What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2021-02-05 · 87 added, 78 removed, 206 unchanged (44% of the section changed)

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While we have not yet experienced a significant disruption to the productivity of our employees as a result of the COVID-19 pandemic, if the stay-at-home orders or work remote or from home conditions in any of our facilities continue for an extended period of time, or if we have an outbreak in any of our facilities, we may, among other issues, experience delays in product development, a decreased ability to support our customers, disruptions in sales and an overall lack of productivity.

We have experienced a disruption in our supply chain as a result of the COVID-19 related restrictions that have impacted our suppliers’ ability to manufacture or provide key components or services, and we have incurred, and continue to incur, additional cost to expedite deliveries of components and services.

While our ability to procure components and services has improved since the initial outbreak of the pandemic, the disruptions in our supply chain have not been fully remediated.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including further disruptions to our supply chain, reductions in demand due to disruptions in the operations of our customers or their end customers, disruptions in local and global economies, volatility in the global financial markets, overall reductions in demand, restrictions on the export or shipment of our products or other COVID-19-related events.

This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions.

We have experienced a disruption in our supply chain and production as a result of the COVID-19 related restrictions and the global shortage of components.

The current environment has impacted our suppliers’ ability to manufacture or provide key components or services, and we have incurred, and continue to incur, additional cost to expedite deliveries of components and services.

The extent to which the COVID-19 pandemic and the global availability of components impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including further disruptions to our supply chain, reductions in demand due to disruptions in the operations of our customers or their end customers, disruptions in local and global economies, volatility in the global financial markets, overall reductions in demand, restrictions on the export or shipment of our products or other COVID-19-related events.

This uncertainty also affects management’s

accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions.

Refer to Risk Factors (Part II, Item 1A of this Form 10-Q) for a discussion of these factors and other risks.

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We sell our products and solutions globally to service providers and enterprises primarily through our extensive network of distributors, and, to a lesser extent, through direct sales.

Sales to distributors accounted for 87% of our revenues during the six months ended December 31, 2020.

Direct sales accounted for 13% of our revenue during the six months ended December 31, 2020.

Sales to distributors accounted for 85% of our revenues during the nine months ended March 31, 2021.

Direct sales accounted for 15% of our revenue during the nine months ended March 31, 2021.

For the nine months ended March 31, 2020, sales to distributors accounted for 95% of our revenues and direct sales accounted for 5% of our revenues.

Cost of Revenues

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Over time, we expect our research and development costs to increase as we continue making significant investments in developing new products in addition to new versions of our existing products.

• Sales, general and administrative expenses include salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in sales, marketing and general and administrative activities, as well as the costs of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, professional services, facilities, general liability insurance and travel.

general liability insurance and travel.

As our product portfolio and targeted markets expand, we may need to employ different sales models, such as building a traditional direct sales force.

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Results of Operations

Comparison of Three and Six Months Ended December 31, 2020 and 2019

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

Comparison of Three and Nine Months Ended March 31, 2021 and 2020

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

2021 2020 2021 2020

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Total stock-based compensation 775 725 2,265 2,144

Total revenues increased $171.2 million, or 56%, from $308.3 million in the three months ended December 31, 2019 to $479.4 million in the three months ended December 31, 2020.

Total revenues increased $321.4 million, or 51%, from $631.6 million in the six months ended December 31, 2019 to $953.0 million in the six months ended December 31, 2020.

During the three and six months ended December 31, 2020, there were no material price changes in the Company’s products sold.

Total revenues increased $129.8 million, or 38%, from $337.4 million in the three months ended March 31, 2020 to $467.2 million in the three months ended March 31, 2021.

Total revenues increased $451.2 million, or 47%, from $969.0 million in the nine months ended March 31, 2020 to $1.4 billion in the nine months ended March 31, 2021.

While the Company's revenue year over year increased, revenue for the three months ended March 31, 2021 declined compared to the three months ended December 31, 2020.

This was primarily due to the disruption in our supply chain as a result of the COVID-19 pandemic and the global availability of components.

The current environment has impacted our suppliers' ability to manufacture or provide key components and services and as a result the lack of available inventory limited our ability to meet customer orders.

In addition, we continue to incur additional costs to expedite deliveries of components and services.

During the three and nine months ended March 31, 2021, there were no material price changes in the Company’s products sold.

However, the Company continues to introduce new products which may have average selling prices and margins different than our legacy products.

Revenues by Product Type

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 %

Service Provider Technology revenue increased $52.2 million, or 53%, from $97.7 million in the three months ended December 31, 2019 to $149.9 million in the three months ended December 31, 2020 and increased $93.7 million, or 44%, from $213.6 million in the six months ended December 31, 2019 to $307.3 million in the six months ended December 31, 2020.

The increase in Service Provider Technology revenue during the three and six months ended December 31, 2020 as compared to the same periods in the prior year, was primarily due to increased revenue in all regions across all the platforms.

Enterprise Technology revenue increased $119.0 million, or 57%, from $210.6 million in the three months ended December 31, 2019 to $329.6 million in the three months ended December 31, 2020 and increased $227.7 million, or 54%, from $417.9 million in the six months ended December 31, 2019 to $645.6 million in the six months ended December 31, 2020.

The increase in Enterprise Technology revenue during the three and six months ended December 31, 2020 as compared to the same periods in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions except South America.

Service Provider Technology revenue increased $45.9 million, or 43%, from $106.4 million in the three months ended March 31, 2020 to $152.4 million in the three months ended March 31, 2021 and increased $139.6 million, or 44%, from $320.1 million in the nine months ended March 31, 2020 to $459.7 million in the nine months ended March 31, 2021.

The increase in Service Provider Technology revenue during the three and nine months ended March 31, 2021 as compared to the same periods in the prior year, was primarily due to increased revenue in all regions across all the platforms.

Enterprise Technology revenue increased $83.9 million, or 36%, from $231.0 million in the three months ended March 31, 2020 to $314.9 million in the three months ended March 31, 2021 and increased $311.6 million, or 48%, from $648.9 million in the nine months ended March 31, 2020 to $960.5 million in the nine months ended March 31, 2021.

The increase in Enterprise Technology revenue during the three months ended March 31, 2021 as compared to the same period in the

prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions.

The increase in Enterprise Technology revenue during the nine months ended March 31, 2021 as compared to the same period in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions, except South America.

Revenues by Geography

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A majority of our sales are to distributors who either sell to resellers or directly to end customers, who may be located in different countries than the initial ship-to destination.

The following are our revenues by geography for the three and six months ended December 31, 2020 and 2019 (in thousands, except percentages):

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

The following are our revenues by geography for the three and nine months ended March 31, 2021 and 2020 (in thousands, except percentages):

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.

North America

Revenues in North America increased $63.5 million, or 49%, from $130.0 million in the three months ended December 31, 2019 to $193.4 million in the three months ended December 31, 2020 and increased $136.4 million, or 49%, from $277.9 million in the six months ended December 31, 2019 to $414.3 million in the six months ended December 31, 2020.

The increase in North America revenues during the three and six months ended December 31, 2020 as compared to the same periods in the prior year, was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Revenues in North America increased $75.6 million, or 56%, from $133.9 million in the three months ended March 31, 2020 to $209.5 million in the three months ended March 31, 2021 and increased $212.0 million, or 51%, from $411.8 million in the nine months ended March 31, 2020 to $623.8 million in the nine months ended March 31, 2021.

The increase in North America revenues during the three and nine months ended March 31, 2021 as compared to the same periods in the prior year, was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Europe, the Middle East, and Africa (EMEA)

Revenues in EMEA increased $98.1 million, or 81%, from $120.6 million in the three months ended December 31, 2019 to $218.8 million in the three months ended December 31, 2020 and increased $151.5 million, or 61% from $246.4 million in the six months ended December 31, 2019 to $397.9 million in the six months ended December 31, 2020.

The increase in EMEA revenues during the three and six months ended December 31, 2020 as compared to the same periods in the prior year, was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Revenues in the Asia Pacific region increased $4.6 million, or 14%, from $32.8 million in the three months ended December 31, 2019 to $37.4 million in the three months ended December 31, 2020 and increased $16.8 million, or 27%, from $62.5 million in the six months ended December 31, 2019 to $79.3 million in the six months ended December 31, 2020.

The increase in Asia Pacific revenues during the three and six months ended December 31, 2020 as compared to the same periods in the prior year was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Revenues in EMEA increased $30.1 million, or 19%, from $159.4 million in the three months ended March 31, 2020 to $189.6 million in the three months ended March 31, 2021 and increased $181.6 million, or 45% from $405.9 million in the nine months ended March 31, 2020 to $587.5 million in the nine months ended March 31, 2021.

The increase in EMEA revenues during the three and nine months ended March 31, 2021 as compared to the same periods in the prior year, was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Revenues in the Asia Pacific region increased $9.9 million, or 38%, from $26.2 million in the three months ended March 31, 2020 to $36.1 million in the three months ended March 31, 2021 and increased $26.7 million, or 30%, from $88.8 million in the nine months ended March 31, 2020 to $115.5 million in the nine months ended March 31, 2021.

The increase in Asia Pacific revenues during the three and nine months ended March 31, 2021 as compared to the same periods in the prior year was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

South America

Revenues in South America increased $5.0 million, or 20%, from $24.9 million in the three months ended December 31, 2019 to $29.9 million in the three months ended December 31, 2020 and increased $16.7 million, or 37%, from $44.7 million in the six months ended December 31, 2019 to $61.4 million in the six months ended December 31, 2020.

The increase in South America revenues during the three and six months ended December 31, 2020 as compared to the same periods in the prior year was primarily due to increased revenues from our Service Provider Technology products, partially offset by decreased revenues from our Enterprise Technology products.

Revenues in South America increased $14.2 million, or 79%, from $17.8 million in the three months ended March 31, 2020 to $32.0 million in the three months ended March 31, 2021 and increased $30.9 million, or 49%, from $62.5 million in the nine months ended March 31, 2020 to $93.4 million in the nine months ended March 31, 2021.

The increase in South America revenues during the three months ended March 31, 2021 as compared to the same period in the prior year was primarily due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

The increase in the nine months ended March 31, 2021 as compared to the same periods in the prior year was primarily due to increased revenues from our Service Provider Technology products, partially offset by decreased revenues from our Enterprise Technology products.

Cost of Revenues and Gross Profit

Cost of revenues increased $85.6 million, or 52%, from $163.2 million in the three months ended December 31, 2019 to $248.8 million in the three months ended December 31, 2020.

The increase is primarily due to cost increase associated with an overall increase in revenue and higher shipping costs, partially offset by lower other indirect costs.

Cost of revenues increased $159.1 million, or 47%, from $335.1 million in the six months ended December 31, 2019 to $494.2 million in the six months ended December 31, 2020.

Cost of revenues increased $66.7 million, or 38%, from $177.8 million in the three months ended March 31, 2020 to $244.5 million in the three months ended March 31, 2021.

The increase is primarily due to cost increase associated with an overall increase in revenue and higher shipping costs, partially offset by lower other indirect costs and lower tariffs.

Cost of revenues increased $225.8 million, or 44%, from $512.9 million in the nine months ended March 31, 2020 to $738.7 million in the nine months ended March 31, 2021.

The increase is primarily due to cost increases associated with an overall increase in revenue, higher tariff-related costs and shipping costs, partially offset by lower other indirect costs.

Gross profit margin increased to 48.1% in the three months ended December 31, 2020 compared to 47.1% in the three months ended December 31, 2019.

Gross profit margin increased to 48.1% in the six months ended December 31, 2020 compared to 46.9% in the six months ended December 31, 2019.

The increase in gross profit margin during the three months ended December 31, 2020 was primarily driven by higher revenue and other indirect cost being lower as a percentage of overall revenue partially offset by higher shipping costs as a percentage of revenue.

The increase in gross profit margin during the six months ended December 31, 2020 was primarily driven by higher revenue and favorable changes in product mix, and other indirect cost being lower as a percentage of overall revenue partially offset by higher shipping costs and higher tariff-related costs as a percentage of revenue.

Gross profit margin increased to 47.7% in the three months ended March 31, 2021 compared to 47.3% in the three months ended March 31, 2020.

Gross profit margin increased to 48.0% in the nine months ended March 31, 2021 compared to 47.1% in the nine months ended March 31, 2020.

The increase in gross profit margin during the three months ended March 31, 2021 was primarily driven by higher revenue and favorable changes in product mix, tariffs and other indirect cost being lower as a percentage of overall revenue partially offset by higher shipping costs as a percentage of revenue.

The increase in gross profit margin during the nine months ended March 31, 2021 was primarily driven by higher revenue and favorable changes in product mix, and other indirect cost being lower as a percentage of overall revenue partially offset by higher shipping costs and higher tariff-related costs as a percentage of revenue.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased $4.9 million, or 20%, from $24.0 million in the three months ended December 31, 2019 to $28.9 million in the three months ended December 31, 2020.

As a percentage of revenues, R&D expenses decreased from 8% for the three months ended December 31, 2019 to 6% for the three months ended December 31, 2020.

R&D expenses increased $10.4 million, or 24%, from $44.3 million in the six months ended December 31, 2019 to $54.7 million in the six months ended December 31, 2020.

As a percentage of revenues, R&D expenses decreased from 7% for the six months ended December 31, 2019 to 6% for the six months ended December 31, 2020.

The increase in R&D expenses in absolute dollars for the both the three and six months ended December 31, 2020 as compared to the same periods in the prior year was primarily due to higher employee related expenses and professional and service related fees.

Research and development (“R&D”) expenses increased $8.8 million, or 41%, from $21.7 million in the three months ended March 31, 2020 to $30.5 million in the three months ended March 31, 2021.

As a percentage of revenues, R&D expenses increased from 6% for the three months ended March 31, 2020 to 7% for the three months ended March 31, 2021.

R&D expenses increased $19.2 million, or 29%, from $66.0 million in the nine months ended March 31, 2020 to $85.2 million in the nine months ended March 31, 2021.

As a percentage of revenues, R&D expenses decreased from 7% for the nine months ended March 31, 2020 to 6% for the nine months ended March 31, 2021.

The increase in R&D expenses in absolute dollars for both the three and nine months ended March 31, 2021 as compared to the same periods in the prior year was primarily due to higher employee related expenses and other costs to support the increase in development activities.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $2.0 million, or 22%, from $9.0 million in the three months ended December 31, 2019 to $11.0 million in the three months ended December 31, 2020.

As a percentage of revenues, SG&A expenses decreased from 3% for the three months ended December 31, 2019 to 2% for the three months ended December 31, 2020.

SG&A expenses increased $3.9 million, or 20%, from $19.4 million in the six months ended December 31, 2019 to $23.3 million for the six months ended December 31, 2020.

As a percentage of revenues, SG&A expenses decreased from 3% for the six months ended December 31, 2019 to 2% for the six months ended December 31, 2020.

The increase in SG&A expenses in absolute dollars for three months ended December 31, 2020 as compared to the same period in the prior year was primarily due to higher professional and service fees and higher depreciation expense offset, in part by legal settlement

received and lower payroll and marketing expense.

The increase in SG&A expenses in absolute dollars for the six months ended December 31, 2020 as compared to the same period in the prior year was primarily due to higher professional and service fees and higher depreciation expense offset, in part by legal settlement received, lower marketing expense and lower bad debt expense.

Sales, general and administrative (“SG&A”) expenses increased $2.6 million, or 25%, from $10.6 million in the three months ended March 31, 2020 to $13.3 million in the three months ended March 31, 2021.

As a percentage of revenues, SG&A expenses decreased from 3.1% for the three months ended March 31, 2020 to 2.8% for the three months ended March 31, 2021.

SG&A expenses increased $6.5 million, or 22%, from $30.1 million in the nine months ended March 31, 2020 to $36.6 million for the nine months ended March 31, 2021.

As a percentage of revenues, SG&A expenses decreased from 3.1% for the nine months ended March 31, 2020 to 2.6% for the nine months ended March 31, 2021.

The increase in SG&A expenses in absolute dollars for three months ended March 31, 2021 as compared to the same period in the prior year was primarily due to higher professional and service fees and higher depreciation expense, partially offset by lower payroll expense and a business e-mail compromise recovery received in the third quarter fiscal 2021.

The increase in SG&A expenses in absolute dollars for the nine months ended March 31, 2021 as compared to the same period in the prior year was primarily due to higher professional and service fees and higher depreciation expense offset, in part by legal settlement received in the second quarter fiscal 2021, a business e-mail compromise recovery received, lower employee related expenses and lower marketing expense.

Provision for Income Taxes

Our provision for income taxes increased $13.4 million, or 94.5%, from $14.2 million for the three months ended December 31, 2019 to $27.5 million for the three months ended December 31, 2020.

Our effective tax rate increased to 14.7% for the three months ended December 31, 2020 as compared to 14.2% for the three months ended December 31, 2019.

Our provisions for income taxes increased $25.0 million, or 78%, from $32.0 million for the six months ended December 31, 2019 to $57.1 million for the six months ended December 31, 2020.

Our effective tax rate increased to 15.3% for the six months ended December 31, 2020 as compared to 14.8% for the six months ended December 31, 2019.

The change in effective tax rates for the three and six months ended December 31, 2020 as compared to the same periods in the prior year was primarily due to the increase in overall taxable income in jurisdictions with higher tax rates.

Our provision for income taxes increased $11.0 million, or 64.7%, from $17.0 million for the three months ended March 31, 2020 to $28.0 million for the three months ended March 31, 2021.

Our effective tax rate increased to 16.1% for the three months ended March 31, 2021 as compared to 14.1% for the three months ended March 31, 2020.

Our provisions for income taxes increased $36.0 million, or 73%, from $49.1 million for the nine months ended March 31, 2020 to $85.1 million for the nine months ended March 31, 2021.

Our effective tax rate increased to 15.5% for the nine months ended March 31, 2021 as compared to 14.6% for the nine months ended March 31, 2020.

The change in effective tax rates for the three and nine months ended March 31, 2021 as compared to the same periods in the prior year was primarily due to the increase in overall taxable income in jurisdictions with higher tax rates.

Liquidity and Capital Resources

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Our principal source of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities and short-term and long-term investments.

We had cash and cash equivalents of $189.1 million and $142.6 million as of December 31, 2020 and June 30, 2020, respectively.

We had cash and cash equivalents of $262.8 million and $142.6 million as of March 31, 2021 and June 30, 2020, respectively.

Consolidated Cash Flow Data

The following table sets forth the major components of our consolidated statements of cash flows data for the periods presented:

Six Months Ended December 31,

Nine Months Ended March 31,

(In thousands)

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Cash Flows from Operating Activities

Net cash provided by operating activities in the six months ended December 31, 2020 consisted primarily of net income of $316.2 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $21.5 million.

Net cash provided by operating activities in the nine months ended March 31, 2021 consisted primarily of net income of $462.3 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $36.2 million.

This net change consisted primarily of a $60.8 million decrease in inventory offset by $3.6 million increase in vendor deposits, a $45.2 million increase in accounts receivable due to higher revenue for the period, a $3.8 million decrease in net accounts payable and accrued liabilities, a $26.2 million decrease in taxes payable due to the timing of federal tax payments and a $27.1 million increase in prepaid expense and other assets.

Net cash provided by operating activities in the six months ended December 31, 2019 consisted primarily of net income of $184.0 million, in addition to the changes in operating assets and liabilities that resulted in net cash inflows of $40.5 million.

This net change consisted primarily of a $11.3 million decrease in inventory and $4.4 million decrease in vendor deposit, $8.7 million decrease in accounts receivable due to increased collections for the period, $36.4 million increase in net accounts payable and accrued liabilities, a $24.4 million decrease in taxes payable due to the timing of federal tax payments and $3.2 million decrease in prepaid expense and other assets.

Net cash provided by operating activities in the nine months ended March 31, 2020 consisted primarily of net income of $287.7 million, in addition to the changes in operating assets and liabilities that resulted in net cash inflows of $25.3 million.

This net change consisted primarily of a $53.3 million decrease in inventory and $2.4 million decrease in vendor deposit, $8.4 million increase in net accounts payable and accrued liabilities, $3.4 million decrease in prepaid expense and other assets, a $17.8 million increase in accounts receivable and a $25.4 million decrease in taxes payable due to the timing of federal tax payments.

Cash Flows from Investing Activities

We used $10.9 million of cash in investing activities during the six months ended December 31, 2020.

We used $15.1 million of cash in investing activities during the nine months ended March 31, 2021.

Our investing activities consisted primarily of $16.0 million of capital expenditures and purchase of intangible assets, partially offset by maturities of investment securities of $0.9 million.

Net cash provided by investing activities in the six months ended December 31, 2019 was $55.3 million.

Net cash provided by investing activities in the nine months ended March 31, 2020 was $60.4 million.

Our investing activities consisted primarily of cash inflows of $89.2 million net proceeds from our available-for-sale securities offset, in part by cash outflows of $28.8 million of capital expenditures.

Cash Flows from Financing Activities

The Company used $251.5 million of cash in financing activities during the six months ended December 31, 2020.

During the six months ended December 31, 2020, we used $47.5 million of net funds for repayments under the Facilities, used $152.6 million related

to the repurchase of our common stock, and used $50.6 million related to dividends paid on our common stock.

The Company used $312.5 million of cash in financing activities during the nine months ended March 31, 2021.

During the nine months ended March 31, 2021, we used $80.0 million of net funds for repayments under the Facilities, $152.6 million related to the repurchase of our common stock, $75.7 million related to dividends paid on our common stock and $3.3 million of debt issuance costs related to the amended and restated credit agreement.

See Note 8- Debt of the Notes to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the Facilities.

The Company used $436.8 million of cash in financing activities during the six months ended December 31, 2019.

During the six months ended December 31, 2019, we received $145.0 million of net funds from borrowing and repayments under the Company's credit facilities, used $538.0 million related to the repurchase of our common stock, and used $40.1 million related to dividends paid on our common stock and $3.1 million of debt issuance costs.

We believe our existing cash and cash equivalents, cash provided by operations and the availability of additional fund, under our Facilities will be sufficient to meet our working capital, future stock repurchases, dividends, and capital expenditure needs for the next twelve months.

The Company used $556.1 million of cash in financing activities during the nine months ended March 31, 2020.

During the nine months ended March 31, 2020, we generated $188.8 million of net funds from borrowing and repayments under the Company's credit facilities, which were more than offset by financing cash outflows of $681.2 million related to the repurchase of our common stock, $59.6 million related to dividends paid on our common stock and $3.1 million of debt issuance costs.

We believe our existing cash and cash equivalents, cash provided by operations and the availability of additional funds, under our Facilities will be sufficient to meet our working capital, future stock repurchases, dividends, and capital expenditure needs for the next twelve months.

However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated or need to rely more heavily on our Facilities or other sources of liquidity to continue to meet our needs.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending to support development efforts, the timing of new product introductions, market acceptance of our products, the availability of additional funds under our Facilities and overall economic conditions.

The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial markets and the domestic and global economy.

The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial

markets and the domestic and global economy.

This disruption can contribute to potential payment delays or defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the availability of financing credit as well as other segments of the credit markets.

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We believe the fair value of these indemnification agreements is minimal.

We have not recorded any liabilities for these agreements as of December 31, 2020.

Based upon our historical experience and information known as of the date of this report, we do not believe it is likely that we have a material liability for the above indemnities as of December 31, 2020.

We have not recorded any liabilities for these agreements as of March 31, 2021.

Contractual Obligations and Off-Balance Sheet Arrangements

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We believe that we will be able to fund these obligations through our existing cash and cash equivalents, cash generated from operations and the availability of additional funds, under the Facilities.

The following table summarizes the Company’s contractual obligations as of December 31, 2020 for the remainder of fiscal 2021 and future fiscal years (in thousands):

The following table summarizes the Company’s contractual 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

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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 December 31, 2020, we have 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.

We periodically review the potential liability, and as of March 31, 2021, we have 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.

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 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 our contract manufacturers.

We estimate 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 our contract manufacturers.

Transition Tax

The Company also had obligations of $85.5 million as of December 31, 2020, related to Transition Tax.

The Company also had obligations of $85.5 million as of March 31, 2021, related to Transition Tax.

These obligations are included within Income taxes payable and Long-term taxes payable on our Consolidated Balance Sheets.

Other Obligations

The Company had other obligations of $57.9 as of December 31, 2020, which consisted primarily of commitments related to raw materials and research and development projects.

The Company had other obligations of $52.9 as of March 31, 2021, which consisted primarily of commitments related to raw materials and research and development projects.

Unrecognized Tax Benefits

As of December 31, 2020, we had $32.5 million and an additional $4.4 million for accrued interest, classified as non-current liabilities.

As of March 31, 2021, we had $34.0 million and an additional $4.6 million for accrued interest, classified as non-current liabilities.

At this time, we are unable to make a reasonably reliable estimate of timing of payments in individual years in connection with these tax liabilities;

7 unchanged sentences

These risks and uncertainties include, but are not limited to, the impact of U.S.

COVID-19 pandemic on our business, results and liquidity, volatility in our short-term investments, and the risks set forth throughout this Report, including under Part II:

tariffs on results of operations, our ability to manage our growth, our ability to sustain or increase profitability, demand for our products, our ability to compete, our ability to rapidly develop new technology and introduce new products, our ability to safeguard our intellectual property, trends in the networking industry and fluctuations in general economic conditions, the impact of COVID-19 pandemic on our business, results and liquidity, volatility in our short-term investments, and the risks set forth throughout this Report, including under Part II:

“Other Information”, Item 1, “Legal Proceedings” and under Item 1A, “Risk Factors.” These forward-looking statements speak only as of the date hereof.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis