What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-05 compared with 2023-02-03 · 87 added, 81 removed, 205 unchanged (45% of the section changed)

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

Supply Constraints and Risks – We continue to experience significant supply constraints caused, in part, by the COVID-19 pandemic.

The continued duration of these supply constraints remains uncertain.

Supply Constraints and Risks – We have experienced significant supply constraints caused, in part, by the COVID-19 pandemic.

Our efforts to mitigate these supply constraints have included, for example, increasing our inventory build in an attempt to secure supply and meet customer demand, paying higher component and shipping costs to secure supply and modifying our product designs to leverage alternate suppliers.

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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 on 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.

While the impact on 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.

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 “Part II – Item IA.

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

Sales to distributors accounted for 63% of our revenues during the six months ended December 31, 2022.

Direct sales accounted for 37% of our revenue during the six months ended December 31, 2022.

Sales to distributors accounted for 63% of our revenues during the nine months ended March 31, 2023.

Direct sales accounted for 37% of our revenue during the nine months ended March 31, 2023.

Cost of Revenues

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The vast majority of our products that are imported into the U.S.

from China are currently

subject to tariffs that range between 7.5% and 25%.

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

These tariffs have already affected our operating results and margins.

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Refer to “Part II—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.

Operating Expenses

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Our critical accounting policies are discussed in our Annual Report, filed with the SEC on August 26, 2022, and there have been no material changes other than that have been disclosed in Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements herein.

Additionally, as the COVID-19 pandemic continues to develop and supply chain constraints on the global supply of components, particularly the chipsets, we use to manufacture our products persists, many of our estimates could require increased judgment and carry a higher degree of variability and volatility.

Additionally, as the supply chain constraints caused, in part, by the COVID-19 pandemic continue to develop with supply chain constraints on the global supply of components persisting, particularly for the chipsets, we use to manufacture our products, many of our estimates could require increased judgment and carry a higher degree of variability and volatility.

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

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Results of Operations

Comparison of Three and Six Months Ended December 31, 2022 and 2021

Comparison of Three and Nine Months Ended March 31, 2023 and 2022

The following table summarizes our consolidated results of operations for the periods indicated, expressed in dollars and as a percentage of total revenues (in thousands, except percentages):

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

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

2023 2022 2023 2022

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Total stock-based compensation $ 1,246 $ 874 $ 3,394 $ 2,503

Total revenues increased $62.0 million, or 14%, from $431.6 million in the three months ended December 31, 2021 to $493.6 million in the three months ended December 31, 2022.

Total revenues increased $101.2 million, or 11%, from $890.5 million in the six months ended December 31, 2021 to $991.7 million in the six months ended December 31, 2022.

Total revenues increased $99.7 million, or 28%, from $358.1 million in the three months ended March 31, 2022 to $457.8 million in the three months ended March 31, 2023.

Total revenues increased $200.9 million, or 16%, from $1,248.5 million in the nine months ended March 31, 2022 to $1,449.4 million in the nine months ended March 31, 2023.

The increase in revenues was primarily driven by our Enterprise Technology platform.

The revenue from the Service Provider Technology platform declined when compared to the comparable prior year period.

The revenue from the Service Provider Technology platform increased when compared to the comparable quarter in the prior year and declined when compared to the comparable prior year period.

Revenues by Product Type

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

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

2023 2022 2023 2022

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Total revenues $ 457,773 100 % $ 358,068 100 % $ 1,449,427 100 % $ 1,248,547 100 %

Enterprise Technology revenue increased $87.1 million, or 26%, from $330.4 million in the three months ended December 31, 2021 to $417.4 million in the three months ended December 31, 2022.

Enterprise Technology revenue increased $166.6 million, or 25%, from $677.1 million in the six months ended December 31, 2021 to $843.7 million in the six months ended December 31, 2022.

The increase in Enterprise Technology revenue during the three and six months ended December 31, 2022 as compared to the same period in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions.

Service Provider Technology revenue decreased $25.0 million, or 25%, from $101.2 million in the three months ended December 31, 2021 to $76.2 million in the three months ended December 31, 2022.

Service Provider Technology revenue decreased $65.4 million, or 31%, from $213.3 million in the six months ended December 31, 2021 to $147.9 million in the six months ended December 31, 2022.

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

Enterprise Technology revenue increased $78.5 million, or 27%, from $295.0 million in the three months ended March 31, 2022 to $373.6 million in the three months ended March 31, 2023.

Enterprise Technology revenue increased $245.1 million, or 25%, from $972.2 million in the nine months ended March 31, 2022 to $1217.3 million in the nine months ended March 31, 2023.

The increase in Enterprise Technology revenue during the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions except Asia Pacific.

The increase in Enterprise Technology revenue during the nine months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to product expansion and further adoption of our UniFi technology platform across all regions.

Service Provider Technology revenue increased $21.2 million, or 34%, from $63.0 million in the three months ended March 31, 2022 to $84.2 million in the three months ended March 31, 2023.

Service Provider Technology revenue decreased $44.2 million, or 16%, from $276.4 million in the nine months ended March 31, 2022 to $232.1 million in the nine months ended March 31, 2023.

The increase in Service Provider Technology revenue during the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to increased revenue in all regions across all platforms.

The decrease in Service Provider Technology revenue during the nine months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to decreased revenue in all regions across all the platforms.

Revenues by Geography

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

The following are our revenues by geography for the three and six months ended December 31, 2022 and 2021 (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, 2023 and 2022 (in thousands, except percentages):

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

2023 2022 2023 2022

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Total revenues $ 457,773 100 % $ 358,068 100 % $ 1,449,427 100 % $ 1,248,547 100 %

(1) Revenue for the United States was $209.4 million and $172.3 million for the three months ended December 31, 2022 and 2021, respectively.

Revenue for the United States was $419.7 million and $362.8 million for the six months ended December 31, 2022 and 2021 , respectively.

(1) Revenue for the United States was $214.3 million and $173.9 million for the three months ended March 31, 2023 and 2022, respectively.

Revenue for the United States was $634.0 million and $536.8 million for the nine months ended March 31, 2023 and 2022 , respectively.

North America

Revenues in North America increased $40.4 million, or 22%, from $187.1 million in the three months ended December 31, 2021 to $227.5 million in the three months ended December 31, 2022 and increased $57.0 million, or 14%, from $396.1 million in the six months ended December 31, 2021 to $453.2 million in the six months ended December 31, 2022.

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

Revenues in North America increased $47.2 million, or 26%, from $183.6 million in the three months ended March 31, 2022 to $230.7 million in the three months ended March 31, 2023 and increased $104.2 million, or 18%, from $579.7 million in the nine months ended March 31, 2022 to $683.9 million in the nine months ended March 31, 2023.

The increase in North America revenues during the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology and Service Provider Technology products.

The increase in North America revenues during the nine months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology products offset in part, by decreased revenue from our Service Provider Technology products.

Europe, the Middle East, and Africa (EMEA)

Revenues in EMEA increased $4.1 million, or 2%, from $191.0 million in the three months ended December 31, 2021 to $195.1 million in the three months ended December 31, 2022 and increased $31.6 million, or 9%, from $363.6 million in the six months ended December 31, 2021 to $395.2 million in the six months ended December 31, 2022.

The increase in EMEA revenues during the three and six months ended December 31, 2022 as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology products offset in part, by decreased revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region increased $11.2 million, or 34%, from $32.8 million in the three months ended December 31, 2021 to $43.9 million in the three months ended December 31, 2022 and increased $13.6 million, or 18%, from $75.7 million in the six months ended December 31, 2021 to $89.3 million in the six months ended December 31, 2022.

The increase in Asia Pacific revenues during the three and six months ended December 31, 2022 as compared to the same period in the prior year was primarily due to increased revenue from Enterprise Technology products offset in part, by decreased revenue from our Service Provider Technology products.

Revenues in EMEA increased $38.0 million, or 28%, from $135.2 million in the three months ended March 31, 2022 to $173.3 million in the three months ended March 31, 2023, and increased $69.7 million, or 14%, from $498.8 million in the nine months ended March 31, 2022 to $568.5 million in the nine months ended March 31, 2023.

The increase in EMEA revenues during the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology and Service Provider Technology products.

The increase in EMEA revenues during the nine months ended March 31, 2023, as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology products offset, in part, by decreased revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region increased $0.4 million, or 2%, from $26.5 million in the three months ended March 31, 2022 to $26.9 million in the three months ended March 31, 2023, and increased $14.0 million, or 14%, from $102.2 million in the nine months ended March 31, 2022 to $116.2 million in the nine months ended March 31, 2023.

The increase in Asia Pacific revenues during the three months ended March 31, 2023 as compared to the same period in the prior year was primarily due to increased revenue from Service Provider Technology products offset, in part, by decreased revenue from our Enterprise Technology products.

The increase in Asia Pacific revenues during the nine months ended March 31, 2023, as compared to the same period in the prior year, was primarily due to increased revenue from Enterprise Technology products offset, in part, by decreased revenue from our Service Provider Technology products.

South America

Revenues in South America increased $6.3 million, or 30%, from $20.8 million in the three months ended December 31, 2021 to $27.1 million in the three months ended December 31, 2022 and decreased $1.1 million, or 2%, from $55.0 million in the six months ended December 31, 2021 to $54.0 million in the six months ended December 31, 2022.

The increase in South America revenues during the three months ended December 31, 2022 as compared to the same period in the prior year was primarily due to increased revenue from Enterprise Technology products offset in part by decreased revenue from Service Provider Technology products.

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

Cost of Revenues and Gross Profit

Cost of revenues increased $39.1 million, or 15%, from $256.9 million in the three months ended December 31, 2021 to $296.0 million in the three months ended December 31, 2022.

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

Cost of revenues increased $116.4 million, or 23%, from $506.3 million in the six months ended December 31, 2021 to $622.7 million in the six months ended December 31, 2022.

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

Gross profit margin decreased to 40.0% in the three months ended December 31, 2022 compared to 40.5% in the three months ended December 31, 2021 and decreased to 37.2% in the six months ended December 31, 2022 compared to 43.1% in the six months ended December 31, 2021, primarily driven by changes in product mix and increased component and shipping costs.

Revenues in South America increased $14.1 million, or 110%, from $12.8 million in the three months ended March 31, 2022 to $26.9 million in the three months ended March 31, 2023 and increased $13.0 million, or 19%, from $67.8 million in the nine months ended March 31, 2022 to $80.9 million in the nine months ended March 31, 2023.

The increase in South America revenues during the three months ended March 31, 2023 as compared to the same period in the prior year was due to increased revenue from Enterprise Technology and Service Provider Technology products.

The increase in South America revenues during the nine months ended March 31, 2023 as compared to the same period in the prior year was primarily due to increased revenue from Enterprise Technology products offset, in part, by decreased revenue from Service Provider Technology products.

Gross profit margin increased to 41.2% in the three months ended March 31, 2023, compared to 32.4% in the three months ended March 31, 2022 and decreased to 38.0% in the nine months ended March 31, 2023, compared to 40.0% in the nine months ended March 31, 2022.

The increase in gross profit margin for the three months ended March 31, 2023, as compared to the comparable prior year period was primarily driven by lower shipping costs.

The decrease in gross profit margin for the nine months ended March 31, 2023, as compared to the comparable prior year period was primarily driven by changes in product mix and increased component costs.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased by $0.9 million, or 3%, from $32.9 million in the three months ended December 31, 2021 to $33.8 million in the three months ended December 31, 2022.

As a percentage of revenues, R&D expenses remained consistent at 7% for the three months ended December 31, 2022 compared to 8% in the three months ended December 31, 2021.

Research and development (“R&D”) expenses increased marginally by $1.5 million, or 2%, from $64.9 million in the six months ended December 31, 2021 to $66.4 million in the six months ended December 31, 2022.

As a percentage of revenues, R&D expenses remained consistent at 7% for both periods.

Research and development (“R&D”) expenses increased by $2.9 million, or 8%, from $35.3 million in the three months ended March 31, 2022 to $38.2 million in the three months ended March 31, 2023.

As a percentage of revenues, R&D expenses decreased from 10% for the three months ended March 31, 2022 to 8% for the three months ended March 31, 2023.

Research and development (“R&D”) expenses increased by $4.5 million, or 4%, from $100.2 million in the nine months ended March 31, 2022 to $104.6 million in the nine months ended March 31, 2023.

As a percentage of revenues, R&D expenses decreased from 8% for the nine months ended March 31, 2022 to 7% for the nine months ended March 31, 2023.

The increase in R&D expenses as compared to the comparable prior year periods was primarily due to higher employee related expenses.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $2.2 million, or 13%, from $16.4 million in the three months ended December 31, 2021 to $18.6 million in the three months ended December 31, 2022.

As a percentage of revenues, SG&A expenses remained consistent at 4% for both periods.

Sales, general and administrative (“SG&A”) expenses increased $3.2 million, or 10%, from $32.2 million in the six months ended December 31, 2021 to $35.3 million in the six months ended December 31, 2022.

As a percentage of revenues, SG&A expenses remained consistent at 4% for both periods.

The increase in SG&A costs as compared to the comparable prior year period was primarily due to higher credit card processing fees, offset in part by lower professional fees.

Sales, general and administrative (“SG&A”) expenses decreased $1.4 million, or 8%, from $18.2 million in the three months ended March 31, 2022 to $16.7 million in the three months ended March 31, 2023.

As a percentage of revenues, SG&A expenses decreased from 5% for the three months ended March 31, 2022 to 4% for the three months ended March 31, 2023.

Sales, general and administrative (“SG&A”) expenses increased $1.8 million, or 4%, from $50.3 million in the nine months ended March 31, 2022 to $52.1 million in the nine months ended March 31, 2023.

As a percentage of revenues, SG&A expenses decreased from 4.0% for the nine months ended March 31, 2022 to 3% for the nine months ended March 31, 2023.

The decrease in SG&A costs during the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to lower marketing expenses, professional fees and charitable contributions offset, in part, by higher employee related expenses and credit card processing fees.

The increase in SG&A costs during the nine months ended March 31, 2023, as compared to the comparable prior year period was primarily due to higher credit card processing fees and travel expenses offset, in part, by lower professional fees and marketing expenses.

Provision for Income Taxes

Our provision for income taxes increased $2.7 million, or 14%, from $19.0 million for the three months ended December 31, 2021 to $21.7 million for the three months ended December 31, 2022.

Our effective tax rate increased to 16.2% for the three months ended December 31, 2022 as compared to 15.5% for the three months ended December 31, 2021.

Our provision for income taxes decreased $4.9 million, or 11%, from $44.8 million for the six months ended December 31, 2021 to $39.9 million for the six months ended December 31, 2022.

Our effective tax rate increased to 16.3% for the six months ended

December 31, 2022 as compared to 16.0% for the six months ended December 31, 2021.

The change in effective tax rates for the three and six months ended December 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 as well as an increase in current U.S taxes as a result of mandatory capitalization and amortization of research and development expenditures incurred in fiscal year 2023, as required by the 2017 Tax Cuts and Jobs Act (“TCJA”), and its interplay with GILTI.

Our provision for income taxes increased $9.5 million, or 105%, from $9.0 million for the three months ended March 31, 2022 to

$18.5 million for the three months ended March 31, 2023.

Our effective tax rate increased to 15.8% for the three months ended March 31, 2023 as compared to 15.2% for the three months ended March 31, 2022.

Our provision for income taxes increased $4.5 million, or 8%, from $53.8 million for the nine months ended March 31, 2022 to $58.3 million for the nine months ended March 31, 2023.

Our effective tax rate increased to 16.1% for the six months ended March 31, 2023 as compared to 15.8% for the six months ended March 31, 2022.

The change in effective tax rates for the three and nine months ended March 31, 2023, as compared to the same periods in the prior year was primarily driven by a change in the mix of the income earned in the various jurisdictions as well as an increase in current U.S.

taxes as a result of mandatory capitalization and amortization of research and development expenditures incurred in fiscal year 2023, as required by the 2017 Tax Cuts and Jobs Act ("TCJA"), and its interplay with GILTI.

There is no offsetting deferred benefit due to our election to treat GILTI as a period cost.

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Our principal source of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities and short-term investments.

We had cash and cash equivalents of $159.5 million and $136.2 million as of December 31, 2022 and June 30, 2022, respectively.

We had cash and cash equivalents of $152.5 million and $136.2 million as of March 31, 2023 and June 30, 2022, respectively.

In April 2023, we entered the First Amendment Term Loan, which increased the size of our credit facilities by $250 million.

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

Nine Months Ended

(In thousands)

Net cash provided by operating activities $ 2,333 $ 196,125

Net cash (used in) provided by operating activities $ (159,872) $ 300,280

Net cash (used in) investing activities (15,650) (10,718)

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Cash Flows from Operating Activities

Net cash provided by operating activities in the six months ended December 31, 2022 consisted primarily of net income of $205.4 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $219.1 million.

This net change consisted primarily of a $388.1 million increase in inventory, a $32.3 million increase in accounts receivable, a $8.9 million increase in prepaid expense and other assets, a $221.5 million increase in net accounts payable and accrued liabilities, a $24.4 million decrease in taxes payable due to the timing of federal tax payments and a $15.0 million decrease in vendor deposits.

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.

This net change consisted primarily of a $44.7 million increase in inventory, $19.2 million increase in vendor deposit, a $46.8 million decrease in accounts receivable, a $21.5 million decrease in net accounts payable and accrued liabilities, a $13.3 million decrease in taxes payable due to the timing of federal tax payments and a $3.0 million increase in prepaid expense and other assets.

Net cash used in operating activities in the nine months ended March 31, 2023 consisted primarily of net income of $304.0 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $487.7 million.

This net change consisted primarily of a $489.5 million increase in inventory, a $26.7 million increase in accounts receivable, a $8.7 million increase in prepaid expense and other assets, a $73.5 million increase in net accounts payable and accrued liabilities, a $28.7 million decrease in taxes payable due to the timing of federal tax payments and a $5.0 million increase in vendor deposits.

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 $0.8 million increase in prepaid expense and other assets.

Cash Flows from Investing Activities

We used $13.5 million of cash in investing activities during the six months ended December 31, 2022.

We used $15.7 million of cash in investing activities during the nine months ended March 31, 2023.

Our investing activities consisted primarily of $15.7 million of capital expenditures.

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.

Cash Flows from Financing Activities

We used $34.4 million of cash in financing activities during the six months ended December 31, 2022.

During the six months ended December 31, 2022, we used $72.5 million related to dividends paid on our common stock and received $107.5 million (net) of funds under the Company's credit facilities.

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 believe our existing cash and cash equivalents, cash provided by operations and the availability of additional funds under the 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 received $191.8 million of cash from financing activities during the nine months ended March 31, 2023.

During the nine months ended March 31, 2023, we received $301.3 million (net) of funds under the Company's Facilities and used $108.8 million related to dividends paid on our common stock.

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 Facilities, $513.0 million related to the repurchase of our common stock and $111.8 million related to dividends paid on our common stock.

In April 2023, we entered the First Amendment Term Loan, which increased the size of our credit facility by $250 million.

We used the First Amendment Term Loan to repay $250 million of outstanding revolver loans under our Revolving Facility, allowing us to increase the cash available to be drawn under the Revolving Facility by the same amount.

We believe our existing cash and cash equivalents, in addition to the ability to draw cash under the Revolving Facility, if needed, will be sufficient to meet our near-term working capital requirements, future stock repurchases, dividends, and capital expenditure needs for the next twelve months, as well as long-term liquidity requirements in the event that the cash from operations is not adequate to meet our cash needs.

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 the 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, 2022.

Based upon our historical experience and information known as of the date of this Quarterly Report on Form 10-Q, we do not believe it is likely that we will have material liability for the above indemnities as of December 31, 2022.

We have not recorded any liabilities for these agreements as of March 31, 2023.

Contractual Obligations and Off-Balance Sheet Arrangements

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We periodically review the potential liability.

There have been no significant liabilities for cancellations recorded as of December 31, 2022.

There have been no significant liabilities for cancellations recorded as of March 31, 2023.

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 $440.6 million to $916.5 million as of December 31, 2022, 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 $1,279.2 million to $1,390.5 million as of March 31, 2023, depending upon the timing of orders placed for these components by our contract manufacturers.

Transition Tax

We have obligations of $67.4 million as of December 31, 2022, related to transition tax.

We have obligations of $67.5 million as of March 31, 2023, related to transition tax.

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

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Other Obligations

We had other obligations of $5.4 million as of December 31, 2022, which consisted primarily of commitments related to research and development projects.

We had other obligations of $5.8 million as of March 31, 2023, which consisted primarily of commitments related to research and development projects.

Unrecognized Tax Benefits

As of December 31, 2022, we had $33.5 million of unrecognized tax benefits and an additional $3.3 million for accrued interest, classified as non-current liabilities.

As of March 31, 2023, we had $34.9 million of unrecognized tax benefits and an additional $3.5 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.

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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 interest rate and foreign currency risks, 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.

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.

2 unchanged sentences

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

required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Except as required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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