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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No. 001-35300
UBIQUITI INC.
(Exact name of registrant as specified in its charter)
Delaware 32-0097377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
685 Third Avenue, 27th Floor, New York, NY 10017
(Address of principal executive offices, Zip Code)
(646) 780-7958
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareUINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 
As of May 4, 2023, 60,441,733 shares of Common Stock, par value $0.001, were issued and outstanding.    


Table of Contents
UBIQUITI INC.
INDEX TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023
 
  Page
PART I – FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2

Table of Contents
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements
UBIQUITI INC.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited) 
March 31, 2023June 30, 2022
Assets
Current assets:
Cash and cash equivalents$152,520 $136,224 
Investments — short-term121 427 
Accounts receivable, net of allowance for doubtful accounts of $66 and $52 at March 31, 2023 and June 30, 2022, respectively
146,359 119,627 
Inventories743,397 262,441 
Vendor deposits 89,321 89,661 
Prepaid expenses and other current assets20,674 13,193 
Total current assets1,152,392 621,573 
Property and equipment, net85,122 80,232 
Operating lease right-of-use assets, net59,562 64,231 
Deferred tax assets6,483 6,618 
Other long-term assets71,638 72,058 
Total assets$1,375,197 $844,712 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$159,075 $83,663 
Income taxes payable1,705 14,061 
Debt — short-term24,410 23,865 
Other current liabilities177,190 189,361 
Total current liabilities362,380 310,950 
Income taxes payable — long-term77,783 94,169 
Operating lease liabilities —long-term48,583 54,025 
Debt — long-term1,063,814 762,622 
Other long-term liabilities7,112 5,822 
Total liabilities1,559,672 1,227,588 
Commitments and contingencies (Note 9)
Stockholders’ deficit:
Preferred stock—$0.001 par value; 50,000,000 shares authorized; none issued
  
Common stock—$0.001 par value; 500,000,000 shares authorized:
60,441,733 and 60,420,525 issued and outstanding as of March 31, 2023 and June 30, 2022, respectively
60 60 
Additional paid–in capital3,391 650 
Accumulated other comprehensive (loss) (474)
Retained (deficit)(187,926)(383,112)
Total stockholders’ (deficit)(184,475)(382,876)
Total liabilities and stockholders’ deficit$1,375,197 $844,712 
See notes to consolidated financial statements (unaudited).

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UBIQUITI INC.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)

 
Three Months Ended March 31,Nine Months Ended March 31,
2023202220232022
Revenues$457,773 $358,068 $1,449,427 $1,248,547 
Cost of revenues269,297 242,050 892,023 748,369 
Gross profit188,476 116,018 557,404 500,178 
Operating expenses:
Research and development38,210 35,261 104,633 100,181 
Sales, general and administrative16,741 18,151 52,080 50,302 
Total operating expenses54,951 53,412 156,713 150,483 
Income from operations133,525 62,606 400,691 349,695 
Interest expense and other, net(16,497)(3,252)(38,421)(9,784)
Income before income taxes117,028 59,354 362,270 339,911 
Provision for income taxes18,451 9,000 58,306 53,758 
Net income$98,577 $50,354 $303,964 $286,153 
Net income per share of common stock:
Basic$1.63 $0.82 $5.03 $4.61 
Diluted$1.63 $0.82 $5.03 $4.61 
Weighted average shares used in computing net income per share of common stock:
Basic60,441 61,411 60,432 62,089 
Diluted60,455 61,435 60,451 62,125 
Other comprehensive income:
Unrealized losses on available-for-sale securities$ $(439)$ $(433)
Other comprehensive loss (439) (433)
Comprehensive income$98,577 $49,915 $303,964 $285,720 
See notes to consolidated financial statements (unaudited).


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UBIQUITI INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except per share amounts)
(Unaudited)
Three and Nine Months Ended March 31, 2023
Common StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity (Deficit)
SharesAmountAmountAmountAmountAmount
Balance at June 30, 2022
60,420,525 $60 $650 $(383,112)$(474)$(382,876)
Net Income— — — 93,182 — 93,182 
Other comprehensive income (loss)— — — (49)(49)
Stock options exercised2,112 — 23 — — 23 
Restricted stock units issued, net of tax withholdings6,174 — (544)— — (544)
Stock-based compensation expense— — 1,048 — — 1,048 
Dividends Paid on Common Stock ($0.60 per share)
— — — (36,256)— (36,256)
Balance at September 30, 2022
60,428,811 $60 $1,177 $(326,186)$(523)$(325,472)
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 withholdings2,147 — (50)— — (50)
Stock-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 withholdings10,775 — (83)— — (83)
Stock-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)



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Three and Nine Months Ended March 31, 2022
Common StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity (Deficit)
SharesAmountAmountAmountAmountAmount
Balance at June 30, 2021
62,582,858 $63 $ $2,635 $1 $2,699 
Net Income— — — 132,150 — 132,150 
Other comprehensive (loss)— — — — (1)(1)
Stock options exercised1,605 — 17 — — 17 
Restricted stock units issued, net of tax withholdings7,887 — (952)— — (952)
Repurchases of Common Stock(130,994)(1)125 (39,376)— (39,252)
Stock-based compensation expense— — 810 — — 810 
Dividends Paid on Common Stock ($0.60 per share)
— $— $— $(37,499)$— $(37,499)
Balance at September 30, 2021
62,461,356 $62 $ $57,910 $ $57,972 
Net Income— — — 103,649 — 103,649 
Other comprehensive income (loss)— — — — 7 7 
Stock options exercised2,584 — 36 — — 36 
Restricted stock units issued, net of tax withholdings7,947 — (181)— — (181)
Repurchases of Common Stock(434,271)— (587)(128,457)— (129,044)
Stock-based compensation expense— — 819 — — 819 
Dividends Paid on Common Stock ($0.60 per share)
— $— $— $(37,445)$— $(37,445)
Balances at December 31, 2021
62,037,616 $62 $87 $(4,343)$7 $(4,187)
Net Income— — — 50,354 — 50,354 
Other comprehensive income (loss)— — — — (439)(439)
Stock options exercised2,112 — 23 — — 23 
Restricted stock units issued, net of tax withholdings7,225 — (52)— — (52)
Repurchases of Common Stock(1,264,974)(1)(932)(343,777)— (344,710)
Stock-based compensation expense— — 874 — — 874 
Dividends Paid on Common Stock ($0.60 per share)
— — — (36,860)— (36,860)
Balances at March 31, 2022
60,781,979 $61 $ $(334,626)$(432)$(334,997)



See notes to consolidated financial statements (unaudited).

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UBIQUITI INC.
Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
Nine Months Ended March 31,
20232022
Cash Flows from Operating Activities:
Net income$303,964 $286,153 
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Depreciation and amortization12,164 10,110 
Amortization of debt issuance costs979 990 
Non-cash lease expense325 1,029 
Premium amortization and (discount accretion), net 35 
Provision for inventory obsolescence8,142 1,437 
Provision for loss on vendor deposits and purchase commitments(2,419)8,430 
Stock-based compensation3,394 2,503 
Provisions for doubtful accounts14  
Deferred taxes135 109 
Recovery of impaired investment (902)
Change in unrealized loss on available-for-sale securities780 (407)
Provision for sales returns62 83 
Other, net325  
Changes in operating assets and liabilities:
Accounts receivable(26,746)84,808 
Inventories(489,463)(13,520)
Vendor deposits(5,045)(34,844)
Prepaid expenses and other assets(8,695)(796)
Accounts payable74,827 (9,812)
Income taxes payable(28,742)(12,663)
Deferred revenues(2,561)(2,721)
Accrued and other liabilities(1,312)(19,742)
Net cash (used in) provided by operating activities(159,872)300,280 
Cash Flows from Investing Activities:
Purchase of property and equipment and other long-term assets(15,650)(11,063)
Purchase of investments (864)
Proceeds from maturities of investments 1,209 
Net cash (used in) investing activities(15,650)(10,718)
Cash Flows from Financing Activities:
Proceeds from borrowing under the credit facility- Revolver380,000 250,000 
Repayment against credit facility- Revolver(60,000) 
Repayment against credit facility- Term(18,750)(18,750)
Repurchases of common stock (513,005)
Payment of common stock cash dividends(108,778)(111,804)
Proceeds from exercise of stock options23 76 
Tax withholdings related to net share settlements of restricted stock units(677)(1,185)
Net cash provided by (used in) financing activities191,818 (394,668)
Net increase (decrease) in cash and cash equivalents16,296 (105,106)
Cash and cash equivalents at beginning of period136,224 249,418 
Cash and cash equivalents at end of period$152,520 $144,312 
Supplemental Disclosure of Cash Flow Information:
Income taxes paid, net of refunds$87,315 $72,826 
Interest paid$34,241 $7,403 
Non-Cash Investing and Financing Activities:
Right-of-use asset recognized$5,814 $27,524 
Unpaid stock repurchases$ $10,000 
Unpaid property and equipment and other long-term assets$1,097 $264 
See notes to consolidated financial statements (unaudited).

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UBIQUITI INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business— Ubiquiti Inc. and its wholly owned subsidiaries (collectively, “Ubiquiti” or the “Company”) develop high performance networking technology for service providers, enterprises, and consumers globally.

The Company operates on a fiscal year ending June 30. In these notes, Ubiquiti refers to the fiscal years ending June 30, 2023 and 2022, as fiscal 2023 and fiscal 2022 respectively.

Basis of Presentation— The Company’s consolidated financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) related to interim financial statements based on applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. These consolidated financial statements reflect all adjustments, which are, in the opinion of the Company, of a normal and recurring nature and those necessary to state fairly the statements of financial position, results of operations and cash flows for the dates and periods presented. The June 30, 2022 balance sheet was derived from the audited consolidated financial statements as of that date. All significant intercompany transactions and balances have been eliminated.

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2022, included in its Annual Report on Form 10-K, as filed with the SEC on August 26, 2022 (the “Annual Report”). The results of operations for the three and nine months ended March 31, 2023 are not necessarily indicative of the results to be expected for any future periods.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are disclosed in its audited consolidated financial statements for the fiscal year ended June 30, 2022, included in the Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies as discussed in the Annual Report.

Use of Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Those estimated assumptions include, but are not limited to, revenue recognition and deferred revenue; allowance for doubtful accounts and sales return reserves; inventory valuation and vendor deposits; accounting for income taxes, including the valuation allowance on deferred tax assets and reserves for uncertain tax positions; determinations of fair value for stock-based awards; estimate of incremental borrowing rate for determining the present value of future lease payments; and valuation of warranty accruals. We evaluate our estimates based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

NOTE 3—REVENUES

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 recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our products and PCS to our customers. Transfer of control to the customer for products generally occurs at the point in time when products have been shipped to our customer as this represents the point in time when the customer has a present obligation to pay and physical possession including title and risk of loss have been transferred to the customer. Revenue for PCS is recognized ratably over time over the estimated period for which implied PCS services will be delivered.

Disaggregation of Revenue

See Note 13, "Segment Information, Revenues by Geography and Significant Customers" for disaggregation of revenue by product category and geography.


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Contract Balances

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. Our contract liabilities consist of advance payments (Customer deposits) as well as billing in excess of revenue recognized primarily related to deferred revenue. We classify customer deposits as a current liability, and deferred revenue as a current or non-current liability based on the timing of when we expect to fulfill these remaining performance obligations. 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, 2023 and June 30, 2022, the Company’s customer deposits were $0.8 million and $1.1 million, respectively.

As of March 31, 2023, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $17.2 million and $7.1 million, respectively.

As of June 30, 2022, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $20.8 million and $5.8 million, respectively.

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,
 2023202220232022
Numerator:
Net income$98,577 $50,354 $303,964 $286,153 
Denominator:
Weighted-average shares used in computing basic earnings per share60,441 61,411 60,432 62,089 
Add—dilutive potential common shares:
Stock options 5  7 
Restricted stock units14 19 19 29 
Weighted-average shares used in computing diluted net income per share60,455 61,435 60,451 62,125 
Net income per share of common stock:
Basic$1.63 $0.82 $5.03 $4.61 
Diluted$1.63 $0.82 $5.03 $4.61 

The Company excludes potentially dilutive securities from its diluted net income per share calculation when their effect would be anti-dilutive to net income per share amounts.

NOTE 5—BALANCE SHEET COMPONENTS

Inventories

Inventories consisted of the following (in thousands):
March 31, 2023June 30, 2022
Finished goods$645,520 $253,260 
Raw materials97,877 9,181 
Total$743,397 $262,441 


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Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):
March 31, 2023June 30, 2022
Testing equipment$19,800 $16,999 
Tooling equipment19,918 18,398 
Leasehold improvements23,898 18,589 
Computer and other equipment11,398 11,078 
Software10,346 10,509 
Furniture and fixtures1,961 2,668 
Corporate aircraft65,807 65,807 
Property and equipment, gross153,128 144,048 
Less: Accumulated depreciation(68,006)(63,816)
Property and equipment, net$85,122 $80,232 

Other Long-term Assets

Other long-term assets consisted of the following (in thousands):
March 31, 2023June 30, 2022
Hong Kong Tax deposit (1)
59,972 59,992 
Intangible assets, net (2)
6,085 7,228 
Other long-term assets, net5,581 4,838 
Total$71,638 $72,058 
(1) The Company expects the deposits made with the Hong Kong Inland Revenue Department (“IRD”) to be refunded upon completion of the audit. See Note 12, "Income Taxes" to the consolidated financial statements for additional details regarding this ongoing tax audit.
(2) Accumulated amortization was $5.5 million and $4.3 million as of March 31, 2023, and June 30, 2022, respectively.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):
March 31, 2023June 30, 2022
Deferred revenue — short-term$17,161 20,766 
Accrued expenses18,349 42,305 
Lease liability— current13,842 12,744 
Warranty accrual7,943 6,394 
Accrued compensation and benefits5,757 6,168 
Customer deposits753 1,059 
Reserve for sales returns3,995 4,297 
Inventory received not billed101,466 86,953 
Other payables7,924 8,675 
Total$177,190 $189,361 

Other Long-Term Liabilities

Other long-term liabilities consisted of the following (in thousands):
March 31, 2023June 30, 2022
Deferred Revenue — long-term$7,112 $5,822 


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NOTE 6—ACCRUED WARRANTY

The Company offers warranties on certain products, generally a period of one to two years and records a liability for the estimated future costs associated with potential warranty claims. The warranty costs are reflected in the Company’s consolidated statements of operations and comprehensive income within cost of revenues. The warranties are typically in effect for one year for distributors from the date of shipment and two years for direct sales from the date of delivery. The Company assesses the adequacy of its accrued warranty liabilities and adjusts the amounts as necessary based on historical experience factors and changes in future estimates. Historical factors include product failure rates, material usage and service delivery costs incurred in correcting product failures. In certain circumstances, the Company may have recourse from its contract manufacturers for replacement cost of defective products, which it also factors into its warranty liability assessment.

Warranty obligations, included in other current liabilities, were as follows (in thousands):
 Nine Months Ended March 31,
 20232022
Beginning balance$6,394 $4,812 
Accruals for warranties issued during the period8,344 6,342 
Changes in liability for pre-existing warranties during the period206 790 
Settlements made during the period(7,001)(5,847)
Ending balance$7,943 $6,097 

NOTE 7—DEBT

On March 30, 2021, the Company, as borrower and certain domestic subsidiaries entered into an amended and restated credit agreement (the “Third Amended and Restated Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), the other financial institutions named as lenders therein, and Wells Fargo as administrative agent and collateral agent for the lenders, that extended the $700 million senior secured revolving credit facility (the “Revolving Facility”) and provided a $500 million senior secured term loan facility (the “Term Facility”, together with the Revolving Facility, the “Facilities”), and extended the maturity of the Facilities to March 30, 2026. In addition, the Facilities include an option to request increases in the amounts of such credit facilities by up to an additional $500 million in the aggregate.

The Company has $1.8 million of debt issuance costs which are capitalized and are being amortized as interest expense over the remaining life of the facilities.

The Company’s debt consisted of the following (in thousands):
March 31, 2023June 30, 2022
Term Facility - short term$25,000 $25,000 
Debt issuance costs, net(590)(1,135)
Total Debt - short term24,410 23,865 
Term Facility - long term425,000 443,750 
Revolving Facility - long term640,000 320,000 
Debt issuance costs, net(1,186)(1,128)
Total Debt - long term$1,063,814 $762,622 

The Revolving Facility includes a sub-limit of $25.0 million for letters of credit and a sub-limit of $25.0 million for swingline loans. The Facilities are available for working capital and general corporate purposes that comply with the terms of the Third Amended and Restated Credit Agreement, including to finance the repurchase of the Company’s common stock or to make dividends to the holders of the Company’s common stock. Under the Third Amended and Restated Credit Agreement, revolving loans and swingline loans may be borrowed, repaid and reborrowed until March 30, 2026, at which time all amounts borrowed must be repaid. The Term Facility is payable in quarterly installments of 1.25% of the original principal amount of the Term Facility, commencing with the quarter ending June 30, 2021. The Facilities may be prepaid at any time without penalty.

The Revolving and Term Facilities bear interest, at the Company’s option, at either (i) a floating rate per annum equal to the base rate 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 applicable LIBOR rate (or the Secured Overnight Financing Rate ("SOFR") rate for any new or existing loans that reset after April 2, 2023) for a specified period, plus a margin of between 1.50% and

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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 between 0.50% and 1.25%, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter. Base rate is defined as the greatest of (A) Wells Fargo’s prime rate, (B) the federal funds rate plus 0.50% or (C) the applicable LIBOR rate (or SOFR rate for any new or existing loans that reset after April 2, 2023) for a period of one month plus 1.00%. A default interest rate shall apply on all obligations during certain events of default under the Third Amended and Restated Credit Agreement at a rate per annum equal to 2.00% above the applicable interest rate. The Company will pay to each lender a facility fee on a quarterly basis based on the unused amount of each lender’s commitment to make revolving loans, of between 0.20% and 0.35%, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter. The Company will also pay to the applicable lenders on a quarterly basis certain fees based on the daily amount available to be drawn under each outstanding letter of credit, including aggregate letter of credit commissions of between 1.50% and 2.25%, depending on the Company’s consolidated total leverage ratio as of the most recently ended fiscal quarter, and issuance fees of 0.125% per annum. The Company is also obligated to pay Wells Fargo, as agent, fees customary for a credit facility of this size and type.

The Third Amended and Restated Credit Agreement requires the Company to maintain during the term of the Facilities a maximum consolidated total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratio of 3.50 to 1.00. In addition, the Third Amended and Restated Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the ability of the Company and its subsidiaries to, among other things, grant liens or enter into agreements restricting their ability to grant liens on property, enter into mergers, dispose of assets, change their accounting or reporting policies, change their business and incur indebtedness, in each case subject to customary exceptions for a credit facility of this size and type. The Third Amended and Restated Credit Agreement includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain ERISA events. The occurrence of an event of default could result in the acceleration of the obligations under the Third Amended and Restated Credit Agreement.

The Facilities

As of March 31, 2023, $450.0 million was outstanding on the Term Facility and $640 million was outstanding on the Revolving Facility, leaving $60 million available on the Revolving Facility.

Term Facility

During the nine months ended March 31, 2023, the Company made aggregate payments of $36.8 million under the Term Facility, of which $18.8 million was repayment of principal and $18.0 million was payment of interest.

As of March 31, 2023, the interest rate on the Term Facility was 6.59%. This interest rate reset on April 28, 2023.

Revolving Facility

Under the Third Amended and Restated Credit Agreement, during the nine months ended March 31, 2023, the Company made aggregate payments of $76.3 million under the Revolving Facility, of which $60 million was repayment of principal and $16.3 million was payment of interest. As of March 31, 2023, the interest rates on the Revolving Facility were 6.46% - 6.53%.

The following table summarizes the Company’s estimated debt and interest payment obligations as of March 31, 2023, for the remainder of fiscal 2023 and future fiscal years (in thousands):
2023 (remainder)
2024202520262027ThereafterTotal
Debt payment obligations$6,250 $25,000 $25,000 $1,033,750 $ $ $1,090,000 
Interest and other payments on debt payment obligations (1)
18,196 72,139 70,272 51,468   212,075 
Total$24,446 $97,139 $95,272 $1,085,218 $ $ $1,302,075 
(1) Interest payments are calculated based on the applicable rates and payment dates as of March 31, 2023 and assumes the outstanding revolver balance remains at $640 million. Although the Company’s interest rates on debt obligations may vary, the Company has assumed the most recent available interest rates for all periods presented.

The Facilities were amended on April 3, 2023. For additional information regarding the Facilities, refer to Note 14 - Subsequent Events.

NOTE 8—LEASES


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The Company enters into agreements under which we lease various real estate spaces in North America, Europe and Asia Pacific, under non-cancellable leases that expire on various dates through fiscal 2036. 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, 2023, 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, 2023 and 2022 (in thousands):
Financial Statement ClassificationThree Months Ended March 31,Nine Months Ended March 31,
2023202220232022
Operating lease costs:
Fixed lease costsOperating expenses$2,761 $2,390 $8,287 $6,861 
Fixed lease costsCost of revenues1,010 1,051 2,975 3,347 
Variable lease costsOperating expenses234 230 388 549 
Variable lease costsCost of revenues149 139 305 468 
Total lease costs$4,154 $3,810 $11,955 $11,225 

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, 2023, were $0.2 million and $0.4 million, respectively. Total short-term costs for the three and nine months ended March 31, 2022, were $0.2 million and $0.4 million, respectively. 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, 2023 and 2022, cash paid for amounts associated with the Company's operating lease liabilities were approximately $3.8 million and $3.8 million, respectively. For the nine months ended March 31, 2023 and 2022, cash paid for amounts associated with the Company’s operating lease liabilities were approximately $11.4 million and $10.2 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, 2023:
Remainder of Fiscal 2023
$3,805 
Fiscal 2024
15,163 
Fiscal 2025
13,831 
Fiscal 2026
9,683 
Fiscal 2027
5,727 
Thereafter18,726 
Total future fixed operating lease payments$66,935 
Less: Imputed interest$4,510 
Total operating lease liabilities$62,425 
Weighted-average remaining lease term - operating leases7 years
Weighted-average discount rate - operating leases2.5 %

NOTE 9—COMMITMENTS AND CONTINGENCIES

Operating Leases

See Note 8, "Leases" for future minimum lease payments under non-cancelable operating leases as of March 31, 2023.

Purchase Obligations

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

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the normal course of business, the Company’s contract manufacturers procure components and manufacture products based upon orders placed by us. If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products. We periodically review the potential liability. There have been no significant liabilities for cancellations recorded as of March 31, 2023. Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate the contract manufacturers for any unrecorded liabilities incurred. We may be subject to additional purchase obligations for supply agreements and components ordered by our contract manufacturers based on manufacturing forecasts we provide them each month. We estimate the amount of these additional purchase obligations to range from $1,279.2 million to $1,390.5 million as of March 31, 2023, depending upon the timing of orders placed for these components by our contract manufacturers.

Other Obligations

As of March 31, 2023, the Company has other obligations of $5.8 million which consisted primarily of commitments related to research and development projects.

Indemnification Obligations

The Company enters into standard indemnification agreements with many of its business partners in the ordinary course of business. These agreements include provisions for indemnifying the business partner against any claim brought by a third-party to the extent any such claim alleges that a Company product infringes a patent, copyright or trademark, or violates any other proprietary rights of that third-party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable and the Company has not incurred any material costs to defend lawsuits or settle claims related to these indemnification agreements to date.

Legal Matters

The Company may be involved, from time to time, in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters and other litigation matters relating to various claims that arise in the normal course of business. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Taking all of the above factors into account, the Company records an amount where it is probable that the Company will incur a loss and where that loss can be reasonably estimated. However, the Company’s estimates may be incorrect and the Company could ultimately incur more or less than the amounts initially recorded. The Company may also incur significant legal fees, which are expensed as incurred, in defending against these claims. 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.

Vivato/XR

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 7,062,296 (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”) proceedings before the Patent Trial and Appeal Board (“PTO”). The PTO invalidated asserted claims of two of the three Patents-in-Suit. The District Court lifted the stay on March 1, 2021 to resume proceedings on the 231 Patent in the Original Action.

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. Patent No. 10,594,376 (the “New Action”). The New Action, as well as four similar new lawsuits filed by Vivato against other defendants in the same jurisdiction, were consolidated into the Original Action. On 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. That ruling is now on appeal. All claims asserted against the Company in the Original Action have been dismissed.

On April 18, 2022, the court granted in part the motion for judgment on the pleadings with respect to the ’728 patent, dismissing one of the four remaining claims.


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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.

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.
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 is authorized to repurchase up to $200 million of common stock. The 2022 May Program expires on September 30, 2023. The Company did not make any repurchases under the 2022 May Program during the three and nine months ended March 31, 2023. As of March 31, 2023, the Company had $200 million available for share purchase under the 2022 May Program.

NOTE 11—STOCK BASED COMPENSATION

Stock-Based Compensation Plans

The Company’s 2020, 2010 and 2005 Equity Incentive Plans are described in the Company’s Annual Report.

As of March 31, 2023, the Company had 4,939,274 authorized shares available for future issuance under all of its stock incentive plans.

Stock-Based Compensation

The following table shows total stock-based compensation expense included in the consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2023 and 2022 (in thousands):

 Three Months Ended March 31,Nine Months Ended March 31,
 2023202220232022
Cost of revenues$24 $18 $47 $63 
Research and development942 629 2,524 1,786 
Sales, general and administrative280 227 823 654 
1,246 874 $3,394 $2,503 

Stock Options

The following is a summary of option activity for the Company’s stock incentive plans for the nine months ended March 31, 2023:

 Common Stock Options Outstanding
 Number
of Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(In thousands)
Balance, June 30, 2022
2,112 $10.77 0.37$584,982 
Exercised(2,112)$10.77 
Forfeitures and cancellations
Balance, March 31, 2023
 $ — $