What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-27 compared with 2020-08-21 · 97 added, 110 removed, 228 unchanged (48% of the section changed)

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We develop technology platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics for professional, home and personal use.

We categorize our solutions in to three main categories:

We categorize our solutions into three main categories:

high performance networking technology for service providers, enterprises and consumers.

We target the service provider and enterprise markets through our highly engaged community of service providers, distributors, value added resellers, systems integrators and corporate IT professionals, which we refer to as the Ubiquiti Community.

We target the service provider and enterprise markets through our highly engaged community of service providers, distributors, value added resellers, webstores, systems integrators and

corporate IT professionals, which we refer to as the Ubiquiti Community.

We target consumers through digital marketing, retail chains and, to a lesser extent, the Ubiquiti Community.

The majority of our human capital resources consist of entrepreneurial and de-centralized research and development (“R&D”) personnel.

We do not employ a traditional direct sales force, but instead drive brand awareness through online reviews and publications, our website, our distributors and the Company’s user community where customers can interface directly with our R&D, marketing, and support teams.

Our technology platforms were designed from the ground up with a focus on delivering highly-advanced and easily deployable solutions that appeal to a global customer base market.

We offer a broad and expanding portfolio of networking products and solutions for operator-owners of wireless internet services (“WISP’s”), enterprises and smart homes.

Our operator-owner service provider-product platforms provide carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing and the related software for WISP’s to easily control, track and bill their customers.

Our enterprise product platforms provide wireless LAN (“WLAN”) infrastructure, video surveillance products, switching and routing solutions, security gateways, and other complimentary WLAN products along with a unique software platform, which enables users to control their network from one simple, easy to use software interface.

Our consumer products, sold under the Ubiquiti Labs brand name, are targeted to the smart home and highly connected consumers.

We believe that our products are highly differentiated due to our proprietary software, firmware expertise, and hardware design capabilities.

We distribute our products through a worldwide network of over 100 distributors and on-line retailers.

The Company has a very broad installed base with over 101 million devices sold in over 200 countries and territories around the world, since inception.

In addition to Mr.

Pera, our founder, Chairman of the Board and Chief Executive Officer, who is central to our business, the majority of our human capital resources consist of entrepreneurial and de-centralized research and development (“R&D”) personnel.

We do not employ a traditional direct sales force, but instead drive brand awareness through online reviews and publications, our website, our distributors and our user community where customers can interface directly with our R&D, marketing, and support teams.

Our technology platforms were designed from the ground up with a focus on delivering highly-advanced and easily deployable solutions that appeal to a global customer base.

We offer a broad and expanding portfolio of networking products and solutions for operator-owners of wireless internet services (“WISPs”), enterprises and smart homes.

Our operator-owner service provider-product platforms provide carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing and the related software for WISPs to easily control, track and bill their customers.

Our enterprise product platforms provide wireless LAN (“WLAN”) infrastructure, video surveillance products, switching and routing solutions, security gateways, door access systems, and other complimentary WLAN products along with a unique software platform, which enables users to control their network from one simple, easy to use software interface.

Our consumer products are targeted to the smart home and highly connected consumers.

We believe that our products are differentiated due to our proprietary software, firmware expertise, and hardware design capabilities.

We distribute our products through a worldwide network of over 100 distributors and on-line retailers and direct to customers through our webstores.

COVID-19 Update - The 2019 novel coronavirus (COVID-19), which the World Health Organization (“WHO”) characterized as a pandemic in March 2020, continues to disrupt global economies, and has spread to the major markets in which we operate, including the United States, Asia, Europe and South America.

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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, 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.

For example, in fiscal 2021, we experienced reduced availability of components (including the chipsets) used to manufacture our products, which has impacted, and we expect will continue to impact our ability and costs to manufacture our products.

These supply shortages have resulted in increased component delivery lead times and increased costs to obtain components, particularly the chipsets, and may result in delays in product production.

We do not stockpile sufficient components to cover the time it would take to re-engineer our products to replace the chipsets used to manufacture or products.

While we are continuing to work closely with our suppliers and contract manufacturers to minimize the potential adverse impacts of the supply shortage, there are many companies seeking to purchase the limited supply of chipsets and other components, many of which have greater resources and larger market share than we have, which may limit the effectiveness of our efforts.

We expect that shortages of chipsets and other components will continue and may have an adverse impact on our ability to manufacture our products and meet demand for our products.

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 I, Item 1A of this Form 10-K) for a discussion of these factors and other risks.

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Additionally, Service Provider Technology includes antennas and other products primarily in the 0.9 to 6.0 GHz spectrum and miscellaneous products such as mounting brackets, cables and power over Ethernet adapters.

• Enterprise Technology includes our UniFi platforms, including UniFi enterprise Wi-Fi, UniFi Protect, UniFi switching and routing solutions and our AmpliFi platform

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

Sales to distributors accounted for 93% of our revenues in the year ended June 30, 2020.

• Enterprise Technology includes our UniFi platforms, including UniFi enterprise Wi-Fi, UniFi Protect, UniFi Access, UniFi-Talk, UniFi switching and routing solutions and our AmpliFi platform

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 through our webstores.

Sales to distributors accounted for 83% and 93% of our revenues in the year ended June 30, 2021 and 2020, respectively.

Direct sales accounted for 17% and 7% of our revenues in the year ended June 30, 2021 and 2020, respectively.

Cost of Revenues

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In addition, cost of revenues includes labor and other costs w hich include salary, benefits and stock-based compensation, in addition to costs associated with tooling, testing and quality assurance, warranty costs, logistics costs, tariffs and excess and obsolete inventory write-downs.

We currently operate warehouses located in U.S.

We currently operate warehouses located in the U.S.

and the Czech Republic.

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from China are currently subject to tariffs that range between 7.5% and 25%.

On January 22, 2020, the United States of Trade Representative announced it will reduce Section 301 List 4A additional tariffs from 15% to 7.5% and the List 4B tariffs would not go into effect.

These tariffs have already affected our operating results and margins.

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Operating Expenses

We classify our operating expenses as research and development, selling, general and administrative expenses, litigation expenses and expense related to the business email compromise fraud loss.

We classify our operating expenses as research and development, and sales, general and administrative expenses.

• Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, licensed or purchased intellectual property, facilities and travel.

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In preparing the consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate.

The Company must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss.

To the extent that the Company establishes a reserve, its provision for income taxes would be increased.

If the Company ultimately determines that payment of these amounts is unnecessary, it reverses the liability and recognizes a tax benefit during the period in which it determines that the liability is no longer necessary.

The Company records an additional charge in its provision for taxes in the period in which it determines that tax liability is greater than its original estimate.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive income.

We must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss.

To the extent that we establish a reserve, the provision for income taxes would be increased.

If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognizes a tax benefit during the period in which we determine that the liability is no longer necessary.

We record an additional charge in our provision for taxes in the period in which we determine that tax liability is greater than our original estimate.

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive income.

Refer to “Part I—Item 1A.

Risk Factors—Risks Related to Regulatory, Legal and Tax Matters—Changes in applicable tax regulations could negatively affect our financial results” for additional information.

Critical Accounting Policies

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Additionally, as the COVID-19 pandemic continues to develop, many of our estimates could require increased judgement and carry a higher degree of variability and volatility.

Additionally, as the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility.

As events continue to evolve our estimates may change materially in future periods.

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PCS is the right to receive, on a when-and-if available basis, future unspecified software upgrades and features relating to the product’s essential software as well as technical support and bug fixes.

The Company accounts for a contract with a customer when there is an approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable.

The Company’s distinct performance obligations consist mainly of transferring control of its products identified in the contracts, purchase orders or invoices and implied PCS services.

We account for a contract with a customer when there is an approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable.

Our distinct performance obligations consist mainly of transferring control of our products identified in the contracts, purchase orders or invoices and implied PCS services.

Our contracts with the majority of our distribution customers do not include provisions for cancellations, returns, inventory swaps, or refunds that materially impact recognize d revenue.

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Although payment terms vary, payment is generally due from customers within 60 days of the invoice date and the contracts do not have significant financing components or include extended payment terms.

The Company is directly responsible for fulfilling its performance obligations in contracts with customers and does not rely on another party to fulfill its promise.

We are directly responsible for fulfilling the performance obligations in contracts with customers and do not rely on another party to fulfill our promise.

We use observable list prices to determine the stand-alone selling price of our performance obligation related to our products, and we utilize a cost-plus margin approach to estimate the stand-alone selling price of our implied PCS obligation.

When our contracts contain multiple performance obligation, we allocate the transaction price based on the estimated standalone selling price s of the promised products or services underlying each performance obligation.

When our contracts contain multiple performance obligations, we allocate the transaction price based on the estimated standalone selling price s of the promised products or services underlying each performance obligation.

The expected costs associated with our base warranties continue to be recognized as an expense when the products are sold and is not considered a separate performance obligation.

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hardware product should change, the future rate of amortization of the revenues allocated to PCS could also change.

Key factors considered by the Company in developing the estimated cost in the cost plus margin approach for PCS includes reviewing the activities for PCS include reviewing the activities of specific employees engaged in support and software enhancements to determine the amount of time that is allocated to the development of the undelivered elements, determining the cost of this development effort, and then adding an appropriate level of gross profit to these costs.

Key factors considered by the Company in developing the estimated cost in the cost plus margin approach for PCS includes reviewing the activities of specific employees engaged in support and software enhancements to determine the amount of time that is allocated to the development of the undelivered elements, determining the cost of the development effort, and then adding an appropriate level of gross profit to these costs.

Inventory and Inventory Valuation

The Company’s inventories are primarily finished goods and, to a lesser extent, raw materials.

Our inventories are primarily finished goods and, to a lesser extent, raw materials.

Inventories are stated at the lower of actual cost, computed using the first-in, first-out method, or net realizable value (NRV).

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The determination of NRV involves numerous judgments including estimating average selling prices based upon recent sales, industry trends, existing customer orders, and seasonal factors.

Should actual market conditions differ from the Company’s estimates, future results of operations could be materially affected.

The Company reduces the value of its inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the estimated market value.

Should actual market conditions differ from our estimates, future results of operations could be materially affected.

We reduce the value of our inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the NRV.

Write-downs are not reversed until the related inventory has been subsequently sold or scrapped.

The valuation of inventory also requires the Company to estimate excess and obsolete inventory.

The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to the Company’s forecast of customer demand.

Customer demand is dependent on various factors and requires the Company to use judgment in forecasting future demand for these products.

The Company also considers the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products.

If actual market conditions are less favorable than

those projected by management, additional inventory write-downs may be required, which would have a negative impact on the Company’s gross margin.

If the Company ultimately sells inventory that has been previously written down, the Company’s gross margins in future periods would be positively impacted.

The Company capitalizes manufacturing overhead expenditures as part of inventory costs.

The valuation of inventory also requires us to estimate excess and obsolete inventory.

The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of customer demand.

Customer demand is dependent on various factors and requires us to use judgment in forecasting future demand for these products.

We also consider the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products.

If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which would have a negative impact on our gross margin.

If we ultimately sell inventory that has been previously written down, our gross margins in future periods would be positively impacted.

We capitalize manufacturing overhead expenditures as part of inventory costs.

Capitalized costs primarily include management’s best estimate of the direct labor, tariffs and materials costs incurred related to inventory acquired or produced but not sold during the respective period.

Manufacturing overhead costs are capitalized to inventory and are recognized as cost of revenues in future periods based on the Company’s rate of inventory turnover.

Manufacturing overhead costs are capitalized to inventory and are recognized as cost of revenues in future periods based on when the inventory is sold or written-down.

We account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.

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We may be subject to income tax audits in each of the jurisdictions in which we operate and, as a result, must also assess exposures to any potential issues arising from current or future audits of current and prior years’ tax returns.

Accordingly, we must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Accordingly, we must assess such

potential exposures and, where necessary, provide a reserve to cover any expected loss.

We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws.

Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

We reflect changes in recognition or measurement in the period in which our change in judgment occurs.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

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53,513 3 % 40,569 3 %

Litigation settlement — — % 18,000 2 %

Total operating expenses 169,684 9 % 129,974 10 %

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Total stock-based compensation $ 3,029 $ 2,888

Revenues increased $122.8 million, or 11%, from $1.2 billion in fiscal 2019 to $1.3 billion in fiscal 2020.

During fiscal year ended June 30, 2020, 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.

Total revenues increased $613.6 million, or 48%, from $1.3 billion in fiscal 2020 to $1.9 billion in fiscal 2021.

During fiscal year ended June 30, 2021, there were no material price changes in our products sold.

However, we continue to introduce new products which may have average selling prices and margins different than our legacy products.

During fiscal 2021, we have and continue to experience limitations in our ability to secure products due to COVID-19 and the worldwide component shortage.

This has limited our ability to meet demand, caused us to delay introducing new products and significantly increased our backlog of orders.

While we have taken several steps to secure components and manufacturing capacity with our contract manufacturers, it is uncertain whether we will continue to be able to procure products at our current levels.

Revenues by Product Type

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Total revenues $ 1,898,094 100 % $ 1,284,500 100 %

Service Provider Technology revenues increased $13.5 million, or 3.2%, from $428.5 million in fiscal 2019, to $442.0 million in fiscal 2020, primarily due to increased revenue in North America and EMEA, partially offset by a decrease in Asia Pacific and South America.

Enterprise Technology revenues increased $109.2 million, or 14.9%, from $733.2 million in fiscal 2019, to $842.5 million in fiscal 2020 primarily due to product expansion and further adoption of our UniFi technology platform across all regions.

Service Provider Technology revenues increased $181.1 million, or 41.0%, from $442.0 million in fiscal 2020, to $623.2 million in fiscal 2021, primarily due to increased revenue in all regions across all the platforms.

Enterprise Technology revenues increased $432.5 million, or 51.3%, from $842.5 million in fiscal 2020, to $1.3 billion in fiscal 2021 primarily due to product expansion and further adoption of our UniFi technology platform across all regions.

Revenues by Geography

We have determined the geographical distribution of our product revenues based on our customers’ ship-to destinations.

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

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 fiscal 2021 and fiscal 2020:

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Revenues in South America increased $38.9 million, or 46.7%, from $83.3 million in fiscal 2020 to $122.2 million in fiscal 2021.

The year-over-year increase was primarily due to increased revenue from our Enterprise Technology products, partially offset by decreased revenue in our Service Provider Technology products.

The year-over-year increase was primarily due to increased revenue from both our Enterprise Technology products and Service Provider Technology products.

Europe, the Middle East, and Africa (“EMEA”)

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Revenues in the Asia Pacific region increased $42.4 million, or 37.8%, from $112.1 million in fiscal 2020 to $154.5 million in fiscal 2021.

The year-over-year increase was primarily due to increased revenue from our Enterprise Technology products, partially offset by decreased revenue in our Service Provider Technology products.

The year-over-year increase was due to increased revenues from both our Enterprise Technology products and Service Provider Technology products.

Cost of Revenues and Gross Profit

Cost of revenues increased $309.5 million, or 45.8%, from $676.3 million in fiscal 2020 to $985.8 million in fiscal 2021.

The increase in fiscal 2020 was primarily due to cost increase associated with an overall increase in revenue, higher indirect costs, higher tariffs and expedited shipping costs.

The increase in fiscal 2021 was primarily due to cost increase associated with an overall increase in revenue, higher tariffs and shipping

costs, partially offset by lower indirect costs.

Gross profit margin increased to 48.1% in fiscal 2021 from 47.3% in fiscal 2020.

The increase was primarily driven by favorable changes in product mix, partially offset by higher tariffs and expedited shipping costs.

The increase in gross profit margin was primarily driven by favorable changes in product mix as well as other indirect costs being lower as a percentage of overall revenue, partially offset by higher shipping costs.

Operating Expenses

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Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses decreased $2.7 million, or 6.2%, from $43.2 million in fiscal 2019 to $40.6 million in fiscal 2020.

Sales, general and administrative (“SG&A”) expenses increased $12.9 million, or 31.9%, from $40.6 million in fiscal 2020 to $53.5 million in fiscal 2021.

As a percentage of revenues, sales, general and administrative expenses decreased from 3.2% in fiscal 2020 to 2.8% in fiscal 2021.

The decrease in SG&A in absolute dollars was primarily due to lower professional fees and employee related costs offset, in part by higher marketing expenses, increased service fees and higher depreciation.

The increase in SG&A in absolute dollars was primarily due to higher professional and service fee and higher depreciation expense, offset in part by a legal settlement received in the second quarter fiscal 2021 and a BEC recovery received in the third quarter fiscal 2021.

Provision for Income Taxes

Our provision for income taxes increased 58.9% from $69.9 million for fiscal 2020 to $111.1 million for fiscal 2021.

Our effective tax rate increased to 15.5% in fiscal 2020 as compared to 15.4% for fiscal 2019.

The slight increase in the effective tax rate in fiscal 2020 is primarily due to the mix of earnings earned in various jurisdictions.

Our effective tax rate decreased to 15.3% in fiscal 2021 as compared to 15.5% for fiscal 2020.

The decrease in the effective tax rate in fiscal 2021 is primarily due to certain discrete tax benefits recognized during the fiscal year, partially offset by an increase in overall taxable income in jurisdictions with higher tax rates.

While our effective rate has remained relatively consistent, the rate can vary based upon changes in the mix of the taxable income earned in various tax jurisdictions and the timing of provisions related to discrete tax items.

Comparison of Year Ended June 30, 2020 and 2019

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Sources and Uses of Cash

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.

Our principal sources 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 $249.4 million and $142.6 million at June 30, 2021 and 2020, respectively.

In fiscal year 2019 the Company began investing cash in various fixed income available-for-sale securities.

As of June 30, 2020 and 2019 we held $2.5 million and $103.3 million respectively, in available-for-sale securities.

Our securities investment portfolio consists of high quality, investment grade securities from diverse issuers.

Refer to “Part I—Item 1A.

Risk Factors—Risks Related to Our Business and Operations—We may experience risks in our investments due to changes in the market, which could adversely affect the value or liquidity of our investments.” for additional information.

Consolidated Cash Flow Data

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Cash Flows from Operating Activities

Net cash provided by operating activities in fiscal 2021 consisted primarily of net income of $616.6 million, partially offset by the changes in operating assets and liabilities that resulted in net cash outflows of $32.3 million.

This net change consisted primarily of $52.9 million decrease in inventory offset by $17.1 million increase in vendor deposit, $30.1 million increase in accounts receivable due to higher revenue for the period, a $30.5 million increase in prepaid and other assets, and a $27.8 million decrease in taxes payable due to the timing of federal tax payments, a $12.9 million increase in accounts payable and accrued liabilities.

Net cash provided by operating activities in fiscal 2020 consisted primarily of net income of $380.3 million, in addition to the changes in operating assets and liabilities that resulted in net cash inflows of $52.4 million.

This net change consisted primarily of $28.1 million increase in inventory, $10.8 million increase in prepaid and other assets, and a $3.5 million decrease in taxes payable due to the timing of federal tax payments, partially offset by $3.1 million decrease in vendor deposits and a $76.9 million increase in accounts payable and accrued liabilities.

Net cash provided by operating activities in fiscal 2019 consisted primarily of net income of $322.7 million, partially offset by the changes in operating assets and liabilities that resulted in net cash outflow of $78.3 million.

This net change was primarily driven by outflows arising from $163.7 million increase in inventory and $15.8 million increase in prepaid and other assets, partially offset by $27.7 million decrease in vendor deposits, a $16.3 million increase in taxes payable due to the timing of federal tax payments and a $29.3 million increase in accounts payable and accrued liabilities.

This net change consisted primarily of $28.1 million increase in inventory offset by $3.1 million decrease in vendor deposits, $10.8 million increase in prepaid and other assets, and a $3.5 million decrease in taxes payable due to the timing of federal tax payments, partially offset by a $76.9 million increase in accounts payable and accrued liabilities and $13.9 million decrease in accounts receivable.

Cash Flows from Investing Activities

We used $19.3 million of cash in investing activities during fiscal 2021.

Our investing activities consisted primarily of $18.3 million of capital expenditures and purchase of intangible assets, and $0.9 million net purchases for our available-for-sale securities.

Net cash provided by investing activities during fiscal 2020 was $69.6 million.

Our investing activities consisted primarily of cash inflows of $100.2 million net proceeds from our available-for-sale securities offset, in part by $30.6 million of capital expenditures.

We used $157.6 million of cash investing during fiscal 2019.

During fiscal 2019 our investing activities consisted of net purchases of available-for-sale securities of $100.9 million, $51.7 million of capital expenditures and purchase of intangible assets, and a $5.0 million purchase of a private equity investment.

Our investing activities consisted of cash inflows of $100.2 million net proceeds from our available-for-sale securities offset, in part by $30.6 million of capital expenditures.

Cash Flows from Financing Activities

We used $486.0 million of cash in financing activities during fiscal 2021.

During fiscal 2020, we generated $157.5 million of net funds from borrowing and repayments under the Facilities, which were more than offset by financing cash outflows of $700.1 million related to repurchase of common stock, $78.7 million related to dividends paid on our common stock and $3.1 million of debt issuance costs related to the Third Amendment.

During fiscal 2021, we used $161.3 million of net funds for repayments under the Facilities, $219.8 million related to repurchase of common stock, $100.8 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 IV, Item 15 of this Annual Report on Form 10-K for additional information regarding the Facilities.

We used $625.4 million of cash in financing activities during fiscal 2020.

During fiscal 2019, we had financing cash outflow of $468.2 million related to the repurchase of our common stock, $71.4 million related to dividends paid on our common stock and $25.0 million repayment on our term loan under our credit facility.

These outflows were partially offset with $35.0 million draws on our revolving facility.

During fiscal 2020, we generated $157.5 million of net funds from borrowing and repayments under our credit facilities, which were more than offset by financing cash outflows of $700.1 million related to the repurchase of our common stock, $78.7 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, including known contractual obligations of $76.3 million , excluding off-balance sheet arrangements as discussed below, for other obligations.

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.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, pricing inflation for the components (including chipsets) to manufacture our products, 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 and may continue to cause 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 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 our contractual obligations as of June 30, 2020 (in thousands):

Payments Date by Period

Year 1 1-3 Years 3-5 Years More than 5 Years Total

Operating Leases 7,856 8,318 6,753 5,476 28,403

Debt Payments 25,000 630,000 — — 655,000

Interest and other payments on debt payment obligations (1)

13,953 20,669 — — 34,622

Transition tax 9,004 18,007 39,391 28,137 94,539

Other Obligations 21,077 40,000 6,667 — 67,744

Total $ 76,890 $ 716,994 $ 52,811 $ 33,613 $ 880,308

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

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

Operating Leases

See Note 9 - Leases of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment commitments under leases as of June 30, 2020.

Debt and Interest Payment Obligations

See Note 8 - Debt of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment commitments under debt as of June 30, 2020.

Purchase Obligations

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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 pr oducts.

We periodically review the potential liability, and as of June 30, 2020, we have recorded a purchase obligation liability of $3.3 million related to component purchase commitments.

We periodically review the potential liability, and as of June 30, 2021, we have recorded a purchase obligation liability o f $8.0 million relat ed to component purchase commitments.

There have been no other significant liabilities for cancellations recorded as of June 30, 2021 .

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

We estimate the amount of these additional purchase obligation to rang e from $146.3 million to $303.3 million as of June 30, 2020, depending upon the timing of orders placed for these components by our manufacturers.

We estimate the amount of these additional purchase obligations to rang e from $163.8 million to $843.1 million as of June 30, 2021, depending upon the timing of orders placed for these components by our manufacturers.

See Note 10 - Commitments and Contingencies of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment commitments under purchase commitments as of June 30, 2021.

Transition Tax

The Company has obligations of $94.5 million as of June 30, 2020, related to Transition Tax.

We have obligations of $85.4 million as of June 30, 2021, related to transition tax.

Payment of these obligations are expected to be $9.0 million for fiscal 2022, $9.0 million for fiscal 2023, $16.9 million for fiscal 2024, $22.5 million for fiscal 2025 and $28.1 million for fiscal 2026.

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

Other Obligations

As of June 30, 2020.

the Company has other obligations of $3.9 million which consisted primarily of commitments related to raw materials and research and development projects.

As of June 30, 2021, we have other obligations of $2.9 million which consisted primarily of commitments related to raw materials and research and development projects.

Unrecognized Tax Benefits

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Warranties and Indemnifications

Our products are generally accompanied by a twelve-month warranty, from date of purchase, which covers both parts and labor.

Our products are generally accompanied by a twelve to twenty-four month warranty from date of purchase, which covers both parts and labor.

Generally, the distributor is responsible for the freight costs associated with warranty returns, and we absorb the freight costs of replacing items under warranty.

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We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity.

We may terminate the indemnification agreements

with these persons upon the termination of their services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination.

We may terminate the indemnification agreements with these persons upon the termination of their services with us, but termination will not affect claims for indemnification related to

events occurring prior to the effective date of termination.

The maximum amount of potential future indemnification is unlimited.

1 unchanged sentence

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

We had not recorded any liabilities for these agreements as of June 30, 2020 or 2019.

Based upon our historical experience and information known as of the date of this report, we do not believe it is likely that we will have significant liability for the above indemnities as of June 30, 2020.

We have not recorded any liabilities for these agreements as of June 30, 2021 or 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 will have material liability for the above indemnities as of June 30, 2021.

Off-Balance Sheet Arrangements

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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-K

Item 7. Management’s Discussion and Analysis