What changed in this filing

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Item 1. Financial Statements

2024-04-23 compared with 2023-10-24 · 94 added, 151 removed, 341 unchanged (42% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

2024 December 31,

27 unchanged sentences

5,000 shares authorized;

no shares issued and outstanding as of September 30, 2023 and December 31, 2022

no shares issued and outstanding as of March 30, 2024 and December 31, 2023

Common stock, $ 0.025 par value;

100,000 shares authorized;

65,950 shares issued and outstanding as of September 30, 2023, and 65,735 shares issued and outstanding as of December 31, 2022

65,525 shares issued and outstanding as of March 30, 2024, and 65,052 shares issued and outstanding as of December 31, 2023

Additional paid-in capital 1,102,314 1,078,393

4 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Revenue $ 226,310 $ 250,008

6 unchanged sentences

Total operating expenses 124,609 118,115

Operating income 15,929 20,005 37,676 39,559

Operating income (loss) ( 2,032 ) 9,936

Interest income and other expense, net:

17 unchanged sentences

Total other comprehensive income (loss), net of tax ( 324 ) 1,166

Comprehensive income $ 17,183 $ 12,620 $ 37,038 $ 26,319

Comprehensive income (loss) $ ( 221 ) $ 10,764

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Shares Amount

Balance as of July 1, 2023 66,320 $ 1,658 $ 1,112,434 $ ( 1,589 ) $ ( 370,733 ) $ 741,770

Balance as of December 31, 2023 65,052 $ 1,627 $ 1,078,393 $ ( 659 ) $ ( 360,379 ) $ 718,982

Stock-based compensation — — 16,856 — — 16,856

2 unchanged sentences

Net income — — — — 103 103

Other comprehensive income — — — 230 — 230

Balance as of September 30, 2023 65,950 $ 1,649 $ 1,104,435 $ ( 1,359 ) $ ( 353,780 ) $ 750,945

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

Shares Amount

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

Stock-based compensation

— — 11,027 — — 11,027

Issuance of common stock under equity incentive plans, net of forfeitures 201 5 6,966 — — 6,971

Net income — — — — 13,443 13,443

Other comprehensive loss — — — ( 324 ) — ( 324 )

Balance as of October 1, 2022 65,442 $ 1,636 $ 1,050,826 $ ( 3,084 ) $ ( 401,631 ) $ 647,747

Balance as of March 30, 2024 65,525 $ 1,638 $ 1,102,314 $ ( 983 ) $ ( 360,276 ) $ 742,693

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

2 unchanged sentences

Stock-based compensation — — 16,220 — — 16,220

— — 50,090 — — 50,090

Issuance of common stock under equity incentive plans, net of forfeitures 534 13 12,458 — — 12,471

2 unchanged sentences

Other comprehensive income — — — 1,166 — 1,166

Balance as of September 30, 2023 65,950 $ 1,649 $ 1,104,435 $ ( 1,359 ) $ ( 353,780 ) $ 750,945

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

Shares Amount

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

Stock-based compensation

— — 31,502 — — 31,502

Issuance of common stock under equity incentive plans, net of forfeitures 1,168 29 21,469 — — 21,498

Net income — — — — 29,083 29,083

Other comprehensive loss — — — ( 2,764 ) — ( 2,764 )

Balance as of October 1, 2022 65,442 $ 1,636 $ 1,050,826 $ ( 3,084 ) $ ( 401,631 ) $ 647,747

Balance as of April 1, 2023 66,244 $ 1,656 $ 1,097,596 $ ( 1,307 ) $ ( 380,106 ) $ 717,839

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

(In thousands, unaudited)

Nine Months Ended

September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Operating activities:

23 unchanged sentences

Payments related to financing arrangements — ( 1,066 )

Net cash provided by (used in) financing activities ( 23,310 ) 20,503

Net cash provided by financing activities 7,076 10,222

Effect of exchange rate changes on cash and cash equivalents ( 39 ) 57

24 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 nine months ended September 30, 2023 than for the nine months ended October 1, 2022.

As a result, the Company had one less day in the three months ended March 30, 2024 than for the three months ended April 1, 2023.

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.

2 unchanged sentences

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.

The Company’s significant accounting policies did not change during the nine months ended September 30, 2023.

The Company’s significant accounting policies did not change during the three months ended March 30, 2024.

Newly Adopted Accounting Standard

The Company did not adopt any new accounting standards during the nine months ended September 30, 2023 that were significant to the Company.

The Company did not adopt any new accounting standards during the three months ended March 30, 2024 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 nine months ended September 30, 2023 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, that are significant or expected to be significant to the Company.

There have been no additional accounting pronouncements or changes in accounting pronouncements during the three months ended March 30, 2024 as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, that are significant or expected to be significant to the Company.

Cash, Cash Equivalents and Marketable Securities

The Company has invested its excess cash primarily in money market funds and highly liquid marketable securities such as commercial paper, corporate debt securities, municipal securities and U.S.

The Company has invested its excess cash primarily in money market funds and highly liquid marketable securities such as U.S.

treasury securities, corporate debt instruments, commercial paper and U.S.

government securities.

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

Marketable securities represent commercial paper, U.S.

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

Marketable securities represent highly liquid U.S.

treasury securities, corporate debt instruments, commercial paper and U.S.

government securities with maturities greater than 90 days at date of purchase.

5 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 three and nine months ended September 30, 2023 and October 1, 2022, respectively.

There were no realized gains and losses for each of the three months ended March 30, 2024 and April 1, 2023.

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

September 30,

2024 December 31,

4 unchanged sentences

government securities 3,098 9,969

Corporate debt securities — 140

government agency securities 997 —

Total cash and cash equivalents 88,418 63,409

9 unchanged sentences

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

As of September 30, 2023 Amortized Cost Unrealized Losses Fair Value

As of March 30, 2024 Amortized Cost Unrealized Losses Fair Value

government securities $ 86,588 $ ( 78 ) $ 86,510

8 unchanged sentences

Corporate debt securities 6,999 1 7,000

Municipal securities 101 ( 1 ) 100

$ 199,742 $ 1 $ 199,743

9 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 September 30, 2023 Level 1 Level 2 Total

As of March 30, 2024 Level 1 Level 2 Total

Money market funds $ 21,556 $ — $ 21,556

10 unchanged sentences

Corporate debt securities — 7,000 7,000

Municipal securities — 100 100

$ 104,809 $ 97,497 $ 202,306

1 unchanged sentence

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

September 30,

2024 December 31,

3 unchanged sentences

Inventory consisted of the following (in thousands):

September 30,

2024 December 31,

3 unchanged sentences

Prepaid expenses and other current assets consisted of the following (in thousands):

September 30,

2024 December 31,

2 unchanged sentences

$ 119,214 $ 118,598

Notes Receivable

The Company has notes receivable with one customer related to the sale of hardware.

The notes receivable are secured by the underlying hardware and have original terms of three years at interest rates ranging from 5 % to 8 %.

The Company assesses the credit worthiness of this customer on a periodic basis and did no t have an allowance for credit losses against these notes as of September 30, 2023.

As of September 30, 2023, there was $ 13.0 million outstanding, of which $ 5.2 million is included in “Prepaid expenses and other current assets” and $ 7.8 million in “Other assets” in the accompanying Condensed Consolidated Balance Sheets.

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

September 30,

2024 December 31,

8 unchanged sentences

Accrued liabilities consisted of the following (in thousands):

September 30,

2024 December 31,

Compensation and related benefits $ 24,666 $ 27,813

Component inventory held by suppliers $ 25,536 $ 32,182

Compensation and related benefits 22,630 36,741

Professional and consulting fees 6,985 7,717

Current portion of warranty and retrofit 5,581 5,655

Customer advances or rebates 5,449 5,653

Taxes payable 4,742 4,581

Revenue share payments 4,186 7,210

Operating leases 4,236 4,142

Taxes payable 4,165 4,317

Litigation settlement 3,250 3,250

Product returns 3,040 2,897

Business events 1,967 3,167

Customer advances or rebates 3,038 5,967

Insurance 2,106 2,107

Freight 1,146 3,649

Business events — 2,938

Other 7,038 8,314

1 unchanged sentence

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

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Balance at beginning of period $ 8,029 $ 8,386

Accruals for product warranty and retrofit

1,081 219 2,899 396

Cost of warranty and retrofit claims

1 unchanged sentence

Balance at end of period $ 7,655 $ 8,445

In March 2018, and as amended in December 2020, the Company entered into an agreement with a vendor to develop a certain software product and related enhancements pursuant to which the Company is obligated to make revenue-share payments under the program, subject to aggregate fixed revenue-share payments of $ 15.8 million.

The payments are based on a revenue-share rate applied to revenue from the developed-product and the corresponding hardware sales through March 2024.

If the minimum revenue-share payments are not achieved by the end of that period, a true-up payment will be due.

As of September 30, 2023, the liability, including accrued interest, was $ 4.2 million, which is included in “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheet.

As of December 31, 2022, the liability, including accrued interest, was $ 11.4 million, of which $ 7.2 million was included in “Accrued liabilities” and $ 4.2 million in “Other long-term liabilities.”

Commitments and Contingencies

2 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 September 30, 2023 (in thousands):

Future minimum payments under the non-cancelable operating leases consisted of the following as of March 30, 2024 (in thousands):

Period Future Minimum Lease Payments

3 unchanged sentences

Less imputed interest ( 866 )

As of September 30, 2023, the operating lease liability consisted of the following (in thousands):

As of March 30, 2024, the operating lease liability consisted of the following (in thousands):

Accrued liabilities - current portion of operating leases $ 4,236

2 unchanged sentences

The future minimum lease payments under the lease are $ 4.3 million and are included in the table above.

The weighted average discount rate for the Company’s operating leases as of September 30, 2023 was 5.4 %.

The weighted average remaining lease term as of September 30, 2023 was 3.3 years.

For the three and nine months ended September 30, 2023, total rent expense of the Company was $ 1.2 million and $ 3.6 million, respectively.

For the three and nine months ended October 1, 2022, total rent expense of the Company was $ 1.2 million and $ 3.4 million, respectively.

Cash paid within operating cash flows for operating leases was $ 3.4 million for the nine months ended September 30, 2023 and October 1, 2022 for each respective period.

The weighted average discount rate for the Company’s operating leases as of March 30, 2024 was 5.1 %.

The weighted average remaining lease term as of March 30, 2024 was 3.1 years.

For the three months ended March 30, 2024 and April 1, 2023, 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 $ 1.1 million and $ 1.2 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Purchase Commitments

The Company’s suppliers, including contract manufacturers (“CMs”) and original design manufacturers (“ODMs”), place orders for certain component inventory in advance based upon the Company’s build forecasts in order to reduce manufacturing lead times and ensure adequate component supply.

The Company’s contract manufacturers (“CMs”) and original design manufacturers (“ODMs”) place orders for component inventory based upon the Company’s build forecasts and pursuant to stated component lead times to ensure adequate component supply.

The components are used by the CMs and ODMs to build the products included in the build forecasts.

1 unchanged sentence

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.

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

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 actual demand.

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 September 30, 2023 and December 31, 2022, the Company had approximately $ 227.2 million and $ 340.6 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs, within two years .

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 $ 13.4 million and $ 10.3 million as of September 30, 2023 and December 31, 2022, respectively.

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

The estimated excess and obsolete component liabilities related to manufacturing and engineering change orders, termination of manufacturing partners and other factors are included in “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets, because the corresponding component parts have not been received by the Company.

The Company records the related charges in “Cost of revenue” in its Condensed Consolidated Statements of Comprehensive Income (Loss).

As of March 30, 2024 and December 31, 2023, the Company had approximately $ 146.8 million and $ 176.3 million, respectively, of outstanding purchase commitments for inventories to be delivered by its suppliers, including CMs and ODMs.

From time to time, the Company is involved in various legal proceedings arising from the normal course of business activities.

The Company is not currently a party to any legal proceeding that, if determined adversely to the Company, in management’s opinion, is currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole.

The Company is not currently a party to any legal proceeding or any legal proceeding known to be contemplated by government authorities that, if determined adversely to the Company, in management’s opinion, is currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole.

Stockholders’ Equity

2 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.

At the Company’s 2023 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 September 30, 2023, there were 5.4 million shares available for issuance under the 2019 Plan.

During the three months ended September 30, 2023, 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 $ 41.18 per share.

During the nine months ended September 30, 2023, stock option awards exercisable for up to an aggregate of 0.9 million shares of common stock were granted with a grant date weighted-average exercise price of $ 46.25 per share.

As of March 30, 2024, there were 2.9 million shares available for issuance under the 2019 Plan.

During the three months ended March 30, 2024, time-based 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 $ 35.95 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 .

In February 2023, performance-based stock option awards exercisable for up to an aggregate of 1.2 million shares of common stock were granted to certain Company executives with a grant date exercise price of $ 51.57 per share.

In February 2024, performance-based stock option awards exercisable for up to an aggregate of 2.4 million shares of common stock were granted to certain Company executives with a grant date exercise price of $ 34.26 per share and divided into two plans, with the first plan accounting for 75 % of the total shares granted and the second plan accounting for 25 % of the total shares granted.

The actual number of shares earned is contingent upon achievement of annual corporate financial targets for bookings and non-GAAP net operating income for 2024 (collectively, the “2024 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 2024 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.

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

For the first plan, if the non-GAAP net operating income target and the bookings target are each achieved below 80 % of target, no shares would be awarded, and the performance-based stock option awards would be forfeited in full.

If either target is achieved at the minimum threshold of 80 % of target, then the shares are awarded at 75 % of the granted shares, with an increasing percentage of shares awarded above the minimum thresholds up to 120 % of the granted shares for each target.

1 unchanged sentence

The maximum combined award is 100 %.

The probability of meeting a portion of the performance conditions related to these performance-based stock option awards was assessed to be probable as of September 30, 2023 based on adjusted targets, and stock-based compensation expense of $ 2.8 million was recognized for the three months ended September 30, 2023.

For the nine months ended September 30, 2023, stock-based compensation expense of $ 9.7 million was recognized.

During the three months ended September 30, 2023, 61,000 shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 9.01 per share.

During the nine months ended September 30, 2023, 0.3 million shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 11.93 per share.

As of September 30, 2023, unrecognized stock-based compensation expense of $ 84.6 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.1 years.

For the second plan, if the bookings target is achieved below 90 % of target, the performance-based stock option awards would be forfeited in full.

If the target is achieved at the minimum threshold of 90 % of target, then the shares are awarded at 75 % with an increasing percentage of shares awarded above the minimum thresholds up to 100 % of the granted shares.

The maximum award is 100 %.

The probability of meeting a portion of the performance conditions related to these performance-based stock option awards was assessed to be probable as of March 30, 2024, and stock-based compensation expense of $ 1.7 million was recognized for the three months ended March 30, 2024.

During the three months ended March 30, 2024, 168,000 shares of common stock were issued pursuant to the exercise of stock options at a weighted-average exercise price of $ 8.56 per share.

As of March 30, 2024, unrecognized stock-based compensation expense of $ 87.8 million related to stock options, net of estimated forfeitures, is expected to be recognized over a weighted-average period of 2.3 years.

Employee Stock Purchase Plans

3 unchanged sentences

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 September 30, 2023, there were 4.5 million shares available for issuance under the ESPP.

During the nine months ended September 30, 2023, 0.2 million shares were purchased under the ESPP.

As of September 30, 2023, unrecognized stock-based

compensation expense of $ 1.2 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 years.

As of March 30, 2024, there were 4.3 million shares available for issuance under the ESPP.

During the three months ended March 30,

2024, 0.2 million shares were purchased under the ESPP.

As of March 30, 2024, unrecognized stock-based compensation expense of $ 0.9 million related to the ESPP is expected to be recognized over a remaining service period of 0.4 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 recurring compensation.

1 unchanged sentence

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, with a maximum of 0.25 million shares allocated per purchase period.

At the Company’s 2023 annual meeting of stockholders, the stockholders approved 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 7.5 million shares.

As of September 30, 2023, there were 3.6 million shares available for issuance under the NQ ESPP.

During the nine months ended September 30, 2023, 0.6 million shares were purchased and issued.

As of September 30, 2023, unrecognized stock-based compensation expense of $ 11.4 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 0.8 years.

As of March 30, 2024, there were 3.1 million shares available for issuance under the NQ ESPP.

During the three months ended March 30, 2024, 0.2 million shares were purchased and issued.

As of March 30, 2024, unrecognized stock-based compensation expense of $ 11.3 million related to the NQ ESPP is expected to be recognized over a remaining weighted-average service period of 0.8 years.

Stock-Based Compensation

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

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Cost of revenue $ 636 $ 800

5 unchanged sentences

Stock Repurchase Program

The Company has in place a stock repurchase program for up to $ 100 million of the Company’s common stock.

The Company maintains a common stock repurchase program.

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.

1 unchanged sentence

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.

For the nine months ended September 30, 2023, the Company purchased 1.0 million shares of common stock for $ 42.4 million at an average price per share of $ 44.47 .

As of September 30, 2023, the remaining balance under this authorization was $ 57.6 million.

For the three months ended March 30, 2024, the Company purchased 0.1 million shares of common stock for $ 3.7 million at an average price per share of $ 32.87 .

As of March 30, 2024, the remaining balance under the current authorizations was $ 109.9 million.

Revenue from Contracts with Customers

The Company develops, markets and sells a broadband platform and managed services, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the Company unit level.

Accordingly, the Company is a single reporting segment and operating unit structure.

Accordingly, the Company is considered to be a single reporting segment and operating unit structure.

The Company’s chief operating decision maker is the Company’s Chief Executive Officer, who reviews financial information presented on a Company-wide basis, for purposes of allocating resources and evaluating financial performance.

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

Three Months Ended Nine Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

March 30, 2024 April 1, 2023

United States $ 210,089 $ 227,939

Europe 19,377 7,178 46,483 16,705

Americas ex U.S.

7,414 11,557 26,280 31,236

Europe 6,860 12,368

Middle East & Africa 1,889 1,773

4 unchanged sentences

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

The closing balance as of September 30, 2023 was $ 5.5 million of which the Company expects to bill 47 % of the balance during the remainder of 2023.

The contract asset balance may fluctuate depending on the timing of fulfilling the related performance obligations with the Company's customers.

Contract assets were $ 3.3 million as of March 30, 2024 as compared to $ 4.7 million as of December 31, 2023, and are included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

The Company expects to bill 46 % of the March 30, 2024 balance during 2024.

Contract Liability

Deferred revenue was $ 60.4 million, $ 67.2 million and $ 58.6 million as of September 30, 2023, July 1, 2023 and December 31, 2022, respectively.

The decrease in the deferred revenue balance for the three months ended September 30, 2023 was the result of revenue recognized of $ 16.7 million that was included in the deferred revenue balance at the beginning the period offset by cash payments received or due in advance of satisfying the Company’s performance obligations.

The increase in the deferred revenue balance for the nine months ended September 30, 2023 was driven by cash payments received or due in advance of satisfying the Company’s performance obligations and balances reclassified to contract assets during the period offset by $ 26.1 million of revenue recognized that was included in the deferred revenue balance at the beginning of the period.

Deferred revenue was $ 63.9 million and $ 61.5 million as of March 30, 2024 and December 31, 2023, respectively.

The increase in the deferred revenue balance for the three months ended March 30, 2024 was driven by cash payments received or due in advance of satisfying the Company’s performance obligations offset by $ 14.0 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 $ 219.5 million as of September 30, 2023, and the Company expects to recognize as revenue 39 % of this amount over the next 12 months and the remainder thereafter.

RPOs were $ 245.2 million as of March 30, 2024, and the Company expects to recognize as revenue 40 % of this amount over the next 12 months and nearly all of the remainder over the two years 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 September 30, 2023 and December 31, 2022, the unamortized balance of deferred commissions was $ 10.9 million and $ 11.2 million, respectively.

For the three and nine months ended September 30, 2023, the amount of amortization was $ 1.7 million and $ 4.6 million, respectively, compared to $ 1.0 million and $ 2.6 million for the three and nine months ended October 1, 2022, respectively.

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

As of March 30, 2024 and December 31, 2023, the unamortized balance of deferred commissions was $ 11.8 million and $ 12.0 million, respectively.

For the three months ended March 30, 2024 and April 1, 2023, the amount of amortization was $ 2.0 million and $ 1.3 million, respectively.

There was no impairment loss in relation to the costs capitalized for these periods.

Concentration of Customer Risk

No customer accounted for more than 10% of the Company’s revenue for the three or nine months ended September 30, 2023 and October 1, 2022.

Two customers represented 16 % and 13 %, respectively, of the Company’s accounts receivable as of September 30, 2023.

One customer represented 11 % of the Company’s accounts receivable as of December 31, 2022.

No customer accounted for more than 10% of the Company’s revenue for the three months ended March 30, 2024 and April 1, 2023.

One customer represented 15 % of the Company’s total receivables as of March 30, 2024.

Two customers represented 19 % and 14 % of the Company’s accounts receivable as of December 31, 2023.

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

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Income before income taxes $ 468 $ 11,409

1 unchanged sentence

Effective tax rate 78.0 % 15.9 %

The Company’s income taxes for the three and nine months ended September 30, 2023 and October 1, 2022 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 nine months ended September 30, 2023 and October 1, 2022 differed from the statutory federal corporate tax rate of 21% primarily due to state taxes, the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

The Company has historically recorded its interim period provision for income taxes by applying a forecasted annual effective tax rate to year-to-date earnings and adjusting for discrete items.

However, due to the level of forecasted provision for income taxes relative to the forecasted pre-tax income used in computing the effective tax rate, the effective tax rate is highly sensitive to fluctuations in pre-tax income and does not provide a reasonable estimate for income taxes in the interim period.

As such, the Company has computed its provision for income taxes for the three months ended March 30, 2024 using an actual year-to-date tax calculation.

The Company plans to revert to applying a forecasted annual effective tax rate to year-to-date earnings and adjusting for discrete items once that method produces more reasonable results.

The Company’s effective tax rate for the three months ended March 30, 2024 and April 1, 2023 differed from the statutory federal corporate tax rate of 21% primarily due to state taxes and the effect of non-deductible stock-based compensation for executive officers offset by the favorable impact of U.S.

federal research tax credits, excess tax benefits from stock-based compensation and the U.S.

tax impact of foreign operations.

For the three and nine months ended September 30, 2023, the Company recognized a tax benefit of $ 3.6 million related to the finalization of its 2022 tax returns.

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

1 unchanged sentence

Management believes that it is more likely than not that the Company will utilize a significant portion of its deferred tax assets.

The Company maintained a valuation allowance for the three and nine months ended September 30, 2023 and October 1, 2022 of $ 29.9 million and $ 30.9 million, respectively, on certain U.S.

The Company maintained a valuation of $ 29.9 million the three months ended March 30, 2024 on certain U.S.

federal and state deferred tax assets that the Company believes are not more likely than not to be realized in future periods.

1 unchanged sentence

In the event that actual results differ from these estimates, or if the Company decides to adjust these estimates in the future periods, further adjustments to its valuation allowance may be recorded, which could materially impact the Company’s financial position and net income in the period of the adjustment.

In December 2021, the Organization for Economic Cooperation and Development enacted model rules for a new global minimum tax framework (“Pillar Two”), and certain governments in countries which the Company operates have enacted local Pillar Two legislation, with an effective date from January 1, 2024.

The Company currently does not expect Pillar Two to have a material impact on its financial statements.

Net Income Per Common Share

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 Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

Three Months Ended

2024 April 1,

Net income $ 103 $ 9,598

9 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 1. Financial Statements