What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-05-10 · 79 added, 102 removed, 188 unchanged (49% of the section changed)

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Our actual results could differ materially from those discussed in the forward-looking statements.

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this quarterly report, particularly in Note 9, “Commitments and Contingencies” to our consolidated financial statements and Part II “Other Information”, Item 1-Legal Proceedings and 1A-Risk Factors, in this report.

Factors that could cause or contribute to these differences include

those discussed below and elsewhere in this quarterly report, particularly in Note 9, “Commitments and Contingencies” to our consolidated financial statements and Part II “Other Information”, Item 1-Legal Proceedings and 1A-Risk Factors, in this report.

We develop technology platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics for professional, home and personal use.

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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.

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.

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.

Our consumer products are targeted to the smart home and highly connected consumers.

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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 since the COVID-19 pandemic.

Supply Constraints and Risks – We have experienced significant supply constraints in the past, especially during the COVID-19 pandemic.

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

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These mitigation efforts therefore significantly increase the risks of future material excess, obsolete inventory and related losses.

We believe that we have taken the right actions to mitigate these supply constraints, however, we recognize the associated risks.

We believe that we have taken the right actions to mitigate these 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.

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• Service Provider Technology includes our airMAX, UISP, 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, to a lesser extent, through direct sales through our webstores.

Sales to distributors accounted for 63% of our revenues during the nine months ended March 31, 2024.

Direct sales accounted for 37% of our revenue during the nine months ended March 31, 2024.

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 57% of our revenues during the three months ended September 30, 2024.

Direct sales accounted for 43% of our revenue during the three months ended September 30, 2024.

Cost of Revenues

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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 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.

associated with credit card processing fees, 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.

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Results of Operations

Comparison of Three and Nine Months Ended March 31, 2024 and 2023

Comparison of Three Months Ended September 30, 2024 and 2023

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 March 31, Nine Months Ended March 31,

2024 2023 2024 2023

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

Three Months Ended September 30,

% of Revenues % of Revenues

Revenues $ 550,344 100 % $ 463,078 100 %

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Total share-based compensation $ 1,696 $ 1,500

Total revenues increased $35.2 million, or 8%, from $457.8 million in the three months ended March 31, 2023 to $493.0 million in the three months ended March 31, 2024.

Total revenues decreased $28.4 million, or 2%, from $1,449.4 million in the nine months ended March 31, 2023 to $1,421.0 million in the nine months ended March 31, 2024.

The increase in revenues for the three months ended March 31, 2024 as compared to the same period in the prior year was primarily driven by an increase in revenue from our Enterprise Technology platform, offset in part by a decrease in revenue from our Service Provider Technology platform.

The decline in revenue for the nine months ended March 31, 2024 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.

Total revenues increased $87.3 million, or 19%, from $463.1 million in the three months ended September 30, 2023 to $550.3 million in the three months ended September 30, 2024.

The increase in revenues for the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily driven by an increase in revenue from our Enterprise Technology platform, offset in part by a decrease in revenue from our Service Provider Technology platform.

Revenues by Product Type

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

2024 2023 2024 2023

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

Three Months Ended September 30,

(in thousands, except percentages)

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

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

Enterprise Technology revenue increased $40.8 million, or 11%, from $373.6 million in the three months ended March 31, 2023 to

$414.3 million in the three months ended March 31, 2024.

Enterprise Technology revenue decreased $31.3 million, or 3%, from $1,217.3 million in the nine months ended March 31, 2023 to $1,185.9 million in the nine months ended March 31, 2024.

The increase in Enterprise Technology revenue during the three months ended March 31, 2024, as compared to the same period in the prior year, was primarily due to an increase in revenue from our Enterprise Technology platform across all regions.

The decrease in Enterprise Technology revenue during the nine months ended March 31, 2024 as compared to the same period in the prior year, was primarily due to decline in revenue in the EMEA and Asia Pacific regions.

Service Provider Technology revenue decreased $5.5 million, or 7%, from $84.2 million in the three months ended March 31, 2023 to $78.7 million in the three months ended March 31, 2024.

Service Provider Technology revenue increased $2.9 million, or 1%, from $232.1 million in the nine months ended March 31, 2023 to $235.1 million in the nine months ended March 31, 2024.

The decrease in Service Provider Technology in the three months ended March 31, 2024 as compared to the same period in the prior year was primarily due to decline in revenues in all regions except North America.

The increase in Service Provider Technology revenue during the nine months ended March 31, 2024 as compared to the same period in the prior year, was primarily due to increased revenue in the EMEA and North America regions.

Enterprise Technology revenue increased $90.1 million, or 24%, from $380.1 million in the three months ended September 30, 2023 to $470.2 million in the three months ended September 30, 2024.

The increase in Enterprise Technology revenue during the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to an increase in revenue from our Enterprise Technology platform across all regions except South America.

Service Provider Technology revenue decreased $2.8 million, or 3%, from $83.0 million in the three months ended September 30, 2023 to $80.2 million in the three months ended September 30, 2024.

The decrease in Service Provider Technology in the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to decline in revenues in the North America and EMEA regions.

Revenues by Geography

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

The following are our revenues by geography for the three and nine months ended March 31, 2024 and 2023 (in thousands, except percentages):

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

2024 2023 2024 2023

(in thousands, except percentages)

The following are our revenues by geography for the three months ended September 30, 2024 and 2023 (in thousands, except percentages):

Three Months Ended September 30,

(in thousands, except percentages)

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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.

(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.

North America

Revenues in North America increased $11.8 million, or 5%, from $230.7 million in the three months ended March 31, 2023 to $242.5 million in the three months ended March 31, 2024 and increased $9.2 million, or 1%, from $683.9 million in the nine months ended March 31, 2023 to $693.2 million in the nine months ended March 31, 2024.

The increase in North America revenues during the three and nine months ended March 31, 2024 as compared to the same periods in the prior year, was due to increased revenue from both our Enterprise Technology products and our Service Provider Technology products.

Revenues in North America increased by $46.5 million, or 21%, from $224.8 million in the three months ended September 30, 2023 to $271.2 million in the three months ended September 30, 2024.

The increase in North America revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Europe, the Middle East, and Africa (EMEA)

Revenues in EMEA increased $27.4 million, or 16%, from $173.3 million in the three months ended March 31, 2023 to $200.7 million in the three months ended March 31, 2024 and decreased $22.5 million, or 4%, from $568.5 million in the nine months ended March 31, 2023 to $546.0 million in the nine months ended March 31, 2024.

The increase in EMEA revenues during the three months ended March 31, 2024 as compared to the same period in the prior year, was primarily due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

The decrease in EMEA revenues during the nine months ended March 31, 2024 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 an increase in revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region decreased $0.4 million, or 2%, from $26.9 million in the three months ended March 31, 2023 to $26.5 million in the three months ended March 31, 2024 and decreased $20.3 million, or 18%, from $116.2 million in the nine months ended March 31, 2023 to $95.8 million in the nine months ended March 31, 2024.

The decrease in Asia Pacific revenues during the three months ended March 31, 2024 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 Asia Pacific revenues during the nine months ended March 31, 2024 as compared to the same period in the prior year was due to a decrease in revenue from both our Enterprise Technology products and our Service Provider Technology products.

Revenues in EMEA increased by $32.5 million, or 19%, from $172.4 million in the three months ended September 30, 2023 to $204.9 million in the three months ended September 30, 2024.

The increase in EMEA revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Revenues in the Asia Pacific region increased by $4.9 million, or 13%, from $36.1 million in the three months ended September 30, 2023 to $40.9 million in the three months ended September 30, 2024.

The increase in Asia Pacific revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from both our Enterprise Technology products and our Service Provider Technology products.

South America

Revenues in South America decreased $3.5 million, or 13%, from $26.9 million in the three months ended March 31, 2023 to $23.4 million in the three months ended March 31, 2024 and increased $5.2 million, or 6%, from $80.9 million in the nine months ended March 31, 2023 to $86.1 million in the nine months ended March 31, 2024.

The decrease in South America revenues during the three months ended March 31, 2024 as compared to the same period in the prior year was due to decreased revenue from our Service Provider Technology products, partially offset by an increase in revenue from our Enterprise Technology products.

The increase in South America revenues during the nine months ended March 31, 2024 as compared to the same period 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 35.3% in the three months ended March 31, 2024, compared to 41.2% in the three months ended March 31, 2023 and decreased to 37.7% in the nine months ended March 31, 2024, compared to 38.5% in the nine months ended March 31, 2023.

The decrease in gross profit margin for the three months ended March 31, 2024, as compared to the comparable prior year period was driven by incremental excess and obsolete inventory charges, unfavorable product mix and higher shipping costs, offset in part by lower tariffs.

The decrease in gross profit margin for the nine months ended March 31, 2024, as compared to the comparable prior year period was driven by incremental excess and obsolete inventory charges and unfavorable product mix, partially offset by lower shipping costs and lower tariffs.

Revenues in South America increased by $3.5 million, or 12%, from $29.8 million in the three months ended September 30, 2023 to $33.3 million in the three months ended September 30, 2024.

The increase in South America revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from our Service Provider Technology products, partially offset by a decrease in revenue from our Enterprise Technology products.

Gross profit margin increased to 42.1% in the three months ended September 30, 2024, compared to 39.7% in the three months ended September 30, 2023.

The increase in gross profit margin for the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily driven by favorable product mix and lower tariffs, offset in part by higher shipping costs, warehouse related expenses and incremental excess and obsolete inventory charges.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses increased by $4.3 million, or 11%, from $38.2 million in the three months ended March 31, 2023 to $42.5 million in the three months ended March 31, 2024.

As a percentage of revenues, R&D expenses increased from 8% for the three months ended March 31, 2023 to 9% for the three months ended March 31, 2024.

R&D expenses increased by $11.1 million, or 11%, from $104.6 million in the nine months ended March 31, 2023 to $115.7 million in the nine months ended March 31, 2024.

As a percentage of revenues, R&D expenses increased from 7% for the nine months ended March 31, 2023 to 8% for the nine months ended March 31, 2024

The increase in R&D expenses during the three and nine months ended March 31, 2024 as compared to the comparable prior year periods was primarily driven by higher employee-related expenses and prototype-related expenses.

Research and development (“R&D”) expenses increased by $1.7 million, or 5%, from $36.3 million in the three months ended September 30, 2023 to $38.0 million in the three months ended September 30, 2024.

As a percentage of revenues, R&D expenses decreased from 8% for the three months ended September 30, 2023 to 7% for the three months ended September 30, 2024.

The increase in R&D expenses during the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily driven by higher employee-related expenses, depreciation and software costs, offset in part by lower prototype-related expenses.

Sales, General and Administrative

Sales, general and administrative (“SG&A”) expenses increased $3.6 million, or 22%, from $16.7 million in the three months ended March 31, 2023 to $20.4 million in the three months ended March 31, 2024.

As a percentage of revenues, SG&A expenses remained flat at 4% for the three months ended March 31, 2023 compared to the three months ended March 31, 2024.

SG&A expenses increased $7.2 million, or 14%, from $52.1 million in the nine months ended March 31, 2023 to $59.3 million in the nine months ended March 31, 2024.

As a percentage of revenues, SG&A expenses increased from 3% for the nine months ended March 31, 2023 to 4% for the nine months ended March 31, 2024.

The increase in SG&A costs for the three months ended March 31, 2024 as compared to the comparable prior year period was primarily due to higher fees associated with webstore credit card processing, higher travel expenses, professional fees, higher

employee-related expenses, and marketing expenses.

The increase in SG&A for the nine months ended March 31, 2024 as compared to the comparable prior year period was primarily due to higher marketing expenses, higher employee-related expenses, professional fees, and higher fees associated with webstore credit card processing.

Sales, general and administrative (“SG&A”) expenses increased by $5.1 million, or 27%, from $19.3 million in the three months ended September 30, 2023 to $24.4 million in the three months ended September 30, 2024.

As a percentage of revenues, SG&A expenses remained consistent at 4% for the three months ended September 30, 2023, compared to the three months ended September 30, 2024.

The increase in SG&A for the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily due to higher fees associated with webstore credit card processing, professional fees and marketing expenses.

Interest Expense and Other, net

Interest expense and other, net ("I&O") expenses increased $2.4 million, or 14% from $16.5 million in the three months ended March 31, 2023 to $18.9 million in the three months ended March 31, 2024.

As a percentage of revenue, I&O increased from 3% for the three months ended March 31, 2023 to 4% for the three months ended March 31, 2024.

I&O expenses increased $20 million, or 52%, from $38.4 million in the nine months ended March 31, 2023 to $58.4 million in the nine months ended March 31, 2024.

As a percentage of revenues, I&O expenses increased from 3% for the nine months ended March 31, 2023 to 4% for the nine months ended March 31, 2024.

The increase in I&O expenses during the three and nine months ended March 31, 2024 as compared to the comparable prior year periods was primarily due to higher interest expense driven by increased interest rates.

Interest expense and other, net ("I&O") expenses decreased $10.6 million, or 50% from $21.2 million in the three months ended September 30, 2023 to $10.6 million in the three months ended September 30, 2024.

As a percentage of revenue, I&O decreased from 5% for the three months ended September 30, 2023 to 2% for the three months ended September 30, 2024.

The decrease in I&O expenses during the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily due to lower interest expense driven by a decrease in borrowings and lower interest rates and foreign exchange gains.

Provision for Income Taxes

Our provision for income taxes decreased $2.4 million, or 13%, from $18.5 million for the three months ended March 31, 2023 to $16.1 million for the three months ended March 31, 2024.

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 provision for income taxes decreased $2.2 million, or 4%, from $58.3 million in the nine months ended March 31, 2023 to $56.1 million in the nine months ended March 31, 2024.

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 income earned in various tax jurisdictions as well as varying one time discrete benefits during the three and nine months ended March 31, 2024 and 2023.

Our provision for income taxes increased $11.3 million, or 59%, from $19.3 million for the three months ended September 30, 2023 to $30.6 million for the three months ended September 30, 2024.

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 a change in the mix of income earned in various tax jurisdictions.

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 $102.5 million and $114.8 million as of March 31, 2024 and June 30, 2023, respectively.

We had cash and cash equivalents of $165.2 million and $126.3 million as of September 30, 2024 and June 30, 2024, 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:

Nine Months Ended

Three Months Ended

September 30,

(in thousands)

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

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

Net cash used in investing activities (2,604) (3,025)

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 Flows from Operating Activities

Net cash provided by operating activities during the nine months ended March 31, 2024 consisted primarily of net income of $246.2 million, a $181.7 million decrease in inventory, non-cash adjustments of $59.9 million partially offset by other changes in operating assets and liabilities that resulted in net cash outflows of $177.7 million.

This net change in operating assets and liabilities consisted primarily of a $86.0 million decrease in net accounts payable and accrued liabilities, a $28.5 million decrease in taxes payable, and a $41.7 million increase in vendor deposits.

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

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

Net cash provided by operating activities during the three months ended September 30, 2024 consisted primarily of net income of $128.0 million, and the benefit of decreasing vendor deposits of $21.7 million, decreasing inventories of $8.5 million and non-cash adjustments of $15.9 million, further augmented by other changes in operating assets and liabilities that resulted in net cash inflows of $59.7 million.

This net change in operating assets and liabilities consisted primarily of a $58.7 million increase in net accounts payable and accrued liabilities, a $6.2 million increase in taxes payable and $5.4 million decrease in accounts receivable.

Net cash provided by operating activities during 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.

Cash Flows from Investing Activities

We used $10.1 million of cash in investing activities during the nine months ended March 31, 2024.

We used $2.6 million of cash in investing activities during the three months ended September 30, 2024.

Our investing activities consisted primarily of $2.6 million of capital expenditures.

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

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

Our investing activities consisted primarily of $3.0 million of capital expenditures.

Cash Flows from Financing Activities

We used $312.3 million of cash in financing activities during the nine months ended March 31, 2024.

During the nine months ended March 31, 2024, we repaid $203.1 million under the Company's credit Facilities and used $108.8 million related to dividends paid on our common stock.

We received $191.8 million of cash from financing activities during the nine months ended March 31, 2023.

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

We used $192.2 million of cash in financing activities during the three months ended September 30, 2024.

During the three months ended September 30, 2024, we repaid $155.6 million under the Company's credit Facilities and used $36.3 million related to dividends paid on our common stock.

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 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.

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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.

Inflation and the current geopolitical environment 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.

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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.

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.

However, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of 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 March 31, 2024.

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 March 31, 2024.

We have not recorded any liabilities for these agreements as of September 30, 2024.

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 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.

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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

We had other obligations of $5.8 million as of March 31, 2024, which consisted primarily of commitments related to research and development projects.

We had other obligations of $6.2 million as of September 30, 2024, which consisted primarily of commitments related to research and development projects.

Unrecognized Tax Benefits

As of March 31, 2024, we had $35.9 million of unrecognized tax benefits and an additional $5.0 million for accrued interest classified as non-current liabilities.

As of September 30, 2024, we had $34.6 million of unrecognized tax benefits and an additional $5.4 million for accrued interest classified as non-current liabilities.

At this time, we are unable to make a reasonably reliable estimate of timing of payments in individual years in connection with these tax liabilities.

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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.

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, our growth strategies, future prices, our competitive status, our efforts to mitigate shortages of components 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.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, the impact of the global shortage of components (including chipsets) and pricing inflation associated therewith, the impact of U.S.

These risks and uncertainties include, but are not limited to, the impact of the global shortage of components and pricing inflation associated therewith, the impact of U.S.

tariffs on results of operations, our ability to procure products, our ability to manage our growth, our ability to sustain or increase profitability, demand for our products, our ability to compete, our ability to rapidly develop new technology and introduce new products, our ability to safeguard our intellectual property, trends in the markets that we compete and fluctuations in general economic conditions, the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan on our business, results and liquidity, and the risks set forth throughout this Report, including under Part II:

2 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