What changed in this filing

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Item 1. Financial Statements

2022-02-04 compared with 2021-11-05 · 153 added, 134 removed, 472 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Current assets:

1 unchanged sentence

Investments — short-term 2,186 1,320

Accounts receivable, net of allowance for doubtful accounts of $ 54 and $ 47 at September 30, 2021 and June 30, 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 55 and $ 47 at December 31, 2021 and June 30, 2021, respectively

125,459 172,289

23 unchanged sentences

Commitments and contingencies (Note 10)

Stockholders’ equity:

Stockholders’ equity (deficit):

Preferred stock—$ 0.001 par value;

2 unchanged sentences

500,000,000 shares authorized:

62,461,356 and 62,582,858 outstanding as of September 30, 2021 and June 30, 2021, respectively

62,037,616 and 62,582,858 outstanding as of December 31, 2021 and June 30, 2021, respectively

Additional paid–in capital 87 —

Accumulated other comprehensive income 7 1

Retained earnings equity 57,910 2,635

Total stockholders’ equity 57,972 2,699

Retained earnings equity (deficit) ( 4,343 ) 2,635

Total stockholders’ equity (deficit) ( 4,187 ) 2,699

Total liabilities and stockholders’ equity $ 890,848 $ 890,985

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

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

2021 2020 2021 2020

Revenues $ 431,565 $ 479,436 $ 890,479 $ 952,969

17 unchanged sentences

Other comprehensive income:

Unrealized losses on available-for-sale securities $ ( 1 ) $ ( 1 )

Unrealized gain (losses) on available-for-sale securities $ 7 $ ( 4 ) $ 7 $ ( 5 )

Other comprehensive loss 7 ( 4 ) 7 ( 5 )

4 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30, 2021

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

Three and Six Months Ended December 31, 2021

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

Shares Amount Amount Amount Amount Amount

9 unchanged sentences

Balances at September 30, 2021 62,461,356 $ 62 $ — $ 57,910 $ — $ 57,972

Three Months Ended September 30, 2020

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

Net Income — — — 103,649 — 103,649

Other comprehensive income (loss) — — — — 7 7

Stock options exercised 2,584 — 36 — — 36

Restricted stock units issued, net of tax withholdings 7,947 — ( 181 ) — — ( 181 )

Repurchases of Common Stock ( 434,271 ) — ( 587 ) ( 128,457 ) — ( 129,044 )

Stock-based compensation expense — — 819 — — 819

Dividends Paid on Common Stock ($ 0.60 per share)

— — — ( 37,445 ) — ( 37,445 )

Balances at December 31, 2021 62,037,616 $ 62 $ 87 $ ( 4,343 ) $ 7 $ ( 4,187 )

See notes to consolidated financial statements.

Three and Six Months Ended December 31, 2020

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

Shares Amount Amount Amount Amount Amount

9 unchanged sentences

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

Net Income 159,668 159,668

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

Stock options exercised 2,384 — 22 — — 22

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

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

Stock-based compensation expense — — 750 — — 750

Dividends Paid on Common Stock ($ 0.40 per share)

— $ — $ ( 25,115 ) $ ( 25,115 )

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

See notes to consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Three Months Ended September 30,

Six Months Ended December 31,

Cash Flows from Operating Activities:

10 unchanged sentences

Deferred taxes 228 369

Recovery of impaired investment ( 902 ) —

Change in unrealized loss on available-for-sale securities 13 —

Other, net ( 280 ) 346

12 unchanged sentences

Purchase of property and equipment and other long-term assets ( 6,492 ) ( 11,870 )

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

Purchase of investments ( 802 ) —

2 unchanged sentences

Cash Flows from Financing Activities:

Proceeds from borrowing under the credit facility- Revolver 30,000 75,000

Repayment against credit facility- Revolver — ( 110,000 )

3 unchanged sentences

Proceeds from exercise of stock options 51 43

Tax withholdings related to net share settlements of restricted stock units ( 935 ) ( 615 )

Tax withholdings related to net share settlements of equity awards ( 1,132 ) ( 816 )

Net cash (used in) financing activities $ ( 226,820 ) $ ( 251,504 )

7 unchanged sentences

Right-of-use asset recognized $ 27,272 $ 18,626

Unpaid stock repurchases $ 2,497 $ 13,662

Unpaid property and equipment and other long-term assets $ 469 $ 380

15 unchanged sentences

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2021, included in its Annual Report on Form 10-K, as filed with the SEC on August 27, 2021 (the “Annual Report”).

The results of operations for the three months ended September 30, 2021 are not necessarily indicative of the results to be expected for any future periods.

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

NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

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

allowance for doubtful accounts and sales return reserves;

4 unchanged sentences

and valuation of warranty accruals.

We evaluate our estimates and assumptions based on historical experience and other assumptions that are believed to be reasonable under the circumstances.

We evaluate our estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances.

Actual results could differ materially from those estimates.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update (ASU) No.

2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.

The ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

The ASU is effective for calendar year-end public business entities on January 1, 2021 and other entities on January 1, 2022.

Entities may early adopt the ASU in any interim period for which financial statements have not yet been issued (or made available for issuance).

The Company has adopted the new guidance effective July 1, 2021 with no impacts upon adoption.

NOTE 3— REVENUES

6 unchanged sentences

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, “Segment Information” for disaggregation of revenue by product category and geography.

Contract Balances

4 unchanged sentences

The current portion of deferred revenue is included in other current liabilities and the non-current portion is included in other long-term liabilities in our Consolidated Balance Sheets.

As of September 30, 2021 and June 30, 2021, the Company’s customer deposits were $ 1.4 million and $ 2.7 million, respectively.

As of September 30, 2021, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 23.1 million and $ 7.6 million, respectively.

As of December 31, 2021 and June 30, 2021, the Company’s customer deposits were $ 1.3 million and $ 2.7 million, respectively.

As of December 31, 2021, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 21.9 million and $ 6.9 million, respectively.

As of June 30, 2021, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 21.6 million and $ 8.6 million, respectively.

12 unchanged sentences

The valuation techniques used to measure the fair value of the Company’s marketable securities incorporate bond terms and conditions, current performance data, proprietary pricing models, real time quotes from contributing dealers, trade prices and other market data.

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

The following tables summarize the Company’s financial instruments’ adjusted cost, gross unrealized gains and losses, and fair value by significant investment category as of September 30, 2021 and June 30, 2021 (in thousands):

September 30, 2021

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

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

The following tables summarize the Company’s financial instruments’ cost, gross unrealized gains and losses, and fair value by significant investment category as of December 31, 2021 and June 30, 2021 (in thousands):

December 31, 2021

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

Money market funds $ 50 $ — $ — $ 50 $ 50 $ — $ —

Corporate securities 902 13 — 915 — 915 —

Subtotal $ 952 $ 13 $ — $ 965 $ 50 $ 915 $ —

Corporate securities $ 2,349 $ — $ ( 7 ) $ 2,342 $ 1,271 $ 1,071

U.S agency securities 20 — — 20 20

Subtotal $ 2,369 $ — $ ( 7 ) $ 2,362 $ — $ 1,271 $ 1,091

3 unchanged sentences

June 30, 2021

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

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

Money market funds $ 83 $ — $ — $ 83 $ 83 $ — $ —

5 unchanged sentences

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

For the three months ended September 30, 2021 the Company did no t recognize any material net gains or losses from accumulated other comprehensive income related to unrealized gains or losses.

During the three months ended September 30, 2021, interest income on the Company’s investment securities was immaterial.

During the three months ended September 30, 2020, interest income on our investment securities was immaterial.

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 September 30, 2021 (in thousands):

During the three and six months ended December 31, 2021 and December 31, 2020, interest income on the Company's investment securities was immaterial.

Continuous Unrealized Loss

3 unchanged sentences

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

The following table represents the adjusted costs and fair value of cash equivalents and investments by contractual maturity as of September 30, 2021 (in thousands):

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

Available-For-Sale

Adjusted Cost Fair Value

Cost Fair Value

Due within 1 year and money market funds $ 1,323 $ 1,321

Available for sale corporate securities 902 915

Due after 1 year through 5 years 1,096 1,091

1 unchanged sentence

For certain of the Company’s financial instruments, other than those presented in the disclosures above, including cash, accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate fair value due to their short maturities.

As of September 30, 2021 and June 30, 2021, the Company had outstanding loans associated with its credit facilities, which are carried at historical cost.

As of December 31, 2021 and June 30, 2021, the Company had outstanding loans associated with its credit facilities, which are carried at historical cost.

The fair value of the Company’s debt disclosed below was estimated based on the current rates offered to the Company for debt with similar terms and remaining maturities and was a Level 2 measurement.

As of September 30, 2021 and June 30, 2021, the fair value of the Company’s debt, which is carried at historical cost was $ 487.5 million and $ 493.8 million, respectively.

As of December 31, 2021 and June 30, 2021, the fair value of the Company’s debt, which is carried at historical cost was $ 511.3 million and $ 493.8 million, respectively.

NOTE 5— EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):

Three Months Ended September 30,

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

2021 2020 2021 2020

Net income $ 103,649 $ 159,668 $ 235,799 $ 316,177

7 unchanged sentences

Diluted $ 1.66 $ 2.54 $ 3.78 $ 5.00

The Company excludes potentially dilutive securities from its diluted net income per share calculation when their effect would be anti-dilutive to net income per share amounts.

The Company does not have any potentially dilutive securities that would have an anti-dilutive effect on the net income per share amounts.

NOTE 6— BALANCE SHEET COMPONENTS

Inventories consisted of the following (in thousands):

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Finished goods $ 269,893 $ 228,514

3 unchanged sentences

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Testing equipment $ 15,979 $ 15,279

10 unchanged sentences

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Hong Kong Tax deposit (1)

5 unchanged sentences

See Note 14 to the consolidated financial statements for additional details regarding this ongoing tax audit.

(2) Accumulated amortization was $ 3.2 million and $ 2.8 million as of September 30, 2021 and June 30, 2021, respectively.

(2) Accumulated amortization was $ 3.5 million and 2.8 million as of December 31, 2021 and June 30, 2021, respectively.

Other Current Liabilities

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Deferred revenue — short-term $ 21,934 21,617

10 unchanged sentences

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Deferred Revenue — long-term $ 6,850 $ 8,564

Other long-term liabilities — —

Total $ 6,850 $ 8,564

7 unchanged sentences

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

Three Months Ended September 30,

Six Months Ended December 31,

Beginning balance $ 4,812 $ 4,538

6 unchanged sentences

The Third Amended and Restated Credit Agreement replaced the Company's prior $ 700 million senior secured revolving facility (the “Prior Revolving Facility”) and $ 500 million senior secured term loan facility (the “Prior Term Facility”, together with the Prior Revolving Facility, the “Prior 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 “Prior Credit Agreement”).

The Facilities replace the Company's Prior Facilities

under the Prior Credit Agreement, which has been terminated in connection with the Third Amended and Restated Credit Agreement.

The Facilities replace the Company's Prior Facilities under the Prior 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 $ 456.3 million and $ 0.7 million was used to repay the Prior Term Facility under the Prior Credit Agreement for principal and interest, respectively.

3 unchanged sentences

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

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

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

2 unchanged sentences

Term Facility - long term 456,250 468,750

Revolving Facility - long term 30,000 —

Debt issuance costs, net ( 1,421 ) ( 1,720 )

17 unchanged sentences

The Facilities

As of September 30, 2021, $ 487.5 million was outstanding on the Term Facility and there was no outstanding balance on the Revolving Facility, leaving $ 700.0 million available on the Revolving Facility.

As of December 31, 2021, $ 481.3 million was outstanding on the Term Facility and the Company borrowed $ 30.0 million balance on the Revolving Facility, leaving $ 670.0 million available on the Revolving Facility.

Term Facility:

During the three months ended September 30, 2021, the Company made aggregate payments of $ 8.3 million under the Term Facility, of which $ 6.3 million was repayment of principal and $ 2.0 million was payment of interest.

As of September 30, 2021, the interest rate on the term loan was 1.58 %.

As of October 29, 2021, the most currently available reset date, the Term Facility has an interest rate of 1.58 %.

During the six months ended December 31, 2021, the Company made aggregate payments of $ 16.5 million under the Term Facility, of which $ 12.5 million was repayment of principal and $ 4.0 million was payment of interest.

As of December 31, 2021, the interest rate on the term loan was 1.59 %.

As of January 31, 2022, the most currently available reset date, the Term Facility has an interest rate of 1.61 %.

Revolving Facility:

Under the Third Amended and Restated Credit Agreement, during the three months ended September 30, 2021, the Company did not make any aggregate payments under the Revolving Facility.

The following table summarizes the Company’s estimated debt and interest payment obligations as of September 30, 2021, for the remainder of fiscal 2022 and future fiscal years (in thousands):

Under the Third Amended and Restated Credit Agreement, during the three months ended December 31, 2021, the Company did not make any aggregate payments under the Revolving Facility.

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

$30 Million Revolver 1.61 % January 14, 2022 1.61 %

The following table summarizes the Company’s estimated debt and interest payment obligations as of December 31, 2021, for the remainder of fiscal 2022 and future fiscal years (in thousands):

2022 (remainder) 2023 2024 2025 2026 Thereafter Total

3 unchanged sentences

Total $ 17,151 $ 34,320 $ 33,938 $ 33,507 $ 429,969 $ — $ 548,885

(1) - Interest payments are calculated based on the applicable rates and payment dates as of September 30, 2021.

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

Although the Company’s interest rates on our debt obligations may vary, the Company has assumed the most recent available interest rates for all periods presented.

2 unchanged sentences

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

As of September 30, 2021, the Company included such options in determining the lease terms for certain of the Company’s leases because the Company was reasonably certain that it would exercise the extension options.

As of December 31, 2021, the Company included such options in determining the lease terms for certain of the Company’s leases because the Company was reasonably certain that it would exercise the extension options.

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

The following table summarizes the Company’s lease costs for the three months ended September 30, 2021 and 2020 (in thousands):

Financial Statement Classification Three Months Ended September 30,

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

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

2021 2020 2021 2020

Operating lease costs:

5 unchanged sentences

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

Total short-term costs for three months ended September 30, 2021 and 2020 were immaterial.

Total short-term costs for six months ended December 31, 2021 and 2020 were immaterial.

Variable lease costs primarily include maintenance, utilities and operating expenses that are incremental to the fixed base rent payments and are excluded from the calculation of operating lease liabilities and ROU assets.

For the three months ended September 30, 2021 and 2020, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 3.0 million and $ 2.8 million, respectively.

For the three and six months ended December 31, 2021, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $ 3.5 million and $ 6.5 million, respectively.

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

The following table shows the Company’s undiscounted future fixed payment obligations under the Company’s recognized operating leases and a reconciliation to the operating lease liabilities as of September 30, 2021:

Remainder of Fiscal 2022 $ 6,649

11 unchanged sentences

Operating Leases

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

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

Purchase Obligations

2 unchanged sentences

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

The Company periodically reviews the potential liability, and as of September 30, 2021, the Company recorded a purchase obligation liability of $ 7.8 million related to component purchase commitments.

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

The Company periodically reviews the potential liability, and as of December 31, 2021, the Company recorded a purchase obligation liability of $ 7.8 million related to component purchase commitments.

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

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

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

The Company estimates the amount of these additional purchase obligations to range from $ 176.9 million to $ 919.4 million as of September 30, 2021, depending upon the timing of orders placed for these components by its contract manufacturers.

The Company estimates the amount of these additional purchase obligations to range from $ 183.7 million to $ 854.6 million as of December 31, 2021, depending upon the timing of orders placed for these components by its contract manufacturers.

Other Obligations

As of September 30, 2021, the Company has other obligations of $ 2.7 million which consisted primarily of commitments related to raw materials and research and development projects.

As of December 31, 2021, the Company has other obligations of $ 2.5 million which consisted primarily of commitments related to raw materials and research and development projects.

Indemnification Obligations

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Taking all of the above factors into account, the Company records an amount where it is probable that the Company will incur a loss and where that loss can be reasonably estimated.

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.

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

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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 two of the three Patents-in-Suit, but it rejected the challenge to the ‘231 Patent.

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.

5 unchanged sentences

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

Trial is currently scheduled for October 11, 2022.

On November 24, 2021, the Company and the remaining defendants in the Original Action filed a motion for judgment on the pleadings regarding the ’231 Patent.

On January 4, 2022, the Court granted defendants’ motion and dismissed Vivato’s claims based on the ’231 Patent.

All claims asserted against the Company in the Original Action have now been dismissed.

Trial in the New Action is currently scheduled for October 11, 2022.

The Company plans to vigorously defend itself against these claims;

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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.

On July 30, 2021, the Court appointed a lead plaintiff and lead plaintiff’s counsel, and the case was subsequently captioned In re Ubiquiti Inc.

Securities Litigation , 21 Civ.

Plaintiff filed an amended complaint on September 24, 2021.

Lead plaintiff filed an amended complaint on September 24, 2021.

Defendants moved to dismiss the amended complaint on October 22, 2021.

On October 29, 2021, Plaintiff informed the Court that she intends to further amend the complaint and plans to do so on or before November 12, 2021.

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.

On November 12, 2021, lead plaintiff filed a second amended complaint.

On January 5, 2022, lead plaintiff voluntarily dismissed the Securities Action.

Ubiquiti Inc.

On October 21, 2021, a purported stockholder of the Company filed an action captioned Flannery v.

Ubiquiti Inc., C.A.

2021-0913-PAF (the “Books and Records Action”) in the Court of Chancery of the State of Delaware seeking to inspect certain books and records of the Company pursuant to 8 Delaware Code Section 220.

The Books and Records Action complaint seeks to inspect, without limitation, books and records concerning the data breach experienced by the Company in January 2021, as well as related statements, disclosures, policies, procedures, and practices.

Ubiquiti’s response to the complaint is due on November 12, 2021.

Ubiquiti Inc.

2021-0913-PAF (the “Books and Records Action”) in the Court of Chancery of the State of Delaware seeking to inspect certain books

and records of the Company pursuant to 8 Delaware Code Section 220.

The Books and Records Action complaint sought to inspect, without limitation, books and records concerning the data breach experienced by the Company in January 2021, as well as related statements, disclosures, policies, procedures, and practices.

On December 20, 2021, Flannery voluntarily dismissed the Books and Records Action.

NOTE 11— COMMON STOCK AND TREASURY STOCK

3 unchanged sentences

The 2020 May Program expires on March 31, 2022.

During the three months ended September 30, 2021, under the 2020 May Program, the Company repurchased and retired 130,994 shares of common stock at an average price per share of $ 299.64 for an aggregate amount of $ 39.3 million.

As of September 30, 2021, the Company had $ 278.9 million available for share repurchases under the 2020 May Program.

The following table provides information with respect to the Company’s Share Repurchase programs and the activity under the available share repurchase programs during the three months ended September 30, 2021 (in millions, except share and per share amounts):

Date of Publicly Announced Program Amount of Publicly Announced Program Total Number of Shares Purchased as Part of Publicly Announced Programs Average Price Paid per Share Total Aggregate Amount Paid Period of Purchases Estimated Remaining Balance Available for Share Repurchases under the Program Expiration date of Program

May 8, 2020 $ 500 million 130,994 $ 299.64 $ 221.1 July 7, 2021 - September 30, 2021 $ 278.9 3/31/2022

During the three months ended December 31, 2021, under the 2020 May Program, the Company repurchased and retired 434,271 shares of common stock at an average price per share of $ 297.15 for an aggregate amount of $ 129.0 million.

As of December 31, 2021, the Company had $ 149.8 million available for share repurchases under the 2020 May Program.

The following table provides information with respect to the Company’s 2020 May Program and the activity under the available share repurchase program during the six months ended December 31, 2021 (in millions, except share and per share amounts):

Date of Publicly Announced Program Amount of Publicly Announced Program Total Number of Shares Purchased Average Price Paid per Share Total Aggregate Amount Paid Period of Purchases Estimated Remaining Balance Available for Share Repurchases under the Program Expiration date of Program

May 8, 2020 $ 500 million 565,265 $ 297.73 $ 168.3 July 7, 2021 - December 21, 2021 $ 149.8 3/31/2022

NOTE 12— ACCUMULATED OTHER COMPREHENSIVE INCOME

1 unchanged sentence

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

For the three months ended September 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.

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

NOTE 13— STOCK BASED COMPENSATION

1 unchanged sentence

The Company’s 2020, 2010 and 2005 Equity Incentive Plan are described in the Company’s Annual Report.

As of September 30, 2021, the Company had 4,986,685 authorized shares available for future issuance under all of its stock incentive plans.

As of December 31, 2021, the Company had 4,986,146 authorized shares available for future issuance under all of its stock incentive plans.

Stock-Based Compensation

The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations and Comprehensive Income for the three months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

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

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

2021 2020 2021 2020

Cost of revenues $ 23 $ 29 $ 45 $ 57

1 unchanged sentence

Sales, general and administrative 209 209 427 411

$ 819 $ 750 $ 1,629 $ 1,490

Stock Options

The following is a summary of option activity for the Company’s stock incentive plans for the three months ended September 30, 2021:

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

Common Stock Options Outstanding

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Forfeitures and cancellations — $ —

Balance, September 30, 2021 8,920 $ 11.64 1.02 $ 2,560

Vested as of September 30, 2021 8,920 $ 11.64 1.02 $ 2,560

Vested and exercisable as of September 30, 2021 8,920 $ 11.64 1.02 $ 2,560

During the three months ended September 30, 2021 and 2020, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.5 million and $ 0.3 million, respectively, as determined as of the date of option exercise.

As of September 30, 2021, the Company had no unrecognized compensation costs related to stock options.

The Company did no t grant any employee stock options during the three months ended September 30, 2021 and 2020.

Balance, December 31, 2021 6,336 $ 10.77 0.87 $ 1,875

Vested as of December 31, 2021 6,336 $ 10.77 0.87 $ 1,875

Vested and exercisable as of December 31, 2021 6,336 $ 10.77 0.87 $ 1,875

During the three months ended December 31, 2021 and 2020, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.7 million and $ 0.6 million, respectively, as determined as of the date of option exercise.

During the six months ended December 31, 2021 and 2020, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 1.3 million and $ 0.9 million, respectively, as determined as of the date of option exercise.

As of December 31, 2021, the Company had no unrecognized compensation costs related to stock options.

The Company did no t grant any employee stock options during the three and six months ended December 31, 2021 and 2020.

Restricted Stock Units (“RSUs”)

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RSUs canceled ( 1,201 ) $ 176.55

Non-vested RSUs, September 30, 2021 52,939 $ 163.17

The intrinsic value of RSUs vested in the three months ended September 30, 2021 and 2020 was $ 3.4 million and $ 2.1 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 15.8 million as of September 30, 2021.

As of September 30, 2021, there were unrecognized compensation costs related to RSUs of $ 5.9 million which the Company expects to recognize over a weighted average period of 3.0 years.

Non-vested RSUs, December 31, 2021 44,619 $ 179.71

The intrinsic value of RSUs vested in the three months ended December 31, 2021 and 2020 was $ 3.0 million and $ 2.4 million, respectively.

The intrinsic value of RSUs vested in the six months ended December 31, 2021 and 2020 was $ 6.0 million and $ 4.5 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 13.7 million as of December 31, 2021.

As of December 31, 2021, there were unrecognized compensation costs related to RSUs of $ 5.3 million which the Company expects to recognize over a weighted average period of 3.1 years.

NOTE 14— INCOME TAXES

The Company recorded tax provisions of $ 25.7 million for the three months ended September 30, 2021 as compared to $ 29.5 million for the three months ended September 30, 2020.

The decrease is primarily related to a decrease in profit before tax for the three months ended September 30, 2021.

The Company recorded tax provisions of $ 19.0 million and $ 44.8 million for the three and six months ended December 31, 2021 as compared to $ 27.5 million and $ 57.1 million for the three and six months ended December 31, 2020.

The decrease is primarily related to decrease in profit before tax for the six months ended December 31, 2021 as compared to the six months ended December 31, 2020.

The Company’s estimated fiscal year 2022 effective tax rate, before discrete items, differs from the U.S.

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tax rate, partially offset by additional US tax related to our non-US operations under Global Intangible Low-Taxes Income (GILTI) provision.

As of September 30, 2021, the Company had approximately $ 33.3 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

During the three months ended September 30, 2021, the Company recorded an increase of its unrecognized tax benefits of $ 1.2 million.

As of December 31, 2021, the Company had approximately $ 34.6 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

During the three months ended December 31, 2021, the Company recorded an increase of its unrecognized tax benefits of $ 1.2 million.

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 Sheets.

As of September 30, 2021, the Company had $ 3.8 million accrued interest related to uncertain tax matters.

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

As of December 31, 2021, the Company had $ 4.0 million accrued interest related to uncertain tax matters.

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

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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 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.

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 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.

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.

There is a scheduled IRS Appeal conference for February 10, 2022.

The Company strongly believes the position of the IRS with regard to this matter is without merit.

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

Three Months Ended September 30,

Service Provider Technology $ 112,141 24 % $ 157,461 33 %

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

2021 2020 2021 2020

Enterprise technology $ 330,358 77 % $ 329,561 69 % $ 677,131 76 % $ 645,632 68 %

Service Provider Technology 101,207 23 % 149,875 31 % 213,348 24 % 307,337 32 %

Total revenues $ 431,565 100 % $ 479,436 100 % $ 890,479 100 % $ 952,969 100 %

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

Three Months Ended September 30,

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

2021 2020 2021 2020

North America (1)

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Total revenues $ 431,565 100 % $ 479,436 100 % $ 890,479 100 % $ 952,969 100 %

(1) Revenue for the United States was $ 190.6 million and $ 209.8 million for the three months ended September 30, 2021 and 2020, respectively.

Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:

Percentage of Revenues Percentage of Accounts Receivable

Three Months Ended September 30, September 30, June 30,

2021 2020 2021 2021

Customer A * * * *

Customer B * 12 % * *

(1) Revenue for the United States was $ 172.3 million and $ 179.1 million for the three months ended December 31, 2021 and 2020, respectively.

For the periods presented, there were no c ustomers with an accounts receivable balance of 10% or greater of total accounts receivable or customers with net revenues of 10% or greater of total revenues .

NOTE 16 - SUBSEQUENT EVENTS

Stock Repurchases

Between October 1, 2021 and November 4, 2021, the Company repurchased and retired 30,937 shares of common stock at an average price of $ 299.94 for an aggregate amount of $ 9.2 million.

As of November 4, 2021, the Company had $ 269.6 million available for share repurchases under the 2020 May Program.

On November 3, 2021, the Company's Board of Directors had approved a quarterly cash dividend of $ 0.60 per share payable on November 22, 2021 to shareholders of record at the close of business on November 15, 2021.

Between January 1, 2022 and February 3, 2022, the Company repurchased 509,555 shares of common stock at an average price of $ 294.05 for an aggregate amount of $149.8 million.

On February 1, 2022, the Company’s Board of Directors approved a new $ 300 million stock repurchase program (the “2022 February Program”).

Under the 2022 February Program, the Company is authorized to repurchase up to $ 300 million of common stock.

The 2022 February Program expires on June 30, 2023.

On February 3, 2022, the Company's Board of Directors approved a quarterly cash dividend of $ 0.60 per share payable on February 22, 2022 to shareholders of record at the close of business on February 14, 2022.

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

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

What changed 10-Q

Item 1. Financial Statements