What changed in this filing

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Item 1. Financial Statements

2022-07-26 compared with 2022-04-26 · 109 added, 86 removed, 364 unchanged (35% of the section changed)

31 unchanged sentences

5,000 shares authorized;

no shares issued and outstanding as of April 2, 2022 and December 31, 2021

no shares issued and outstanding as of July 2, 2022 and December 31, 2021

Common stock, $ 0.025 par value;

100,000 shares authorized;

64,612 shares issued and outstanding as of April 2, 2022, and 64,274 shares issued and outstanding as of December 31, 2021

65,241 shares issued and outstanding as of July 2, 2022, and 64,274 shares issued and outstanding as of December 31, 2021

Additional paid-in capital 1,032,833 997,855

6 unchanged sentences

(In thousands, except per share data)

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

Systems $ 191,195 $ 159,553 $ 365,621 $ 312,855

12 unchanged sentences

Operating income 9,701 20,529 19,554 41,331

Interest and other expense, net:

Interest and other income (expense), net:

Interest income (expense), net 240 ( 119 ) 275 ( 244 )

Other income (expense), net ( 272 ) 255 ( 340 ) 343

Total interest and other expense, net ( 33 ) ( 37 )

Total interest and other income (expense), net ( 32 ) 136 ( 65 ) 99

Income before income taxes 9,669 20,665 19,489 41,430

9 unchanged sentences

Net income $ 7,521 $ 20,458 $ 15,640 $ 41,073

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Unrealized loss on available-for-sale marketable securities, net ( 306 ) — ( 1,467 ) —

Foreign currency translation adjustments, net ( 403 ) 44 ( 474 ) 9

Total other comprehensive loss, net of tax ( 1,232 ) ( 35 )

Total other comprehensive income (loss), net of tax ( 709 ) 44 ( 1,941 ) 9

Comprehensive income $ 6,812 $ 20,502 $ 13,699 $ 41,082

4 unchanged sentences

Shares Amount

Balance as of December 31, 2021 64,274 $ 1,607 $ 997,855 $ ( 320 ) $ ( 430,714 ) $ 568,428

Balance as of April 2, 2022 64,612 $ 1,616 $ 1,014,336 $ ( 1,552 ) $ ( 422,595 ) $ 591,805

Stock-based compensation

3 unchanged sentences

Other comprehensive loss — — — ( 709 ) — ( 709 )

Balance as of July 2, 2022 65,241 $ 1,631 $ 1,032,833 $ ( 2,261 ) $ ( 415,074 ) $ 617,129

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

Shares Amount

Balance as of April 3, 2021 62,851 $ 1,572 $ 961,846 $ ( 226 ) $ ( 648,477 ) $ 314,715

Stock-based compensation

— — 6,223 — — 6,223

Issuance of common stock under equity incentive plans, net of forfeitures 349 8 4,190 — — 4,198

Net income — — — — 20,458 20,458

Other comprehensive loss — — — 44 — 44

Balance as of July 3, 2021 63,200 $ 1,580 $ 972,259 $ ( 182 ) $ ( 628,019 ) $ 345,638

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

6 unchanged sentences

Other comprehensive loss — — — ( 1,941 ) — ( 1,941 )

Balance as of April 3, 2021 62,851 $ 1,572 $ 961,846 $ ( 226 ) $ ( 648,477 ) $ 314,715

Balance as of July 2, 2022 65,241 $ 1,631 $ 1,032,833 $ ( 2,261 ) $ ( 415,074 ) $ 617,129

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

Shares Amount

Balance as of December 31, 2020 62,122 $ 1,553 $ 948,055 $ ( 191 ) $ ( 669,092 ) $ 280,325

Stock-based compensation

— — 11,394 — — 11,394

Issuance of common stock under equity incentive plans, net of forfeitures 1,078 27 12,810 — — 12,837

Net income — — — — 41,073 41,073

Other comprehensive loss — — — 9 — 9

Balance as of July 3, 2021 63,200 $ 1,580 $ 972,259 $ ( 182 ) $ ( 628,019 ) $ 345,638

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands, unaudited)

Three Months Ended

2022 April 3,

Six Months Ended

Operating activities:

48 unchanged sentences

Quarterly periods are based on a 4-4-5 calendar with the first quarter ending on the Saturday closest to March 31 st .

As a result, the Company had one less day in the three months ended April 2, 2022 than for the three months ended April 3, 2021.

As a result, the Company had one less day in the six months ended July 2, 2022 than for the six months ended July 3, 2021.

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.

4 unchanged sentences

Although the availability of vaccines has increased, there are no assurances as to when the pandemic will become endemic.

In March 2020, the Company instituted office closures, travel restrictions and a work-from-anywhere policy for substantially all of its employees due to shelter-in-place mandates.

In July 2021, the Company reopened its U.S.

offices to fully-vaccinated employees who choose to work in the office and lifted certain travel restrictions.

The COVID-19 pandemic has had a prolonged impact on the Company’s supply chain operations due to restrictions, reduced capacity and limited availability from suppliers on whom the Company relies for sourcing components and materials and from third-party partners on whom the Company relies for manufacturing, warehousing and logistics services.

Although demand for the Company’s products has been strong in the short-term as subscribers seek more bandwidth and better Wi-Fi, 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 constraints primarily due to challenges in sourcing components and materials for the Company’s products.

The Company’s supply chain continues to face constraints primarily due to closures affecting suppliers and manufacturers in China that have led to challenges in sourcing components and materials.

Shortages and delays relating to the Company’s components and materials have also caused, and may continue to cause, difficulties in managing global logistics, and transport and warehousing services for the Company’s products.

The prolonged impact of COVID-19 could exacerbate these constraints or 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 remains 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, 2021.

The Company’s significant accounting policies did not change during the three months ended April 2, 2022.

The Company’s significant accounting policies did not change during the six months ended July 2, 2022.

Newly Adopted Accounting Standard

The Company did not adopt any new accounting standards during the three months ended April 2, 2022 that were significant to the Company.

The Company did not adopt any new accounting standards during the six months ended July 2, 2022 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 April 2, 2022 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, 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 July 2, 2022 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that are significant or potentially significant to the Company.

Cash, Cash Equivalents and Marketable Securities

2 unchanged sentences

The Company considers all investments with maturities of three months or less when purchased to be cash equivalents.

Marketable securities represent highly liquid commercial paper, U.S.

Marketable securities represent commercial paper, U.S.

government agency securities, corporate debt securities, municipal securities and U.S.

6 unchanged sentences

Realized gains and losses on sales of marketable securities, if any, are determined on the specific identification method and are reclassified from accumulated other comprehensive loss to results of operations as other expense, net.

There were no realized gains and losses for the period ended April 2, 2022.

There were no realized gains and losses for the three and six months ended July 2, 2022 and July 3, 2021, respectively.

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

3 unchanged sentences

Commercial paper 24,616 21,582

government agency securities 3,797 —

government securities 2,499 —

Municipal securities 1,760 —

Money market funds 2,787 2,320

5 unchanged sentences

government agency securities 9,028 5,527

Municipal securities 2,226 2,808

Corporate debt securities 799 3,576

Municipal securities 694 2,808

Total marketable securities 173,369 153,002

1 unchanged sentence

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

The amortized cost and fair value of marketable securities as of April 2, 2022 were as follows (in thousands):

The amortized cost and fair value of marketable securities as of July 2, 2022 were as follows (in thousands):

Amortized Cost Gross Unrealized Losses Fair Value

2 unchanged sentences

government agency securities 9,117 ( 89 ) 9,028

Municipal securities 2,231 ( 5 ) 2,226

Corporate debt securities 803 ( 4 ) 799

Municipal securities 696 ( 2 ) 694

Total marketable securities $ 199,630 $ ( 1,645 ) $ 197,985

10 unchanged sentences

The following tables sets forth the Company’s financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):

As of April 2, 2022 Level 1 Level 2 Total

As of July 2, 2022 Level 1 Level 2 Total

Money market funds $ 2,787 $ — $ 2,787

2 unchanged sentences

government agency securities — 9,028 9,028

Municipal securities — 3,986 3,986

Corporate debt securities — 799 799

Municipal securities — 694 694

$ 102,595 $ 98,177 $ 200,772

23 unchanged sentences

Software 9,623 9,013

Furniture and fixtures 1,526 1,812

Leasehold improvements 1,678 1,351

Furniture and fixtures 1,074 1,812

Total 64,744 62,808

3 unchanged sentences

2022 December 31,

Intangible asset $ 6,227 $ 6,885

Intangible asset, net $ 5,569 $ 6,885

Other long-term assets 9,307 6,800

6 unchanged sentences

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.

As of April 2, 2022, the liability, including accrued interest, was $ 13.3 million of which $ 6.6 million is included in “Accrued liabilities” and $ 6.7 million in “Other long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet.

As of July 2, 2022, the liability, including accrued interest, was $ 12.9 million, of which $ 5.7 million is included in “Accrued liabilities” and $ 7.2 million in “Other long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet.

As of December 31, 2021, the liability, including accrued interest, was $ 13.2 million, of which $ 4.7 million was included in “Accrued liabilities” and $ 8.5 million in other “Other long-term liabilities.”

4 unchanged sentences

Current portion of warranty and retrofit 6,777 7,076

Customer advances or rebates 6,979 4,742

Current portion of revenue share payments 5,747 4,731

Professional and consulting fees 5,678 4,819

Taxes payable 5,115 4,251

Freight 5,201 3,997

Customer advances or rebates 5,118 4,742

Operating leases 3,822 3,596

Taxes payable 3,395 4,251

Product returns 2,804 1,836

3 unchanged sentences

Changes in the Company’s accrued warranty and retrofit liability were as follows (in thousands):

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

Balance at beginning of period $ 9,570 $ 9,650 $ 9,594 $ 9,208

Provision for warranty and retrofit charged to cost of revenue 527 1,202

Utilization of reserve ( 551 ) ( 760 )

Accruals for product warranty and retrofit

( 351 ) 1,003 177 2,205

Cost of warranty and retrofit claims

( 565 ) ( 742 ) ( 1,117 ) ( 1,502 )

Balance at end of period $ 8,654 $ 9,911 $ 8,654 $ 9,911

3 unchanged sentences

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 April 2, 2022 (in thousands):

Future minimum payments under the non-cancelable operating leases consisted of the following as of July 2, 2022 (in thousands):

Period Future Minimum Lease Payments

2 unchanged sentences

Less imputed interest ( 1,619 )

As of April 2, 2022, the operating lease liability consisted of the following (in thousands):

As of July 2, 2022, the operating lease liability consisted of the following (in thousands):

Accrued liabilities - current portion of operating leases $ 3,822

2 unchanged sentences

The future minimum lease payments under the lease are $ 8.5 million and are included in the table above.

The weighted average discount rate for the Company’s operating leases as of April 2, 2022 was 6.1 %.

The weighted average remaining lease term as of April 2, 2022 was 3.8 years.

Total rent expense of the Company was $ 1.1 million for the three months ended April 2, 2022 and April 3, 2021 for each respective period.

Cash paid within operating cash flows for operating leases was $ 1.1 million and $ 1.0 million for the three months ended April 2, 2022 and April 3, 2021, respectively.

The weighted average discount rate for the Company’s operating leases as of July 2, 2022 was 6.1 %.

The weighted average remaining lease term as of July 2, 2022 was 3.5 years.

For the three and six months ended July 2, 2022, total rent expense of the Company was $ 1.1 million and $ 2.2 million, respectively.

For the three and six months ended July 3, 2021, total rent expense of the Company was $ 0.9 million and $ 2.1 million, respectively.

Cash paid within operating cash flows for operating leases was $ 2.3 million and $ 2.0 million for the six months ended July 2, 2022 and July 3, 2021, respectively.

Purchase Commitments

5 unchanged sentences

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 April 2, 2022 and April 3, 2021, the Company had approximately $ 261.4 million and $ 107.8 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within one to two years .

As of July 2, 2022 and December 31, 2021, the Company had approximately $ 324.2 million and $ 247.3 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within two years .

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 $ 8.4 million and $ 7.6 million as of April 2, 2022 and December 31, 2021, respectively.

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 $ 9.3 million and $ 7.6 million as of July 2, 2022 and December 31, 2021, respectively.

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

5 unchanged sentences

The 2019 Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash-based awards and dividend equivalents to eligible individuals.

As of April 2, 2022, there were 5.9 million shares available for issuance under the 2019 Plan.

At the Company’s 2022 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the 2019 Plan by 1.5 million shares.

As of July 2, 2022, there were 7.0 million shares available for issuance under the 2019 Plan.

Stock Options

During the three months ended April 2, 2022, stock option awards exercisable for up to an aggregate of 0.3 million shares of common stock were granted with a grant date weighted-average exercise price of $ 55.96 per share.

During the three months ended July 2, 2022, stock option awards exercisable for up to an aggregate of 0.4 million shares of common stock were granted with a grant date weighted-average exercise price of $ 33.46 per share.

During the six months ended July 2, 2022, stock option awards exercisable for up to an aggregate of 0.8 million shares of common stock were granted with a grant date weighted-average exercise price of $ 43.15 per share.

These stock option awards vest 25 % on the first anniversary of the vesting commencement date and on a quarterly basis thereafter over an additional three years .

1 unchanged sentence

The actual number of shares earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP net operating income for 2022 (collectively, the “2022 Performance Targets”) during the one-year performance period.

These performance-based stock option awards will vest, subject to certification by the Compensation Committee of the Company’s Board of Directors upon the achievement of the 2022 Performance Targets, as to 25 % of the shares of common stock earned on the one year anniversary of the date of grant, and as to the remaining 75 % of the shares of common stock earned, 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.

quarterly installments over the subsequent 36 months, subject to the executive’s continuous service with the Company through the respective vesting dates.

If the non-GAAP net operating income target is achieved below 80 % of target or the bookings target is achieved below 90 % of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full.

If both targets are achieved at the minimum threshold of 80 % of target for non-GAAP net operating income

and 90 % of target for bookings, then the shares are awarded at 50 % of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 100 % of the granted shares if both targets are achieved at 100 % or more of target.

The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of April 2, 2022, and stock-based compensation expense of $ 1.6 million was recognized for the three months ended April 2, 2022.

During the three months ended April 2, 2022, 0.2 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.61 per share.

As of April 2, 2022, unrecognized stock-based compensation expense of $ 54.6 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.2 years.

If both targets are achieved at the minimum threshold of 80 % of target for non-GAAP net operating income and 90 % of target for bookings, then the shares are awarded at 50 % of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 100 % of the granted shares if both targets are achieved at 100 % or more of target.

The probability of meeting the performance conditions related to these performance-based stock option awards was assessed to be probable as of July 2, 2022, and stock-based compensation expense of $ 2.9 million was recognized for the three months ended July 2, 2022.

For the six months ended July 2, 2022, stock-based compensation expense of $ 4.5 million was recognized.

During the three months ended July 2, 2022, 0.3 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.51 per share.

During the six months ended July 2, 2022, 0.5 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 7.56 per share.

As of July 2, 2022, unrecognized stock-based compensation expense of $ 55.3 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.2 years.

Employee Stock Purchase Plans

1 unchanged sentence

The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions of up to 15 % of their eligible compensation subject to certain Internal Revenue Code limitations.

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

In addition, participants may purchase up to 2,000 shares of common stock during each offering period.

The offering periods under the ESPP are two six-month offering periods from August 15 th through February 14 th and February 15 th through August 14 th of each year.

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.

As of April 2, 2022, there were 3.5 million shares available for issuance under the ESPP.

During the three months ended April 2, 2022, 0.1 million shares were purchased under the ESPP.

As of April 2, 2022, unrecognized stock-based compensation expense of $ 0.8 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 years.

At the Company’s 2022 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the ESPP by 1.3 million shares, which will go into effect for the six-month purchase period commencing August 15, 2022 and ending on February 14, 2023.

The total shares authorized for issuance under the ESPP increased from 11.1 million shares to 12.4 million shares.

As of July 2, 2022, there were 3.5 million shares available for issuance under the ESPP.

During the six months ended July 2, 2022, 0.1 million shares were purchased under the ESPP.

As of July 2, 2022, 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 eligible 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.

Beginning in the second quarter of 2022, the NQ ESPP will provide four three-month offering periods, from August 8 th through November 7 th , November 8 th through February 7 th , February 8 th through May 7 th and May 8 th through August 7 th of each year.

A transition period will begin on May 15 th and will end on August 7, 2022.

As of April 2, 2022, there were 2.8 million shares available for issuance under the NQ ESPP.

As of April 2, 2022, unrecognized stock-based compensation expense of $ 6.4 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 1.0 year.

Beginning in the second quarter of 2022, the NQ ESPP provides quarterly offering periods from February 8 th through May 7 th , May 8 th through August 7 th , August 8 th through November 7 th and November 8 th through February 7 th of each year.

A transition period began on May 15 th and will end on August 7 th .

At the Company’s 2022 annual meeting of stockholders, the stockholders approved an increase in the number of shares of common stock issuable under the NQ ESPP by 0.8 million shares.

The maximum number of shares of common stock currently authorized for issuance under the NQ ESPP is 6.3 million shares, with a maximum of 0.5 million shares allocated per purchase period.

As of July 2, 2022, there were 3.3 million shares available for issuance under the NQ ESPP, including the stockholder-approved 0.8 million share increase.

During the three and six months ended July 2, 2022, 0.4 million shares were purchased and issued.

As of July 2, 2022, unrecognized stock-based compensation expense of $ 6.9 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 0.9 years.

Stock-Based Compensation

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

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

Cost of revenue:

10 unchanged sentences

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

Three Months Ended

April 2, 2022 April 3, 2021

Three Months Ended Six Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

United States $ 183,932 $ 138,587 $ 349,563 $ 277,934

Americas ex U.S.

10,808 14,457 19,679 25,860

Europe 2,954 9,844 9,527 13,259

5 unchanged sentences

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

The balance as of December 31, 2021 was $ 1.7 million of which $ 0.9 million remained in the Company’s Condensed Consolidated Balance Sheet as of April 2, 2022.

The closing balance as of April 2, 2022 was $ 2.1 million of which the Company expects to bill 83 % of the balance during the remainder of 2022.

The increase in the contract asset was driven by the timing of professional services contracts with the Company's customers.

The balance as of December 31, 2021 was $ 1.7 million of which $ 0.4 million remained in the Company’s Condensed Consolidated Balance Sheet as of July 2, 2022.

The closing balance as of July 2, 2022 was $ 1.7 million of which the Company expects to bill 60 % of the balance during the remainder of 2022.

The contract asset balance may fluctuate depending on the timing of professional services contracts with the Company's customers.

Contract Liability

8 unchanged sentences

$ 58,220 $ 49,494

The increase in the deferred revenue balance for the three months ended April 2, 2022 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations offset by $ 7.3 million of revenue recognized that was included in the deferred revenue balance at the beginning of the period.

Revenue allocated to remaining performance obligations represents contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

This amount was $ 138.0 million as of April 2, 2022, and the Company expects to recognize 35 % of such revenue over the next 12 months and the remainder thereafter.

The increase in the deferred revenue balance for the three and six months ended July 2, 2022 is primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations offset by $ 12.9 million of revenue recognized that was included in the deferred revenue balance at the beginning of the period.

Revenue allocated to remaining performance obligations (“RPOs”) represents contract revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods but excludes variable consideration where the monthly invoicing is based on usage or where actual usage exceeds the minimum commitment.

RPOs were $ 162.8 million as of July 2, 2022, and the Company expects to recognize as revenue 34 % of this amount over the next 12 months and the remainder thereafter.

Contract Costs

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

As of April 2, 2022 and December 31, 2021, the unamortized balance of deferred commissions was $ 7.3 million and $ 7.4 million, respectively.

For the three months ended April 2, 2022 and April 3, 2021, the amount of amortization was $ 0.8 million and $ 0.1 million, respectively.

As of July 2, 2022 and December 31, 2021, the unamortized balance of deferred commissions was $ 7.7 million and $ 7.4 million, respectively.

For the three and six months ended July 2, 2022, the amount of amortization was $ 0.9 million and $ 1.6 million, respectively, compared to $ 0.2 million and $ 0.3 million for the three and six months ended July 3, 2021, respectively.

There was no impairment loss in relation to the costs capitalized for either period.

Concentration of Customer Risk

No customer accounted for more than 10% of the Company’s total revenue for the three months ended April 2, 2022 and April 3, 2021.

No customer represented more than 10% of the Company’s accounts receivable as of April 2, 2022.

No customer accounted for more than 10% of the Company’s total revenue for the three or six months ended July 2, 2022 or July 3, 2021.

No customer represented more than 10% of the Company’s accounts receivable as of July 2, 2022.

One customer represented 12 % of the Company’s accounts receivable as of December 31, 2021.

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

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

Income before income taxes $ 9,669 $ 20,665 $ 19,489 $ 41,430

1 unchanged sentence

Effective tax rate 22.2 % 1.0 % 19.7 % 0.9 %

The Company’s income taxes for the three months ended April 2, 2022 and April 3, 2021 were determined using an estimated effective tax rate adjusted for discrete items that occurred during the respective periods.

The Company's effective tax rate for the three months ended April 2, 2022 was lower than the statutory federal corporate tax rate of 21% primarily due to U.S.

The Company’s income taxes for the three months ended July 2, 2022 and July 3, 2021 were determined using an estimated effective tax rate adjusted for discrete items that occurred during the respective periods.

The Company's effective tax rate for the three and six months ended July 2, 2022 differs from the statutory federal corporate tax rate of 21% primarily due to U.S.

federal research tax credits and excess tax benefits from stock-based compensation partially offset by state taxes, the inclusion of income from certain foreign operations and the effect of non-deductible stock-based compensation for executive officers.

The Company's effective tax rate for the three months ended April 3, 2021 was significantly lower than 2022 as the Company maintained a full valuation allowance during the period.

The Company's effective tax rate for the three and six months ended July 3, 2021 was significantly lower than 2022 as the Company maintained a full valuation allowance until the third quarter of 2021.

The Company has net deferred tax assets that have arisen primarily as a result of temporary differences, net operating loss carryforwards and tax credits.

8 unchanged sentences

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

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

Net income $ 7,521 $ 20,458 $ 15,640 $ 41,073

8 unchanged sentences

These antidilutive shares were from stock options.

Subsequent Event

In July 2022, the Company’s Board of Directors authorized a one-year stock repurchase program for up to $ 100 million of the Company’s common stock.

Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements.

The specific timing, price and size of the purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations consistent with the Company’s capital allocation strategy.

The repurchase program does not obligate the Company to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.

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