What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2022-02-04 · 89 added, 96 removed, 238 unchanged (44% of the section changed)

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differentiated due to our proprietary software, firmware expertise, and hardware design capabilities.

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

We distribute our products through a worldwide network of over 100 distributors and online retailers and direct to customers

through our webstores.

COVID-19 Update - The 2019 novel coronavirus (COVID-19), which the World Health Organization (“WHO”) characterized as a

pandemic in March 2020, continues to disrupt global economies, and has spread to the major markets in which we operate,

including the United States, Asia, Europe and South America.

The COVID-19 pandemic has resulted in significant governmental

measures being implemented to control the spread of the virus, including, among others, restrictions on travel, stay-at-home orders

or work remote or from home conditions in many of the locations where we have offices.

We have taken and will continue to take

precautionary measures intended to help minimize the risk of COVID-19 to our employees.

While we have not yet experienced a

significant disruption to the productivity of our employees as a result of the COVID-19 pandemic, if the stay-at-home orders or

work remote or from home conditions in any of our facilities continue for an extended period of time, or an outbreak in

any of our facilities, we may, among other issues, experience delays in product development, a decreased ability to support our

customers, disruptions in sales and an overall lack of productivity.

We have experienced a disruption in our supply chain and

production as a result of the COVID-19 related restrictions and the global shortage of components.

The current environment has

impacted our suppliers’ ability to manufacture or provide key components or services, and we have incurred, and continue to incur,

additional cost to expedite deliveries of components and services.

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

The COVID-19 pandemic has resulted in significant governmental measures being implemented to control the spread of the virus, including, among others, restrictions on travel, stay-at-home orders or work remote or from home conditions in many of the locations where we have offices.

We have taken and will continue to take precautionary measures intended to help minimize the risk of COVID-19 to our employees.

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

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

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

For example, during fiscal 2022, we experienced reduced availability of components (including the chipsets) used to manufacture our products, which has impacted, and we expect will continue to impact our ability and costs to manufacture our products.

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

Recent Developments

Russia-Ukraine Military Conflict - We are monitoring the military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated economic sanctions.

While the impact to our operations in Ukraine and its surrounding countries has not been material to our business or results of operations as of the date hereof, the full impact of the military conflict on our business and results of operations remains uncertain.

The extent to which the conflict may impact our business or results of operations in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, as well as its impact on surrounding countries, including its impact on our operations in Ukraine and its surrounding countries, and its impact on global supply chains.

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

Key Components of Our Results of Operations and Financial Condition

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distributors, and, to a lesser extent, through direct sales through our webstores.

Sales to distributors accounted for 71% of our revenues during the six months ended December 31, 2021.

Direct sales accounted for 29% of our revenue during the six months ended December 31, 2021.

Sales to distributors accounted for 67% of our revenues during the nine months ended March 31, 2022.

Direct sales accounted for 33% of our revenue during the nine months ended March 31, 2022.

Cost of Revenues

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

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not

require management’s judgment in its application.

In other cases, management’s judgment is required in selecting among available alternative accounting standards that provide for different accounting treatment for similar transactions.

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Accordingly, our actual results could differ significantly from the estimates made by our management.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of

operations and cash flows will be affected.

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

Our critical accounting policies are discussed in our Annual Report, filed with the SEC on August 27, 2021, and there have been no material changes other than that have been disclosed in Note 2 to our consolidated financial statements herein.

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Results of Operations

Comparison of Three and Six Months Ended December 31, 2021 and 2020

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

Comparison of Three and Nine Months Ended March 31, 2022 and 2021

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

2022 2021 2022 2021

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Total stock-based compensation 874 775 2,503 2,265

Total revenues decreased $47.9 million, or 10%, from $479.4 million in the three months ended December 31, 2020 to $431.6 million in the three months ended December 31, 2021.

Total revenues decreased $62.5 million, or 7%, from $953.0 million in the six months ended December 31, 2020 to $890.5 million in the six months ended December 31, 2021.

The decline in revenue was primarily associated with our Service Provider category.

Overall, revenues for the comparable periods were negatively impacted by our inability to fulfill demand due to the global component supply shortage.

Total revenues decreased $109.1 million, or 23%, from $467.2 million in the three months ended March 31, 2021 to $358.1 million in the three months ended March 31, 2022.

Total revenues decreased $171.7 million, or 12%, from $1420.2 million in the nine months ended March 31, 2021 to $1248.5 million in the nine months ended March 31, 2022.

The decline in revenue for the quarter ended March 31, 2022, as compared to the comparable prior year period, was primarily driven by decreases in revenue in both the Enterprise Technology and Service Provider Technology platforms.

The decline in revenue for the nine months ended March 31, 2022, as compared to the comparable prior year period, was primarily driven by a decrease in revenue in the Service Provider Technology platform.

Overall, revenues were significantly negatively impacted by our inability to fulfill demand due to the global component supply shortage and the continued outbreaks of COVID around the world.

Revenues by Product Type

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

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

2022 2021 2022 2021

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Total revenues $ 358,068 100 % $ 467,237 100 % $ 1,248,547 100 % $ 1,420,206 100 %

Enterprise Technology revenue increased $0.8 million, or 0.2%, from $329.6 million in the three months ended December 31, 2020 to $330.4 million in the three months ended December 31, 2021 and increased $31.5 million, or 5%, from $645.6 million in the six months ended December 31, 2020 to $677.1 million in the six months ended December 31, 2021.

The increase in Enterprise Technology revenue during the three and six months ended December 31, 2021 as compared to the same periods in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all

Service Provider Technology revenue decreased $48.7 million, or 32%, from $149.9 million in the three months ended December 31, 2020 to $101.2 million in the three months ended December 31, 2021 and decreased $94.0 million, or 31%, from $307.3 million in the six months ended December 31, 2020 to $213.3 million in the six months ended December 31, 2021.

The decrease in Service Provider Technology revenue during the three months ended December 31,2021 as compared to the same period in the prior year, was primarily due to decreased revenue in all regions across all the platforms.

The decrease in Service Provider Technology revenue during the six months ended December 31,2021 as compared to the same period in the prior year, was primarily due to decreased revenue in all regions across all the platforms except one.

Enterprise Technology revenue decreased $19.9 million, or 6.3%, from $314.9 million in the three months ended March 31, 2021 to $295.0 million in the three months ended March 31, 2022 and increased $11.7 million, or 1%, from $960.5 million in the nine months ended March 31, 2021 to $972.2 million in the nine months ended March 31, 2022.

The decrease in Enterprise Technology revenue during the three months ended March 31, 2022, as compared to the same period in the prior year, was primarily due to decreased revenue in our UniFi technology platform across all geographic regions other than North America.

The increase in Enterprise Technology revenue during the nine months ended March 31, 2022, as compared to the same period in the prior year, was primarily due to increased revenue from our UniFi technology platform across all geographic regions other than EMEA.

Service Provider Technology revenue decreased $89.4 million, or 59%, from $152.4 million in the three months ended March 31, 2021 to $63.0 million in the three months ended March 31, 2022 and decreased $183.3 million, or 40%, from $459.7 million in the nine months ended March 31, 2021 to $276.4 million in the nine months ended March 31, 2022.

The decrease in Service Provider Technology revenue during the three and nine months ended March 31, 2022, as compared to the same periods in the prior year, was primarily due to decreased revenue in all of our product platforms across all geographic regions.

Revenues by Geography

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than the initial ship-to destination.

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

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

The following are our revenues by geography for the three and nine months ended March 31, 2022 and 2021 (in thousands, except percentages):

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

2022 2021 2022 2021

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Total revenues $ 358,068 100 % $ 467,237 100 % $ 1,248,547 100 % $ 1,420,206 100 %

(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.

Revenue for the United States was $362.8 million and $389.0 million for the six months ended December 31, 2021 and 2020, respectively.

(1) Revenue for the United States was $173.9 million and $193.2 million for the three months ended March 31, 2022 and 2021, respectively.

Revenue for the United States was $536.8 million and $582.1 million for the nine months ended March 31, 2022 and 2021, respectively.

North America

Revenues in North America decreased $6.4 million, or 3%, from $193.4 million in the three months ended December 31, 2020 to $187.1 million in the three months ended December 31, 2021 and decreased $18.2 million, or 4%, from $414.3 million in the six months ended December 31, 2020 to $396.1 million in the six months ended December 31, 2021.

The decrease in North America revenues during the three and six months ended December 31, 2021 as compared to the same periods in the prior year, was primarily due to decreased revenue from our Service Provider Technology products offset, in part, by increased revenue from Enterprise Technology products.

Revenues in North America decreased $25.9 million, or 12%, from $209.5 million in the three months ended March 31, 2021 to $183.6 million in the three months ended March 31, 2022 and decreased $44.1 million, or 7%, from $623.8 million in the nine months ended March 31, 2021 to $579.7 million in the nine months ended March 31, 2022.

The decrease in North America revenues during the three and nine months ended March 31, 2022 as compared to the same periods in the prior year, was primarily due to decreased revenue from our Service Provider Technology products offset, in part, by increased revenue from Enterprise Technology products.

Europe, the Middle East, and Africa (EMEA)

Revenues in EMEA decreased $27.8 million, or 13%, from $218.8 million in the three months ended December 31, 2020 to $191.0 million in the three months ended December 31, 2021 and decreased $34.3 million, or 9%, from $397.9 million in the six months ended December 31, 2020 to $363.6 million in the six months ended December 31, 2021.

The decrease in EMEA revenues during the three and six months ended December 31, 2021 as compared to the same periods in the prior year, was primarily due to decreased revenue from both our Service Provider Technology and Enterprise Technology products.

Revenues in the Asia Pacific region decreased $4.6 million, or 12%, from $37.4 million in the three months ended December 31, 2020 to $32.8 million in the three months ended December 31, 2021 and decreased $3.6 million, or 5%, from $79.3 million in the six months ended December 31, 2020 to $75.7 million in the six months ended December 31, 2021.

The decrease in Asia Pacific revenues during the three months ended December 31, 2021 as compared to the three months ended December 31, 2020 was due to decreased revenue from both our Service Provider Technology and Enterprise Technology products.

The decrease in Asia Pacific revenues during the six months ended December 31, 2021 as compared to the six months ended December 31, 2020 was primarily due to decreased revenue from our Service Provider products offset, in part, by an increased

revenue from Enterprise Technology products.

Revenues in EMEA decreased $54.4 million, or 29%, from $189.6 million in the three months ended March 31, 2021 to $135.2 million in the three months ended March 31, 2022 and decreased $88.7 million, or 15%, from $587.5 million in the nine months ended March 31, 2021 to $498.8 million in the nine months ended March 31, 2022.

The decrease in EMEA revenues during the three and nine months ended March 31, 2022 as compared to the same periods in the prior year, was primarily due to decreased revenue from both our Service Provider Technology and Enterprise Technology products.

Revenues in the Asia Pacific region decreased $9.6 million, or 27%, from $36.1 million in the three months ended March 31, 2021 to $26.5 million in the three months ended March 31, 2022 and decreased $13.3 million, or 12%, from $115.5 million in the nine months ended March 31, 2021 to $102.2 million in the nine months ended March 31, 2022.

The decrease in Asia Pacific revenues during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was due to decreased revenue from both our Service Provider Technology and Enterprise Technology products.

The decrease in Asia Pacific revenues during the nine months ended March 31, 2022 as compared to the nine months ended March 31, 2021 was primarily due to decreased revenue from our Service Provider products offset, in part, by increased revenue from our Enterprise Technology products.

South America

Revenues in South America decreased $9.1 million, or 30%, from $29.9 million in the three months ended December 31, 2020 to $20.8 million in the three months ended December 31, 2021 and decreased $6.4 million, or 10%, from $61.4 million in the six months ended December 31, 2020 to $55.0 million in the six months ended December 31, 2021.

The decrease in South America revenues during the three and six months ended December 31, 2021 as compared to the same periods in the prior year, was primarily due to decreased revenue from our Service Provider Technology products offset, in part, by increased revenue from Enterprise Technology products.

Revenues in South America decreased $19.2 million, or 60%, from $32.0 million in the three months ended March 31, 2021 to $12.8 million in the three months ended March 31, 2022 and decreased $25.6 million, or 27%, from $93.4 million in the nine months ended March 31, 2021 to $67.8 million in the nine months ended March 31, 2022.

The decrease in South America revenues during the three months ended March 31, 2022 as compared to the same period in the prior year, was due to decreased revenue from both our Service Provider Technology and Enterprise Technology products.

The decrease in South America revenues during the nine months ended March 31, 2022 as compared to the same periods in the prior year, was primarily due to decreased revenue from our Service Provider Technology products offset, in part, by increased revenue from our Enterprise Technology products.

Cost of Revenues and Gross Profit

Cost of revenues increased $8.1 million, or 3%, from $248.8 million in the three months ended December 31, 2020 to $256.9 million in the three months ended December 31, 2021.

The increase is primarily due to higher shipping costs and direct component costs.

Cost of revenues increased $12.1 million, or 2%, from $494.2 million in the six months ended December 31, 2020 to $506.3 million in the six months ended December 31, 2021.

The increase is primarily due to due to higher shipping costs and direct component costs.

Gross profit margin decreased to 40.5% in the three months ended December 31, 2021 compared to 48.1% in the three months ended December 31, 2020, and decreased to 43.1% in the six months ended December 31, 2021 compared to 48.1% in the six months ended December 31, 2020, primarily driven by higher shipping costs.

General transportation costs have increased materially, and we continue to incur additional costs on top of these general costs to expedite shipments.

Cost of revenues decreased $2.4 million, or 1%, from $244.5 million in the three months ended March 31, 2021 to $242.1 million in the three months ended March 31, 2022.

The decrease is mainly due to lower sales, offset by a change in mix of products, and higher shipping costs.

Cost of revenues increased $9.7 million, or 1%, from $738.7 million in the nine months ended March 31, 2021 to $748.4 million in the nine months ended March 31, 2022.

The increase is primarily due to a change in the mix of products sold and higher component costs, shipping costs and indirect overhead expenses.

Gross profit margin decreased to 32.4% in the three months ended March 31, 2022 compared to 47.7% in the three months ended March 31, 2021, and decreased to 40.1% in the nine months ended March 31, 2022 compared to 48.0% in the nine months ended March 31, 2021, primarily driven by a change in mix of products sold and higher component costs, shipping costs and indirect overhead expenses.General transportation costs have increased materially and we continue to incur additional costs on top of these general costs to expedite shipments.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased $4 million, or 14%, from $28.9 million in the three months ended December 31, 2020 to $32.9 million in the three months ended December 31, 2021.

As a percentage of revenues, R&D expenses increased from 6% for the three months ended December 31, 2020 to 8% for the three months ended December 31, 2021.

Research and development (“R&D”) expenses increased $10.2 million, or 19%, from $54.7 million in the six months ended December 31, 2020 to $64.9 million in the six months ended December 31, 2021.

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

The increase in R&D expenses as compared to the comparable prior year period was primarily driven by higher employee related costs.

Research and development (“R&D”) expenses increased $4.8 million, or 16%, from $30.5 million in the three months ended March 31, 2021 to $35.3 million in the three months ended March 31, 2022.

As a percentage of revenues, R&D expenses increased from 7% for the three months ended March 31, 2021 to 10% for the three months ended March 31, 2022.

R&D expenses increased $15.0 million, or 18%, from $85.2 million in the nine months ended March 31, 2021 to $100.2 million in the nine months ended March 31, 2022.

As a percentage of revenues, R&D expenses increased from 6% for the nine months ended March 31, 2021 to 8% for the nine months ended March 31, 2022.

The increase in R&D expenses in the three and nine months ended March 31, 2022, as compared to both comparable prior periods, was primarily driven by higher employee related costs, depreciation and amortization and prototype testing expenses.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $5.5 million, or 50%, from $11.0 million in the three months ended December 31, 2020 to $16.4 million in the three months ended December 31, 2021.

As a percentage of revenues, SG&A expenses increased from 2.3% for the three months ended December 31, 2020 to 3.8% for the three months ended December 31, 2021.

Sales, general and administrative (“SG&A”) expenses increased $8.9 million, or 38%, from $23.3 million in the six months ended December 31, 2020 to $32.2 million in the six months ended December 31, 2021.

As a percentage of revenues, SG&A expenses increased from 2% for the six months ended December 31, 2020 to 4% for the six months ended December 31, 2021.

The increase in SG&A costs as compared to the comparable prior year period was primarily due to higher professional fees, marketing expenses and fees associated with webstore credit card processing and the benefit of a legal settlement received in the quarter ended December 2021.

Sales, general and administrative (“SG&A”) expenses increased $4.9 million, or 37%, from $13.3 million in the three months ended March 31, 2021 to $18.2 million in the three months ended March 31, 2022.

As a percentage of revenues, SG&A expenses increased from 2.8% for the three months ended March 31, 2021 to 5.1% for the three months ended March 31, 2022.

SG&A expenses increased $13.7 million, or 38%, from $36.6 million in the nine months ended March 31, 2021 to $50.3 million in the nine months ended March 31, 2022.

As a percentage of revenues, SG&A expenses increased from 3% for the nine months ended

March 31, 2021 to 4% for the nine months ended March 31, 2022.

The increase in SG&A expenses in the three months and nine months ended March 31, 2022, as compared to both comparable prior periods, was primarily driven by increased marketing expenses, increased credit card processing fees and donations to humanitarian relief organizations addressing the military conflict between Russia and Ukraine, offset by lower professional and service fees and the benefit of the Business e-mail compromise (‘BEC’) recovery recognized in the quarter ending March 31, 2021.

Provision for Income Taxes

Our provision for income taxes decreased $8.5 million, or 31%, from $27.5 million for the three months ended December 31, 2020 to $19.0 million for the three months ended December 31, 2021.

Our effective tax rate increased to 15.5% for the three months ended December 31, 2021 as compared to 14.7% for the three months ended December 31, 2020.

Our provision for income taxes decreased $12.3 million, or 22%, from $57.1 million for the six months ended December 31, 2020 to $44.8 million for the six months ended December 31, 2021.

Our effective tax rate increased to 16% for the six months ended December 31, 2021 as compared to 15.3% for the six months ended December 31, 2020.

The change in effective tax rates for the three and six months ended December 31, 2021 as compared to the same periods in the prior year was primarily driven by changes in the mix of the income earned in various tax jurisdictions.

Our provision for income taxes decreased $19.0 million, or 68%, from $28.0 million for the three months ended March 31, 2021 to $9.0 million for the three months ended March 31, 2022.

Our effective tax rate decreased to 15.2% for the three months ended March 31, 2022 as compared to 16.1% for the three months ended March 31, 2021.

Our provision for income taxes decreased $31.3 million, or 37%, from $85.1 million for the nine months ended March 31, 2021 to $53.8 million for the nine months ended March 31, 2022.

Our effective tax rate increased to 15.8% for the nine months ended March 31, 2022 as compared to 15.5% for the nine months ended March 31, 2021.

The change in effective tax rates for the three and nine months ended March 31, 2022 as compared to the same periods in the prior year was primarily driven by changes in the mix of the income earned in various tax jurisdictions.

Liquidity and Capital Resources

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Our principal uses for liquidity are to fund normal operations, to fund payments of the Company’s debt, dividends and stock repurchases, and to fund research and development expenses.

We had cash and cash equivalents of $212.2 million and $249.4 million as of December 31, 2021 and June 30, 2021, respectively.

We had cash and cash equivalents of $144.3 million and $249.4 million as of March 31, 2022 and June 30, 2021, respectively.

Consolidated Cash Flow Data

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

Six Months Ended December 31,

Nine Months Ended March 31,

(In thousands)

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Cash Flows from Operating Activities

Net cash provided by operating activities in the six months ended December 31, 2021 consisted primarily of net income of $235.8 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $55.6 million.

Net cash provided by operating activities in the nine months ended March 31, 2022 consisted primarily of net income of $286.2 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $9.3 million.

This net change consisted primarily of a $13.5 million increase in inventory, $34.8 million increase in vendor deposits, a $84.8 million decrease in accounts receivable, a $29.6 million decrease in net accounts payable and accrued liabilities, a $12.7 million decrease in taxes payable due to the timing of federal tax payments and a $5.9 million decrease in prepaid expense and other assets.

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

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

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

Cash Flows from Investing Activities

We used $6.5 million of cash in investing activities during the six months ended December 31, 2021.

We used $10.7 million of cash in investing activities during the nine months ended March 31, 2022.

Our investing activities consisted primarily of $11.1 million of capital expenditures and $0.9 million purchase of investments, partially offset by maturities of investment securities of $1.2 million.

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

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

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

Cash Flows from Financing Activities

We used $226.8 million of cash in financing activities during the six months ended December 31, 2021.

During the six months ended December 31, 2021, we used $17.5 million of net funds for repayments under the Company's credit facilities, $168.3 million related to the repurchase of our common stock and $74.9 million related to dividends paid on our common stock.

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

During the six months ended December 31, 2020, we used $47.5 million of net funds for repayments under the facilities, used $152.6 million related to the repurchase of our common stock and used $50.6 million related to dividends paid on our common stock.

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

twelve months, as well as long-term liquidity requirements.

We used $394.7 million of cash in financing activities during the nine months ended March 31, 2022.

During the nine months ended

March 31, 2022, we used $231.3 million of net funds for repayments under the Company's credit facilities, $513.0 million related to the repurchase of our common stock and $111.8 million related to dividends paid on our common stock.

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

During the nine months ended March 31, 2021, we used $80.0 million of net funds for repayments under the facilities, used $152.6 million related to the repurchase of our common stock and used $75.7 million related to dividends paid on our common stock.

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

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

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

Based upon our historical experience and information known as of the date of this report, we do not believe it is likely that we have a material liability for the above indemnities as of December 31, 2021.

We have not recorded any liabilities for these agreements as of March 31, 2022.

Contractual Obligations and Off-Balance Sheet Arrangements

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During the normal course of business, our contract manufacturers procure components and manufacture products based upon orders placed by us.

If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products.

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

If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased

by the subcontractors to manufacture our products.

We periodically review the potential liability, and as of March 31, 2022, we have 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 March 31, 2022.

Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate the contract manufacturers for any unrecorded liabilities incurred.

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

We estimate the amount of these additional purchase obligations to range from $183.7 million to $854.6 million as of December 31, 2021, depending upon the timing of orders placed for these components by

our contract manufacturers.

We estimate the amount of these additional purchase obligations to range from $185.6 million to $1,294.2 million as of March 31, 2022, depending upon the timing of orders placed for these components by our contract manufacturers.

Transition Tax

The Company also had obligations of $76.4 million as of December 31, 2021, related to transition tax., which represent future cash tax payments associated with the one-time U.S.

The Company also had obligations of $76.4 million as of March 31, 2022, related to transition tax, which represent future cash tax payments associated with the one-time U.S.

transition tax on accumulated earnings of foreign subsidiaries as a result of the Tax Cuts and Jobs Act (“the Tax Act”).

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Other Obligations

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

The Company had other obligations of $3.1 million as of March 31, 2022, which consisted primarily of commitments related to raw materials and research and development projects.

Unrecognized Tax Benefits

As of December 31, 2021, we had $34.6 million and an additional $4.0 million for accrued interest, classified as non-current liabilities.

As of March 31, 2022, we had $35.4 million of unrecognized tax benefits and an additional $4.2 million for accrued interest, classified as non-current liabilities.

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

therefore, such amounts are not included in the above contractual obligation table.

Recent Accounting Pronouncements

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When used in this Report, the words “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and negatives of those terms are intended to identify forward-looking statements.

These are statements that relate to future periods and include statements about our future results, sources of revenue, our dividend, our continued growth, our gross margins, market trends, our product development, our introduction of new products, technological developments, the features, benefits and performance of our current and future products, the ability of our products to address a variety of markets, the anticipated growth of demand for connectivity worldwide, our growth strategies, future price reductions, our competitive status, our dependence on our senior management and our ability to attract and retain key personnel, dependency on and concentration of our distributors, our employee relations, current and potential litigation, current or potential indemnification liabilities, the effects of government regulations, the impact of tariffs, the expected impact of taxes on our liquidity and results of operations, our compliance with laws and regulations, our expected future operating costs and expenses and expenditure levels for research and development, selling, general and administrative expenses, fluctuations in operating results, fluctuations in our stock price, our payment of dividends, our future liquidity and cash needs, and the adequacy of and our reliance on our source of liquidity to meet such needs, our Facilities, future acquisitions of and investments in complimentary businesses and the expected impact of various accounting policies and rules adopted by the Financial Accounting Standards Board and the impact of COVID-19 pandemic on our business.

These are statements that relate to future periods and include statements about our future results, sources of revenue, our dividend, our continued growth, our gross margins, market trends, our product development, our introduction of new products, technological developments, the features, benefits and performance of our current and future products, the ability of our products to address a variety of markets, the anticipated growth of demand for connectivity worldwide, our growth strategies, future price reductions, our competitive status, our dependence on our senior management and our ability to attract and retain key personnel, dependency on and concentration of our distributors, our employee relations, current and potential litigation, current or potential indemnification liabilities, the effects of government regulations, the impact of tariffs, the expected impact of taxes on our liquidity and results of operations, our compliance with laws and regulations, our expected future operating costs and expenses and expenditure levels for research and development, selling, general and administrative expenses, fluctuations in operating results, fluctuations in our stock price, our payment of dividends, our future liquidity and cash needs, and the adequacy of and our reliance on our source of liquidity to meet such needs, our Facilities, future acquisitions of and investments in complimentary businesses, the expected impact of various accounting policies and rules adopted by the Financial Accounting Standards Board and the impact of COVID-19 pandemic and the military conflict between Russia and Ukraine on our business and results of operations.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

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

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis