What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-08-25 compared with 2022-08-26 · 93 added, 109 removed, 228 unchanged (47% of the section changed)

2 unchanged sentences

We categorize our solutions into three main categories:

high performance

networking technology for enterprises, service providers and consumers.

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

We target consumers through digital marketing, retail

chains and, to a lesser extent, the Ubiquiti Community.

In addition to Mr.

8 unchanged sentences

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 if an outbreak occurs 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, in 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.

These supply shortages have resulted in increased component delivery lead times and increased costs to obtain components, particularly the chipsets, and may result in delays in product production, which shortages may be further exacerbated by increasing global shipping lead times and delays.

We do not stockpile sufficient components, particularly the chipsets, to cover the time it would take to re-engineer our products to replace the chipsets used to manufacture our products.

While we are continuing to work closely with our suppliers and contract manufacturers to minimize the potential adverse impacts of the supply shortage, there are many companies seeking to purchase the limited supply of chipsets and other components, many of which have greater resources and larger market share than we have, which may limit the effectiveness of our efforts.

We expect that shortages of chipsets and other components will continue and may have an adverse impact on our ability to manufacture our products and meet demand for our products.

The extent to which the COVID-19 pandemic and the global availability of components impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including further disruptions to our supply chain, reductions in demand due to disruptions in the operations of our customers or their end customers, disruptions in local and global economies, volatility in the global financial markets, overall reductions in demand, restrictions on the export or shipment of our products or other COVID-19-related events.

This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions.

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

Recent Developments

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.

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 inventory and vendor deposit balances.

The increasing balances of inventories 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.

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.

9 unchanged sentences

We operate our business as one reportable and operating segment.

Further information regarding Segments can be found in Note 15 to our Consolidated Financial Statements.

Further information regarding Segments can be found in Note 13, "Segment Information, Revenues by Geography and Significant Customers," to our Consolidated Financial Statements.

Our revenues are derived principally from the sale of networking hardware.

2 unchanged sentences

Enterprise Technology and Service Provider Technology.

• Enterprise Technology includes our UniFi platforms, including UniFi Network Wi-Fi, switching and routing solutions, UniFi Protect, UniFi Access, UniFi-Talk and our AmpliFi platform.

• Service Provider Technology includes our airMAX, EdgeMAX, UFiber, and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and CPE.

Additionally, Service Provider Technology includes antennas and other products primarily in the 0.9 to 6.0 GHz spectrum and miscellaneous products such as mounting brackets, cables and power over Ethernet adapters.

• Enterprise Technology includes our UniFi platforms, including UniFi Gateway Consoles, UniFi WiFi, UniFi Switches, UniFi Protect, UniFi Access, UniFi-Talk and our AmpliFi platform.

• Service Provider Technology includes our airMAX, EdgeMAX, UFiber, Wave, GPON and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and CPE.

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

Sales to distributors accounted for 65% and 83% of our revenues in the year ended June 30, 2022 and 2021, respectively.

Direct sales accounted for 35% and 17% of our revenues in the year ended June 30, 2022 and 2021, respectively.

Sales to distributors accounted for 64% and 65% of our revenues during the years ended June 30, 2023 and 2022, respectively.

Direct sales accounted for 36% and 35% of our revenues during the years ended June 30, 2023 and 2022, respectively.

Cost of Revenues

Our cost of revenues is comprised primarily of the costs of procuring finished goods from our contract manufacturers and certain key components that we consign to certain of our contract manufacturers.

In addition, cost of revenues includes labor and other costs w hich include salary, benefits and stock-based compensation, in addition to costs associated with tooling, testing and quality assurance, warranty costs, logistics costs, tariffs and excess and obsolete inventory write-downs.

In addition, cost of revenues includes labor and other costs w hich include salary, benefits and share-based compensation, in addition to costs associated with tooling, testing and quality assurance, warranty costs, logistics costs, tariffs and excess and obsolete inventory write-downs.

We currently operate warehouses located in the U.S., Europe and Asia Pacific.

16 unchanged sentences

We classify our operating expenses as research and development, and sales, general and administrative expenses.

• Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, licensed or purchased intellectual property, facilities and travel.

• Research and development expenses consist primarily of salary and benefit expenses, including share-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, licensed or purchased intellectual property, facilities and travel.

Over time, we expect our research and development costs to increase as we continue making significant investments in developing new products in addition to new versions of our existing products.

• Sales, general and administrative expenses include salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in sales, marketing and general and administrative activities, as well as the costs of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, professional services, facilities, general liability insurance and travel.

• Sales, general and administrative expenses include salary and benefit expenses, including share-based compensation, for employees and costs for contractors engaged in sales, marketing and general and administrative activities, as well as the costs of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, professional services, facilities, general liability insurance and travel.

As our product portfolio and targeted markets expand, we may need to employ different sales models, such as building a traditional direct sales force.

5 unchanged sentences

In preparing the consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate.

We must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss.

We must assess potential exposures and, where necessary, provide a reserve to cover any expected loss.

To the extent that we establish a reserve, the provision for income taxes would be increased.

13 unchanged sentences

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.

Additionally, as the COVID-19 pandemic continues to develop, 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.

2 unchanged sentences

Revenue consists of revenue from sales of hardware and the related essential software (“Products”) as well as related implied PCS.

We recognize revenue when obligations under the terms of a contract with our customers are satisfied, generally, upon transfer of

control of promised goods or services to customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

We recognize revenue when obligations under the terms of a contract with our customers are satisfied, generally, upon transfer of control of promised goods or services to customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

We apply the following five-step revenue recognition model:

12 unchanged sentences

We record a provision for returns related to this variable consideration based upon its historical returns experience with these customers.

We record amounts billed to distributors for shipping and handling costs as revenues.

We record amounts billed for shipping and handling costs as revenues.

We classify shipping and handling costs incurred by us as cost of revenue.

17 unchanged sentences

We reduce the value of our inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the NRV.

downs are not reversed until the related inventory has been subsequently sold or scrapped.

Write-downs are not reversed until the related inventory has been subsequently sold or scrapped.

The valuation of inventory also requires us to estimate excess and obsolete inventory.

The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of customer demand.

Customer demand is dependent on various factors and requires us to use judgment in forecasting future demand for these products.

The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of customer demand which is dependent on various factors and requires us to use judgment in forecasting future demand for its products.

We also consider the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products.

2 unchanged sentences

We capitalize manufacturing overhead expenditures as part of inventory costs.

Capitalized costs primarily include management’s best estimate of the direct labor, tariffs and materials costs incurred related to inventory acquired or produced but not sold during the respective period.

Capitalized costs primarily include management’s best estimate of the indirect labor, tariffs, shipping and logistics costs incurred related to inventory acquired or produced but not sold during the respective period.

Manufacturing overhead costs are capitalized to inventory and are recognized as cost of revenues in future periods based on when the inventory is sold or written-down.

16 unchanged sentences

Comparison of Years Ended June 30, 2023 and 2022

Years Ended June 30,

Year ended June 30,

(In thousands, except percentages)

15 unchanged sentences

Net income $ 407,641 21 % $ 378,657 23 %

* Less than 1%

(1) Includes stock-based compensation as follows

(1) Includes share-based compensation as follows

Cost of revenues $ 73 $ 74

1 unchanged sentence

Sales, general and administrative 1,120 901

Total stock-based compensation $ 3,516 $ 3,029

Total revenues decreased $206.4 million, or 10.9%, from $1,898.1 million in fiscal 2021 to $1,691.7 million in fiscal 2022.

The decline in revenue was primarily driven by a decrease in revenue in the Service Provider Technology platform.

Total share-based compensation $ 4,734 $ 3,516

Total revenues increased $248.8 million, or 15%, from $1,691.7 million in fiscal 2022 to $1,940.5 million in fiscal 2023.

The increase in revenue was primarily driven by an increase in revenue in the Enterprise Technology platform.

During fiscal year ended June 30, 2023, there were no material price changes in our products sold.

However, we have experienced an increase in webstore direct to consumer sales which has a higher average selling price compared to sales to our distribution partners and we continue to introduce new products which may have average selling prices and margins different than our legacy products.

During fiscal 2022 our revenues were negatively impacted by our inability to fulfill demand due to the global component supply shortage and the continued outbreaks of COVID-19 around the world.

These factors have limited our ability to meet demand, caused us to delay introducing new products, prioritize which products are manufactured, what regions receive products, and significantly increased our backlog of orders and we expect to continue during fiscal 2023.

Overall, our fiscal 2023 revenue benefited from our improved ability to secure components and produce products.

We have also experienced an increase in direct sales through our webstore which has a higher average selling price compared to sales to our distribution partners and we continue to introduce new products which may have average selling prices and margins different than our legacy products.

Revenues by Product Type

Years Ended June 30,

Year ended June 30,

(in thousands, except percentages)

2 unchanged sentences

Total revenues $ 1,940,512 100 % $ 1,691,692 100 %

Enterprise Technology revenues increased $41.8 million, or 3.3%, from $1,274.9 million in fiscal 2021, to $1,316.7 million in fiscal 2022 primarily due to increased revenue from our UniFi technology platform across all geographic regions other than EMEA.

Service Provider Technology revenues decreased $248.2 million, or 39.8%, from $623.2 million in fiscal 2021, to $375.0 million in fiscal 2022, primarily due to decreased revenues in all of our product platforms across all geographic locations.

Enterprise Technology revenues increased $304.7 million, or 23%, from $1,316.7 million in fiscal 2022, to $1,621.4 million in fiscal 2023 primarily due to increased revenue from our Enterprise Technology platform across all geographic regions.

During fiscal 2023 we were able to procure components and manufacture products at a level far above fiscal 2022.

Service Provider Technology revenues decreased $55.9 million, or 15%, from $375.0 million in fiscal 2022, to $319.1 million in fiscal 2023, primarily due to decreased revenues in our Service Provider Technology platform across all geographic locations.

Revenues by Geography

2 unchanged sentences

The following are our revenues by geography for fiscal 2023 and fiscal 2022:

Years Ended June 30,

Year ended June 30,

(in thousands, except percentages)

5 unchanged sentences

Total revenues $ 1,940,512 100% $ 1,691,692 100%

(1) Revenue for the United States was $734.5 million and $774.3 million in fiscal 2022 and fiscal 2021, respectively.

(1) Revenue for the United States was $855.3 and $734.5 in fiscal 2023 and fiscal 2022, respectively.

North America

Revenues in North America decreased $45.2 million, or 5.4%, from $836.0 million in fiscal 2021 to $790.8 million in fiscal 2022.

The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.

Revenues in North America increased $131.4 million, or 16.6%, from $790.8 million in fiscal 2022 to $922.2 million in fiscal 2023.

The year-over-year increase was primarily due to increased revenue from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.

Europe, the Middle East, and Africa (“EMEA”)

Revenues in EMEA decreased $110.0 million, or 14.0%, from $785.3 million in fiscal 2021 to $675.3 million in fiscal 2022.

The year-over-year decrease was due to decreased revenues from both our Enterprise Technology products and Service Provider Technology products.

Revenues in the Asia Pacific region decreased $19.5 million, or 12.7%, from $154.5 million in fiscal 2021 to $135.0 million in fiscal 2022.

The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.

Revenues in EMEA increased $84.1 million, or 12.5%, from $675.3 million in fiscal 2022 to $759.4 million in fiscal 2023.

The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.

Revenues in the Asia Pacific region increased $13.5 million, or 10.0%, from $135.0 million in fiscal 2022 to $148.5 million in fiscal 2023.

The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.

South America

Revenues in South America decreased $31.6 million, or 25.9%, from $122.2 million in fiscal 2021 to $90.6 million in fiscal 2022.

The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.

Cost of Revenues and Gross Profit

Cost of revenues increased $36.1 million, or 3.7%, from $985.8 million in fiscal 2021 to $1,021.9 million in fiscal 2022.

The increase in fiscal 2022 was primarily driven by higher shipping costs, increased component costs and increase in general operating expenses.

Revenues in South America increased $19.8 million, or 21.8%, from $90.6 million in fiscal 2022 to $110.4 million in fiscal 2023.

The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.

Gross profit margin decreased to 39.2% in fiscal 2023 from 39.6% in fiscal 2022.

The decline in GAAP gross margin for full fiscal 2022 versus full fiscal 2021 was primarily driven by higher shipping costs, increased component costs and an increase in general operating expenses.

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

The decline in gross profit margin for fiscal 2023 as compared to fiscal 2022 was primarily driven by changes in product mix and higher component costs, partially offset by lower shipping costs.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased $21.5 million, or 18.5%, from $116.2 million in fiscal 2021 to $137.7 million in fiscal 2022.

As a percentage of revenues, research and development expenses increased from 6% in fiscal 2021 to 8% in fiscal 2022.

The increase in R&D expense for fiscal 2022 versus fiscal 2021 was primarily driven by higher employee related expenses, prototype testing expenses, software expenses, depreciation and amortization expenses and rent.

R&D expenses increased $7.5 million, or 5.4%, from $137.7 million in fiscal 2022 to $145.2 million in fiscal 2023.

As a percentage of revenues, R&D expenses decreased from 8% in fiscal 2022 to 7% in fiscal 2023.

The increase in R&D expense for fiscal 2023 versus fiscal 2022 was primarily driven by higher employee-related expenses and facility costs.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $1.1 million, or 1.6%, from $69.9 million in fiscal 2022 to $71.0 million in fiscal 2023.

As a percentage of revenues, sales, general and administrative expenses increased from 3% in fiscal 2021 to

4% in fiscal 2022.

The increase in fiscal 2022 SG&A expenses as compared to fiscal 2021 was primarily driven by increased fees associated with webstore credit card processing, increased travel expense and donations to humanitarian relief organizations addressing the military conflict between Russia and Ukraine, offset in part by lower legal related costs.

As a percentage of revenues, SG&A expenses remained consistent at 4% for both fiscal 2022 and 2023.

The increase in fiscal 2023 SG&A expenses as compared to fiscal 2022 was primarily driven by increased fees associated with webstore credit card processing, partially offset by lower professional fees and marketing expenses.

Interest Expense and Other, net

Interest expense and other, net ("I&O") expenses increased $40.4 million, or 226.8%, from $17.8 million in fiscal 2022 to $58.2 million in fiscal 2023.

As a percentage of Revenue, I&O expense increased from 1% in fiscal 2022 to 3% in fiscal 2023.

The increase in I&O expense for fiscal 2023 as compared to fiscal 2022 was primarily driven by higher interest expense due to incremental borrowings and increased interest rates.

Provision for Income Taxes

Our provision for income taxes decreased 40.8% from $111.1 million for fiscal 2021 to $65.8 million for fiscal 2022.

Our effective tax rate decreased to 14.8% in fiscal 2022 as compared to 15.3% for fiscal 2021.

The decrease in the effective tax rate in fiscal 2022 is primarily due to reduced domestic pre-tax income along with certain discrete tax benefits recognized during the fiscal year, partially offset by an increase in local taxes in foreign jurisdictions.

While our effective rate has remained relatively consistent, the rate can vary based upon changes in the mix of the taxable income earned in various tax jurisdictions and the timing of provisions related to discrete tax items.

Our provision for income taxes increased 19.6% from $65.8 million for fiscal 2022 to $78.7 million for fiscal 2023.

Our effective tax rate increased to 16.2% in fiscal 2023 as compared to 14.8% for fiscal 2022.

The change in effective tax rates for fiscal 2023 as compared to fiscal 2022 was primarily driven by a change in the mix of the income earned in various jurisdictions as well as an increase in current U.S.

taxes as a result of mandatory capitalization and amortization of R&D expenditures incurred in fiscal year 2023, as required by the Tax Cuts and Jobs Act of 2017 ("TCJA"), and its interplay with global intangible low-taxes income ("GILTI").

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

Comparison of Year Ended June 30, 2022 and 2021

2 unchanged sentences

Sources and Uses of Cash

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

Our principal sources of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities (as defined herein) and short-term investments.

We had cash and cash equivalents of $114.8 million and $136.2 million at June 30, 2023 and 2022, 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:

Years Ended June 30,

(In thousands)

Net cash provided by operating activities $ 370,259 $ 612,022

Net cash provided by (used in) investing activities (11,180) (19,266)

Net cash (used in) financing activities (472,273) (485,955)

Net (decrease) increase in cash and cash equivalents $ (113,194) $ 106,801

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

Year ended June 30,

Net cash (used in) provided by operating activities $ (145,428) $ 370,259

Net cash (used in) investing activities (20,934) (11,180)

Net cash provided by (used in) financing activities 144,964 (472,273)

Net increase (decrease) in cash and cash equivalents $ (21,398) $ (113,194)

Cash Flows from Operating Activities

Net cash provided by operating activities in fiscal 2022 consisted primarily of net income of $378.7 million, partially offset by the changes in operating assets and liabilities that resulted in net cash outflows of $38.1 million.

This net change consisted primarily of $29.6 million increase in inventory, $79.0 million increase in vendor deposits, and a $10.3 million decrease in taxes payable due to the timing of federal tax payments offset by $52.7 million decrease in accounts receivable due to lower revenue for the period, a $1.8 million decrease in prepaid and other assets, and a $29.9 million increase in accounts payable, accrued and other liabilities.

For fiscal 2023 the net cash used in operating activities was $145.4 million, primarily due to a significant increase in inventory and to a lesser extent, increases in vendor deposits and accounts receivable.

The key uses of cash resulting in the net cash outflow from operations was a $487.9 million increase in inventory, a $39.5 million increase in vendor deposits and a $48.2 million increase in accounts receivable, partially offset by $407.6 million of net income.

The increase in inventories is a result of the strategic decision to secure inventory while components were available in an effort to increase product availability.

The increase in account receivable is a result of higher sales.

Net cash provided by operating activities in fiscal 2022 consisted primarily of net income of $378.7 million, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $38.1 million.

This net change consisted primarily of $52.9 million decrease in inventory offset by $17.1 million increase in vendor deposits, $30.5 million increase in accounts receivable due to higher revenue for the period, a $30.5 million increase in prepaid and other assets, a $27.8 million decrease in taxes payable due to the timing of federal tax payments, and a $12.9 million increase in accounts payable and accrued liabilities.

Due to our inability to meet demand because of the supply chain constraints and general price increases, we expect that we will need to increase our investment in inventory and vendor deposits.

This net change consisted primarily of $29.6 million increase in inventory, $79.0 million increase in vendor deposits, and a $10.3 million decrease in taxes payable due to the timing of federal tax payments, offset by $52.7 million decrease in accounts receivable due to lower revenue for the period, a $1.8 million decrease in prepaid and other assets, and a $29.9 million increase in accounts payable, accrued and other liabilities.

Cash Flows from Investing Activities

We used $20.9 million of cash in investing activities during fiscal 2023.

Our investing activities consisted primarily of $13.5 million of capital expenditures and purchase of intangible assets, offset by $2.3 million net proceeds from sales / maturities of our available-for-sale securities.

Our investing activities consisted primarily of $20.9 million of capital expenditures and purchase of intangible assets.

We used $11.2 million of cash in investing activities during fiscal 2022.

Our investing activities consisted primarily of $18.3 million of capital expenditures and purchase of intangible assets, and $0.9 million net purchases for our available-for-sale securities.

Our investing activities consisted primarily of $13.5 million of capital expenditures and purchase of intangible assets, offset by $2.3 million net proceeds from sales and maturities of our available-for-sale securities.

Cash Flows from Financing Activities

We used $472.3 million of cash in financing activities during fiscal 2022.

During fiscal 2022, we used $618.1 million for repurchase of common stock, $148.1 million for dividends paid on our common stock and received net proceeds from our borrowings of $295.0 million.

We had cash inflows of $145.0 million from financing activities during fiscal 2023.

During fiscal 2023, in order to support the increase in inventories we borrowed a net of $291.9 million under our facilities, we also paid $145.0 million for dividends on our common stock and debt issuance costs of $1.2 million.

During fiscal 2023 we increased the size of our facility to include an additional $250.0 million term loan.

The proceeds from this new term loan were used to repay a portion of the outstanding revolver loans under the revolving facility.

See Note 7 – Debt of the Notes to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding the Facilities.

We used $472.3 million of cash in financing activities during fiscal 2022.

During fiscal 2021, we used $161.3 million of net funds for repayments under the Facilities, $219.8 million related to repurchase of common stock, $100.8 million related to dividends paid on our common stock and $3.3 million of debt issuance costs related to the amended and restated credit agreement.

During fiscal 2022, we used $618.1 million related to repurchase of common stock, $148.1 million related to dividends paid on our common stock, and received net proceeds from our borrowings of $295.0 million.

See Note 7 – Debt of the Notes to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding the Facilities.

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.

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.

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.

A key objective for liquidity in the next twelve months is to reduce inventories and debt levels.

continue to meet our needs.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending to support development efforts, the timing of new product introductions, market acceptance of our products, the availability of additional funds under the Facilities and overall economic conditions.

14 unchanged sentences

The maximum potential amount of future payments we could be required to make under these indemnification agreements is not estimable.

We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain

limits, while such persons are or were serving at our request in such capacity.

We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity.

We may terminate the indemnification agreements with these persons upon the termination of their services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination.

8 unchanged sentences

Purchase Obligations

We subcontract with third parties to manufacture our products and have purchase commitments with key component suppliers.

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

We subcontract with third parties to manufacture our products and supply key components.

As of June 30, 2023 we had $1,136.7 million of purchase commitments with these third parties.

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 June 30, 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 June 30, 202 2.

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 rang e from $410.3 million to $1,276.6 million as of June 30, 2022, depending upon the timing of orders placed for these components by our manufacturers.

See Note 10 - Commitments and Contingencies of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment commitments under purchase commitments as of June 30, 2022 .

There have been no significant liabilities for current or anticipated cancellations recorded as of June 30, 2023.

Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate these third parties.

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

See Note 9 – Commitments and Contingencies of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment

commitments under purchase commitments as of June 30, 2023.

Transition Tax

We have obligations of $67.5 million as of June 30, 2023, related to transition tax.

Payment of these obligations are expected to be $9.0 million for fiscal 2023, $16.9 million for fiscal 2024, $22.5 million for fiscal 2025 and $28.0 million for fiscal 2026.

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.

These obligations are included within Income tax payable and Long-term taxes payable on our consolidated balance sheets.

Other Obligations

As of June 30, 2022, we have other obligations of $3.4 million which consisted primarily of commitments related to raw materials and research and development projects.

Unrecognized Tax Benefits

As of June 30, 2022, we had $32.7 million 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 the timing of payments in individual years in connection with these tax liabilities.

As of June 30, 2023, we have other obligations of $5.9 million which consisted primarily of commitments related to research and development projects.

Recent Accounting Pronouncements

1 unchanged sentence

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 7. Management’s Discussion and Analysis