What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-08-27 compared with 2020-08-21 · 195 added, 316 removed, 996 unchanged (34% of the section changed)

47 unchanged sentences

3.1 Third Amended and Restated Certificate of Incorporation of Ubiquiti Inc., as amended 10-K August 21, 2019

3.2 Amended and Restated Bylaws of Ubiquiti Inc., as amended 10-K August 21, 2019

3.2 Amended and Restated Bylaws, as amended , as of December 17, 2020 8-K 3.1 December 18, 2020

4.1 Specimen Common Stock Certificate of Ubiquiti Networks, Inc.

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S-1 10.3 June 17, 2011

10.4# Ubiquiti Inc.

2020 Omnibus Incentive Plan 8-K 10.1 December 11, 2020

10.5# Employment Agreement, dated as of March 1, 2016, between Ubiquiti Networks, Inc.

1 unchanged sentence

10-K 10.6 August 22, 2016

10.5 Jinyong Ji Investment Taiwan Lease, dated as of March 16, 2010, between Ubiquiti Networks, Inc.

and Jinyong Ji Investment Co., Ltd.

S-1 10.1 June 17, 2011

Number Description Incorporated by Reference from Form Incorporated by

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Exhibit Number Date Filed Filed

10.6 Jinyong Ji Investment Taiwan Lease, dated as of March 16, 2010, between Ubiquiti Networks, Inc.

and Jinyong Ji Investment Co., Ltd.

S-1 10.1 June 17, 2011

10.7† Amended Technology License Agreement, dated as of September 1, 2010, between Ubiquiti Networks, Inc.

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10-K 10.1 August 24, 2018

10.12 Second Amendment, dated as of March 15, 2019, to Second Amended and Restated Credit Agreement, dated as of January 17, 2018, by and among Ubiquiti Networks, Inc.

and Ubiquiti International Holding Company Limited, as borrowers, certain subsidiaries of the borrowers, as guarantors, the lenders and other financial institutions party thereto and Wells Fargo Bank, National Associations, as administrative agent 10-Q 10.1 May 10, 2019

Number Description Incorporated by Reference from Form Incorporated by

1 unchanged sentence

Exhibit Number Date Filed Filed

10.13 Second Amendment, dated as of March 15, 2019, to Second Amended and Restated Credit Agreement, dated as of January 17, 2018, by and among Ubiquiti Networks, Inc.

10.14 Third Amendment, dated as of September 9, 2019, to Second Amended & Restated Credit Agreement, dated as of January 17, 2018, by Ubiquiti Inc., as borrower, Ubiquiti International Holding Company Limited, as a released party, and certain subsidiaries of the borrower, as guarantors, the lenders and other financial institutions party thereto and Wells Fargo Bank, National Associations, as administrative agent 8-K 10.1 September 12, 2019

10.15 Third Amended and Restated Credit Agreement, dated as of March 30, 2021, by and among Ubiquiti Inc.

as borrower, certain domestic subsidiaries of the borrower, as guarantors, the lenders and other financial institutions party thereto and Wells Fargo Bank, National Association, as administrative agent.

Third Amended and Restated Credit Agreement, dated as of March 30, 2021, by and among Ubiquiti Inc.

8-K 10.1 April 5, 2021

10.16 Aircraft Lease Agreement between Ubiquiti Networks, Inc.

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101.CAL XBRL Taxonomy Calculation Linkbase Document X

Number Description Incorporated by Reference from Form Incorporated by

Reference from

Exhibit Number Date Filed Filed

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

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Director August 27, 2021

/s/ Michael E.

/s/ Brandon Arrindell

Brandon Arrindell

Director August 27, 2021

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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We identified the assessment of gross unrecognized tax benefits as a critical audit matter.

Complex auditor judgment, including the involvement of tax professionals with specialized skills and knowledge, was required to evaluate the Company’s interpretation and application of tax law in the United States and certain foreign jurisdictions in which it operates, and their inter-relationship.

This evaluation included the determination of which tax positions have more than a 50% likelihood of being sustained upon examination.

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This included controls over the Company’s gross unrecognized tax benefit process to:

• evaluate the Company’s tax structure and interpret United States and foreign tax laws and their inter-relationship,

• identify tax law changes in jurisdictions that may impact the Company’s unrecognized tax benefits, and

• evaluate and estimate the gross unrecognized tax benefits associated with uncertain tax positions.

• evaluate the Company’s tax structure and interpret United States and foreign tax laws,

• evaluate the gross unrecognized tax benefits associated with uncertain tax positions.

In addition, we involved tax professionals with specialized skills and knowledge, who assisted in performing the following procedures over certain jurisdictions:

• obtaining an understanding of the Company’s overall tax structure and assessing the Company’s compliance with tax laws,

• evaluating changes in the Company’s tax structure that occurred during the year as well as changes in tax law, and assessing the interpretation of those changes under the relevant jurisdiction’s tax law,

• examining and assessing transfer pricing studies for compliance with applicable regulations,

• inspecting correspondence, assessments, and settlements from taxing authorities to assess the Company’s determination of its tax positions having more than a 50% likelihood to be sustained upon examination, and

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Commitments and contingencies (Note 10)

Stockholders’ equity:

Stockholders’ equity (deficit):

Preferred stock—$ 0.001 par value;

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Accumulated other comprehensive income 1 9

Retained (deficit) earnings ( 295,978 ) 98,815

Total stockholders’ (deficit) equity ( 295,458 ) 99,277

Total liabilities and stockholders’ equity $ 737,451 $ 875,865

Retained earnings (deficit) 2,635 ( 295,978 )

Total stockholders’ equity (deficit) 2,699 ( 295,458 )

Total liabilities and stockholders’ equity (deficit) $ 890,985 $ 737,451

See notes to consolidated financial statements.

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In thousands, except share data

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

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

Shares Amount Amount Amount Amount Amount

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Net Income — — — 322,694 — 322,694

Other comprehensive income (loss) — — — — 393 393

Stock options exercised 92,644 — 831 — — 831

Payroll taxes settled on Option Exercises ( 582,497 ) ( 1 ) — ( 40,623 ) — ( 40,624 )

Restricted stock units issued, net of tax withholdings 41,256 — ( 1,473 ) — — ( 1,473 )

1 unchanged sentence

Stock-based compensation expense — — 2,890 — — 2,890

Dividends Paid on Common Stock ($ 1.00 per share)

— — — ( 71,358 ) — ( 71,358 )

Balances at June 30, 2019 69,472,568 $ 69 $ — $ 98,815 $ 393 $ 99,277

54 unchanged sentences

Proceeds from maturity of investments 922 15,832 38,304

Net cash (used in) investing activities 69,584 ( 157,567 ) ( 9,115 )

Net cash (used in) provided by investing activities ( 19,266 ) 69,584 ( 157,567 )

Cash Flows from Financing Activities:

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Proceeds from exercise of stock options 125 179 831

Tax withholdings related to net share settlements of stock options — — ( 40,624 )

Tax withholdings related to net share settlements of restricted stock units ( 998 ) ( 1,132 ) ( 1,473 )

Net cash (used in) provided by financing activities ( 625,398 ) ( 530,225 ) ( 260,449 )

Net cash (used in) by financing activities ( 485,955 ) ( 625,398 ) ( 530,225 )

Net (decrease) increase in cash and cash equivalents 106,801 ( 95,530 ) ( 428,534 )

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Net unsettled investment purchases (sales, and maturities) $ — $ 522 $ ( 522 )

(1) The Company reclassified $ 42 million reported in previous period, related to deposits on long term assets to purchase of property and equipment and other long-term assets, to conform to the current period presentation.

See notes to consolidated financial statements.

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GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes.

Those estimated assumptions include, but are not limited to, revenue recognition and deferred revenue;

Those estimates and assumptions include, but are not limited to, revenue recognition and deferred revenue;

allowance for doubtful accounts and sales return reserves;

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Actual results could differ materially from those estimates.

Management has determined that it operates as one reportable and operating segment as the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker, does not make decisions about resources to be allocated or assess performance on a segment basis.

Further information regarding Segments can be found in Note 15, to the consolidated financial statements.

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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.

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.

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

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If the estimated life of the 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.

As of June 30, 2021 and 2020, the Company had deferred revenues of $ 30.2 million and $ 22.7 million, respectively, related to PCS obligations.

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NRV is based upon an estimated average selling price reduced by the estimated costs of disposal.

The determination of net realizable value involves certain judgments including estimating average selling prices based on recent sales.

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.

The determination of net realizable value involves certain judgments

including estimating average selling prices based on recent sales.

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 NRV.

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

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Capitalized costs primarily include management’s best estimate of the direct labor and material 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 the 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 the future periods based on when the inventory is sold or written-down.

Product Warranties

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Leasehold improvements shorter of lease term or useful life

Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the statement of operations.

Upon retirement or disposition, the asset cost and related accumulated depreciation are removed with any gain or loss recognized in the consolidated statement of operations.

Expenditures for maintenance and repairs are charged to operations as incurred.

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At contract inception, the Company determines if an arrangement is a lease, or contains a lease, of an identified asset for which the Company has the right to obtain substantially all of the economic benefits from its use and the right to direct its use.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, while

lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, while lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and

liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term.

The implicit discount rate in the Company’s leases generally cannot readily be determined and therefore, the Company uses its incremental borrowing rate based on information available at lease commencement date in determining the present value of future payments.

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The functional currency of the Company and its subsidiaries is the U.S.

For foreign operations, local currency denominated monetary assets and liabilities are remeasured at the period end exchange rates, and revenues, costs and expenses are remeasured at the average exchange rates during the fiscal year.

For foreign operations, local currency denominated

monetary assets and liabilities are remeasured at the period end exchange rates, and revenues, costs and expenses are remeasured at the average exchange rates during the fiscal year.

Foreign exchange gains and losses have been immaterial to the Company’s results of operations to date.

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Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2016-02, Leases (“ ASU 2016-02 ”) and in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements (“ASU 2018-11”) (collectively referred to as “ASC 842”).

This guidance requires the recognition of ROU assets and lease liabilities, arising from financing and operating leases, on the consolidated balance sheet, along with additional qualitative and quantitative disclosures.

Companies are required to adopt this guidance using a modified retrospective approach and apply the transition provisions under the guidance at either 1) the later of the beginning of the earliest comparative period presented in the financial statements and the commencement date of the lease, or 2) the beginning of the period of adoption (i.e.

on the effective date).

Under the transition method using the second application date, a company initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted the guidance on July 1, 2019, beginning of our fiscal year 2020, using the modified retrospective transition method and initially applied the transition provisions at July 1, 2019, which allowed us to continue to apply the legacy guidance in ASC 840 for periods prior to fiscal 2019.

We elected the package of transition practical expedients, which among other things, allows us to keep the historical lease classifications and not have to reassess the lease classification for any existing leases as of the date of adoption.

We also made the following accounting policy elections as allowed by ASC 842:

• to apply the short-term lease exception, which allows us to keep leases with an initial term of twelve months or less off the balance sheet.

• to account for each separate lease component of a contract and its associated non-lease components as a single-lease component for all our leases.

As a result of the adoption of this standard, there was no adjustment to the opening balance of retained earnings as there was no cumulative effect adjustment at the date of adoption.

Accordingly, the primary impact of adopting ASC 842 was the recognition of ROU assets and lease liabilities for operating leases of approximately $ 23.3 million and $ 24.0 million respectively for all existing leases which had remaining obligations as of July 1, 2019.

This included reclassifying deferred rent of $ 0.7 million from other current liabilities to a component of the ROU asset.

ASC 842 did not have a material impact on our results of operations and comprehensive income and statement of cash flow.

Recent Accounting Pronouncements Not Yet Effective

Credit Losses on Financial Instruments

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ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses for certain financial instruments and financial assets.

For trade receivables, we will be required to estimate lifetime expected credit losses.

For available-for-sale debt

securities, we will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset.

For trade receivables, we are required to estimate lifetime expected credit losses.

For available-for-sale debt securities, the Company will recognize an allowance for credit losses rather than a reduction to the carrying value of the asset.

ASU 2016-13 is effective for the Company’s fiscal year beginning July 1, 2020 on a modified retrospective basis.

Although the Company is finalizing the adoption process of the new standard, including identifying, evaluating and quantifying the impact on the consolidated financial statements, we do not except the adoption of this ASU to result in a material impact to the Company’s consolidated financial position, results of operations, or cash flows.

As of July 1, 2020, the Company adopted the new standard, including identifying, evaluating and quantifying the impact on its consolidated financial statements.

The Company concluded that the expected credit loss impact to the opening balance of fiscal 2021 retained earnings was deemed immaterial, and as a result the adoption did not have a material impact the Company's consolidated financial position, results of operations, or cash flows.

Recent Accounting Pronouncements Not Yet Effective

In December 2019, the FASB issued ASU No.

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ASU 2019-12 is effective for the Company’s fiscal year beginning July 1, 2021.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures .

The Company has evaluated the impact of this new standard on its consolidated financial statements and related disclosures and determined that there will be no material impact resulting from its adoption.

NOTE 3— REVENUES

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Disaggregation of Revenue

See Note 15 of Notes to Consolidated Financial Statements “Segment Information” for disaggregation of revenue by product category and geography.

See Note 15 of Notes to Consolidated Financial Statements “Segment Information” for disaggregation of revenue by product

category and geography.

Contract Balances

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The Company’s contracts with customers generally do not contain other forms of variable consideration, however when additional variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price.

These reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future vary

from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known .

NOTE 4— FAIR VALUE OF FINANCIAL INSTRUMENTS

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Subtotal $ 1,055 $ — $ — $ 1,055 $ 1,055 $ — $ —

Commercial paper $ 1,123 $ — $ — $ 1,123 $ 524 $ 599 $ —

Corporate securities 1,429 9 — 1,438 — 925 513

U.S agency securities 4,702 4 — 4,706 — 3,712 994

US Government Bonds 12,189 20 ( 1 ) 12,208 — 8,178 4,030

Subtotal $ 1,429 $ 9 $ — $ 1,438 $ — $ 925 $ 513

2 unchanged sentences

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

During fiscal year end June 30, 2020 and 2019, the Company reclassified realized net gain of $ 371.8 thousand and $ 30.5 thousand, respectively, to earnings from accumulated other comprehensive income.

During fiscal year end June 30, 2020 and 2019, the Company had $ 1.0 million and $ 2.7 million, respectively, of interest income on our investment securities.

During fiscal year end June 30, 2021, the Company did not recognize any net gains or losses from accumulated other comprehensive income related to unrealized gains or losses.

During fiscal year end June 30, 2020, the Company reclassified realized net gain $ 0.4 million, respectively, to earnings from accumulated other comprehensive income.

During fiscal year end June 30, 2021, interest income on the Company's investments securities was immaterial.

During fiscal year end June 30, 2020, the Company had $ 1.0 million of interest income on our investment securities.

The Company's had no material continuous unrealized loss position from marketable securities as of June 30, 2021.

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

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 June 30, 2019 (in thousands):

June 30, 2019

Continuous Unrealized Losses

Less than 12 Months 12 Months or Greater Total

Fair Value of marketable securities $ 8,072 $ — $ 8,072

Unrealized Loss $ ( 3 ) $ — $ ( 3 )

Based on evaluation of securities that have been in a continuous loss position, we did not recognize any other-than-temporary impairment charges during fiscal year end June 30, 2021 and 2020.

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

Deposits on aircraft (1)

Hong Kong tax deposit (1)

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Total $ 71,946 $ 43,223

(1) The Company made $ 42 million and $ 15 million in deposits related to the purchase of an airplane in fiscal 2019 and fiscal 2020.

During the third quarter of fiscal 2020, the Company made its final payment that was due upon transfer of title and receipt of the airplane.

As a result, the Company reclassified the $ 57 million in deposits related to the purchase, to Property and Equipment, net on our Consolidated Balance Sheet.

As a result of an independent security study, the Company’s independent directors approved the purchase of the airplane, which Mr.

Pera will be expected to use for all business and personal air travel.

(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.

Of that amount, $ 15.5 million, $ 13.4 million, and $ 6.6 million were made during fiscal year 2020, 2019 and 2018, respectively.

We expect the $ 35.5 million of deposits made with the IRD to be refunded upon completion of the audit.

These deposits were made during fiscal year 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 $ 2.8 million and $ 1.8 million as June 30, 2021 and June 30, 2020, respectively.

(4) During fiscal 2019, the Company entered into a $ 5 million strategic cost method investment where the Company acquired preferred stock.

The shares were recorded at cost in Other Long-Term Assets on our Consolidated Balance Sheet.

During fiscal 2020, the Company recorded an impairment charge of $ 5 million.

This unrealized loss is reflected in Interest expense and other, net on the Consolidated Statement of Operations and Comprehensive Income.

Other Current Liabilities

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Reserves for sales returns 2,242 1,275

Inventory received not billed 55,548 1,607

Other payables 2,944 4,489

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Total $ 4,812 $ 4,538

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.

The Third Amendment replaced the Company’s existing $ 400 million senior secured revolving facility and $ 500 million senior

secured term loan facility under the Second A&R Credit Agreement.

At the closing of the Third Amendment, the Term Facility was fully drawn, of which $ 462.5 million and $ 0.5 million was used to repay the prior term facility under the Second A&R Credit Agreement for principal and interest, respectively.

Additionally, $ 120.0 million was drawn under the Revolving Facility.

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.

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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.

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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.

The Company will also pay to the applicable lenders on a quarterly basis certain fees based on the daily amount available to be drawn under each outstanding letter of credit, including aggregate letter of credit commissions of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter, and issuance fees of 0.125 % per annum.

The Company will also pay to the applicable lenders on a quarterly basis certain fees

based on the daily amount available to be drawn under each outstanding letter of credit, including aggregate letter of credit commissions of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter, and issuance fees of 0.125 % per annum.

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

The Credit Agreement requires the Company to maintain during the term of the Facilities (i) a maximum consolidated total leverage ratio of 3.25 to 1.00 and (ii) a minimum consolidated interest coverage 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 June 30, 2020, $ 475.0 million was outstanding on the Term Facility and $ 180.0 million on the Revolving Facility, leaving $ 520.0 million available on the Revolving Facility.

As of June 30, 2021, $ 493.8 million was outstanding on the Term Facility.

As of June 30, 2021, there was no outstanding balance on the Revolving Facility, leaving $ 700.0 million available on the Revolving Facility.

As of June 30, 2021, the Company was in compliance with the financial covenants under the Third Amended and Restated Credit Agreement.

Term Facility:

Under the Credit Agreement, during fiscal year 2020, the Company made aggregate payments of $ 40.9 million under the Term Facility, of which $ 25.0 million was repayment of principal and $ 15.9 million was payment of interest.

Revolving Facility:

Under the Credit Agreement, during fiscal year 2020, the Company made aggregate payments of $ 250.9 million under the Revolving Facility, of which $ 245.0 million was repayment of principal and $ 5.9 million was payment of interest.

Under Existing Credit Agreement, during fiscal year 2021, the Company made aggregate payments of $ 19.1 million under the Existing Term Facility, of which $ 12.5 million was a repayment of principal and $ 6.6 million was a payment of interest.

Under the Third Amended and Restated Credit Agreement, during fiscal year 2021, the Company made aggregate payments of $ 8.3 million under the Term Facility, of which $ 6.3 million was a repayment of principal and $ 2.0 million was a payment of interest.

As of June 30, 2021, the interest rate on the term loan was 1.60 %.

As of July 30, 2021, the most currently available reset date, the Term Facility has an interest rate of 1.59 %.

The table below shows the respective interest rates as of June 30, 2020, in addition to the interest rate reset dates as available for each revolver draw.

Debt Payment Obligations Interest Rate as of June 30, 2020 Rate Reset Date Reset Rate

$120 Million Revolver 1.93 % August 17, 2020 1.91 %

$50 Million Revolver 1.93 % July 29, 2020 1.92 %

$10 Million Revolver 1.94 % August 20, 2020 1.91 %

Revolving Facility:

Under the Existing Credit Agreement, during fiscal year 2021, the Company made aggregate payments of $ 182.9 million under the Existing Revolving Facility, of which $ 180.0 million was a repayment of principal and $ 2.9 million was a payment of interest.

Under the Third Amended and Restated Credit Agreement, during fiscal year 2021, the Company made aggregate payments of $ 75.3 million under the Revolving Facility, of which $ 75.0 million was a repayment of principal and $ 0.3 million was a payment of interest.

The following table summarizes our estimated debt and interest payment obligations as of June 30, 2021, for fiscal 2022 and future fiscal years (in thousands):

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NOTE 9— LEASES

On July 1, 2019, we adopted the new accounting standard ASC 842, Leases, using the modified retrospective method.

We elected this adoption date as our date of initial application.

As a result, we have not updated financial information related to, nor have we provided disclosures required under ASC 842 for, periods prior to July 1, 2019.

The primary changes to our policies relate to recognizing most leases on our consolidated balance sheet as liabilities with corresponding right-of-use (“ROU”) assets.

The Company has entered into agreements under which we lease various real estate spaces in North America, Europe and Asia Pacific, under non-cancellable leases that expire on various dates through fiscal 2029.

Some of our leases include options to extend the term of such leases for a period from 12 months to 60 months, and/or have options to early terminate the lease.

As of June 30, 2020, we included such options in determining the lease terms for certain of our leases as we were reasonably certain that we would exercise those options.

As of June 30,

2021, we included such options in determining the lease terms for certain of our leases as we were reasonably certain that we would exercise those options.

Most of our leases require us to pay certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs.

Practical Expedients

The modified retrospective approach included a package of optional practical expedient that we elected to apply.

Among other things, these expedients permitted us not to reassess prior conclusions regarding lease identification, lease classification and initial direct costs under ASC 842.

The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for real estate leases.

Additionally, the Company does not recognize ROU assets or lease liabilities for leases with original

terms or renewals of one year or less.

The following table summarizes our lease costs for fiscal year ended June 30, 2020 (in thousands):

June 30, 2020

The following table summarizes our lease costs for fiscal year ended June 30, 2021 and 2020 (in thousands):

Operating lease costs:

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

Total short-term costs for fiscal year June 30, 2020 was $ 0.2 million.

Total short-term costs for fiscal year June 30, 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 fiscal year June 30, 2020, the cash paid for amounts associated with our operating lease liabilities were approximately $ 9.0 million which were classified as operating activities in the consolidated statement of cash flows.

For fiscal year June 30, 2021 and 2020, the cash paid for amounts associated with our operating lease liabilities were approximately $ 11.2 million and $ 9.0 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 our undiscounted future fixed payment obligations under our recognized operating leases and a reconciliation to the operating lease liabilities as of June 30, 2021:

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Total operating lease liabilities $ 41,407

Weighted-average remaining lease term - operating leases 5.44

Weighted-average remaining lease term - operating leases Five years

Weighted-average discount rate - operating leases 2.7 %

Due to our election to apply the effective date method of adoption for ASC 842, we have included the following additional disclosure under our historical lease accounting under ASC 840.

As of June 30, 2019, future minimum lease payments under non-cancelable operating lease were as follows (in thousands):

FY 2020 $ 7,395

FY 2021 $ 5,509

FY 2022 $ 2,639

FY 2023 $ 2,205

FY 2024 $ 1,982

Thereafter $ 7,116

Total future minimum annual payments $ 26,846

Fiscal 2019 rent expense under operating leases $ 7.8 million

NOTE 10— COMMITMENTS AND CONTINGENCIES

Operating Leases

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of June 30, 2020 and June 30, 2019

See Note 9- Leases for future minimum lease payments under non-cancelable operating leases as of June 30, 2021.

Purchase Obligations

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

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.

The Company 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 $ 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.

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However, the Company’s estimates may be incorrect and the Company could ultimately incur more or less than the amounts initially recorded.

The Company may also incur significant legal fees, which are expensed as

incurred, in defending against these claims.

The Company may also incur significant legal fees, which are expensed as incurred, in defending against these claims.

The Company is not currently aware of any pending or threatened litigation that would have a material adverse effect on the Company’s financial statements.

On April 19, 2017, XR Communications, LLC, d/b/a Vivato Technologies (“Vivato”), filed a complaint against the Company in the United States District Court for the Central District of California, alleging that at least one of the Company’s products infringes United States Patent Numbers 7,062,296 (the “‘296 Patent”), 7,729,728 (the “‘728 Patent”), and 6,611,231 (the “‘231 Patent” and, collectively, the “Patents-in-Suit”).

The ‘296 and ‘728 Patents are entitled “Forced Beam Switching in Wireless Communication Systems Having Smart Antennas.” The ‘231 Patent is entitled “Wireless Packet Switched Communications Systems and Networks Using Adaptively Steered Antenna Arrays.” Vivato amended its complaint on June 23, 2017 and again on July 6, 2017.

According to the complaint, the products accused of infringing the Patents-in-Suit include Wi-Fi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard.

Vivato has also filed nine other lawsuits asserting the same patents against other defendants in the Central District of California.

On October 2, 2017, the ten cases were consolidated into a single action for all purposes except trial.

On March 19, 2018, the Company and the remaining defendants in the consolidated action moved to stay the case (the “Motion to Stay”) pending completion of certain inter partes review proceedings be fore the Patent Trial and Appeal Board.

On April 9, 2018, the Court held a hearing on the Motion to Stay, and, on April 11, 2018, the Court granted the motion.

On February 11, 2019, the Court maintained the stay pending a status conference scheduled for December 2, 2019.

During the status conference on December 2, 2019, the Court rejected a request from Vivato to lift the stay in part.

The Court maintained the stay in full pending a further status conference, which was originally scheduled for March 17, 2020 and subsequently rescheduled for August 31, 2020.

Vivato also filed nine other lawsuits asserting the same patents against other defendants in the Central District of California.

On October 2, 2017, the ten cases were consolidated into a single action for all purposes except trial (the "Original Action").

According to the operative Second Amended Complaint filed on July 6, 2017, the products accused of infringing the Patents-in-Suit include Wi-Fi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard.

On March 19, 2018, the Company and the remaining defendants in the Original Action moved to stay the case pending completion of certain inter partes review proceedings before the Patent Trial and Appeal Board.

On April 11, 2018, the Court stayed the Original Action.

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

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

Following the Federal Circuit's affirmance, the District Court lifted the stay on March 1, 2021 to resume proceedings on the '231 Patent in the Original Action.

On June 16, 2021, Vivato filed a new suit against the Company in the Central District of California, alleging that various Company products infringe some of the non-invalidated claims of the ’728 Patent and U.S.

10,594,376 (the “New Action”).

According to the New Action, the products accused of infringing these patents include Wi-Fi access points and routers supporting

MU-MIMO, including without limitation access points and routers utilizing the 802.11ac and 802.11ax protocols.

The New Action, as well as four similar new lawsuits filed by Vivato against other defendants in the same jurisdiction, were consolidated into the Original Action.

The Company’s response to the New Action was filed on August 11, 2021.

The Company plans to vigorously defend itself against these claims;

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

As previously disclosed on the Form 8-K filed by the Company on February 20, 2018, on February 13, 2018, the Securities and Exchange Commission (the “SEC”) issued subpoenas to the Company and certain of the Company’s officers requesting documents and information relating to a range of topics, including metrics relating to the Ubiquiti Community, accounting practices, financial information, auditors, international trade practices, and relationships with distributors and various other third parties.

The Company has responded to the requests and intends to cooperate fully with the SEC.

As the SEC’s investigation is ongoing, we cannot currently predict the timing or the outcome of such investigation.

Shareholder Class Actions

On February 21, 2018, a purported class action, captioned Paul Vanderheiden v.

Ubiquiti Networks, Inc.

18-cv-01620 (the “ Vanderheiden Action”), was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers.

The Vanderheiden Action complaint alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making false and/or misleading statements, including purported overstatements of the Company’s online community user engagement metrics and accounts receivable.

On February 28, 2018 and March 13, 2018, substantially similar purported class actions, captioned Xiya Qian v.

Ubiquiti Networks, Inc.

18-cv-01841 (the “ Qian Action”) and J ohn Kho v.

Ubiquiti Networks, Inc.

18-cv-02242 (the “ Kho Action”, together with the Vanderheiden Action and the Qian Action, the “Class Actions”), respectively, were filed in the United States District Court for the Southern District of New York.

On October 24, 2018, the Court consolidated the Class Actions and appointed lead plaintiff and lead counsel (the “Consolidated Class Action”).

Plaintiff filed its Consolidated Amended Complaint on December 24, 2018.

On March 21, 2019, Defendants informed the Court that they were prepared to move to dismiss the Consolidated Amended Complaint but that, consistent with the Court’s individual practices, they would refrain from filing that motion pending receipt of further guidance from the Court.

On October 16, 2019, the parties in the Consolidated Class Action reached an agreement in principle to settle the Consolidated Class Action (the “Settlement”).

The Court granted final approval of the Settlement on March 27, 2020, dismissing the Consolidated Class Action with prejudice.

The Settlement, which included an award of attorneys’ fees to Plaintiffs’ counsel, was fully funded by certain of the Company’s insurers.

Shareholder Derivative Actions & Section 220 Demand

On March 13, 2018, Anthony Franchi filed a shareholder derivative complaint in the Superior Court of the State of California, County of San Mateo, against the Company’s directors, and certain of its officers (the “ Franchi Action”).

The Company was named

as a nominal defendant.

The complaint asserted claims against all individual defendants for breach of fiduciary duty for disseminating false and misleading information, failure to maintain internal controls, and unjust enrichment.

Additional claims were asserted against Robert Pera for breach of fiduciary duty for insider selling and misappropriation of information, as well as for violation of California Corporations Code § 25402.

The allegations in support of these claims were similar to the allegations made in the Consolidated Class Actions.

Plaintiff sought a judgment on behalf of the Company for all damages incurred or that would be incurred as a result of the alleged breaches of fiduciary duty by the individual defendants, a judgment ordering disgorgement of all profits, benefits, and other compensation obtained by the individual defendants, a judgment directing the Company to reform its governance and internal procedures, and attorneys’ fees and other costs.

The Company moved for a stay of the derivative action pending resolution of the Consolidated Class Action.

The court denied the Company’s motion, but stayed discovery until the resolution of any motion to dismiss the Consolidated Class Action.

On August 27, 2018, the individual defendants and nominal defendant Ubiquiti demurred to the Franchi Action.

Plaintiff filed an omnibus response on October 5, 2018 and defendants filed replies on October 22, 2018.

The California Superior Court did not render a decision on the demurrers.

On June 4, 2018, Ubiquiti stockholder Richard Gericke served a demand to inspect the Company’s books and records pursuant to Section 220 of the Delaware General Corporation Law.

The Company commenced its production of documents responding to Mr.

Gericke’s requests for records on August 22, 2018 and completed its production on October 10, 2018.

In addition to serving his Section 220 demand, Mr.

Gericke sought leave to intervene in the Franchi Action.

Gericke’s motion was denied without prejudice on November 30, 2018.

On March 11, 2019, Mr.

Gericke filed a shareholder derivative complaint in the Court of Chancery for the State of Delaware against the Company’s directors and certain of its officers (the “ Gericke Action”, and together with the Franchi Action, the “Derivative Actions”).

The Company was named as a nominal defendant.

The complaint asserted claims against all defendants for breach of fiduciary duty, waste of corporate assets, and unjust enrichment.

The allegations in support of these claims were similar to the allegations made in the Franchi Action.

Plaintiff sought a judgment on behalf of the Company for the damages sustained by the individual defendants’ alleged wrongdoing, an award to the Company of restitution from the individual defendants, an award to Plaintiff of the costs and disbursements of the action, including attorneys’ fees, and an order directing the Company to take action to reform and improve corporate governance and internal procedures.

On October 14, 2019, the parties entered into an agreement in principle to settle the Derivative Actions pursuant to which the Company agreed to adopt certain corporate governance modifications and commitments (the “Derivative Settlement”).

On November 1, 2019, the Court of Chancery entered an order staying the Gericke Action.

On November 8, 2019, the California Superior Court entered an order staying the Franchi Action pending the Court’s review and approval of the Derivative Settlement.

On March 10, 2020, the California Superior Court granted final approval of the Derivative Settlement, dismissing the Franchi Action with prejudice.

On March 17, 2020, the Court of Chancery dismissed the Gericke Action with prejudice.

In connection with the Derivative Settlement, certain of the Company’s insurers fully funded an agreed-upon award of attorneys’ fees to Plaintiffs’ counsel.

In re Ubiquiti Inc.

Securities Litigation (SDNY)

On May 19, 2021, a purported class action, captioned Nils Molder, Individually and On Behalf of All Others Similarly Situated v.

Ubiquiti Inc.

1:21-cv-04520 (the “Securities Action”), was filed in the United States District Court for the Southern District of New York against the Company and certain of its officers.

The Securities Action complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making false and/or misleading statements, including purported failure to disclose material facts about a data breach experienced by the Company in January 2021.

On July 30, 2021, the Court appointed a lead plaintiff and lead plaintiff’s counsel and ordered the lead plaintiff to file an amended complaint on or before September 24, 2021.

The case is now captioned In re Ubiquiti Inc.

Securities Litigation, 21 Civ.

The Company plans to vigorously defend itself against these claims;

however, there can be no assurance that the Company will prevail in the lawsuit.

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

NOTE 11— COMMON STOCK AND TREASURY STOCK

Common Stock Repurchases

On November 6, 2019, the Company’s Board of Directors approved a $ 200 million stock repurchase program (the “2019 November Program”).

Under the 2019 November Program, the Company is authorized to repurchase up to $ 200 million of common stock.

The 2019 November Program expires on December 31, 2021.

During the three months ended September 30, 2020, 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.

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

Under the 2020 May Program, the Company may repurchase up to $ 500 million of its common stock.

The 2020 May Program expires on March 31, 2022.

During the twelve months ended June 30, 2021, under the 2020 May Program, the Company repurchased and retired 917,008 shares of common stock at an average price per share of $ 198.33 for an aggregate amount of $ 181.9 million.

Under both programs, for the fiscal year ended June 30, 2021, the Company repurchased and retired 1,145,188 shares of common stock at an average price per share of $ 191.90 for an aggregate amount of $ 219.8 million.

As of June 30, 2021, the Company had $ 318.1 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 fiscal year ended June 30, 2021 (in millions, except share and per share amounts):

Date of Approved and 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 Programs Expiration date of Program

May 8, 2020 $ 500 million — $ — $ — — $ 500.0 million 3/31/2022

November 8, 2019 $ 200 million 1,211,771 $ 133.78 $ 162.1 February 7, 2020 - April 21, 2020 $ 37.9 million 12/31/2021

August 9, 2019 $ 500 million 4,337,320 $ 115.28 $ 500.0 August 12, 2019 - October 28, 2019 $ — 12/31/2020

November 9, 2018 $ 200 million 293,709 $ 121.86 $ 35.8 July 8,2019 - August 12, 2019 $ — 12/31/2019

November 8, 2019 $ 200.0 228,180 $ 166.05 $ 37.9 August 21, 2020 - September 15, 2020 $ — 12/31/2021

May 8, 2020 $ 500.0 917,008 $ 198.33 $ 181.9 September 15, 2020 - June 24, 2021 $ 318.1 3/31/2022

The following table summarizes total activity related to our stock repurchase programs for the fiscal year end as indicated (in millions, except average price per share):

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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.

As of June 30, 2020 and 2019 the Company’s accumulated other comprehensive income includes $ 9.2 thousand and $ 0.4 million respectively, of net unrealized gains from our available-for-sale securities.

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 fiscal year ended June 30, 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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Incentive stock options may be granted only to employees.

The 2010 Plan is administered by the Company’s Board of Directors or a committee of the Company’s Board of Directors.

Subject to the terms and conditions of the 2010 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2010 Plan.

The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2010 Plan.

Options and RSUs generally vest over a four-year period from the date of grant and generally expire five to ten years from the date of grant.

The terms of the 2010 Plan provide that an option price shall not be less than 100 % of fair market value on the date of grant.

2020 Equity Incentive Plan

With the adoption of the 2010 Plan, no additional awards may be granted under the 2005 Plan.

In February 2005, the Company’s Board of Directors and the stockholders approved the 2005 Plan, which was amended and restated in March 2006.

The 2005 Plan provided for the issuance of stock options, restricted stock and stock bonuses to employees, consultants, advisors, directors and officers of the Company.

The terms of the options granted under the 2005 Plan were determined at the time of grant.

The Company made use of different vesting schedules through fiscal 2009, but subsequent new grants generally vested as to 25 % on the first anniversary of the date of grant and monthly thereafter over the next three years and generally have a term of 10 years from the date of grant.

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

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

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

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

The 2020 and 2010 Equity Plan is administered by the Company’s Board of Directors or a committee of the Company’s Board of Directors.

Subject to the terms and conditions of the 2020 and 2010 Equity Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2020 and 2010 Equity Plan.

The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2020 and 2010 Equity Plan.

Options and RSUs generally vest over a four-year period from the date of grant and generally expire ten years from the date of grant.

The terms of the 2020 and 2010 Equity Plan provide that an option price shall not be less than 100 % of fair market value on the date of grant.

As of June 30, 2021, the Company had 4,989,630 authorized shares available for future issuance under all of its stock incentive plans.

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Stock Options

The following is a summary of option activity for the Company’s stock incentive plans for fiscal 2020, 2019 and 2018:

The following is a summary of option activity for the Company’s stock incentive plans for fiscal 2021:

Common Stock Options Outstanding

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Exercised ( 11,734 ) $ 10.67

Balance, June 30, 2018 137,491 $ 9.15 3.62 $ 10,390

Exercised ( 92,644 ) $ 8.99

Balance, June 30, 2019 44,847 $ 9.50 2.78 $ 5,472

Exercised ( 22,582 ) $ 7.95

Cancelations ( 6 ) $ 2.90

Balance, June 30, 2021 10,525 $ 11.51 1.29 $ 3,165

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1,000 0.51 $ 18.49

$ 18.49 - $ 18.49

1,000 1.51 $ 18.49

$ 19.99 - $ 19.99

500 1.42 $ 19.99

During fiscal 2021, 2020 and 2019, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 3.1 million, $ 3.9 million, and $ 10.8 million, respectively, as determined as of the date of option exercise.

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actual number of future forfeitures differs from that estimated, the Company may be required to record adjustments to stock-based compensation expense in future periods.

Cash received from stock option exercises during fiscal 2020, 2019 and 2018 was $ 0.2 million, $ 0.8 million and $ 1.5 million, respectively.

Restricted Stock Units (“RSUs”)

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Non-vested RSUs, June 30, 2021 61,533 $ 143.28

RSUs granted 49,965 $ 92.77

RSUs vested ( 53,443 ) $ 43.67

RSUs forfeited ( 27,836 ) $ 61.55

Non-vested RSUs, June 30, 2019 112,786 $ 73.24

RSUs granted 20,333 $ 157.68

RSUs vested ( 42,801 ) $ 61.28

RSUs forfeited ( 7,747 ) $ 80.30

Non-vested RSUs, June 30, 2020 82,571 $ 99.57

The intrinsic value of RSUs vested in fiscal 2021, 2020 and 2019 was $ 7.7 million, $ 7.0 million and $ 6.0 million, respectively.

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State 791 410 624

Foreign — — —

Deferred tax expense ( 1,192 ) 262 2,027

Deferred tax benefit (expense) ( 674 ) ( 1,192 ) 262

Provision for income taxes $ 111,070 $ 69,899 $ 58,795

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Other permanent items 0.2 0.6 1.0

Change in U.S.

Federal Statutory Tax Rate — — 0.4

Transition tax — — 0.6

Effective tax rate 15.3 % 15.5 % 15.4 %

The Company’s effective tax rate increased 0.1 % to 15.5 % in fiscal 2020 from 15.4 % in fiscal 2019.

The Company’s effective tax rate decreased 0.2 % to 15.3 % in fiscal 2021 from 15.5 % in fiscal 2020.

The Company recorded tax provisions of $ 111.1 million for fiscal 2021 as compared to $ 69.9 million for fiscal 2020.

Our effective tax rate and resulting provision for income taxes for fiscal 2020 and fiscal 2019 years reflect the full impact of the 2017 Tax Act, which resulted in a reduction in the U.S.

statutory rate to 21% which is partially offset by a reduced tax benefit from foreign operations.

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

statutory rate primarily due to profits earned in jurisdictions where the tax rate is lower than the U.S.

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

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

Significant components of the Company's deferred tax assets and liabilities as of June 30, 2021 are as follows (in thousands):

(In thousands)

Deferred tax assets

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Deferred tax liabilities

Basis difference for fixed assets ( 1,509 ) ( 301 )

Property and equipment ( 3,402 ) ( 1,509 )

Right of use assets ( 8,576 ) ( 5,622 )

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Unrecognized benefit—end of year $ 32,092 $ 31,350 $ 30,850

As of June 30, 2020, the Company had approximately $ 31.4 million of unrecognized tax benefits, substantially all of which would,

if recognized, affect its tax expense.

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 June 30, 2021, the Company had approximately $ 32.1 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

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 June 30, 2021, the Company had $ 3.6 million accrued interest related to uncertain tax matters.

The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S.

Internal Revenue Service and the Hong Kong Inland Revenue Department (“IRD”).

The Company, and one or more of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S.

Internal Revenue Service and the Hong Kong IRD.

All material consolidated federal, state and local income tax matters have been concluded for years through 2014.

The majority of the Company’s foreign jurisdictions have been concluded through 2014, with the exception of Hong Kong which has been reviewed through 2009 and is currently under audit for the 2010-2016 tax years.

During fiscal years 2020, 2019 and 2018, the Company made a total of $ 15.5 million, $ 13.4 million, and $ 6.6 million of deposits with the Hong Kong Inland Revenue Department (“IRD”) in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2014 tax years.

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

During fiscal years 2021, 2020, 2019 and 2018, the Company made a total of $ 21.9 million, $ 15.5 million, $ 13.4 million, and $ 6.6 million of deposits with the Hong Kong IRD in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2014 tax years.

These refundable deposits totaling $ 57.4 million are included within other long-term assets on our Consolidated Balance Sheets.

The IRD is examining the Company’s claims that its revenue is generated through activities performed wholly outside of the Hong Kong tax jurisdiction and are therefore exempt from Hong Kong tax.

The Company is fully cooperating with the examination including submitting documentation in support of its position.

The Company continues to believe that its tax positions filed with IRD are more likely than not to be sustained based on their technical merits and therefore no reserve has been provided for this tax uncertainty and we expect the $ 35.5 million of deposits made with IRD to be refunded upon completion of the audit.

The Company continues to believe that its tax positions filed with IRD are more likely than not to be sustained based on their technical merits and therefore no reserve has been provided for this tax uncertainty and the Company expects the $ 57.4 million of deposits made with IRD to be refunded upon completion of the audit.

However, there can be no assurance that this matter will be resolved in the Company’s favor and therefore it’s possible that an adverse outcome of the matter could have a material effect on the Company’s results of operations and financial condition.

In July 2018, the Company received a draft Notice of Proposed Adjustment (“Draft NOPA”) from the Internal Revenue Service (“IRS”) proposing an adjustment to income for the fiscal 2015 and fiscal 2016 tax years based on its interpretation of certain obligations of the non-US entities under the credit facility.

In July 2018, the Company received a draft Notice of Proposed Adjustment (“Draft NOPA”) from the Internal Revenue Service

(“IRS”) proposing an adjustment to income for the fiscal 2015 and fiscal 2016 tax years based on its interpretation of certain obligations of the non-US entities under the credit facility.

This Draft NOPA was superseded by an Acknowledgement of Facts (“AOF”) issued to the Company by the IRS on January 17, 2020.

The IRS in its AOF continued to propose an adjustment to the Company’s income for its fiscal 2015 and fiscal 2016 tax years based on the IRS’ interpretation of certain obligations of the Company’s foreign subsidiaries under the Company’s credit facilities.

The incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

On May 12, 2020, the IRS issued a final Notice of Proposed Adjustment to the Company with respect to the 2015/2016 tax years.

The Company has formally protested the adjustment and the case is expected to be moved from the Examination Division to the IRS Appeals Division where a formal review of the facts and the applicable law will take place.

The Company has formally protested the adjustment and the case has been moved from the Examination Division to the IRS Appeals Division where a formal review of the facts and the applicable law will take place.

The timing of when the case will be scheduled to be reviewed by the Appeals Division is uncertain at this time due in large part to an existing backlog of cases awaiting review by the Division.

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Regardless of whether the matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle.

The Company estimates the incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50.0 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

As the Company believes that the tax originally paid in fiscal 2015 and fiscal 2016 is correct, it has not provided a reserve for this tax uncertainty.

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The bill was meant to address the economic fallout in response to locally mandated shelter-in-place orders that were executed in an attempt to slow the spread of COVID-19.

Under CARES, several provisions of the tax code were amended to help provide additional relief to businesses that were adversely affected by the pandemic.

The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL”) and allow businesses and individuals to carry back NOLs arising in fiscal 2018, fiscal 2019, and fiscal 2020 to the five prior tax years;

suspend the excess business loss rules under section 461(l);

accelerate refunds of previously generated corporate AMT credits;

generally loosen the business interest limitation under section 163(j) from 30 percent to 50 percent;

and fix the “retail glitch” for qualified improvement property in the 2017 tax code overhaul known informally as the Tax Cuts and Jobs Act (TCJA, P.L.

None of these provisions of CARES are expected to have material impacts to the Company’s fiscal 2021 tax provision.

We will monitor the updates, both to the Company’s business as well as guidance issued with respect to CARES that could impact the current interpretation of the provisions under CARES, to determine whether any additional considerations need to be made with respect to the Company’s tax provision in future periods.

On July 27, 2015, in Altera Corp.

Commissioner, the U.S.

Tax Court issued a decision related to the treatment of stock-based compensation (“SBC”) expense in an intercompany cost-sharing arrangement, holding that the Treasury Regulations under which the compensation was mandatory included as costs were invalid.

On June 27, 2016, the Internal Revenue Service (“IRS”) appealed the court’s decision to the Ninth Circuit Court of Appeals.

On July 24, 2018 the Ninth Circuit Court of Appeals overturned the U.S.

Tax Court’s decision reversing in favor of the IRS, and holding that the Regulations were valid.

On August 8, 2018, the Ninth Circuit Court of Appeals withdrew this decision, and assigned a new panel to consider the appeal.

On June 7, 2019 the Ninth Circuit

released their decision on the appeal.

This case focused on the validity of amendments made to the cost sharing regulations in August of 2003 (2003 CSA SBC Regulations) which explicitly required the inclusion of SBC costs in intangible development cost pools for CSAs.

On June 22, 2020, the United States Supreme Court announced that it was denying the petition for Altera Corp.

Commissioner holding that the Regulations were valid.

We will continue to monitor ongoing developments;

however, there is no impact on the company’s position at this time.

The Company will monitor the updates, both to the Company’s business as well as guidance issued with respect to CARES that could impact the current interpretation of the provisions under CARES, to determine whether any additional considerations need to be made with respect to the Company’s tax provision in future periods.

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

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

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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Aircraft Lease Agreement

On November 13, 2013, the Company entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) with RJP Manageco LLC (the “Lessor”), a limited liability company owned by the Company’s Chief Executive Officer, Robert J.

Pursuant to the Aircraft Lease Agreement, the Company may lease an aircraft owned by the Lessor for Company business purposes.

Under the Aircraft Lease Agreement, the aircraft may be leased at a rate of $ 5,000 per flight hour.

This hourly rate does not include the cost of flight crew or on-board services, which the Company will purchase from a third-party provider.

The Company recognized a total of approximately $ 1.4 million, $ 1.7 million and $ 1.6 million in expenses pursuant to the Aircraft Lease Agreement during fiscal 2020, fiscal 2019 and fiscal 2018, 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.

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 fiscal year ended June 30, 2021 and recognized a total of approximately $ 1.4 million and $ 1.7 million during fiscal year ended June 30, 2020 and 2019, respectively.

All expenses pursuant to the Aircraft Lease Agreement have been included in the Company’s sales, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

NOTE 17 - SUBSEQUENT EVENTS

On August 21, 2020, the Company announced that its Board of Directors had approved a quarterly cash dividend of $ 0.40 per share payable on September 8, 2020 to shareholders of record at the close of business on August 31, 2020.

Stock Repurchases

Between July 1, 2021 and August 26, 2021, the Company repurchased and retired 93,152 shares of common stock at an average price of $ 299.66 for an aggregate amount of $ 27.9 million.

As of August 26, 2021, the Company had $ 290.2 million available for share repurchases under the 2020 May Program.

On August 27, 2021, the Company announced that its Board of Directors had approved a quarterly cash dividend of $ 0.60 per share payable on September 15, 2021 to shareholders of record at the close of business on September 7, 2021.

Any future dividends will be subject to the approval of the Company’s Board of Directors.

NOTE 18— SUPPLEMENTARY DATA (UNAUDITED)

The following table presents the Company’s unaudited consolidated statements of operations data for each of the eight quarters during fiscal 2020 and 2019.

In management’s opinion, this information has been presented on the same basis as the audited consolidated financial statements included in a separate section of this report, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts below to state fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes.

The operating results for any quarter should not be relied upon as necessarily indicative of results for any future period.

In thousands, except per share data First

Quarter Second

Quarter Third

Quarter Fourth

Net revenue $ 323,277 $ 308,284 $ 337,417 $ 315,522

Gross profit 151,391 145,086 159,635 152,060

Income from operations 120,689 112,048 127,357 118,104

Net income 98,146 85,811 103,722 92,618

Net income per share of common stock:

Basic $ 1.44 $ 1.32 $ 1.60 $ 1.45

Diluted $ 1.43 $ 1.32 $ 1.60 $ 1.45

Quarter Second

Quarter Third

Quarter Fourth

Net revenue $ 282,905 $ 307,276 $ 284,911 $ 286,641

Gross profit 131,606 140,231 132,830 132,937

Income from operations 99,618 91,657 102,137 100,885

Net income (loss) 85,703 77,796 88,300 70,895

Net income (loss) per share of common stock:

Basic $ 1.16 $ 1.09 $ 1.25 $ 1.01

Diluted $ 1.16 $ 1.09 $ 1.25 $ 1.01

Exhibit Index

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10-K August 21, 2019

Amended and Restated Bylaws of Ubiquiti Inc., as amended

10-K August 21, 2019

Amended and Restated Bylaws, as amended , as of December 17, 2020

3.1 December 18, 2020

Specimen Common Stock Certificate of Ubiquiti Networks, Inc.

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S-1 10.3 June 17, 2011

Ubiquiti Inc.

2020 Omnibus Incentive Plan

8-K 10.1 December 11, 2020

Employment Agreement, dated as of March 1, 2016 , between Ubiquiti Networks, Inc.

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8-K 10.1 September 12, 2019

Third Amended and Restated Credit Agreement, dated as of March 30, 2021, by and among Ubiquiti Inc.

10.1 April 5, 2021

Aircraft Lease Agreement between Ubiquiti Networks, Inc.

21 unchanged sentences

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 9A. Controls and Procedures