What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-30 compared with 2020-05-07 · 111 added, 81 removed, 161 unchanged (54% of the section changed)

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We also offer high-voltage gate drivers - either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry - used to operate high-voltage switches such as insulated-gate bipolar transistors (IGBTs) and silicon-carbide (SiC) MOSFETs.

These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from a few kilowatts up to one gigawatt) such as industrial motors, solar- and wind-power systems, electric vehicles and high-voltage DC transmission systems.

Our products bring a number of important benefits to the power-conversion market compared with less advanced alternatives, including reduced component count and design complexity, smaller size, higher reliability and reduced time-to-market.

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These include the introduction of products that enable us to address higher-power AC-DC applications (such as our Hiper™ product families), the introduction of LED-driver products, and our entry into the gate-driver market through the acquisition of CT-Concept Technologie AG in 2012.

In 2016 we introduced the SCALE-iDriver TM family of gate-driver ICs, broadening the range of gate-driver applications we can address, and in 2018 we introduced our BridgeSwitch™ motor-driver ICs, addressing BLDC motors, as described above.

In 2016 we introduced the SCALE-iDriver TM family of ICs, broadening the range of gate-driver applications we can address, and in 2018 we introduced our BridgeSwitch™ motor-driver ICs, addressing BLDC motors, as described above.

We have recently introduced a series of automotive-qualified versions of our products, including SCALE-iDriver ICs and LinkSwitch™ ICs, targeting the EV market;

we expect to introduce additional products targeting EVs in the future, and expect automotive applications to become a significant portion of our SAM over time.

Also contributing to our SAM expansion has been the emergence of new applications within the power ranges that our products can address.

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Also, external factors such as global economic conditions and supply-chain dynamics can cause our operating results to be volatile.

In particular, the severe economic disruption caused by the global novel coronavirus pandemic (COVID-19) may affect the demand for our products and make our results more difficult to forecast.

In particular, the severe economic disruption caused by the global novel coronavirus pandemic (COVID-19) may affect the supply of and demand for our products and make our results more difficult to forecast.

Furthermore, because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours.

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Recent Results

Our net revenues were $109.7 million and $89.2 million in the three months ended March 31, 2020 and 2019 , respectively.

The increase in revenues was primarily due to growth in the consumer end market, particularly increased sales into comfort-appliances such as air conditioners, as well as the communications end market, reflecting increased adoption of higher-power chargers for mobile phones.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 55% and 52% of our net revenues in the three months ended March 31, 2020 and 2019, respectively.

In the three months ended March 31, 2020 , two customers, both distributors of our products, each accounted for approximately 11% of our net revenues.

In the three months ended March 31, 2019 , one customer accounted for approximately 13% of our net revenues.

International sales accounted for 98% and 97% of our net revenues in the three months ended March 31, 2020 and 2019, respectively.

Our gross margin for the three months ended March 31, 2020 and 2019 was 51.5% , and 51.0% , respectively.

The increase in gross margin was due to a favorable change in end-market mix with a greater amount of revenues coming from higher-margin end markets.

Total operating expenses were $41.4 million and $39.4 million in the three months ended March 31, 2020 and 2019 , respectively.

The increase was due primarily to higher salary and related expenses driven by the expansion of our workforce, as well as higher stock-based compensation expense related to performance-based awards.

These expenses were partially offset by lower patent-litigation expense reflecting the recent conclusion of our litigation with ON Semiconductor, as well as lower travel expenses due to restrictions associated with the COVID-19 pandemic.

Our net revenues were $106.8 million and $102.9 million in the three months ended June 30, 2020 and 2019, respectively and $216.5 million and $192.1 million in the six months ended June 30, 2020 and 2019.

The increase in revenue was primarily due to growth in the communications and industrial end markets, reflecting increased adoption of higher-power chargers for mobile phones and growth across a broad range of industrial applications.

In the three-month period these increases were partially offset by lower revenues from the consumer end market, while strong demand for appliance applications in the first quarter of 2020 provided year-over-year growth in the consumer end market for the six-month period.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 59% and 56% of our net revenues in the three and six months ended June 30, 2020, respectively and 56% and 54% of net revenues in each of the respective corresponding periods of 2019.

In the three and six months ended June 30, 2020, one customer, a distributor of our products, accounted for approximately 13% and 12% of our net revenues.

In the three months and six ended June 30, 2019, the same customer accounted for approximately 10% and 12% of our net revenues.

International sales accounted for 97% of our net revenues in each of the three and six months ended June 30, 2020 and 2019.

Our gross margin was 50.1% in each of the three months ended June 30, 2020 and 2019, respectively, and 50.8% and 50.5% in the six months ended June 30, 2020, and 2019, respectively.

The increase in gross margin in the six-month period was due to a favorable change in end-market mix with a greater amount of revenues coming from higher-margin end markets.

Total operating expenses were $40.6 million and $41.8 million in the three months ended June 30, 2020 and 2019, respectively, and $82.0 million and $81.2 million in the six months ended June 30, 2020 and 2019, respectively.

The decrease in

the three-month period was due primarily to lower legal expenses following the conclusion of our patent litigation with ON Semiconductor in October 2019, as well as lower travel expenses due to restrictions associated with the COVID-19 pandemic.

These decreases were partially offset by higher salary and related expenses driven by the expansion of our workforce, as well as higher stock-based compensation expense related to performance-based awards.

The increase in the six-month period was primarily due to higher salary and related expenses from the expansion of our workforce and higher stock-based compensation expense related to performance awards.

These increases were mostly offset by lower legal expenses following the conclusion of our litigation with ON Semiconductor and lower travel expenses due to COVID-19 pandemic related restrictions.

COVID-19 Pandemic

The COVID-19 pandemic has disrupted everyday life and markets worldwide, and governments around the world have imposed restrictions aimed at controlling the spread of the virus, including shelter-in-place orders, travel restrictions, business

shutdowns and border closures.

Since March 16, 2020 our San Jose headquarters location has been subject to a shelter-in-place order, under which most of our employees have been required to work from home;

Beginning March 16, 2020 our San Jose headquarters location was subject to a shelter-in-place order, under which most of our employees were required to work from home;

other locations around the world have also been subject to such restrictions.

We have implemented a variety of measures to protect the health and safety of those employees whose responsibilities require them to go to our office locations, including the provision of masks and sanitizers, and regular deep cleaning of our facilities.

While it is uncertain when we will be able to return to normal working conditions, we believe that we are able to conduct our day-to-day operations effectively in spite of the restrictions.

While we do not believe our recent results have been impacted materially by the pandemic, we believe our results in future periods are likely to be affected as the economic downturn stemming from the pandemic reduces demand for end products that incorporate our products.

Also, the pandemic may impact our ability to supply products to our customers if our suppliers are unable to obtain necessary raw materials or other inputs, if our manufacturing partners are unable to staff their manufacturing facilities, or if key logistical elements of our supply chain such as warehousing or shipping services are disrupted.

We have taken steps to reduce the effects of such supply disruptions, including higher-than-normal levels of inventory of wafers and finished goods, safety stocks of certain key inputs, and multiple sources for most of our products.

The supply of wafers from our foundry partners has not been interrupted;

however, government-mandated closures in China, Malaysia, Sri Lanka and Philippines have caused temporary shutdowns at our assembly and test sub-contractors in those countries.

All of the affected sub-contractors have either fully or partially resumed operations.

While these disruptions have resulted in delayed shipments to some customers, we believe our mitigation efforts have been effective at preventing a material impact to our results.

In anticipation of reduced demand for our products in future periods, we have adjusted our near-term operating-expense and capital-spending plans, such as slowing the pace of hiring, and will continue to make adjustments as business conditions change.

We will begin a phased reopening of our San Jose headquarters when these restrictions are lifted.

Most of our employees in other locations around the world have returned to the office under a phased reopening plan.

We have implemented a variety of measures to protect the health and safety of our employees, including the provision of masks, gloves and sanitizers, social-distancing rules, and regular deep cleaning of our facilities.

While we have been able to conduct our day-to-day operations effectively in spite of the restrictions caused by the pandemic, the pandemic has caused disruptions in our supply chain.

While the supply of wafers from our foundry partners has not been interrupted, government-mandated closures in China, Malaysia, Sri Lanka and the Philippines have caused temporary shutdowns at our assembly and test sub-contractors in those countries;

all of the affected sub-contractors have now resumed operations.

While these disruptions have resulted in delayed shipments to some customers, we believe we have thus far prevented a material impact to our results through a variety of mitigation measures including higher-than-normal inventories of wafers and finished goods, safety stocks of certain key inputs, and multiple sources for most of our products.

The economic downturn stemming from the pandemic has resulted in reduced demand for goods incorporating our products.

While the future trajectory of demand is highly uncertain, we have adjusted our near-term operating-expense and capital-spending plans, in anticipation of a continued period of reduced demand.

However, we believe our business is fundamentally sound with strong, long-term growth prospects and ample cash resources.

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Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Net revenues 100.0 % 100.0 % 100.0 % 100.0 %

Cost of revenues 49.9 49.9 49.2 49.5

Gross profit 50.1 50.1 50.8 50.5

Operating expenses:

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Income from operations 12.1 9.5 12.9 8.2

Other income 1.4 1.3 1.5 1.3

Income before income taxes 13.5 10.8 14.4 9.5

Provision for income taxes 1.1 0.2 1.0 0.1

Comparison of the Three Months Ended March 31, 2020 and 2019

Net income 12.4 % 10.6 % 13.4 % 9.4 %

Comparison of the Three and Six Months Ended June 30, 2020 and 2019

Net revenues.

Net revenues consist of revenues from product sales, which are calculated net of returns and allowances.

Net revenues for the three months ended March 31, 2020 and 2019 were $109.7 million and $89.2 million , respectively.

The increase in revenues was due to growth in the consumer end market, particularly the comfort-appliances such as air conditioners, as well as the communications end market, reflecting increased adoption of faster higher-power chargers for mobile phones.

Our revenue mix by end market for the three months ended March 31, 2020 and 2019 was as follows:

Net revenues for the three and six months ended June 30, 2020 were $106.8 million and $216.5 million, respectively and $102.9 million and $192.1 million, respectively, for the corresponding periods of 2019.

In the three-month period these increases were partially offset by lower revenues from the consumer end market following strong sales from appliance applications in the prior quarter as reflected in the higher rate of year-over-year growth for the six-month period.

Our revenue mix by end market for the three and six months ended June 30, 2020 and 2019 was as follows:

Three Months Ended

June 30, Six Months Ended

End Market 2020 2019 2020 2019

Communications 28 % 24 % 25 % 21 %

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $107.0 million and $86.5 million in the three months ended March 31, 2020 and 2019 , respectively.

Computer 6 % 6 % 5 % 6 %

Consumer 31 % 37 % 36 % 38 %

Industrial 35 % 33 % 34 % 35 %

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $103.9 million and $210.8 million in the three and six months ended June 30, 2020, respectively, and $100.3 million and $186.8 million, respectively, in the corresponding periods of 2019.

Although power converters using our products are distributed to end markets worldwide, most are manufactured in Asia.

As a result, sales to this region represented 75% of our net revenues in the three months ended March 31, 2020 and 2019 .

As a result, sales to this region represented 81% and 78% of our net revenues in the three and six months ended June 30, 2020, respectively, and 78% and 77%, respectively, in the corresponding periods of 2019.

We expect international sales, and sales to the Asia region in particular, to continue to account for a large portion of our net revenues in the future.

Sales to distributors accounted for 76% and 78% of net revenues in the three months ended March 31, 2020 and 2019 , respectively.

Sales to distributors accounted for 82% and 79% of net revenues in the three and six months ended June 30, 2020, respectively and 73% and 75% in the corresponding periods of 2019.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

In the three months ended March 31, 2020 , two customers, both distributors of our products, each accounted for more than 10% of our net revenues.

In the three months ended March 31, 2019 , one of these two distributors accounted for more than 10% of our net revenues.

The following table discloses the customers’ percentage of revenues for the respective periods:

In each of the three and six months ended June 30, 2020, and 2019, one customer, a distributor of our products, accounted for more than 10% of our net revenues.

The following table discloses this customer’s percentage of revenues for the respective periods:

Three Months Ended

Powertech Distribution Ltd.

_______________

*Total customer revenue was less than 10% of net revenues.

June 30, Six Months Ended

Customer 2020 2019 2020 2019

Avnet 13 % 10 % 12 % 12 %

No other customers accounted for 10% or more of our net revenues in these periods.

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Gross margin is gross profit divided by net revenues.

The table below compares gross profit and gross margin for the three months ended March 31, 2020 and 2019 :

The table below compares gross profit and gross margin for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

Gross margin increased in the three months ended March 31, 2020 , compared with the same period in 2019 , due primarily to a favorable change in end-market mix with more revenues coming from higher-margin end markets.

Net revenues $ 106.8 $ 102.9 $ 216.5 $ 192.1

Gross profit $ 53.5 $ 51.6 $ 110.0 $ 97.0

Gross margin 50.1 % 50.1 % 50.8 % 50.5 %

Gross margin increased in the six months ended June 30, 2020, compared with the corresponding period in 2019, due primarily to a favorable change in end-market mix with more revenues coming from higher-margin end markets.

Research and development expenses.

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We also record R&D expenses for prototype wafers related to new products until such products are released to production.

The table below compares R&D expenses for the three months ended March 31, 2020 and 2019 :

The table below compares R&D expenses for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

Net revenues $ 106.8 $ 102.9 $ 216.5 $ 192.1

R&D expenses $ 19.8 $ 19.3 $ 38.9 $ 37.2

R&D expenses as a % of net revenue 18.5 % 18.7 % 18.0 % 19.4 %

R&D expenses increased in the three months ended March 31, 2020 as compared to the same period in 2019 , due primarily to higher salary and related expenses driven by increased headcount, increased equipment related expenses, as well as higher stock-based compensation expense related to performance-based awards.

R&D expenses increased in the three and six months ended June 30, 2020 as compared to the corresponding periods in 2019, due primarily to higher salary and related expenses driven by increased headcount, as well as higher stock-based compensation expense related to performance-based awards.

Sales and marketing expenses.

Sales and marketing (“S&M”) expenses consist primarily of employee-related expenses, including stock-based compensation, commissions to sales representatives, amortization of intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.

The table below compares S&M expenses for the three months ended March 31, 2020 and 2019 :

The table below compares S&M expenses for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

Net revenues $ 106.8 $ 102.9 $ 216.5 $ 192.1

S&M expenses $ 13.0 $ 13.2 $ 26.5 $ 26.2

S&M expenses as a % of net revenue 12.2 % 12.8 % 12.2 % 13.7 %

S&M expenses increased in the three months ended March 31, 2020 as compared to the same period in 2019 , due primarily to higher salary and related expenses driven by the expansion of our sales force, as well as higher stock-based compensation expense related to performance-based awards.

These expenses were partially offset by lower travel expenses as a result of restrictions associated with the COVID-19 pandemic.

S&M expenses decreased in the three months ended June 30, 2020, as compared to the corresponding period in 2019, due to lower travel expenses and promotional activities resulting from restrictions associated with the COVID-19 pandemic, along with lower amortization of intangibles, which were partially offset by higher salary and related expenses driven by the expansion of our sales force and higher stock-based compensation expense related to performance-based awards.

S&M increased in the six months ended June 30, 2020, as compared to the corresponding period in 2019, as the higher salary and related expenses driven by the expansion of our sales force and higher stock-based compensation were only partially offset by lower travel expenses and promotional activities resulting from restrictions associated with the COVID-19 pandemic, and lower amortization of intangibles.

General and administrative expenses.

General and administrative (“G&A”) expenses consist primarily of employee-related expenses, including stock-based compensation expenses, for administration, finance, human resources and general management, as well as consulting, professional services, legal and audit expenses.

The table below compares G&A expenses for the three months ended March 31, 2020 and 2019 :

The table below compares G&A expenses for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

Net revenues $ 106.8 $ 102.9 $ 216.5 $ 192.1

G&A expenses $ 7.8 $ 9.3 $ 16.6 $ 17.7

G&A expenses as a % of net revenue 7.3 % 9.1 % 7.7 % 9.2 %

G&A expenses increased in the three ended March 31, 2020 as compared to the same period in 2019 as a result of higher salary and related expenses driven by the expansion of our workforce, as well as higher stock-based compensation expense related

to performance-based awards.

These expenses were partially offset by lower patent-litigation expense following our settlement with ON Semiconductor in October 2019.

G&A expenses decreased in the three and six months ended June 30, 2020 as compared to the corresponding periods in 2019 due to lower patent-litigation expense following our settlement with ON Semiconductor in October 2019, partially offset by higher stock-based compensation expense related to performance-based awards.

Other income .

Other income consists primarily of interest income earned on cash and cash equivalents, marketable securities and other investments, and the impact of foreign exchange gains or losses.

The table below compares other income for the three months ended March 31, 2020 and 2019 :

The table below compares other income for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

Net revenues $ 106.8 $ 102.9 $ 216.5 $ 192.1

Other income $ 1.5 $ 1.3 $ 3.3 $ 2.5

Other income as a % of net revenue 1.4 % 1.3 % 1.5 % 1.3 %

Other income increased in the three months ended March 31, 2020 as compared to the same period in 2019 due primarily to an increase in interest income earned on higher cash and investment balances.

Other income increased in the three and six months ended June 30, 2020 as compared to the corresponding periods in 2019 due primarily to an increase in interest income earned on higher cash and investment balances.

Provision for income taxes .

Provision for income taxes represents federal, state and foreign taxes.

The table below compares income-tax expense for the three months ended March 31, 2020 and 2019 :

The table below compares income-tax expense for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

June 30, Six Months Ended

(dollars in millions) 2020 2019 2020 2019

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Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

Our effective tax rates for the three months ended March 31, 2020 and 2019 were 5.8% and 0.5% , respectively.

Our effective tax rates for the three and six months ended June 30, 2020 were 8.4% and 7.0%, respectively, and 2.0% and 1.4%, respectively, for the corresponding periods of 2019.

The effective tax rate in these periods was lower than the statutory federal income-tax rate of 21% due to the geographic distribution of our world-wide earnings in lower-tax jurisdictions, the impact of federal research tax credits and the recognition of excess tax benefits related to share-based payments.

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Liquidity and Capital Resources

As of March 31, 2020 , we had $422.6 million in cash, cash equivalents and short-term marketable securities, an increase of approximately $11.5 million from $411.1 million as of December 31, 2019 .

As of March 31, 2020 , we had working capital, defined as current assets less current liabilities, of $506.0 million , an increase of approximately $15.1 million from $490.9 million as of December 31, 2019 .

Operating activities generated cash of $26.4 million in the three months ended March 31, 2020 .

As of June 30, 2020, we had $445.9 million in cash, cash equivalents and short-term marketable securities, an increase of approximately $34.8 million from $411.1 million as of December 31, 2019.

As of June 30, 2020, we had working capital, defined as current assets less current liabilities, of $512.5 million, an increase of approximately $21.6 million from $490.9 million as of December 31, 2019.

Operating activities generated cash of $63.0 million in the six months ended June 30, 2020.

Net income for this period was $29.1 million;

we also incurred non-cash stock-based compensation expense, depreciation, amortization and deferred income taxes of $12.7 million, $11.1 million, $2.2 million and $1.3 million, respectively.

Sources of cash also included an $8.8 million increase in accounts payable, excluding payables related to property and equipment, due primarily to the timing of payments and a $3.8 million decrease in accounts receivable due to the timing of cash receipts.

These sources of cash were partially offset by a $6.3 million increase in inventories in order to support future demand, a $6.3 million decrease in taxes payable and accrued liabilities, primarily due to the timing of payroll related liabilities and a $4.0 million increase in prepaid expenses and other assets, primarily driven by prepaid taxes, advances to suppliers and interest receivable on marketable securities.

Operating activities generated cash of $1.1 million in the three months ended March 31, 2019.

Sources of cash also included a $11.6 million

decrease in accounts receivable due to the timing of cash receipts, a $5.9 million increase in accounts payable (excluding payables related to property and equipment) due primarily to the timing of payments, and a $4.1 million decrease in prepaid expenses and other assets, primarily driven by taxes refunded.

These sources of cash were partially offset by a $13.6 million increase in inventories in order to support future demand and a $1.7 million decrease in taxes payable and accrued liabilities.

Operating activities generated cash of $20.5 million in the six months ended June 30, 2019.

Net income for this period was $18.1 million;

we also incurred non-cash stock-based compensation expense, depreciation, amortization and deferred income taxes of $9.9 million, $9.4 million, $2.5 million and $1.7 million, respectively.

Sources of cash also included a $1.2 million increase in accounts payable, excluding payables related to property and equipment, due primarily to the timing of payments.

These sources of cash were mostly offset by a $9.3 million increase in accounts receivable due to the timing of customer shipments, a $4.2 million increase in inventory reflecting a combination of the recent market slowdown and anticipation of demand and a $4.2 million increase in prepaid expenses and other assets, primarily driven by advances to suppliers, prepaid legal fees and prepaid taxes.

Our investing activities in the three months ended March 31, 2020 , resulted in a $12.5 million net use of cash, primarily consisting of $11.6 million for purchases of property and equipment, primarily production-related machinery and equipment and $0.9 million for purchases of marketable securities, net of sales and maturities.

Our investing activities in the three months ended March 31, 2019, resulted in a $1.7 million net use of cash, primarily consisting of $3.5 million for purchases of property and equipment, primarily production-related machinery and equipment, partially offset by $2.0 million from sales and maturities of marketable securities, net of purchases.

Our financing activities in the three months ended March 31, 2020 , resulted in a $2.1 million net use of cash, consisting of $5.6 million for the payment of dividends to stockholders and $2.0 million for the repurchase of our common stock.

Sources of cash also included a $4.2 million increase in accounts payable (excluding payables related to property and equipment) due primarily to the timing of payments, and a $1.2 million increase in taxes payable and accrued liabilities.

These sources of cash were partially offset by a $14.5 million increase in accounts receivable due to the timing of customer shipments, an $8.3 million increase in inventory reflecting a combination of the recent market slowdown and anticipation of future demand, and a $3.6 million increase in prepaid expenses and other assets, primarily driven by prepaid taxes and advances to suppliers.

Our investing activities provided $17.8 million of cash in the six months ended June 30, 2020, primarily consisting of $39.1 million from sales and maturities of marketable securities, net of purchases, partially offset by $21.6 million for purchases of property and equipment, primarily production-related machinery and equipment as well as construction of our office in Switzerland.

Our investing activities in the six months ended June 30, 2019, resulted in a $43.6 million net use of cash, primarily consisting of $35.0 million for purchases of marketable securities, net of sales and maturities, and $8.3 million for purchases of property and equipment, primarily production-related machinery and equipment.

Our financing activities in the six months ended June 30, 2020, resulted in a $8.3 million net use of cash, consisting of $11.9 million for the payment of dividends to stockholders and $2.6 million for the repurchase of our common stock.

These uses of cash were offset in part by $6.3 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

Our financing activities in the three months ended March 31, 2019, resulted in a $7.7 million net use of cash, consisting of $7.3 million for the repurchase of our common stock and $4.9 million for the payment of dividends to stockholders.

Our financing activities in the six months ended June 30, 2019, resulted in a $11.5 million net use of cash, consisting of $9.9 million for the payment of dividends to stockholders and $7.3 million for the repurchase of our common stock.

These uses of cash were offset in part by $5.7 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

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all advances under the revolving line of credit will become due on such date, or earlier in the event of a default.

As of March 31, 2020 , $6.2 million was reserved against the available credit in the form a standby letter of credit.

No advances were outstanding under the agreement as of March 31, 2020 .

In January 2019, our board of directors declared four quarterly cash dividends in the amount of $0.17 per share to be paid to stockholders of record at the end of each quarter in 2019.

In October 2019, our board of directors raised the cash dividend per share with the declaration five cash dividends, consisting of (a) a dividend in the amount of $0.02 per share to be paid to stockholders of record at the end of the fourth quarter in 2019, which is in addition to the dividend in the amount of $0.17 per share to be paid to stockholders of record at the end of the fourth quarter in 2019 previously declared by the board in January 2019, and (b) a dividend in the amount of $0.19 per share to be paid to stockholders of record at the end of each quarter in 2020.

In April 2020, our board of directors raised the cash dividend further with the declaration of three cash dividends in the amount of $0.21 per share (in lieu of the $0.19 per share previously announced) to be paid to stockholders of record at the end of each of the second, third and fourth quarters in 2020.

A dividend payout of $5.6 million occurred on March 31, 2020.

As of June 30, 2020, $6.2 million was reserved against the available credit in the form a standby letter of credit.

No advances were outstanding under the agreement as of June 30, 2020.

In January 2019, our board of directors declared four quarterly cash dividends of $0.17 per share to be paid to stockholders of record at the end of each quarter in 2019.

In October 2019, our board of directors raised the cash dividend per share with the declaration five cash dividends, consisting of (a) a dividend of $0.02 per share to be paid to stockholders of record at the end of the fourth quarter in 2019, which is in addition to the dividend of $0.17 per share to be paid to stockholders of record at the end of the fourth quarter in 2019 previously declared by the board in January 2019, and (b) a dividend of $0.19 per share to be paid to stockholders of record at the end of each quarter in 2020.

In April 2020, our board of directors raised the cash dividend further with the declaration of three cash dividends of $0.21 per share (in lieu of the $0.19 per share previously announced) to be paid to stockholders of record at the end of each of the second, third and fourth quarters in 2020.

Dividend payouts of $5.6 million and $6.3 million occurred on March 31, 2020 and June 30, 2020, respectively.

The declaration of any future cash dividend is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interests of our stockholders.

As of December 31, 2019, we had approximately $43.9 million remaining under our stock-repurchase program.

In the three months ended March 31, 2020 we repurchased approximately 24,000 shares of our common stock for approximately $2.0 million .

As of March 31, 2020 , we had approximately $41.9 million remaining in our repurchase program, which has no expiration date.

In the six months ended June 30, 2020 we repurchased approximately 32,000 shares of our common stock for approximately $2.6 million.

As of June 30, 2020, we had approximately $41.3 million remaining in our repurchase program, which has no expiration date.

Authorization of future repurchase programs is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors.

As of March 31, 2020 , we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $20.6 million.

As of June 30, 2020, we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $20.8 million.

A portion of the tax obligation is classified as long-term income taxes payable and a portion is recorded in deferred tax assets in our condensed consolidated balance sheet.

As of March 31, 2020 , there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2019 .

As of June 30, 2020, there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our cash, cash equivalents and investment balances may change in future periods due to changes in our planned cash outlays, including changes in incremental costs such as direct and integration costs related to future acquisitions.

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federal taxes beginning after December 31, 2017.

Accordingly, as of March 31, 2020 , our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring additional U.S.

Accordingly, as of June 30, 2020, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring additional U.S.

federal income taxes.

If our operating results deteriorate during the remainder of 2020 as a result of a decrease in customer demand, pricing pressure, or other factors, our ability to generate positive cash flow from operations may be jeopardized.

In particular, the economic disruption around the world caused by COVID-19 such as business shutdowns, stay-at-home directives, travel restrictions, border closures as well as factory closures, delays on deliveries, and disruptions to freight infrastructure could significantly disrupt our sales and marketing activities, manufacturing and product shipments and demand for our products which could have a material adverse

impact on our cash flows.

In that case, we may be forced to use our cash, cash equivalents and short-term investments, use our credit agreement or seek additional financing from third parties to fund our operations.

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Off-Balance-Sheet Arrangements

As of March 31, 2020 , we did not have any off-balance-sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of June 30, 2020, we did not have any off-balance-sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis