What changed in this filing

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Item 1. Financial Statements

2020-07-21 compared with 2020-04-30 · 218 added, 85 removed, 283 unchanged (52% of the section changed)

2 unchanged sentences

(In thousands, except par value)

2020 December 31,

(Unaudited) (See Note 1)

Current assets:

2 unchanged sentences

Accounts receivable, net 58,590 46,509

Inventory 36,659 40,153

Prepaid expenses and other current assets 11,640 9,698

2 unchanged sentences

Right-of-use operating leases 11,079 15,864

Goodwill 116,175 116,175

Other assets 15,025 19,440

$ 321,314 $ 316,823

LIABILITIES AND STOCKHOLDERS’ EQUITY

13 unchanged sentences

5,000 shares authorized;

no shares issued and outstanding as of March 28, 2020 and December 31, 2019

no shares issued and outstanding as of June 27, 2020 and December 31, 2019

Common stock, $ 0.025 par value;

100,000 shares authorized;

61,958 shares issued and 56,628 shares outstanding as of March 28, 2020, and 61,778 shares issued and 56,448 shares outstanding as of December 31, 2019

63,473 shares issued and 58,143 shares outstanding as of June 27, 2020, and 61,778 shares issued and 56,448 shares outstanding as of December 31, 2019

Additional paid-in capital 912,402 895,899

1 unchanged sentence

Accumulated deficit ( 713,732 ) ( 702,576 )

Treasury stock, 5,330 shares as of March 28, 2020 and December 31, 2019

Treasury stock, 5,330 shares as of June 27, 2020 and December 31, 2019

( 39,986 ) ( 39,986 )

Total stockholders’ equity 159,168 154,028

$ 321,314 $ 316,823

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Systems $ 110,841 $ 92,833 $ 205,350 $ 175,193

Services 8,182 7,471 15,355 14,461

Total revenue 119,023 100,304 220,705 189,654

Cost of revenue:

Systems 56,721 49,561 107,429 94,162

Services 5,897 6,075 11,247 12,481

Total cost of revenue 62,618 55,636 118,676 106,643

Gross profit 56,405 44,668 102,029 83,011

Operating expenses:

2 unchanged sentences

General and administrative 11,193 9,165 21,862 17,952

Restructuring charges 6,286 — 6,286 —

Total operating expenses 59,743 49,599 111,707 97,055

6 unchanged sentences

Provision for income taxes 148 95 477 250

Net loss $ ( 4,212 ) $ ( 5,045 ) $ ( 11,156 ) $ ( 14,812 )

Net loss per common share:

2 unchanged sentences

net loss per common share:

Basic 57,261 54,624 56,906 54,339

Diluted 57,261 54,624 56,906 54,339

Net loss $ ( 4,212 ) $ ( 5,045 ) $ ( 11,156 ) $ ( 14,812 )

Other comprehensive income (loss), net of tax -

foreign currency translation adjustments, net

3 ( 223 ) 249 43

Comprehensive loss $ ( 4,209 ) $ ( 5,268 ) $ ( 10,907 ) $ ( 14,769 )

2 unchanged sentences

(In thousands, unaudited)

Additional Paid-in Capital

Accumulated Other Comprehensive Loss

Accumulated Deficit

Treasury Stock

Total Stockholders’ Equity

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at March 28, 2020 56,628 $ 1,549 $ 899,978 $ ( 1,106 ) $ ( 709,520 ) $ ( 39,986 ) $ 150,915

Stock-based compensation

— — 3,241 — — — 3,241

Exercise of stock options

591 15 4,494 — — — 4,509

Issuance of vested restricted stock units

233 6 ( 6 ) — — — —

Stock issued under employee stock purchase plans

691 17 4,695 — — — 4,712

— — — — ( 4,212 ) — ( 4,212 )

Other comprehensive income

— — — 3 — — 3

Balance at June 27, 2020 58,143 $ 1,587 $ 912,402 $ ( 1,103 ) $ ( 713,732 ) $ ( 39,986 ) $ 159,168

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at March 30, 2019 54,164 $ 1,488 $ 879,475 $ ( 487 ) $ ( 694,649 ) $ ( 39,986 ) $ 145,841

Stock-based compensation

— — 2,569 — — — 2,569

Exercise of stock options

6 — 35 — — — 35

Issuance of vested restricted stock units, net of taxes withheld

334 8 ( 138 ) — — — ( 130 )

Stock issued under employee stock purchase plans 939 24 4,135 — — — 4,159

— — — — ( 5,045 ) — ( 5,045 )

Other comprehensive loss

— — — ( 223 ) — — ( 223 )

Balance at June 29, 2019 55,443 $ 1,520 $ 886,076 $ ( 710 ) $ ( 699,694 ) $ ( 39,986 ) $ 147,206

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at December 31, 2019 56,448 $ 1,545 $ 895,899 $ ( 854 ) $ ( 702,576 ) $ ( 39,986 ) $ 154,028

Stock-based compensation

— — 6,225 — — — 6,225

Exercise of stock options

Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld

Stock forfeited under employee stock purchase plans prior to vesting

748 19 5,589 — — — 5,608

Issuance of vested restricted stock units

280 7 ( 7 ) — — — —

Stock issued under employee stock purchase plans

667 16 4,696 — — — 4,712

— — — — ( 11,156 ) — ( 11,156 )

Other comprehensive loss

Balance at March 28, 2020

Additional Paid-in Capital

Accumulated Other Comprehensive Loss

Accumulated Deficit

Treasury Stock

Total Stockholders’ Equity

— — — ( 249 ) — — ( 249 )

Balance at June 27, 2020 58,143 $ 1,587 $ 912,402 $ ( 1,103 ) $ ( 713,732 ) $ ( 39,986 ) $ 159,168

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Treasury Stock Total Stockholders’ Equity

Shares Amount

Balance at December 31, 2018 53,955 $ 1,482 $ 876,073 $ ( 753 ) $ ( 684,882 ) $ ( 39,986 ) $ 151,934

Stock-based compensation

— — 5,714 — — — 5,714

Exercise of stock options

55 2 324 — — — 326

Issuance of vested performance restricted stock units and restricted stock units, net of taxes withheld

Stock forfeited under employee stock purchase plans prior to vesting

501 13 ( 169 ) — — — ( 156 )

Stock issued under employee stock purchase plans 932 23 4,134 — — — 4,157

— — — — ( 14,812 ) — ( 14,812 )

Other comprehensive income

Balance at March 30, 2019

— — — 43 — — 43

Balance at June 29, 2019 55,443 $ 1,520 $ 886,076 $ ( 710 ) $ ( 699,694 ) $ ( 39,986 ) $ 147,206

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands, unaudited)

Three Months Ended

Six Months Ended

2020 June 29,

Operating activities:

Net loss $ ( 11,156 ) $ ( 14,812 )

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

1 unchanged sentence

Depreciation and amortization 7,006 4,644

Loss on asset retirements

Asset retirements and write-downs 3,749 138

Changes in operating assets and liabilities:

Accounts receivable, net ( 12,082 ) 6,840

Inventory 3,494 4,791

Prepaid expenses and other assets 1,175 1,697

4 unchanged sentences

Net cash provided by (used in) operating activities 3,935 ( 3,251 )

Investing activities:

Investing activity –

Purchases of property and equipment ( 4,480 ) ( 9,538 )

Net cash used in investing activities

Financing activities:

Proceeds from exercise of stock options 5,608 326

Proceeds from employee stock purchase plans 4,712 4,157

Taxes paid for awards vested under equity incentive plan — ( 156 )

5 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 238 ) 25

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 3,723 ( 14,704 )

Cash, cash equivalents and restricted cash at beginning of period 47,457 50,274

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Quarterly periods are based on a 4-4-5 calendar with the first, second and third quarters ending on the 13th Saturday of each fiscal period.

As a result, the Company had one less day in the three months ended March 28, 2020 than for the three months ended March 30, 2019 .

As a result, the Company had one less day in the six months ended June 27, 2020 than for the six months ended June 29, 2019.

The preparation of financial statements in conformity with GAAP for interim financial reporting requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

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The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict.

The Company has instituted office closures, implemented shelter-in-place orders and restrictions and instituted a mandatory work from home policy for substantially all of its employees.

The Company has instituted office closures, travel restrictions and instituted a mandatory work-from-home policy for substantially all of its employees.

The spread of COVID-19 has impacted the Company's supply chain operations through restrictions and shutdown of business activities by suppliers whom the Company relies on for sourcing components and materials and third-party partners whom the Company relies on for manufacturing, warehousing and logistics services.

Although demand for the Company's products have remained strong as subscribers seek more bandwidth and better WiFi, customers’ purchasing decisions may be impacted by the pandemic, which could in turn impact the Company's revenue and results of operations.

As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Although demand for the Company's products may remain strong in the short-term as subscribers seek more bandwidth and better WiFi, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on the economy, which could in turn impact the Company's revenue and results of operations.

Furthermore, the Company’s supply chain continues to face challenges in sourcing components and materials to manufacture its products, and future outbreaks could cause further supply chain disruptions.

As of the issuance date of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity or results of operations is uncertain.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019.

The Company’s significant accounting policies did not change during the three months ended March 28, 2020 .

The Company’s significant accounting policies did not change during the six months ended June 27, 2020.

Newly Adopted Accounting Standard

The Company did not adopt any new accounting standards during the three months ended March 28, 2020 that were significant to the Company.

The Company did not adopt any new accounting standards during the six months ended June 27, 2020 that were significant to the Company.

Recent Accounting Pronouncements Not Yet Adopted

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended March 28, 2020 , as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 , that are significant or potentially significant to the Company.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the six months ended June 27, 2020, as compared to the recent accounting pronouncements described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, that are significant or potentially significant to the Company.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash consisted of the following (in thousands):

2020 December 31,

Cash and cash equivalents:

Cash $ 50,552 $ 46,815

Money market funds — 14

1 unchanged sentence

Restricted cash 628 628

$ 51,180 $ 47,457

The carrying amounts of the Company’s money market funds approximate their fair values due to their nature, duration and short maturities.

1 unchanged sentence

Accounts receivable, net consisted of the following (in thousands):

2020 December 31,

Accounts receivable $ 60,020 $ 46,883

Allowance for doubtful accounts ( 1,430 ) ( 374 )

$ 58,590 $ 46,509

Inventory consisted of the following (in thousands):

2020 December 31,

Raw materials $ 383 $ 656

Finished goods 36,276 39,497

$ 36,659 $ 40,153

Property and equipment, net consisted of the following (in thousands):

2020 December 31,

Test equipment $ 38,993 $ 37,001

Software 17,548 20,646

Computer equipment 11,229 10,835

1 unchanged sentence

Leasehold improvements 1,428 2,047

Total 71,395 72,871

Accumulated depreciation and amortization ( 50,429 ) ( 51,344 )

$ 20,966 $ 21,527

Other long-term assets consisted of the following (in thousands):

2020 December 31,

Intangible asset $ 10,833 $ 12,148

1 unchanged sentence

Other long-term assets 1,297 1,203

$ 15,025 $ 19,440

Intangible Asset

1 unchanged sentence

The payments are based on a revenue-share rate applied to revenue from the developed-product and the corresponding hardware sales subject to a minimum and a maximum aggregate amount over the three-year sales period.

The Company had its first sale in August 2019, and as a result, the Company capitalized an intangible asset with a value of $ 13.2 million in the third quarter of 2019.

The intangible asset has an estimated five -year useful life and is being amortized using the greater of the ratio of current gross revenue for the products to the total of current and anticipated future gross revenue for the products or the straight-line method.

3 unchanged sentences

This amount is being amortized over a period of 29 months, representing the remaining contractual term.

The amortization expense for the three months ended March 28, 2020 was $0.8 million .

The amortization expense for the three and six months ended June 27, 2020 was $ 0.8 million and $ 1.6 million, respectively.

Accrued liabilities consisted of the following (in thousands):

2020 December 31,

Compensation and related benefits $ 19,501 $ 19,010

Customer advances or rebates

Warranty and retrofit 7,732 7,294

Professional and consulting fees

Current portion of financing arrangements

Customer advances or rebates 6,948 7,252

Component inventory held by suppliers 5,723 1,925

Current portion of financing arrangements 5,296 4,044

Professional and consulting fees 4,921 4,996

Operating leases 2,718 2,663

Taxes payable 2,175 2,021

Restructuring charges 1,383 —

Operations 1,248 1,053

Product returns 1,229 919

Freight 1,054 808

Other 4,756 5,561

$ 64,684 $ 57,546

Warranty and Retrofit

6 unchanged sentences

Changes in the Company’s warranty and retrofit accrual are as follows (in thousands):

Three Months Ended

Three Months Ended Six Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Balance at beginning of period $ 7,430 $ 8,166 $ 7,294 $ 8,547

2 unchanged sentences

Balance at end of period $ 7,732 $ 7,910 $ 7,732 $ 7,910

Accrued Restructuring Charges

Responding to trends caused by the COVID-19 pandemic, the Company initiated a restructuring plan in June 2020 to accelerate the Company’s all platform future and to align with a work-from-anywhere culture.

The Company incurred restructuring charges of approximately $ 6.3 million, consisting of facilities-related charges and severance and other termination related benefits for the three and six months ended June 27, 2020.

As part of its work-from-anywhere culture, many of the Company’s employees elected to work remotely on a permanent basis.

In light of this shift, the Company evaluated its space needs and determined that a portion of the Company's leased office spaces in Richardson, Texas and San Jose, California would no longer be utilized.

As a result, the right-of-use assets related to these leases were written down, resulting in a charge of $ 3.5 million for the three and six months ended June 27, 2020.

In addition, the Company wrote off assets with net book value of $ 0.3 million and accrued common areas maintenance fees and property taxes related to the unused office space totaling $ 1.4 million for three and six months ended June 27, 2020.

The following table summarizes the activities pursuant to the above restructuring plan (in thousands):

Facilities Severance and Related Benefits Total

Balance at March 28, 2020 $ — $ — $ —

Restructuring charges 5,112 1,174 6,286

Asset write-down ( 3,747 ) — ( 3,747 )

Cash payments — ( 65 ) ( 65 )

Balance at June 27, 2020 $ 1,365 $ 1,109 $ 2,474

Credit Agreements

5 unchanged sentences

The BofA Loan Agreement is secured by substantially all of the Company’s assets, including the Company’s intellectual property.

Loans under the credit facility will bear interest at a rate per annum equal to LIBOR (customarily defined) plus an applicable margin between 1.50% to 2.25% and Prime Rate (customarily defined) plus an applicable margin between 0.50% to 1.25% , in each case largely based on a fixed charge coverage ratio measured at the end of each fiscal quarter.

Effective July 1, 2020, loans under the credit facility will bear interest at a rate per annum equal to either LIBOR (customarily defined) plus an applicable margin between 1.5 % to 2.0 % or Prime Rate (customarily defined) plus an applicable margin between 0.5 % to 1.0 %, in each case largely based on a fixed charge coverage ratio measured at the end of each fiscal quarter.

The availability of borrowings under the BofA Loan Agreement is subject to certain conditions and requirements, including among others, if at any time the Company’s availability is less than $ 5.0 million, the Company must maintain a minimum fixed charge coverage ratio (“FCCR”) of 1.0 to 1.0.

As of March 28, 2020 , the Company was in compliance with these requirements, had borrowings outstanding of $30.0 million , availability of $5.0 million and an FCCR of 7.9 to 1.0.

The Company's interest rate on the line of credit was 4.5% as of March 28, 2020 .

As of June 27, 2020, the Company was in compliance with these requirements, had borrowings

outstanding of $ 26.0 million, availability of $ 9.0 million and an FCCR of 4.1 to 1.0.

The Company's interest rate on the line of credit was 4.5 % as of June 27, 2020 and decreased to 3.75 % on July 1, 2020.

Financing Arrangements

1 unchanged sentence

Each agreement is to be paid over 36 months with a weighted average interest rate of 6.2 %.

As of March 28, 2020 , there was $2.5 million outstanding under these financing arrangements, which is included in accrued liabilities and other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet.

During 2017, 2018 and 2019, t he Company entered into financing arrangements for consulting services of $5.4 million in connection with the Company’s ERP implementation.

As of June 27, 2020, there was $ 2.1 million outstanding under these financing arrangements, which is included in accrued liabilities and other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet.

From 2017 to 2020, t he Company entered into financing arrangements for consulting services of $ 5.5 million in connection with the Company’s ERP implementation.

The current amounts due under this agreement are to be paid over a weighted average term of 2.4 years with a weighted average interest rate of 6.3 %.

As of March 28, 2020 , there was $1.8 million outstanding under these arrangements, which is included in accrued liabilities and other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet.

As of June 27, 2020, there was $ 1.9 million outstanding under these arrangements, which is included in accrued liabilities and other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet.

Commitments and Contingencies

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Certain of the Company’s operating leases contain renewal options and rent acceleration clauses.

Future minimum payments under the non-cancelable operating leases consisted of the following as of March 28, 2020 (in thousands):

Minimum Future Lease Payments

Future minimum payments under the non-cancelable operating leases consisted of the following as of June 27, 2020 (in thousands):

Period Minimum Future Lease Payments

Remainder of 2020 $ 1,890

Thereafter 2,881

Total future minimum lease payments 18,802

5 unchanged sentences

The future minimum lease payments under the lease are $ 12.9 million and are included in the table above.

The weighted average discount rate for the Company's operating leases as of March 28, 2020 was 7.0% .

The weighted average remaining lease term as of March 28, 2020 was 4.9 years .

For the three months ended March 28, 2020 and March 30, 2019 , total rent expense of the Company was $1.1 million and $1.2 million , respectively.

Cash paid within operating cash flows for operating leases was $1.0 million and $0.8 million for three months ended March 28, 2020 and March 30, 2019 , respectively.

The weighted average discount rate for the Company's operating leases as of June 27, 2020 was 7.0 %.

The weighted average remaining lease term as of June 27, 2020 was 4.6 years.

For the three and six months ended June 27, 2020, total rent expense of the Company was $ 1.1 million and $ 2.2 million, respectively.

For the three and six months ended June 29, 2019, total rent expense of the Company was $ 1.3 million and $ 2.5 million, respectively.

Cash paid within operating cash flows for operating leases was $ 1.7 million and $ 2.0 million for six months ended June 27, 2020 and June 29, 2019, respectively.

Purchase Commitments

3 unchanged sentences

The Company places purchase orders with its CMs and ODMs in order to fulfill its monthly finished product inventory requirements.

The Company incurs a liability when the CMs and ODMs convert the component inventory to a finished product and takes ownership of the finished goods inventory.

incurs a liability when the CMs and ODMs convert the component inventory to a finished product and takes ownership of the finished goods inventory.

In the event of termination of services with a manufacturing partner, the Company has purchased, and may be required to purchase in the future, certain of the remaining components inventory held by the CM or ODM as well as any outstanding orders pursuant to the contractual provisions with such CM or ODM.

As of March 28, 2020 , the Company had approximately $74.9 million of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one year.

The Company has from time to time, and subject to certain conditions, reimbursed its suppliers for component inventory purchases when this inventory has been rendered excess or obsolete, for example due to manufacturing and engineering change orders resulting from design changes, manufacturing discontinuation of parts by its suppliers, or in cases where inventory levels greatly exceed projected demand.

The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, were $4.2 million and $1.9 million as of March 28, 2020 and December 31, 2019 , respectively.

As of June 27, 2020, the Company had approximately $ 104.8 million of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one year.

The Company has from time to time, and subject to certain conditions, reimbursed certain suppliers for component inventory purchases when this inventory has been rendered excess or obsolete, for example due to manufacturing and engineering change orders resulting from design changes, manufacturing discontinuation of products by its suppliers, or in cases where the Company has committed inventory levels that greatly exceed projected demand.

The estimated excess and obsolete inventory liabilities related to such manufacturing and engineering change orders and other factors, which are included in accrued liabilities in the accompanying balance sheets, were $ 5.7 million and $ 1.9 million as of June 27, 2020 and December 31, 2019, respectively.

The Company records the related charges in cost of systems revenue in its Condensed Consolidated Statements of Comprehensive Loss.

3 unchanged sentences

2019 Equity Incentive Award Plan

At the annual meeting of stockholders of the Company in May 2019, the stockholders approved the 2019 Equity Incentive Award Plan (the “2019 Plan”).

At the Company’s 2019 annual meeting of stockholders, the stockholders approved the 2019 Equity Incentive Award Plan (the “2019 Plan”).

The 2019 Plan supersedes and replaces the 2010 Equity Incentive Award Plan (the “2010 Plan”) and preceding plans.

4 unchanged sentences

The number of shares available for issuance under the 2019 Plan includes an initial reserve of 1.7 million shares of common stock, any shares of common stock that are available for issuance under the 2010 Plan as of the effective date of the 2019 Plan and any shares of common stock subject to issued and outstanding awards under the 2010 Plan that expire, are cancelled or otherwise terminate following the effective date of the 2019 Plan.

As of March 28, 2020 , there were 2.4 million shares available for issuance under the 2019 Plan.

At the Company’s 2020 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable by 3.5 million shares.

As of June 27, 2020, there were 5.0 million shares available for issuance under the 2019 Plan.

Stock Options

During the three months ended June 27, 2020, stock option awards exercisable for up to an aggregate of 0.9 million shares of common stock were granted with a grant date fair value of $ 12.63 per share.

During the six months ended June 27, 2020, stock option awards exercisable for up to an aggregate of 0.9 million shares of common stock were granted with a grant date fair value of $ 12.44 per share.

During the three months ended March 28, 2020, performance-based stock option awards exercisable for up to an aggregate of 0.8 million shares of common stock were granted to certain Company executives with a grant date fair value of $ 9.16 per share.

3 unchanged sentences

From this base, shares are awarded on a 50 % weighting for both non-GAAP net income and bookings up to 100 % for each 2020 Performance Target using a sliding scale.

The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of March 28, 2020 , and stock-based compensation expense of $0.3 million was recognized for the three months ended March 28, 2020 .

The probability of

meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of June 27, 2020, and stock-based compensation expense of $ 0.5 million was recognized for the three months ended June 27, 2020.

For the six months ended June 27, 2020 stock-based compensation expense of $ 0.7 million was recognized.

During the three months ended March 30, 2019, performance-based stock option awards exercisable for up to an aggregate of 2.0 million shares of common stock were granted to Company executives with a grant date fair value of $ 8.03 per share.

3 unchanged sentences

One quarter of these performance-based stock option awards vested on this date, and the remaining 75 % of the shares of common stock earned will vest in substantially equal quarterly installments over the subsequent 36 months, subject to the executive’s continuous service with the Company through the respective vesting dates.

During the three months ended March 28, 2020 , stock options exercisable for up to an aggregate of 50,000 shares were granted with a grant date fair value of $9.16 per share.

During the three months ended March 28, 2020 , 0.2 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $7.01 per share.

As of March 28, 2020 , unrecognized stock-based compensation expense of $7.5 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.8 years.

During the three months ended June 27, 2020, 0.6 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.63 per share.

During the six months ended June 27, 2020, 0.7 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.50 per share.

As of June 27, 2020, unrecognized stock-based compensation expense of $ 11.4 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 3.0 years.

Restricted Stock Units

During the three months ended March 28, 2020 , RSUs for 48,000 shares of common stock vested.

As of March 28, 2020 , unrecognized stock-based compensation expense of $0.6 million related to RSUs, net of estimated forfeitures, was expected to be recognized over a weighted-average period of 0.3 years.

During the three and six months ended June 27, 2020, RSUs of 0.1 million were granted with a grant date fair value of $ 11.22 per share.

During the three months ended June 27, 2020, RSUs for 0.2 million shares of common stock vested.

During the six months ended June 27, 2020, RSUs for 0.3 million shares of common stock vested.

As of June 27, 2020, unrecognized stock-based compensation expense of $ 1.4 million related to RSUs, net of estimated forfeitures, was expected to be recognized over a weighted-average period of 0.8 years.

Employee Stock Purchase Plans

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In addition, no participant may purchase more than 2,000 shares of common stock in each offering period.

The offering periods under the ESPP are six -month periods commencing on May 15 and November 15 of each year.

Beginning in the third quarter of 2020, the ESPP will provide two six -month offering periods from August 15 th through February 14 th and February 15 th through August 14 th of each year.

A transition period began on May 15 th and will end on August 14, 2020.

The price of common stock purchased under the ESPP is 85 % of the lower of the fair market value of the common stock on the commencement date and the end date of each six -month offering period.

1 unchanged sentence

The total shares authorized for issuance under the ESPP increased from 7.3 million shares to 9.8 million shares.

As of March 28, 2020 , there were 3.2 million shares available for issuance under the ESPP.

As of March 28, 2020 , unrecognized stock-based compensation expense of $0.2 million related to the ESPP is expected to be recognized over a remaining service period of 0.1 years.

As of June 27, 2020, there were 2.8 million shares available for issuance under the ESPP.

During the three and six months ended June 27, 2020, 0.4 million shares were purchased under the ESPP.

As of June 27, 2020, unrecognized stock-based compensation expense of $ 0.3 million related to the ESPP is expected to be recognized over a remaining service period of 0.1 years.

The NQ ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 25 % of their annual compensation.

Eligible employees have the right to (a) purchase the maximum number of whole shares of common stock that can be purchased with the elected payroll deductions during each offering period for which the employee is enrolled at a purchase price equal to the closing price of the Company’s common stock on the last day of such offering period and (b) receive an equal number of shares of the Company’s common stock that are subject to a risk of forfeiture in the event the employee terminates employment within the one year period immediately following the purchase date.

The NQ ESPP provides two six -month offering periods, currently from December 21 through June 20 and June 21 through December 20 of each year.

Beginning in the fourth quarter of 2020, the NQ ESPP will provide two six -month offering periods, from November 15 th through May 14 th and May 15 th through November 14 th of each year.

A transition period began on June 21 st and will end on November 14, 2020.

In May 2020, the stockholders approved an amendment of certain terms and an increase in the number of shares of common stock issuable under the NQ ESPP by 1.2 million shares.

The maximum number of shares of common stock currently authorized for issuance under the NQ ESPP is 4.7 million shares, with a maximum of 0.5 million shares allocated per purchase period.

As of March 28, 2020 , there were 1.6 million shares available for issuance under the NQ ESPP.

As of March 28, 2020 , unrecognized stock-based compensation expense of $2.7 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.0 years.

As of June 27, 2020, there were 2.5 million shares available for issuance under the NQ ESPP, including the stockholder-approved 1.2 million share increase.

During the three and six months ended June 27, 2020, 0.3 million shares were purchased and issued.

As of June 27, 2020, unrecognized stock-based compensation expense of $ 3.8 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.1 years.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):

Three months ended

Three Months Ended Six Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Cost of revenue:

Products $ 126 $ 123 $ 233 $ 278

Services 90 93 205 192

Research and development 1,098 873 2,107 1,889

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General and administrative 926 666 1,722 1,467

$ 3,242 $ 2,569 $ 6,225 $ 5,714

Revenue from Contracts with Customers

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The following is a summary of revenue disaggregated by geographic region based upon the location of the customers (in thousands):

Three Months Ended

March 28, 2020

March 30, 2019

Three Months Ended Nine Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

United States $ 108,198 $ 85,837 $ 196,248 $ 161,622

Canada 2,868 3,317 6,989 6,732

Middle East 2,330 5,949 4,631 9,700

Caribbean 2,310 501 5,873 2,767

Europe 2,110 2,471 4,482 4,910

Other 1,207 2,229 2,482 3,923

$ 119,023 $ 100,304 $ 220,705 $ 189,654

Contract Asset

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Amounts are billed in accordance with the agreed-upon contractual terms.

The balance at December 31, 2019 was $5.0 million of which $1.7 million remained in the Company's Condensed Consolidated Balance Sheet at March 28, 2020 .

The closing balance at March 28, 2020 was $2.9 million of which the Company expects to bill 58% of the balance during the remainder of 2020.

The decrease in the contract asset was driven by billings for past services in the first quarter of 2020 as well as the timing and volume of professional services contracts during the quarter.

The balance at December 31, 2019 was $ 5.0 million of which $ 1.6 million remained in the Company's Condensed Consolidated Balance Sheet at June 27, 2020.

The closing balance at June 27, 2020 was $ 4.0 million of which the Company expects to bill 52 % of the balance during the remainder of 2020.

The decrease in the contract asset was driven by billings for past services as well as the timing and volume of professional services contracts during the six months ended June 27, 2020.

Contract Liability

Deferred revenue consisted of the following (in thousands):

2020 December 31,

Products and services $ 12,587 $ 12,480

Extended warranty 3,772 4,678

16,359 17,158

Products and services 1,786 790

Extended warranty 16,406 17,550

The increase in the deferred revenue balance for the three months ended March 28, 2020 is primarily driven by cash payments received or due in advance of satisfying the Company's performance obligations, offset by $6.1 million of revenue recognized that was included in the deferred revenue balance at the beginning of each period, respectively.

18,192 18,340

$ 34,551 $ 35,498

The decrease in the deferred revenue balance for the three and six months ended June 27, 2020 is primarily driven by $ 7.4 million and $ 13.4 million of revenue recognized that was included in the deferred revenue balance at the beginning of each period, respectively, offset by cash payments received or due in advance of satisfying the Company's performance obligations.

Revenue allocated to remaining performance obligations represent contract revenue that has not yet been recognized for contracts greater than one year, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

This amount was $61.1 million as of March 28, 2020 , and the Company expects to recognize 46% of such revenue over the next 12 months and the remainder thereafter.

This amount was $ 62.3 million as of June 27, 2020, and the Company expects to recognize 45 % of such revenue over the next 12 months and the remainder thereafter.

Contract Costs

The Company capitalizes certain sales commissions related primarily to extended warranty support for which the expected amortization period is greater than one year.

As of March 28, 2020 , the unamortized balance of deferred commissions was $0.7 million .

For the three months ended March 28, 2020 , the amount of amortization was less than $0.1 million , and there was no impairment loss in relation to the costs capitalized.

As of June 27, 2020, the unamortized balance of deferred commissions was $ 0.7 million.

For the three and six months ended June 27, 2020, the amount of amortization was less than $ 0.1 million, and there was no impairment loss in relation to the costs capitalized.

Concentration of Customer Risk

CenturyLink, Inc.

represented 15% and 14% of total revenue for the three months ended March 28, 2020 and March 30, 2019, respectively.

represented 15 % of total revenue for each of the three and six months ended June 27, 2020, and 17 % and 15 % for the three and six months ended June 29, 2019, respectively.

No other customers accounted for more than 10% of the Company’s total revenue for these periods.

As of March 28, 2020 , CenturyLink, Inc.

accounted for 25% of the Company's accounts receivable and Verizon Communications Inc.

accounted for 14% of the Company’s account receivable as of March 30, 2019.

CenturyLink, Inc.

accounted for 19 % of the Company's accounts receivable as of June 27, 2020 and 17 % as of December 31, 2019.

The following table presents the provision for income taxes from operations and the effective tax rates for the periods indicated (in thousands, except percentages):

Three Months Ended

Three Months Ended Six Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Provision for income taxes $ 148 $ 95 $ 477 $ 250

Effective tax rate ( 3.6 ) % ( 1.9 ) % ( 4.5 ) % ( 1.7 ) %

The effective tax rate for the three months ended March 28, 2020 was determined using an estimated annual effective tax rate adjusted for discrete items, if any, that occurred during the respective periods.

The effective tax rate for the three months ended June 27, 2020 was determined using an estimated annual effective tax rate adjusted for discrete items, if any, that occurred during the respective periods.

Deferred tax assets are recognized if realization of such assets is more likely than not.

The Company has established and continues to maintain a full valuation allowance against its net deferred tax assets, with the exception of certain foreign deferred tax assets, as the Company does not believe that realization of those assets is more likely than not.

The Company’s effective tax rate may be subject to fluctuation during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which it operates, valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where it conducts business .

recognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where it conducts business.

Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per common share for the periods indicated (in thousands, except per share data):

Three Months Ended

Three Months Ended Six Months Ended

2020 June 29,

2019 June 27,

2020 June 29,

Net loss $ ( 4,212 ) $ ( 5,045 ) $ ( 11,156 ) $ ( 14,812 )

Weighted-average common shares outstanding used to compute basic net loss per share 57,261 54,624 56,906 54,339

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

What changed 10-Q

Item 1. Financial Statements