What changed in this filing

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Item 1. Business

2023-08-25 compared with 2022-08-26 · 46 added, 24 removed, 149 unchanged (32% of the section changed)

9 unchanged sentences

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.

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.

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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% 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.

Wired networking solutions have traditionally been used to address increasing consumer and enterprise bandwidth needs.

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Our current Enterprise Provider solutions include:

• UniFi -Enterprise WLAN - our UniFi-Enterprise WLAN platform was designed as an enterprise Wi-Fi system, combining Wi-Fi certified hardware with software-based management controller (UniFi OS).

• UniFi Gateway 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 WiFi - our UniFi WiFi platform was designed as an enterprise Wi-Fi system, combining Wi-Fi certified hardware with software-based management controller (UniFi OS).

UniFi uses a virtual controller that allows for on-site management or remote management through the cloud, allowing for configuration of the network and individual access points.

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• 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.

• UniFi Talk - A new approach to business telephony.

UniFi Talk is a plug-and-play phone system and VoIP subscription service designed for small and medium-sized businesses.

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

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We have developed and intend to continue to develop our technology in part by operating with a relatively flat reporting structure that relies on individual contributors or small development teams to develop, test and obtain feedback for our products.

As of June 30, 2022, our research and development team consisted of 978 full time equivalent employees, including contractors, located in the United States, Taiwan, China, Latvia, the Czech Republic, Lithuania, Ukraine, Poland, and elsewhere.

As of June 30, 2023, our research and development team consisted of 1,059 full time equivalent employees, including contractors, located in the United States, Taiwan, China, Latvia, the Czech Republic, Lithuania, Ukraine, Sweden, and elsewhere.

Our research and development operations work on product development of new products and new versions of existing products.

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We rely on third party components and technology to build and operate our products, and we rely on our contract manufacturers to obtain the components, subassemblies and products necessary for the manufacture of our products.

While components and supplies in the past have been generally available from a variety of sources, we and our contract manufacturers currently depend on a single or limited number of suppliers for several components for our products and the impact of COVID-19 and the current shortage of chips has limited out ability to meet demand.

We and our contract manufacturers rely on purchase orders rather than long-term contracts with these suppliers.

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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.

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).

While we have attempted to mitigate supply shortages through our contract manufacturers and exploring open-market avenues to procure the necessary components, but we expect to experience continuing challenges in terms of securing our supply of such components and pricing inflation for the components to manufacture our products.

Since 2020, we have experienced, and expect to continue to experience, periodic volatility in the supply of components used to manufacture our products, especially chipsets.

This has resulted in supply constraints and corresponding increases in component delivery lead times and costs to obtain components, and resulted in delays in product production.

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 used to manufacture our products and we generally do not have any guaranteed supply arrangements with our suppliers for these components (including the chipsets).

While we have attempted to mitigate supply shortages through our contract manufacturers and exploring open-market avenues to procure the necessary components, there is no assurance that we will be able to obtain sufficient supply of such components on suitable terms, including the pricing terms.

If we need to seek a suitable second source for these components for our products, there can be no assurance that we would be able to successfully source our chipsets on suitable terms, if at all.

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Risk Factors - Risks Related to Our Business and Industry - We rely upon a limited number of suppliers.

If these sources fail to satisfy our supply requirements or we are unable to manage our supply requirements through other sources, could disrupt our business or have a material adverse effect on our results of operations and financial condition.”

We have experienced a major disruption in our supply chain as a result of the COVID-19 pandemic due to COVID-19 related restrictions that have significantly impacted our suppliers’ ability to manufacture or provide key components or services, as well as shipping and logistics delays.

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

If these sources fail to satisfy our supply requirements or we are unable to manage our supply requirements through other sources, it could disrupt our business or have a material adverse effect on our results of operations and financial condition.”

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.

Although these mitigation efforts are intended to optimize our access to the components required to meet customer demand for our products, we have limited visibility into future sales, which makes it difficult to forecast our future results of operations.

These mitigation efforts have increased, and are expected to continue to increase, our balances of finished goods and raw material inventories and vendor deposits.

The increasing balances of finished goods and raw material inventory and vendor deposits significantly increase the risks of future material excess, obsolete inventory and related losses.

We believe that we are taking the right actions to mitigate these continuing supply constraints, however, we recognize the associated risks.

For a further discussion of the uncertainties and business risks associated with the supply constraints, 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, public health problems, military conflicts and geopolitical tensions, which could adversely affect our business, results of operations and financial condition.”

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On January 22, 2020, the United States of Trade Representative announced it will reduce Section 301 List 4A additional tariffs from 15% to 7.5% and the List 4B tariffs would not go into effect.

These tariffs have already affected our operating results and margins.

These tariffs have affected our operating results and margins.

For so long as such tariffs are in effect, we expect it will continue to affect our operating results and margins.

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During fiscal 2023, we sold our products to over 100 distributors and direct to customers through our webstores (collectively, “customers”) in over 75 countries.

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.

In fiscal 2023, 2022, and 2021, there were no customers that represented 10% or more of our revenue.

Refer to Note 13 in our Notes to Consolidated Financial Statements for more information regarding financial data by geographic areas.

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Our sales are primarily made through standard sale orders for delivery of products.

Our inability to procure sufficient product due to COVID-19 and the worldwide chip shortage has led to a significant increase in our backlog of unfulfilled orders.

Our inability to procure sufficient product due to COVID-19 and the worldwide chip shortage had led to a significant increase in our backlog of unfulfilled orders in fiscal 2022.

However, with the abatement of supply constraints, we were able to reduce our backlog of unfulfilled orders in 2023.

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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For further discussion of the risks associated with intellectual property, see “Part I - Item 1A.

Risk Factors - Risks Related to Intellectual Property”.

Human Capital

Factors - Risks Related to Intellectual Property”.

Environmental matters

We are subject to various environmental regulations governing materials usage, packaging and other environmental impacts in the United States and in various countries where our products are manufactured and sold.

We are also subject to regulatory developments, including SEC disclosure regulations relating to "conflict minerals," relating to ethically responsible sourcing of the components and materials used in our products.

To date, compliance with federal, state, local, and foreign laws enacted for the protection of the environment has had no material effect on our capital expenditures, earnings, or competitive position.

Human Capital Management

Employee Overview

Our employees are at the center of everything we do at Ubiquiti and are the driving force for our innovation and success.

Ubiquiti seeks to provide a safe, inclusive and positive employee experience for all its employees.

It is our policy to make employment decisions and opportunities based on merit, qualifications, potential and competency.

As of June 30, 2023, we employed and or contracted with 1,535 full time equivalent employees, of which 1,059 were in research and development, 365 in operations, and 111 in sales, general and administrative.

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We seek to maintain a culture of accountability and performance that enables us to deliver highly-advanced and easily deployable solutions that appeal to a global market.

Talent and Human Capital Management

We believe that human capital management is key to our continued growth and success, and is critical to our ability to attract, retain and develop talented and skilled employees.

We hire and compensate our talent based on their role, experiences, contributions and performance, regardless of their gender, race or ethnic background or other personal characteristics.

Our human capital is governed by employment regulations in each country in which we operate.

We monitor key employment activities, such as hiring, termination and pay practices to comply with established regulations across the world.

Incentive Plans

Our incentive plans are designed to increase stockholder value by attracting, retaining and motivating high value personnel through the granting of equity and non-equity-based compensation awards.

The principal purpose of our incentive plans is to motivate individuals to perform to the best of their abilities to achieve our short- and long-term objectives

Available Information

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Also posted on our website on the Corporate Governance page is the Company’s Code of Ethics for Principal Executive and Senior Financial Officers and Section 16 Officers .

We intend to post any amendment or waiver to this Code on our website within the time period required by the SEC.

We will, if required, disclose future amendments to our Code of Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, or certain waivers of such provisions granted to such persons, on our website identified above.

The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov .

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Our website address is www.ui.com.

From time to time, we may use our website as a channel of distribution of material information.

The information on, or that can be assessed through, our website is not part of this Annual Report on Form 10-K.

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