Ubiquiti Inc. 10-Q

Item 1. Financial Statements UBIQUITI INC. Consolidated Balance Sheets (In thousands, except share data) (Unaudited) September 30, 2020 June 30, 2020 Assets Current assets: Cash and cash equivalents $ 128,427 $ 142,617 Investments — short-term 1,013 925 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 Inventories 256,038 285,943 Vendor deposits 4,935 5,934 Prepaid income taxes 33 34 Prepaid expenses and other current assets 15,483 9,034 Total current assets 601,951 586,647 Property and equipment, net 78,481 78,522 Operating lease right-of-use assets, net 24,827 24,444 Deferred tax assets — long-term 3,682 4,102 Investments — long-term — 513 Other long-term assets 42,923 43,223 Total assets $ 751,864 $ 737,451 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 68,968 $ 155,547 Income taxes payable 42,406 30,961 Debt — short-term 24,067 24,067 Other current liabilities 131,609 53,722 Total current liabilities 267,050 264,297 Income taxes payable — long-term 107,039 115,330 Operating lease liabilities —long-term 19,512 18,533 Debt — long-term 612,429 628,437 Other long-term liabilities 7,696 6,312 Total liabilities 1,013,726 1,032,909 Commitments and contingencies (Note 10) Stockholders’ deficit: Preferred stock—$ 0.001 par value; 50,000,000 shares authorized; none issued — — Common stock—$ 0.001 par value; 500,000,000 shares authorized: 63,096,850 and 63,687,891 outstanding as of September 30, 2020 and June 30, 2020, respectively 63 64 Additional paid–in capital — 447 Accumulated other comprehensive income 8 9 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. 3 Table of Contents UBIQUITI INC. Consolidated Statements of Operations and Comprehensive Income (In thousands, except per share amounts) (Unaudited) Three Months Ended September 30, 2020 2019 Revenues $ 473,533 $ 323,277 Cost of revenues 245,417 171,886 Gross profit 228,116 151,391 Operating expenses: Research and development 25,813 20,252 Sales, general and administrative 12,350 10,450 Total operating expenses 38,163 30,702 Income from operations 189,953 120,689 Interest expense and other, net ( 3,917 ) ( 4,653 ) Income before income taxes 186,036 116,036 Provision for income taxes 29,527 17,890 Net income $ 156,509 $ 98,146 Net income per share of common stock: Basic $ 2.46 $ 1.44 Diluted $ 2.46 $ 1.43 Weighted average shares used in computing net income per share of common stock: Basic 63,612 68,390 Diluted 63,673 68,484 Other comprehensive income: Unrealized (losses) on available-for-sale securities $ ( 1 ) $ ( 153 ) Other Comprehensive (loss) ( 1 ) ( 153 ) Comprehensive income $ 156,508 $ 97,993 See notes to consolidated financial statements. 4 Table of Contents UBIQUITI INC. Consolidated Statements of Stockholders’ Deficit (In thousands, except per share amounts) (Unaudited) 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 Balance at June 30, 2020 63,687,891 $ 64 $ 447 $ ( 295,978 ) $ 9 $ ( 295,458 ) Net Income — — — 156,509 — 156,509 Other comprehensive income (loss) — — — — ( 1 ) ( 1 ) Stock options exercised 2,194 — 21 — — 21 Restricted stock units issued, net of tax withholdings 8,768 — ( 615 ) — — ( 615 ) Repurchases of Common Stock ( 602,003 ) ( 1 ) ( 593 ) ( 96,994 ) — ( 97,588 ) Stock-based compensation expense — — 740 — — 740 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 ) 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 Balance at June 30, 2019 69,472,568 $ 69 $ — $ 98,815 $ 393 $ 99,277 Net Income — — — 98,146 — 98,146 Other comprehensive income (loss) — — — — ( 153 ) ( 153 ) Stock options exercised 678 — 3 — — 3 Restricted stock units issued, net of tax withholdings 9,743 — ( 501 ) — — ( 501 ) Repurchases of Common Stock ( 3,635,534 ) ( 3 ) ( 191 ) ( 416,025 ) — ( 416,219 ) Stock-based compensation expense — — 689 — — 689 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 ) See notes to consolidated financial statements. 5 Table of Contents UBIQUITI INC. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended September 30, 2020 2019 Cash Flows from Operating Activities: Net income $ 156,509 $ 98,146 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,634 1,849 Amortization of debt issuance costs 464 304 Non-cash lease expense 64 732 Premium amortization and (discount accretion), net 2 ( 65 ) Write off unamortized debt issuance costs — 105 Provision for inventory obsolescence 180 697 Provision for loss on vendor deposits and purchase commitments 2,553 1,112 Stock-based compensation 740 689 Deferred Taxes 420 ( 76 ) Other, net 299 572 Changes in operating assets and liabilities: Accounts receivable ( 53,870 ) ( 18,676 ) Inventories 29,960 19,616 Vendor deposits 579 3,803 Prepaid income taxes 1 ( 14 ) Prepaid expenses and other assets ( 3,919 ) ( 8,035 ) Accounts payable ( 86,562 ) 25,955 Income taxes payable 3,154 ( 7,232 ) Deferred revenues 3,069 925 Accrued and other liabilities 60,684 ( 757 ) Net cash provided by operating activities 116,961 119,650 Cash Flows from Investing Activities: Purchase of property and equipment and other long-term assets ( 2,836 ) ( 18,333 ) Advance of loan to third party ( 2,497 ) — Purchase of investments — ( 18,361 ) Proceeds from sale of investments — 59,715 Proceeds from maturities of investments 422 8,577 Net cash provided by (used in) investing activities ( 4,911 ) 31,598 Cash Flows from Financing Activities: Proceeds from borrowing under the credit facility — Term — 37,500 Proceeds from borrowing under the credit facility — Revolver — 120,000 Repayment against credit facility — Revolver ( 10,000 ) — Repayment against credit facility — Term ( 6,250 ) ( 6,250 ) Debt Issuance Costs — ( 3,138 ) Repurchases of common stock ( 83,926 ) ( 396,599 ) Payment of common stock cash dividends ( 25,470 ) ( 20,669 ) Proceeds from exercise of stock options 21 3 Tax withholdings related to net share settlements of restricted stock units ( 615 ) ( 501 ) Net cash (used in) financing activities ( 126,240 ) ( 269,654 ) Net (decrease) in cash and cash equivalents ( 14,190 ) ( 118,406 ) Cash and cash equivalents at beginning of period 142,617 238,147 Cash and cash equivalents at end of period $ 128,427 $ 119,741 Supplemental Disclosure of Cash Flow Information: Income taxes paid, net of refunds $ 26,062 $ 25,244 Interest paid $ 3,226 $ 4,768 Non-Cash Investing and Financing Activities: Right-of-use asset recognized $ 2,533 $ 1,093 Unpaid stock repurchases $ 13,662 $ 21,844 Unpaid property and equipment and other long-term assets $ 133 $ — Net unsettled investment purchases (sales and maturities) $ — $ 521 See notes to consolidated financial statements. 6 Table of Contents UBIQUITI INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1— BUSINESS AND BASIS OF PRESENTATION Business — Ubiquiti Inc. and its wholly owned subsidiaries (collectively, “Ubiquiti” or the “Company”) develop high performance networking technology for service providers, enterprises, and consumers globally. The Company operates on a fiscal year ending June 30. In this Quarterly Report, the fiscal year ending June 30, 2021 is referred to as “fiscal 2021” and the fiscal year ended June 30, 2020 is referred to as “fiscal 2020”. Basis of Presentation — The Company’s consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) related to interim financial statements based on applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. These consolidated financial statements reflect all adjustments, which are, in the opinion of the Company, of a normal and recurring nature and those necessary to state fairly the statements of financial position, results of operations and cash flows for the dates and periods presented. The June 30, 2020 balance sheet was derived from the audited financial statements as of that date. All significant intercompany transactions and balances have been eliminated. 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 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 The Company’s significant accounting policies are disclosed in its audited consolidated financial statements for the year ended June 30, 2020, included in the Annual Report on Form 10-K. 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 Accounting Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Those estimated assumptions include, but are not limited to, revenue recognition and deferred revenue; allowance for doubtful accounts and sales return reserves; inventory valuation and vendor deposits; accounting for income taxes, including the valuation allowance on deferred tax assets and reserves for uncertain tax positions; determinations of fair value for stock-based awards; estimate of incremental borrowing rate for determining the present value of future lease payments; and valuation of warranty accruals. We evaluate our estimates and assumptions based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. Recently Adopted Accounting Pronouncements Credit Losses on Financial Instruments In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): 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 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. 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. 7 Table of Contents Recent Accounting Pronouncements Not Yet Effective Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), which amends the existing guidance relating to the accounting for income taxes. ASU 2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. ASU 2019-12 is effective for the Company’s fiscal year beginning July 1, 2021. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures. NOTE 3— REVENUES Revenue is primarily generated from the sale of hardware as well as the related implied post contract services (“PCS”). Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; 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 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. Disaggregation of Revenue See Note 15 of Notes to Consolidated Financial Statements “Segment Information” for disaggregation of revenue by product category and geography. Contract Balances The timing of revenue recognition, billing and cash collections results in billed accounts receivable, deferred revenue primarily attributable to PCS and customer deposits on the Consolidated Balance Sheets. 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. 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 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 Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The accounting guidance establishes a three-tier fair value hierarchy that requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value: Level 1 —Quoted prices in active markets for identical assets or liabilities; Level 2 —Inputs other than the quoted prices in active markets, that are observable either directly or indirectly; Level 3 —Unobservable inputs based on the Company’s own assumption. 8 Table of Contents The Company records securities available-for-sale at fair value on a recurring basis. We classify our investments within Level 1 or 2 because they are valued using either quoted market prices or inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded. Our fixed income available-for-sale securities consist of high-quality investment grade securities from diverse issuers. 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 September 30, 2020 and June 30, 2020. 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 September 30, 2020 and June 30, 2020 (in thousands): September 30, 2020 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents (1) Short-Term Investments Long-Term Investments Level 1 Money market funds $ 1,478 $ — $ — $ 1,478 $ 1,478 $ — $ — Subtotal $ 1,478 $ — $ — $ 1,478 $ 1,478 $ — $ — Level 2 Corporate securities 1,005 8 — 1,013 — 1,013 — Subtotal $ 1,005 $ 8 $ — $ 1,013 $ — $ 1,013 $ — Total $ 2,483 $ 8 $ — $ 2,491 $ 1,478 $ 1,013 $ — (1) Cash and cash equivalents on the consolidated balance sheets includes securities that have a maturity of three months or less at the date of purchase. The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments. June 30, 2020 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents (1) Short-Term Investments Long-Term Investments Level 1 Money market funds $ 1,055 $ — $ — $ 1,055 $ 1,055 $ — $ — Subtotal $ 1,055 $ — $ — $ 1,055 $ 1,055 $ — $ — Level 2 Corporate securities 1,429 9 — 1,438 — 925 513 Subtotal $ 1,429 $ 9 $ — $ 1,438 $ — $ 925 $ 513 Total $ 2,484 $ 9 $ — $ 2,493 $ 1,055 $ 925 $ 513 (1) Cash and cash equivalents on the consolidated balance sheets includes securities that have a maturity of three months or less at the date of purchase. The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments. 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. 9 Table of Contents 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 Adjusted Cost Fair Value Due within 1 year and money market funds $ 2,483 $ 2,491 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 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 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 September 30, 2020 2019 Numerator: Net income $ 156,509 $ 98,146 Denominator: Weighted-average shares used in computing basic earnings per share 63,612 68,390 Add—dilutive potential common shares: Stock options 20 41 Restricted stock units 41 53 Weighted-average shares used in computing diluted net income per share 63,673 68,484 Net income per share of common stock: Basic $ 2.46 $ 1.44 Diluted $ 2.46 $ 1.43 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, because to include them would have been anti-dilutive for the period (in thousands): Three Months Ended September 30, 2020 2019 Restricted stock units — 11 NOTE 6— BALANCE SHEET COMPONENTS Inventories Inventories consisted of the following (in thousands): September 30, 2020 June 30, 2020 Finished goods $ 252,620 $ 282,381 Raw materials 3,418 3,562 Total $ 256,038 $ 285,943 10 Table of Contents Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): September 30, 2020 June 30, 2020 Testing equipment $ 12,903 $ 12,476 Tooling equipment 14,091 13,601 Leasehold improvements 13,073 12,944 Computer and other equipment 7,792 7,676 Software 7,267 7,266 Furniture and fixtures 2,365 2,147 Corporate aircraft 65,807 64,659 Property and Equipment, Gross 123,298 120,769 Less: Accumulated depreciation ( 44,817 ) ( 42,247 ) Property and Equipment, net $ 78,481 $ 78,522 Other Long-term Assets Other long-term assets consisted of the following (in thousands): September 30, 2020 June 30, 2020 Hong Kong Tax deposit (1) $ 35,495 $ 35,495 Intangible assets, net (2) 3,019 3,063 Other long-term assets, net 4,409 4,665 Total $ 42,923 $ 43,223 (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. 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. (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): September 30, 2020 June 30, 2020 Deferred revenue — short-term $ 18,150 16,464 Accrued expenses 16,793 12,148 Lease liability— current 6,524 7,056 Warranty accrual 4,484 4,538 Accrued compensation and benefits 4,220 4,084 Customer deposits 2,580 2,061 Reserve for sales returns 1,801 1,275 Other payables 77,057 6,096 Total $ 131,609 $ 53,722 Other Long-Term Liabilities Other long-term liabilities consisted of the following (in thousands): September 30, 2020 June 30, 2020 Deferred Revenue — long-term $ 7,637 $ 6,254 Other long-term liabilities 59 58 Total $ 7,696 $ 6,312 11 Table of Contents NOTE 7— ACCRUED WARRANTY The Company offers warranties on certain products, generally a period of one year, and records a liability for the estimated future costs associated with potential warranty claims. The warranty costs are reflected in the Company’s consolidated statements of operations and comprehensive income within cost of revenues. The warranties are typically in effect for twelve months from the distributor’s purchase date of the product. The Company assesses the adequacy of its accrued warranty liabilities and adjusts the amounts as necessary based on historical experience factors and changes in future estimates. Historical factors include product failure rates, material usage and service delivery costs incurred in correcting product failures. In certain circumstances, the Company may have recourse from its contract manufacturers for replacement cost of defective products, which it also factors into its warranty liability assessment. Warranty obligations, included in other current liabilities, were as follows (in thousands): Three Months Ended September 30, 2020 2019 Beginning balance $ 4,538 $ 4,518 Accruals for warranties issued during the period 2,142 2,486 Changes in liability for pre-existing warranties during the period ( 585 ) ( 112 ) Settlements made during the period ( 1,611 ) ( 2,099 ) Ending balance $ 4,484 $ 4,793 NOTE 8— DEBT 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 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. Our Debt consisted of the following (in thousands): September 30, 2020 June 30, 2020 Term Loan - short term $ 25,000 $ 25,000 Debt issuance costs, net ( 933 ) ( 933 ) Total Debt - short term 24,067 24,067 Term Loan - long term 443,750 450,000 Revolver - long term 170,000 180,000 Debt issuance costs, net ( 1,321 ) ( 1,563 ) Total Debt - long term $ 612,429 $ 628,437 The Revolving Facility includes a sub-limit of $ 10.0 million for letters of credit and a sub-limit of $ 25.0 million for swingline loans. The Facilities are available for working capital and general corporate purposes that comply with the terms of the Credit Agreement, including to finance the repurchase of the Company’s common stock or to make dividends to the holders of the Company’s common stock. Under the Credit Agreement, revolving loans and swingline loans may be borrowed, repaid and reborrowed until January 17, 2023, at which time all amounts borrowed must be repaid. The term loan is payable in quarterly installments of 1.25 % of the original principal amount of the term loan, in each case plus accrued and unpaid interest. 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 12 Table of Contents 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. Base rate is defined as the greatest of (A) Wells Fargo’s prime rate, (B) the federal funds rate plus 0.50 % or (C) the applicable LIBOR rate (or replacement rate) for a period of one month plus 1.00 %. A default interest rate shall apply on all obligations during certain events of default under the Credit Agreement at a rate per annum equal to 2.00 % above the applicable interest rate. The Company will pay to each lender a facility fee on a quarterly basis based on the unused amount of each lender’s commitment to make revolving loans, of between 0.20 % and 0.35 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter. The Company will also pay to the applicable lenders on a quarterly basis certain fees based on the daily amount available to be drawn under each outstanding letter of credit, including aggregate letter of credit commissions of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter, and issuance fees of 0.125 % per annum. 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 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. The Credit Agreement includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement. The obligations of Ubiquiti Inc. and certain domestic subsidiaries, if any, under the Credit Agreement are required to be guaranteed by such domestic subsidiaries (the “Domestic Guarantors”) and are collateralized by substantially all assets (excluding intellectual property) of Ubiquiti Inc. and the Domestic Guarantors. 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 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 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): 13 Table of Contents 2021 (remainder) 2022 2023 2024 2025 Thereafter Total Debt payment obligations $ 18,750 $ 25,000 $ 595,000 $ — $ — $ — $ 638,750 Interest and other payments on debt payment obligations (1) 10,106 13,091 7,002 — — — 30,199 Total $ 28,856 $ 38,091 $ 602,002 $ — $ — $ — $ 668,949 (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 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 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. 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: Fixed lease costs Operating expenses $ 1,801 $ 1,574 Fixed lease costs Cost of revenues 509 515 Variable lease costs Operating expenses 203 102 Variable lease costs Cost of revenues 100 93 Total lease costs $ 2,613 $ 2,284 The operating lease costs in the table above include costs for long-term and short-term leases. 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 Fiscal 2022 5,097 Fiscal 2023 4,322 Fiscal 2024 4,130 Fiscal 2025 3,705 Thereafter 5,484 Total future fixed operating lease payments $ 28,737 Less: Imputed interest $ 2,701 Total operating lease liabilities $ 26,036 Weighted-average remaining lease term - operating leases 5.4 years Weighted-average discount rate - operating leases 3.7 % 14 Table of Contents NOTE 10— COMMITMENTS AND CONTINGENCIES Operating Leases 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 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 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 $ 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 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 The Company enters into standard indemnification agreements with many of its business partners in the ordinary course of business. These agreements include provisions for indemnifying the business partner against any claim brought by a third party to the extent any such claim alleges that a Company product infringes a patent, copyright or trademark, or violates any other proprietary rights of that third-party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable and the Company has not incurred any material costs to defend lawsuits or settle claims related to these indemnification agreements to date. Legal Matters The Company may be involved, from time to time, in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters and other litigation matters relating to various claims that arise in the normal course of business. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Taking all of the above factors into account, the Company records an amount where it is probable that the Company will incur a loss and where that loss can be reasonably estimated. However, the Company’s estimates may be incorrect and the Company could ultimately incur more or less than the amounts initially recorded. The Company may also incur significant legal fees, which are expensed as incurred, in defending against these claims. The Company is not currently aware of any pending or threatened litigation that would have a material adverse effect on the Company’s financial statements. Vivato/XR On April 19, 2017, XR Communications, LLC, d/b/a Vivato Technologies (“Vivato”), filed a complaint against the Company in the United States District Court for the Central District of California, alleging that at least one of the Company’s products infringes United States Patent Numbers 7,062,296 (the “’296 Patent”), 7,729,728 (the “’728 Patent”), and 6,611,231 (the “’231 Patent” and, collectively, the “Patents-in-Suit”). The ‘296 and ‘728 Patents are entitled “Forced Beam Switching in Wireless Communication Systems Having Smart Antennas.” The ‘231 Patent is entitled “Wireless Packet Switched Communications Systems and Networks Using Adaptively Steered Antenna Arrays.” Vivato amended its complaint on June 23, 2017 and again on July 6, 2017. 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 15 Table of Contents 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. On March 19, 2018, the Company and the remaining defendants in the consolidated action moved to stay the case (the “Motion to Stay”) pending completion of certain inter partes review proceedings before the Patent Trial and Appeal Board. On April 9, 2018, the Court held a hearing on the Motion to Stay, and, on April 11, 2018, the Court granted the motion. On February 11, 2019, the Court maintained the stay pending a status conference scheduled for December 2, 2019. 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 November 23, 2020. The Company plans to vigorously defend itself against these claims; however, there can be no assurance that the Company will prevail in the lawsuit. The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation. SEC Subpoena 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 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. 5310. NOTE 11— COMMON STOCK AND TREASURY STOCK Common Stock Repurchases 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 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 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. 16 Table of Contents NOTE 13— STOCK BASED COMPENSATION Stock-Based Compensation Plans The Company’s 2010 Equity Incentive Plan and 2005 Equity Incentive Plan are described in its Annual Report. 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 months ended September 30, 2020 and 2019 (in thousands): Three Months Ended September 30, 2020 2019 Cost of revenues $ 28 $ 32 Research and development 510 481 Sales, general and administrative 202 176 $ 740 $ 689 Stock Options 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 Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) Balance, June 30, 2020 22,265 $ 11.07 2.16 $ 3,640 Exercised ( 2,194 ) $ 9.79 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”) The following table summarizes the activity of the RSUs made by the Company: Number of Shares Weighted Average Grant Date Fair Value Per Share Non-vested RSUs, June 30, 2020 82,571 $ 99.57 RSUs granted 3,999 $ 171.06 RSUs vested ( 12,295 ) $ 81.03 RSUs canceled ( 1,191 ) $ 97.73 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. 17 Table of Contents 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 $ 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-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 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 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 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 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. 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. 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 18 Table of Contents 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 Management has determined that the Company operates as one reportable and operating segment as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company’s Chief Operating Decision Maker. Furthermore, the Company does not organize or report its costs on a segment basis. The Company presents its revenues by product type in two primary categories: Service Provider Technology and Enterprise Technology. • Service Provider Technology includes our airMAX, EdgeMAX, UFiber, and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and CPE. Additionally, Service Provider Technology includes antennas and other products primarily in the 0.9 to 6.0 GHz spectrum and miscellaneous products such as mounting brackets, cables and power over Ethernet adapters. • Enterprise Technology includes our UniFi platform, including UniFi enterprise Wi-Fi, UniFi Protect, UniFi switching and routing solutions and our AmpliFi platform. Revenues by product type are as follows (in thousands, except percentages): Three Months Ended September 30, 2020 2019 Service Provider Technology $ 157,461 33 % $ 115,926 36 % Enterprise Technology 316,072 67 % 207,351 64 % Total revenues $ 473,533 100 % $ 323,277 100 % Revenues by geography based on customer’s ship-to destinations were as follows (in thousands, except percentages): Three Months Ended September 30, 2020 2019 North America (1) $ 220,880 47 % $ 147,951 46 % Europe, the Middle East and Africa ("EMEA") 179,180 38 % 125,841 39 % Asia Pacific 41,945 9 % 29,716 9 % South America 31,528 6 % 19,769 6 % Total revenues $ 473,533 100 % $ 323,277 100 % (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 September 30, September 30, June 30, 2020 2019 2020 2020 Customer A * 10 % * * Customer B 12 % 14 % 18 % 17 % NOTE 16— RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS 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. Pera. Pursuant to the Aircraft Lease Agreement, the Company may lease an aircraft owned by the Lessor for Company business purposes. Under the Aircraft Lease Agreement, the aircraft may be leased at a rate of $ 5,000 per flight hour. 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 $ 0.5 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 19 Table of Contents Consolidated Statements of Operations and Comprehensive Income. NOTE 17 - SUBSEQUENT EVENTS Stock Repurchases 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. Dividends 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.