What changed in this filing

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Item 1. Financial Statements

2021-02-05 compared with 2020-11-06 · 196 added, 144 removed, 473 unchanged (42% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Current assets:

1 unchanged sentence

Investments — short-term 508 925

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

Accounts receivable, net of allowance for doubtful accounts of $ 49 and $ 203 at December 31, 2020 and June 30, 2020, respectively

163,696 142,160

13 unchanged sentences

Accounts payable $ 86,672 $ 155,547

Income taxes payable 42,406 30,961

Taxes payable 13,127 30,961

Debt — short-term 24,067 24,067

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500,000,000 shares authorized:

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

62,798,242 and 63,687,891 outstanding as of December 31, 2020 and June 30, 2020, respectively

Additional paid–in capital 55 447

7 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Revenues $ 479,436 $ 308,284 $ 952,969 $ 631,561

24 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30, 2020

Three and Six Months Ended December 31, 2020

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

10 unchanged sentences

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

Three Months Ended September 30, 2019

Net Income — — 159,668 — 159,668

Other comprehensive income (loss) — — — ( 4 ) ( 4 )

Stock options exercised 2,384 — 22 — — 22

Restricted stock units issued, net of tax withholdings 8,141 — ( 201 ) — — ( 201 )

Repurchases of Common Stock ( 309,133 ) — ( 516 ) ( 54,542 ) — ( 55,058 )

Stock-based compensation expense — 750 — — 750

Dividends Paid on Common Stock ($ 0.40 per share)

— — ( 25,115 ) — ( 25,115 )

Balances at December 31, 2020 62,798,242 $ 63 $ 55 $ ( 181,922 ) $ 4 $ ( 181,800 )

Three and Six Months Ended December 31, 2019

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

10 unchanged sentences

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

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 )

See notes to consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Three Months Ended September 30,

Six Months Ended December 31,

Cash Flows from Operating Activities:

2 unchanged sentences

Depreciation and amortization 5,266 3,669

Impairment of cost based investment — 5,000

Amortization of debt issuance costs 968 809

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Purchase of property and equipment and other long-term assets ( 11,870 ) ( 20,185 ) (1)

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

Purchase of investments — ( 25,034 )

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Net cash (used in) financing activities $ ( 251,504 ) $ ( 436,794 )

Net (decrease) in cash and cash equivalents ( 14,190 ) ( 118,406 )

Net increase (decrease) in cash and cash equivalents 46,497 ( 138,143 )

Cash and cash equivalents at beginning of period 142,617 238,147

5 unchanged sentences

Right-of-use asset recognized $ 18,626 $ 4,739

Unpaid stock repurchases $ 13,662 $ 21,844

Unpaid property and equipment and other long-term assets $ 380 $ 466

Net unsettled investment purchases (sales and maturities) $ — $ 517

(1) The Company reclassified $ 15 million reported in previous period, related to deposits on long term assets to purchase of property and equipment and other long-term assets, to conform to the current period presentation.

See notes to consolidated financial statements.

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

The results of operations for the three and six months ended December 31, 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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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.

The Company evaluates its 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.

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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.

For available-for-sale debt securities, the Company 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.

The Company 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

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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.

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 is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

Revenue is recognized when obligations under the terms of a contract with customers are satisfied;

generally, this occurs with the transfer of control of the Company’s products and PCS to its customers.

Transfer of control to the customer for products generally occurs at the point in time when products have been shipped to customers 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.

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.

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

The Company classifies 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 the Company’s consolidated balance sheets.

As of December 31, 2020 and June 30, 2020, the Company’s customer deposits were $ 4.9 million and $ 2.1 million, respectively.

As of December 31, 2020, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 20.0 million and $ 8.7 million, respectively.

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

NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS

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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

The Company classifies its 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.

The Company’s 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 the Company’s 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 December 31, 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 December 31, 2020 and June 30, 2020 (in thousands):

December 31, 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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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.

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):

For the three and six months ended December 31, 2020 the Company did no t recognize any net gains or losses from accumulated other comprehensive income related to unrealized gains or losses.

For the three and six months ended December 31, 2019, the Company reclassified realized net gain of $ 0.2 million and $ 0.4 million to earnings from accumulated other comprehensive income related to unrealized gains or losses.

During the three and six months ended December 31, 2020, and 2019, interest income on the Company’s investment securities was immaterial.

The Company had no continuous unrealized loss position from marketable securities as of December 31, 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 December 31, 2020 (in thousands):

Available-For-Sale

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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.

As of December 31, 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.

As of December 31, 2020 and June 30, 2020, the fair value of the Company’s debt, which is carried at historical cost was $ 607.5 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,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Net income $ 159,668 $ 85,811 $ 316,177 $ 183,957

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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,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Restricted stock units — — — —

1 unchanged sentence

Inventories consisted of the following (in thousands):

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Finished goods $ 229,916 $ 282,381

3 unchanged sentences

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

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Testing equipment $ 14,385 $ 12,476

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

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Hong Kong Tax deposit (1)

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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.

The Company expects 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.

(2) Accumulated amortization was $ 2.0 million and $ 1.8 million as of December 31, 2020 and June 30, 2020, respectively.

Other Current Liabilities

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

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Deferred revenue — short-term $ 19,951 16,464

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

September 30, 2020 June 30, 2020

December 31, 2020 June 30, 2020

Deferred Revenue — long-term $ 8,714 $ 6,254

2 unchanged sentences

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 Company offers warranties on certain products, generally a period of one to two years 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 warranties are typically in effect for one year for distributors from the date of shipment and two years for direct sales from the date of delivery.

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.

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

Three Months Ended September 30,

Six Months Ended December 31,

Beginning balance $ 4,538 $ 4,518

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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

The Company’s Debt consisted of the following (in thousands):

December 31, 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.

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.

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.

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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 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 ratio 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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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.

As of December 31, 2020, $ 462.5 million was outstanding on the Term Facility and $ 145.0 million on the Revolving Facility, leaving $ 555.0 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.

Under the Credit Agreement, during the three months ended December 31, 2020, the Company made aggregate payments of $ 8.5 million under the Term Facility, of which $ 6.2 million was repayment of principal and $ 2.3 million was payment of interest.

During the six months ended December 31, 2020, the Company made aggregate payments of $ 17.1 million under the Term Facility, of which $ 12.5 million was repayment of principal and $ 4.6 million was payment of interest.

As of December 31, 2020, the interest rate on the term loan was 1.90 %.

As of January 29, 2021, the most currently available reset date, the Term Facility has an interest rate of 1.87 %.

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

Under the Credit Agreement, during the three months ended December 31, 2020, the Company made aggregate payments of $ 101.0 million under the Revolving Facility, of which $ 100.0 million was repayment of principal and $ 1.0 million was payment of interest.

During the six months ended December 31, 2020, the Company made aggregate payments of $ 111.9 million under the Revolving Facility, of which $ 110.0 million was repayment of principal and $ 1.9 million was payment of interest.

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

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

$ 75 Million Revolver

1.90 % October 19, 2020 1.90 %

1.90 % January 14, 2021 1.88 %

$ 70 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):

1.90 % January 21, 2021 1.88 %

The following table summarizes the Company’s estimated debt and interest payment obligations as of December 31, 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 $ 18,965 $ 37,679 $ 576,774 $ — $ — $ — $ 633,418

(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.

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

Although the Company’s interest rates on our debt obligations may vary, the Company has 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

The Company enters into agreements under which it leases 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 the Company’s 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 December 31, 2020, the Company included such options in determining the lease terms for certain of the Company’s leases because the Company was reasonably certain that it would exercise those options.

Most of the Company’s leases require it to pay certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs.

The following table summarizes the Company’s lease costs for the three and six months ended December 31, 2020 and 2019 (in thousands):

Financial Statement Classification Three Months Ended December 31, Six Months Ended December 31,

2020 2019 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 three months ended September 30, 2020 and 2019 were immaterial.

Total short-term costs for the six months ended December 31, 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:

For the three and six months ended December 31, 2020, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 2.6 million and $ 5.4 million, respectively.

For the three and six months ended December 31, 2019, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 2.2 million and $ 4.4 million, respectively.

Cash paid for amounts associated with the Company’s operating lease liabilities were classified as operating activities in the consolidated statement of cash flows.

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

Remainder of Fiscal 2021 $ 4,722

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Operating Leases

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

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of December 31, 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.

The Company subcontracts with third parties to manufacture its products and have purchase commitments with key component suppliers.

During the normal course of business, the Company’s contract manufacturers procure components and manufacture

products based upon orders placed by the Company.

If the Company cancels all or part of the orders, the Company may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture the Company's products.

The Company periodically reviews the potential liability, and as of December 31, 2020, the Company recorded a purchase obligation liability of $ 7.6 million related to component purchase commitments.

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

The Company’s consolidated financial position and results of operations could be negatively impacted if it were required to compensate the contract manufacturers for any unrecorded liabilities incurred.

The Company may be subject to additional purchase obligations for supply agreements and components ordered by its contract manufacturers based on manufacturing forecasts it provides them each month.

The Company estimates the amount of these additional purchase obligations to range from $ 149.8 million to $ 617.6 million as of December 31, 2020, depending upon the timing of orders placed for these components by its 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.

As of December 31, 2020, the Company has other obligations of $ 57.9 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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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 Court maintained the stay in full pending a further status conference, which was originally scheduled for March 17, 2020 and subsequently rescheduled for February 22, 2021.

The Patent Trial and Appeal Board, in the aforementioned series of inter partes review proceedings, invalidated two of the three patents-in-suit, but it rejected the challenge to the ‘231 Patent.

The decision was appealed.

On November 25, 2020, the Federal Circuit Court of Appeals affirmed the Patent Trial and Appeal Board decision.

The Company anticipates the issue of the pending stay will be addressed by the Court at the February 22 status hearing.

The Company plans to vigorously defend itself against these claims;

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The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

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.

Ubiquiti Inc.

Cambium Networks (“Cambium”), et.

This litigation was initiated in 2018 by the Company and relates to the defendants’ development, marketing and sale of firmware licensed under the trade name “Elevate.” Elevate was designed by Defendant Cambium to be used on Ubiquiti’s M-Series line of devices and to replace Ubiquiti’s AirOS firmware on said devices.

The Company asserted causes of action for breach of contract (Count I), willful violation of the Copyright Act (Count II), violations of the Computer Fraud and Abuse Act (Count III), violations of the Digital Millennium Copyright Act (Count IV), false advertising under § 43(a) of the Lanham Act (Count V), tortious interference with contract (Count VI), unfair competition (Count VII), intentional interference with prospective economic advantage (Count VIII), common law misappropriation claims (Count IX), and RICO violations (Counts X & XI).

None of the Defendants asserted any counter-claims against the Company.

The parties reached a confidential settlement of the lawsuit on December 1, 2020.

Pursuant to the settlement, the case was dismissed by the Court on January 5, 2021.

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 September 30, 2020, the Company repurchased and retired 228,180 shares of common stock at an average price per share of $ 166.05 for an aggregate amount of $ 37.9 million.

As of September 15, 2020, the Company had no remaining balance available for share repurchase under the 2019 November Program.

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

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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):

During the three months ended December 31, 2020, the Company repurchased and retired 309,133 shares of common stock at an average price per share of $ 178.11 for an aggregate amount of $ 55.1 million.

During the six months ended December 31, 2020, the Company repurchased and retired 911,136 shares of common stock at an average price per share of $ 167.53 for an aggregate amount of $ 152.6 million.

As of December 31, 2020, the Company had $ 385.2 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 six months ended December 31, 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

May 8, 2020 $ 500 million 682,956 $ 168.03 $ 114.8 September 15, 2020 - November 2, 2020 $ 385.2 3/31/2022

NOTE 12— ACCUMULATED OTHER COMPREHENSIVE INCOME

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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.

For the three and six months ended December 31, 2020 and 2019, the Company’s accumulated other comprehensive income includes net unrealized gains (losses) from the Company’s available-for-sale securities, respectively.

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.

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

In December 2020, the Company's stockholders approved the Ubiquiti Inc.

2020 Omnibus Incentive Plan (the “2020 Equity Plan”) that will succeed the Company's 2010 Equity Incentive Plan (the “Prior Plan”), and no additional awards will be granted under the Prior Plan following January 31, 2021.

Under the terms of the 2020 Equity Plan, the Company is authorized to grant awards for up to five million shares of common stock over the term of the 2020 Equity Plan.

Outstanding awards under the Prior Plan remain in effect pursuant to the terms of the Prior Plan.

As of December 31, 2020, the Company had 14,991,245 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,

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

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Cost of revenues $ 29 $ 33 $ 57 $ 65

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Sales, general and administrative 209 170 411 346

$ 750 $ 730 $ 1,490 $ 1,419

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:

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

Common Stock Options Outstanding

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Exercised ( 4,578 ) $ 9.56

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.

Forfeitures and cancellations ( 6 ) $ 2.90

Balance, December 31, 2020 17,681 $ 11.46 1.72 $ 4,722

Vested as of December 31, 2020 17,681 $ 11.46 1.72 $ 4,722

Vested and exercisable as of December 31, 2020 17,681 $ 11.46 1.72 $ 4,722

During the three months ended December 31, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.6 million and $ 3.1 million, respectively, as determined as of the date of option exercise.

During the six months ended December 31, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.9 million and $ 3.2 million, respectively, as determined as of the date of options exercise.

As of December 31, 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 and six months ended December 31, 2020 and 2019.

Restricted Stock Units (“RSUs”)

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RSUs canceled ( 1,697 ) $ 110.07

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.

Non-vested RSUs, December 31, 2020 64,455 $ 110.62

The intrinsic value of RSUs vested in the three months ended December 31, 2020 and 2019 was $ 2.4 million and $ 1.6 million, respectively.

The intrinsic value of RSUs vested in the six months ended December 31, 2020 and 2019 was $ 4.5 million and $ 3.4 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 18.0 million as of December 31, 2020.

As of December 31, 2020, there were unrecognized compensation costs related to RSUs of $ 4.8 million which the Company expects to recognize over a weighted average period of 2.9 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 recorded tax provisions of $ 27.5 million and $ 57.1 million for the three and six months ended December 31, 2020 as compared to $ 14.2 million and $ 32.0 million for the three and six months ended December 31, 2019.

The increase is primarily related to an increase in profit before tax for the six months ended December 31, 2020 as compared to the six months ended December 31, 2019.

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.

tax rate, partially offset by additional US tax related to the Company’s non-U.S.

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

As of December 31, 2020, the Company had approximately $ 32.5 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

During the three months ended December 31, 2020, the Company recorded an increase of its unrecognized tax benefits of $ 1.4 million and released $ 1.6 million of its unrecognized tax benefits due to the lapse of the application statute of limitations for the quarter ended December 31, 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.

As of December 31, 2020, the Company had $ 4.4 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.

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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 2010-2015 tax years.

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

On December 30, 2020, the company received notification that the Hong Kong IRD is seeking an additional $ 67.8 million deposit covering the 2015 tax year.

The Company has filed a formal protest in response to this notice and the matter is awaiting a response from the Hong Kong IRD.

The refundable deposits are included within other long-term assets on the Company’s 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.

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 the Company expects 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.

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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.

The Company estimates 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.

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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 in future periods.

The Company 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.

On December 27, 2020, the Consolidations Appropriations Act (“CAA”) 2020 was enacted.

The CCA was enacted as a supplement to the CARES legislation providing additional financial relief

to taxpayers adversely impacted by restrictions put into place in response to the COVID-19 pandemic.

In addition, the CCA provides funding for public health initiatives in response to the pandemic.

This legislation does not have a material impact on the Company’s tax provision.

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

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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.

• Service Provider Technology includes the Company’s 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.

• Enterprise Technology includes the Company’s UniFi platform, including UniFi enterprise Wi-Fi, UniFi Protect, UniFi Access, UniFi switching and routing solutions and the Company’s AmpliFi platform.

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Service Provider Technology $ 149,875 31 % $ 97,716 32 % $ 307,337 32 % $ 213,642 34 %

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

North America (1)

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Total revenues $ 479,436 100 % $ 308,284 100 % $ 952,969 100 % $ 631,561 100 %

(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.

(1) Revenue for the United States was $ 179.1 million and $ 121.7 million for the three months ended December 31, 2020 and 2019, respectively.

Revenue for the United States was $ 388.9 million and $ 263.6 million for the six months ended December 31, 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,

Three Months Ended December 31, Six Months Ended December 31, December 31, June 30,

2020 2019 2020 2019 2020 2020

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NOTE 16— RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS

Aircraft Lease Agreemen t

Aircraft Lease Agreement

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 $ 0.5 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.

Pursuant to the Aircraft Lease Agreement, the Company had no expense during the three and six months ended December 31, 2020 and recognized a total of approximately $ 0.4 million and $ 0.9 million in expenses during the three and six months ended December 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.

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.

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.

On February 5, 2021, the Company announced that its Board of Directors had approved a quarterly cash dividend of $ 0.40 per share payable on February 22, 2021 to shareholders of record at the close of business on February 16, 2021.

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