What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2021-02-05 · 161 added, 135 removed, 534 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except share data)

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Current assets:

1 unchanged sentence

Investments — short-term 1,013 925

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

Accounts receivable, net of allowance for doubtful accounts of $ 52 and $ 203 at March 31, 2021 and June 30, 2020, respectively

187,315 142,160

28 unchanged sentences

500,000,000 shares authorized:

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

62,814,126 and 63,687,891 outstanding as of March 31, 2021 and June 30, 2020, respectively

Additional paid–in capital 696 447

7 unchanged sentences

(In thousands, except per share amounts)

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

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

2021 2020 2021 2020

25 unchanged sentences

(In thousands, except per share amounts)

Three and Six Months Ended December 31, 2020

Three and Nine Months Ended March 31, 2021

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

19 unchanged sentences

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

Three and Six Months Ended December 31, 2019

Net Income — — — 146,075 — 146,075

Other comprehensive income (loss) — — — — ( 1 ) ( 1 )

Stock options exercised 4,372 — 48 — — 48

Restricted stock units issued, net of tax withholdings 11,512 — ( 182 ) — — ( 182 )

Stock-based compensation expense — — 775 — — 775

Dividends Paid on Common Stock ($ 0.40 per share)

— — — ( 25,124 ) — ( 25,124 )

Balances at March 31, 2021 62,814,126 $ 63 $ 696 $ ( 60,971 ) $ 3 $ ( 60,209 )

Three and Nine Months Ended March 31, 2020

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

19 unchanged sentences

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

Net Income — — — 103,722 — 103,722

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

Stock options exercised 2,478 — 25 — — 25

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

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

Stock-based compensation expense — — 725 — — 725

Dividends Paid on Common Stock ($ 0.30 per share)

— — — ( 19,447 ) — ( 19,447 )

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

See notes to consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Six Months Ended December 31,

Nine Months Ended March 31,

Cash Flows from Operating Activities:

2 unchanged sentences

Depreciation and amortization 8,313 5,098

Impairment of cost based investment — 5,000

Impairment of equity investment — 5,000

Amortization of debt issuance costs 1,462 1,308

43 unchanged sentences

Right-of-use asset recognized $ 20,773 $ 5,665

Unpaid stock repurchases $ — $ 5,210

Unpaid property and equipment and other long-term assets $ 49 $ 19

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.

Net unsettled investment purchases $ 1,234 $ 117

See notes to consolidated financial statements.

14 unchanged sentences

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

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

The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the results to be expected for any future periods.

NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

46 unchanged sentences

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 March 31, 2021 and June 30, 2020, the Company’s customer deposits were $ 4.3 million and $ 2.1 million, respectively.

As of March 31, 2021, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 22.2 million and $ 9.3 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.

12 unchanged sentences

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

The Company held no Level 3 financial instruments as of March 31, 2021 and June 30, 2020.

March 31, 2021

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

15 unchanged sentences

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

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):

For the three and nine months ended March 31, 2021 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 months ended March 31, 2020, the Company's reclassified realized net loss to earnings from accumulated other comprehensive income related to unrealized gains or losses, was immaterial.

For the nine months ended March 31, 2020, the Company reclassified realized net gain of $ 0.4 million to earnings from accumulated other comprehensive income related to unrealized gains or losses.

During the three and nine months ended March 31, 2021, interest income on the Company’s investment securities was immaterial.

During the three and nine months ended March 31, 2020, the Company had $ 0.2 million and $ 1.0 million interest income on the Company's investment securities.

The following table represents the Company's marketable securities that had been in continuous unrealized loss position for less than 12 months and for 12 months or greater as of March 31, 2021 (in thousands):

Continuous Unrealized Loss

Less than 12 Months 12 Months or Greater Total

Fair Value of marketable securities $ 1,133 $ — $ 1,133

Unrealized Loss ( 1 ) — ( 1 )

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

The following table represents the adjusted costs and fair value of cash equivalents and investments by contractual maturity as of March 31, 2021 (in thousands):

Available-For-Sale

1 unchanged sentence

Due within 1 year and money market funds $ 1,734 $ 1,737

Due after 1 year through 5 years 726 726

Total $ 2,460 $ 2,463

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 December 31, 2020 and June 30, 2020, the Company had outstanding loans associated with its credit facilities, which are carried at historical cost.

As of March 31, 2021 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 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.

As of March 31, 2021 and June 30, 2020, the fair value of the Company’s debt, which is carried at historical cost was $ 575.0 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 December 31, Six Months Ended December 31,

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

2021 2020 2021 2020

10 unchanged sentences

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 December 31, Six Months Ended December 31,

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

2021 2020 2021 2020

2 unchanged sentences

Inventories consisted of the following (in thousands):

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Finished goods $ 221,307 $ 282,381

3 unchanged sentences

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

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Testing equipment $ 14,985 $ 12,476

10 unchanged sentences

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

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Hong Kong Tax deposit (1)

4 unchanged sentences

(1) The Company made a total of $ 57.4 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.

These deposits were made during fiscal years 2021, 2020, 2019, and 2018 in the amounts of $ 21.9 million, $ 15.5 million, $ 13.4 million and $ 6.6 million, respectively.

The Company expects the $ 57.4 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 $ 2.0 million and $ 1.8 million as of December 31, 2020 and June 30, 2020, respectively.

(2) Accumulated amortization was $ 2.4 million and $ 1.8 million as of March 31, 2021 and June 30, 2020, respectively.

Other Current Liabilities

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

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Deferred revenue — short-term $ 22,193 16,464

5 unchanged sentences

Reserve for sales returns 2,153 1,275

Inventory received not billed 82,105 1,607

Other payables 5,483 4,489

2 unchanged sentences

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

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

Deferred Revenue — long-term $ 9,323 $ 6,254

2 unchanged sentences

NOTE 7— ACCRUED WARRANTY

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 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.

4 unchanged sentences

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

Six Months Ended December 31,

Nine Months Ended March 31,

Beginning balance $ 4,538 $ 4,518

3 unchanged sentences

Ending balance $ 4,753 $ 4,544

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.

On March 30, 2021, the Company, as borrower and certain domestic subsidiaries entered into an amended and restated credit agreement (the “Third Amended and Restated 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 extended the $ 700 million senior secured revolving credit facility (the “Revolving Facility”) and provided a new $ 500 million senior secured term loan facility (the “Term Facility”, together with the Revolving Facility, the “Facilities”), and extended the maturity of the Facilities to March 30, 2026.

In addition, the Facilities include an option to request increases in the amounts of such credit facilities by up to an additional $ 500 million in the aggregate.

The Third Amended and Restated Credit Agreement replaced the Company's existing $ 700 million senior secured revolving facility (the “Existing Revolving Facility”) and $ 500 million senior secured term loan facility (the “Existing Term Facility”, together with the Existing Revolving Facility, the “Existing Facilities”) under the Second Amended & Restated Credit Agreement, dated as of January 17, 2018 (as amended by the First Amendment, dated as of June 29, 2018, the Second Amendment, dated as of March 15, and the Third Amendment, dated as of September 9, 2019, the “Existing Credit Agreement”).

The Facilities replace the Company's Existing Facilities under the Existing Credit Agreement, which has been terminated in connection with the Third Amended and Restated Credit Agreement.

At the closing of the Third Amended and Restated Credit Agreement, the Term facility was fully drawn, of which $ 462.5 million and $ 0.7 million was used to repay the Existing Term Facility under the Existing Credit Agreement for principal and interest, respectively.

Additionally, at closing of the Third Amended and Restated Credit Agreement, $ 75.0 million and $ 0.4 million of the Existing Revolving Facility under the Existing Credit Agreement was repaid for principal and interest, respectively.

The Company then borrowed $ 75.0 million under the Revolving Facility under the Third Amended and Restated Credit Agreement.

The Company incurred $ 3.3 million of debt issuance costs which are capitalized and amortized as interest expense over the life of the facilities.

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

December 31, 2020 June 30, 2020

March 31, 2021 June 30, 2020

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

6 unchanged sentences

The Revolving Facility includes a sub-limit of $ 25.0 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.

The Facilities are available for working capital and general corporate purposes that comply with the terms of the Third Amended and Restated 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 Third Amended and Restated Credit Agreement, revolving loans and swingline loans may be borrowed, repaid and reborrowed until March 30, 2026, 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, commencing with the quarter ending June 30, 2021.

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

2 unchanged sentences

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 Third Amended and Restated 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.

1 unchanged sentence

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

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

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 Third Amended and Restated Credit Agreement requires the Company to maintain during the term of the Facilities a maximum consolidated total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratio of 3.5 to 1.00.

In addition, the Third Amended and Restated 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 Third Amended and Restated 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 Third Amended and Restated Credit Agreement.

The Facilities

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.

As of March 31, 2021, $ 500.0 million was outstanding on the Term Facility and $ 75.0 million on the Revolving Facility, leaving $ 625.0 million available on the Revolving Facility.

Term Facility:

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 %.

Under the Existing Credit Agreement, during the three months ended March 31, 2021, the Company made no principal payments against the Existing Term Facility, however, made $ 2.0 million payment of interest.

During the nine months ended March 31, 2021, the Company made aggregate payments of $ 19.1 million under the Existing Term Facility, of which $ 12.5 million was repayment of principal and $ 6.6 million was payment of interest.

As of March 31, 2021, the interest rate on the term loan was 1.61 %.

As of April 30, 2021, the most currently available reset date, the Term Facility has an interest rate of 1.6 %.

Revolving Facility:

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 % January 14, 2021 1.88 %

Under the Existing Credit Agreement, during the three months ended March 31, 2021, the Company made aggregate payments of $ 71.0 million under the Existing Revolving Facility, of which $ 70.0 million was repayment of principal and $ 1.0 million was payment of interest.

During the nine months ended March 31, 2021, the Company made aggregate payments of $ 182.9 million under the Existing Revolving Facility, of which $ 180.0 million was repayment of principal and $ 2.9 million was payment of interest.

The table below shows the respective interest rates as of March 31, 2021, in addition to the interest rate reset dates as available for each revolver draw.

Debt Payment Obligations Interest Rate as of March 31, 2021 Rate Reset Date Reset Rate

$ 75 Million Revolver

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):

1.61 % April 30, 2021 1.61 %

The following table summarizes the Company’s estimated debt and interest payment obligations as of March 31, 2021, for the remainder of fiscal 2021 and future fiscal years (in thousands):

2021 (remainder) 2022 2023 2024 2025 Thereafter Total

3 unchanged sentences

Total $ 8,904 $ 35,391 $ 34,983 $ 34,601 $ 34,167 $ 475,340 $ 623,386

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

(1) - Interest payments are calculated based on the applicable rates and payment dates as of March 31, 2021.

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.

2 unchanged sentences

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.

As of March 31, 2021, 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 the extension 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,

The following table summarizes the Company’s lease costs for the three and nine months ended March 31, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

6 unchanged sentences

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

Total short-term costs for the six months ended December 31, 2020 and 2019 were immaterial.

Total short-term costs for the three and nine months ended March 31, 2021 and 2020 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 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.

For the three and nine months ended March 31, 2021, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 2.8 million and $ 8.2 million, respectively.

For the three and nine months ended March 31, 2020, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 2.3 million and $ 6.6 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 $ 2,466

11 unchanged sentences

Operating Leases

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of December 31, 2020.

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of March 31, 2021.

Purchase Obligations

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.

The Company subcontracts with third parties to manufacture its products and has 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 periodically reviews the potential liability, and as of March 31, 2021, the Company recorded a purchase obligation liability of $ 8.3 million related to component purchase commitments.

There have been no other significant liabilities for cancellations recorded as of March 31, 2021.

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.

The Company estimates the amount of these additional purchase obligations to range from $ 150.3 million to $ 756.5 million as of March 31, 2021, depending upon the timing of orders placed for these components by its contract manufacturers.

Other Obligations

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.

As of March 31, 2021, the Company has other obligations of $ 52.9 million which consisted primarily of commitments related to raw materials and research and development projects.

Indemnification Obligations

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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.

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.

On February 11, 2019, the Court maintained the stay pending a status conference scheduled for

December 2, 2019.

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 and was postponed pending submission and approval of a scheduling order as described below.

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.

That decision was appealed, and on November 25, 2020, the Federal Circuit Court of Appeals affirmed the Patent Trial and Appeal Board decision.

On February 16, 2021, the parties submitted a joint status report to the Court seeking to lift the stay.

On February 17, 2021, the Court ordered the parties to submit a further report by March 1, 2021, at which time the stay would be lifted.

The parties submitted their joint report and proposals for a case schedule, and the Court has not yet issued a schedule in this matter.

The Company plans to vigorously defend itself against these claims;

2 unchanged sentences

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.

National Union National Union Fire Insurance Company of Pittsburgh, Pa.

(“National Union”)

The Company filed this action in February of 2018, in the Superior Court of California County of Santa Clara.

The Company alleged causes of action for breach of the applicable insurance contract and breach of the implied covenant of good faith and fair dealing, arising from National Union’s coverage denial for a loss from an email compromise scam that occurred in 2015.

The parties reached a confidential settlement of the lawsuit on March 4, 2021.

Pursuant to the settlement, the case was dismissed by the Court on March 24, 2021.

NOTE 11— COMMON STOCK AND TREASURY STOCK

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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.

During the three months ended September 30, 2020, under the 2019 November Program, 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.

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The 2020 May Program expires on March 31, 2022.

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):

During the six months ended December 31, 2020, under the 2020 May Program, the Company repurchased and retired 682,956 shares of common stock at an average price per share of $ 168.03 for an aggregate amount of $ 114.8 million.

The Company made no repurchases during the three months ended March 31, 2021.

Under both programs, for the nine months ended March 31, 2021, 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 March 31, 2021, 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 nine months ended March 31, 2021 (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

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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 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.

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

For the three and nine months ended March 31, 2021 and 2020, the Company’s accumulated other comprehensive income includes net unrealized gains and losses from the Company’s available-for-sale securities, respectively.

NOTE 13— STOCK BASED COMPENSATION

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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.

As of March 31, 2021, the Company had 4,989,876 authorized shares available for future issuance under all of its stock incentive plans.

Stock-Based Compensation

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

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

The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended March 31, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

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Stock Options

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

The following is a summary of option activity for the Company’s stock incentive plans for the nine months ended March 31, 2021:

Common Stock Options Outstanding

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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.

Balance, March 31, 2021 13,309 $ 11.65 1.56 $ 3,815

Vested as of March 31, 2021 13,309 $ 11.65 1.56 $ 3,815

Vested and exercisable as of March 31, 2021 13,309 $ 11.65 1.56 $ 3,815

During the three months ended March 31, 2021 and 2020, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 1.4 million and $ 0.3 million, respectively, as determined as of the date of option exercise.

During the nine months ended March 31, 2021 and 2020, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 2.4 million and $ 3.5 million, respectively, as determined as of the date of options exercise.

As of March 31, 2021, 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 nine months ended March 31, 2021 and 2020.

Restricted Stock Units (“RSUs”)

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RSUs canceled ( 2,001 ) $ 105.82

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.

Non-vested RSUs, March 31, 2021 62,115 $ 142.42

The intrinsic value of RSUs vested in the three months ended March 31, 2021 and 2020 was $ 3.2 million and $ 3.3 million, respectively.

The intrinsic value of RSUs vested in the nine months ended March 31, 2021 and 2020 was $ 7.7 million and $ 6.7 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 18.5 million as of March 31, 2021.

As of March 31, 2021, there were unrecognized compensation costs related to RSUs of $ 6.6 million which the Company expects to recognize over a weighted average period of 3.4 years.

NOTE 14— INCOME TAXES

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 recorded tax provisions of $ 28.0 million and $ 85.1 million for the three and nine months ended March 31, 2021 as compared to $ 17.0 million and $ 49.1 million for the three and nine months ended March 31, 2020.

The increase is primarily related to an increase in profit before tax for the three and nine months ended March 31, 2021 as compared to the three and nine months ended March 31, 2020.

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

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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 December 31, 2020, the Company had $ 4.4 million accrued interest related to uncertain tax matters.

As of March 31, 2021, the Company had approximately $ 34.0 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

During the nine months ended March 31, 2021, the Company recorded an increase of its unrecognized tax benefits of $ 1.5 million.

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

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

As of March 31, 2021, the Company had $ 4.6 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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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 Company has filed a formal protest in response to this notice and the Assessor's office agreed to a reduced deposit of $ 21.9 million which was remitted on March 26, 2021.

These refundable deposits totaling $ 57.4 million 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.

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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.

The impact of the CCA on the Company's tax provision is immaterial.

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

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

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

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

2021 2020 2021 2020

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

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

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

2021 2020 2021 2020

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Total revenues $ 467,237 100 % $ 337,417 100 % $ 1,420,206 100 % $ 968,978 100 %

(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.

(1) Revenue for the United States was $ 193.2 million and $ 125.4 million for the three months ended March 31, 2021 and 2020, respectively.

Revenue for the United States was $ 582.1 million and $ 389.0 million for the nine months ended March 31, 2021 and 2020, 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 December 31, Six Months Ended December 31, December 31, June 30,

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

2021 2020 2021 2020 2021 2020

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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.

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.

This hourly rate does not include the cost of flight crew or

on-board services, which the Company purchases from a third-party provider.

Pursuant to the Aircraft Lease Agreement, the Company had no expense during the three and nine months ended March 31, 2021 and recognized a total of approximately $ 0.4 million and $ 1.3 million in expenses during the three and nine months ended March 31, 2020, 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

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.

On May 6, 2021, the Company's Board of Directors had approved a quarterly cash dividend of $ 0.40 per share payable on May 24, 2021 to shareholders of record at the close of business on May 17, 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