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Item 1. Financial Statements

2021-11-03 compared with 2021-05-05 · 149 added, 270 removed, 429 unchanged (49% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current Assets:

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Other assets 8,693 8,430

$ 290,576 $ 179,801

TOTAL ASSETS $ 308,919 $ 297,653

LIABILITIES AND EQUITY

4 unchanged sentences

Advance payments and unearned revenue 35,483 32,304

Short-term debt — 9,000

Restructuring liabilities 3,008 2,737

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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, 11,164,194 shares issued and outstanding at April 2, 2021;

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,187,003 shares issued and outstanding at October 1, 2021;

11,153,445 shares issued and outstanding at July 2, 2021 (see Note 1 Stock Split)

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TOTAL LIABILITIES AND EQUITY $ 308,919 $ 297,653

$ 290,576 $ 179,801

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended

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

2021 April 3,

2020 April 2,

2021 April 3,

Three Months Ended

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

2021 October 2,

Revenue from product sales $ 50,847 $ 44,464

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Operating income 6,814 6,565

Interest income 128 112 202 318

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

Interest income, net 28 35

Income before income taxes 6,842 6,600

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

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

Net income (loss) per share of common stock outstanding:

Provision for income taxes 2,160 664

Net income $ 4,682 $ 5,936

Net income per share of common stock outstanding:

Basic $ 0.42 $ 0.55

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AVIAT NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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 )

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

(In thousands) October 1,

2021 October 2,

Net income $ 4,682 $ 5,936

Other comprehensive (loss) income:

Net change in cumulative translation adjustments

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

Net change in cumulative translation adjustments, net of tax ( 164 ) 414

Other comprehensive (loss) income ( 164 ) 414

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

Comprehensive income $ 4,518 $ 6,350

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

(In thousands) April 2,

2021 April 3,

Three Months Ended

(In thousands) October 1,

2021 October 2,

Operating Activities

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 4,682 $ 5,936

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property, plant and equipment 1,264 1,254

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Financing Activities

Proceeds from borrowings — 27,000

Repayments of borrowings — ( 9,000 )

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

Payments for repurchase of common stock - treasury shares ( 713 ) —

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Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 187 ) 89

Net increase in cash, cash equivalents, and restricted cash 4,192 7,260

Net decrease in cash, cash equivalents, and restricted cash ( 658 ) ( 5,393 )

Cash, cash equivalents, and restricted cash, beginning of period 48,198 41,872

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (1)

Three Months Ended April 2, 2021

Three Months Ended October 1, 2021

Common Stock Treasury Stock Additional

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(In thousands, except share amounts) Shares $

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

Balance as of July 2, 2021 11,153,445 $ 112 $ ( 787 ) $ 818,939 $ ( 620,602 ) $ ( 14,327 ) $ 183,335

Net income — — — — 4,682 — 4,682

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Share-based compensation — — — 863 — — 863

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

Balance as of October 1, 2021 11,187,003 $ 112 $ ( 1,500 ) $ 819,711 $ ( 615,920 ) $ ( 14,491 ) $ 187,912

Three Months Ended October 2, 2020

Common Stock Additional

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(In thousands, except share amounts) Shares $

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 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

(In thousands, except share amounts) Shares $

Balance as of July 3, 2020 10,800,974 $ 108 $ 814,283 $ ( 730,741 ) $ ( 14,969 ) $ 68,681

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Shares withheld for taxes related to vesting of equity awards ( 11,232 ) — ( 128 ) — — ( 128 )

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

Share-based compensation — — 571 — — 571

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

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of June 28, 2019 10,711,090 $ 108 $ 815,142 $ ( 730,998 ) $ ( 12,736 ) $ 71,516

Net loss — — — ( 886 ) — ( 886 )

Other comprehensive loss, net of tax — — — — ( 2,477 ) ( 2,477 )

Issuance of common stock under employee stock plans 430,846 4 7 — — 11

Shares withheld for taxes related to vesting of equity awards ( 108,130 ) ( 2 ) ( 762 ) — — ( 764 )

Stock repurchase ( 256,046 ) ( 2 ) ( 1,770 ) — — ( 1,772 )

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

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

Balance as of October 2, 2020 10,886,724 $ 109 $ 815,148 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

(1) See Note 1 Stock Split.

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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 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 results for the three months ended October 1, 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 2, 2021.

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

The three months ended October 1, 2021 and the three months ended October 2, 2020 both consisted of 13 weeks.

Fiscal year 2022 will be comprised of 52 weeks and will end on July 1, 2022.

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

Fiscal 2021 was comprised of 52 weeks and ended on July 2, 2021.

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.

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Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods.

Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, contingencies and recoverability of long-lived assets.

Such estimates affect significant items, including revenue recognition, provision for doubtful accounts, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, contingencies and recoverability of long-lived assets.

The actual results that we experience may differ materially from our estimates.

Summary of Significant Accounting Policies

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.

There have been no material changes in our significant accounting policies as of October 1, 2021 and for the three months ended October 1, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 2, 2021.

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.

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.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) .

This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes.

ASU 2019-12 became effective for us in our first quarter of fiscal 2022.

We adopted this guidance during the first quarter of fiscal 2021.

The adoption had no material impact on our unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13).

The update eliminates, adds, and modifies certain disclosure requirements for fair value measurements.

We adopted this update during the first quarter of fiscal 2021.

The adoption had no material impact on our unaudited condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

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This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and was effective March 12, 2020 through December 31, 2022.

We are currently evaluating the potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) .

This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes.

ASU 2019-12 will be effective for us in our first quarter of fiscal 2022.

We are currently evaluating the potential impact that adopting ASU 2019-12 will have on our unaudited condensed consolidated financial statements.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and is effective March 12, 2020 through December 31, 2022.

We are evaluating the potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

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Cash, Cash Equivalents, and Restricted Cash

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) April 2,

The following table provides a summary of the 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) October 1,

Cash and cash equivalents $ 47,313 $ 47,942

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Our net accounts receivable are summarized below:

(In thousands) April 2,

(In thousands) October 1,

Accounts receivable $ 61,184 $ 50,276

Allowances for collection losses ( 1,801 ) ( 1,841 )

Allowances for doubtful accounts ( 1,746 ) ( 2,141 )

Total accounts receivable, net $ 59,438 $ 48,135

Our inventories are summarized below:

(In thousands) April 2,

(In thousands) October 1,

Finished products $ 16,337 $ 15,409

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$ 6,344 $ 6,570

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 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

The charges during the three months ended October 1, 2021 and October 2, 2020 were classified in cost of product sales as follows:

Three Months Ended

(In thousands) October 1,

2021 October 2,

Excess and obsolete inventory charges $ 133 $ 63

Customer service inventory write-downs 248 122

Total inventory charges

$ 563 $ 237 $ 1,148 $ 751

Assets Held for Sale

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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.

We expect to complete the sale by the end of our second fiscal 2022 quarter.

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

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

As a result, no impairment charge was recorded in our statement of operations.

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

(In thousands) April 2,

(In thousands) October 1,

Land $ 210 $ 210

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Total property, plant and equipment, net $ 10,676 $ 11,701

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.

Included in the total plant, property and equipment above were $ 0.4 million and $ 0.3 million of assets in progress which have not been placed in service as of October 1, 2021 and July 2, 2021, 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 Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Three Months Ended

(In thousands) October 1,

2021 October 2,

Depreciation and amortization $ 1,264 $ 1,254

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Our accrued expenses are summarized below:

(In thousands) April 2,

(In thousands) October 1,

Accrued compensation and benefits $ 8,175 $ 13,455

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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 Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Three Months Ended

(In thousands) October 1,

2021 October 2,

Balance as of the beginning of the period $ 3,228 $ 3,196

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Our advance payments and unearned revenue are summarized below:

(In thousands) April 2,

(In thousands) October 1,

Advance payments $ 1,278 $ 2,445

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Total advance payments and unearned revenue $ 35,483 $ 32,304

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.

Excluded from the balances above are $ 8.5 million and $ 8.6 million in long-term unearned revenue as of October 1, 2021 and July 2, 2021, respectively.

Fair Value Measurements of Assets and Liabilities

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We maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

We did not have any fair value measurements of liabilities to disclose.

The three levels of inputs used to measure fair value are as follows:

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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 April 2, 2021 and July 3, 2020 were as follows:

April 2, 2021 July 3, 2020 Valuation Inputs

The carrying amounts, estimated fair values, and valuation input levels of our assets measured at fair value on a recurring basis as of October 1, 2021 and July 2, 2021 were as follows:

October 1, 2021 July 2, 2021 Valuation Inputs

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

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$ 3,009 $ 3,009 $ 3,288 $ 3,288 Level 2

Other accrued expenses:

Foreign exchange forward contracts

$ — $ — $ 14 $ 14 Level 2

We classify items within Level 1 if quoted prices are available in active markets.

Our Level 1 items mainly are money market funds.

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

As of October 1, 2021 and July 2, 2021, 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 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 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.

Our bank certificates of deposit are classified within Level 2.

As of October 1, 2021 and July 2, 2021, we did not have any recurring assets that were valued using significant unobservable inputs.

Our policy is to recognize asset 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 three months of fiscal 2022 and 2021, we had no transfers between levels of the fair value hierarchy of our assets 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 nine months ended April 2, 2021.

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

The following summarizes our lease costs (in thousands):

Three Months Ended Nine Months Ended

2021 April 3, 2020 April 2,

2021 April 3, 2020

(In thousands) (In thousands)

Three Months Ended

2021 October 2, 2020

(In thousands)

Operating lease costs $ 317 $ 313

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$ 1,031 $ 839

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

The following summarizes our lease term and discount rate for the three months ended October 1, 2021:

Weighted average remaining lease term 7.93

Weighted average discount rate 5.7 %

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):

As of October 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):

(In thousands)

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The SVB Credit Facility provides for a $ 25.0 million accounts receivable formula-based revolving credit facility that can be borrowed by our U.S.

company, with a $ 25.0 million sublimit that can be borrowed by our Singapore subsidiary.

company, with a $ 25.0 million sublimit that can be borrowed by our U.S.

and Singapore entities.

Loans may be advanced under the SVB Credit Facility based on a borrowing base equal to a specified percentage of the value of eligible accounts of the borrowers under the SVB Credit Facility.

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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 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 %.

We repaid the outstanding debt balance in July 2020.

As of October 1, 2021, available credit under the SVB Credit Facility was $ 22.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 2.5 million.

We did not borrow against the SVB Credit Facility during the first quarter of fiscal 2022 and there was no borrowing outstanding as of October 1, 2021 or July 2, 2021.

The SVB Credit Facility carries an interest rate computed, at our option, based on either (i) at the prime rate reported in the Wall Street Journal plus a spread of 0.50 % to 1.50 %, with such spread determined based on our adjusted quick ratio;

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

As of October 1, 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 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 provides for up to $ 0.3 million in short-term advances at various interest rates, all of which was available as of October 1, 2021 and July 2, 2021.

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 October 1, 2021 and July 2, 2021.

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):

April 2, 2021 July 3, 2020

October 1, 2021 July 2, 2021

Contract Assets

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

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.

As of October 1, 2021, we had $ 44.0 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 45 % is expected to be recognized as revenue in the remainder of fiscal 2022 and the balance thereafter.

During the three months ended October 1, 2021 we recognized $ 6.9 million of revenue which was included in advance payments and unearned revenue at the beginning of the reporting period.

Remaining Performance Obligations

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

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 82.0 million at October 1, 2021.

Of this amount, we expect to recognize approximately 70 % 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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the design, manufacturing, and sale of a range of wireless networking products, solutions, and services.

Our financial performance is regularly reviewed by our chief operating decision maker who is our chief executive officer.

Our financial performance is regularly reviewed by our chief operating decision maker who is our Chief Executive Officer (“CEO”).

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 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,

Revenue by region for the three months ended October 1, 2021 and October 2, 2020 was as follows:

Three Months Ended

(In thousands) October 1,

2021 October 2,

North America

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The loss of a significant portion of business from any significant customers could adversely affect our unaudited condensed consolidated financial statements.

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

Three Months Ended Nine Months Ended

2021 April 3,

2020 April 2,

2021 April 3,

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

Three Months Ended

2021 October 2,

Motorola Solutions, Inc.

* Less than 10.0%

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

April 2, 2021 July 3, 2020

State Government Customer 13.9 % *

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

October 1, 2021 July 2, 2021

Motorola Solutions, Inc.

Mobile Telephone Networks Group (MTN Group) 10 % 14 %

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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.

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

As of October 1, 2021, $ 1.9 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.

During the first quarter of fiscal 2022, we repurchased 22,543 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $ 0.7 million.

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

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Stock Incentive Programs

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

As of October 1, 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 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.

During the three months ended October 1, 2021, we granted 46,533 restricted stock units, 46,533 market-based stock units and 114,012 stock options to purchase shares of our common stock.

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

Three Months Ended Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

Three Months Ended

(In thousands) October 1,

2021 October 2,

By Expense Category:

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Total share-based compensation expense $ 863 $ 571

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”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $ 35.00 per one one-thousandth of a Preferred Share, subject to adjustment.

Until the rights become exercisable, they will not be evidenced by separate certificates and will trade automatically with shares of the Company’s common stock.

The Rights have a de minimis fair value.

The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), dated as of September 6, 2016, between the Company and Computershare Inc., as rights agent.

By adopting the Plan, we are helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended.

The Plan reduces the likelihood that changes in our investor base have the unintended effect of limiting our use of the Tax Benefits.

The Plan expired on September 6, 2019.

On March 3, 2020, our Board of Directors reauthorized the Plan at the same term with a Record Date of March 13, 2020.

On August 27, 2020, we entered into the Amended and Restated Tax Benefit Preservation Plan (the “Amended and Restated Plan”) with Computershare Inc.

as Rights Agent.

The Amended and Restated Plan, reauthorized by our Board of Directors on March 3, 2020, was approved by our shareholders at our Annual Shareholders’ Meeting held on November 11, 2020.

As of October 1, 2021, there was approximately $ 1.6 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 1.8 years.

As of October 1, 2021, there was $ 6.0 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.

Restructuring Activities

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Severance and Benefits Facilities and Other Total

(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

(In thousands) Fiscal 2021 Plan Q4 2020 Plan Prior Years' Plan Prior Years’ plan

Accrual balance, July 2, 2021 2,209 $ 216 $ 64 $ 248 $ 2,737

Charges 628 31 — — 659

Cash payments ( 326 ) ( 49 ) — — ( 375 )

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Accrual balance, October 1, 2021 $ 2,504 $ 198 $ 64 $ 242 $ 3,008

Cash payments — ( 395 ) ( 81 ) — — — — ( 476 )

Foreign exchange impact — ( 45 ) — 36 — 13 10 14

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

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.

As of October 1, 2021, the accrual balance of $ 3.0 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 third and fourth quarter of fiscal 2021, our Board of Directors approved a restructuring plan (the “Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability.

Payments related to the accrued restructuring balances for this plan are expected to be fully paid in fiscal 2022.

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.

The Q4 2020 Plan is being implemented starting with our fourth fiscal quarter of 2020 through the second fiscal quarter of 2021.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2022.

During the third quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q3 2020 Plan”) in order to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.

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

Fiscal 2020 Plan

During the fourth quarter of fiscal 2019, our Board of Directors approved a restructuring plan (the “Fiscal 2020 Plan”) to primarily consolidate product development, right size our resources to support our international business and other support functions.

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

Fiscal 2018-2019 Plan

During the fourth quarter of fiscal 2018, our Board of Directors approved a restructuring plan (the “Fiscal 2018-2019 Plan”) to consolidate back-office support functions and align resources by geography to lower our expense structure.

We completed the restructuring activities under the Fiscal 2018-2019 Plan at the end of fiscal 2019.

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

Fiscal 2015-2016 Plan

Prior Years’ Plan

In January 2018, we reached a settlement with a certain foreign government for grant liabilities which allowed us to reduce our estimated payments relating to prior years’ restructuring plan by $ 0.3 million.

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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.

Payments related to the accrued restructuring liability balance for this plan are expected to be paid in fiscal 2022.

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 tax benefit from the release of valuation allowance on our U.S.

federal and state deferred tax assets.

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

During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal 2022.

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.

The determination of our income taxes for the three months ended October 1, 2021 and October 2, 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 three months ended October 1, 2021 was primarily due to tax expense related to U.S.

and profitable subsidiaries.

The tax expense for the three months ended October 2, 2020 was primarily due to tax expense related to profitable subsidiaries.

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

The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and tax attributes that were attributable to the Microwave Communication Division when it was a division of Harris.

when it was a division of Harris.

There have been no settlement payments recorded since the acquisition date.

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

in the future and utilize these tax attributes, 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 are 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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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 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 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 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.

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.

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.

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.

Such interest expense was not material for the three months ending October 1, 2021 and October 2, 2020.

On December 27, 2020, the U.S.

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.

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

Net income (loss) per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock and participating securities outstanding.

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

Net Income Per Share of Common Stock

Net income per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock and participating securities outstanding.

Our restricted shares contain rights to receive non-forfeitable dividends and therefore are considered to be participating securities and included in the calculations of net income per basic and diluted common share.

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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.

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

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 )

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

Three Months Ended

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

2021 October 2,

Net income $ 4,682 $ 5,936

Weighted-average shares outstanding, basic

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Effect of potentially dilutive equivalent shares

690 124 538 —

Weighted-average shares outstanding, diluted

11,954 11,092

Net income (loss) per share of common stock outstanding:

Net income per share of common stock outstanding:

$ 0.42 $ 0.55

$ 0.39 $ 0.54

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 Nine Months Ended

(In thousands) April 2,

2021 April 3,

2020 April 2,

2021 April 3,

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

Three Months Ended

(In thousands) October 1,

2021 October 2,

Stock options 24 171

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Total shares of common stock excluded

8 850 6 1,024

Commitments and Contingencies

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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 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.

As of October 1, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 43.8 million.

In addition, we had contractual obligations of approximately $ 4.0 million associated with software licenses as of October 1, 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 April 2, 2021, we had no guarantees applicable to our debt arrangements.

As of October 1, 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 April 2, 2021, we had commercial commitments of $ 57.8 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

As of October 1, 2021, we had commercial commitments of $ 64.0 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 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;

As of October 1, 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 April 2, 2021, we had not recorded any liabilities related to these indemnifications.

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

Legal Proceedings

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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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The COVID-19 pandemic may have an impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume.

extent normal economic and operating activities can resume.

Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

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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 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.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

We continue to monitor, assess and adapt to the situation and prepare for implications to our business, supply chain and customer demand.

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

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.

The financial results for the three months ended October 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.

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