 Plan

(In thousands) Fiscal 2021 Plan Q4 2020 Plan Q3 2020 Plan Fiscal 2020 Plan Fiscal 2018-2019 Plan Prior Years' Plan Fiscal 2015-2016 Plan

Accrual balance, July 3, 2020 — $ 1,557 $ 431 $ 360 $ 90 $ 64 $ 236 $ 2,738

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Accrual balance, January 1, 2021 $ — $ 772 $ 180 $ 127 $ — $ 38 $ 256 $ 1,373

As of January 1, 2021, the accrual balance of $ 1.4 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Charges, net 1,323 ( 21 ) ( 58 ) ( 82 ) — — — 1,162

Cash payments ( 135 ) ( 321 ) ( 94 ) ( 45 ) — — — ( 595 )

Foreign exchange impact — — — — — 26 ( 10 ) 16

Accrual balance, April 2, 2021 $ 1,188 $ 430 $ 28 $ — $ — $ 64 $ 246 $ 1,956

As of April 2, 2021, the accrual balance of $ 2.0 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Fiscal 2021 Plan

During the third quarter of fiscal 2021, our Board of Directors approved a restructuring plan (the “Fiscal 2021 Plan”) in order to continue to reduce operating costs and improve profitability as part of our transformational initiative to optimize our business model and increase efficiencies.

The Fiscal 2021 Plan is anticipated to entail a reduction in force of approximately 30 employees to be implemented through the second quarter of fiscal year 2022, with a certain number of positions being consolidated and/or relocated.

During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”) in order to continue to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.

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Activities under the Fiscal 2015-2016 Plan primarily included reductions in workforce across the Company, but primarily in operations outside the United States.

We completed the restructuring

activities under the Fiscal 2015-2016 Plan as of July 1, 2016.

We completed the restructuring activities under the Fiscal 2015-2016 Plan as of July 1, 2016.

Payments related to the accrued restructuring liability balance for this plan are expected to be paid in fiscal 2021.

For further information, see “Note 7.

Restructuring Activities” in Part II, Item 8 of our 2020 Form 10-K.

Our effective tax rate varies from the U.S.

federal statutory rate of 21% primarily due to results of foreign operations that are subject to income taxes at different statutory rates, certain jurisdictions where we cannot recognize tax benefit on current losses, and partial valuation allowance against U.S.

federal and state deferred tax assets.

During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal 2021.

The determination of our income taxes for the six months ended January 1, 2021 and December 27, 2019 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax expense for the six months ended January 1, 2021 was primarily due to tax expense related to profitable subsidiaries and $ 0.4 million of tax expense related to an audit settlement with the Financial Administration of the Republic of Slovenia.

The tax expense for the six months ended December 27, 2019 was primarily due to tax expense related to profitable subsidiaries and $ 0.6 million increase in our reserves for uncertain tax positions.

We continue to record a partial valuation allowance on our U.S.

deferred tax assets which primarily represent future income tax benefits associated with our operating losses.

Realization of our deferred tax assets is dependent on generating sufficient pre-tax book income in future periods.

Although we believe it is more likely than not that future income will be sufficient to allow us to recover the value of a portion of our U.S.

deferred tax assets, realization is not assured and future events could cause us to change our judgment.

If future events cause us to conclude that it is not more likely than not that we will be able to recover more or less of the current anticipated portion of deferred tax assets, we would be required to either decrease or increase the valuation allowance on our deferred tax assets at that time, which would result in a charge to income tax expense and a material increase or decrease in net income in the period in which we change our judgment.

During the second quarter of fiscal 2021, we did not record any adjustment to valuation allowance on our U.S.

deferred tax assets.

The determination of our income taxes for the nine months ended April 2, 2021 and April 3, 2020 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax benefit for the nine months ended April 2, 2021 was primarily due to the release of valuation allowance on our U.S.

federal and state deferred tax assets.

The tax expense for the nine months ended April 3, 2020 was primarily due to tax expense related to profitable subsidiaries and a $ 0.4 million increase in our reserves for uncertain tax positions.

At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets on a more likely than not basis.

During the third quarter of fiscal 2021, we recorded a valuation allowance release of $ 92.2 million as a discrete item based on management’s reassessment of the amount of its U.S.

federal and state deferred tax assets that are more likely than not to be realized, primarily as a result of increases in U.S.

profitability in the current period and expectations of continued profitability in future periods.

In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets.

We continue to maintain a valuation allowance of $ 1.4 million on certain U.S.

federal and state deferred tax assets that we believe is not more likely than not to be realized in future periods.

We entered into a tax sharing agreement with Harris Corporation (“Harris”) effective on January 26, 2007, the acquisition date of Stratex Networks, Inc.

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To the extent we become more profitable in the U.S.

in the future, we may be required to make certain payments to Harris which is currently not estimable.

in the future and utilize these tax attributes, we may be required to make certain payments to Harris which is currently not estimable.

We have a number of open income tax audits covering various tax years, which vary from jurisdiction to jurisdiction.

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Saudi Arabia - 2019, and Ivory Coast - 2017.

During the first quarter of 2021, we received a tax refund of $ 1.2 million from the Federal Revenue of Brazil related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the Financial Administration of the Republic of Slovenia for fiscal years 2016 to 2018 and recorded $ 0.4 million of tax expense related to the denial of research and development tax relief as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the General Authority of Zakat and Tax in Saudi Arabia for fiscal years 2016 to 2018 and recorded minimal tax benefit related to the release of previously recorded ASC 740-10 reserve as a discrete item.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign and state income taxes.

Such interest expense was not material for the three and six months ended January 1, 2021 and December 27, 2019.

Such interest expense was not material for the three and nine months April 2, 2021 and April 3, 2020.

On March 27, 2020, the U.S.

enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act which provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes in the deduction of interest, (3) acceleration of alternative minimum tax credit (“AMT”) refunds, and (4) a technical correction to allow accelerated deductions for qualified improvement property.

The Tax Cuts and Jobs Act repealed the corporate AMT

credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year 2018.

The Tax Cuts and Jobs Act repealed the corporate AMT credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year 2018.

The CARES Act allows for acceleration of the refundable AMT credit up to 100% of the AMT credit to be refunded in tax year 2018.

During the third quarter of fiscal 2020, in connection with our analysis of the impact of the CARES Act, we reclassified the refundable AMT credit of $ 3.4 million from a long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of the CARES Act.

During the third quarter of 2021, we received a tax refund of $ 3.5 million from the U.S.

Internal Revenue Service primarily related to our refundable alternative minimum tax credit claim under the CARES Act and recorded minimal tax benefit related to interest as a discrete item.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign and state income taxes.

Such interest expense was not material for the three and nine months April 2, 2021 and April 3, 2020.

On December 27, 2020, the US enacted the Consolidated Appropriations Act of 2021 (CAA) which extended and expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of Payroll Protection Program loans, and (2) the Employer Retention Credit for 2021.

We continue to examine the elements of CARES Act and CAA and the impact they may have on our future business.

On March 11, 2021, the U.S.

enacted the American Rescue Plan Act of 2021 (ARPA) which expands Section 162(m) to cover the next five most highly compensated employees for the taxable year, in addition to the “covered employees” effective for taxable years beginning after December 31, 2026.

We continue to examine the elements of the CARES Act, CAA, and ARPA and the impact they may have on our future business.

Net Income (Loss) Per Share of Common Stock

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The impact on earnings per share of the participating securities under the two-class method was immaterial.

On April 7, 2021 we effected a two -for-one split in the form of a stock dividend to shareholders of record as of April 1, 2021.

The following table presents the computation of basic and diluted net income (loss) per share:

Three Months Ended Six Months Ended

(In thousands, except per share amounts) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Net income (loss) $ 94,731 $ 731 $ 107,308 $ ( 886 )

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Effect of potentially dilutive equivalent shares

690 124 538 —

Weighted-average shares outstanding, diluted

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The following table summarizes the weighted-average equity awards that were excluded from the diluted net income (loss) per share calculations since they were anti-dilutive:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Stock options 8 654 4 738

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Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements.

As of January 1, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 25.8 million.

In addition, we had contractual obligations of approximately $ 1.2 million associated with software licenses as of January 1, 2021.

As of April 2, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 31.4 million.

In addition, we had contractual obligations of approximately $ 1.5 million associated with software licenses as of April 2, 2021.

Financial Guarantees and Commercial Commitments

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The terms of the guarantees are generally equal to the remaining term of the related debt or other obligations and are generally limited to two years or less.

As of January 1, 2021, we had no guarantees applicable to our debt arrangements.

As of April 2, 2021, we had no guarantees applicable to our debt arrangements.

We have entered into commercial commitments in the normal course of business including surety bonds, standby letters of credit agreements, and other arrangements with financial institutions primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers.

As of January 1, 2021, we had commercial commitments of $ 59.7 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

As of April 2, 2021, we had commercial commitments of $ 57.8 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

We do not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on these performance guarantees in the future.

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Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment against our customers arising from claims against such customers that our products infringe the intellectual property rights of a third party.

As of January 1, 2021, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

As of April 2, 2021, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

we have not received any request to defend any customers from infringement claims arising from the use of our products;

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Because the outcome of infringement disputes is related to the specific facts of each case and given the lack of previous or current indemnification claims, we cannot estimate the maximum amount of potential future payments, if any, related to our indemnification provisions.

As of January 1, 2021, we had not recorded any liabilities related to these indemnifications.

As of April 2, 2021, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

We are subject from time to time to disputes with customers concerning our products and services.

In May 2016, we received notification of a claim for damages from a customer alleging that certain of our products were defective.

Although we believe that we have numerous contractual and legal defenses to these disputes, at this time we have accrued an immaterial amount representing the estimated probable loss for which we would settle the matter.

We currently cannot form an estimate of the range of loss in excess of our amounts already accrued.

If the outcome of this matter is greater than the current immaterial amount accrued, we intend to dispute it vigorously.

In May 2016, we received notification of a claim for damages from a customer alleging that certain of our products were defective which we settled with an immaterial amount during the third quarter of 2021.

From time to time, we may be involved in various other legal claims and litigation that arise in the normal course of our operations.

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There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges.

As a result, our business, financial condition, results of

operations, and cash flows could be adversely affected.

As a result, our business, financial condition, results of operations, and cash flows could be adversely affected.

The actual liability in any such matters may be materially different from our estimates, if any.

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Significant judgment is required to determine the probability that a liability has been incurred or an asset impaired and whether such loss is reasonably estimable.

Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in our unaudited condensed consolidated financial statements.

Further, estimates of this nature are

highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in our unaudited condensed consolidated financial statements.

As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise estimates accordingly.

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We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three and six months ended January 1, 2021.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three and nine months ended April 2, 2021.

However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods.

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We expect these challenges to continue until business and economic activities return to more normal levels.

The financial results for the three and six months ended January 1, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

The financial results for the three and nine months ended April 2, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

Subsequent Event

On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration process.

Once the shelf registration statement is declared effective by the SEC, we will be able to, from time to time, offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of $ 200 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

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 1. Financial Statements