What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-02-09 compared with 2023-11-03 · 101 added, 79 removed, 186 unchanged (49% of the section changed)

14 unchanged sentences

We offer a broad and expanding portfolio of networking products and solutions for operator-owners of wireless internet services (“WISPs”), enterprises and smart homes.

Our operator-owner service-provider-product platforms provide carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing and the related software for WISPs to easily control, track and bill their customers.

control, track and bill their customers.

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

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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 have experienced significant supply constraints caused, in part, by the COVID-19 pandemic.

Supply Constraints and Risks – We have experienced significant supply constraints since 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.

These mitigation efforts have caused our inventory and vendor deposit balances to increase in the past, and they may cause such increases in the future.

These mitigation efforts therefore 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.

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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 64% of our revenues during the three months ended September 30, 2023.

Direct sales accounted for 36% of our revenue during the three months ended September 30, 2023.

Sales to distributors accounted for 64% of our revenues during the six months ended December 31, 2023.

Direct sales accounted for 36% of our revenue during the six months ended December 31, 2023.

Cost of Revenues

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

In addition, we outsource other logistics warehousing and order fulfillment functions located in China and to a lesser extent in other countries.

In addition, we outsource other logistics warehousing and order fulfillment functions located in Vietnam and to a lesser extent in other countries.

We also evaluate and utilize other vendors for various portions of our supply chain from time to time.

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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.

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

If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary.

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Results of Operations

Comparison of Three Months Ended September 30, 2023 and 2022

Comparison of Three and Six Months Ended December 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 September 30,

% of Revenues % of Revenues

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

2023 2022 2023 2022

% of Revenues % of Revenues % of Revenues % of Revenues

Revenues $ 464,954 100 % $ 493,571 100 % $ 928,032 100 % $ 991,654 100 %

18 unchanged sentences

Total share-based compensation $ 1,506 $ 1,101 $ 3,006 $ 2,148

Total revenues decreased $35.0 million, or 7%, from $498.1 million in the three months ended September 30, 2022 to $463.1 million in the three months ended September 30, 2023.

The decline in revenues as compared to the comparable prior year period was primarily driven by a decrease in revenue from our Enterprise Technology platform, partially offset by an increase in revenues from the Service Provider Technology platform.

Total revenues decreased $28.6 million, or 6%, from $493.6 million in the three months ended December 31, 2022 to $465.0 million in the three months ended December 31, 2023.

Total revenues decreased $63.6 million, or 6%, from $991.7 million in the six months ended December 31, 2022 to $928.0 million in the six months ended December 31, 2023.

The decline in revenues for the three months ended December 31, 2023 as compared to the same period in the prior year was primarily driven by a decrease in revenue from both our Enterprise Technology platform and Service Provider Technology platform.

The decline in revenue for the six months ended December 31, 2023 as compared to the same period in the prior year was primarily driven by a decrease in revenue from our Enterprise Technology platform, partially offset by an increase in revenue from our Service Provider Technology platform.

Revenues by Product Type

Three Months Ended September 30,

(in thousands, except percentages)

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

2023 2022 2023 2022

(in thousands, except percentages) (in thousands, except percentages)

Enterprise technology $ 391,492 84 % $ 417,408 85 % $ 771,586 83 % $ 843,706 85 %

1 unchanged sentence

Total revenues $ 464,954 100 % $ 493,571 100 % $ 928,032 100 % $ 991,654 100 %

Enterprise Technology revenue decreased $46.2 million, or 11%, from $426.3 million in the three months ended September 30, 2022 to $380.1 million in the three months ended September 30, 2023.

The decrease in Enterprise Technology revenue during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to decline in revenue from our UniFi technology platform across all regions except South America.

Service Provider Technology revenue increased $11.2 million, or 16%, from $71.8 million in the three months ended September 30, 2022 to $83.0 million in the three months ended September 30, 2023.

The increase in Service Provider Technology revenue during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to increased revenue in all regions except South America.

Enterprise Technology revenue decreased $25.9 million, or 6%, from $417.4 million in the three months ended December 31, 2022 to

$391.5 million in the three months ended December 31, 2023.

Enterprise Technology revenue decreased $72.1 million, or 9%, from $843.7 million in the six months ended December 31, 2022 to $771.6 million in the six months ended December 31, 2023.

The decrease in Enterprise Technology revenue during the three months ended December 31, 2023, as compared to the same period in the prior year, was primarily due to decline in revenue from our Enterprise Technology platform in the EMEA and Asia Pacific regions.

The decrease in Enterprise Technology revenue during the six months ended December 31, 2023 as compared to the same period in the prior year, was primarily due to decline in revenue across all regions except South America.

Service Provider Technology revenue decreased $2.7 million, or 4%, from $76.2 million in the three months ended December 31, 2022 to $73.5 million in the three months ended December 31, 2023.

Service Provider Technology revenue increased $8.5 million, or 6%, from $147.9 million in the six months ended December 31, 2022 to $156.4 million in the six months ended December 31, 2023.

The decrease in Service Provider Technology in the three months ended December 31, 2023 as compared to the same period in the prior year was primarily due to decline in revenues in North and South America.

The increase in Service Provider Technology revenue during the six months ended December 31, 2023 as compared to the same period in the prior year, was primarily due to increased revenue in all regions except South America.

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 months ended September 30, 2023 and 2022 (in thousands, except percentages):

Three Months Ended September 30,

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

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

2023 2022 2023 2022

(in thousands, except percentages)

North America (1)

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Total revenues $ 464,954 100 % $ 493,571 100 % $ 928,032 100 % $ 991,654 100 %

(1) Revenue for the United States was $209.2 million and $210.3 million for the three months ended September 30, 2023 and 2022, respectively.

(1) Revenue for the United States was $210.4 million and $209.4 million for the three months ended December 31, 2023 and 2022, respectively.

Revenue for the United States was $419.6 million and $419.7 million for the six months ended December 31, 2023 and 2022, respectively.

North America

Revenues in North America decreased $0.9 million, or 0.4%, from $225.7 million in the three months ended September 30, 2022 to $224.8 million in the three months ended September 30, 2023.

The decrease in North America revenues during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to decreased revenue from Enterprise Technology products, offset in part by increased revenue from our Service Provider Technology products.

Revenues in North America decreased $1.6 million, or 1%, from $227.5 million in the three months ended December 31, 2022 to $225.9 million in the three months ended December 31, 2023 and decreased $2.5 million, or 1%, from $453.2 million in the six months ended December 31, 2022 to $450.6 million in the six months ended December 31, 2023.

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

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

Europe, the Middle East, and Africa (EMEA)

Revenues in EMEA decreased $27.7 million, or 14%, from $200.1 million in the three months ended September 30, 2022 to $172.4 million in the three months ended September 30, 2023.

The decrease in EMEA revenues during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to decreased revenue from Enterprise Technology products, offset in part by increased revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region decreased $9.2 million, or 20%, from $45.3 million in the three months ended September 30, 2022 to $36.1 million in the three months ended September 30, 2023.

The decrease in Asia Pacific revenues during the three months ended September 30, 2023 as compared to the same period in the prior year was primarily due to decreased revenue from our Enterprise Technology products, offset in part by increased revenue from our Service Provider Technology products.

Revenues in EMEA decreased $22.1 million, or 11%, from $195.1 million in the three months ended December 31, 2022 to $173.0 million in the three months ended December 31, 2023 and decreased $49.9 million, or 13%, from $395.2 million in the six months ended December 31, 2022 to $345.3 million in the six months ended December 31, 2023.

The decrease in EMEA revenues during the three and six months ended December 31, 2023 as compared to the same periods in the prior year, was primarily due to decreased revenue from our Enterprise Technology products, offset in part by increased revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region decreased $10.7 million, or 24%, from $43.9 million in the three months ended December 31, 2022 to $33.3 million in the three months ended December 31, 2023 and decreased $19.9 million, or 22%, from $89.3 million in the six months ended December 31, 2022 to $69.4 million in the six months ended December 31, 2023.

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

South America

Revenues in South America increased $2.9 million, or 11%, from $26.9 million in the three months ended September 30, 2022 to $29.8 million in the three months ended September 30, 2023.

The increase in South America revenues during the three months ended September 30, 2023 as compared to the same period in the prior year was due to increased revenue from Enterprise Technology products, partially offset by a decrease in revenue from Service Provider Technology products.

Gross profit margin increased to 39.7% in the three months ended September 30, 2023, compared to 34.4% in the three months ended

September 30, 2022.

The increase in gross profit margin for the three months ended September 30, 2023, as compared to the comparable prior year period was primarily driven by lower shipping and component costs, as well as by product mix.

Revenues in South America increased $5.8 million, or 21%, from $27.1 million in the three months ended December 31, 2022 to $32.9 million in the three months ended December 31, 2023 and increased $8.7 million, or 16%, from $54.0 million in the six months ended December 31, 2022 to $62.7 million in the six months ended December 31, 2023.

The increase in South America revenues during the three and six months ended December 31, 2023 as compared to the same periods in the prior year was due to increased revenue from our Enterprise Technology products, partially offset by a decrease in revenue from our Service Provider Technology products.

Gross profit margin decreased to 38.2% in the three months ended December 31, 2023, compared to 40.0% in the three months ended December 31, 2022 and increased to 39.0% in the six months ended December 31, 2023, compared to 37.2% in the six months ended December 31, 2022.

The decrease in gross profit margin for the three months ended December 31, 2023, as compared to the comparable prior year period was driven by product mix and product-related costs, offset in part by lower shipping costs.

The increase in gross profit margin for the six months ended December 31, 2023, as compared to the comparable prior year period was driven by lower shipping costs, offset in part by product mix.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased by $3.6 million, or 11%, from $32.7 million in the three months ended September 30, 2022 to $36.3 million in the three months ended September 30, 2023.

As a percentage of revenues, R&D expenses increased from 7% for the three months ended September 30, 2022 to 8% for the three months ended September 30, 2023.

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

Research and development (“R&D”) expenses increased by $3.1 million, or 9%, from $33.8 million in the three months ended December 31, 2022 to $36.9 million in the three months ended December 31, 2023.

As a percentage of revenues, R&D expenses increased from 7% for the three months ended December 31, 2022 to 8% for the three months ended December 31, 2023.

R&D expenses increased by $6.8 million, or 10%, from $66.4 million in the six months ended December 31, 2022 to $73.2 million in the six months ended December 31, 2023.

As a percentage of revenues, R&D expenses increased from 7.0% for the six months ended December 31, 2022 to 8.0% for the six months ended December 31, 2023

The increase in R&D expenses during the three and six months ended December 31, 2023 as compared to the comparable prior year periods was primarily driven by higher employee-related expenses and prototype-related expenses.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $2.6 million, or 16%, from $16.7 million in the three months ended September 30, 2022 to $19.3 million in the three months ended September 30, 2023.

As a percentage of revenues, SG&A expenses increased from 3% for the three months ended September 30, 2022 to 4% for the three months ended September 30, 2023.

The increase in SG&A costs during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to higher marketing expenses, professional fees and higher fees associated with webstore credit card processing.

Sales, general and administrative (“SG&A”) expenses increased $1.0 million, or 5%, from $18.6 million in the three months ended December 31, 2022 to $19.6 million in the three months ended December 31, 2023.

As a percentage of revenues, SG&A expenses remained flat at 4% for the three months ended December 31, 2022 compared to the three months ended December 31, 2023.

SG&A expenses increased $3.6 million, or 10%, from $35.3 million in the six months ended December 31, 2022 to $38.9 million in the six months ended December 31, 2023.

As a percentage of revenues, SG&A expenses remained flat at 4% for the six months ended December 31, 2022 compared to the six months ended December 31, 2023.

The increase in SG&A costs as compared to the comparable prior year periods was primarily due to higher employee-related expenses, marketing expenses and professional fees.

Interest Expense and Other, net

Interest expense and other, net ("I&O") expenses increased $10.6 million, or 99.3% from $10.7 million in the three months ended September 30, 2022 to $21.2 million in the three months ended September 30, 2023.

As a percentage of revenue, I&O increased from 2% for the three months ended September 30, 2022 to 5% for the three months ended September 30, 2023.

The increase in I&O expenses during the three months ended September 30, 2023 as compared to the same period in the prior year, was primarily due to higher interest expense due to incremental borrowings and increased interest rates.

Interest expense and other, net ("I&O") expenses increased $7.0 million, or 62% from $11.3 million in the three months ended December 31, 2022 to $18.3 million in the three months ended December 31, 2023.

As a percentage of revenue, I&O increased from

2% for the three months ended December 31, 2022 to 4% for the three months ended December 31, 2023.

I&O expenses increased $17.6 million, or 80%, from $21.9 million in the six months ended December 31, 2022 to $39.5 million in the six months ended December 31, 2023.

As a percentage of revenues, I&O expenses increased from 2% for the six months ended December 31, 2022 to 4% for the six months ended December 31, 2023.

The increase in I&O expenses during the three and six months ended December 31, 2023 as compared to the same periods in the prior year, was primarily due to higher interest expense due to incremental borrowings and increased interest rates.

Provision for Income Taxes

Our provision for income taxes increased $1.1 million, or 6%, from $18.2 million for the three months ended September 30, 2022 to $19.3 million for the three months ended September 30, 2023.

Our effective tax rate increased to 18.1% for the three months ended September 30, 2023 as compared to 16.3% for the three months ended September 30, 2022.

The change in effective tax rates for the three months ended September 30, 2023, as compared to the same period in the prior year, was primarily driven by changes in the mix of the income earned in various tax jurisdictions partially offset by a decrease in the GILTI inclusion for the U.S.

taxable income for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, as well as a release of a reserve for unrecognized tax benefit due to statute of limitation during the three months ended September 30, 2022.

Our provision for income taxes decreased $1.0 million, or 4%, from $21.7 million for the three months ended December 31, 2022 to $20.7 million for the three months ended December 31, 2023.

Our effective tax rate increased to 20.2% for the three months ended December 31, 2023 as compared to 16.2% for the three months ended December 31, 2022.

Our provision for income taxes increased $0.2 million, or 0.5%, from $39.9 million in the six months ended December 31, 2022 to $40.1 million in the six months ended December 31, 2023.

Our effective tax rate increased from 16.3% for the six months ended December 31, 2022 to 19.1% for the six months ended December 31, 2023.

The change in effective tax rates for the three and six months ended December 31, 2023, as compared to the same period in the prior year, was primarily driven by a combination of changes in the mix of the income earned in various tax jurisdictions and a one-time release of a reserve for unrecognized tax benefit due to statute of limitation during the three and six months ended December 31, 2022.

Liquidity and Capital Resources

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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 $108.5 million and $114.8 million as of September 30, 2023 and June 30, 2023, respectively.

We had cash and cash equivalents of $97.6 million and $114.8 million as of December 31, 2023 and June 30, 2023, 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:

Three Months Ended

September 30,

Six Months Ended

(In thousands)

1 unchanged sentence

Net cash used in investing activities (6,877) (13,468)

Net cash used in financing activities (70,956) (33,027)

Net increase (decrease) in cash and cash equivalents $ (6,299) $ 295

Net cash (used in) provided by financing activities (156,611) 34,416

Net (decrease) increase in cash and cash equivalents $ (17,225) $ 23,281

Cash Flows from Operating Activities

Net cash provided by operating activities in the three months ended September 30, 2023 consisted primarily of net income of $87.8 million partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $31.2 million.

This net change consisted primarily of a $33.5 million decrease in net accounts payable and accrued liabilities, a $25.7 million increase in vendor deposits, partially offset by a $28.6 million decrease in inventory.

Net cash provided by operating activities in the three months ended September 30, 2022 consisted primarily of net income of $93.2 million, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $56.6 million.

This net change consisted primarily of a $94.2 million increase in inventory, a $27.9 million increase in accounts receivable, a $1.7 million decrease in prepaid expense and other assets, a $34.2 million increase in net accounts payable and accrued liabilities, a $4.5 million increase in taxes payable due to the timing of federal tax payments and a $30.4 million decrease in vendor deposits.

Net cash provided by operating activities in the six months ended December 31, 2023 consisted primarily of net income of $169.9 million, a $50.1 million decrease in inventory, partially offset by other changes in operating assets and liabilities that resulted in net cash outflows of $48.6 million.

This net change consisted primarily of a $53.6 million decrease in net accounts payable and accrued liabilities, a $29.3 million decrease in taxes payable, and a $17.0 million increase in vendor deposits.

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.

Cash Flows from Investing Activities

We used $3.0 million of cash in investing activities during the three months ended September 30, 2023.

We used $6.9 million of cash in investing activities during the six months ended December 31, 2023.

Our investing activities consisted primarily of $6.9 million of capital expenditures.

We used $8.7 million of cash in investing activities during the three months ended September 30, 2022.

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

Our investing activities consisted primarily of $13.5 million of capital expenditures.

Cash Flows from Financing Activities

We used $71.0 million of cash in financing activities during the three months ended September 30, 2023.

During the three months ended September 30, 2023, we repaid $34.4 million under the Company's credit Facilities and used $36.3 million related to dividends paid on our common stock.

We used $33.0 million of cash in financing activities during the three months ended September 30, 2022.

During the three months ended September 30, 2022, we used $36.3 million related to dividends paid on our common stock and received $3.8 million (net) of funds under the Company’s credit Facilities.

We used $156.6 million of cash in financing activities during the six months ended December 31, 2023.

During the six months ended December 31, 2023, we repaid $83.8 million under the Company's credit Facilities and used $72.5 million related to dividends paid on our common stock.

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 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, 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.

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.

The COVID-19 pandemic and resulting global disruptions have caused and may continue to cause significant volatility in financial markets and the domestic and global economy.

This disruption can contribute to potential payment delays or defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the availability of financing credit as well as other segments of the credit markets.

For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, refer to "Part II-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" for additional information.

We expect to continue to

maintain financing flexibility in the current market conditions.

However, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the pandemic are reasonably likely to materially affect our liquidity and capital resources in the future.

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, management of inventory and vendor deposits, the availability of additional funds under the Facilities and overall economic conditions.

The COVID-19 pandemic and resulting global disruptions and inflation have caused and may continue to cause significant volatility in financial markets and the domestic and global economy.

This volatility can contribute to potential payment delays or defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the availability of financing credit as well as other segments of the credit markets.

For a further discussion of the uncertainties and business risks, refer to "Part II-Item 1A.

Risk Factors – Risks Related to Our Business and Industry – General global economic downturns and macroeconomic trends, including inflation or slowed economic growth, may negatively affect our customers and their ability to purchase our products.

A downturn or such other trends may decrease our revenues and increase our costs and may increase credit risk with our customers and impact our ability to collect account receivable and recognize revenue," for additional information.

We expect to continue to maintain financing flexibility in the current market conditions.

However, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the pandemic, global economic downturns and macroeconomic trends are reasonably likely to materially affect our liquidity and capital resources in the future.

Warranties and Indemnifications

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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 September 30, 2023.

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 September 30, 2023.

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

Contractual Obligations and Off-Balance Sheet Arrangements

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

As of September 30, 2023, we had $1,081.4 million of purchase commitments with these third parties.

As of December 31, 2023, we had $1,045.0 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.

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

There have been no significant liabilities for current or anticipated cancellations recorded as of December 31, 2023.

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

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Transition Tax

We have obligations of $50.6 million as of September 30, 2023, related to transition tax.

We have obligations of $50.6 million as of December 31, 2023, related to transition tax.

Payment of these obligations are expected to be $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 September 30, 2023, which consisted primarily of commitments related to research and development projects.

We had other obligations of $5.5 million as of December 31, 2023, which consisted primarily of commitments related to research and development projects.

Unrecognized Tax Benefits

As of September 30, 2023, we had $33.4 million of unrecognized tax benefits and an additional $3.6 million for accrued interest, classified as non-current liabilities.

As of December 31, 2023, we had $34.7 million of unrecognized tax benefits and an additional $4.3 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.

Recent Accounting Pronouncements

There have been no accounting pronouncements or changes in accounting pronouncements since the filing of the Annual Report that are significant or potentially significant to the Company.

For a discussion of recent accounting pronouncements, refer to Note 2 to the Consolidated Financial Statements.

Note About Forward-Looking Statements

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 prices, our competitive status, our efforts to mitigate shortages of components (including chipsets) used to manufacture our products, 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, the Facilities (as defined herein), future acquisitions of and investments in complimentary businesses, the expected impact of various accounting policies and rules adopted by the Financial Accounting Standards Board ,the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan on our business and results of operations.

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, the Facilities (as defined herein), future acquisitions of and investments in complimentary businesses, the expected impact of various accounting policies and rules adopted by the Financial Accounting Standards Board ,the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan 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.

4 unchanged sentences

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