What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-02 compared with 2023-11-03 · 95 added, 84 removed, 290 unchanged (38% of the section changed)

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• Optical Security and Performance Products (OSP).

During the first quarter, our end markets spend environment continued to be challenging, particularly with the service providers in North America.

Weaker demand created headwinds for our Fiber, Cable and Wireless Lab product revenues in our Network and Service Enablement (NSE) segment.

In addition, OSP revenues continued to be impacted by the weaker demand for our anti-counterfeiting products as tight fiscal policies slowdown inventory consumption by customers.

During the second quarter we continued to see lower capital expenditure spend by NEMs and weaker spend by service providers, which impacted our Field, Fiber and Wireless Lab products.

Partially offsetting this was increased demand for our Avionics, PNT and SE products.

Any prolonged disruption of manufacturing of our products, commerce and related activity or significant decrease in demand for our products could materially and adversely affect our results of business, operations, and financial conditions.

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Looking Ahead

We continue to be impacted by macroeconomic conditions and challenges.

As we look ahead to our second fiscal quarter of 2024, we expect revenue to be relatively flat sequentially primarily due to continued slow recovery in service provider spend coupled with lower anti-counterfeiting demand as our customers work to adjust their year-end inventories.

For calendar year 2024, in addition to the factors mentioned above, we anticipate:

• Beginning of recovery in Wireless Lab products as major wireless NEMs continue 5G product development and begin to increase 6G investment;

• Increased demand for our avionics, military, and Position, Navigation and Timing (PNT) products;

• Recovery in our Fiber and Lab and Production product demand driven by strong optical demand by data center, optical NEMs, optical module, and semiconductor customers;

• Increased SE products demand as our new architecture begins to gain traction and acceptance with major customers.

We continue to be impacted by macroeconomic conditions and end market demand volatility.

As we look ahead to the third fiscal quarter of fiscal 2024, we expect revenue to be relatively flat sequentially primarily due to continued slow recovery in service provider spend and reduced seasonal demand in 3D sensing.

Despite near-term macroeconomic headwinds, our long-term focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure.

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Financial Highlights

First quarter fiscal 2024 results included the following notable items:

Second quarter fiscal 2024 results included the following notable items:

• Net revenue of $254.5 million, down $30.0 million or 10.5% year-over-year.

• GAAP operating margin of 6.5%, down 960 bps year-over-year.

• GAAP operating margin of 8.8%, up 80 bps year-over-year.

• Non-GAAP operating margin of 13.2%, down 300 bps year-over-year.

• GAAP diluted EPS of $0.04, down $0.10 or 71.4% year-over-year.

• GAAP diluted EPS of $0.05, up $0.01 or 25.0% year-over-year.

• Non-GAAP diluted EPS of $0.11, down $0.03 or 21.4% year-over-year.

A reconciliation of GAAP financial measures to Non-GAAP financial measures is provided below (in millions, except EPS amounts) :

Three Months Ended

September 30, 2023 October 1, 2022

Operating Income Operating Margin Operating Income Operating Margin

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin

GAAP measures $ 22.4 8.8 % $ 22.9 8.0 % $ 38.4 7.6 % $ 72.7 12.2 %

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Non-GAAP measures $ 33.7 13.2 % $ 46.0 16.2 % $ 64.5 12.8 % $ 113.4 19.1 %

Three Months Ended

September 30, 2023 October 1, 2022

Net Income Diluted EPS Net Income Diluted EPS

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted

EPS Net income Diluted

GAAP measures $ 10.7 $ 0.05 $ 8.4 $ 0.04 $ 20.5 $ 0.09 $ 41.0 $ 0.18

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Shares used in per share calculation for Non-GAAP EPS 223.5 227.1 223.9 228.8

(1) Other items include charges (benefits) unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, transformational initiatives such as site consolidations, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.

(2) Favorable litigation settlement recorded as a gain to Interest and other income, net in the Consolidated Statements of Operations for the three months ended September 30, 2023.

(1) Other items include charges (benefits) unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, legal settlement, accretion of debt discount and losses on disposal of long-lived assets.

(2) Unfavorable (favorable) litigation settlement recorded to Interest and other income, net in the Consolidated Statements of Operations for the three and six months ended December 30, 2023.

Use of Non-GAAP (Adjusted) Financial Measures

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Non-cash interest expense and other expense:

The Company excludes certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, in calculating non-GAAP net income and non-GAAP EPS.

The Company excludes certain investing expenses, including accretion of debt discount, and other non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, in calculating non-GAAP net income and non-GAAP EPS.

Income tax expense or benefit:

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The following table summarizes selected Consolidated Statements of Operations items ( in millions, except for percentages ):

Three Months Ended

September 30, 2023 October 1, 2022 Change Percent Change

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 Change Percent Change December 30, 2023 December 31, 2022 Change Percent Change

Segment net revenue:

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Percentage of net revenue 0.6 % 0.8 % 0.7 % 0.7 %

Restructuring and related benefits $ (0.8) $ — $ (0.8) NM

Restructuring and related benefits $ (0.1) $ — $ (0.1) NM $ (0.9) $ — $ (0.9) NM

Percentage of net revenue — % — % 0.2 % — %

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Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit, and operating income consistent with our approach for managing the business.

Three months ended September 30, 2023 and October 1, 2022

Net revenue decreased by $62.3 million, or 20.1%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease reflects the weakness in service provider spending and softness in anti-counterfeiting.

Product revenues decreased by $62.1 million, or 23.2%, during the three months ended September 30, 2023 compared to the same period a year ago, driven by decreases in all segments.

Service revenues remained relatively flat, decreasing $0.2 million, or 0.5%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease was driven by revenue decrease in our NE segment offset in part by revenue increase from our SE segment.

Three months ended December 30, 2023 and December 31, 2022

Net revenue decreased by $30.0 million, or 10.5%, during the three months ended December 30, 2023 compared to the same period a year ago.

This decrease reflects the continuing weakness in service provider spending and softness in anti-counterfeiting.

Product revenues decreased by $30.6 million, or 12.7%, during the three months ended December 30, 2023 compared to the same period a year ago, driven by decreases in all segments.

Service revenues increased by $0.6 million, or 1.4%, during the three months ended December 30, 2023 compared to the same period a year ago.

This was driven by revenue increase from our SE segment offset by revenue decrease in our NE segment.

Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties.

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The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue ( in millions ):

Three Months Ended

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

United States $ 84.7 33.3 % $ 92.5 32.5 % $ 167.5 33.3 % $ 189.1 31.8 %

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Total net revenue $ 254.5 100.0 % $ 284.5 100.0 % $ 502.4 100.0 % $ 594.7 100.0 %

Net revenue from customers outside the Americas represented 59.5% and 60.4% of net revenue, respectively, during the three months ended September 30, 2023 and October 1, 2022.

Net revenue from customers outside the Americas represented 59.5% of net revenue during the three and six months ended December 30, 2023.

Net revenue from customers outside the Americas during the three and six months ended December 31, 2022 represented 62.6% and 61.4% of net revenue, respectively.

We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.

Amortization of Acquired Technologies (Cost of revenues)

Amortization of acquired technologies within Cost of revenues decreased $3.6 million or 50.7% during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Gross margin decreased by 1.4 percentage points during the three months ended September 30, 2023 from 59.6% in the same period a year ago to 58.2% in the current period.

Amortization of acquired technologies within Cost of revenues decreased $2.3 million or 40.4% and $5.9 million or 46.1% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago.

These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Gross margin decreased by 0.5 percentage points during the three months ended December 30, 2023 from 58.7% in the same period a year ago to 58.2% in the current period.

The decrease was primarily due to gross margin reduction from our NE and OSP segments, partially offset by gross margin increase in our SE segment, as discussed below in the Operating Segment Information section.

Gross margin decreased by 1.0 percentage point during the six months ended December 30, 2023 from 59.2% in the same period a year ago to 58.2% in the current period.

As discussed in more detail under “Net Revenue” above, we sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive (increasingly due to Asia-Pacific-based competition), are price sensitive and/or are affected by customer seasonal and mix variant buying patterns.

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Research and Development

R&D expense decreased by $2.7 million, or 5.1%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease was primarily due to benefits from our restructuring activities and variable expense reductions.

As a percentage of net revenue, R&D expense increased by 3.1 percentage points during the three months ended September 30, 2023 compared to the same period a year ago.

R&D expense decreased by $2.4 million, or 4.6% and $5.1 million, or 4.9% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago.

These decreases were primarily due to benefits from our restructuring activities and variable expense reductions.

As a percentage of net revenue, R&D expense increased by 1.2 percentage points during the three and six months ended December 30, 2023 compared to the same periods a year ago.

We believe that continuing our investments in R&D is critical to attaining our strategic objectives.

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Selling, General and Administrative

SG&A expense decreased by $3.0 million, or 3.7%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease was primarily due to benefits from our restructuring activities, variable expense reductions including lower commissions, and the fair value adjustment of contingent consideration related to acquisitions.

As a percentage of net revenue, SG&A increased 5.2 percentage points during the three months ended September 30, 2023 compared to the same period a year ago.

SG&A expense decreased by $15.2 million, or 16.9%, during the three months ended December 30, 2023 compared to the same period a year ago.

This decrease was primarily due to the fair value adjustment of contingent consideration related to acquisitions, benefits from our restructuring activities and variable expense reductions including lower commissions.

As a percentage of net revenue, SG&A decreased 2.2 percentage points during the three months ended December 30, 2023 compared to the same period a year ago.

SG&A expense decreased by $18.2 million, or 10.7%, during the six months ended December 30, 2023 compared to the same period a year ago.

As a percentage of net revenue, SG&A increased 1.7 percentage points during the six months ended December 30, 2023 compared to the same period a year ago.

Amortization of Intangibles (Operating expenses)

Amortization of intangibles within Operating expenses decreased $0.1 million or 4.5% during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Amortization of intangibles within Operating expenses decreased $0.8 million or 36.4% and $0.9 million or 20.5% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago.

These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Restructuring

The Company restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.

The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.

During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities.

The Fiscal 2023 Plan, which affected approximately 5% of the Company's workforce, resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities.

The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and was substantially complete as of September 30, 2023.

The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and the Company anticipates this phase to be substantially complete by the end of the second quarter of fiscal 2024.

The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and was substantially complete as of December 30, 2023.

The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and the Company anticipates this phase to be substantially complete by the end of fiscal 2024.

We estimate future cash payments of $1.2 million under the Fiscal 2023 Plan during the remainder of fiscal 2024, funded by operating cash flow.

During the three months ended September 30, 2023, the Company recorded restructuring benefits of $0.8 million related to the FY 2023 Plan.

During the three and six months ended December 30, 2023, the Company recorded restructuring benefits of $0.1 million and $0.9 million, respectively, related to the Fiscal 2023 Plan.

Refer to “Note 13.

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Interest and other income, net

Interest and other income, net, was $10.2 million during the three months ended September 30, 2023 compared to $1.1 million during the same period a year ago.

Interest and other income, net, was $3.8 million during the three months ended December 30, 2023 compared to $2.2 million during the same period a year ago.

This $1.6 million increase was primarily driven by higher interest income during the current period partially offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Interest and other income, net, was $14.0 million during the six months ended December 30, 2023 compared to $3.3 million during the same period a year ago.

This $10.7 million increase was primarily driven by a legal settlement in our favor in the amount of $7.3 million and higher interest income during the current period partially offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Interest Expense

Interest expense increased by $1.7 million, or 27.9%, during the three months ended September 30, 2023 compared to the same period a year ago.

This increase was primarily driven by the accretion of debt discount on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023.

Interest expense increased by $1.7 million, or 27.4% and $3.4 million, or 27.6% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago.

These increases were primarily driven by the accretion of debt discount and interest expense on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023.

Provision for Income Taxes

We recorded an income tax provision of $8.6 million for the three months ended September 30, 2023.

We recorded an income tax provision of $12.2 million for the three months ended October 1, 2022.

The income tax provision for the three months ended September 30, 2023 and October 1, 2022 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

We recorded an income tax provision of $7.6 million and $16.2 million for the three and six months ended December 30, 2023, respectively.

We recorded an income tax provision of $10.5 million and $22.7 million for the three and six months ended December 31, 2022, respectively.

The income tax provision for the three and six months ended December 30, 2023 and December 31, 2022 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to our income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to our domestic and foreign income from continuing operations.

As of September 30, 2023, and July 1, 2023, our unrecognized tax benefits totaling $50.7 million and $51.1 million, respectively, are included in deferred taxes and other non-current tax liabilities, net.

We had $3.0 million accrued for the payment of interest and penalties as of September 30, 2023.

As of December 30, 2023, and July 1, 2023, our unrecognized tax benefits totaling $50.8 million and $51.1 million, respectively, are included in deferred taxes and other non-current tax liabilities, net.

We had $3.3 million accrued for the payment of interest and penalties as of December 30, 2023.

The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.

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Information related to our operating segments were as follows (in millions) :

Three Months Ended

September 30, 2023 October 1, 2022 Change Percentage Change

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 Change Percentage Change December 30, 2023 December 31, 2022 Change Percentage Change

Network Enablement

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Network Enablement

NE net revenue decreased by $46.5 million, or 23.7%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease was primarily driven by lower volumes in Wireless, Field Instruments and Lab and Production partially offset by PNT revenue not included in the comparable period.

NE gross margin decreased by 1.4 percentage points during the three months ended September 30, 2023 to 63.1% from 64.5% in the same period a year ago primarily due to lower volumes and unfavorable product mix.

NE net revenue decreased by $27.8 million, or 15.2% during the three months ended December 30, 2023 compared to the same period a year ago, primarily driven by lower volumes in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue.

NE net revenue decreased by $74.3 million, or 19.6% during the six months ended December 30, 2023 compared to the same period a year ago, primarily driven by lower volumes in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue.

NE gross margin decreased by 1.9 percentage points during the three months ended December 30, 2023 to 62.5% from 64.4% in the same period a year ago primarily due to lower volumes and unfavorable product mix.

NE gross margin decreased by 1.7 percentage points during the six months ended December 30, 2023 to 62.8% from 64.5% in the same period a year ago primarily due to lower volumes and unfavorable product mix.

Service Enablement

SE net revenue decreased by $2.0 million, or 8.9%, during the three months ended September 30, 2023 compared to the same period a year ago primarily due to lower Assurance revenues offset in part by increased Data Center revenues.

SE gross margin increased by 1.1 percentage points during the three months ended September 30, 2023 to 67.2% from 66.1% in the same period a year ago primarily due to favorable product mix.

SE net revenue increased by $0.3 million, or 1.3%, during the three months ended December 30, 2023 compared to the same period a year ago primarily due to higher Assurance revenue offset in part by lower Data Center revenue.

SE net revenue decreased by $1.7 million, or 3.7%, during the six months ended December 30, 2023 compared to the same period a year ago primarily due to lower Assurance revenue offset in part by higher Data Center revenue.

SE gross margin increased by 4.6 percentage points during the three months ended December 30, 2023 to 68.9% from 64.3% in the same period a year ago primarily due to favorable product mix.

SE gross margin increased by 2.9 percentage points during the six months ended December 30, 2023 to 68.1% from 65.2% in the same period a year ago primarily due to favorable product mix.

Network and Service Enablement

NSE operating margin decreased by 12.3 percentage points during the three months ended September 30, 2023 to 0.9% from 13.2% in the same period a year ago primarily due to lower volumes.

NSE operating margin decreased by 5.3 percentage points during the three months ended December 30, 2023 to 3.6% from 8.9% in the same period a year ago primarily due to lower volumes.

NSE operating margin decreased by 8.8 percentage points during the six months ended December 30, 2023 to 2.3% from 11.1% in the same period a year ago primarily due to lower volumes.

Optical Security and Performance Products

OSP net revenue decreased by $13.8 million, or 15.1%, during the three months ended September 30, 2023 compared to the same period a year ago.

This decrease was primarily driven by lower anti-counterfeiting and consumer and industrial revenue compared to the same period a year ago.

OSP gross margin decreased by 4.2 percentage points during the three months ended September 30, 2023 to 52.5% from 56.7% in the same period a year ago primarily due to unfavorable manufacturing variances and lower volumes.

OSP operating margin decreased by 4.5 percentage points during the three months ended September 30, 2023 to 37.8% from 42.3% in the same period a year ago primarily due to the aforementioned reduction in gross margin.

OSP net revenue decreased by $2.5 million, or 3.2%, during the three months ended December 30, 2023 compared to the same period a year ago.

This decrease was primarily driven by lower anti-counterfeiting revenue partially offset by higher consumer and industrial and government revenues.

OSP net revenue decreased by $16.3 million, or 9.7%, during the six months ended December 30, 2023 compared to the same period a year ago.

This decrease was primarily driven by lower anti-counterfeiting and consumer and industrial revenues partially offset by higher government revenue.

OSP gross margin decreased by 0.2 percentage points during the three months ended December 30, 2023 to 52.1% from 52.3% in the same period a year ago primarily due to lower volumes.

OSP gross margin decreased by 2.4 percentage points during the six months ended December 30, 2023 to 52.3% from 54.7% in the same period a year ago primarily due to unfavorable manufacturing variances and lower volumes.

OSP operating margin increased by 0.9 percentage points during the three months ended December 30, 2023 to 36.4% from 35.5% in the same period a year ago primarily due to lower operating expenses.

OSP operating margin decreased by 2.1 percentage points during the three months ended December 30, 2023 to 37.1% from 39.2% in the same period a year ago primarily due to the aforementioned reduction in gross margin.

Liquidity and Capital Resources

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Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and are reported as a separate component of stockholders’ equity.

As of September 30, 2023, U.S.

As of December 30, 2023, U.S.

subsidiaries owned approximately 29.6% of our cash and cash equivalents, short-term investments and restricted cash.

As of September 30, 2023, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

As of December 30, 2023, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

Nonetheless we could realize investment losses under adverse market conditions.

During the three months ended September 30, 2023, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets.

During the three months ended December 30, 2023, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets.

In addition, we maintain cash balances in operating accounts that are with third-party financial institutions.

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The Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met.

As of September 30, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $152.1 million, net of outstanding standby letters of credit of $4.1 million.

As of December 30, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $159.0 million, net of outstanding standby letters of credit of $4.1 million.

Refer to “Note 11.

Debt” for more information.

Cash Flows for the Three Months Ended September 30, 2023

As of September 30, 2023, our combined balance of cash and cash equivalents and restricted cash increased by $12.3 million to $527.9 million from $515.6 million as of July 1, 2023.

During the three months ended September 30, 2023, Cash provided by operating activities was $50.3 million, consisting of net income of $9.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) which totaled $27.7 million, including changes in deferred tax balances, and changes in operating assets and liabilities that provided $12.8 million.

Cash Flows for the Six Months Ended December 30, 2023

As of December 30, 2023, our combined balance of cash and cash equivalents and restricted cash increased by $37.0 million to $552.6 million from $515.6 million as of July 1, 2023.

During the six months ended December 30, 2023, Cash provided by operating activities was $70.7 million, consisting of net income of $20.5 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) which totaled $53.5 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $3.3 million.

Changes in our operating assets and liabilities related primarily to a decrease in accounts receivable of $22.8 million due to collections outpacing billings and a decrease in other current and non-current assets of $1.3 million.

These were offset by a decrease in deferred revenue of $10.1 million due to timing of support billings and project acceptance, a decrease in accrued payroll and related expenses of $9.1 million due primarily to lower variable expenses and timing of payroll, a decrease in accounts payable of $7.6 million driven by timing of purchases and related payments, a decrease in accrued expenses and other current and non-current liabilities of $1.4 million, an increase in inventory of $0.3 million and a decrease in income taxes payable of $0.6 million.

During the three months ended September 30, 2023, Cash used in investing activities was $12.6 million, primarily resulting from $6.5 million net purchases of short-term investments and $6.7 million used for capital expenditures offset by $0.6 million proceeds from sales of assets.

During the three months ended September 30, 2023, Cash used in financing activities was $16.1 million, primarily resulting from $10.0 million cash paid to repurchase common stock under our share repurchase program and $9.1 million in withholding tax payments on the vesting of restricted stock awards and performance-based awards.

These were offset by a decrease in deferred revenue of $17.5 million primarily due to timing of support billings and project acceptances, a decrease in accrued payroll and related expenses of $4.4 million due primarily to lower variable expenses and reduced headcount from restructuring activities, a decrease in accounts payable of $2.4 million driven by timing of purchases and related payments, a decrease in accrued expenses and other current and non-current liabilities of $2.1 million, an increase in inventory of $0.7 million and a decrease in income taxes payable of $0.3 million.

During the six months ended December 30, 2023, Cash used in investing activities was $20.3 million, primarily resulting from $12.5 million used for capital expenditures and $9.7 million net purchases of short-term investments offset by $1.9 million proceeds from sales of assets.

During the six months ended December 30, 2023, Cash used in financing activities was $18.3 million, primarily resulting from $10.0 million cash paid to repurchase common stock under our share repurchase program, $9.3 million in withholding tax payments on the vesting of restricted stock and performance-based awards and $1.9 million paid for acquisition related liabilities.

These were offset by $3.0 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Share Repurchase Program

During the three months ended September 30, 2023, we repurchased 1.0 million shares of our common stock for $10.0 million pursuant to our 2022 Repurchase Plan.

As of September 30, 2023, the Company had remaining authorization of $224.8 million for future share repurchases under the 2022 Repurchase Plan.

During the six months ended December 30, 2023, we repurchased 1.0 million shares of our common stock for $10.0 million pursuant to our 2022 Repurchase Plan.

As of December 30, 2023, the Company had remaining authorization of $224.8 million for future share repurchases under the 2022 Repurchase Plan.

Refer to “Note 15.

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Contractual Obligations

There were no material changes to our existing contractual commitments during the first quarter of fiscal 2024.

There were no material changes to our existing contractual commitments during the second quarter of fiscal 2024.

Off-Balance Sheet Arrangements

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plan is fully funded, and the other Germany plans, which were initially established as “pay-as-you-go” plans, are unfunded.

As of September 30, 2023, our pension plans were under-funded by $52.0 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

As of December 30, 2023, our pension plans were under-funded by $54.4 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

Pension plan assets are managed by external third parties and we monitor the performance of our investment managers.

As of September 30, 2023, the fair value of plan assets had decreased approximately 4.9% since July 1, 2023, our most recent fiscal year end.

As of December 30, 2023, the fair value of plan assets had increased approximately 5.6% since July 1, 2023, our most recent fiscal year end.

We are also responsible for the non-pension PBO assumed from a past acquisition of $0.4 million.

36 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