What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2022-02-02 · 81 added, 81 removed, 159 unchanged (50% of the section changed)

74 unchanged sentences

The COVID-19 pandemic has had and is likely to continue to have an impact on our operations, supply chains and distribution systems.

The COVID-19 pandemic has led to an increase in

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, including the ongoing vaccination efforts and how quickly and to what extent normal economic and operating activities can resume.

The COVID-19 pandemic has led to an increase in 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, including the ongoing vaccination efforts and how quickly and to what 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.

3 unchanged sentences

Operations Review

The market for mobile backhaul continued to be our primary addressable market segment globally in the first six months of fiscal 2022.

The market for mobile backhaul continued to be our primary addressable market segment globally in the first nine months of fiscal 2022.

In North America, we supported 5G and long-term evolution (“LTE”) deployments of our mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers.

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We manage our sales activities primarily on a geographic basis in North America and three international geographic regions:

(1) Africa and the Middle East, (2) Europe and Russia, and (3) Latin America and Asia Pacific.

Revenue by region for the three and six months ended December 31, 2021 and January 1, 2021 and the related changes were as follows:

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

(1) Africa and the Middle East, (2) Europe, and (3) Latin America and Asia Pacific.

Revenue by region for the three and nine months ended April 1, 2022 and April 2, 2021 and the related changes were as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

North America $ 49,042 $ 42,021 $ 7,021 16.7 % $ 151,025 $ 136,678 $ 14,347 10.5 %

Africa and the Middle East 13,123 9,904 3,219 32.5 % 37,360 31,138 6,222 20.0 %

Europe and Russia 2,908 1,511 1,397 92.5 % 5,611 3,773 1,838 48.7 %

Europe 2,898 3,280 (382) (11.6) % 8,509 7,053 1,456 20.6 %

Latin America and Asia Pacific

2 unchanged sentences

$ 74,516 $ 66,404 $ 8,112 12.2 % $ 225,538 $ 203,225 $ 22,313 11.0 %

Our revenue in North America increased by $1.9 million, or 3.8%, during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in North America increased by $7.3 million, or 7.7%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the three and six months of fiscal 2022 was primarily due to an increase in the number of private network projects.

Our revenue in Africa and the Middle East increased by $2.9 million or 26.9% during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Africa and the Middle East increased by $3.0 million, or 14.1%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

This increase in revenue during the three and six months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe and Russia increased by $1.4 million, or 92.5%, for the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Europe and Russia increased by $1.8 million, or 48.7%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

This increase during the three and six months of fiscal 2021 was primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $1.2 million, or 12.8%, during the second quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Latin America and Asia Pacific increased by $2.0 million, or 11.9%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

The increase during the three and six months of fiscal 2022 was from increased sales to mobile operator customers.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Our revenue in North America increased by $7.0 million, or 16.7%, during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in North America increased by $14.3 million, or 10.5%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the three and nine months of fiscal 2022 was primarily due to an increase in the number of private network projects.

Our revenue in Africa and the Middle East increased by $3.2 million or 32.5% during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Africa and the Middle East increased by $6.2 million, or 20.0%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

This increase in revenue during the three and nine months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe decreased by $0.4 million, or 11.6%, for the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

Revenue in Europe increased by $1.5 million, or 20.6%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

This increase during the three and nine months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific decreased by $1.7 million, or 15.6%, during the third quarter of fiscal 2022 compared with the same period of fiscal 2021.

This decrease in revenue during the third quarter of fiscal 2022 was primarily due to timing of customer specific order in prior year.

Revenue in Latin America and Asia Pacific increased by $0.3 million, or 1.0%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

The increase during the nine months of fiscal 2022 was from increased sales to mobile operator customers.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Product sales $ 52,047 $ 45,246 $ 6,801 15.0 % $ 156,361 $ 136,401 $ 19,960 14.6 %

2 unchanged sentences

$ 74,516 $ 66,404 $ 8,112 12.2 % $ 225,538 $ 203,225 $ 22,313 11.0 %

Our revenue from product sales increased by $6.8 million, or 14.5%, for the second quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $0.6 million, or 2.3%, during the second quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our revenue from product sales increased by $13.2 million, or 14.4%, for the first six months of fiscal 2022 compared with the same period of fiscal 2021.

Our services revenue increased by $1.0 million, or 2.3%, during the first six months of fiscal 2022 compared with the same period of fiscal 2021.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Our revenue from product sales increased by $6.8 million, or 15.0%, for the third quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $1.3 million, or 6.2%, during the third quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our revenue from product sales increased by $20.0 million, or 14.6%, for the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

Our services revenue increased by $2.4 million, or 3.5%, during the first nine months of fiscal 2022 compared with the same period of fiscal 2021.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Revenue $ 74,516 $ 66,404 $ 8,112 12.2 % $ 225,538 $ 203,225 $ 22,313 11.0 %

6 unchanged sentences

32.7 % 32.1 % 33.5 % 33.2 %

Gross margin for the second quarter of fiscal 2022 increased by $1.2 million, or 4.6% compared with the same quarter of fiscal 2021.

Gross margin for the first six months of fiscal 2022 increased by $3.1 million, or 6.0%.

For the three and six months of fiscal 2022, gross margin improved over the same period in fiscal 2021 primarily due to higher volume of Private Network business and increased sales through the Aviat Store which serves primarily the Rural Broadband space.

Gross margin for the third quarter of fiscal 2022 increased by $2.0 million, or 7.7% compared with the same quarter of fiscal 2021.

Gross margin for the first nine months of fiscal 2022 increased by $5.0 million, or 6.6%.

For the three and nine months of fiscal 2022, gross margin improved over the same period in fiscal 2021 primarily due to higher volume of Private Network business and increased sales through the Aviat Store which serves primarily the Rural Broadband space.

Gross margins continue to be pressured by expedite fees and inflation as we work to overcome supply chain issues.

However, our pricing actions to offset higher costs are gaining momentum.

Product margin as a percentage of product revenue decreased in the second quarter and in the first six months of fiscal 2022 compared with the same period of fiscal 2021 primarily due to increased supply chain costs.

Service margin as a percentage of service revenue increased in the second quarter and in the first six months of fiscal 2022 compared to the same periods in fiscal 2021 primarily due to stronger profitability in the North America region.

However, our pricing actions to offset higher costs continue to gain momentum.

Product margin as a percentage of product revenue decreased in the third quarter and in the first nine months of fiscal 2022 compared with the same period of fiscal 2021 primarily due to increased supply chain costs.

Service margin as a percentage of service revenue in the third quarter and in the first nine months of fiscal 2022 compared to the same periods in fiscal 2021 were relatively flat.

Research and Development Expenses

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Research and development $ 5,259 $ 5,275 $ (16) (0.3) % $ 17,338 $ 15,541 $ 1,797 11.6 %

7.1 % 7.9 % 7.7 % 7.6 %

Our research and development expenses increased by $0.8 million and $1.8 million, or 13.8% and 17.7%, in the three and six months, respectively of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the increased spending resulting from R&D efforts to design around problematic suppliers.

Our research and development expenses increased by $1.8 million, or 11.6%, in the nine months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the increased spend in prior six month period resulting from R&D efforts to design around problematic suppliers and deceleration of grant programs for nine month period to date compared to prior year.

Selling and Administrative Expenses

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Selling and administrative $ 14,867 $ 15,106 $ (239) (1.6) % $ 41,304 $ 41,555 $ (251) (0.6) %

20.0 % 22.7 % 18.3 % 20.4 %

Our selling and administrative expenses increased by $0.1 million, or 0.9%, in the second quarter of fiscal 2022 compared with the same period in fiscal 2021.

Our selling and administrative expenses decreased by $12 thousand, or —%, for the six months of fiscal 2022 compared with the same period in fiscal 2021.

The increase for the three period compared to comparable period of fiscal 2021 was primarily due to higher travel expenses and variable compensation.

The movement in the six month comparable periods was not significant.

Restructuring Charges

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Restructuring (recovery) charges $ (960) $ — $ (960) N/A $ (301) $ — $ (301) N/A

In the second quarter of fiscal 2022, we recorded restructuring recoveries of $(1.0) million primarily related to the restructuring plan (the “Fiscal 2021 Plan”).

Included in our restructuring plans for which we were carrying a provision were positions identified for termination that have not been executed from a restructuring perspective.

Due to transition of leadership in the finance function it was concluded that we would not make several of the planned headcount reductions, and the likelihood of future restructuring for these positions is presently deemed remote.

Therefore, we decided it was prudent to reverse the associated provision.

Our selling and administrative expenses decreased by $0.2 million, or 1.6%, in the third quarter of fiscal 2022 compared with the same period in fiscal 2021.

Our selling and administrative expenses decreased by $0.3 million, or 0.6%, for the nine months of fiscal 2022 compared with the same period in fiscal 2021.

The decrease for the three and nine months of fiscal 2022 compared to comparable period of fiscal 2021 was primarily due to variable compensation.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Restructuring (recovery) charges $ (72) $ 1,162 $ (1,234) (106.2) % $ (373) $ 1,162 $ (1,535) (132.1) %

In the third quarter of fiscal 2022, we recorded restructuring recoveries of $0.1 million primarily related to the restructuring plan (the “Fiscal 2021 Plan”).

As of April 1, 2022, the accrual balance of $1.0 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Included in the above plans for which we were carrying a provision were positions identified for termination that have not been executed from a restructuring perspective.

Other Expense/Income, net

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Other expense (income), net $ 175 $ (128) $ 303 (236.7) % $ 387 $ (201) $ 588 (292.5) %

Our other expenses (income), net increased by $0.3 million, in the three and six months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to the movement in foreign exchange.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 31, 2021 January 1, 2021 $ Change % Change December 31, 2021 January 1, 2021 $ Change % Change

Our other expenses (income), net increased by $0.3 million and $0.6 million, in the three and nine months of fiscal 2022, respectively, compared with the same periods of fiscal 2021 primarily due to the movement in foreign exchange.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 1, 2022 April 2, 2021 $ Change % Change April 1, 2022 April 2, 2021 $ Change % Change

Income before income taxes $ 7,307 $ 4,163 $ 3,144 75.5 % $ 23,117 $ 18,679 $ 4,438 23.8 %

Provision for income taxes $ 3,052 $ 1,275 $ 1,777 139.4 % $ 5,212 $ 1,939 $ 3,273 168.8 %

Provision for (benefit from) income taxes $ 1,278 $ (90,568) $ 91,846 (101.4) % $ 6,490 $ (88,629) $ 95,119 (107.3) %

We estimate our annual effective tax rate at the end of each quarterly period, and we record the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances.

The tax expense for the first six months of fiscal 2022 was primarily due to the tax expense related to U.S.

and profitable subsidiaries.

The tax expense for the first six months of fiscal 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 first nine months of fiscal 2022 was primarily due to the tax expense related to U.S.

and profitable foreign subsidiaries.

The tax benefit for the first nine months of fiscal 2021 was primarily due to the release of valuation allowance on our U.S.

federal and state deferred tax assets.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of December 31, 2021, our total cash and cash equivalents were $42.3 million.

As of April 1, 2022, our total cash and cash equivalents were $31.3 million.

Approximately $12.2 million, or 39.1%, was held in the United States.

The remaining balance of $19.1 million, or 60.9%, was held by entities outside the United States.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on December 31, 2021, $23.4 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on April 1, 2022, $16.8 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Operating Activities

Cash provided by or used in operating activities is presented as net income adjusted for non-cash items and changes in operating assets and liabilities.

Net cash used in operating activities was $2.2 million for the first six months of fiscal 2022, compared to $10.2 million cash provided from operations for the first six months of fiscal 2021;

Net cash used in operating activities was $10.8 million for the first nine months of fiscal 2022, compared to $14.2 million cash provided from operations for the first nine months of fiscal 2021;

this difference was primarily related to a net change in Accounts receivable and partially offset by the net change in Accounts payable.

Net cash provided by noncash items was $8.7 million for the first six months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $21.1 million for the first six months of fiscal 2022, compared to net use of cash of $8.0 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first six months of fiscal 2022 primarily related to Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections;

Net cash provided by noncash items was $12.6 million for the first nine months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $40.0 million for the first nine months of fiscal 2022, compared to net use of cash of $12.5 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first nine months of fiscal 2022 primarily related to Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections;

and an increase in certain levels of inventories primarily to mitigate supply chain constraints.

1 unchanged sentence

Investing Activities

Net cash used in investing activities was $0.8 million and $1.4 million for the first six months of fiscal 2022 and 2021, respectively, which consisted of capital expenditures.

Net cash used in investing activities was $1.2 million and $2.4 million for the first nine months of fiscal 2022 and 2021, respectively, which consisted of purchases of marketable securities and acquisition of capital expenditures offset by proceeds from asset held for sale.

During the remainder of fiscal year 2022, we expect to spend approximately $2.0 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

1 unchanged sentence

Financing cash flows consist primarily from repayments of short-term debt, repurchase of stock and proceeds from the sale of shares of common stock through employee equity plans.

Net cash used in financing activities was $2.4 million for the first six months of fiscal 2022, primarily due to repurchase of $2.6 million of stock which was partially offset by cash proceeds from the issuance of common stock under employee stock plans of $0.6 million net of payments for taxes related to settlement of equity awards of $0.4 million.

Net cash used in financing activities was $7.7 million for the first six months of fiscal 2021, primarily due to $9.0 million repayment of short-term debt partially offset by cash proceeds from the issuance of common stock under employee stock plans of $1.5 net of the payments for taxes related to settlement of equity awards of $0.2 million.

As of December 31, 2021, our principal sources of liquidity consisted of $42.3 million in cash and cash equivalents;

Net cash used in financing activities was $4.0 million for the first nine months of fiscal 2022, primarily due to repurchase of $4.6 million of stock which was partially offset by cash proceeds from the issuance of common stock under employee stock plans of $0.9 million net of payments for taxes related to settlement of equity awards of $0.4 million.

Net cash used in financing activities was $7.7 million for the first nine months of fiscal 2021, primarily due to $9.0 million repayment of short-term debt partially offset by cash proceeds from the issuance of common stock under employee stock plans of $1.9 net of the payments for taxes related to settlement of equity awards of $0.2 million.

As of April 1, 2022, our principal sources of liquidity consisted of $31.3 million in cash and cash equivalents;

$21.7 million of available credit under our $25.0 million SVB Credit Facility, which matures on June 28, 2024, and future collections of receivables from customers.

11 unchanged sentences

Availability under the accounts receivable formula-based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-limit.

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

As of December 31, 2021, available credit under the SVB Credit Facility was $22.5 million reflecting the calculated borrowing base of $25.0 million less outstanding letters of credit of $2.5 million.

We did not borrow against the SVB Credit Facility during the six months ended December 31, 2021 and there was no borrowing outstanding as of December 31, 2021 or July 2, 2021

As of December 31, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

As of April 1, 2022, available credit under the SVB Credit Facility was $21.7 million, reflecting the lower available limit of $25.0 million less outstanding letters of credit of $3.3 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.

We have not borrowed against the SVB Credit Facility during the nine months ended April 1, 2022 and there were no borrowing outstanding as of April 1, 2022 or July 2, 2021.

As of April 1, 2022, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

In addition, we have an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support the operations of our subsidiary located there.

This line of credit provides for $0.4 million in short-term advances at various interest rates, all of which was available as of December 31, 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 none was outstanding as of December 31, 2021 and July 2, 2021.

This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of April 1, 2022 and July 2, 2021.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which none was outstanding as of April 1, 2022 and July 2, 2021.

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

Restructuring Payments

We had liabilities for restructuring activities totaling $1.8 million as of December 31, 2021, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We had liabilities for restructuring activities totaling $1.0 million as of April 1, 2022, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We expect to fund these future payments with available cash and cash provided by operations.

1 unchanged sentence

The amounts disclosed in our fiscal 2021 Annual Report on Form 10-K filed with the SEC on August 25, 2021 include our commercial commitments and contractual obligations.

During the first six months of fiscal 2022, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2021 Annual Report on Form 10-K.

During the first nine months of fiscal 2022, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2021 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

5 unchanged sentences

Currently we are not participating in transactions that generate relationships with unconsolidated entities or financial partnerships, including variable interest entities, and we do not have any material retained or contingent interest in assets as defined above.

As of December 31, 2021, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our current or future financial condition.

As of April 1, 2022, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our current or future financial condition.

In addition, we are not currently a party to any related party transactions that materially affect our results of operations, cash flows or financial condition.

As of December 31, 2021, we had commercial commitments of $64.2 million.

As of April 1, 2022, we had commercial commitments of $65.1 million.

Please refer to “Note 12 Commitments and Contingencies” of the Notes to unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for Contractual Obligations and Off-Balance Sheet Arrangements.

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis