What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-05-08 · 157 added, 328 removed, 460 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except share data)

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Current assets:

1 unchanged sentence

Investments — short-term 1,013 925

Accounts receivable, net of allowance for doubtful accounts of $ 203 and $ 203 at March 31, 2020 and June 30, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 211 and $ 203 at September 30, 2020 and June 30, 2020, respectively

196,022 142,160

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Total assets $ 751,864 $ 737,451

Liabilities and Stockholders’ Equity

Liabilities and Stockholders’ Deficit

Current liabilities:

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Commitments and contingencies (Note 10)

Stockholders’ equity:

Stockholders’ deficit:

Preferred stock—$ 0.001 par value;

2 unchanged sentences

500,000,000 shares authorized:

63,783,333 and 69,472,568 outstanding as of March 31, 2020 and June 30, 2019, respectively

63,096,850 and 63,687,891 outstanding as of September 30, 2020 and June 30, 2020, respectively

Additional paid–in capital — 447

Accumulated other comprehensive income 8 9

Retained (deficit) earnings ( 356,028 ) 98,815

Total stockholders’ equity (deficit) ( 355,986 ) 99,277

Total liabilities and stockholders’ equity $ 620,619 $ 875,865

Retained earnings (deficit) ( 261,933 ) ( 295,978 )

Total stockholders’ deficit ( 261,862 ) ( 295,458 )

Total liabilities and stockholders’ deficit $ 751,864 $ 737,451

See notes to consolidated financial statements.

2 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

Three Months Ended September 30,

Revenues $ 473,533 $ 323,277

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Sales, general and administrative 12,350 10,450

Litigation settlement — — — 18,000

Total operating expenses 38,163 30,702

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Income before income taxes 186,036 116,036

Provisions for income taxes 17,017 10,390 49,059 32,427

Provision for income taxes 29,527 17,890

Net income $ 156,509 $ 98,146

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Other comprehensive income:

Unrealized (losses) gains on available-for-sale securities $ ( 90 ) $ 325 $ ( 415 ) $ 177

Other comprehensive (loss) gains ( 90 ) 325 ( 415 ) 177

Unrealized (losses) on available-for-sale securities $ ( 1 ) $ ( 153 )

Other Comprehensive (loss) ( 1 ) ( 153 )

Comprehensive income $ 156,508 $ 97,993

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UBIQUITI INC.

Consolidated Statements of Stockholders' Equity (Deficit)

Consolidated Statements of Stockholders’ Deficit

(In thousands, except per share amounts)

Three and Nine Months Ended March 31, 2020

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity (Deficit)

Three Months Ended September 30, 2020

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Deficit

Shares Amount Amount Amount Amount Amount

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Dividends Paid on Common Stock ($ 0.40 per share)

— — — ( 25,470 ) — ( 25,470 )

Balances at September 30, 2020 63,096,850 $ 63 $ — $ ( 261,933 ) $ 8 $ ( 261,862 )

Net Income — — — 85,811 — 85,811

Other comprehensive income (loss) — — — — ( 172 ) ( 172 )

Stock options exercised 17,192 — 124 — — 124

Restricted stock units issued, net of tax withholdings 7,935 — ( 139 ) — — ( 139 )

Repurchases of Common Stock ( 995,495 ) ( 1 ) ( 250 ) ( 119,321 ) — ( 119,572 )

Stock-based compensation expense — — 730 — — 730

Dividends Paid on Common Stock ($0.30 per share) — — — ( 19,460 ) — ( 19,460 )

Balances at December 31, 2019 64,877,087 $ 65 $ 465 $ ( 292,703 ) $ 68 $ ( 292,105 )

Net Income — — — 103,722 — 103,722

Other comprehensive income (loss) — — — — ( 90 ) ( 90 )

Stock options exercised 2,478 — 25 — — 25

Restricted stock units issued, net of tax withholdings 16,374 — ( 416 ) — — ( 416 )

Repurchases of Common Stock ( 1,112,606 ) ( 1 ) ( 799 ) ( 147,600 ) — ( 148,400 )

Stock-based compensation expense — — 725 — — 725

Dividends Paid on Common Stock ($0.30 per share) — — — ( 19,447 ) — ( 19,447 )

Balances at March 31, 2020 63,783,333 $ 64 $ — $ ( 356,028 ) $ ( 22 ) $ ( 355,986 )

Three and Nine Months Ended March 31, 2019

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

Three Months Ended September 30, 2019

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Deficit

Shares Amount Amount Amount Amount Amount

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Dividends Paid on Common Stock ($ 0.30 per share)

— $ — $ — $ ( 20,669 ) $ — $ ( 20,669 )

Balances at September 30, 2019 65,847,455 $ 66 $ — $ ( 239,733 ) $ 240 $ ( 239,427 )

Net Income — — — 77,796 — 77,796

Other comprehensive income (loss) — — — — ( 2 ) ( 2 )

Stock options exercised 18,748 — 186 — — 186

Restricted stock units issued, net of tax withholdings 10,378 — ( 114 ) — — ( 114 )

Repurchases of Common Stock ( 2,287,975 ) ( 2 ) ( 851 ) ( 205,462 ) — ( 206,315 )

Stock-based compensation expense — — 779 — — 779

Dividends Paid on Common Stock ($0.25 per share) — $ — $ — $ ( 17,633 ) $ — $ ( 17,633 )

Balances at December 31, 2018 70,599,038 $ 71 $ — $ 125,413 $ ( 148 ) $ 125,336

Net Income — — — 88,300 — 88,300

Other comprehensive income (loss) — — — — 325 325

Stock options exercised 50,318 — 430 — — 430

Restricted stock units issued, net of tax withholdings 17,871 — ( 413 ) — — ( 413 )

Repurchases of Common Stock ( 91,249 ) — — ( 8,999 ) — ( 8,999 )

Stock-based compensation expense — — 752 — — 752

Dividends Paid on Common Stock ($0.25 per share) — — — ( 17,631 ) — ( 17,631 )

Balances at March 31, 2019 70,575,978 $ 71 $ 769 $ 187,083 $ 177 $ 188,100

See notes to consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended March 31,

Three Months Ended September 30,

Cash Flows from Operating Activities:

2 unchanged sentences

Depreciation and amortization 2,634 1,849

Impairment of cost based investment 5,000 —

Amortization of debt issuance costs 464 304

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Purchase of property and equipment and other long-term assets ( 2,836 ) ( 18,333 )

Private equity investment — ( 5,000 )

Advance of loan to third party ( 2,497 ) —

Purchase of investments — ( 18,361 )

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These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2020, included in its Annual Report on Form 10-K, as filed with the SEC on August 21, 2020 (the “Annual Report”).

The results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for any future periods.

The results of operations for the three months ended September 30, 2020 are not necessarily indicative of the results to be expected for any future periods.

NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Except as noted below, there have been no other changes to the Company’s significant accounting policies as discussed in the Annual Report.

Use of Estimates

Use of Accounting Estimates

The preparation of financial statements in conformity with U.S.

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Actual results could differ materially from those estimates.

At contract inception, the Company determines if an arrangement is a lease, or contains a lease, of an identified asset for which the Company has the right to obtain substantially all of the economic benefits from its use and the right to direct its use.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, while lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term.

The implicit discount rate in the Company’s leases generally cannot readily be determined and therefore, the Company uses its incremental borrowing rate based on information available at lease commencement date in determining the present value of future payments.

ROU assets are determined based upon the calculated lease liability, adjusted by unamortized initial direct costs, unamortized lease incentives received and cumulative deferred or prepaid lease payments.

The Company has options to renew or terminate certain leases.

These options are included in the determination of lease term when it is reasonably certain that the Company will exercise such options.

The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for operating leases.

Additionally, the Company does not recognize ROU assets or lease liabilities for leases with original terms or renewals of one year or less.

Lease expense for our operating leases is recognized on a straight-line basis over the term of the lease.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2016-02, Leases (“ASU 2016-02”) and in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”) (collectively referred to as “ASC 842”).

This guidance requires the recognition of ROU assets

and lease liabilities, arising from financing and operating leases, on the consolidated balance sheet, along with additional qualitative and quantitative disclosures.

Companies are required to adopt this guidance using a modified retrospective approach and apply the transition provisions under the guidance at either 1) the later of the beginning of the earliest comparative period presented in the financial statements and the commencement date of the lease, or 2) the beginning of the period of adoption (i.e.

on the effective date).

Under the transition method using the second application date, a company initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted the guidance on July 1, 2019, beginning of our fiscal year 2020, using the modified retrospective transition method and initially applied the transition provisions at July 1, 2019, which allowed us to continue to apply the legacy guidance in ASC 840 for periods prior to fiscal 2019.

We elected the package of transition practical expedients, which among other things, allows us to keep the historical lease classifications and not have to reassess the lease classification for any existing leases as of the date of adoption.

We also made the following accounting policy elections as allowed by ASC 842:

• to apply the short-term lease exception, which allows us to keep leases with an initial term of twelve months or less off the balance sheet.

• to account for each separate lease component of a contract and its associated non-lease components as a single-lease component for all our leases.

As a result of the adoption of this standard, there was no adjustment to the opening balance of retained earnings as there was no cumulative effect adjustment at the date of adoption.

Accordingly, the primary impact of adopting ASC 842 was the recognition of ROU assets and lease liabilities for operating leases of approximately $ 23.3 million and $ 24.0 million, respectively for all existing leases which had remaining obligations as of July 1, 2019.

This included reclassifying deferred rent of $ 0.7 million from other current liabilities to a component of the ROU asset.

ASC 842 did not have a material impact on our results of operations and comprehensive income and statement of cash flow.

Recent Accounting Pronouncements Not Yet Effective

Credit Losses on Financial Instruments

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Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses.

ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses for certain financial instruments and financial assets.

For trade receivables, we are required to estimate lifetime expected credit losses.

For available-for-sale debt securities, we will recognize an allowance for credit losses rather than a reduction to the carrying value of the asset.

ASU 2016-13 is effective for the Company’s fiscal year beginning July 1, 2020 on a modified retrospective basis.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures;

however, we do not believe that the adoption of this standard will have a material impact on the Company's consolidated financial position or results of operations.

As of July 1, 2020, the Company adopted the new standard, including identifying, evaluating and quantifying the impact on its consolidated financial statements.

We concluded that the expected credit loss impact to the opening balance of fiscal 2021 retained earnings was deemed immaterial, and as a result the adoption did not have a material impact the Company's consolidated financial position, results of operations, or cash flow.

Recent Accounting Pronouncements Not Yet Effective

In December 2019, the FASB issued ASU No.

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generally, this occurs with the transfer of control of our products and PCS to our customers.

Transfer of control to the customer for products generally occurs at the point in time when products have been shipped to our customer by third party carriers as this represents the point in time when the customer has a present obligation to pay and physical possession including title and risk of loss have been transferred to the customer.

Transfer of control to the customer for products generally occurs at the point in time when products have been shipped to our customer as this represents the point in time when the customer has a present obligation to pay and physical possession including title and risk of loss have been transferred to the customer.

Revenue for PCS is recognized ratably over time over the estimated period for which implied PCS services will be delivered.

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Accounts receivable are recognized in the period the Company’s right to the consideration is unconditional.

Our contract liabilities consist of advance payments

(Customer deposits) as well as billing in excess of revenue recognized primarily related to deferred revenue.

Our contract liabilities consist of advance payments (Customer deposits) as well as billing in excess of revenue recognized primarily related to deferred revenue.

We classify customer deposits as a current liability, and deferred revenue as a current or non-current liability based on the timing of when we expect to fulfill these remaining performance obligations.

The current portion of deferred revenue is included in other current liabilities and the non-current portion is included in other long-term liabilities in our consolidated balance sheets.

As of March 31, 2020 and June 30, 2019, the Company’s customer deposits were $ 1.0 million and $ 3.0 million, respectively.

As of March 31, 2020, the Company’s deferred revenue, included in current liabilities and non-current liabilities, was $ 16.9 million and $ 6.1 million, respectively.

As of June 30, 2019, the Company’s deferred revenue, included in current liabilities and non-current liabilities, was $ 15.3 million and $ 6.5 million, respectively.

As of September 30, 2020 and June 30, 2020, the Company’s customer deposits were $ 2.6 million and $ 2.1 million, respectively.

As of September 30, 2020, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 18.2 million and $ 7.6 million, respectively.

As of June 30, 2020, the Company’s deferred revenue, included in other current liabilities and other long-term current liabilities, was $ 16.5 million and $ 6.3 million.

respectively.

NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS

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The valuation techniques used to measure the fair value of our marketable securities incorporate bond terms and conditions, current performance data, proprietary pricing models, real time quotes from contributing dealers, trade prices and other market data.

The Company held no Level 3 financial instruments as of March 31, 2020 and June 30, 2019.

The following tables summarize the Company’s financial instruments’ adjusted cost, gross unrealized gains and losses, and fair value by significant investment category as of March 31, 2020 and June 30, 2019 (in thousands):

March 31, 2020

The Company held no Level 3 financial instruments as of September 30, 2020 and June 30, 2020.

September 30, 2020

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents (1) Short-Term Investments Long-Term Investments

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Subtotal $ 1,055 $ — $ — $ 1,055 $ 1,055 $ — $ —

Commercial paper $ 1,123 $ — $ — $ 1,123 $ 524 $ 599 $ —

Corporate securities 1,429 9 — 1,438 — 925 513

U.S agency securities 4,702 4 — 4,706 — 3,712 994

US Government Bonds 12,189 20 ( 1 ) 12,208 — 8,178 4,030

Subtotal $ 1,429 $ 9 $ — $ 1,438 $ — $ 925 $ 513

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The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments.

During the three and nine months ended March 31, 2020 the Company reclassified realized net loss of $ 6.7 thousand and realized net gain of $ 378.0 thousand to earnings from accumulated other comprehensive income related to unrealized gains or losses.

For the three and nine months ended March 31, 2019, the Company reclassified realized net gain of $ 25.5 thousand and $ 24.5 thousand to earnings from accumulated other comprehensive income related to unrealized gains or losses.

During the three months ended March 31, 2020 and 2019, the Company had $ 0.2 million and $ 0.7 million, respectively, of interest income on our investment securities.

During the nine months ended March 31, 2020 and 2019, the Company had $ 1.0 million and $ 2.2 million, respectively, of interest income on our investment securities.

The following table represents the Company’s marketable securities that had been in continuous unrealized loss position for less than 12 months and for 12 months or greater as of March 31, 2020 and June 30, 2019 (in thousands):

March 31, 2020

Continuous Unrealized Losses

Less than 12 Months 12 Months or Greater Total

Fair Value of marketable securities $ 7,175 $ — $ 7,175

Unrealized Loss $ ( 58 ) $ — $ ( 58 )

June 30, 2019

Continuous Unrealized Losses

Less than 12 Months 12 Months or Greater Total

Fair Value of marketable securities $ 8,072 $ — $ 8,072

Unrealized Loss $ ( 3 ) $ — $ ( 3 )

Based on evaluation of securities that have been in a continuous loss position, we did not recognize any other-than-temporary impairment charges during the three and nine months ended March 31, 2020 and 2019.

The following table represents the adjusted costs and fair value of investment by contractual maturity as of March 31, 2020 (in thousands):

For the three months ended September 30, 2020, the Company did not recognize any net gains or losses from accumulated other comprehensive income related to unrealized gains or losses.

During the three months ended September 30, 2019, the Company reclassified realized net gain of $ 0.2 million to earnings from accumulated other comprehensive income related to unrealized gains or losses.

During the three months ended September 30, 2020, interest income on our investment securities was immaterial.

During the three months ended September 30, 2019, we had $ 0.5 million of interest income on our investment securities.

The Company had no continuous unrealized loss position from marketable securities as of September 30, 2020 and June 30, 2020.

The following table represents the adjusted costs and fair value of cash equivalents and investments by contractual maturity as of September 30, 2020 (in thousands):

Available-For-Sale

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Due within 1 year and money market funds $ 2,483 $ 2,491

Due after 1 year through 5 years 5,131 5,113

Total $ 2,483 $ 2,491

For certain of the Company’s financial instruments, other than those presented in the disclosures above, including cash, accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate fair value due to their short maturities.

As of March 31, 2020 and June 30, 2019, the Company had an outstanding loan associated with its credit facilities, which are carried at historical cost.

As of September 30, 2020 and June 30, 2020, the Company had outstanding loans associated with its credit facilities, which are carried at historical cost.

The fair value of the Company’s debt disclosed below was estimated based on the current rates offered to the Company for debt with similar terms and remaining maturities and was a Level 2 measurement.

As of March 31, 2020 and June 30, 2019, the fair value of the Company’s debt carried at historical cost was $ 686.3 million and $ 497.5 million, respectively.

As of September 30, 2020 and June 30, 2020, the fair value of the Company’s debt, which is carried at historical cost, was $ 638.8 million and $ 655.0 million, respectively.

NOTE 5— EARNINGS PER SHARE

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

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

Three Months Ended September 30,

Net income $ 156,509 $ 98,146

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The Company excludes potentially dilutive securities from its diluted net income per share calculation when their effect would be anti-dilutive to net income per share amounts.

The following table summarizes the total potential shares of common stock that were excluded from the diluted per share calculation as including them would have been anti-dilutive for the period (in thousands):

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

The following table summarizes the total potential shares of common stock that were excluded from the diluted per share calculation, because to include them would have been anti-dilutive for the period (in thousands):

Three Months Ended September 30,

Restricted stock units — 11

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Inventories consisted of the following (in thousands):

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Finished goods $ 252,620 $ 282,381

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

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Testing equipment $ 12,903 $ 12,476

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

March 31, 2020 June 30, 2019

Deposits on aircraft (1)

September 30, 2020 June 30, 2020

Hong Kong Tax deposit (1)

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Intangible assets, net (2)

Other long-term assets (4)

Other long-term assets, net 4,409 4,665

Total $ 42,923 $ 43,223

(1) The Company made $ 57 million in deposits related to the purchase of an airplane through December 31, 2019.

During the third quarter of fiscal 2020, the Company made its final payment that was due upon transfer of title and receipt of the airplane.

As a result, the Company reclassified the $ 57 million in deposits related to the purchase, to Property and Equipment, net on our Consolidated Balance Sheet.

As a result of an independent security study, the Company’s independent directors approved the purchase of the airplane, which Mr.

Pera will be expected to use for all business and personal air travel.

(1) The Company made a total of $ 35.5 million of deposits with the Hong Kong Inland Revenue Department (“IRD”) in connection with extending the statute of limitation for income tax examinations currently under audit for the 2010-2014 tax years.

Of that amount, $ 13.4 million was made during fiscal year 2019 and $ 6.6 million made during fiscal year 2018.

These deposits were made during fiscal years 2020, 2019, and 2018 in the amounts of $ 15.5 million, $ 13.4 million and $ 6.6 million, respectively.

We expect the $ 35.5 million of deposits made with the IRD to be refunded upon completion of the audit.

See Note 14 to the consolidated financial statements for additional details regarding this ongoing tax audit.

(3) Accumulated amortization was $ 1.8 million and $ 1.6 million as of March 31, 2020 and June 30, 2019, respectively.

(4) During fiscal 2019, the Company entered into a $ 5 million strategic cost method investment where the Company acquired preferred stock.

The shares were recorded at cost in Other Long-Term Assets on our Consolidated Balance Sheet.

During the second quarter fiscal 2020, the Company recorded an impairment charge of $ 5 million.

This unrealized loss is reflected in Interest expense and other, net on the Consolidated Statement of Operations and Comprehensive Income.

(2) Accumulated amortization was $ 1.9 million and $ 1.8 million as September 30, 2020 and June 30, 2020, respectively.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Deferred revenue — short-term $ 18,150 16,464

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

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Deferred Revenue — long-term $ 7,637 $ 6,254

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Warranty obligations, included in other current liabilities, were as follows (in thousands):

Nine Months Ended March 31,

Three Months Ended September 30,

Beginning balance $ 4,538 $ 4,518

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On September 9, 2019, Ubiquiti Inc., as borrower, Ubiquiti International Holding Company Limited (the “Cayman Borrower”), as a released party, and certain subsidiaries entered into the Third Amendment (the “Third Amendment”) to the Second Amended & Restated Credit Agreement, dated January 17, 2018 (as amended by the First Amendment, dated as of June 19, 2018, and the Second Amendment dated as of March 15, 2019, the “Second A&R Credit Agreement”, and as further amended by the Third Amendment, the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), the other financial institutions named as lenders therein, and Wells Fargo as administrative agent and collateral agent for the lenders, that provides for a $ 700 million senior secured revolving credit facility (the “Revolving Facility”) and a $ 500 million senior secured term loan facility (the “Term Facility”, together with the Revolving Facility, the “Facilities”), with an option to request increases in the amounts of such credit facilities by up to an additional $ 400 million in the aggregate.

The maturity date for the credit facility remains at January 17, 2023.

The maturity date for the Facilities remains at January 17, 2023.

In addition, the Third Amendment (a) released the Cayman Borrower from its obligations as a borrower under the Second A&R Credit Agreement, (b) released all of the foreign subsidiaries that were previously party to the Second A&R Credit Agreement as guarantors of the obligations of the released Cayman Borrower and (c) made conforming amendments to the provisions of the Second A&R Credit Agreement and other loan documents to reflect the release from the Second A&R Credit Agreement.

The Third Amendment also modified certain definitions and certain covenants relating to indebtedness and investments.

The Third Amendment replaced the Company’s existing $ 400 million senior secured revolving facility and $ 500 million senior secured term loan facility under the Second A&R Credit Agreement.

At the closing of the Third Amendment, the Term Facility was fully drawn, of which $ 462.5 million and $ 0.5 million was used to repay the prior term facility under the Second A&R Credit Agreement for principal and interest, respectively.

Additionally, $ 120.0 million was drawn under the Revolving Facility.

The Company incurred $ 3.1 million of debt issuance costs which are capitalized and amortized as interest expense over the life of the Facilities.

Our Debt consisted of the following (in thousands):

March 31, 2020 June 30, 2019

September 30, 2020 June 30, 2020

Term Loan - short term $ 25,000 $ 25,000

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Revolving, swingline and term loans may be prepaid at any time without penalty.

Revolving and term loans bear interest, at the Company’s option, at either (i) a floating rate per annum equal to the base rate plus a margin of between 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the applicable LIBOR rate (or replacement rate) for a specified period, plus a margin of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

Revolving and term loans bear interest, at the Company’s option, at either (i) a floating rate per annum

equal to the base rate plus a margin of between 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the applicable LIBOR rate (or replacement rate) for a specified period, plus a margin of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

Swingline loans bear interest at a floating rate per annum equal to the base rate plus a margin of between 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

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The Company is also obligated to pay Wells Fargo, as agent, fees customary for a credit facility of this size and type.

The Credit Agreement requires the Company to maintain during the term of the Facilities (i) a maximum consolidated total leverage ratio of 3.25 to 1.00 and (ii) a minimum consolidated interest coverage ratio of 3.5 to 1.00.

The Credit Agreement requires the Company to maintain during the term of the Facilities (i) a maximum consolidated total leverage of 3.25 to 1.00 and (ii) a minimum consolidated interest coverage ratio of 3.5 to 1.00.

In addition, the Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the ability of the Company and its subsidiaries to, among other things, grant liens or enter into agreements restricting their ability to grant liens on property, enter into mergers, dispose of assets, change their accounting or reporting policies, change their business and incur indebtedness, in each case subject to customary exceptions for a credit facility of this size and type.

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and the Domestic Guarantors.

Third Amendment

As of March 31, 2020, $ 481.3 million was outstanding on the Term Facility and $ 205.0 million on the Revolving Facility, leaving $ 495.0 million available on the Revolving Facility.

The Facilities

As of September 30, 2020, $ 468.8 million was outstanding on the Term Facility and $ 170.0 million on the Revolving Facility, leaving $ 530.0 million available on the Revolving Facility.

Term Facility

Under the Credit Agreement, during the three months ended March 31, 2020, the Company made aggregate payments of $ 10.5 million under the Term Facility, of which $ 6.3 million was repayment of principal and $ 4.2 million was payment of interest.

During the nine months ended March 31, 2020, the Company made aggregate payments of $ 31.9 million under the Term Facility, of which $ 18.8 million was repayment of principal and $ 13.2 million was payment of interest.

Under the Credit Agreement, during the three months ended September 30, 2020, the Company made aggregate payments of $ 8.6 million under the Term Facility, of which $ 6.3 million was repayment of principal and $ 2.3 million was payment of interest.

Revolving Facility

Under the Credit Agreement, during the three months ended March 31, 2020, the Company made aggregate payments of $ 51.8 million under the Revolving Facility, of which $ 50.0 million was repayment of principal and $ 1.8 million was payment of interest.

During the nine months ended March 31, 2020, the Company made aggregate payments of $ 174.4 million under the Revolving Facility, of which $ 170.0 million was repayment of principal and $ 4.4 million was payment of interest.

As of March 31, 2020, the interest rate on the term loan was 2.74 %.

As of April 30, 2020, the most currently available reset date, the Term Facility has an interest rate of 2.15 %.

The table below shows the respective interest rates as of March 31, 2020, in addition to the interest rate reset dates as available for each revolver draw.

Debt Payment Obligations Interest Rate as of March 31, 2020 Rate Reset Date Reset Rate

$120 Million Revolver 2.55 % April 14, 2020 2.58 %

$50 Million Revolver 2.67 % April 23, 2020 2.37 %

$25 Million Revolver 2.36 % April 20, 2020 2.47 %

$10 Million Revolver 2.45 % April 16, 2020 2.54 %

The following table summarizes our estimated debt and interest payment obligations as of March 31, 2020, for the remainder of fiscal 2020 and future fiscal years (in thousands):

Under the Credit Agreement, during the three months ended September 30, 2020, the Company made aggregate payments of $ 10.9 million under the Revolving Facility, of which $ 10.0 million was repayment of principal and $ 0.9 million was payment of interest.

As of September 30, 2020, the interest rate on the term loan was 1.90 %.

As of October 30, 2020, the most currently available reset date, the Term Facility has an interest rate of 1.90 %.

The table below shows the respective interest rates as of September 30, 2020, in addition to the interest rate reset dates as available for each revolver draw:

Debt Payment Obligations Interest Rate as of September 30, 2020 Rate Reset Date Reset Rate

$ 120 Million Revolver

1.90 % October 19, 2020 1.90 %

$ 50 Million Revolver

1.90 % October 30, 2020 1.90 %

The following table summarizes our estimated debt and interest payment obligations as of September 30, 2020, for the remainder of fiscal 2021 and future fiscal years (in thousands):

2021 (remainder) 2022 2023 2024 2025 Thereafter Total

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Total $ 28,856 $ 38,091 $ 602,002 $ — $ — $ — $ 668,949

(1) - Interest payments are calculated based on the applicable rates and payment dates as of March 31, 2020.

(1) - Interest payments are calculated based on the applicable rates and payment dates as of September 30, 2020.

Although our interest rates on our debt obligations may vary, we have assumed the most recent available interest rates for all periods presented.

NOTE 9— LEASES

On July 1, 2019, we adopted the new accounting standard ASC 842, Leases, using the modified retrospective method.

We elected this adoption date as our date of initial application.

As a result, we have not updated financial information related to, nor have we provided disclosures required under ASC 842 for, periods prior to July 1, 2019.

The primary changes to our policies relate to recognizing most leases on our consolidated balance sheet as liabilities with corresponding right-of-use (“ROU”) assets.

The Company has entered into agreements under which we lease various real estate spaces in North America, Europe and Asia Pacific, under non-cancellable leases that expire on various dates through fiscal 2029.

The Company enters into agreements under which we lease various real estate spaces in North America, Europe and Asia Pacific, under non-cancellable leases that expire on various dates through fiscal 2029.

Some of our leases include options to extend the term of such leases for a period from 12 months to 60 months, and/or have options to early terminate the lease.

As of March 31, 2020, we did include such options in determining the lease terms for certain of our leases because when we were reasonably certain that we would exercise those options.

As of September 30, 2020, we included such options in determining the lease terms for certain of our leases because we were reasonably certain that we would exercise those options.

Most of our leases require us to pay certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs.

Practical Expedients

The modified retrospective approach included a package of optional practical expedient that we elected to apply.

Among other things, these expedients permitted us not to reassess prior conclusions regarding lease identification, lease classification and initial direct costs under ASC 842.

The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for real estate leases.

Additionally, the Company does not recognize ROU assets or lease liabilities for leases with original terms or renewals of one year or less.

The following table summarizes our lease costs for the three and nine months ended March 31, 2020 (in thousands):

Financial Statement Classification Three Months Ended March 31, 2020 Nine Months Ended March 31, 2020

The following table summarizes our lease costs for the three months ended September 30, 2020 (in thousands):

Three Months Ended September 30,

Financial Statement Classification 2020 2019

Operating lease costs:

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The operating lease costs in the table above include costs for long-term and short-term leases.

Total short-term costs for the nine months ended March 31, 2020 was $ 0.2 million.

Variable lease costs primarily include maintenance, utilities and operating

expenses that are incremental to the fixed base rent payments and are excluded from the calculation of operating lease liabilities and ROU assets.

For the three and nine months ended March 31, 2020, cash paid for amounts associated with our operating lease liabilities were approximately $ 2.3 million and $ 6.6 million which were classified as operating activities in the consolidated statement of cash flows.

The following table shows our undiscounted future fixed payment obligations under our recognized operating leases and a reconciliation to the operating lease liabilities as of March 31, 2020:

Total short-term costs for the three months ended September 30, 2020 and 2019 were immaterial.

Variable lease costs primarily include maintenance, utilities and operating expenses that are incremental to the fixed base rent payments and are excluded from the calculation of operating lease liabilities and ROU assets.

For the three months ended September 30, 2020 and 2019, cash paid for amounts associated with our operating lease liabilities were approximately $ 2.8 million and $ 2.2 million, respectively, which were classified as operating activities in the consolidated statement of cash flows.

The following table shows our undiscounted future fixed payment obligations under our recognized operating leases and a reconciliation to the operating lease liabilities as of September 30, 2020:

Remainder of Fiscal 2021 $ 5,999

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Weighted-average discount rate - operating leases 3.7 %

Due to our election to apply the effective date method of adoption for ASC 842, we have included the following additional disclosure under our historical lease accounting under ASC 840.

As of June 30, 2019, future minimum lease payments under non-cancelable operating lease were as follows (in thousands):

Fiscal 2020 $ 7,395

Fiscal 2021 5,509

Fiscal 2022 2,639

Fiscal 2023 2,205

Fiscal 2024 1,982

Thereafter 7,116

Total future minimum annual payments $ 26,846

Fiscal 2019 rent expense under operating leases $ 7.8 million

NOTE 10— COMMITMENTS AND CONTINGENCIES

Operating Leases

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of March 31, 2020 and June 30, 2019.

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of September 30, 2020.

Purchase Obligations

We subcontract with third parties to manufacture our products.

We subcontract with third parties to manufacture our products and have purchase commitments with key component suppliers.

During the normal course of business, our contract manufacturers procure components and manufacture products based upon orders placed by us.

If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products.

We periodically review the potential liability, and as of March 31, 2020, we have recorded a purchase obligation liability of $ 3.0 million related to component purchase commitments.

There have been no other significant liabilities for cancellations recorded as of March 31, 2020.

We periodically review the potential liability, and as of September 30, 2020, we have recorded a purchase obligation liability of $ 5.2 million related to component purchase commitments.

There have been no other significant liabilities for cancellations recorded as of September 30, 2020.

Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate the contract manufacturers for any unrecorded liabilities incurred.

We may be subject to additional purchase obligations for supply agreements and components ordered by our contract manufacturers based on manufacturing forecasts we provide them each month.

We estimate the amount of these additional

purchase obligation to range from $ 139.0 million to $ 311.0 million as of March 31, 2020, depending upon the timing of orders placed for these components by our manufacturers.

We estimate the amount of these additional purchase obligation to range from $ 148.7 million to $ 427.0 million as of September 30, 2020, depending upon the timing of orders placed for these components by our contract manufacturers.

Other Obligations

As of March 31, 2020, the Company has other obligations of $ 17.0 million which consisted primarily of commitments related to raw materials and research and development projects.

As of September 30, 2020, the Company has other obligations of $ 64.2 million which consisted primarily of commitments related to raw materials and research and development projects.

Indemnification Obligations

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According to the complaint, the products accused of infringing the Patents-in-Suit include Wi-Fi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard.

Vivato has also filed nine other lawsuits asserting the same patents against other defendants in the Central District of California.

Vivato has also filed nine other

lawsuits asserting the same patents against other defendants in the Central District of California.

On October 2, 2017, the ten cases were consolidated into a single action for all purposes except trial.

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During the status conference on December 2, 2019, the Court rejected a request from Vivato to lift the stay in part.

The Court maintained the stay in full pending a further status conference, which was originally scheduled for March 17, 2020 and subsequently rescheduled for June 8, 2020.

The Court maintained the stay in full pending a further status conference, which was originally scheduled for March 17, 2020 and subsequently rescheduled for November 23, 2020.

The Company plans to vigorously defend itself against these claims;

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As previously disclosed on the Form 8-K filed by the Company on February 20, 2018, on February 13, 2018, the Securities and Exchange Commission (the “SEC”) issued subpoenas to the Company and certain of the Company’s officers requesting documents and information relating to a range of topics, including metrics relating to the Ubiquiti Community, accounting practices, financial information, auditors, international trade practices, and relationships with distributors and various other third parties.

The Company has responded to the requests and intends to cooperate fully with the SEC.

As the SEC’s investigation is ongoing, we cannot currently predict the timing or the outcome of such investigation.

Shareholder Class Actions

On February 21, 2018, a purported class action, captioned Paul Vanderheiden v.

Ubiquiti Networks, Inc.

18-cv-01620 (the “ Vanderheiden Action”), was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers.

The Vanderheiden Action complaint alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making false and/or misleading statements, including purported overstatements of the Company’s online community user engagement metrics and accounts receivable.

On February 28, 2018 and March 13, 2018, substantially similar purported class actions, captioned Xiya Qian v.

Ubiquiti Networks, Inc.

18-cv-01841 (the “ Qian Action”) and J ohn Kho v.

Ubiquiti Networks, Inc.

18-cv-02242 (the “ Kho Action”, together with the Vanderheiden Action and the Qian Action, the “Class Actions”), respectively, were filed in the United States District Court for the Southern District of New York.

On October 24, 2018, the Court consolidated the Class Actions and appointed lead plaintiff and lead counsel (the “Consolidated Class Action”).

Plaintiff filed its Consolidated Amended Complaint on December 24, 2018.

On March 21, 2019, Defendants informed the Court that they were prepared to move to dismiss the Consolidated Amended Complaint but that, consistent with the Court’s individual practices, they would refrain from filing that motion pending receipt of further guidance from the Court.

On October 16, 2019, the parties in the Consolidated Class Action reached an agreement in principle to settle the Consolidated Class Action (the “Settlement”).

The Court granted final approval of the Settlement on March 27, 2020, dismissing the Consolidated Class Action with prejudice.

The Settlement, which included an award of attorneys’ fees to Plaintiffs’ counsel, was fully funded by certain of the Company’s insurers.

Shareholder Derivative Actions & Section 220 Demand

On March 13, 2018, Anthony Franchi filed a shareholder derivative complaint in the Superior Court of the State of California, County of San Mateo, against the Company’s directors, and certain of its officers (the “ Franchi Action”).

The Company was named as a nominal defendant.

The complaint asserted claims against all individual defendants for breach of fiduciary duty for disseminating false and misleading information, failure to maintain internal controls, and unjust enrichment.

Additional claims were asserted against Robert Pera for breach of fiduciary duty for insider selling and misappropriation of information, as well as for violation of California Corporations Code § 25402.

The allegations in support of these claims were similar to the allegations made in the Consolidated Class Actions.

Plaintiff sought a judgment on behalf of the Company for all damages incurred or that would be incurred as a result of the alleged breaches of fiduciary duty by the individual defendants, a judgment ordering disgorgement of all profits, benefits, and other compensation obtained by the individual defendants, a judgment directing the Company to reform its governance and internal procedures, and attorneys’ fees and other costs.

The Company moved for a stay of the derivative action pending resolution of the Consolidated Class Action.

The court denied the Company’s motion, but stayed discovery until the resolution of any motion to dismiss the Consolidated Class Action.

On August 27, 2018, the individual defendants and nominal defendant Ubiquiti demurred to the Franchi Action.

Plaintiff filed an omnibus response on October 5, 2018 and defendants filed replies on October 22, 2018.

The California Superior Court did not render a decision on the demurrers.

On June 4, 2018, Ubiquiti stockholder Richard Gericke served a demand to inspect the Company’s books and records pursuant to Section 220 of the Delaware General Corporation Law.

The Company commenced its production of documents responding to Mr.

Gericke’s requests for records on August 22, 2018 and completed its production on October 10, 2018.

In addition to serving his Section 220 demand, Mr.

Gericke sought leave to intervene in the Franchi Action.

Gericke’s motion was denied without prejudice on November 30, 2018.

On March 11, 2019, Mr.

Gericke filed a shareholder derivative complaint in the Court of Chancery for the State of Delaware against the Company’s directors and certain of its officers (the “ Gericke Action”, and together with the Franchi Action, the “Derivative Actions”).

The Company was named as a nominal defendant.

The complaint asserted claims against all defendants for breach of fiduciary duty, waste of corporate assets, and unjust enrichment.

The allegations in support of these claims were similar to the allegations made in the Franchi Action.

Plaintiff sought a judgment on behalf of the Company for the damages sustained by the individual defendants’ alleged wrongdoing, an award to the Company of restitution from the individual defendants, an award to Plaintiff of the costs and disbursements of the action, including attorneys’ fees, and an order directing the Company to take action to reform and improve corporate governance and internal procedures.

On October 14, 2019, the parties entered into an agreement in principle to settle the Derivative Actions pursuant to which the Company agreed to adopt certain corporate governance modifications and commitments (the “Derivative Settlement”).

On November 1, 2019, the Court of Chancery entered an order staying the Gericke Action.

On November 8, 2019, the California Superior Court entered an order staying the Franchi Action pending the Court’s review and approval of the Derivative Settlement.

On March 10, 2020, the California Superior Court granted final approval of the Derivative Settlement, dismissing the Franchi Action with prejudice.

On March 17, 2020, the Court of Chancery dismissed the Gericke Action with prejudice.

In connection with the Derivative Settlement, certain of the Company’s insurers fully funded an agreed-upon award of attorneys’ fees to Plaintiffs’ counsel.

The Company responded to the requests and fully cooperated with the SEC.

On September 11, 2020, the Company received notification from the SEC that it has concluded its investigation as to the Company and does not intend to recommend an enforcement action against the Company.

The notice was provided under the guidelines set out in the final paragraph of Securities Act Release No.

NOTE 11— COMMON STOCK AND TREASURY STOCK

Common Stock Repurchases

On November 6, 2019, the Company’s Board of Directors approved a $ 200 million stock repurchase program (the “2019 November Program”).

Under the 2019 November Program, the Company is authorized to repurchase up to $ 200 million of common stock.

The 2019 November Program expires on December 31, 2021.

During the three months ended March 31, 2020, the Company repurchased and retired 1,112,606 shares of common stock at an average price per share of $ 133.38 for an aggregate amount of $ 148.4 million.

During the nine months ended March 31, 2020, the Company repurchased and retired 5,743,635 shares of common stock at an average price per share of $ 119.12 for an aggregate amount of $ 684.2 million.

Both the three and nine months ended March 31, 2020 included unpaid stock repurchases of $ 5.2 million related to repurchases executed on or prior to March 31, 2020 for trades settled in the fourth quarter of fiscal 2020.

As of March 31, 2020, the Company had $ 51.6 million available for share repurchases under the 2019 November Program.

The following table provides information with respect to the Company’s share repurchase programs and the activity under the available share repurchase programs during the nine months ended March 31, 2020 (in millions, except share and per share amounts):

On May 5, 2020, the Company's Board of Directors approved a $ 500 million stock repurchase program (the "2020 May Program").

Under the 2020 May Program, the Company may repurchase up to $ 500 million of its common stock.

The 2020 May Program expires on March 31, 2022.

During the three months ended September 30, 2020, the Company repurchased and retired 602,003 shares of common stock at an average price per share of $ 162.10 for an aggregate amount of $ 97.6 million, which included unpaid stock repurchases of $ 13.7 million related to repurchases executed on or prior to September 30, 2020 for trades settled in the second quarter of fiscal 2021.

As of September 30, 2020, the Company had $ 440.3 million available for share repurchases under the 2020 May Program.

The following table provides information with respect to the Company’s Share Repurchase programs and the activity under the available share repurchase programs during the three months ended September 30, 2020 (in millions, except share and per share amounts):

Date of Publicly Announced Program Amount of Publicly Announced Program Total Number of Shares Purchased as Part of Publicly Announced Programs Average Price Paid per Share Total Aggregate Amount Paid Period of Purchases Estimated Remaining Balance Available for Share Repurchases under the Program Expiration date of Program

November 9, 2018 $ 200 million 293,709 $ 121.9 $ 35.8 July 8, 2019 - August 12, 2019 $ — 12/31/2019

August 9, 2019 $ 500 million 4,337,320 $ 115.3 $ 500.0 August 12, 2019 - October 28, 2019 $ — 12/31/2020

November 8, 2019 $ 200 million 1,112,606 $ 133.4 $ 148.4 February 7, 2020 - March 31, 2020 $ 51.6 million 12/31/2021

November 8, 2019 $ 200 million 228,180 $ 166.05 $ 37.9 August 21, 2020 - September 15, 2020 $ — 12/31/2021

May 8, 2020 $ 500 million 373,823 $ 159.69 $ 59.7 September 15, 2020 - September 30, 2020 $ 440.3 3/31/2022

NOTE 12— ACCUMULATED OTHER COMPREHENSIVE INCOME

The Company’s comprehensive income consists of two components, net income and other comprehensive income (loss).

Accumulated other comprehensive income reflects unrealized gains and losses that are recorded as an element of stockholders’ equity but have been excluded from net income pursuant to GAAP.

As of March 31, 2020 and June 30, 2019, the Company’s accumulated other comprehensive income includes $ 22.2 thousand net unrealized loss and $ 0.4 million net unrealized gains respectively, from our available-for-sale securities.

Comprehensive income consists of two components, net income and other comprehensive income.

Other comprehensive income refers to gains and losses that are recorded as an element of stockholders’ equity but are excluded from net income pursuant to GAAP.

For the three months ended September 30, 2020 and 2019, the Company’s accumulated other comprehensive income includes net unrealized gains (losses) from our available-for-sale securities, respectively.

NOTE 13— STOCK BASED COMPENSATION

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The Company’s 2010 Equity Incentive Plan and 2005 Equity Incentive Plan are described in its Annual Report.

As of March 31, 2020, the Company had 9,988,734 authorized shares available for future issuance under all of its stock incentive plans.

As of September 30, 2020, the Company had 9,990,751 authorized shares available for future issuance under all of its stock incentive plans.

Stock-Based Compensation

The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended March 31, 2020 and 2019 (in thousands):

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations and Comprehensive Income for the three months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Cost of revenues $ 28 $ 32

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Sales, general and administrative 202 176

$ 725 $ 752 $ 2,144 $ 2,306

Stock Options

The following is a summary of option activity for the Company’s stock incentive plans for the nine months ended March 31, 2020:

The following is a summary of option activity for the Company’s stock incentive plans for the three months ended September 30, 2020:

Common Stock Options Outstanding

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Exercised ( 2,194 ) $ 9.79

Balance, March 31, 2020 24,499 $ 11.14 2.42 $ 3,196

Vested as of March 31, 2020 24,499 $ 11.14 2.42 $ 3,196

Vested and exercisable as of March 31, 2020 24,499 $ 11.14 2.42 $ 3,196

During the three months ended March 31, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.3 million and $ 6.8 million, respectively, as determined as of the date of option exercise.

During the nine months ended March 31, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 3.5 million and $ 10.0 million, respectively, as determined as of the date of options exercise.

As of March 31, 2020, the Company had no unrecognized compensation costs related to stock options.

The Company did not grant any employee stock options during the three and nine months ended March 31, 2020 and 2019.

Balance, September 30, 2020 20,071 $ 11.21 1.93 $ 3,120

Vested as of September 30, 2020 20,071 $ 11.21 1.93 $ 3,120

Vested and exercisable as of September 30, 2020 20,071 $ 11.21 1.93 $ 3,120

During the three months ended September 30, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.3 million and $ 0.1 million, respectively, as determined as of the date of option exercise.

As of September 30, 2020, the Company had no unrecognized compensation costs related to stock options.

The Company did no t grant any employee stock options during the three months ended September 30, 2020 and 2019.

Restricted Stock Units (“RSUs”)

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RSUs canceled ( 1,191 ) $ 97.73

Non-vested RSUs, March 31, 2020 85,358 $ 98.04

The intrinsic value of RSUs vested in the three months ended March 31, 2020 and 2019 was $ 3.3 million and $ 2.3 million, respectively.

The intrinsic value of RSUs vested in the nine months ended March 31, 2020 and 2019 was $ 6.7 million and $ 4.4 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 12.1 million as of March 31, 2020.

As of March 31, 2020, there were unrecognized compensation costs related to RSUs of $ 6.2 million which the Company expects to recognize over a weighted average period of 3.3 years.

Non-vested RSUs, September 30, 2020 73,084 $ 106.63

The intrinsic value of RSUs vested in the three months ended September 30, 2020 and 2019 was $ 2.1 million and $ 1.8 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 12.2 million as of September 30, 2020.

As of September 30, 2020, there were unrecognized compensation costs related to RSUs of $ 5.4 million which the Company expects to recognize over a weighted average period of 3.0 years.

NOTE 14— INCOME TAXES

The Company recorded tax provisions of $ 17.0 million and $ 49.1 million for the three and nine months ended March 31, 2020 as compared to $ 10.4 million and $ 32.4 million for the three and nine months ended March 31, 2019.

The increase is primarily related to an increase in profit before tax for the nine months ended March 31, 2020.

The Company recorded tax provisions of $ 29.5 million for the three months ended September 30, 2020 as compared to $ 17.9 million for the three months ended September 30, 2019.

The increase is primarily related to an increase in profit before tax for the three months ended September 30, 2020.

The Company’s estimated fiscal year 2021 effective tax rate, before discrete items, differs from the U.S.

statutory rate primarily due to profits earned in jurisdictions where the tax rate is lower than the U.S.

tax rate, partially offset by additional US tax related to our non-U.S.

operations under Global Intangible Low-Taxes Income (“GILTI”) provision.

As of March 31, 2020, the Company had approximately $ 32.4 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

During the three months ended March 31, 2020, the Company recorded an increase of its unrecognized tax benefits of $ 1.2 million.

tax rate, partially offset by additional US tax related to our non-US operations under Global Intangible Low-Taxes Income (GILTI) provision.

As of September 30, 2020, the Company had approximately $ 32.7 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

The Company recorded a net increase of its unrecognized tax benefits of $ 1.4 million for the three months ended September 30, 2020.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Statement of Operations and Comprehensive Income.

Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheet.

As of March 31, 2020, the Company had $ 5.0 million accrued interest related to uncertain tax matters.

The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S.

Internal Revenue Service and the Hong Kong Inland Revenue Department (“IRD”).

As of September 30, 2020, the Company had $ 5.0 million accrued interest related to uncertain tax matters.

The Company and one or more of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S.

Internal Revenue Service and the Hong Kong IRD.

All material consolidated federal, state and local income tax matters have been concluded for years through 2014.

The majority of the Company’s foreign jurisdictions have been concluded through 2014, with the exception of Hong Kong which has been reviewed through 2009 and is currently under audit for the 2010-2016 tax years.

During fiscal years 2019 and 2018, the Company made a total of $ 20 million of deposits with the Hong Kong Inland Revenue Department in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2013 tax years.

The refundable deposits are included within Prepaid expenses and other current assets on our Consolidated Balance Sheets.

In addition, the Company recently received a protective claim of approximately $ 23.3 million relating to the 2013-2014 year of assessment.

The Company has filed a formal protest of this claim and has requested that the assessment be held in abeyance pending conclusion of the examination .

During fiscal years 2020, 2019, and 2018, the Company made a total of $ 15.5 million, $ 13.4 million, and $ 6.6 million of deposits with the Hong Kong IRD in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2014 tax years.

The refundable deposits are included within other long-term assets on our Consolidated Balance Sheets.

The IRD is examining the Company’s claims that its revenue is generated through activities performed wholly outside of the Hong Kong tax jurisdiction and are therefore exempt from Hong Kong tax.

The Company is fully cooperating with the examination including submitting documentation in support of its position.

The Company continues to believe that its tax positions filed with IRD are more likely than not to be sustained based on their technical merits and therefore no reserve has been provided for this tax uncertainty and we expect the $ 35.5 million of deposits made with IRD to be refunded upon completion of the audit.

However, there can be no assurance that this matter will be resolved in the Company’s favor and therefore it's possible that an adverse outcome of the matter could have a material effect on the Company’s results of operations and financial condition.

In July 2018, the Company received a draft Notice of Proposed Adjustment (“Draft NOPA”) from the Internal Revenue Service (IRS) proposing an adjustment to income for the fiscal 2015 and 2016 tax years based on its interpretation of certain obligations of the non-U.S.

entities under the credit facility.

In July 2018, the Company received a draft Notice of Proposed Adjustment (“Draft NOPA”) from the Internal Revenue Service (“IRS”) proposing an adjustment to income for the fiscal 2015 and fiscal 2016 tax years based on its interpretation of certain obligations of the non-US entities under the credit facility.

This Draft NOPA was superseded by an Acknowledgement of Facts (“AOF”) issued to the Company by the IRS on January 17, 2020.

The IRS in its AOF continues to propose an adjustment to the Company’s income for its fiscal 2015 and 2016 tax years based on the IRS’ interpretation of certain obligations of the Company’s foreign subsidiaries under the Company’s credit facilities.

The incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

The Company strongly believes the position of the IRS with regard to this matter is inconsistent with the provisions of the credit facilities and applicable tax laws.

The IRS in its AOF continued to propose an adjustment to the Company’s income for its fiscal 2015 and fiscal 2016 tax years based on the IRS’ interpretation of certain obligations of the Company’s foreign subsidiaries under the Company’s credit facilities.

On May 12, 2020, the IRS issued a final Notice of Proposed Adjustment to the Company with respect to the 2015/2016 tax years.

The Company has formally protested the adjustment and the case is expected to be moved from the Examination Division to the IRS Appeals Division where a formal review of the facts and the applicable law will take place.

The timing of when the case will be scheduled to be reviewed by the Appeals Division is uncertain at this time due in large part to an existing backlog of cases awaiting review by the Division.

The Company strongly believes the position of the IRS with regard to this matter is without merit.

However, there can be no assurance that this matter will be resolved in the Company’s favor.

Regardless of whether the matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle.

As the Company believes that the tax originally paid in fiscal 2015 and 2016 is correct, it has not provided an additional reserve for this tax uncertainty.

However, there is still a possibility that an adverse outcome of the matter could have a material effect on the Company’s results of operations and financial condition.

We estimate the incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50.0 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

As the Company believes that the tax originally paid in fiscal 2015 and fiscal 2016 is correct, it has not provided a reserve for this tax uncertainty.

However, an adverse outcome may have a material and adverse effect on the Company’s results of operations and financial condition.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) was signed into law on March 25, 2020.

The bill was meant to address the economic fallout in response to locally mandated shelter-in-place orders that were executed in an attempt to slow the spread of COVID-19.

Under CARES, several provisions of the tax code were amended to help provide additional relief to businesses that were adversely affected by the pandemic.

The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOL) and allow businesses and individuals to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years;

suspend the excess business loss rules under section 461(l);

accelerate refunds of previously generated corporate AMT credits;

generally loosen the business interest limitation under section 163(j) from 30 percent to 50 percent;

and fix the “retail glitch” for qualified improvement property in the 2017 tax code overhaul known informally as the Tax Cuts and Jobs Act (TCJA, P.L.

None of these provisions of CARES are expected to have material impacts to the Company’s fiscal 2020 tax provision.

We will monitor the updates, both to the Company’s business as well as guidance issued with respect to CARES that could impact the current interpretation of the provisions under CARES, to determine whether any additional considerations need to be made with respect to the Company’s tax provision.

We will monitor the updates, both to the Company’s business as well as guidance issued with respect to CARES that could

impact the current interpretation of the provisions under CARES, to determine whether any additional considerations need to be made with respect to the Company’s tax provision in future periods.

NOTE 15— SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS

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Revenues by product type are as follows (in thousands, except percentages):

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

Three Months Ended September 30,

Service Provider Technology $ 157,461 33 % $ 115,926 36 %

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Revenues by geography based on customer’s ship-to destinations were as follows (in thousands, except percentages):

Three Months Ended March 31, Nine Months Ended March 31,

2020 2019 2020 2019

Three Months Ended September 30,

North America (1)

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Total revenues $ 473,533 100 % $ 323,277 100 %

(1) Revenue for the United States was $ 125.4 million and $ 105.1 million for the three months ended March 31, 2020 and 2019, respectively.

Revenue for the United States was $ 389.0 million and $ 331.9 million for the nine months ended March 31, 2020 and 2019, respectively.

(1) Revenue for the United States was $ 209.8 million and $ 141.9 million for the three months ended September 30, 2020 and 2019, respectively.

Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:

Percentage of Revenues Percentage of Accounts Receivable

Three Months Ended March 31, Nine Months Ended March 31, March 31, June 30,

Three Months Ended September 30, September 30, June 30,

2020 2019 2020 2020

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NOTE 16— RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS

Aircraft Lease Agreement

Aircraft Lease Agreemen t

On November 13, 2013, the Company entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) with RJP Manageco LLC (the “Lessor”), a limited liability company owned by the Company’s CEO, Robert J.

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This hourly rate does not include the cost of flight crew or on-board services, which the Company purchases from a third-party provider.

The Company recognized a total of approximately $ 0.4 million and $ 1.3 million in expenses pursuant to the Aircraft Lease Agreement during the three and nine months ended March 31, 2020.

The Company recognized a total of approximately $ 0.4 million and $ 1.3 million in expenses pursuant to the Aircraft Lease Agreement during the three and nine months ended March 31, 2019, respectively.

All expenses pursuant to the Aircraft Lease Agreement have been included in the Company’s sales, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

The Company recognized a total of approximately $ 0.5 million in expenses pursuant to the Aircraft Lease Agreement during the three months ended September 30, 2019.

All expenses pursuant to the Aircraft Lease Agreement have been included in the Company’s sales, general and administrative expenses in the

Consolidated Statements of Operations and Comprehensive Income.

NOTE 17 - SUBSEQUENT EVENTS

Stock Repurchases

On May 5, 2020, the Company’s Board of Directors approved a new $ 500 million stock repurchase program (the “2020 May Program”).

Under the 2020 May Program, the Company is authorized to repurchase up to $ 500 million of common stock.

The 2020 May Program expires on March 31, 2022.

Subsequent to March 31, 2020, the Company repurchased and retired 99,165 shares of common stock at an average price of $ 138.25 for an aggregate amount of $ 13.7 million.

As of May 7, 2020, the Company had $ 37.9 million available under the 2019 November Program.

On May 5, 2020, the Company’s Board of Directors approved a quarterly cash dividend of $ 0.30 per share payable on May 26, 2020 to shareholders of record at the close of business on May 18, 2020.

Subsequent to September 30, 2020, the Company repurchased and retired 309,133 shares of common stock at an average price of $ 178.11 for an aggregate amount of $ 55.1 million.

As of November 5, 2020, the Company had $ 385.2 million available for share repurchases under the 2020 May Program.

On November 6, 2020, the Company announced that its Board of Directors had approved a quarterly cash dividend of $ 0.40 per share payable on November 23, 2020 to shareholders of record at the close of business on November 16, 2020.

Any future dividends will be subject to the approval of the Company's Board of Directors.

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