What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2024-02-06 · 68 added, 59 removed, 113 unchanged (53% of the section changed)

49 unchanged sentences

Aggregate consideration transferred at closing was approximately $54.5 million, which is subject to certain post-closing adjustments.

The Company estimates additional cash consideration of approximately $22.9 million will be transferred to NEC in the fourth quarter of fiscal 2024, primarily related to settlement of the post-closing working capital adjustment.

The Company estimates additional cash consideration of approximately $22.4 million will be transferred to NEC in the first quarter of fiscal 2025, primarily related to settlement of the post-closing working capital adjustment.

The Company funded the cash portion of the NEC Transaction with Term Loan borrowings under its Credit Facility.

5 unchanged sentences

Operations Review

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first six months of fiscal 2024.

The market for mobile backhaul continued to be the Company’s primary addressable market segment globally in the first nine months of fiscal 2024.

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

6 unchanged sentences

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

Revenue by region for the three and six months ended December 29, 2023 and December 30, 2022 and the related changes were as follows:

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Revenue by region for the three and nine months ended March 29, 2024 and March 31, 2023 and the related changes were as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

North America $ 44,409 $ 46,064 $ (1,655) (3.6) % $ 151,243 $ 146,961 $ 4,282 2.9 %

3 unchanged sentences

Total revenue $ 111,613 $ 83,480 $ 28,133 33.7 % $ 294,215 $ 255,414 $ 38,801 15.2 %

Revenue in North America decreased by $0.7 million during the second quarter of fiscal 2024 compared with the same period of fiscal 2023, primarily due to timing of public safety projects.

Revenue in North America increased by $5.9 million during the first six months of fiscal 2024 compared with the same period of fiscal 2023, primarily due to strong private network and tier 1 demand.

Revenue in Africa and the Middle East increased by $0.4 million during the second quarter of fiscal 2024 compared with the same period of fiscal 2023.

Revenue in Africa and the Middle East decreased by $0.7 million during the first six months of fiscal 2024 compared with the same period of fiscal 2023.

The decrease during the first six months of fiscal 2024 was primarily due to cyclical softness in the capital expenditure plans of large mobile operators in the region and currency impacts from locally provided services.

Revenue in Europe increased by $0.2 million during the second quarter of fiscal 2024 compared with the same period of fiscal 2023.

Revenue in Europe increased by $1.0 million during the first six months of fiscal 2024 compared with the same period of fiscal 2023.

The increases for the second quarter and the first six months of fiscal 2024 were primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $4.4 million during the second quarter and the first six months of fiscal 2024 compared with the same periods of fiscal 2023.

The increase was primarily due to higher volumes of projects with mobile operators.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Revenue in North America decreased by $1.7 million during the third quarter of fiscal 2024 compared with the same period of fiscal 2023, primarily due to the near completion of a large tier 1 project.

Revenue in North America increased by $4.3 million during the first nine months of fiscal 2024 compared with the same period of fiscal 2023, primarily due to private network and tier 1 demand.

Revenue in Africa and the Middle East decreased by $7.8 million during the third quarter of fiscal 2024 compared with the same period of fiscal 2023.

Revenue in Africa and the Middle East decreased by $8.5 million during the first nine months of fiscal 2024 compared with the same period of fiscal 2023.

The decreases for the third quarter and the first nine months of fiscal 2024 were primarily due to cyclical softness in the capital expenditure plans of large mobile operators in the region and currency impacts from locally provided services.

Revenue in Europe increased by $2.7 million during the third quarter of fiscal 2024 compared with the same period of fiscal 2023.

Revenue in Europe increased by $3.7 million during the first nine months of fiscal 2024 compared with the same period of fiscal 2023.

The increases for the third quarter and the first nine months of fiscal 2024 were primarily due to increased sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific increased by $34.9 million during the third quarter of fiscal 2024 compared with the same period of fiscal 2023.

Revenue in Latin America and Asia Pacific increased by $39.3 million during the first nine months of fiscal 2024 compared with the same periods of fiscal 2023.

The increases were primarily due to contributions resulting from the NEC Transaction and higher volumes of projects with mobile operators.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Product sales $ 70,857 $ 54,811 $ 16,046 29.3 % $ 196,794 $ 175,473 $ 21,321 12.2 %

1 unchanged sentence

Total revenue $ 111,613 $ 83,480 $ 28,133 33.7 % $ 294,215 $ 255,414 $ 38,801 15.2 %

Revenue from product sales and services increased by 1.3% and 14.0%, respectively for the second quarter of fiscal 2024 compared with the same quarter of fiscal 2023.

Revenue from product sales and services increased by 4.4% and 10.5%, respectively for the first six months of fiscal 2024 compared with the same period of fiscal 2023.

The relatively proportionate increases were driven by the same overall factors of revenue growth discussed previously.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Revenue from product sales and services increased by 29.3% and 42.2%, respectively for the third quarter of fiscal 2024 compared with the same quarter of fiscal 2023.

Revenue from product sales and services increased by 12.2% and 21.9%, respectively for the first nine months of fiscal 2024 compared with the same period of fiscal 2023.

The increases were driven by the same overall factors of revenue growth discussed previously.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Revenue $ 111,613 $ 83,480 $ 28,133 33.7 % $ 294,215 $ 255,414 $ 38,801 15.2 %

4 unchanged sentences

Service margin % 33.0 % 37.6 % 31.0 % 34.5 %

Gross margin for the second quarter of fiscal 2024 increased by $4.6 million compared with the same quarter of fiscal 2023.

Gross margin for the first six months of fiscal 2024 increased by $7.0 million.

Gross margin dollars and as a percentage of revenue increased in the second quarter and for the first six months of fiscal 2024 compared with the prior year primarily due to higher software revenue, favorable project level mix, and moderating freight and material costs.

Gross margin for the third quarter of fiscal 2024 increased by $6.7 million compared with the same quarter of fiscal 2023.

Gross margin for the first nine months of fiscal 2024 increased by $13.7 million.

Gross margin dollars as a percentage of revenue decreased in the third quarter and for the first nine months of fiscal 2024 compared with the prior year primarily due to expected near term dilution as a result of the NEC Transaction.

Research and Development

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Research and development $ 10,623 $ 6,518 $ 4,105 63.0 % $ 25,441 $ 18,652 $ 6,789 36.4 %

% of revenue 9.5 % 7.8 % 8.6 % 7.3 %

Research and development expenses increased by $2.3 million and $2.7 million for the second quarter and the first six months of fiscal 2024, respectively, compared with the corresponding periods of fiscal 2023.

The increase in research and development expenses was primarily due to increased product development activities and additional costs from the NEC Transaction.

Research and development expenses increased by $4.1 million and $6.8 million for the third quarter and the first nine months of fiscal 2024, respectively, compared with the corresponding periods of fiscal 2023.

The increase in research and development expenses was primarily due to increased product development activities and additional costs resulting from the NEC Transaction.

Selling and Administrative

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Selling and administrative $ 21,300 $ 15,842 $ 5,458 34.5 % $ 61,979 $ 49,913 $ 12,066 24.2 %

% of revenue 19.1 % 19.0 % 21.1 % 19.5 %

Selling and administrative expenses increased by $4.9 million and $6.6 million for the second quarter and the first six months of fiscal 2024, respectively, compared with the corresponding periods of fiscal 2023.

The increase in selling and administrative expenses was primarily due to merger and acquisition expenses related to the NEC Transaction.

Selling and administrative expenses increased by $5.5 million and $12.1 million for the third quarter and the first nine months of fiscal 2024, respectively, compared with the corresponding periods of fiscal 2023.

The increase in selling and administrative expenses was primarily due to merger and acquisition expenses and additional costs resulting from the NEC Transaction.

Restructuring

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Restructuring charges $ 2,000 $ 928 $ 1,072 115.5 % $ 2,644 $ 2,878 $ (234) (8.1) %

In the second quarter of fiscal 2024, restructuring charges were $2.0 million, an increase of $1.1 million compared to the same period in fiscal 2023.

The increase in restructuring charges was primarily due to restructuring activities associated with the NEC Transaction.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Restructuring (recovery) charges

$ (417) $ (23) $ (394) 1,713.0 % $ 2,227 $ 2,855 $ (628) (22.0) %

In the third quarter of fiscal 2024, restructuring recoveries were $(0.4) million, an increase of $0.4 million compared to the same period in fiscal 2023.

For the first nine months of fiscal 2024, restructuring charges were $2.2 million, primarily related to restructuring activities associated with the NEC Transaction.

The prior year includes non-recurring restructuring charges primarily associated with the Redline acquisition completed in the first quarter of fiscal 2023.

The Company’s successfully executed restructuring initiatives have enabled it to restructure specific groups to optimize skill sets and align its organizational structure to execute on strategic deliverables, in addition to aligning cost structure with the core of the business.

Other (Income) Expense, net

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Other (income) expense, net $ (243) $ (460) $ 217 (47.2) % $ 658 $ 2,322 $ (1,664) (71.7) %

Other income, net decreased by $0.2 million for the second quarter of fiscal 2024, primarily due to interest expense incurred on the Term Loan borrowings used to fund the NEC Transaction.

Other expense, net decreased by $1.7 million for the first six months of fiscal 2024, primarily due to non-recurring losses of $1.7 million recognized on the sale of marketable securities included in the prior year.

Three Months Ended Six Months Ended

(In thousands, except percentages) December 29, 2023 December 30, 2022 $ Change % Change December 29, 2023 December 30, 2022 $ Change % Change

Interest Expense, net

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Interest expense, net $ 928 $ 122 $ 806 660.7 % $ 1,421 $ 210 $ 1,211 576.7 %

Interest expense, net increased by $0.8 million and $1.2 million for the third quarter and the first nine months of fiscal 2024, respectively, compared with the corresponding periods of fiscal 2023.

The increase in interest expense, net was primarily due to interest expense incurred on the Term Loan borrowings used to fund the NEC Transaction in the second quarter of fiscal 2024.

Other Expense, net

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Other expense, net $ 63 $ 306 $ (243) (79.4) % $ 228 $ 2,540 $ (2,312) (91.0) %

Other expense, net decreased by $(0.2) million for the third quarter of fiscal 2024, primarily as a result of foreign exchange rate movement.

Other expense, net decreased by $2.3 million for the first nine months of fiscal 2024, primarily due to non-recurring losses of $1.7 million recognized on the sale of marketable securities included in the prior year.

Three Months Ended Nine Months Ended

(In thousands, except percentages) March 29, 2024 March 31, 2023 $ Change % Change March 29, 2024 March 31, 2023 $ Change % Change

Income before income taxes $ 4,037 $ 7,068 $ (3,031) (42.9) % $ 13,920 $ 17,337 $ (3,417) (19.7) %

1 unchanged sentence

The Company estimates its annual effective tax rate at the end of each quarterly period, and records 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.

Tax expense for the first six months of fiscal 2024 was primarily attributable to tax expense for the U.S.

Tax expense for the first nine months of fiscal 2024 was primarily attributable to tax expense for the U.S.

entity and profitable foreign subsidiaries.

Tax expense for the first six months of fiscal 2023 was primarily attributable to tax expense related to U.S.

Tax expense for the first nine months of fiscal 2023 was primarily attributable to tax expense related to U.S.

and profitable foreign subsidiaries, including deferred tax expense associated with the acquisition of Redline in July 2022 and the subsequent multi-step restructuring, in which two Canadian Redline corporations converted to unlimited liability companies and then amalgamated by the end of September 2022.

1 unchanged sentence

Sources of Cash

As of December 29, 2023, the Company’s total cash and cash equivalents were $45.9 million.

As of March 29, 2024, the Company’s total cash and cash equivalents were $58.2 million.

Approximately $20.6 million was held in the United States.

The remaining balance of $37.6 million was held by entities outside the United States.

Of the amount of cash and cash equivalents held by the Company’s foreign subsidiaries on December 29, 2023, $25.4 million was held in jurisdictions where its 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 the Company’s foreign subsidiaries on March 29, 2024, $37.2 million was held in jurisdictions where its undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Operating Activities

Operating cash flows is presented as net income adjusted for certain non-cash items and changes in operating assets and liabilities.

Net cash provided by (used in) operating activities was $6.9 million for the first six months of fiscal 2024, compared with $(8.4) million in the prior year.

Net cash provided by (used in) operating activities was $22.2 million for the first nine months of fiscal 2024, compared with $(9.0) million in the prior year.

The $31.2 million increase is primarily attributable to improvements in working capital and increased net income prior to non-cash adjustments compared to the prior year.

Investing Activities

Net cash used in investing activities was $33.5 million for the first six months of fiscal 2024, compared to $7.3 million in the prior year.

The $26.2 million increase is primarily due to payments of the cash consideration associated with the NEC Transaction and increased capital expenditures, partially offset by non-recurring activity included in the prior year related to proceeds received on the sale of marketable securities.

Net cash used in investing activities was $35.0 million for the first nine months of fiscal 2024, compared to $11.7 million in the prior year.

The $23.3 million increase is primarily due to payments of the cash consideration associated with the NEC Transaction, partially offset by non-recurring activity included in the prior year related to proceeds received on the sale of marketable securities.

Financing Activities

Financing cash flows consist primarily of borrowings and repayments under the Company’s Credit Facility and proceeds from the exercise of employee stock options.

Net cash provided by financing activities was $50.3 million for the first six months of fiscal 2024, compared with $0.1 million in the prior year.

Net cash provided by financing activities was $49.3 million for the first nine months of fiscal 2024, compared with $6.2 million in the prior year.

The $43.1 million increase is primarily due to the $50.0 million of Term Loan borrowings primarily used to settle the cash portion of the consideration associated with the NEC Transaction.

As of December 29, 2023, the Company’s principal sources of liquidity consisted of $45.9 million in cash and cash equivalents, $37.7 million of available credit under its Credit Facility, and future collections of receivables from customers.

As of March 29, 2024, the Company’s principal sources of liquidity consisted of $59.2 million in cash and cash equivalents and marketable securities, $35.2 million of available credit under its Credit Facility, and future collections of receivables from customers.

The Company regularly requires letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce its credit and sovereign risk.

Historically, the Company’s primary sources of liquidity have been cash flows from operations and credit facilities.

Additionally, the Company has an effective shelf registration statement on Form S-3 allowing it to offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of approximately $200.0 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

amount of approximately $200.0 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

The Company believes that its existing cash and cash equivalents, the available borrowings under its Credit Facility, the availability under its effective shelf registration statement and future cash collections from customers will be sufficient to provide for its anticipated requirements and plans for cash for at least the next 12 months.

In addition, the Company believes these sources of liquidity will be sufficient to provide for its anticipated requirements and plans for cash beyond the next 12 months.

The Company borrowed and repaid $33.2 million against the Revolver during the first six months of fiscal 2024.

The Company borrowed and repaid $33.2 million against the Revolver during the first nine months of fiscal 2024.

In the second quarter of fiscal 2024, the Company borrowed $50.0 million against the Term Loan to primarily settle the cash portion of the consideration associated with the NEC Transaction.

As of December 29, 2023, the Company had $50.0 million outstanding under its Term Loan and no borrowings under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.

As of December 29, 2023, the Company had commercial commitments outstanding of $57.3 million, that were not recorded on the unaudited condensed consolidated balance sheets.

As of March 29, 2024, the Company had $49.4 million outstanding under its Term Loan and no borrowings under its Revolver and was in compliance with all financial covenants contained in the Credit Facility.

As of March 29, 2024, the Company had commercial commitments outstanding of $16.6 million, that were not recorded on the unaudited condensed consolidated balance sheets.

The Company does 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.

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