What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-28 compared with 2021-07-29 · 96 added, 83 removed, 184 unchanged (49% of the section changed)

54 unchanged sentences

Recent Results

Our net revenues were $180.1 million and $106.8 million for the three months ended June 30, 2021 and 2020, respectively, and $353.8 million and $216.5 million for the six months ended June 30, 2021 and 2020, respectively.

The increase in revenues reflects the strong demand conditions currently prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications.

All of our end-market categories exhibited strong

growth, led by the communications and computer markets, reflecting increased adoption of higher-power chargers for mobile phones and tablets, and our increased market share in these applications.

Revenues from the consumer market grew as a result of strong demand for consumer appliances, as well as increased market share in appliance applications.

Revenues from the industrial category increased driven by growth in a broad range of applications including home-and-building automation, battery operated tools and broad-based industrial applications.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 80% of net revenues in both the three and six months ended June 30, 2021, and 59% and 56% of net revenues in the corresponding periods of 2020.

In the three months ended June 30, 2021, two customers, distributors of our products, accounted for 29% and 19% of our net revenues.

In the six months ended June 30, 2021, the same customers accounted for 30% and 19% of our net revenues.

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

International sales accounted for 98% of our net revenues in each of the three and six months ended June 30, 2021, and 97% of our net revenues in each of the corresponding periods of 2020.

Our gross margin was 50.7% and 50.1% in the three months ended June 30, 2021 and 2020, respectively, and 49.7% and 50.8% in the six months ended June 30, 2021 and 2020, respectively.

The increase in gross margin in the three months ended June 30, 2021, as compared to the corresponding period of 2020, was due primarily to manufacturing efficiencies.

Our gross margin decreased in the six-month period of 2021, as compared to the corresponding period of 2020, as improved manufacturing efficiencies only partially offset an unfavorable change in end-market mix as a greater amount of revenues came from lower-margin end markets.

Total operating expenses were $46.3 million and $40.6 million for the three months ended June 30, 2021 and 2020, respectively, and $90.6 million and $82.0 million for the six months ended June 30, 2021 and 2020, respectively.

The increases in operating expenses for the three and six months ended June 30, 2021 as compared to the corresponding periods of 2020 were due primarily to higher salary and related expenses driven by increased headcount and annual merit increases, higher stock-based compensation expense related to performance-based awards, as well as increased materials engineering and equipment-related expenses in support of our product development efforts.

Our net revenues were $176.8 million and $121.1 million for the three months ended September 30, 2021 and 2020, respectively, and $530.6 million and $337.6 million for the nine months ended September 30, 2021 and 2020, respectively.

advanced chargers for mobile devices such as smartphones, tablets and notebook computers and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 76% and 79% of net revenues in the three and nine months ended September 30, 2021, and 65% and 56% of net revenues in the corresponding periods of 2020.

In the three and nine months ended September 30, 2021, two customers, distributors of our products, each accounted for more than 10% of our net revenues.

These customers each accounted for more than 10% of our net revenues in the corresponding three-month period of 2020, while only one accounted for more than 10% in the corresponding nine-month period of 2020.

International sales accounted for 97% and 98% of our net revenues in the three and nine months ended September 30, 2021, respectively, and 98% of our net revenues in each of the corresponding periods of 2020.

Our gross margin was 51.9% and 49.2% in the three months ended September 30, 2021 and 2020, respectively, and 50.4% and 50.2% in the nine months ended September 30, 2021 and 2020, respectively.

Our gross margin increased in the three-month period due primarily to a favorable change in end-market mix, with a greater percentage of revenues coming from higher-margin end markets, as well as manufacturing efficiencies, partially offset by increased equipment-related charges.

Our gross margin increased slightly in the nine-month period as manufacturing efficiencies were mostly offset by an unfavorable change in end-market mix and increased equipment-related expenses.

Total operating expenses were $46.1 million and $44.8 million for the three months ended September 30, 2021 and 2020, respectively, and $136.7 million and $126.8 million for the nine months ended September 30, 2021 and 2020, respectively.

The increases in operating expenses for the three- and nine-month periods were due primarily to higher salary and related expenses driven by increased headcount and annual merit increases, higher stock-based compensation expense related to performance-based awards, as well as increased materials engineering and equipment-related expenses in support of our product development efforts.

COVID-19 Pandemic

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

With restrictions lifting and high employee-vaccination rates, we have begun a phased reopening of our San Jose headquarters;

with most employees expected to return in the coming months.

With high employee-vaccination rates and an ease in restrictions, we have begun a phased reopening of our San Jose headquarters.

Our employee health and well-being is a top priority.

We are actively monitoring the situation and expect most employees to return to the office as restrictions are further lifted.

Some of our employees in other locations around the world have also 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, in early 2020, the pandemic caused some disruptions in our supply chain.

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

all of the affected sub-contractors had resumed operations by the end of 2020.

While these disruptions resulted in delayed shipments to some customers early in 2020, our results were not materially affected due to 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 components for most of our products.

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 our 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 at various times.

These disruptions have not materially affected our results due to a variety of mitigation measures including higher-than-normal inventories of wafers and finished goods in the early stages of the pandemic, safety stocks of certain key inputs, and multiple sources for components for most of our products.

Although there are signs of improvement in many areas around the world, the potential for new lockdowns and other mitigation efforts to deal with an increase in infection rates in certain areas remains a key risk for our supply chain and the results of our business.

Despite the economic downturn stemming from the pandemic, demand for goods incorporating our products is strong.

While the future trajectory of demand is uncertain, we believe our business is fundamentally sound with strong, long-term growth prospects.

While the continuing pandemic brings a greater-than-normal level of uncertainty with respect to the demand for our products, we believe our business is fundamentally sound with strong, long-term growth prospects.

We have increased headcount and intend to continue investing in research and development and other functions necessary to support our future growth.

We also intend to continue our cash dividend and stock-repurchase programs;

however, if the economy deteriorates or our business outlook changes, our board of directors may

choose to suspend or alter these programs at its discretion.

however, if the economy deteriorates or our business outlook changes, our board of directors may choose to suspend or alter these programs at its discretion.

For additional discussion regarding COVID-19 business risks refer to Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenues

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Provision for income taxes

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Comparison of the Three and Nine Months Ended September 30, 2021 and 2020

Net revenues.

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

Net revenues for the three and six months ended June 30, 2021 were $180.1 million and $353.8 million, respectively, and $106.8 million and $216.5 million, respectively, for the corresponding periods of 2020.

All of our end-market categories exhibited strong growth, led by the communications and computer markets, reflecting increased adoption of higher-power chargers for mobile phones and tablets, and our increased market share in these applications.

Revenues from the consumer market grew as a result of strong demand for consumer appliances, as well as increased market share in appliance applications.

Revenues from the industrial category increased driven by growth in a broad range of applications including home-and-building automation, battery-operated tools and broad-based industrial applications.

Our revenue mix by end market for the three and six months ended June 30, 2021 and 2020 was as follows:

Net revenues for the three and nine months ended September 30, 2021 were $176.8 million and $530.6 million, respectively, and $121.1 million and $337.6 million, respectively, for the corresponding periods of 2020.

The increase in revenues reflects the strong demand conditions currently prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications.

Our revenue mix by end market for the three and nine months ended September 30, 2021 and 2020 was as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Communications

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $176.3 million and $345.9 million in the three and six months ended June 30, 2021, respectively, and $103.9 million and $210.8 million, respectively, in corresponding periods of 2020.

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $171.7 million and $517.7 million in the three and nine months ended September 30, 2021, respectively, and $118.7 million and $329.6 million, respectively, in corresponding periods of 2020.

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 85% of our net revenues in both the three and six months ended June 30, 2021, and 81% and 78%, respectively, in the corresponding periods of 2020.

As a result, sales to this region represented 80% and 83% of our net revenues in the three and nine months ended September 30, 2021, and 82% and 80%, respectively, in the corresponding periods of 2020.

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 77% in the three and six months ended June 30, 2021, respectively, and 82% and 79%, respectively, in the corresponding periods of 2020.

Sales to distributors accounted for 72% and 75% in the three and nine months ended September 30, 2021, respectively, and 70% and 76%, respectively, in the corresponding periods of 2020.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Honestar Technologies Co., Ltd.

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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 and six months ended June 30, 2021 and 2020:

The table below compares gross profit and gross margin for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

The increase in gross margin in the three months ended June 30, 2021, as compared to the corresponding period of 2020, was due primarily to manufacturing efficiencies.

Our gross margin decreased in the six-month period of 2021, as compared to the corresponding period of 2020, as improved manufacturing efficiencies only partially offset an unfavorable change end-market mix as a greater amount of revenues came from lower-margin end markets.

Our gross margin increased slightly in the nine-month period as manufacturing efficiencies were mostly offset by an unfavorable change in end-market mix and increased equipment-related expenses.

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 and six months ended June 30, 2021 and 2020:

The table below compares R&D expenses for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Percentage of net revenues

R&D expenses for the three and six months ended June 30, 2021 increased, as compared to the corresponding periods of 2020, primarily due to higher salary and related expenses driven by increased headcount and annual merit increases, higher stock-based compensation expense related to performance-based awards, and an increase in materials engineering and equipment-related expenses in support of our product development efforts.

R&D expenses increased for the three and nine months ended September 30, 2021, as compared to the corresponding periods of 2020, primarily due to higher salary and related expenses driven by increased headcount and annual merit increases, higher stock-based compensation expense related to performance-based awards and increased equipment-related expenses partially offset by lower outside-service expenses.

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 and six months ended June 30, 2021 and 2020:

The table below compares S&M expenses for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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Percentage of net revenues

S&M expenses increased in the three and six months ended June 30, 2021, as compared to the corresponding periods of 2020, due primarily to increased commission expense driven by increased sales, higher salary and related expenses stemming from annual merit increases, and higher stock-based compensation expense primarily related to performance-based awards.

S&M expenses increased in the three and nine months ended September 30, 2021, as compared to the corresponding periods of 2020, due primarily to increased commission expense driven by increased sales, higher salary and related expenses stemming from annual merit increases, and higher stock-based compensation expense primarily related to performance-based awards.

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 and six months ended June 30, 2021 and 2020:

The table below compares G&A expenses for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Percentage of net revenues

G&A expenses increased for the three and six months ended June 30, 2021 due primarily to higher stock-based compensation expense related to performance-based awards.

G&A expenses decreased for the three months ended September 30, 2021, as compared to the corresponding period of 2020, due to lower patent-litigation and bad-debt expenses.

G&A expenses increased for the nine months ended September 30, 2021, as compared to the corresponding period of 2020, primarily due to higher stock-based compensation expense related to performance-based awards, partially offset by lower patent-litigation expenses.

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 and six months ended June 30, 2021 and 2020:

The table below compares other income for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Percentage of net revenues

Other income decreased primarily due to lower interest income, as lower yields on our cash and investments more than offset the impact of higher cash and investment balances .

Other income decreased for the three and nine months ended September 30, 2021, as compared to the corresponding periods of 2020, due primarily to lower interest income, as lower yields on our cash and investments more than offset the impact of 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 and six months ended June 30, 2021 and 2020:

The table below compares income-tax expense for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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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 and six months ended June 30, 2021 were 7.2% and 4.9%, respectively, and 8.4% and 7.0%, respectively for the corresponding periods of 2020.

Our effective tax rates for the three and nine months ended September 30, 2021 were 8.2% and 6.1%, respectively, and 5.1% and 6.4%, respectively, for the corresponding periods of 2020.

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.

Additionally, in the six months ended June 30, 2021, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

Additionally, in the nine months ended September 30, 2021, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

These benefits were partially offset by U.S.

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Liquidity and Capital Resources

As of June 30, 2021, we had $515.3 million in cash, cash equivalents and short-term marketable securities, an increase of approximately $66.1 million from $449.2 million as of December 31, 2020.

As of June 30, 2021, we had working capital, defined as current assets less current liabilities, of $599.3 million, an increase of approximately $60.6 million from $538.7 million as of December 31, 2020.

As of September 30, 2021, we had $548.9 million in cash, cash equivalents and short-term marketable securities, an increase of approximately $99.7 million from $449.2 million as of December 31, 2020.

As of September 30, 2021, we had working capital, defined as current assets less current liabilities, of $637.3 million, an increase of approximately $98.6 million from $538.7 million as of December 31, 2020.

We have a Credit Agreement with Wells Fargo Bank, National Association (the "Credit Agreement") that provides us with a $75.0 million revolving line of credit to use for general corporate purposes with a $20.0 million sub-limit for the issuance of standby and trade letters of credit.

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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.

No advances were outstanding under the agreement as of June 30, 2021.

No advances were outstanding under the agreement as of September 30, 2021.

Cash From Operating Activities

Operating activities generated cash of $125.0 million in the six months ended June 30, 2021.

Operating activities generated cash of $183.7 million in the nine months ended September 30, 2021.

Net income for this period was $123.7 million;

we also incurred non-cash stock-based compensation expense, depreciation, amortization, and deferred income taxes of $17.7 million, $15.3 million, $1.9 million, and $1.2 million, respectively.

Sources of cash also included a $13.2 million decrease in inventory reflecting strong demand for the period and a $8.1 million increase in accounts payable (excluding payables related to property and equipment) due to the timing of payments.

These sources of cash were partially offset by a $5.5 million increase in accounts receivable due to increased customer shipments, a $4.5 million increase in prepaid expenses and other assets, primarily due to prepaid income taxes, and a $4.4 million decrease in taxes payable and accrued liabilities.

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

we also incurred non-cash stock-based compensation expense, depreciation and amortization of $27.3 million, $23.4 million and $2.7 million, respectively.

Sources of cash also included an $11.1 million decrease in inventory reflecting strong demand for the period and a $6.6 million increase in accounts payable (excluding payables related to property and equipment) due to the timing of payments.

These sources of cash were partially offset by a $6.2 million decrease in taxes payable and accrued liabilities, a $5.0 million increase in prepaid expenses and other assets, primarily due to prepaid income taxes, and a $3.0 million increase in accounts receivable due to increased customer shipments.

Operating activities generated cash of $79.3 million in the nine months ended September 30, 2020.

Net income for this period was $43.9 million;

we also incurred non-cash stock-based compensation expense, depreciation, amortization and deferred income taxes of $22.0 million, $17.1 million, $3.3 million and $0.1 million, respectively.

Sources of cash also included an $11.6 million decrease 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.

Sources of cash also included an $6.4 million increase in accounts payable (excluding payables related to property and equipment) due primarily to the timing of payments and a $6.1 million decrease in prepaid expenses and other assets, primarily driven by taxes refunded.

These sources of cash were partially offset by a $14.4 million increase in inventories in order to support the demand environment, a $5.3 million increase in accounts receivable due to the increase and timing of customer shipments and a $0.9 million decrease in taxes payable and accrued liabilities.

Cash From Investing Activities

Our investing activities in the six months ended June 30, 2021, resulted in a $47.9 million net use of cash, primarily consisting of $28.7 million for the purchase of marketable securities, net of sales and maturities, and $19.3 million for purchases of property and equipment, primarily production-related machinery and equipment as well as construction of a new office building in Switzerland.

Our investing activities in the six months ended June 30, 2020, provided a net $17.8 million of cash, 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 nine months ended September 30, 2021, resulted in a $128.1 million net use of cash, primarily consisting of $97.8 million for the purchase of marketable securities, net of sales and maturities, and $30.3 million for purchases of property and equipment, primarily production-related machinery and equipment as well as construction of a new office building in Switzerland.

Our investing activities in the nine months ended September 30, 2020, resulted in a $14.5 million net use of cash, primarily consisting of $35.7 million for purchases of property and equipment, primarily production-related machinery and equipment as well as construction of our offices in Switzerland and Germany, partially offset by $20.9 million from sales and maturities of marketable securities, net of purchases.

Cash From Financing Activities

Our financing activities in the six months ended June 30, 2021, resulted in a $38.4 million net use of cash, consisting of $26.4 million for the repurchase of our common stock and $15.7 million for the payment of dividends to stockholders, partially offset by $3.7 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.

Our financing activities in the six months ended June 30, 2020, resulted in an $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 nine months ended September 30, 2021, resulted in a $52.0 million net use of cash, consisting of $36.2 million for the repurchase of our common stock and $23.5 million for the payment of dividends to stockholders, partially offset by $7.7 million from the issuance of common stock from the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

Our financing activities in the nine months ended September 30, 2020, resulted in an $11.5 million net use of cash, consisting of $18.5 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 $9.7 million from the issuance of common stock from the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

Credit Agreement

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The Credit Agreement terminates on June 7, 2026;

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

No advances were outstanding under the agreement as of June 30, 2021.

all advances under the revolving line of credit

will become due on such date, or earlier in the event of a default.

No advances were outstanding under the agreement as of September 30, 2021.

In October 2019, our board of directors declared four quarterly cash dividends of $0.095 per share to be paid to stockholders of record at the end of each quarter in 2020.

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In January 2021, our board of directors raised the quarterly cash dividend by an additional $0.02 per share with the declaration of four cash dividends of $0.13 per share to be paid to stockholders of record at the end of each quarter in 2021.

Dividends payouts of $7.8 million and $7.9 million occurred on March 31, 2021 and June 30, 2021, respectively.

In October 2021, our board of directors raised the quarterly cash dividend again with the declaration of five cash dividends of $0.15 per share (in lieu of the $0.13 per share announced in January 2021) to be paid to stockholders of record at the end of the fourth quarter in 2021 and at the end of each quarter in 2022.

Dividends payouts of $7.8 million, $7.9 million and $7.8 million occurred on March 31, 2021, June 30, 2021 and September 30, 2021, 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.

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In April 2021, our board of directors authorized the use of an additional $50.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the six months ended June 30, 2021, we repurchased approximately 335,000 shares of our common stock for $26.4 million .

As of June 30, 2021, we had approximately $64.9 million remaining under our stock-repurchase program, which has no expiration date.

In the nine months ended September 30, 2021, we repurchased approximately 455,000 shares of our common stock for $36.2 million .

As of September 30, 2021, we had approximately $55.1 million remaining under our stock-repurchase program, which has no expiration date.

In October 2021, our board of directors authorized the use of an additional $50.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

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.

Contractual Commitments

As of June 30, 2021 we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $20.4 million.

As of September 30, 2021 we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $20.9 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 June 30, 2021, 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, 2020.

As of September 30, 2021, 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, 2020.

Other Information

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federal taxes.

Accordingly, as of June 30, 2021, 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 September 30, 2021, 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.

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Off-Balance-Sheet Arrangements

As of June 30, 2021, 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 September 30, 2021, 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