What changed in this filing

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Item 1. Business

2022-08-26 compared with 2021-08-27 · 28 added, 28 removed, 145 unchanged (28% of the section changed)

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Our devices play a role in creating networking infrastructure in over 200 countries and territories around the world.

Our professional networking products are powered by our UNMS and UniFi software platforms to provide high-capacity distributed Internet access and unified information technology management, respectively.

Our professional networking products are powered by our UISP and UniFi OS software platforms to provide high-capacity distributed Internet access and unified information technology management, respectively.

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

We categorize our solutions into three main categories:

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

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

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

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

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

We target consumers through digital marketing, including

through our webstores, retail chains and, to a lesser extent, the Ubiquiti Community.

In addition to Mr.

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

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

support teams.

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

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

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

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

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

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We reported net income of $378.7 million, $616.6 million and $380.3 million in the fiscal years ended June 30, 2022, 2021 and 2020, respectively.

Refer to our Consolidated Financial Statements included under Part IV,

Item 15 of this report for more financial information.

Refer to our Consolidated Financial Statements included under Part IV, Item 15 of this Annual Report on Form 10-K for more financial information.

Industry Overview

Internet traffic worldwide has grown rapidly in recent years, driven by an increase in the number of users, increasing mobility of those users and high bandwidth applications, such as video, audio, cloud-based applications, online gaming and social networking.

According to Cisco Annual Internet Report, internet users as a percentage of global population will be 66%, an increase from 51% in 2018.

According to Cisco Annual Internet Report, internet users as a percentage of global population will be 66% in 2023, an increase from 51% in 2018.

Additionally, it is estimated that there will be 3.6 networked devices per capita connected to IP networks in 2023, up from 2.4 networked devices per capita in 2018.

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We offer products and solutions based on our proprietary technology across multiple markets.

Utilizing low-cost hardware, consumer chipsets and innovative software and firmware, we seek to build price-performance solutions to address both service providers and enterprises.

Utilizing low-cost hardware and innovative software and firmware, we seek to build price- performance solutions to address both enterprises and service providers.

Key Technology Platforms

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Devices on the airMax platform, such as customer premise equipment (“CPE”), base station, and backhaul, are able to support a wireless network that can scale to hundreds of clients per base station over long distances while maintaining low latency and high throughput.

• EdgeMAX - our EdgeMAX platform is a software and systems routing platform, powered by our full-featured EdgeOS operating system that includes advanced quality of service, firewall, dynamic routing and virtual private network functionality.

• EdgeMAX - our EdgeMAX platform is a software and systems routing platform, powered by our full-featured UISP operating system that includes advanced quality of service, firewall, dynamic routing and virtual private network functionality.

• airFiber - our airFiber platform is a wireless backhaul point-to-point radio system, a wireless method of transmitting data to and from network backbone.

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• UniFi Protect - our UniFi Protect platform is a video surveillance system that can be accessed securely from any web browser, provides detailed statistical reporting and advanced analytics and provides a management console with multiple views, versatile camera setting and customizable event recordings.

• UniFi Switch - UniFi Switch is one of our top selling categories as end customers can easily add equipment as they expand their networks.

UniFi Switch delivers performance, switching, and power of ethernet (“PoE+”) support for enterprise networks.

• UniFi Switch - UniFi Switch delivers performance, switching, and power of ethernet (“PoE+”) support for enterprise networks.

• UniFi Console - UniFi Console is an Enterprise class router and security gateway device that is expandable and extends the UniFi enterprise solutions to provide cost-effective, reliable routing and advanced network security.

• UniFi Access - UniFi Access is a state-of-the art door access system that is easily expandable.

We offer a consumer product platform, called AmpliFi, which is a Wi-Fi system solution designed to serve the demands of the modern connected home.

We offer consumer products, called AmpliFi and Alien, which are Wi-Fi system solutions designed to serve the demands of the modern connected home.

We continue to explore consumer related market opportunities and have research and development teams focused on consumer related solutions.

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We use contract manufacturers, primarily located in China and Vietnam, to manufacture our products.

Our relationships with contract manufacturers allow us to conserve working capital, reduce manufacturing costs and minimize delivery lead times while maintaining high product quality and the ability to scale quickly to handle increased order volume.

Over the long term, our contract manufacturers are not required to manufacture our products for any specific period or in any specific quantity.

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These agreements generally automatically renew for successive one-year periods unless the agreements are terminated by written notice of nonrenewal with advance notice prior to the end of their then-current term.

The Company has not received any termination notice as of the date of this Report.

The Company has not received any termination notice as of the date of this Annual Report on Form 10-K.

We depend on these license agreements to modify and replace firmware on certain chipsets with our proprietary firmware.

While our agreements with suppliers remains effective, the terms of these agreements, allow either party to terminate the agreements without cause at the end of the annual contract term.

We have seen in fiscal 2021, and expect to continue to see increasing demand and reduced availability for certain components (including the chipsets), which has impacted and we expect will continue to impact our ability and costs to manufacture our

Our inability to procure sufficient quantities of certain components during fiscal 2022, including chipsets, has had a negative impact

on our ability to manufacture our products and increased the costs associated therewith, and we expect these supply constraints, and their negative impact on our manufacturing output and associated costs, to continue.

We do not stockpile sufficient components, particularly the chipsets, to cover the time it would take to re-engineer our products to replace the components which comprise the raw materials for our product offerings and we generally do not have any guaranteed supply arrangements with our suppliers for these components (including the chipsets).

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For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, refer to “Part I - Item 1A.

Risk Factors - Risks Related to Our Business and Industry - Our contract manufacturers, logistics centers and certain administrative and research and development operations, as well as our customers and suppliers, are located in areas likely to be subject to natural disasters and public health problems, which could adversely affect our business, results of operations and financial condition.”

Risk Factors - Risks Related to Our Business and Industry - Our contract manufacturers, logistics centers and certain administrative and research and development operations, as well as our customers and suppliers, are located in areas likely to be subject to natural disasters, public health problems, military conflicts and geopolitical tensions, which could adversely affect our business, results of operations and financial condition.”

In June 2018, the Office of the United States Trade Representative announced new proposed tariffs for certain products imported into the U.S.

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Refer to “Part I - Item 1A.

Risk Factors—Risks Related to Our International Operations—Our business may be negatively affected by political events and foreign policy responses” for additional information.

Risk Factors - Risks Related to Our International Operations”.

Our business may be negatively affected by political events and foreign policy responses” for additional information.

Sales and Distribution

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

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

During fiscal 2022, we sold our products to over 100 distributors and direct to customers through our webstores (collectively, “customers”) in over 75 countries.

In fiscal 2021, there were no customers that represented 10% or more of our revenue, while in in fiscal 2020, only one customer represented 10% or more of our revenue and in fiscal 2019, two customers represented 10% or more of our revenue.

In fiscal 2022 and 2021, there were no customers that represented 10% or more of our revenue, while in in fiscal 2020, only one customer represented 10% or more of our revenue.

Refer to Note 15 in our Notes to Consolidated Financial Statements for more information regarding financial data by geographic areas.

A majority of our sales are made to distributors outside the United States and we anticipate that non-U.S.

A majority of our sales are made outside the United States and we anticipate that non-U.S.

sales will continue to be a significant portion of our revenues.

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However, we do not believe our backlog information is a reliable indicator of our ability to achieve any particular level of revenue or financial performance.

The markets for networking solutions for service providers, enterprise WLAN, video surveillance, microwave backhaul and machine-to-machine communications technology are highly competitive and are influenced by the following competitive factors, among others:

The markets for networking solutions for service providers, enterprise WLAN, video surveillance, microwave backhaul and

machine-to-machine communications technology are highly competitive and are influenced by the following competitive factors, among others:

• total cost of ownership and return on investment associated with the solutions;

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Our products are designed to operate in growing networks without degradation in performance or operational complexity.

In the backhaul market, our competitors include Cambium Networks, Ceragon Networks, DragonWave, MikroTîkls, Airspan, SAF Tehnika and Trango.

In the backhaul market, our competitors include Cambium Networks, Ceragon Networks, MikroTîkls, Airspan, SAF Tehnika and Trango.

In the CPE market, our competitors include Cambium Networks, MikroTîkls, Ruckus Wireless (CommScope)and TP-LINK Technologies.

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As of June 30, 2022, we employed and or contracted with 1,377 full time equivalent employees, of which 978 were in research and development, 317 in operations, and 82 in sales, general and administrative.

Our workforce is diversified across multiple locations with 57%, 28% and 15% located in Asia Pacific, Europe, the Middle East, and Africa ("EMEA") and the Americas, respectively.

Our workforce is diversified across multiple locations with 65%, 23% and 12% located in (i) Asia Pacific, (ii) Europe, the Middle East, and Africa (“EMEA”) and (iii) the Americas, respectively.

The Company believes that its entrepreneurial, decentralized, and diversified work environment has contributed to its success.

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Available Information

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed with the U.S.

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed or furnished with the U.S.

Securities and Exchange Commission (the “SEC”).

Such reports and other information filed by the Company with the SEC are available free of charge on the Company’s website at http://ir.ui.com when such reports are available on the SEC website.

Such reports and other information filed or furnished by the Company with the SEC are available free of charge on the Company’s website at http://ir.ui.com when such reports are available on the SEC website.

Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our website.

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

What changed 10-K

Item 1. Business