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What changed in Ubiquiti Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ubiquiti Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+241 added−239 removedSource: 10-K (2024-08-23) vs 10-K (2023-08-25)

Top changes in Ubiquiti Inc.'s 2024 10-K

241 paragraphs added · 239 removed · 206 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWhile our agreements with suppliers remains effective, the terms of these agreements, allow either party to terminate the agreements without cause at the end of the annual contract term. 6 Table of Contents Since 2020, we have experienced, and expect to continue to experience, periodic volatility in the supply of components used to manufacture our products, especially chipsets.
Biggest changeWe depend on these license agreements to modify and replace firmware on certain chipsets with our proprietary firmware. While our agreements with suppliers remains effective, the terms of these agreements, allow either party to terminate the agreements without cause at the end of the annual contract term.
We target the enterprise and service provider markets through our highly engaged community of service providers, distributors, value added resellers, webstores, systems integrators and 4 Table of Contents corporate IT professionals, which we refer to as the Ubiquiti Community. We target consumers through digital marketing, including through our webstores, retail chains and, to a lesser extent, the Ubiquiti Community.
We target the enterprise and service provider markets through our highly engaged community of service providers, distributors, value added resellers, webstores, systems integrators and corporate IT professionals, which we refer to as the Ubiquiti Community. We target consumers through digital marketing, including 4 Table of Contents through our webstores, retail chains and, to a lesser extent, the Ubiquiti Community.
For a further discussion of the uncertainties and business risks associated with our international workforce and operations, refer to risk factors under “Part I - Item 1A. Risk Factors - Risks Related to Our International Operations.” Manufacturing and Suppliers We use contract manufacturers, primarily located in China and Vietnam, to manufacture our products.
For a further discussion of the uncertainties and business risks associated with our international workforce and operations, refer to risk factors under “Part I - Item 1A. Risk Factors - Risks Related to Our International Operations.” Manufacturing and Suppliers We use contract manufacturers, primarily located in Vietnam and China, to manufacture our products.
Our products and solutions are designed to meet the price- performance characteristics demanded by our customers to achieve a strong overall return on their investment. Our products are designed to operate in growing networks without degradation in performance or operational complexity. In the backhaul market, our competitors include Cambium Networks, Ceragon Networks, MikroTîkls, Airspan, SAF Tehnika and Trango.
Our products and solutions are designed to meet the price- performance characteristics demanded by our customers to achieve a strong overall return on their investment. Our products are designed to operate in growing networks without degradation in performance or operational complexity. In the backhaul market, our competitors include Cambium Networks, Ceragon Networks, MikroTîkls, Airspan and Trango.
In the CPE market, our competitors include Cambium Networks, MikroTîkls, Ruckus Wireless (CommScope)and TP-LINK Technologies. In the antenna market, we primarily compete with PCTEL, ARC, ITELITE and Radio Waves. In the enterprise WLAN market, we primarily compete with Huawei, Aerohive Networks, Aruba Networks (HPE), Ruckus Wireless (CommScope), Cisco Meraki and Cisco.
In the CPE market, our competitors include Cambium Networks, MikroTîkls, Ruckus Wireless (CommScope), TP-Link Technologies and Tarana Wireless. In the antenna market, we primarily compete with PCTEL, ARC, ITELITE and Radio Waves. In the enterprise WLAN market, we primarily compete with Aerohive Networks, Aruba Networks (HPE), Cisco Meraki and Cisco and Ruckus Wireless (CommScope).
During fiscal 2023, we sold our products to over 100 distributors and direct to customers through our webstores (collectively, “customers”) in over 75 countries. In fiscal 2023, 2022, and 2021, there were no customers that represented 10% or more of our revenue.
During fiscal 2024, we sold our products to over 100 distributors and direct to customers through our webstores (collectively, “customers”) in over 75 countries. In fiscal 2024, 2023, and 2022, there were no customers that represented 10% or more of our revenue.
For further discussion of the risks associated with intellectual property, see “Part I - Item 1A. Risk 8 Table of Contents Factors - Risks Related to Intellectual Property”. Environmental matters We are subject to various environmental regulations governing materials usage, packaging and other environmental impacts in the United States and in various countries where our products are manufactured and sold.
For further discussion of the risks associated with intellectual property, see “Part I - Item 1A. Risk Factors - Risks Related to Intellectual Property”. Environmental matters We are subject to various environmental regulations governing materials usage, packaging and other environmental impacts in the United States and in various countries where our products are manufactured and sold.
In the video surveillance market, we primarily compete with Axis Communications, HIKVISION, Mobotix and Vivotek. We expect increased competition from other established and emerging companies if our market continues to develop and expand. As we enter new markets, we expect to face competition from incumbent and new market participants.
In the video surveillance market, we primarily compete with Axis Communications, HIKVISION, Hanwha Vision and Vivotek. We expect increased competition from other established and emerging companies if our market continues to develop and expand. As we enter new markets, we expect to face competition from incumbent and new market participants.
As of June 30, 2023, our research and development team consisted of 1,059 full time equivalent employees, including contractors, located in the United States, Taiwan, China, Latvia, the Czech Republic, Lithuania, Ukraine, Sweden, and elsewhere. Our research and development operations work on product development of new products and new versions of existing products.
As of June 30, 2024, our research and development team consisted of 1,134 full time equivalent employees, including contractors, located in the United States, Taiwan, China, Latvia, the Czech Republic, Lithuania, Ukraine, Sweden, and elsewhere. Our research and development operations work on product development of new products and new versions of existing products.
We do not have any visibility on the location or extent of purchases of our products by individual network operators and service providers from our distributors. For further discussion of the risks associated with foreign operations, see “Part I - Item 1A.
We do not have any visibility on the location or extent of purchases of our products by individual network operators and service providers from our distributors. For further discussion of the risks associated with foreign operations, see “Part I - Item 1A. Risk Factors-Risks Related to Our International Operations”.
Our workforce is diversified across multiple locations with 67%, 22% and 11% located in (i) Asia Pacific, (ii) Europe, the Middle East, and Africa (“EMEA”) and (iii) the Americas, respectively. The Company believes that its entrepreneurial, decentralized, and diversified work environment has contributed to its success.
Our workforce is diversified across multiple locations with 64%, 23% and 13% located in (i) Asia Pacific, (ii) Europe, the Middle East, and Africa (“EMEA”) and (iii) the Americas, respectively. The Company believes that its entrepreneurial, decentralized, and diversified work environment has contributed to its success.
We believe that we are taking the right actions to mitigate these continuing supply constraints, however, we recognize the associated risks. For a further discussion of the uncertainties and business risks associated with the supply constraints, refer to “Part I - Item 1A.
We believe that we have taken the right actions to mitigate these supply constraints; however, we recognize the associated risks. For a further discussion of the uncertainties and business risks associated with the supply constraints, refer to “Part I - Item 1A.
Our research and development expenses were $145.2 million, $137.7 million and $116.2 million for fiscal 2023, fiscal 2022 and fiscal 2021, respectively. We expect that the number of our research and development personnel will increase over time and that our research and development expenses will also increase.
Our research and development expenses were $159.8 million, $145.2 million and $137.7 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. We expect that the number of our research and development personnel will increase over time and that our research and development expenses will also increase.
Our revenues were $1.9 billion, $1.7 billion and $1.9 billion in the fiscal years ended June 30, 2023, 2022 and 2021, respectively. We reported net income of $407.6 million, $378.7 million and $616.6 million in the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
Our revenues were $1.9 billion, $1.9 billion and $1.7 billion in the fiscal years ended June 30, 2024, 2023 and 2022, respectively. We reported net income of $350.0 million, $407.6 million and $378.7 million in the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
Risk Factors-Risks Related to Our International Operations”. 7 Table of Contents Backlog Our sales are primarily made through standard sale orders for delivery of products. Our inability to procure sufficient product due to COVID-19 and the worldwide chip shortage had led to a significant increase in our backlog of unfulfilled orders in fiscal 2022.
Backlog Our sales are primarily made through standard sale orders for delivery of products. Our inability to procure sufficient product due to COVID-19 and the worldwide chip shortage had led to a significant increase in our backlog of unfulfilled orders in fiscal 2022.
Competition The markets for networking solutions for service providers, enterprise WLAN, video surveillance, microwave backhaul and machine-to-machine communications technology are highly competitive and are influenced by the following competitive factors, among others: • total cost of ownership and return on investment associated with the solutions; • simplicity of deployment and use of the solutions; • ability to rapidly develop high performance integrated solutions; • reliability and scalability of the solutions; • market awareness of a particular brand; • ability to provide secure access to wireless networks; • ability to offer a suite of products and solutions; • ability to allow centralized management of the solutions; and • ability to provide quality product support.
However, we do not believe our backlog information is a reliable indicator of our ability to achieve any particular level of revenue or financial performance. 7 Table of Contents Competition The markets for networking solutions for service providers, enterprise WLAN, video surveillance, microwave backhaul and machine-to-machine communications technology are highly competitive and are influenced by the following competitive factors, among others: • total cost of ownership and return on investment associated with the solutions; • simplicity of deployment and use of the solutions; • ability to rapidly develop high performance integrated solutions; • reliability and scalability of the solutions; • market awareness of a particular brand; • ability to provide secure access to wireless networks; • ability to offer a suite of products and solutions; • ability to allow centralized management of the solutions; and • ability to provide quality product support.
Devices on the airMax platform, such as customer premise equipment (“CPE”), base station, and backhaul, are able to support a wireless network that can scale to hundreds of clients per base station over long distances while maintaining low latency and high throughput. • EdgeMAX - our EdgeMAX platform is a software and systems routing platform, powered by our full-featured UISP operating system that includes advanced quality of service, firewall, dynamic routing and virtual private network functionality. • airFiber - our airFiber platform is a wireless backhaul point-to-point radio system, a wireless method of transmitting data to and from network backbone.
Devices on the airMAX platform, such as customer premise equipment (“CPE”), base station, and backhaul, are able to support a wireless network that can scale to hundreds of clients per base station over long distances while maintaining low latency and high throughput. • airFiber - our airFiber platform is a wireless backhaul point-to-point radio system, a wireless method of transmitting data to and from network backbone.
As of June 30, 2023, we employed and or contracted with 1,535 full time equivalent employees, of which 1,059 were in research and development, 365 in operations, and 111 in sales, general and administrative.
As of June 30, 2024, we employed and or contracted with 1,515 full time equivalent employees, of which 1,134 were in research and development, 264 in operations, and 117 in sales, general and administrative.
Human Capital Management Employee Overview Our employees are at the center of everything we do at Ubiquiti and are the driving force for our innovation and success. Ubiquiti seeks to provide a safe, inclusive and positive employee experience for all its employees. It is our policy to make employment decisions and opportunities based on merit, qualifications, potential and competency.
Ubiquiti seeks to provide a safe, inclusive and positive employee experience for all its employees. It is our policy to make employment decisions and opportunities based on merit, qualifications, potential and competency.
We do not stockpile sufficient components, particularly the chipsets, to cover the time it would take to re-engineer our products to replace the components used to manufacture our products and we generally do not have any guaranteed supply arrangements with our suppliers for these components (including the chipsets).
This has resulted in supply constraints and corresponding increases in component delivery lead times and costs to obtain components, and resulted in delays in product production. 6 Table of Contents We do not stockpile sufficient components, to cover the time it would take to re-engineer our products to replace the components used to manufacture our products and we generally do not have any guaranteed supply arrangements with our suppliers for these components (including the chipsets).
Our executive office is located at 685 Third Avenue, 27th Floor, New York, New York 10017. Our website address is www.ui.com. From time to time, we may use our website as a channel of distribution of material information. The information on, or that can be assessed through, our website is not part of this Annual Report on Form 10-K. 9
From time to time, we may use our website and its subdomains as a channel of distribution of material information. The information on, or that can be assessed through, any websites cited herein are not part of this Annual Report on Form 10-K.
These mitigation efforts have increased, and are expected to continue to increase, our balances of finished goods and raw material inventories and vendor deposits. The increasing balances of finished goods and raw material inventory and vendor deposits significantly increase the risks of future material excess, obsolete inventory and related losses.
These mitigation efforts have caused our inventory and vendor deposit balances to increase in the past, and they may cause such increases in the future. These mitigation efforts therefore significantly increase the risks of future material excess, obsolete inventory and related losses.
We are also subject to regulatory developments, including SEC disclosure regulations relating to "conflict minerals," relating to ethically responsible sourcing of the components and materials used in our products. To date, compliance with federal, state, local, and foreign laws enacted for the protection of the environment has had no material effect on our capital expenditures, earnings, or competitive position.
We are also subject to regulatory developments, including SEC disclosure regulations relating to "conflict minerals," relating to ethically responsible sourcing of the 8 Table of Contents components and materials used in our products.
However, with the abatement of supply constraints, we were able to reduce our backlog of unfulfilled orders in 2023. However, we do not believe our backlog information is a reliable indicator of our ability to achieve any particular level of revenue or financial performance.
However, with the abatement of supply constraints, we were able to reduce our backlog of unfulfilled orders in 2023 and 2024.
Utilizing low-cost hardware and innovative software and firmware, we seek to build price- performance solutions to address both enterprises and service providers. Key Technology Platforms Our current Service Provider and carrier solutions include: • airMAX - our airMAX platform includes proprietary protocols developed by us that contain advanced technologies for minimizing signal noise.
Utilizing low-cost hardware and innovative software and firmware, we seek to build price- performance solutions to address both enterprises and service providers.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . Our executive office is located at 685 Third Avenue, 27th Floor, New York, New York 10017. Our website address is www.ui.com.
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It is designed to enable internet providers (“ISPs”) to quickly build high speed fiber internet networks for many users and over long distance. 5 Table of Contents Our current Enterprise Provider solutions include: • UniFi Gateway Console - UniFi Console is an Enterprise class router and security gateway device that is expandable and extends the UniFi enterprise solutions to provide cost-effective, reliable routing and advanced network security. • UniFi WiFi - our UniFi WiFi platform was designed as an enterprise Wi-Fi system, combining Wi-Fi certified hardware with software-based management controller (UniFi OS).
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Key Technology Platforms Our current Enterprise Provider solutions include: • UniFi Cloud Gateway - UniFi Cloud Gateway is an Enterprise class internet and security gateway device that provides reliable routing, advanced cybersecurity and powerful site management. • UniFi WiFi - An enterprise WiFi system that combines state-of-the-art hardware with intuitive software management for configuration of access points at scale. • UniFi Protect - our UniFi Protect platform is a video surveillance platform with private local storage, secure remote access and cameras designed for every deployment. • UniFi Switch - UniFi Switch is a versatile switching platform that delivers high-capacity performance, and power over ethernet to scale enterprise networks. • UniFi Access - UniFi Access is a state-of-the art door access solution that is easily expandable with touchscreen readers, live video, and mobile application credential support. • UniFi Talk - UniFi Talk is a plug-and-play business phone system and VoIP subscription service designed to elevate productivity in organizations. 5 Table of Contents Our current Service Provider and carrier solutions include: • airMAX - our airMAX platform includes proprietary protocols developed by us that contain advanced technologies for minimizing signal noise.
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UniFi uses a virtual controller that allows for on-site management or remote management through the cloud, allowing for configuration of the network and individual access points. • UniFi Protect - our UniFi Protect platform is a video surveillance system that can be accessed securely from any web browser, provides detailed statistical reporting and advanced analytics and provides a management console with multiple views, versatile camera setting and customizable event recordings. • UniFi Switch - UniFi Switch delivers performance, switching, and power of ethernet (“PoE+”) support for enterprise networks. • UniFi Access - UniFi Access is a state-of-the art door access system that is easily expandable. • UniFi Talk - A new approach to business telephony.
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It is designed to enable internet providers (“ISPs”) to quickly build high speed fiber internet networks for many users and over long distance. • Wave - Products built on the proprietary Wave Technology platform are engineered to maximize speed/performance across long distances using the worldwide, unlicensed 60GHz band.
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UniFi Talk is a plug-and-play phone system and VoIP subscription service designed for small and medium-sized businesses. We offer consumer products, called AmpliFi and Alien, which are Wi-Fi system solutions designed to serve the demands of the modern connected home. We continue to explore consumer related market opportunities and have research and development teams focused on consumer related solutions.
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We have experienced in the past, particularly from 2020 to 2023, and may experience in the future, periodic volatility in the supply of components used to manufacture our products.
Removed
We depend on these license agreements to modify and replace firmware on certain chipsets with our proprietary firmware.
Added
To date, compliance with federal, state, local, and foreign laws enacted for the protection of the environment has had no material effect on our capital expenditures, earnings, or competitive position. Human Capital Management Employee Overview Our employees are at the center of everything we do at Ubiquiti and are the driving force for our innovation and success.
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This has resulted in supply constraints and corresponding increases in component delivery lead times and costs to obtain components, and resulted in delays in product production.
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Further, the Company's references to any URLs for any websites cited herein are intended to be inactive textual references only. 9

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+16 added−20 removed308 unchanged
Biggest changeUpon a default under one or more of these loans, the lender could sell the pledged shares into the market without limitation on volume or manner of sale. Sales of shares by Mr. Pera to reduce his loan balance or the lenders upon foreclosure are likely to adversely affect our stock price. Mr.
Biggest changeIn the event Mr. Pera pledges shares of common stock as collateral for margin or other loans, Mr. Pera may need to sell shares of our common stock to meet applicable repayment requirements. Upon a default under such loans, the lender could sell the pledged shares into the market without limitation on volume or manner of sale.
Shortages of components or manufacturing capacity could increase our costs or delay our ability to fulfill future orders and could have a material adverse impact on our business and results of operations. We retain contract manufacturers, located primarily in China and Vietnam, to manufacture our products.
Shortages of components or manufacturing capacity could increase our costs or delay our ability to fulfill future orders and could have a material adverse impact on our business and results of operations. We retain contract manufacturers, located primarily in Vietnam and China, to manufacture our products.
We have been investing and expect to continue to invest in growth areas and in our enterprise and service provider technologies, and if the return on these investments is lower or develops more slowly than we expect, our results of operations may be harmed.
We have been investing and expect to continue to invest in growth areas in our enterprise and service provider technologies, and if the return on these investments is lower or develops more slowly than we expect, our results of operations may be harmed.
All of our consumer products are subject to changing consumer preferences that cannot be predicted with certainty and lead times for our products may make it more difficult for us to respond rapidly to new or changing product or consumer preferences.
All of our products are subject to changing preferences that cannot be predicted with certainty and lead times for our products may make it more difficult for us to respond rapidly to new or changing product or consumer preferences.
We have operations in China, the Czech Republic, Lithuania, Poland, Latvia, Ukraine, India, Taiwan, Vietnam and elsewhere, with our operations in Taiwan, in particular, increasingly important to our overall business. We also sell to distributors in numerous countries throughout the world.
We have operations in China, the Czech Republic, Lithuania, Poland, Latvia, Ukraine, India, Taiwan, Vietnam and elsewhere, with our operations in Taiwan and Vietnam, in particular, increasingly important to our overall business. We also sell to distributors in numerous countries throughout the world.
We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries will produce anticipated levels of revenues or profitability. Our third-party logistics and warehousing providers in China, Vietnam and elsewhere may fail to safeguard and accurately manage and report our inventory.
We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries will produce anticipated levels of revenues or profitability. Our third-party logistics and warehousing providers in Vietnam and China and elsewhere may fail to safeguard and accurately manage and report our inventory.
We use third-party logistics and warehousing providers located in China, Vietnam and other countries to fulfill a portion of our worldwide sales. We also rely on our third-party logistics and warehousing providers to safeguard and manage and report on the status of our products at their warehouse and in transit.
We use third-party logistics and warehousing providers located in Vietnam, China and other countries to fulfill a portion of our worldwide sales. We also rely on our third-party logistics and warehousing providers to safeguard and manage and report on the status of our products at their warehouse and in transit.
Our contract manufacturers operate primarily in China and Vietnam, where the prosecution of intellectual property infringement and trade secret theft is more difficult than in the United States.
Our contract manufacturers operate primarily in Vietnam and China, where the prosecution of intellectual property infringement and trade secret theft is more difficult than in the United States.
Pera, in particular, is central to our product development efforts and overall strategic direction. The departure or loss of Mr. Pera or any of the other members of our management team and the inability to identify and hire a qualified replacement timely would adversely affect our business, results of operations and financial condition.
Mr. Pera, in particular, is central to our product development efforts and overall strategic direction. The departure or loss of Mr. Pera or any of the other members of our management team and the inability to identify and hire a qualified replacement timely would adversely affect our business, results of operations and financial condition.
Whether or not there is merit to a given claim, it can be time consuming and costly to defend against, and could: • adversely affect our relationships with our current or future users, customers and suppliers; • cause delays or stoppages in the shipment of our products; • cause us to modify or redesign our products; • cause us to rebrand our products or services; • subject us to a temporary or permanent injunction; • divert management’s attention and resources; • subject us to significant damages or settlements; • cause us to give up some of our intellectual property; • require us to enter into costly licensing agreements; or • require us to cease offering certain of our products or services.
Whether or not there is merit to a given claim, it can be time consuming and costly to defend against, and could: • adversely affect our relationships with our current or future users, customers and suppliers; • cause delays or stoppages in the shipment of our products; • cause us to modify or redesign our products; 23 • cause us to rebrand our products or services; • subject us to a temporary or permanent injunction; • divert management’s attention and resources; • subject us to significant damages or settlements; • cause us to give up some of our intellectual property; • require us to enter into costly licensing agreements; or • require us to cease offering certain of our products or services.
A number of factors may affect our future effective tax rates including, but not limited to: • the interpretation of country-by-country reports and outcome of discussions with various tax authorities regarding intercompany transfer pricing arrangements; • changes that involve Ubiquiti’s supply chain outside of the United States; • changes in the composition of earnings in countries or states with differing tax rates; • the resolution of issues arising from tax audits with various tax authorities, • changes to tax laws regarding R&D tax credits; • changes in share-based compensation; and • changes in tax law and/or generally accepted accounting principles.
A number of factors may affect our future effective tax rates including, but not limited to: • the interpretation of country-by-country reports and outcome of discussions with various tax authorities regarding intercompany transfer pricing arrangements; • changes that involve Ubiquiti’s supply chain outside of the United States; • changes in the composition of earnings in countries or states with differing tax rates; • the resolution of issues arising from tax audits with various tax authorities, • changes to tax laws regarding R&D tax credits; • changes in share-based compensation; and 32 • changes in tax law and/or generally accepted accounting principles.
Additionally, any or all of the following could either limit supply or increase costs, directly or indirectly, to us or our contract manufacturers: 15 • labor strikes or shortages; • financial problems of either contract manufacturers or component suppliers; • reservation of manufacturing capacity at our contract manufactures by other companies, inside or outside of our industry; • changes or uncertainty in tariffs, economic sanctions, and other trade barriers; and • industry consolidation occurring within one or more component supplier markets, such as the semiconductor market.
Additionally, any or all of the following could either limit supply or increase costs, directly or indirectly, to us or our contract manufacturers: • labor strikes or shortages; • financial problems of either contract manufacturers or component suppliers; • reservation of manufacturing capacity at our contract manufactures by other companies, inside or outside of our industry; • changes or uncertainty in tariffs, economic sanctions, and other trade barriers; and • industry consolidation occurring within one or more component supplier markets, such as the semiconductor market.
Weakness in orders, directly or indirectly, from the markets we serve, including as a result of any slowdown in capital expenditures by the markets we service (which may be more prevalent during a global economic downturn, or periods of economic, political or regulatory uncertainty), could have a material adverse effect on our business, results of operations, liquidity and financial condition.
Weakness in orders, directly or indirectly, from the markets we serve, including as a result of any slowdown in capital expenditures by the markets we serve (which may be more prevalent during a global economic downturn, or periods of economic, political or regulatory uncertainty), could have a material adverse effect on our business, results of operations, liquidity and financial condition.
There can be no assurance 19 that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.
There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.
Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. 23 We have received, and may in the future receive, claims from third parties, including competitors and non-practicing entities, asserting intellectual property infringement and other related claims.
Furthermore, because of the potential for high court awards that are not necessarily predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts. We have received, and may in the future receive, claims from third parties, including competitors and non-practicing entities, asserting intellectual property infringement and other related claims.
Another example, in November 2016, the Standing Committee of China’s National People’s Congress passed China’s first Cybersecurity Law (“CSL”), which took effect in June 2017. The CSL is the first Chinese law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny.
Another example, in November 2016, the Standing Committee of 29 China’s National People’s Congress passed China’s first Cybersecurity Law (“CSL”), which took effect in June 2017. The CSL is the first Chinese law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny.
Since these activities are currently conducted in China and Vietnam and could be expanded to other foreign countries, some of these risks may be more significant due to the less predictable legal and political environment. Additionally, changes in the local political, social and economic environment could adversely affect our ability and plans to develop our own manufacturing capacity.
Since these activities are currently conducted in Vietnam, Taiwan and China and could be expanded to other foreign countries, some of these risks may be more significant due to the less predictable legal and political environment. Additionally, changes in the local political, social and economic environment could adversely affect our ability and plans to develop our own manufacturing capacity.
A tighter credit market for consumer, business, and service provider spending may have several adverse 17 effects, including reduced demand for our products, increased price competition or deferment of purchases and orders by our customers. If global economic conditions are volatile or if economic conditions deteriorate, the consumer demand for our products may not reach our sales targets.
A tighter credit market for consumer, business, and service provider spending may have several adverse effects, including reduced demand for our products, increased price competition or deferment of purchases and orders by our customers. If global economic conditions are volatile or if economic conditions deteriorate, the consumer demand for our products may not reach our sales targets.
If our retailers do not adequately display our products, choose to reduce the space for our products in their stores or locate them in less than premium positioning, choose not to carry some or all of our consumer products or promote competitors’ products over ours, or do not effectively explain to customers the advantages of our consumer products, our sales could decrease and our business could be harmed.
If our retailers do not adequately display our products, choose to reduce the space for our products in their stores or locate them in less than premium positioning, choose not to carry some or all of our products or promote competitors’ products over ours, or do not effectively explain to customers the advantages of our products, our sales could decrease and our business could be harmed.
Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any negative sentiments 21 towards the U.S. as a result of such changes, could also adversely affect our business.
Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently develop and sell products, and any negative sentiments towards the U.S. as a result of such changes, could also adversely affect our business.
Our costs are subject to fluctuations, including due to the costs of raw materials, labor, transportation and energy. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost saving projects and sourcing decisions, while maintaining and improving margins and market share.
Our costs are subject to fluctuations, including due to the costs of raw materials, labor, transportation and energy. Therefore, our business results depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost 17 saving projects and sourcing decisions, while maintaining and improving margins and market share.
We may not be able to achieve an acceptable return, if any, on our research and development efforts, and our business, results of operations, liquidity and financial condition may be adversely affected. As we continually seek to enhance our consumer products, we will incur additional costs to incorporate new or revised features.
We may not be able to achieve an acceptable return, if any, on our research and development efforts, and our business, results of operations, liquidity and financial condition may be adversely affected. As we continually seek to enhance our products, we will incur additional costs to incorporate new or revised features.
Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products, including our firmware updates, could be provided by our distributors, resellers and/or end users despite such precautions. Any such provision could have negative consequences, including government investigations, penalties and reputational harm.
Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products, including our firmware updates, could be provided by our distributors, resellers and/or end users despite such precautions. Any such provision could 28 have negative consequences, including government investigations, penalties and reputational harm.
Additionally, as we invest and dedicate resources into new growth areas, there is no assurance that we may succeed at maintaining our competitive position in enterprise and service provider technologies. To remain competitive and stimulate customer demand, we must effectively manage product introductions, product transitions and marketing.
Additionally, as we invest and dedicate resources into new growth areas, there is no assurance that we may succeed at maintaining our competitive position in existing enterprise and service provider technologies. To remain competitive and stimulate customer demand, we must effectively manage product introductions, product transitions and marketing.
Any disruption resulting from these events could cause significant delays in product development or shipments of our products until we are able to shift our development, manufacturing or logistics centers from the affected contractor to another vendor, or shift the affected administrative or research and development 16 activities to another location.
Any disruption resulting from these events could cause significant delays in product development or shipments of our products until we are able to shift our development, manufacturing or logistics centers from the affected contractor to another vendor, or shift the affected administrative or research and development activities to another location.
For example, political unrest and uncertainties in the Middle East, Eastern Europe and Asia Pacific, including the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan, may lead to disruptions in commerce in those regions, which would in turn impact our sales to those regions.
For example, political unrest and uncertainties in the Middle East, Eastern Europe and Asia Pacific, including the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan, 21 may lead to disruptions in commerce in those regions, which would in turn impact our sales to those regions.
For additional information regarding the impact of privacy regulations 13 applicable to our business, see “—Risks Related to Regulatory, Legal and Tax Matters — Our failure to comply with U.S. and foreign laws related to privacy, data security, cybersecurity and data protection, such as the E.U.
For additional information regarding the impact of privacy regulations applicable to our business, see “—Risks Related to Regulatory, Legal and Tax Matters — Our failure to comply with U.S. and foreign laws related to privacy, data security, cybersecurity and data protection, such as the E.U.
We currently use NetSuite and other software and services to conduct our order management and financial processes. The availability of this service is essential to the management of our business. As we expand our operations, we expect to utilize additional systems and service providers that may also be essential to managing our business.
We currently use NetSuite and other software and services to conduct our order management and financial processes. The availability of this service is essential to the management of our business. As we expand our operations, we expect to utilize additional systems 25 and service providers that may also be essential to managing our business.
The networking, enterprise WLAN, routing, switching, video surveillance, wireless backhaul, machine-to-machine communications and consumer markets in which we primarily compete are highly competitive and are influenced by competitive factors including: • our ability to rapidly develop and introduce new high-performance integrated solutions; • the price and total cost of ownership and return on investment associated with the solutions; • the simplicity of deployment and use of the solutions; • the reliability and scalability of the solutions; • the market awareness of a particular brand; • our ability to provide secure access to wireless networks; • our ability to offer a suite of products and solutions; • our ability to allow centralized management of the solutions; and • our ability to provide product support.
The networking, enterprise WLAN, routing, switching, video surveillance, door access, VoIP, wireless backhaul, machine-to-machine communications and consumer markets in which we primarily compete are highly competitive and are influenced by competitive factors including: • our ability to rapidly develop and introduce new high-performance integrated solutions; • the price and total cost of ownership and return on investment associated with the solutions; • the simplicity of deployment and use of the solutions; • the reliability and scalability of the solutions; • the market awareness of a particular brand; • our ability to provide secure access to wireless networks; • our ability to offer a suite of products and solutions; • our ability to allow centralized management of the solutions; and • our ability to provide product support.
Any inability or failure by us to meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features. We have initiated and may continue to initiate legal proceedings to enforce our intellectual property rights.
Any inability or failure by us to 22 meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features. We have initiated and may continue to initiate legal proceedings to enforce our intellectual property rights.
“Controls and Procedures”, the Company completed the remediation efforts of such material weakness, completed testing of the controls to address such material weaknesses and concluded that the previously reported material weaknesses in internal controls over financial reporting have been satisfactorily remediated as of June 30, 2017.
“Controls and Procedures”, the Company completed the remediation efforts of such material weakness, completed testing of the controls to address such material weaknesses and concluded that the previously reported material weaknesses in internal controls over financial reporting have been satisfactorily remediated as of 31 June 30, 2017.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations, and prevent us from producing accurate 31 and timely financial statements to manage our business.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations, and prevent us from producing accurate and timely financial statements to manage our business.
Despite any defensive measures we take to manage threats to our business, our risk and exposure to these matters remain heightened because of, among other things, the evolving nature of such threats in light of advances in computer capabilities, new discoveries in the field of cryptography, new and sophisticated methods used by criminals including phishing, social engineering or other illicit acts, the increasing use of our webstores by customers, or other events or developments that we may be unable to anticipate or fail to adequately mitigate.
Despite any defensive measures we take to manage threats to our business, our risk and exposure to these matters remain heightened because of, among other things, the evolving nature of such threats in light of advances in computer capabilities and artificial intelligence, new discoveries in the field of cryptography, new and sophisticated methods used by criminals including phishing, social engineering or other illicit acts, the increasing use of our webstores by customers, or other events or developments that we may be unable to anticipate or fail to adequately mitigate.
For example, we currently rely upon some chipset suppliers, such as Qualcomm Atheros and Broadcom, as single-source suppliers of certain components for some of our products, and a disruption in the supply of those components would significantly disrupt our business.
For example, we currently rely upon some chipset suppliers, such as Qualcomm and Broadcom, as single-source suppliers of certain components for some of our products, and a disruption in the supply of those components would significantly disrupt our business.
If our introduction of a new product is not successful, or if we are not able to achieve the revenues or margins we expect, our results of operations may be harmed and we may not recover our product development and marketing expenditures.
If our introduction of a new product is not successful, or if we are not able to achieve the revenues or margins that we expect, our results of operations may be harmed and we may not recover our product development and marketing expenditures.
The operation of our products by network operators or service providers in the United States or elsewhere in a manner not in compliance with local law could result in fines, operational disruption, or harm to our reputation.
The operation of our products by network operators 30 or service providers in the United States or elsewhere in a manner not in compliance with local law could result in fines, operational disruption, or harm to our reputation.
If we fail to promote, maintain and protect our brand successfully, our ability to sustain and expand our business and enter new markets will suffer. We may fail to effectively manage the challenges associated with our growth.
If we fail to promote, maintain and protect our brand successfully, our ability to sustain and expand our business and enter new markets will suffer. 14 We may fail to effectively manage the challenges associated with our growth.
We may also 14 need to increase costs to add personnel, upgrade or replace our existing reporting systems, as well as improve our business processes and controls as a result of these changes.
We may also need to increase costs to add personnel, upgrade or replace our existing reporting systems, as well as improve our business processes and controls as a result of these changes.
If any of our contract manufacturers experiences problems in its manufacturing operations, or if we have to change or add additional contract manufacturers, our ability to ship products to our customers would be impaired.
If any of our contract 15 manufacturers experiences problems in its manufacturing operations, or if we have to change or add additional contract manufacturers, our ability to ship products to our customers would be impaired.
The risks of earthquakes, extreme storms and other natural disasters (including as a result of climate change), military conflicts or geopolitical tensions in these geographic areas are significant. In addition, global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storm, sea-level rise and flooding.
The risks of earthquakes, extreme storms and other natural disasters (including as a result of climate change), military conflicts or geopolitical tensions in these geographic areas are significant. In addition, global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storm, sea-level rise, changing precipitation and flooding.
This risk may be further exacerbated by supply chain constraints on the global supply of components, particularly the chipsets, that we use to manufacture our products, as well as longer shipping lead times and delays. The markets we serve can be especially volatile, and weakness in orders could harm our future results of operations.
This risk may be further exacerbated by supply chain constraints on the global supply of components that we use to manufacture our products, as well as longer shipping lead times and delays. The markets we serve can be especially volatile, and weakness in orders could harm our future results of operations.
These increases in manufacturing costs or delays in manufacturing could have a material adverse impact on our business and results of operations. For additional discussion of the risks associated with supply chain issues or supplies of components, including chipsets, see the risk factor below captioned “We rely upon a limited number of suppliers.
These increases in manufacturing costs or delays in manufacturing could have a material adverse impact on our business and results of operations. For additional discussion of the risks associated with supply chain issues or supplies of components, see the risk factor below captioned “We rely upon a limited number of suppliers.
While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to use our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend, accurately predict customer acquisition, or fully understand or estimate the conditions and behaviors that drive customer behavior.
While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to use our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend, accurately predict customer acquisition, or fully understand or estimate the conditions and behaviors that drive cust omer behavior.
Pera has also indicated to us that he may in the future from time to time pledge additional shares of common stock as collateral for margin or other loans, enter into derivative transactions based on the value of our common stock, dispose of shares of common stock, otherwise monetize shares of his common stock and/or engage in other transactions relating to shares of our common stock and/or other securities of the company.
Pera has indicated to us that he may in the future from time to time pledge shares of common stock as collateral for margin or other loans, enter into derivative transactions based on the value of our common stock, dispose of shares of common stock, otherwise monetize shares of his common stock and/or engage in other transactions relating to shares of our common stock and/or other securities of the company.
Any security breach could also expose us to risks of data loss, litigation and liability, and could seriously disrupt operations and harm our reputation, any of which could adversely affect our financial condition and results of operations. In addition, state and federal laws and regulations are increasingly enacted to protect consumers against identity theft.
Any security breach could also expose us and our service providers to risks of data loss, litigation and liability, and could seriously disrupt operations and harm our reputation, any of which could adversely affect our financial condition and results of operations. In addition, state and federal laws and regulations are increasingly enacted to protect consumers against identity theft.
The risk that these types of events could seriously harm our business is likely to increase as we expand the web-based products and services that we offer. We may be unable to anticipate or fail to adequately mitigate against increasingly sophisticated methods to engage in illegal or fraudulent activities against us.
The risk that these types of events could seriously harm our business is likely to increase as we expand the products and services that we offer. We may be unable to anticipate or fail to adequately mitigate against increasingly sophisticated methods to engage in illegal or fraudulent activities against us.
These include: • the burdens of complying with a wide variety of foreign laws and regulations, and the risks of non-compliance, including the increased burden of complying with anti-bribery regulations, such as the Foreign Corrupt Practices Act (“FCPA”) of the United States, and the risk associated with non-compliance with such laws; • fluctuations in currency exchange rates; • import and export license requirements, tariffs, economic sanctions, contractual limitations and other trade barriers; • increasing labor costs, especially in China and Vietnam; • difficulties in managing the geographically remote personnel; • the complexities of foreign tax systems and changes in their tax rates and rules; • stringent consumer protection and product compliance regulations that are costly to comply with and may vary from country to country; • limited protection and enforcement regimes for intellectual property rights in some countries; • business disruptions created by health crises and outbreaks of communicable diseases, especially in China, such as the outbreak of COVID-19; • increased financial accounting and reporting burdens and complexity; and • political, social and economic instability in some jurisdictions, including impacts of the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan and the responses by governments worldwide to such conflicts.
These include: • the burdens of complying with a wide variety of foreign laws and regulations, and the risks of non-compliance, including the increased burden of complying with anti-bribery regulations, such as the Foreign Corrupt Practices Act (“FCPA”) of the United States, and the risk associated with non-compliance with such laws; • fluctuations in currency exchange rates; • impact of inflation on local economies; • import and export license requirements, tariffs, economic sanctions, contractual limitations and other trade barriers; • increasing labor costs, especially in Vietnam and China; • difficulties in managing the geographically remote personnel; • the complexities of foreign tax systems and changes in their tax rates and rules; • stringent consumer protection and product compliance regulations that are costly to comply with and may vary from country to country; • limited protection and enforcement regimes for intellectual property rights in some countries; • business disruptions created by health crises, pandemics and outbreaks of communicable diseases, especially in China, such as the outbreak of COVID-19; • increased financial accounting and reporting burdens and complexity; and • political, social and economic instability in some jurisdictions, including impacts of the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan and the responses by governments worldwide to such conflicts.
Although we have security measures related to our systems and the privacy of our end customers, we cannot guarantee these measures will effectively prevent others from obtaining unauthorized access to our information and our customers’ information. Any person who circumvents our security measures could destroy or steal valuable information and/or disrupt our operations.
Although we and our service providers have security measures related to our systems and the privacy of our end customers, we cannot guarantee these measures will effectively prevent others from obtaining unauthorized access to our information and our customers’ information. Any person who circumvents our security measures could destroy or steal valuable information and/or disrupt our operations.
The manufacturing or shipping of our products at one or more facilities may be disrupted because our manufacturing and logistics contractors are primarily located in southern China and Vietnam. Our principal executive offices are located in New York, New York and we have operations in Ukraine, Taiwan and their surrounding countries.
The manufacturing or shipping of our products at one or more facilities may be disrupted because our manufacturing and logistics contractors are primarily located in Vietnam and China. Our principal executive offices are located in New York, New York and we 16 have operations in Ukraine, Taiwan and their surrounding countries.
Risk Factors Summary • our limited ability to forecast our results of operations and sales; • volatility and competition in the markets we serve or our inability to compete effectively with our competitors; • our reliance on a limited number of distributors for our products and the inability of our distributors to manage inventory of our products effectively, timely sell our products or estimate future demand for our products; • our inventory decisions, including, without limitation, for new product introductions, are based on assumptions and forecasts, which, if inaccurate, may result in write-downs of inventory or components and increases of vendor deposits; • our inability to keep pace with rapid technological and market changes or to maintain competitive prices for products; • the technological complexity of our products, which may contain undetected hardware defects or software bugs; • our inability to anticipate or mitigate cyberattacks, security vulnerabilities or other fraudulent or illegal activity; • our inability to manage our growth and expand our operations; • our inability to maintain or enhance the strength of our brand; • our reliance on a limited number of contract manufacturers to manufacture our products, and potential quality or product supply problems for our products if we are unable to secure sufficient components for our products or there is a shortage of manufacturing capacity; • our reliance on a limited number of suppliers and our inability to predict shortages in components, such as the global shortage in chipsets, or other supply disruptions as a result of, including, without limitation, the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan, or our failure to identify or qualify alternative suppliers; • disruption to the manufacturing or shipping of our products due to natural disasters, labor shortages or operational reductions from outbreaks of diseases or other public health events, the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan, or similar disruptions in the countries or regions in which our contract manufacturers or logistics contractors are located; • a global economic downturn; • lower than expected returns and exposure to increased operational risks from our investments in business lines, products, services, technologies, joint ventures and other strategic transactions; • our enterprise and service provider technologies; • the ineffective management of product introductions, product transitions and marketing or our inability to remain competitive and stimulate customer demand for our products; • our inability to anticipate consumer preferences and develop desirable consumer products and solutions, or to execute our strategy for our consumer products or develop our sales channels; • general credit, liquidity, market, and interest rate risks to our investment securities; • exposure to adverse developments affecting financial institutions at which we maintain deposits • exposure to increased economic and operational uncertainties from our international operations, including, without limitation, as a result of foreign policy and geopolitical developments, particularly those involving China and Russia, varying legal and regulatory regimes and the effects of foreign currency exchange rates; • the failure of our foreign warehouse and logistics providers to safeguard, manage and properly report our inventory; • exposure to increased operational risks and liability to the extent we develop our own foreign manufacturing capacity; • our inability to manage geographically dispersed research and development teams; • our limited ability to obtain and enforce our intellectual property rights, particularly in China, Russia and South America; • the misappropriation of our intellectual property and trade secrets by our contract manufacturers or others to manufacture competitive products or counterfeit products; • our exposure to extensive intellectual property litigation; • the risks of using open source software in our products; • our debt levels and the impact our debt levels may have on our ability to raise capital or otherwise finance our business; • the risks of expanding our product offerings or our operations or increases in our operating expenses; • our reliance on third-party software and services for certain aspects of our operations, including, without limitation, our financial reporting functions; • uncertainty surrounding the elimination of LIBOR and the transition to SOFR; • our reliance on our founder and chief executive officer, who owns a majority of our common stock; • volatility in the price of our common stock due to volatility in our results of operations or our failure to pay cash dividends or to repurchase shares of our common stock pursuant to our repurchase programs; 10 • the reliance of our products on unlicensed radio frequency spectrum, and the increasing reliance of consumer and other products on the same spectrum or from the introduction of regulation of such spectrum; • potential liability under trade protection, anti-corruption, and other laws resulting from our global operations; • changes in laws and regulations relating to the handling of personal data; • the adverse impact from litigation matters; • the adverse impact to our results of operations from successful warranty claims, product losses or recalls; • indemnification claims against us for intellectual property infringement, defective products, and security vulnerabilities; • our inability to maintain an effective system of internal controls; and • changes in tax laws and regulations or reviews or audits of our tax returns.
Risk Factors Summary • our limited ability to forecast our results of operations and sales; • volatility and competition in the markets we serve or our inability to compete effectively with our competitors; • our reliance on a limited number of distributors for our products and the inability of our distributors to manage inventory of our products effectively, timely sell our products or estimate future demand for our products; • our inventory decisions, including, without limitation, for new product introductions, are based on assumptions and forecasts, which, if inaccurate, may result in write-downs of inventory or components and increases of vendor deposits; • our inability to keep pace with rapid technological and market changes or to maintain competitive prices for products; • the technological complexity of our products, which may contain undetected hardware defects or software bugs; • our inability to anticipate or mitigate cyberattacks, security vulnerabilities or other fraudulent or illegal activity; • our inability to manage our growth and expand our operations; • our inability to maintain or enhance the strength of our brand; • our reliance on a limited number of contract manufacturers to manufacture our products, and potential quality or product supply problems for our products if we are unable to secure sufficient components for our products or there is a shortage of manufacturing capacity; • our reliance on a limited number of suppliers and our inability to predict shortages in components or other supply disruptions as a result of, including, without limitation, the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan, or our failure to identify or qualify alternative suppliers; • disruption to the manufacturing or shipping of our products due to natural disasters, labor shortages or operational reductions from outbreaks of diseases or other public health events, the military conflict between Russia and Ukraine, the escalating tensions between China and Taiwan, or similar disruptions in the countries or regions in which our contract manufacturers or logistics contractors are located; • a global economic downturn; • lower than expected returns and exposure to increased operational risks from our investments in business lines, products, services, technologies, joint ventures and other strategic transactions; • the ineffective management of product introductions, product transitions and marketing or our inability to remain competitive and stimulate customer demand for our products; • our inability to anticipate consumer preferences and develop desirable products and solutions, or to execute our strategy for our products or develop our sales channels; • general credit, liquidity, market, and interest rate risks to our investment securities; • exposure to adverse developments affecting financial institutions at which we maintain deposits • exposure to increased economic and operational uncertainties from our international operations, including, without limitation, as a result of foreign policy and geopolitical developments, particularly those involving China and Russia, varying legal and regulatory regimes and the effects of foreign currency exchange rates; • the failure of our foreign warehouse and logistics providers to safeguard, manage and properly report our inventory; • exposure to increased operational risks and liability to the extent we develop our own foreign manufacturing capacity; • our inability to manage geographically dispersed research and development teams; • our limited ability to obtain and enforce our intellectual property rights, particularly in China, Russia and South America; • the misappropriation of our intellectual property and trade secrets by our contract manufacturers or others to manufacture competitive products or counterfeit products; • our exposure to extensive intellectual property litigation; • the risks of using open source software in our products; • our use of artificial intelligence technologies which may present business, compliance, and reputational risks: • our debt levels and the impact our debt levels may have on our ability to raise capital or otherwise finance our business; • the risks of expanding our product offerings or our operations or increases in our operating expenses; • our reliance on third-party software and services for certain aspects of our operations, including, without limitation, our financial reporting functions; • our reliance on our founder and chief executive officer, who owns a majority of our common stock; • volatility in the price of our common stock due to volatility in our results of operations or our failure to pay cash dividends or to repurchase shares of our common stock; 10 • the reliance of our products on unlicensed radio frequency spectrum, and the increasing reliance of consumer and other products on the same spectrum or from the introduction of regulation of such spectrum; • potential liability under trade protection, anti-corruption, and other laws resulting from our global operations; • changes in laws and regulations relating to the handling of personal data; • the adverse impact from litigation matters; • the adverse impact to our results of operations from successful warranty claims, product losses or recalls; • indemnification claims against us for intellectual property infringement, defective products, and security vulnerabilities; • our inability to maintain an effective system of internal controls; and • changes in tax laws and regulations or reviews or audits of our tax returns.
Additionally, California enacted the California Consumer Privacy Act (the “CCPA”) that, among other things, requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.
Additionally, California enacted the California Consumer Privacy Act, as amended (the “CCPA”) that, among other things, requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.
These laws and regulations will likely increase the costs of doing business and if we fail to implement appropriate security measures, or to detect and provide prompt notice of unauthorized access as required by some of these laws and regulations, we could be subject to potential claims for damages and other remedies, which could adversely affect our business and results of operations.
These laws and regulations will likely increase the costs of doing business and if we or our service providers fail to implement appropriate security measures, or to detect and provide prompt notice of unauthorized access as required by some of these laws and 13 regulations, we could be subject to potential claims for damages and other remedies, which could adversely affect our business and results of operations.
The costs to us to eliminate or alleviate security vulnerabilities can be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions, as well as potential liability to the company.
The costs to us to eliminate or alleviate security vulnerabilities in our products, services and system can be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions, as well as potential liability to the company.
In addition, both China and Taiwan are leading manufacturers of the world’s semiconductor supply.
In addition, both China and 20 Taiwan are leading manufacturers of the world’s semiconductor supply.
In connection with introduction of new products, and our consumer products, in particular, we may spend significant amount on advertising and other marketing campaigns, such as television, print advertising, social media and others, as well as increased promotional activities, to build brand awareness and acquire new users.
In connection with introduction of new products, we may spend significant amount on advertising and other marketing campaigns, such as television, print advertising, social media and others, as well as increased promotional activities, to build brand awareness and acquire new users.
It is also possible that competitors could introduce new products and services that negatively impact consumer preference in the type of consumer products that we supply, which could result in decreased sales of our product and a loss in market share.
It is also possible that competitors could introduce new products and services that negatively impact 19 customer preference in the type of products that we supply, which could result in decreased sales of our product and a loss in market share.
Unauthorized use of our intellectual property, such as the production of counterfeits of our products, and unauthorized registration and use of our trademarks by third parties, is a matter of ongoing concern. The steps we have taken may not prevent unauthorized use of our intellectual property.
Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property, such as the production of counterfeits of our products, and unauthorized registration and use of our trademarks by third parties, is a matter of ongoing concern. The steps we have taken may not prevent unauthorized use of our intellectual property.
Shortages in the supply of components or other supply disruptions, including, without limitation, due to increasing demand for electronics and reductions in supply as a result of unforeseen events such as COVID-19, geopolitical conditions (including China-Taiwan relations) or commercial disputes with the suppliers, may not be predicted in time to design-in different components or qualify other suppliers.
Shortages in the supply of components or other supply disruptions, including, without limitation, due to increasing demand for electronics and reductions in supply as a result of unforeseen events such as health crises or pandemics, geopolitical conditions (including China-Taiwan relations) or commercial disputes with the suppliers, may not be predicted in time to design-in different components or qualify other suppliers.
As a stockholder, even a controlling stockholder, Mr. Pera is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. As of August 25, 2023, Mr. Pera beneficially owned 56,278,181 shares of our common stock.
As a stockholder, even a controlling stockholder, Mr. Pera is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. As of August 23, 2024, Mr. Pera beneficially owned 56,278,181 shares of our common stock.
If we are unable to introduce appealing new consumer products or novel technologies in a timely manner, or our new consumer products or technologies are not accepted or adopted by consumers, our competitors may increase their market share, which could hurt our competitive position in the consumer product market.
If we are unable to introduce appealing new consumer products or novel technologies in a timely manner, or our new products or technologies are not accepted or adopted by customers, our competitors may increase their market share, which could hurt our competitive position.
Our success and future growth depend on the skills, working relationships and continued services of our founder, Chairman and Chief Executive Officer, Robert J. Pera, as well as the other members of our management team. We do not maintain any significant key person insurance with regard to any of our personnel. Mr.
Pera or other key personnel would disrupt our business. Our success and future growth depend on the skills, working relationships and continued services of our founder, Chairman and Chief Executive Officer, Robert J. Pera, as well as the other members of our management team. We do not maintain any significant key person insurance with regard to any of our personnel.
Similarly, our business could be adversely affected if any of our large retail customers were to experience financial difficulties, or change the focus of their businesses in a way that de-emphasized the sale of our products. Our distributors generally offer products from several different manufacturers.
Similarly, our business could be adversely affected if any of our distributors and other retail partners were to experience financial difficulties, or change the focus of their businesses in a way that de-emphasized the sale of our products. Our distributors generally offer products from several different manufacturers.
If we over forecast demand, we may build excess inventory, increase vendor deposits and we may not be able to decrease our expenses in time to offset any shortfall in revenues, which could harm our ability to achieve or sustain expected results of operations.
If we over forecast demand, we may build excess inventory, increase vendor deposits and we may not be able to decrease our expenses in time to offset any shortfall in revenues and we may be required to record write-downs for excess or obsolete inventory, which could harm our ability to achieve or sustain expected results of operations.
These transactions involve numerous risks, including: • difficulties in integrating and managing the operations, technologies and products of the companies we acquire, particularly in light of our lean organizational structure; • diversion of our management’s attention from normal daily operation of our business; • our inability to maintain the key business relationships and the brand equity of the businesses we acquire; • our inability to retain key personnel of the acquired business, particularly in light of the demands we place on individual contributors; • uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; • our dependence on unfamiliar affiliates and partners of the companies we acquire; • insufficient revenues to offset our increased expenses associated with acquisitions; • our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and • our inability to maintain internal standards, controls, procedures and policies, particularly in light of our lean organizational structure. • We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us.
These transactions involve numerous risks, including: • difficulties or delays in integrating and managing the operations, systems, technologies, personnel and products of the companies we acquire, particularly in light of our lean organizational structure; • diversion of our management’s attention from normal daily operation of our business; • our inability to maintain the key business relationships and the brand equity of the businesses we acquire; • our inability to retain key personnel of the acquired business, particularly in light of the demands we place on individual contributors; • uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; • our dependence on unfamiliar affiliates and partners of the companies we acquire; • insufficient revenues to offset our increased expenses associated with acquisitions; • our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and • our inability to maintain internal standards, controls, procedures and policies, particularly in light of our lean organizational structure.
Our success in the consumer product market depends on our ability to identify and originate product trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner.
Our success depends on our ability to identify and originate product trends as well as to anticipate, gauge and react to changing customer demands in a timely manner.
Factors that could cause our results of operation and stock price to fluctuate include: • varying demand for our products due to the financial and operating condition of our distributors and their customers, distributor inventory management practices and general economic conditions; • shifts in our fulfillment practices including increasing inventory levels as part of efforts to decrease our delivery lead times; • failure of our suppliers to provide chips or other components; • failure of our contract manufacturers and suppliers to meet our demand; • success and timing of new product introductions by us, and our competitors; • increased warranty costs; • announcements by us or our competitors regarding products, promotions or other transactions; • costs related to legal proceedings or responding to government inquiries; • our ability to control and reduce product costs; and • expenses of our entry into new markets. • In addition, our business may be subject to seasonality, although our recent growth rates and timing of product introductions may have historically masked our seasonal changes in demand.
Factors that could cause our results of operation and stock price to fluctuate include: • varying demand for our products due to the financial and operating condition of our distributors and their customers, distributor inventory management practices and general economic conditions; • shifts in our fulfillment practices including increasing inventory levels as part of efforts to decrease our delivery lead times; • failure of our suppliers to provide components; • failure of our contract manufacturers and suppliers to meet our demand; • success and timing of new product introductions by us, and our competitors; • increased warranty costs; • announcements by us or our competitors regarding products, promotions or other transactions; • costs related to legal proceedings or responding to government inquiries; • our ability to control and reduce product costs; and • expenses of our entry into new markets.
Additionally, from time to time, unexpected events, such as the COVID-19 pandemic, have had, and may have in the future, adverse effects on the ability of our contract manufacturers to fulfill their obligations to us due to, among other things, work stoppages or slowdowns due to facility closures or other social distancing mitigation efforts, and, more recently, the inability of our contract manufacturers to procure adequate supplies of the components to manufacture our products, particularly chipsets.
Additionally, from time to time, unexpected events, such as health crises or pandemics, have had, and may have in the future, adverse effects on the ability of our contract manufacturers to fulfill their obligations to us due to, among other things, work stoppages or slowdowns due to facility closures or other social distancing mitigation efforts, and the inability of our contract manufacturers to procure adequate supplies of the components to manufacture our products.
We use components that are subject to price fluctuations, shortages or interruptions of supply, such as chipsets.
We use components that are subject to price fluctuations, shortages or interruptions of supply.
In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts. For example, states such as Virginia, Colorado, Utah, Connecticut, Iowa, Indiana, Tennessee, Montana and Texas have enacted their own data privacy laws.
In addition, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts. For example, states such as Colorado, Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Tennessee, Texas, Virginia, and Utah have enacted their own data privacy laws.
Not paying cash dividends to our stockholders, or repurchasing shares of our common stock pursuant to our previously announced stock repurchase program, could cause the market price for our common stock to decline.
Not paying cash dividends to our stockholders, or repurchasing shares of our common stock could cause the market price for our common stock to decline.
We received a threat to publicly release these materials unless we made a payment, which we have not done. As a result, it is possible that the source code and other information could be publicly disclosed or made available to our competitors.
We received a threat to publicly release these materials unless we made a payment, which we did not do and the party responsible was ultimately prosecuted. As a result, it is possible that the source code and other information could be publicly disclosed or made available to our competitors.
We have and we may continue to invest and dedicate resources into new growth areas, such as consumer products, while also focusing on our enterprise and service provider technologies. However, the return on our investments may be lower, or may develop more slowly, than we expect.
We have and we may continue to invest and dedicate resources into new growth areas, such as expansion in our enterprise and service provider technologies and subscription services. However, the return on our investments may be lower, or may develop more slowly, than we expect.
Particularly if the quality of counterfeit products is poor, damage could be done to our brand. Combating counterfeiting is difficult and expensive, and may not be successful, especially in countries that have a relatively weak legal regime for the protection of intellectual property.
Particularly if the quality of counterfeit products is poor, damage could be done to our brand. Counterfeit sales, to the extent they replace otherwise legitimate sales, could also adversely affect our operating results. Combating counterfeiting is difficult and expensive, and may not be successful, especially in countries that have a relatively weak legal regime for the protection of intellectual property.
If the Company fails to meet expectations related to dividends, its stock price may decline, which could have a material adverse impact on investor confidence and employee retention. These and other factors may also affect the continuation of, or activity under, our previously announced stock repurchase program.
If the Company fails to meet expectations related to dividends, its stock price may decline, which could have a material adverse impact on investor confidence and employee retention. These and other factors may also 27 affect our ability to repurchase shares of our common stock.
We have focused, and intend to focus in the future, on getting our new products to market quickly. Due to our rapid product introductions, defects and bugs that may be contained in our products may not yet have manifested. We have in the past experienced, and may in the future experience, defects and bugs.
Due to our rapid product introductions, defects and bugs that may be contained in our products may not yet have manifested. We have in the past experienced, and may in the future experience, defects and bugs.
As of June 30, 2023, our balance outstanding under the Amended Credit Agreement for our Term Facilities and Revolving Facility (each as defined herein), was $690.6 million and $390.0 million, respectively.
As of June 30, 2024, our balance outstanding under the Amended Credit Agreement for our Term Facilities and Revolving Facility (each as defined herein), was $533.1 million and $175.0 million, respectively.
Although we have made efforts to design our policies, procedures, and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes to applicable laws and regulations in this area could subject us to additional regulation and oversight, any of which could significantly increase our operating costs. 30 Government regulations designed to protect personal privacy may make it difficult for us to sell our products.
Although we have made efforts to design our policies, procedures, and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes to applicable laws and regulations in this area could subject us to additional regulation and oversight, any of which could significantly increase our operating costs.
Changes in tax laws and regulations and interpretations of such laws and regulations, including taxation of earnings outside of the U.S., may materially and adversely affect our business, results of operations and financial condition. 33 Item 1B. Unresolved Staff Comments None.
As a result of the 1% excise tax, the cost to us of making repurchases will increase. Changes in tax laws and regulations and interpretations of such laws and regulations, including taxation of earnings outside of the U.S., may materially and adversely affect our business, results of operations and financial condition. 33 Item 1B. Unresolved Staff Comments None.
Failure to pay cash dividends could cause the market price of our common stock to decline. The discontinuance of, or lack of activity under, our previously announced stock repurchase program could also result in a lower market price of our common stock. Fluctuations in our results of operations could cause the market price of our common stock to decline.
Failure to pay cash dividends could cause the market price of our common stock to decline. Failure to repurchase shares of our common stock could also result in a lower market price of our common stock. Fluctuations in our results of operations could cause the market price of our common stock to decline.
If we combine our proprietary software with open source software we could, in some circumstances, be required to release our proprietary source code publicly or license such source code on unfavorable terms or at no cost.
If we combine our proprietary software with open source software we could, in some circumstances, be required to release our proprietary source code publicly or license such source code on unfavorable terms or at no cost. That could significantly diminish the value of some of our products and negatively affect our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFt Lease expiration Purpose New York 6,400 9/30/2027 Corporate Office Taiwan 328,000 7/31/2027 R&D and Administration Czech Republic 64,000 3/31/2029 Warehouse Utah 72,000 2/28/2027 Warehouse and R&D Utah 86,000 8/31/2028 Warehouse Suzhou 93,000 6/30/2024 Manufacturing Facility Netherlands 149,000 5/31/2036 Warehouse Memphis 161,000 8/31/2031 Warehouse
Biggest changeFt Lease expiration Purpose New York 6,400 9/30/2027 Corporate Office Taiwan 328,000 7/31/2027 R&D and Administration Czech Republic 64,000 3/31/2029 Warehouse Utah 72,000 6/30/2028 Warehouse and R&D Utah 86,000 10/31/2028 Warehouse Suzhou 93,000 6/16/2025 Manufacturing Facility Netherlands 149,000 5/31/2036 Warehouse Memphis 161,000 8/31/2031 Warehouse Chicago - Schaumburg 30,000 7/31/2031 R&D and Administration
We believe that our existing properties are in good condition and suitable for the conduct of our business. Below are our material locations as of June 30, 2023, all of which we lease. Location Sq.
We believe that our existing properties are in good condition and suitable for the conduct of our business. Below are our material locations as of June 30, 2024, all of which we lease. Location Sq.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table provides information with respect to the Company’s share repurchase program and the activity under the available share repurchase program during fiscal year ended June 30, 2023 (in millions, except share and per share amounts): Date of Approved and Publicly Announced Program Amount of Publicly Announced Program Total Number of Shares Purchased as Part of Publicly Announced Programs Average Price Paid per Share Total Aggregate Amount Paid Period of Purchase Estimated Remaining Balance Available for Share Repurchase under the Program Expiration date of Program May 6, 2022 $200 — $ — — N/A $ 200.00 9/30/2023 35 The following table provides information with respect to the Company’s share repurchase program and the activity under the available share repurchase program during fiscal quarter ended June 30, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum dollar value of shares that may yet be purchased under the plans or programs April 1, 2023 to April 30, 2023 — — — $ 200 Million May 1, 2023 to May 31, 2023 — — — $ 200 Million June1, 2023 to June 30, 2023 — — — $ 200 Million Total — — — Dividends The following tables provides information with respect to the Company’s cash dividends declared and frequency of payments during fiscal year ended June 30, 2023 and 2022: Year ended June 30, 2023 Q1 Q2 Q3 Q4 Dividends declared date August 26, 2022 November 4, 2022 January 31, 2023 May 5, 2023 Dividends payment date September 13, 2022 November 21, 2022 February 21, 2023 May 22, 2023 Cash dividend paid per common stock $0.60 $0.60 $0.60 $0.60 Year ended June 30, 2022 Q1 Q2 Q3 Q4 Dividends declared date August 27, 2021 November 3, 2021 February 3, 2022 May 3, 2022 Dividends payment date September 15, 2021 November 22, 2021 February 22, 2022 May 23, 2022 Cash dividend paid per common stock $0.60 $0.60 $0.60 $0.60 On August 25, 2023, the Company announced that its Board of Directors declared a cash dividend of $0.60 per share payable on September 11, 2023 to shareholders of record at the close of business on September 5, 2023.
Biggest changeDividends The following tables provides information with respect to the Company’s cash dividends declared and frequency of payments during fiscal year ended June 30, 2024 and 2023: Year ended June 30, 2024 Q1 Q2 Q3 Q4 Dividends declared date August 25, 2023 November 2, 2023 February 5, 2024 May 7, 2024 Dividends payment date September 11, 2023 November 20, 2023 February 26, 2024 May 28, 2024 Cash dividend paid per common stock $0.60 $0.60 $0.60 $0.60 Year ended June 30, 2023 Q1 Q2 Q3 Q4 Dividends declared date August 26, 2022 November 4, 2022 January 31, 2023 May 5, 2023 Dividends payment date September 13, 2022 November 21, 2022 February 21, 2023 May 22, 2023 Cash dividend paid per common stock $0.60 $0.60 $0.60 $0.60 36 On August 23, 2024, the Company announced that its Board of Directors declared a cash dividend of $0.60 per share payable on September 9, 2024 to shareholders of record at the close of business on September 3, 2024.
In determining whether to approve future dividends, the Company’s Board of Directors will take into account such matters as our financial position and results of operations, available cash and cash flow, capital requirements, growth opportunities, applicable corporate legal requirements, and other factors deemed relevant. Unregistered Securities Sold During fiscal 2023 We did not sell any unregistered securities during fiscal 2023.
In determining whether to approve future dividends, the Company’s Board of Directors will take into account such matters as our financial position and results of operations, available cash and cash flow, capital requirements, growth opportunities, applicable corporate legal requirements, and other factors deemed relevant. Unregistered Securities Sold During fiscal 2024 We did not sell any unregistered securities during fiscal 2024.
The Company intends to pay regular quarterly cash dividends of at least $0.60 per share during each remaining quarter of fiscal 2024, however any future dividends will be subject to the approval of the Company’s Board of Directors.
The Company intends to pay regular quarterly cash dividends of at least $0.60 per share during each remaining quarter of fiscal 2025, however any future dividends will be subject to the approval of the Company’s Board of Directors.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information As of August 24, 2023, the number of record holders of our common stock, which is listed on the New York Stock Exchange under the ticker symbol "UI", was 6.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information As of August 22, 2024, the number of record holders of our common stock, which is listed on the New York Stock Exchange under the ticker symbol "UI", was 6.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 34 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Ubiquiti Inc., the NYSE Composite Index and the S&P 500 Computer & Electronics Retail Index *100 invested on June 30, 2018 in stock or index, including reinvestments of dividends.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 35 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Ubiquiti Inc., the NYSE Composite Index and the S&P 500 Computer & Electronics Retail Index *$100 invested on July 1, 2019 in stock or index, including reinvestments of dividends.
The graph assumes that $100 was invested on June 30, 2018 in our common stock, the NYSE Composite Index and the S&P Computer & Retail Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
The graph assumes that $100 was invested on July 1, 2019 in our common stock, the NYSE Composite Index and the S&P Computer & Retail Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
Stock Performance Graph The following graph compares the cumulative total stockholder return for our common stock from June 30, 2018 to June 30, 2023, with the comparable cumulative return the NYSE Composite Index and the S&P Computer & Retail Index.
Stock Performance Graph The following graph compares the cumulative total stockholder return for our common stock from July 1, 2019 to June 30, 2024, with the comparable cumulative return the NYSE Composite Index and the S&P Computer & Retail Index.
Becau se most of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to esti mate the total number of beneficial stockholders represented by these record holders.
Because most of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe have also experienced an increase in direct sales through our webstore which has a higher average selling price compared to sales to our distribution partners and we continue to introduce new products which may have average selling prices and margins different than our legacy products. 41 Revenues by Product Type Year ended June 30, 2023 2022 (in thousands, except percentages) Enterprise Technology 1,621,426 84 % 1,316,685 78 % Service Provider Technology $ 319,086 16 % $ 375,007 22 % Total revenues $ 1,940,512 100 % $ 1,691,692 100 % Enterprise Technology revenues increased $304.7 million, or 23%, from $1,316.7 million in fiscal 2022, to $1,621.4 million in fiscal 2023 primarily due to increased revenue from our Enterprise Technology platform across all geographic regions.
Biggest changeRevenues by Product Type Year ended June 30, 2024 2023 (in thousands, except percentages) Enterprise Technology $ 1,617,665 84 % $ 1,621,426 84 % Service Provider Technology 310,825 16 % 319,086 16 % Total revenues $ 1,928,490 100 % $ 1,940,512 100 % Enterprise Technology revenues decreased $3.8 million, or 0.2%, from $1,621.4 million in fiscal 2023 to $1,617.7 million in fiscal 2024, primarily due to decline in revenue from our Enterprise Technology platform in the Europe, the Middle East, and Africa (“EMEA”) and Asia Pacific regions.
We apply the following five-step revenue recognition model: • Identification of the contract, or contracts with a custome r • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy the performance obligation 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.
We apply the following five-step revenue recognition model: 39 • Identification of the contract, or contracts with a custome r • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy the performance obligation 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.
In June 2018, the Office of the United States Trade Representative announced new proposed tariffs for certain products imported into the U.S. from China. The vast majority of our products that are imported into the U.S. from China are currently subject to tariffs that range between 7.5% and 25%. These tariffs have already affected our operating results and margins.
In June 2018, the Office of the United States Trade Representative announced new proposed tariffs for certain products imported into the U.S. from China. The vast majority of our products that are imported into the U.S. from China are currently subject to tariffs that range between 7.5% and 25%. These tariffs have affected our operating results and margins.
Internet or Web based sales include regulatory provisions which allow customers to return the goods, generally within 30 days. We record a provision for returns related to this variable consideration based upon its historical returns experience with these customers. 39 We record amounts billed for shipping and handling costs as revenues.
Internet or Web based sales include regulatory provisions which allow customers to return the goods, generally within 30 days. We record a provision for returns related to this variable consideration based upon its historical returns experience with these customers. We record amounts billed for shipping and handling costs as revenues.
However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated or need to rely more heavily on the Facilities or other sources of liquidity to 44 continue to meet our needs.
However, this estimate is based on a number of assumptions that may prove to be wrong and we could exhaust our available cash and cash equivalents earlier than presently anticipated or need to rely more heavily on the Facilities or other sources of liquidity to continue to meet our needs.
Transaction price and allocation to performance obligations Transaction prices are typically based on contracted rates. Although payment terms vary, payment is generally due from customers within 60 days of the invoice date and the contracts do not have significant financing components or include extended payment terms.
Transaction price and allocation to performance obligations Transaction prices are typically based on contracted rates. Although payment terms vary, payment is generally due from distribution customers within 60 days of the invoice date and the contracts do not have significant financing components or include extended payment terms.
Warranties and Indemnifications Our products are generally accompanied by a twelve to twenty-four month warranty from date of purchase, which covers both parts and labor. Generally, the distributor is responsible for the freight costs associated with warranty returns, and we absorb the freight costs of replacing items under warranty.
Warranties and Indemnifications Our products are generally accompanied by a twelve to twenty-four month warranty from date of purchase, which covers both parts 45 and labor. Generally, the distributor is responsible for the freight costs associated with warranty returns, and we absorb the freight costs of replacing items under warranty.
For so long as such tariffs are in effect, we expect it will continue to affect our operating results and margins. As a result, our historical and current gross profit margins may not be indicative of our gross profit margins for future periods. Refer to “Part I — Item 1A.
For so 38 long as such tariffs are in effect, we expect it will continue to affect our operating results and margins. As a result, our historical and current gross profit margins may not be indicative of our gross profit margins for future periods. Refer to “Part I — Item 1A.
Over time, we expect our sales, general and administrative expenses to increase in absolute dollars due to continued growth in headcount, expansion of our efforts to register and defend trademarks and patents and to support our business and operations. 38 Provisions for Income Taxes We use the asset and liability method to account for income taxes.
Over time, we expect our sales, general and administrative expenses to increase in absolute dollars due to continued growth in headcount, expansion of our efforts to register and defend trademarks and patents and to support our business and operations. Provisions for Income Taxes We use the asset and liability method to account for income taxes.
The extent to which the conflict may impact our business or results of operations in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, as well as its impact on surrounding countries, including its impact on our operations in Ukraine and its surrounding countries, and its impact on global supply chains.
The extent to which the conflict may impact our business or results of 37 operations in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, as well as its impact on surrounding countries, including its impact on our operations in Ukraine and its surrounding countries, and its impact on global supply chains.
We also consider the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required, which would have a negative impact on our gross margin.
We also consider the rate at which new products will be accepted in the marketplace and how quickly customers will transition from older products to newer products. If actual market conditions are less favorable than those projected by us, additional inventory write-downs may be required, which would have a negative impact on our gross margin.
Based upon our historical experience and information known as of the date of this Annual Report on Form 10-K, we do not believe it is likely that we will have material liability for the above indemnities as of June 30, 2023. Contractual Obligations and Off-Balance Sheet Arrangements Our contractual obligations represent material expected or contractually committed future payment obligations.
Based upon our historical experience and information known as of the date of this Annual Report on Form 10-K, we do not believe it is likely that we will have material liability for the above indemnities as of June 30, 2024. Contractual Obligations and Off-Balance Sheet Arrangements Our contractual obligations represent material expected or contractually committed future payment obligations.
We target the enterprise and service provider markets through our highly engaged community of service providers, distributors, value added resellers, webstores, systems integrators and corporate IT professionals, which we refer to as the Ubiquiti Community. We target consumers through digital marketing, retail 36 chains and, to a lesser extent, the Ubiquiti Community. In addition to Mr.
We target the enterprise and service provider markets through our highly engaged community of service providers, distributors, value added resellers, webstores, systems integrators and corporate IT professionals, which we refer to as the Ubiquiti Community. We target consumers through digital marketing, including through our webstores, retail chains and, to a lesser extent, the Ubiquiti Community. In addition to Mr.
We have a Directors and Officers insurance policy that limits our potential exposure for our indemnification obligations to our directors, officers and certain other employees. We believe the fair value of these indemnification agreements is minimal. We have not recorded any liabilities for these agreements as of June 30, 2023 or 2022.
We have a Directors and Officers insurance policy that limits our potential exposure for our indemnification obligations to our directors, officers and certain other employees. We believe the fair value of these indemnification agreements is minimal. We have not recorded any liabilities for these agreements as of June 30, 2024 or 2023.
There have been no significant liabilities for current or anticipated cancellations recorded as of June 30, 2023. Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate these third parties.
There have been no significant liabilities for current or anticipated cancellations recorded as of June 30, 2024. Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate these third parties.
In addition, we outsource other logistics warehousing and order fulfillment functions located in China and to a lesser extent in other countries. We also evaluate and utilize other vendors for various portions of our supply chain from time to time.
In addition, we outsource other logistics warehousing and order fulfillment functions located in Vietnam and to a lesser extent in other countries. We also evaluate and utilize other vendors for various portions of our supply chain from time to time.
Liquidity 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, future stock repurchases, 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.
Liquidity 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.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending to support development efforts, the timing of new product introductions, market acceptance of our products, the availability of additional funds under the Facilities and overall economic conditions.
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.
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.
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 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 of June 30, 2023 we had $1,136.7 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.
As of June 30, 2024 we had $981.7 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.
In accordance with the Financial Accounting Standards Board’s (“FASB’s”), Accounting Standards Codification (“ASC”), 450-20, Loss Contingencies, we record an accrual when we believe it is reasonably estimable and probable based upon historical experience.
In accordance with the Financial Accounting Standards Board’s ("FASB's"), Accounting Standards Codification ("ASC"), 450-20, Loss Contingencies, we record an accrual when we believe it is reasonably estimable and probable based upon historical experience.
We believe that our products are differentiated due to our proprietary software, firmware expertise, and hardware design capabilities. We distribute our products through a worldwide network of over 100 distributors and online retailers and direct to customers through our webstores. Supply Constraints and Risks – We have experienced significant supply constraints caused, in part, by the COVID-19 pandemic.
We believe that our products are differentiated due to our proprietary software, firmware expertise, and hardware design capabilities. 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 in the past, especially during the COVID-19 pandemic.
Inventory and Inventory Valuation Our inventories are primarily finished goods and, to a lesser extent, raw materials. Inventories are stated at the lower of actual cost, computed using the first-in, first-out method, or net realizable value (NRV). NRV is based upon an estimated average selling price reduced by the estimated costs of disposal.
Inventory and Inventory Valuation Our inventories are comprised of finished goods and raw materials. Inventories are stated at the lower of actual cost, computed using the first-in, first-out method, or net realizable value (NRV). NRV is based upon an estimated average selling price reduced by the estimated costs of disposal.
Risk Factors – Risks Related to Our Business and Industry - Our contract manufacturers, logistics centers and certain administrative and research and development operations, as well as our customers and suppliers, are located in areas likely to be subject to natural disasters, public health problems, military conflicts and geopolitical tensions, which could adversely affect our business, results of operations and financial condition” for additional information.
Risk Factors – Risks Related to Our Business and Industry - Our contract manufacturers, logistics centers and certain administrative and research and development operations, as well as our customers and suppliers, are located in areas likely to be subject to natural disasters, public health problems, military conflicts and geopolitical tensions, which could adversely affect our business, results of operations and financial condition” and “Part I-Item 1A.
Direct sales accounted for 36% and 35% of our revenues during the years ended June 30, 2023 and 2022, respectively. Cost of Revenues Our cost of revenues is comprised primarily of the costs of procuring finished goods from our contract manufacturers and certain key components that we consign to certain of our contract manufacturers.
Webstore sales accounted for 38% and 36% of our revenues during the years ended June 30, 2024 and 2023, respectively. Cost of Revenues Our cost of revenues is comprised primarily of the costs of procuring finished goods from our contract manufacturers and certain key components that we consign to certain of our contract manufacturers.
Comparison of Year Ended June 30, 2022 and 2021 Pursuant to Regulation S-K item 303, a detailed review of our fiscal 2022 performance compared to our fiscal 2021 performance is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 under the caption “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” , filed with the SEC on August 26, 2022.
Comparison of Year Ended June 30, 2023 and 2022 Pursuant to Regulation S-K item 303, a detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance is incorporated by reference from Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 under the caption “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” , filed with the SEC on August 25, 2023.
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 64% and 65% of our revenues during the years ended June 30, 2023 and 2022, respectively.
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 sales through our webstores. Sales to distributors accounted for 62% and 64% of our revenues during the years ended June 30, 2024 and 2023, respectively.
Although these mitigation efforts are intended to optimize our access to the components required to meet customer demand for our products, we have limited visibility into future sales, which makes it difficult to forecast our future results of operations. These mitigation efforts have increased, and are expected to continue to increase, our inventory and vendor deposit balances.
Although these mitigation efforts are intended to optimize our access to the components required to meet customer demand for our products, we have limited visibility into future sales, which makes it difficult to forecast our future results of operations.
Cash Flows from Investing Activities We used $20.9 million of cash in investing activities during fiscal 2023. Our investing activities consisted primarily of $20.9 million of capital expenditures and purchase of intangible assets. We used $11.2 million of cash in investing activities during fiscal 2022.
Our investing activities consisted primarily of $12.0 million of capital expenditures. We used $20.9 million of cash in investing activities during fiscal 2023. Our investing activities consisted primarily of $20.9 million of capital expenditures and purchase of intangible assets.
See Note 9 – Commitments and Contingencies of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment 45 commitments under purchase commitments as of June 30, 2023. Transition Tax We have obligations of $67.5 million as of June 30, 2023, related to transition tax.
See Note 9 – Commitments and Contingencies of the Notes to our Consolidated Financial Statements, included in Part IV, Item 15, of this Annual Report on Form 10-K for future payment commitments under purchase commitments as of June 30, 2024.
Europe, the Middle East, and Africa (“EMEA”) Revenues in EMEA increased $84.1 million, or 12.5%, from $675.3 million in fiscal 2022 to $759.4 million in fiscal 2023. The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.
Europe, the Middle East, and Africa (“EMEA”) Revenues in EMEA decreased $19.3 million, or 2.5%, from $759.4 million in fiscal 2023 to $740.1 million in fiscal 2024. The year-over-year decrease was due to a decline in revenues from our Enterprise Technology products, partially offset by an increase in revenue from our Service Provider Technology products.
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the consolidated statement of operations and comprehensive income.
See Note 7 – Debt of the Notes to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding the Facilities.
See Note 7 – Debt of the Notes to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for additional information regarding the Facilities. We had cash inflows of $145.0 million from financing activities during fiscal 2023.
This disruption can contribute to potential payment delays or defaults in our accounts receivable, affect asset valuations resulting in impairment charges, and affect the availability of financing credit as well as other segments of the credit markets. For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, refer to “Part I-Item 1A.
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. See “Part I-Item 1A.
Revenues by Geography We have determined the geographical distribution of our product revenues based on our customers’ ship-to destinations. 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.
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.
We expect to continue to maintain financing flexibility in the current market conditions. However, due to the rapidly evolving global situation, it is not possible to predict whether unanticipated consequences of the pandemic are reasonably likely to materially affect our liquidity and capital resources in the future.
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.
The increase in inventories is a result of the strategic decision to secure inventory while components were available in an effort to increase product availability. The increase in account receivable is a result of higher sales.
The increase in inventories is a result of the strategic decision to secure inventory while components were available in an effort to increase product availability. The increase in account receivable is a result of higher sales. Cash Flows from Investing Activities We used $12.0 million of cash in investing activities during fiscal 2024.
The COVID-19 pandemic and resulting global disruptions have caused and may continue to cause significant volatility in financial markets and the domestic and global economy.
Inflation and the current geopolitical environment have caused and may continue to cause significant volatility in financial markets and the domestic and global economy.
North America Revenues in North America increased $131.4 million, or 16.6%, from $790.8 million in fiscal 2022 to $922.2 million in fiscal 2023. The year-over-year increase was primarily due to increased revenue from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.
North America Revenues in North America increased $24.2 million, or 2.6%, from $922.2 million in fiscal 2023 to $946.4 million in fiscal 2024. The year-over-year increase was due to increased revenue from both our Enterprise Technology products and Service Provider Technology products.
The following are our revenues by geography for fiscal 2023 and fiscal 2022: Year ended June 30, 2023 2022 (in thousands, except percentages) North America (1) $ 922,230 48% $ 790,809 47% Europe, the Middle East and Africa 759,405 39% 675,306 40% Asia Pacific 148,502 8% 134,961 8% South America 110,375 5% 90,616 5% Total revenues $ 1,940,512 100% $ 1,691,692 100% (1) Revenue for the United States was $855.3 and $734.5 in fiscal 2023 and fiscal 2022, respectively.
The following are our revenues by geography for fiscal 2024 and fiscal 2023: 42 Year ended June 30, 2024 2023 (in thousands, except percentages) North America (1) $ 946,428 49% $ 922,230 48% Europe, the Middle East and Africa 740,113 38% 759,405 39% Asia Pacific 127,901 7% 148,502 8% South America 114,048 6% 110,375 5% Total revenues $ 1,928,490 100% $ 1,940,512 100% (1) Revenue for the United States was $881.0 and $855.3 in fiscal 2024 and fiscal 2023, respectively.
We reduce the value of our inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the NRV. Write-downs are not reversed until the related inventory has been subsequently sold or scrapped. The valuation of inventory also requires us to estimate excess and obsolete inventory.
Write-downs are not reversed until the related inventory has been subsequently sold or scrapped. 40 The valuation of inventory also requires us to estimate excess and obsolete inventory.
Because we have historically included implied post-contract customer support (“PCS”) free of charge in many of our arrangements, we attribute a portion of our systems revenues to this implied PCS. 37 We classify our revenues into two primary product categories: Enterprise Technology and Service Provider Technology. • Enterprise Technology includes our UniFi platforms, including UniFi Gateway Consoles, UniFi WiFi, UniFi Switches, UniFi Protect, UniFi Access, UniFi-Talk and our AmpliFi platform. • Service Provider Technology includes our airMAX, 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 classify our revenues into two primary product categories: Enterprise Technology and Service Provider Technology. • Enterprise Technology includes our UniFi platforms, including UniFi Cloud Gateways, UniFi WiFi, UniFi Switches, UniFi Protect, UniFi Access, UniFi Talk, UniFi Connect and our AmpliFi platform. • 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.
Asia Pacific Revenues in the Asia Pacific region increased $13.5 million, or 10.0%, from $135.0 million in fiscal 2022 to $148.5 million in fiscal 2023. The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.
South America Revenues in South America increased $3.7 million, or 3.3%, from $110.4 million in fiscal 2023 to $114.0 million in fiscal 2024. The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products.
The determination of NRV involves numerous judgments including estimating average selling prices based upon recent sales, industry trends, existing customer orders, and seasonal factors. Should actual market conditions differ from our estimates, future results of operations could be materially affected.
The determination of NRV involves numerous judgments including estimating average selling prices based upon recent sales. Should actual market conditions differ from our estimates, future results of operations could be materially affected. We reduce the value of our inventory for estimated obsolescence or lack of marketability by the difference between the cost of the affected inventory and the NRV.
Liquidity and Capital Resources Sources and Uses of Cash Our principal sources of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities (as defined herein) and short-term investments.
Liquidity and Capital Resources Sources and Uses of Cash Our principal sources of liquidity are cash and cash equivalents, cash generated by operations and the availability of additional funds under the Facilities (as defined herein). We had cash and cash equivalents of $126.3 million and $114.8 million at June 30, 2024 and 2023, respectively.
Russia-Ukraine Military Conflict - We are monitoring the military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated economic sanctions.
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.
The assessment of whether or not a valuation allowance is required often requires significant judgment including current operating results, the forecast of future taxable income and ongoing prudent and feasible tax planning initiatives. 40 In addition, our calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws.
We establish valuation allowances when necessary to reduce deferred tax assets to the amount we expect to realize. The assessment of whether or not a valuation allowance is required often requires significant judgment including current operating results, the forecast of future taxable income and ongoing prudent and feasible tax planning initiatives.
We had cash and cash equivalents of $114.8 million and $136.2 million at June 30, 2023 and 2022, respectively. 43 Consolidated Cash Flow Data The following table sets forth the major components of our consolidated statements of cash flows data for the periods presented (in thousands): Year ended June 30, 2023 2022 Net cash (used in) provided by operating activities $ (145,428) $ 370,259 Net cash (used in) investing activities (20,934) (11,180) Net cash provided by (used in) financing activities 144,964 (472,273) Net increase (decrease) in cash and cash equivalents $ (21,398) $ (113,194) Cash Flows from Operating Activities For fiscal 2023 the net cash used in operating activities was $145.4 million, primarily due to a significant increase in inventory and to a lesser extent, increases in vendor deposits and accounts receivable.
Consolidated Cash Flow Data The following table sets forth the major components of our consolidated statements of cash flows data for the periods presented (in thousands): Year ended June 30, 2024 2023 Net cash provided by (used in) operating activities $ 541,516 $ (145,428) Net cash used in investing activities (11,975) (20,934) Net cash (used in) provided by financing activities (518,025) 144,964 Net increase (decrease) in cash and cash equivalents $ 11,516 $ (21,398) Cash Flows from Operating Activities For fiscal 2024 the net cash provided by operating activities was $541.5 million, primarily due to net income of $350.0 million, and the benefit of decreasing inventories by $250.7 million and non-cash adjustments of $59.5 million.
Results of Operations Comparison of Years Ended June 30, 2023 and 2022 Year ended June 30, 2023 2022 (In thousands, except percentages) Revenues $ 1,940,512 100 % $ 1,691,692 100 % Cost of revenues (1) 1,179,781 61 % 1,021,880 60 % Gross profit 760,731 39 % 669,812 40 % Operating expenses: Research and development (1) 145,172 7 % 137,689 8 % Sales, general and administrative (1) 70,993 4 % 69,859 4 % Total operating expenses 216,165 11 % 207,548 12 % Income from operations 544,566 28 % 462,264 28 % Interest expense and other, net 58,224 3 % 17,815 1 % Income before income taxes 486,342 25 % 444,449 27 % Provision for income taxes 78,701 4 % 65,792 4 % Net income $ 407,641 21 % $ 378,657 23 % (1) Includes share-based compensation as follows Cost of revenues $ 73 $ 74 Research and development 3,541 2,541 Sales, general and administrative 1,120 901 Total share-based compensation $ 4,734 $ 3,516 Revenues Total revenues increased $248.8 million, or 15%, from $1,691.7 million in fiscal 2022 to $1,940.5 million in fiscal 2023.
Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet. 41 Results of Operations Comparison of Years Ended June 30, 2024 and 2023 Year ended June 30, 2024 2023 (In thousands, except percentages) Revenues $ 1,928,490 100 % $ 1,940,512 100 % Cost of revenues (1) 1,188,728 62 % 1,179,781 61 % Gross profit 739,762 38 % 760,731 39 % Operating expenses: Research and development (1) 159,768 8 % 145,172 7 % Sales, general and administrative (1) 80,997 4 % 70,993 4 % Total operating expenses 240,765 12 % 216,165 11 % Income from operations 498,997 26 % 544,566 28 % Interest expense and other, net 75,169 4 % 58,224 3 % Income before income taxes 423,828 22 % 486,342 25 % Provision for income taxes 73,868 4 % 78,701 4 % Net income $ 349,960 18 % $ 407,641 21 % (1) Includes share-based compensation as follows Cost of revenues $ 159 $ 73 Research and development 4,831 3,541 Sales, general and administrative 1,368 1,120 Total share-based compensation $ 6,358 $ 4,734 Revenues Total revenues decreased $12.0 million, or 0.6%, from $1,940.5 million in fiscal 2023 to $1,928.5 million in fiscal 2024.
The increase in fiscal 2023 SG&A expenses as compared to fiscal 2022 was primarily driven by increased fees associated with webstore credit card processing, partially offset by lower professional fees and marketing expenses.
The increase in fiscal 2024 SG&A expenses as compared to fiscal 2023 was primarily driven by higher fees associated with webstore credit card processing, marketing expenses, employee-related expenses and professional fees. 43 Interest Expense and Other, net Interest expense and other, net ("I&O") expenses increased $16.9 million, or 29.1%, from $58.2 million in fiscal 2023 to $75.2 million in fiscal 2024.
Net cash provided by operating activities in fiscal 2022 consisted primarily of net income of $378.7 million, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $38.1 million.
These cash inflows were partially offset by other changes in operating assets and liabilities that resulted in net cash outflows of $118.6 million.
The decline in gross profit margin for fiscal 2023 as compared to fiscal 2022 was primarily driven by changes in product mix and higher component costs, partially offset by lower shipping costs. Operating Expenses Research and Development R&D expenses increased $7.5 million, or 5.4%, from $137.7 million in fiscal 2022 to $145.2 million in fiscal 2023.
Gross Profit Margin Gross profit margin decreased to 38.4% in fiscal 2024 from 39.2% in fiscal 2023. The decline in gross profit margin for fiscal 2024 as compared to fiscal 2023 was primarily driven by incremental excess and obsolete inventory charges and warehouse-related operating expenses, partially offset by lower shipping costs and lower tariffs.
The increase in I&O expense for fiscal 2023 as compared to fiscal 2022 was primarily driven by higher interest expense due to incremental borrowings and increased interest rates. Provision for Income Taxes Our provision for income taxes increased 19.6% from $65.8 million for fiscal 2022 to $78.7 million for fiscal 2023.
As a percentage of Revenue, I&O expense increased from 3% in fiscal 2023 to 4% in fiscal 2024. The increase in I&O expense for fiscal 2024 as compared to fiscal 2023 was primarily driven by higher interest expense due to increased levels of average debt outstanding and higher interest rates.
This net change consisted primarily of $29.6 million increase in inventory, $79.0 million increase in vendor deposits, and a $10.3 million decrease in taxes payable due to the timing of federal tax payments, offset by $52.7 million decrease in accounts receivable due to lower revenue for the period, a $1.8 million decrease in prepaid and other assets, and a $29.9 million increase in accounts payable, accrued and other liabilities.
This net change in operating assets and liabilities consisted primarily of a $70.5 million decrease in accounts payable and accrued liabilities, a $17.1 million decrease in income taxes payable, a $18.3 million increase in vendor deposits, a $17.6 million increase in prepaid expenses and other assets partially offset by a $6.6 million increase in deferred revenues. 44 For fiscal 2023 the net cash used in operating activities was $145.4 million, primarily due to a significant increase in inventory and to a lesser extent, increases in vendor deposits and accounts receivable.
Sales, General and Administrative Sales, general and administrative (“SG&A”) expenses increased $1.1 million, or 1.6%, from $69.9 million in fiscal 2022 to $71.0 million in fiscal 2023. As a percentage of revenues, SG&A expenses remained consistent at 4% for both fiscal 2022 and 2023.
As a percentage of revenues, SG&A expenses remained consistent at 4% for both fiscal 2023 and 2024.
Payment of these obligations are expected to be $16.9 million for fiscal 2024, $22.5 million for fiscal 2025 and $28.1 million for fiscal 2026. These obligations are included within Income tax payable and Long-term taxes payable on our consolidated balance sheets.
These obligations are included within Income tax payable and Long-term taxes payable on our consolidated balance sheets. Other Obligations As of June 30, 2024, we have other obligations of $6.1 million which consisted primarily of commitments related to research and development projects.
As a percentage of revenues, R&D expenses decreased from 8% in fiscal 2022 to 7% in fiscal 2023. The increase in R&D expense for fiscal 2023 versus fiscal 2022 was primarily driven by higher employee-related expenses and facility costs.
The increase in R&D expense for fiscal 2024 versus fiscal 2023 was primarily driven by higher prototype-related expenses and employee-related expenses. Sales, General and Administrative Sales, general and administrative (“SG&A”) expenses increased $10.0 million, or 14.1%, from $71.0 million in fiscal 2023 to $81.0 million in fiscal 2024.
Our effective tax rate increased to 16.2% in fiscal 2023 as compared to 14.8% for fiscal 2022.
Provision for Income Taxes Our provision for income taxes decreased 6.1% from $78.7 million for fiscal 2023 to $73.9 million for fiscal 2024. Our effective tax rate increased to 17.4% in fiscal 2024 as compared to 16.2% for fiscal 2023.
The increase in revenue was primarily driven by an increase in revenue in the Enterprise Technology platform. During fiscal year ended June 30, 2023, there were no material price changes in our products sold. Overall, our fiscal 2023 revenue benefited from our improved ability to secure components and produce products.
The decrease in revenue was driven by a decrease in revenue from both our Enterprise Technology platform and our Service Provider Technology platform. During fiscal year ended June 30, 2024, we experienced an increase in direct sales through our webstores compared to fiscal 2023 and a corresponding decline in sales through distributors.
The change in effective tax rates for fiscal 2023 as compared to fiscal 2022 was primarily driven by a change in the mix of the income earned in various jurisdictions as well as an increase in current U.S. taxes as a result of mandatory capitalization and amortization of R&D expenditures incurred in fiscal year 2023, as required by the Tax Cuts and Jobs Act of 2017 ("TCJA"), and its interplay with global intangible low-taxes income ("GILTI").
The change in effective tax rates for fiscal 2024 as compared to fiscal 2023 was primarily driven by changes in the mix of income earned in various tax jurisdictions.
Interest Expense and Other, net Interest expense and other, net ("I&O") expenses increased $40.4 million, or 226.8%, from $17.8 million in fiscal 2022 to $58.2 million in fiscal 2023. As a percentage of Revenue, I&O expense increased from 1% in fiscal 2022 to 3% in fiscal 2023.
Operating Expenses Research and Development R&D expenses increased $14.6 million, or 10.1%, from $145.2 million in fiscal 2023 to $159.8 million in fiscal 2024. As a percentage of revenues, R&D expenses increased from 7% in fiscal 2023 to 8% in fiscal 2024.
The year-over-year increase was due to increased revenues from Enterprise Technology products, partially offset by decreased revenue from Service Provider Technology products. 42 Gross Profit Gross profit margin decreased to 39.2% in fiscal 2023 from 39.6% in fiscal 2022.
Asia Pacific Revenues in the Asia Pacific region decreased $20.6 million, or 13.9%, from $148.5 million in fiscal 2023 to $127.9 million in fiscal 2024. The year-over-year decrease was due to a decline in revenues from both our Enterprise Technology products and Service Provider Technology products.
The increasing balances of inventories and vendor deposits significantly increase the risks of future material excess, obsolete inventory and related losses. We believe that we are taking the right actions to mitigate these continuing supply constraints, however, we recognize the associated risks.
These mitigation efforts have caused our inventory and vendor deposit balances to increase in the past, and they may cause such increases in the future. These mitigation efforts therefore significantly increase the risks of future material excess, obsolete inventory and related losses.
Removed
We establish valuation allowances when necessary to reduce deferred tax assets to the amount we expect to realize.
Added
Because we have historically included implied post-contract customer support (“PCS”) free of charge in many of our arrangements, we attribute a portion of our systems revenues to this implied PCS.
Removed
During fiscal 2023 we were able to procure components and manufacture products at a level far above fiscal 2022. Service Provider Technology revenues decreased $55.9 million, or 15%, from $375.0 million in fiscal 2022, to $319.1 million in fiscal 2023, primarily due to decreased revenues in our Service Provider Technology platform across all geographic locations.
Added
In addition, our calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws.
Removed
South America Revenues in South America increased $19.8 million, or 21.8%, from $90.6 million in fiscal 2022 to $110.4 million in fiscal 2023.
Added
Service Provider Technology revenues decreased $8.3 million, or 2.6%, from $319.1 million in fiscal 2023 to $310.8 million in fiscal 2024, primarily due to decline in revenue in our Service Provider Technology platform in South America and Asia Pacific regions. Revenues by Geography We have determined the geographical distribution of our product revenues based on our customers’ ship-to destinations.
Removed
There is no offsetting deferred benefit due to our election to treat GILTI as a period cost.
Added
During 2021 the Organization for Economic Co-operation and Development (OECD) announced an agreed-upon framework for its members to implement a global minimum corporate tax of 15% for multinational enterprises, commonly referred to as Pillar Two. Many countries have already proposed or enacted legislation to implement elements of the framework which will apply to Ubiquiti beginning in fiscal year 2025.
Removed
Our investing activities consisted primarily of $13.5 million of capital expenditures and purchase of intangible assets, offset by $2.3 million net proceeds from sales and maturities of our available-for-sale securities. Cash Flows from Financing Activities We had cash inflows of $145.0 million from financing activities during fiscal 2023.
Added
While we are monitoring developments and evaluating the potential impact on future periods, we do not expect Pillar Two to have a significant impact on our fiscal year 2025 financial results.
Removed
We used $472.3 million of cash in financing activities during fiscal 2022. During fiscal 2022, we used $618.1 million related to repurchase of common stock, $148.1 million related to dividends paid on our common stock, and received net proceeds from our borrowings of $295.0 million.
Added
As additional jurisdictions enact Pillar Two legislation, transactional rules lapse, and other provisions of the minimum tax legislation become effective in our fiscal year 2026, we anticipate that our effective tax rate and cash tax payments may increase in future years.
Removed
A key objective for liquidity in the next twelve months is to reduce inventories and debt levels.
Added
Cash Flows from Financing Activities We had cash outflows of $518.0 million from financing activities during fiscal 2024, which primarily consisted of repayments of debt and payment of common stock dividends. During fiscal 2024, we repaid $215.0 million on our Revolving Facility, $157.5 million on our Term Loan Facilities, and paid $145.1 million for dividends on our common stock.
Removed
Other Obligations As of June 30, 2023, we have other obligations of $5.9 million which consisted primarily of commitments related to research and development projects. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, refer to Note 2 to the Consolidated Financial Statements.
Added
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.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity We had cash and cash equivalents of $114.8 million and $136.2 million as of June 30, 2023 and 2022. Cash and cash equivalents includes securities that have a maturity of three months or less at the date of purchase.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity We had cash and cash equivalents of $126.3 million and $114.8 million as of June 30, 2024 and 2023. Cash and cash equivalents includes securities that have a maturity of three months or less at the date of purchase.
Based on a sensitivity analysis, as of June 30, 2023, an instantaneous and sustained 200-basis-point increase in interest rates affecting our floating rate debt obligations, and assuming that we take no counteractive measures, would result in an incremental charge to our income before income taxes of approximately $21.6 million over the next twelve months.
Based on a sensitivity analysis, as of June 30, 2024, an instantaneous and sustained 200-basis-point increase in interest rates affecting our floating rate debt obligations, and assuming that we take no counteractive measures, would result in an incremental charge to our income before income taxes of approximately $14.2 million over the next twelve months.
A 10% appreciation or depreciation in the value of the U.S. dollar relative to the other currencies in which our revenue and expenses are denominated would result in a charge or benefit to our income before income taxes of approximately $7.2 million for fiscal year June 30, 2023.
A 10% appreciation or depreciation in the value of the U.S. dollar relative to the other currencies in which our revenue and expenses are denominated would result in a charge or benefit to our income before income taxes of approximately $1.9 million for fiscal year June 30, 2024.
Added
We have certain bank accounts outside the US, which are denominated in the currencies of the countries in which our operations are located, and may be subject to fluctuations due to changes in foreign currency exchange rates , particularly changes in the Chinese Yuan, Euro, and Taiwan Dollar.
Added
A 10% appreciation or depreciation in the value of the U.S. dollar relative to the other currencies in which bank accounts as at June 30,2024 are denominated would result in a charge or benefit to our income before income taxes of approximately $ 4.7 million for fiscal year June 30, 2024.

Other UI 10-K year-over-year comparisons