What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-05-10 · 107 added, 160 removed, 403 unchanged (40% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Current assets:

Cash and cash equivalents $ 165,175 $ 126,342

Investments — short-term 8 109

Accounts receivable, net of allowance for doubtful accounts of $ 232 and $ 92 at March 31, 2024 and June 30, 2023, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 523 and $ 498 at September 30, 2024 and June 30, 2024, respectively

174,501 169,147

5 unchanged sentences

Operating lease right-of-use assets, net 45,245 47,768

Deferred tax assets 23,021 23,701

Deferred tax assets— long-term 35,835 35,934

Other long-term assets 73,261 73,571

Total assets $ 1,157,918 $ 1,154,412

Liabilities and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

11 unchanged sentences

Commitments and contingencies (Note 9)

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock—$ 0.001 par value;

2 unchanged sentences

500,000,000 shares authorized:

60,461,405 and 60,441,896 issued and outstanding as of March 31, 2024 and June 30, 2023, respectively

60,470,208 and 60,462,539 issued and outstanding as of September 30, 2024 and June 30, 2024, respectively

Additional paid–in capital 12,018 10,645

Retained earnings (deficit) 16,828 ( 120,514 )

Total stockholders’ equity (deficit) 25,873 ( 115,733 )

Total liabilities and stockholders’ equity (deficit) $ 1,223,784 $ 1,406,399

Retained earnings 176,061 84,355

Total stockholders’ equity 188,139 95,060

Total liabilities and stockholders’ equity $ 1,157,918 $ 1,154,412

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands, except per share amounts)

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

2024 2023 2024 2023

Three Months Ended September 30,

Revenues $ 550,344 $ 463,078

9 unchanged sentences

Provision for income taxes 30,640 19,328

Net income and comprehensive income $ 76,290 $ 98,577 $ 246,156 $ 303,964

Net income $ 127,988 $ 87,750

Net income per share of common stock:

8 unchanged sentences

(In thousands, except share data)

Three and Nine Months Ended March 31, 2024

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Total Stockholders’ Equity (Deficit)

Three Months Ended September 30, 2024

Common Stock Additional Paid-In Capital Retained Earnings Total Stockholders’ Equity

Shares Amount Amount Amount Amount

8 unchanged sentences

60,470,208 $ 60 $ 12,018 $ 176,061 $ 188,139

Net Income — — — 82,116 82,116

Restricted stock units issued, net of tax withholdings 731 — ( 11 ) — ( 11 )

Share-based compensation expense — — 1,506 — 1,506

Dividends paid on Common Stock ($ 0.60 per share)

— — — ( 36,269 ) ( 36,269 )

Balances at December 31, 2023

60,448,287 $ 60 $ 7,403 $ ( 23,185 ) $ ( 15,722 )

Net Income — — — 76,290 76,290

Restricted stock units issued, net of tax withholdings 13,118 — ( 82 ) — ( 82 )

Share-based compensation expense — — 1,664 — 1,664

Dividends Paid on Common Stock ($ 0.60 per share)

— — — ( 36,277 ) ( 36,277 )

Balances at March 31, 2024

60,461,405 $ 60 $ 8,985 $ 16,828 $ 25,873

Three and Nine Months Ended March 31, 2023

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Loss Total Stockholders’ Equity (Deficit)

Shares Amount Amount Amount Amount Amount

Three Months Ended September 30, 2023

Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Total Stockholders’ Equity (Deficit)

Shares Amount Amount Amount Amount

Balance at June 30, 2023

1 unchanged sentence

Net Income — — — 87,750 87,750

Other comprehensive (loss) — — — ( 49 ) ( 49 )

Stock options exercised 2,112 — 23 — — 23

Restricted stock units issued, net of tax withholdings 5,660 — ( 313 ) — ( 313 )

4 unchanged sentences

60,447,556 $ 60 $ 5,908 $ ( 69,032 ) $ ( 63,064 )

Net Income — — — 112,205 — 112,205

Reclassification adjustment for loss on investments included in net income — — — — 523 523

Restricted stock units issued, net of tax withholdings 2,147 — ( 50 ) — — ( 50 )

Share-based compensation expense — — 1,101 — — 1,101

Dividends paid on Common Stock ($ 0.60 per share)

— — — ( 36,257 ) — ( 36,257 )

Balances at December 31, 2022

60,430,958 $ 60 $ 2,228 $ ( 250,238 ) $ — $ ( 247,950 )

Net Income — — — 98,577 — 98,577

Restricted stock units issued, net of tax withholdings 10,775 — ( 83 ) — — ( 83 )

Share-based compensation expense — — 1,246 — — 1,246

Dividends Paid on Common Stock ($ 0.60 per share)

— — — ( 36,265 ) — ( 36,265 )

Balances at March 31, 2023

60,441,733 $ 60 $ 3,391 $ ( 187,926 ) $ — $ ( 184,475 )

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended March 31,

Three Months Ended September 30,

Cash Flows from Operating Activities:

4 unchanged sentences

Non-cash lease expense ( 7 ) 258

Provision for inventory obsolescence 21,668 8,142

Provision for excess and obsolete inventory 2,375 1,382

Provision for loss on vendor deposits 4,355 2,954

Share-based compensation 1,696 1,500

Provisions for doubtful accounts 140 14

Deferred taxes 99 116

10 unchanged sentences

Accrued and other liabilities 56,289 ( 3,697 )

Net cash provided by (used in) operating activities 310,115 ( 159,872 )

Net cash provided by operating activities 233,667 67,682

Cash Flows from Investing Activities:

2 unchanged sentences

Cash Flows from Financing Activities:

Proceeds from borrowing under the credit facility- Revolver — 380,000

Repayment against credit facility- Revolver ( 35,000 ) ( 25,000 )

1 unchanged sentence

Payment of common stock cash dividends ( 36,282 ) ( 36,268 )

Proceeds from exercise of stock options — 23

Tax withholdings related to net share settlements of restricted stock units ( 323 ) ( 313 )

Net cash (used in) provided by financing activities ( 312,345 ) 191,818

Net (decrease) increase in cash and cash equivalents ( 12,339 ) 16,296

Net cash used in financing activities ( 192,230 ) ( 70,956 )

Net increase (decrease) in cash and cash equivalents 38,833 ( 6,299 )

Cash and cash equivalents at beginning of period 126,342 114,826

21 unchanged sentences

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2024, included in its Annual Report on Form 10-K, as filed with the SEC on August 23, 2024 (the “Annual Report”).

The results of operations for the three and nine months ended March 31, 2024 are not necessarily indicative of the results to be expected for any future periods.

The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results to be expected for any future periods.

NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

32 unchanged sentences

Revenue is primarily generated from the sale of hardware as well as the related implied post contract services (“PCS”).

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.

Revenue is recognized when obligations under the terms of a contract with our customers are satisfied;

6 unchanged sentences

The timing of revenue recognition, billing and cash collections results in billed accounts receivable, deferred revenue primarily attributable to PCS and customer deposits on the consolidated balance sheets.

Accounts receivable are recognized in the period our right to the consideration is unconditional.

Accounts receivable are recognized in the period the Company’s right to the consideration is unconditional.

Our contract liabilities consist of advance payments (customer deposits) as well as billing in excess of revenue recognized primarily related to deferred revenue.

1 unchanged sentence

The current portion of deferred revenue is included in other current liabilities and the non-current portion is included in other long-term liabilities in our consolidated balance sheets.

As of March 31, 2024 and June 30, 2023, the Company’s customer deposits were $ 1.7 million and $ 1.2 million, respectively.

As of March 31, 2024, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 18.8 million and $ 11.1 million, respectively.

As of September 30, 2024 and June 30, 2024, the Company’s customer deposits were $ 1.7 million and $ 1.3 million, respectively.

As of September 30, 2024, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 21.9 million and $ 15.9 million, respectively.

As of June 30, 2024, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $ 20.3 million and $ 13.4 million, respectively.

We expect the majority of our deferred revenue to convert to revenue in two years .

For the three and nine months ended March 31, 2024 we recognized revenues amounting to $ 3.7 million and $ 14.7 million respectively from the deferred revenue balance as of June 30, 2023.

For the three and nine months ended March 31, 2023, we recognized revenues amounting to $ 4.0 million and $ 17.6 million respectively from the deferred revenue balance as of June 30, 2022.

For the three months ended September 30, 2024 we recognized revenues amounting to $ 7.4 million from the deferred revenue balance as of June 30, 2024.

For the three months ended September 30, 2023, we recognized revenues amounting to $ 6.7 million from the deferred revenue balance as of June 30, 2023.

NOTE 4— EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):

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

2024 2023 2024 2023

Three Months Ended September 30,

Net income $ 127,988 $ 87,750

9 unchanged sentences

Inventories consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Finished goods $ 381,904 $ 387,447

3 unchanged sentences

Property and equipment, net consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Testing equipment $ 19,406 $ 18,964

10 unchanged sentences

Other long-term assets consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Hong Kong Tax deposit (1)

5 unchanged sentences

See Note 11, "Income Taxes" to the consolidated financial statements for additional details regarding this ongoing tax audit.

(2) Accumulated amortization was $ 7.1 million and $ 5.9 million as of March 31, 2024, and June 30, 2023, respectively.

(2) Accumulated amortization was $ 7.8 million and $ 7.5 million as of September 30, 2024, and June 30, 2024, respectively.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Deferred revenue — short-term $ 21,946 20,332

10 unchanged sentences

Other long-term liabilities consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Deferred revenue — long-term $ 15,866 $ 13,416

7 unchanged sentences

Warranty obligations, included in other current liabilities, were as follows (in thousands):

Nine Months Ended March 31,

Three Months Ended September 30,

Beginning balance $ 10,825 $ 8,745

7 unchanged sentences

On April 3, 2023, the Company as borrower and the Domestic Guarantors entered into a first amendment (the “First Amendment”) to the Third Amended and Restated Credit Agreement (as amended, the “Amended Credit Agreement”) with the financial institutions named as lenders therein and Wells Fargo.

The First Amendment added a new term loan facility in an aggregate principal amount of $ 250 million (the “First Amendment Term Loan Facility,” together with the Initial Term Loan Facility, the "Term Loan Facilities") which is payable in quarterly installments equal to $ 3.125 million, commencing with the quarter ended June 30, 2023, and has a maturity date of March 30, 2026.

The First Amendment added a new term loan facility in an aggregate principal amount of $ 250 million (the “First Amendment Term Loan Facility,” together with the Initial Term Loan Facility, the "Term Loan Facilities") which was payable in quarterly installments equal to $ 3.125 million, commencing with the quarter ended June 30, 2023, and had a maturity date of March 30, 2026.

The obligations of the Company and certain domestic subsidiaries under the Amended Credit Agreement are required to be guaranteed by the Domestic Guarantors and are collateralized by substantially all assets (excluding intellectual property) of the Company and the Domestic Guarantors.

The Company's unamortized balance of debt issuance costs are $ 2.0 million as of March 31, 2024, which are amortized as interest expense over the life of the Facilities.

As of September 30, 2024 the Company had repaid all of the First Amendment Term Loan Facility and as a result there are no future payments due.

The Company's unamortized balance of debt issuance costs is $ 0.9 million as of September 30, 2024, which are amortized as interest expense over the life of the Facilities.

Amortization of debt issuance costs included in interest expense for the three months ended September 30, 2024 and September 30, 2023 were $ 1.04 million and $ 0.43 million, respectively.

The Company's debt consisted of the following (in thousands):

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

Initial Term Loan Facility - short term $ 25,000 $ 25,000

11 unchanged sentences

Loans under the Facilities may be prepaid at any time without penalty.

The revolving loans and term loans under the Initial Term Loan Facility bear interest, at the Company’s option, at either (i) a floating rate per annum equal to the Base Rate (as defined below) plus a margin of between 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the Adjusted

Term SOFR (as defined below) for a specified period, plus a margin of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

The revolving loans and term loans under the Initial Term Loan Facility bear interest, at the Company’s option, at either (i) a floating

rate per annum equal to the Base Rate (as defined below) plus a margin of between 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the Adjusted Term SOFR (as defined below) for a specified period, plus a margin of between 1.50 % and 2.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

Swingline loans bear interest at a floating rate per annum equal to the Base Rate plus a margin of be tween 0.50 % and 1.25 %, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter.

14 unchanged sentences

The Facilities

As of March 31, 2024, $ 425.0 million was outstanding on the Initial Term Loan Facility, $ 237.5 million was outstanding on the First Amendment Term Loan Facility, and $ 215.0 million was outstanding on the Revolving Facility, leaving $ 485.0 million available on the Revolving Facility.

As of September 30, 2024, $ 412.5 million was outstanding on the Initial Term Loan Facility and $ 140.0 million was outstanding on the Revolving Facility, leaving $ 560.0 million available on the Revolving Facility.

The First Amendment Term Loan Facility was fully repaid during the three months ended September 30, 2024 and there is no balance outstanding as of September 30, 2024.

Term Loan Facilities

During the nine months ended March 31, 2024, the Company made aggregate payments of $ 67.7 million under the Term Loan Facilities, of which $ 28.1 million was repayment of principal and $ 39.6 million was payment of interest.

During the three months ended September 30, 2024, the Company made aggregate payments of $ 129.4 million under the Term Loan Facilities, of which $ 120.6 million was repayment of principal and $ 8.8 million was payment of interest.

Revolving Facility

Under the Amended Credit Agreement, during the nine months ended March 31, 2024, the Company made aggregate payments of $ 195.0 million under the Revolving Facility, of which $ 175 million was repayment of principal and $ 20.0 million was payment of interest.

The following table summarizes the Company’s estimated debt and interest payment obligations as of March 31, 2024, for the remainder of fiscal 2024 and future fiscal years (in thousands):

Under the Amended Credit Agreement, during the three months ended September 30, 2024, the Company made aggregate payments of $ 38.2 million under the Revolving Facility, of which $ 35.0 million was repayment of principal and $ 3.2 million was payment of interest.

The following table summarizes the Company’s estimated debt and interest payment obligations as of September 30, 2024, for the remainder of fiscal 2025 and future fiscal years (in thousands):

2025 (remainder)

4 unchanged sentences

Total $ 46,300 $ 560,386 $ — $ — $ — $ — $ 606,686

(1) Interest payments are calculated based on the applicable rates and payment dates as of March 31, 2024.

(1) Interest payments are calculated based on the applicable rates and payment dates as of September 30, 2024.

Although our interest rates on our debt obligations may vary, we have assumed the most recent available interest rates for all periods presented.

2 unchanged sentences

Some of our leases include options to extend the term of such leases for a period from 12 months to 60 months, and/or have options to early terminate the lease.

As of March 31, 2024, we included such options in determining the lease terms for certain of our leases because we were reasonably certain that we would exercise the extension options.

As of September 30, 2024, we included such options in determining the lease terms for certain of our leases because we were reasonably certain that we would exercise the extension options.

Most of our leases require us to pay certain operating expenses in addition to base rent, such as taxes, insurance and maintenance costs.

The following table summarizes our lease costs for the three and nine months ended March 31, 2024 and 2023 (in thousands):

Financial Statement Classification Three Months Ended March 31, Nine Months Ended March 31,

2024 2023 2024 2023

The following table summarizes our lease costs for the three months ended September 30, 2024 and 2023 (in thousands):

Financial Statement Classification Three Months Ended September 30,

Operating lease costs:

5 unchanged sentences

The operating lease costs in the table above include costs for long-term and short-term leases.

Total short-term costs for the three and nine months ended March 31, 2024 and 2023, were immaterial.

Total short-term costs for the three months ended September 30, 2024 and 2023 were immaterial.

Variable lease costs primarily include maintenance, utilities and operating expenses that are incremental to the fixed base rent payments and are excluded from the calculation of operating lease liabilities and ROU assets.

For the three months ended March 31, 2024 and 2023, cash paid for amounts associated with the Company's operating lease liabilities were approximately $ 4.3 million and $ 3.8 million, respectively.

For the nine months ended March 31, 2024 and 2023, cash paid for amounts associated with the Company's operating lease liabilities were approximately $ 12.9 million and $ 11.4 million, respectively.

For the three months ended September 30, 2024 and 2023, cash paid for amounts associated with the Company's operating lease liabilities were approximately $ 4.4 million and $ 4.3 million, respectively.

Cash paid for amounts associated with the Company’s operating lease liabilities were classified as operating activities in the consolidated statement of cash flows.

The following table shows the Company’s undiscounted future fixed payment obligations under the Company’s recognized operating leases and a reconciliation to the operating lease liabilities as of March 31, 2024:

Remainder of Fiscal 2025

8 unchanged sentences

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

As of March 31, 2024, we had $ 949.5 million of purchase commitments with these third parties.

As of September 30, 2024, we had $ 1,134.3 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 March 31, 2024.

There have been no significant liabilities for current or anticipated cancellations recorded as of September 30, 2024.

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

1 unchanged sentence

Transition Tax

We have an obligation of $ 50.6 million as of March 31, 2024, related to the mandatory transition tax on accumulated foreign earnings from the 2017 Tax Cuts and Jobs Act.

We expect to make payments of $ 22.5 million and $ 28.1 million in the first quarter of fiscal 2025 and 2026, respectively, in relation to this obligation.

This obligation is included within Income tax payable and Long-term taxes payable on our consolidated balance sheets.

We have an obligation of $ 28.1 million as of September 30, 2024, related to the mandatory transition tax on accumulated foreign earnings from the 2017 Tax Cuts and Jobs Act.

We expect to make a payment to fully settle this obligation in the first quarter of fiscal 2026.

This obligation is included within income tax payable on our consolidated balance sheets.

Other Obligations

As of March 31, 2024, the Company has other obligations of $ 5.8 million which consisted primarily of commitments related to research and development projects.

As of September 30, 2024, the Company has other obligations of $ 6.2 million which consisted primarily of commitments related to research and development projects.

Indemnification Obligations

11 unchanged sentences

The Company is not currently aware of any pending or threatened litigation that would have a material adverse effect on the Company’s financial statements.

On April 19, 2017, XR Communications, LLC, d/b/a Vivato Technologies (“Vivato”), filed a complaint against the Company in the United States District Court for the Central District of California, alleging that at least one of the Company’s products infringes United States Patent Numbers 7,062,29 6 (the “'296 Patent”), 7,729,728 (the “'728 Patent”), and 6,611,231 (the “'231 Patent” and, collectively, the “Patents-in-Suit”) (the “Original Action”).

On April 11, 2018, the Court stayed the Original Action pending completion of certain inter partes review (“IPR”) proce edings before the Patent Trial and Appeal Board (“PTO”).

The PTO invalidated asserted claims of two of the three Patents-in-Suit.

On June 16, 2021, Vivato filed a new suit against the Company in the Central District of California, alleging that various Company products infringe some of the non-invalidated claims of the ’728 Patent and U.S.

10,594,376 (the “New Action”).

November 24, 2021, the Company and the remaining defendants in the Original Action filed a motion for judgment on the pleadings regarding the '231 Patent.

On January 4, 2022, the Court granted defendants’ motion and dismissed Vivato’s claims based on the '231 Patent.

The Federal Circuit Court of Appeals affirmed the invalidity of the '231 Patent on May 18, 2023.

All claims asserted against the Company in the Original Action have been dismissed.

On July 28, 2022, Vivato voluntarily dismissed, with prejudice, its remaining claims related to the '728 patent, as well as claims 22-31 of the '376 Patent.

On October 20, 2022, an IPR was instituted with respect to the asserted claims of the '376 Patent.

On October 26, 2022, the court stayed the case pending completion of the IPR.

On October 3, 2023, the IPR with respect to the '376 Patent was terminated after the petitioners entered into a settlement agreement with Vivato.

On November 10, 2023, the Company filed a new IPR petition with respect to the '376 Patent and a motion to reopen the prior IPR proceeding, which remains pending.

On December 4, 2023, the court lifted the stay.

Trial is currently scheduled for June 25, 2024.

The Company plans to vigorously defend itself against these claims;

however, there can be no assurance that the Company will prevail in the lawsuit.

The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

On April 19, 2017, XR Communications, LLC, d/b/a Vivato Technologies (“Vivato”), filed a complaint against the Company in the United States District Court for the Central District of California.

On October 16, 2024, the Company and Vivato entered into a settlement agreement and the complaint was dismissed with prejudice by the court on October 24,2024.

Network-1 Technologies, Inc.

3 unchanged sentences

The Company plans to vigorously defend itself against these claims;

however, there can be no assurance that the Company will prevail in the lawsuit.

however, there can be

no assurance that the Company will prevail in the lawsuit.

The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

6 unchanged sentences

The Company cannot currently estimate the possible loss or range of losses, if any, that it may experience in connection with this litigation.

NOTE 10— COMMON STOCK AND TREASURY STOCK

Common Stock Repurchases

On May 3, 2022, the Board of Directors of the Company approved a $ 200 million stock repurchase program (the “2022 May Program”).

Under the 2022 May Program, the Company was authorized to repurchase up to $ 200 million of common stock.

The 2022 May Program expired on September 30, 2023, and the Company did not make any repurchases under the 2022 May Program.

NOTE 10— SHARE-BASED COMPENSATION

1 unchanged sentence

The Company’s 2020 and 2010 Equity Incentive Plans are described in the Company’s Annual Report.

As of March 31, 2024, the Company had 4,880,028 authorized shares available for future issuance under all of its stock incentive plans.

As of September 30, 2024, the Company had 4,864,798 authorized shares available for future issuance under all of its stock incentive plans.

Share-Based Compensation

The following table shows total share-based compensation expense included in the consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2024 and 2023 (in thousands):

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

2024 2023 2024 2023

The following table shows total share-based compensation expense included in the consolidated statements of operations and comprehensive income for the three months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended September 30,

Cost of revenues $ 54 $ 33

3 unchanged sentences

Stock Options

There were no options exercised under the Company’s stock incentive plans during the three months ended March 31, 2024 and 2023.

During the nine months ended March 31, 2024 and 2023, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $ 0.0 million and $ 0.6 million, respectively, as determined as of the date of option exercise.

As of March 31, 2024, the Company had no unrecognized compensation costs related to stock options, and the Company did no t grant any employee stock options during the three and nine months ended March 31, 2024, and 2023.

There were no options exercised under the Company’s stock incentive plans during the three months ended September 30, 2024 and 2023.

As of September 30, 2024, the Company had no unrecognized compensation costs related to stock options, and the Company did no t grant any employee stock options during the three months ended September 30, 2024, and 2023.

Restricted Stock Units (“RSUs”)

6 unchanged sentences

RSUs canceled ( 2,017 ) $ 187.64

Non-vested RSUs, March 31, 2024

Non-vested RSUs, September 30, 2024

105,915 $ 184.20

The intrinsic value of RSUs vested in the three months ended March 31, 2024 and 2023 was $ 1.9 million and $ 3.1 million, respectively.

The intrinsic value of RSUs vested in the nine months ended March 31, 2024 and 2023 was $ 3.3 million and $ 5.8 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 11.6 million as of March 31, 2024.

As of March 31, 2024, there were unrecognized compensation costs related to RSUs of $ 14.3 million which the Company expects to recognize over a weighted average period of 3.5 years.

The intrinsic value of RSUs vested in the three months ended September 30, 2024 and 2023 was $ 1.5 million and $ 1.3 million, respectively.

The total intrinsic value of all outstanding RSUs was $ 23.5 million as of September 30, 2024.

As of September 30, 2024, there were unrecognized compensation costs related to RSUs of $ 13.7 million which the Company expects to recognize over a weighted average period of 3.1 years.

NOTE 11— INCOME TAXES

The Company recorded tax provisions of $ 16.1 million and $ 56.1 million for the three and nine months ended March 31, 2024 as compared to $ 18.5 million and $ 58.3 million for the three and nine months ended March 31, 2023.

Our effective tax rate increased to 17.4 % for the three months ended March 31, 2024 as compared to 15.8 % for the three months ended March 31, 2023.

Our effective tax rate increased from 16.1 % for the nine months ended March 31, 2023 to 18.6 % for the nine months ended March 31, 2024.

The change in effective tax rates for the three and nine months ended March 31, 2024, as compared to the same periods in the prior year, was primarily driven by a combination of changes in the mix of the income earned in various tax jurisdictions, a one-time release

of a reserve for unrecognized tax benefit due to statute of limitation during the nine months ended March 31, 2023, as well as a one-time benefit for state income taxes recognized during the three and nine months ended March 31, 2024.

The Company recorded tax provisions of $ 30.6 million for the three months ended September 30, 2024 as compared to $ 19.3 million for the three months ended September 30, 2023.

Our effective tax rate increased to 19.3 % for the three months ended September 30, 2024 as compared to 18.1 % for the three months ended September 30, 2023.

The change in effective tax rates for the three months ended September 30, 2024, 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.

The Company’s estimated fiscal year 2025 effective tax rate, before discrete items, differs from the U.S.

3 unchanged sentences

operations under the Global Intangible Low-Taxes Income ("GILTI") rules.

As of March 31, 2024, the Company had approximately $ 35.9 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

As of September 30, 2024, the Company had approximately $ 34.6 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense.

Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.

As of March 31, 2024, the Company had $ 5.0 million accrued interest related to uncertain tax matters.

As of September 30, 2024, the Company had $ 5.4 million accrued interest related to uncertain tax matters.

The Company and one or more of its subsidiaries, file income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S.

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The IRS in its AOF continued to propose an adjustment to the Company’s income for its fiscal 2015 and fiscal 2016 tax years based on the IRS’ interpretation of certain obligations of the Company’s foreign subsidiaries under the Company’s credit facilities.

On May 12, 2020, the IRS issued a final Notice of Proposed Adjustment to the Company with respect to the 2015/2016 tax years.

On May 12, 2020, the IRS issued a final NOPA to the Company with respect to the 2015/2016 tax years.

The Company formally protested the adjustment and the case was moved from the Examination Division to the IRS Appeals Division where a formal review of the facts and the applicable law took place on May 9, 2022.

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On November 8, 2023, the Company filed a Motion for Summary Judgment.

The IRS responded to our Motion on December 26, 2023 and filed a Cross-Motion for Summary Judgment.

The IRS responded to the Company’s Motion on December 26, 2023 and filed a Cross-Motion for Summary Judgment.

On January 22, 2024, the judge assigned to this case rejected both Motions for Summary Judgment.

As such, the Company is awaiting a trial date to be set which it currently expects to receive by the end of December 2024.

The Company strongly believes the position of the IRS with regard to this matter is without merit.

As such, the Company is awaiting a trial date to be set which it currently expects to receive by the end of March 2025.

The Company continues to believe that its tax position filed with the IRS with regard to this matter is more likely than not to be sustained based on the technical merits.

However, there can be no assurance that this matter will be resolved in the Company’s favor.

Regardless of whether the matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle.

We estimate the incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50.0 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

The Company estimates the incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $ 50.0 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax payable in future years by the Company.

As the Company believes that the tax originally paid in fiscal 2015 and fiscal 2016 is correct, it has not provided a reserve for this tax uncertainty.

However, an adverse outcome may have a material and adverse effect on the Company’s results of operations and financial condition.

Between fiscal years 2018 and 2023, the Company made payments totaling a combined amount of $ 60.4 million as deposits with the Hong Kong IRD in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2017 statutory tax years.

On March 27, 2024, the Company received notification that the Hong Kong IRD is seeking an additional $ 0.8 million deposit covering the 2018 statutory tax year.

The Company filed a formal protest in response to this notice and the Assessor's office agreed to a reduced deposit of $ 0.1 million covering the 2018 statutory tax year.

The refundable deposits are included within other long-term assets on our Consolidated Balance Sheets.

The IRD is examining the Company’s claims that its revenue is generated through activities performed wholly outside of the Hong Kong tax jurisdiction and are therefore exempt from Hong Kong tax.

The Company is fully cooperating with the examination including submitting documentation in support of its position.

The Company continues to believe that its tax positions filed with IRD are more likely than not to be sustained based on their technical merits and therefore no reserve has been provided for this tax uncertainty and we expect the $ 60.2 million (net of foreign currency impact) of deposits made with IRD to be refunded upon completion of the audit.

However, there can be no assurance that this matter will be resolved in the Company’s favor and therefore it's possible that an adverse outcome of the matter could have a material effect on the Company’s results of operations and financial condition.

On March 27, 2024, the Company received notification that the Hong Kong IRD is seeking an additional $ 0.8 million deposit covering the 2018 statutory tax year.

The Company filed a formal protest in response to this notice and the Assessor's office agreed to a reduced deposit of under $ 0.1 million covering the 2018 statutory tax year.

The refundable deposits are included within other long-term assets on our consolidated balance sheets.

The Company expects the $ 60.7 million (net of foreign currency impact) of deposits made with IRD to be refunded upon completion of the audit.

results of operations and financial condition.

The Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion and Profit Shifting released Pillar Two Model Rules (“Pillar Two”) for a global minimum tax.

Many countries have enacted certain aspects of the Pillar Two framework with effective dates prior to the conclusion of the Company’s fiscal year 2025.

Entities operating in countries where Pillar Two has been enacted are required to estimate Pillar Two top-up tax obligations beginning in the first quarter of fiscal year 2025.

For the three months ended September 30, 2024, the Company did not have material Pillar Two top-up tax obligations impacting the Company’s estimated annual effective tax rate.

The Company will continue to evaluate the impact of proposed and enacted legislation as new guidance becomes available.

NOTE 12— SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS

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Revenues by product type are as follows (in thousands, except percentages):

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

2024 2023 2024 2023

Three Months Ended September 30,

Enterprise technology $ 470,184 85 % $ 380,095 82 %

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Revenues by geography based on customer’s ship-to destinations were as follows (in thousands, except percentages):

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

2024 2023 2024 2023

Three Months Ended September 30,

North America (1)

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Total revenues $ 550,344 100 % $ 463,078 100 %

(1) Revenue for the United States was $ 226.2 million and $ 214.3 million for the three months ended March 31, 2024 and 2023, respectively.

Revenue for the United States was $ 645.8 million and $ 634.0 million for the nine months ended March 31, 2024 and 2023, respectively.

For the periods presented, there were no customers with an accounts receivable balance of 10% or greater of total accounts receivable or customers with net revenues of 10% or greater of total revenues.

(1) Revenue for the United States was $ 248.7 million and $ 209.2 million for the three months ended September 30, 2024 and 2023, respectively.

Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:

Percentage of Revenues Percentage of Accounts Receivable

Three months ended September 30, September 30, June 30,

2024 2023 2024 2024

Customer A * * 10 % *

* Denotes less than 10%

NOTE 13— SUBSEQUENT EVENTS

On May 7, 2024, the Company's Board of Directors approved a quarterly cash dividend of $ 0.60 per share payable on May 28, 2024 to shareholders of record at the close of business on May 20, 2024.

On November 8, 2024, the Company's Board of Directors approved a quarterly cash dividend of $ 0.60 per share payable on November 25, 2024 to shareholders of record at the close of business on November 18, 2024.

Any future dividends will be subject to the approval of the Company’s Board of Directors.

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 1. Financial Statements