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What changed in Ubiquiti Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ubiquiti Inc.'s 2022 and 2023 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 2023 report.

+303 added−306 removedSource: 10-K (2023-08-25) vs 10-K (2022-08-26)

Top changes in Ubiquiti Inc.'s 2023 10-K

303 paragraphs added · 306 removed · 247 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe are party to non-exclusive license agreements with some of these suppliers whereby we license certain technology that we incorporate into our products. These agreements generally automatically renew for successive one-year periods unless the agreements are terminated by written notice of nonrenewal with advance notice prior to the end of their then-current term.
Biggest changeThese agreements generally automatically renew for successive one-year periods unless the agreements are terminated by written notice of nonrenewal with advance notice prior to the end of their then-current term. The Company has not received any termination notice as of the date of this Annual Report on Form 10-K.
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.
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.
These tariffs have already affected our operating results and margins. 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.
These tariffs have affected our operating results and margins. 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.
Competition The markets for networking solutions for service providers, enterprise WLAN, video surveillance, microwave backhaul and 7 Table of Contents 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.
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.
Refer to Note 15 in our Notes to Consolidated Financial Statements for more information regarding financial data by geographic areas. A majority of our sales are made outside the United States and we anticipate that non-U.S. sales will continue to be a significant portion of our revenues.
Refer to Note 13 in our Notes to Consolidated Financial Statements for more information regarding financial data by geographic areas. A majority of our sales are made outside the United States and we anticipate that non-U.S. sales will continue to be a significant portion of our revenues.
We believe that our products are differentiated due to our proprietary software, firmware expertise, and hardware design capabilities. We operate our business as one reportable and operating segment. Further information regarding Segments can be found in Note 15 to our Consolidated Financial Statements.
We believe that our products are differentiated due to our proprietary software, firmware expertise, and hardware design capabilities. We operate our business as one reportable and operating segment. Further information regarding Segments can be found in Note 13 to our Consolidated Financial Statements.
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”.
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.
Our workforce is diversified across multiple locations with 65%, 23% and 12% 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 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 research and development expenses were $137.7 million, $116.2 million and $89.4 million for fiscal 2022, fiscal 2021 and fiscal 2020, 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 $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 revenues were $1.7 billion, $1.9 billion and $1.3 billion in the fiscal years ended June 30, 2022, 2021 and 2020, respectively. We reported net income of $378.7 million, $616.6 million and $380.3 million in the fiscal years ended June 30, 2022, 2021 and 2020, respectively.
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.
During fiscal 2022, we sold our products to over 100 distributors and direct to customers through our webstores (collectively, “customers”) in over 75 countries. In fiscal 2022 and 2021, there were no customers that represented 10% or more of our revenue, while in in fiscal 2020, only one customer represented 10% or more of our revenue.
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.
As of June 30, 2022, our research and development team consisted of 978 full time equivalent employees, including contractors, located in the United States, Taiwan, China, Latvia, the Czech Republic, Lithuania, Ukraine, Poland, and elsewhere. Our research and development operations work on product development of new products and new versions of existing products.
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.
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 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 Access - UniFi Access is a state-of-the art door access system that is easily expandable.
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.
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 which comprise the raw materials for our product offerings and we generally do not have any guaranteed supply arrangements with our suppliers for these components (including the chipsets).
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).
Our executive office is located at 685 Third Avenue, 27th Floor, New York, New York 10017. Our website address is www.ui.com. The information on, or that can be assessed through, our website is not part of this Annual Report on Form 10-K. 9
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
Industry Overview Internet traffic worldwide has grown rapidly in recent years, driven by an increase in the number of users, increasing mobility of those users and high bandwidth applications, such as video, audio, cloud-based applications, online gaming and social networking.
Industry Overview Internet traffic worldwide has grown rapidly in recent years, driven by an increase in the number of users, increasing mobility of those users and high bandwidth applications, such as video, audio, cloud-based applications, online gaming and social networking. Wired networking solutions have traditionally been used to address increasing consumer and enterprise bandwidth needs.
Wired networking solutions have traditionally been used to address increasing consumer and enterprise bandwidth needs. However, the high initial capital requirements and ongoing operating costs and long market lead times associated with building and installing infrastructure for wired networks has severely limited the widespread deployment of these networks in underserved and underpenetrated markets.
However, the high initial capital requirements and ongoing operating costs and long market lead times associated with building and installing infrastructure for wired networks has severely limited the widespread deployment of these networks in underserved and underpenetrated markets.
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 has led to a significant increase in our backlog of unfulfilled orders.
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.
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 -Enterprise WLAN - our UniFi-Enterprise WLAN platform was designed as an enterprise Wi-Fi system, combining Wi-Fi certified hardware with software-based management controller (UniFi OS).
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).
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.
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.
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. 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.
Also posted on our website on the Corporate Governance page is the Company’s Code of Ethics for Principal Executive and Senior Financial Officers and Section 16 Officers. We intend to post any amendment or waiver to this Code on our website within the time period required by the SEC.
Also posted on our website on the Corporate Governance page is the Company’s Code of Ethics for Principal Executive and Senior Financial Officers and Section 16 Officers .
While components and supplies in the past have been generally available from a variety of sources, we and our contract manufacturers currently depend on a single or limited number of suppliers for several components for our products and the impact of COVID-19 and the current shortage of chips has limited out ability to meet demand.
While components and supplies in the past have been generally available from a variety of sources, we and our contract manufacturers currently depend on a single or limited number of suppliers for several components for our products. We and our contract manufacturers rely on purchase orders rather than long-term contracts with these suppliers.
If these sources fail to satisfy our supply requirements or we are unable to manage our supply requirements through other sources, could disrupt our business or have a material adverse effect on our results of operations and financial condition.” We have experienced a major disruption in our supply chain as a result of the COVID-19 pandemic due to COVID-19 related restrictions that have significantly impacted our suppliers’ ability to manufacture or provide key components or services, as well as shipping and logistics delays.
If these sources fail to satisfy our supply requirements or we are unable to manage our supply requirements through other sources, it could disrupt our business or have a material adverse effect on our results of operations and financial condition.” We have experienced significant supply constraints caused, in part, by the COVID-19 pandemic.
We seek to maintain a culture of accountability and performance that enables us to deliver highly-advanced and easily deployable solutions that appeal to a global market. 8 Table of Contents Available Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed or furnished with the U.S.
The principal purpose of our incentive plans is to motivate individuals to perform to the best of their abilities to achieve our short- and long-term objectives Available Information The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are filed or furnished with the U.S.
For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, refer to “Part I - Item 1A.
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.
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.
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. 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.
While we have attempted to mitigate supply shortages through our contract manufacturers and exploring open-market avenues to procure the necessary components, but we expect to experience continuing challenges in terms of securing our supply of such components and pricing inflation for the components to manufacture our products.
While we have attempted to mitigate supply shortages through our contract manufacturers and exploring open-market avenues to procure the necessary components, there is no assurance that we will be able to obtain sufficient supply of such components on suitable terms, including the pricing terms.
We and our contract manufacturers rely on purchase orders rather than long-term contracts with these suppliers. The majority of our product revenues are dependent upon the sale of products that incorporate components from a small number of suppliers.
The majority of our product revenues are dependent upon the sale of products that incorporate components from a small number of suppliers. We are party to non-exclusive license agreements with some of these suppliers whereby we license certain technology that we incorporate into our products.
The Company has not received any termination notice as of the date of this Annual Report on Form 10-K. We depend on these license agreements to modify and replace firmware on certain chipsets with our proprietary firmware.
We depend on these license agreements to modify and replace firmware on certain chipsets with our proprietary firmware.
For further discussion of the risks associated with intellectual property, see “Part I - Item 1A. Risk Factors - Risks Related to Intellectual Property”. Human Capital As of June 30, 2022, we employed and or contracted with 1,377 full time equivalent employees, of which 978 were in research and development, 317 in operations, and 82 in sales, general and administrative.
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.
Removed
According to Cisco Annual Internet Report, internet users as a percentage of global population will be 66% in 2023, an increase from 51% in 2018. Additionally, it is estimated that there will be 3.6 networked devices per capita connected to IP networks in 2023, up from 2.4 networked devices per capita in 2018.
Added
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.
Removed
Our inability to procure sufficient quantities of certain components during fiscal 2022, including chipsets, has had a negative impact 6 Table of Contents on our ability to manufacture our products and increased the costs associated therewith, and we expect these supply constraints, and their negative impact on our manufacturing output and associated costs, to continue.
Added
Our efforts to mitigate these supply constraints have included, for example, increasing our inventory build in an attempt to secure supply and meet customer demand, paying higher component and shipping costs to secure supply and modifying our product designs to leverage alternate suppliers.
Added
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.
Added
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.
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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.
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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.
Added
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.
Added
We seek to maintain a culture of accountability and performance that enables us to deliver highly-advanced and easily deployable solutions that appeal to a global market. Talent and Human Capital Management We believe that human capital management is key to our continued growth and success, and is critical to our ability to attract, retain and develop talented and skilled employees.
Added
We hire and compensate our talent based on their role, experiences, contributions and performance, regardless of their gender, race or ethnic background or other personal characteristics. Our human capital is governed by employment regulations in each country in which we operate.
Added
We monitor key employment activities, such as hiring, termination and pay practices to comply with established regulations across the world. Incentive Plans Our incentive plans are designed to increase stockholder value by attracting, retaining and motivating high value personnel through the granting of equity and non-equity-based compensation awards.
Added
We will, if required, disclose future amendments to our Code of Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, or certain waivers of such provisions granted to such persons, on our website identified above.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

139 edited+29 added−26 removed264 unchanged
Biggest changeRisk 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; • 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, including, without limitation, as a result of COVID-19, 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, including, without limitation, COVID-19, 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 from our investments in growth areas or 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 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; • exposure to increased operational risks associated with our investments in new businesses, products, services, technologies, joint ventures and other strategic transactions; • our reliance on third-party software and services for certain aspects of our operations, including, without limitation, our financial reporting functions; • our inability to integrate future acquisitions; • changes in LIBOR reporting practices and the index used to replace LIBOR; • 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.
Biggest changeRisk 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.
Our ability to keep pace in these markets depends upon our ability to enhance our current products, and continue to develop and introduce new products rapidly and at competitive prices.
Our ability to keep pace in these markets depends upon our ability to enhance our current products, and to continue to develop and introduce new products rapidly and at competitive prices.
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; • 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; • 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.
Whether or not there is merit to a given claim, it can be time consuming and costly to defend against, and could: 23 • 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; • 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.
Additionally, from time to time, unexpected events, such as the COVID-19 pandemic, have had, and may continue to 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 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.
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.
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.
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, 29 subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny.
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.
Any future illegal acts such as phishing, social engineering or other fraudulent conduct that go undetected may have significant negative impacts on our reputation, operating results and stock price. Our business and prospects depend on the strength of our brand. 14 Maintaining and enhancing our brand is critical to expanding our base of distributors and end customers.
Any future illegal acts such as phishing, social engineering or other fraudulent conduct that go undetected may have significant negative impacts on our reputation, operating results and stock price. Our business and prospects depend on the strength of our brand. Maintaining and enhancing our brand is critical to expanding our base of distributors and end customers.
Since these activities are currently conducted in 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.
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.
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.
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.
Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming, may place our intellectual property at risk of being invalidated or narrowed in scope, and may divert the efforts of our technical staff and managerial personnel. Enforcement of our intellectual property rights abroad, particularly in China and South America, is limited.
Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming, may place our intellectual property at risk of being invalidated or narrowed in scope, and may divert the efforts of our technical staff and managerial personnel. Enforcement of our intellectual property rights abroad, particularly in China, Russia and South America, is limited.
Pera had also indicated these loans have or will have various requirements to repay all or a portion of the loan upon the occurrence of various events, including when the price of the common stock goes below certain specified levels. Mr. Pera may need to sell shares of our common stock to meet these repayment requirements.
Pera had also indicated these loans have or will have various requirements to repay all or a portion of the 27 loan upon the occurrence of various events, including when the price of the common stock goes below certain specified levels. Mr. Pera may need to sell shares of our common stock to meet these repayment requirements.
In addition, if new spectrums, either licensed or unlicensed, are made available by government 30 regulatory agencies for broadband wireless communication that may disrupt the competitive landscape of our industry and impact our business. We could be adversely affected by unfavorable results in litigation.
In addition, if new spectrums, either licensed or unlicensed, are made available by government regulatory agencies for broadband wireless communication that may disrupt the competitive landscape of our industry and impact our business. We could be adversely affected by unfavorable results in litigation.
There can be no assurance that our advertising and other marketing efforts will result in increased sales of our consumer products. If we are unable to anticipate consumer preferences and successfully develop desirable consumer products and solutions, we might not be able to maintain or increase revenue and profitability.
There can be no assurance that our advertising and other marketing efforts will result in increased sales of our consumer products. 18 If we are unable to anticipate consumer preferences and successfully develop desirable consumer products and solutions, we might not be able to maintain or increase revenue and profitability.
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. 19 Our distributors generally offer products from several different manufacturers.
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.
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. 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 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.
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.
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.
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.
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.
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.
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 use third-party logistics and warehousing providers located in 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.
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.
The intellectual property protection and enforcement regimes in certain countries outside the United States are generally not as comprehensive as in the United States, and may not adequately protect our intellectual property. The legal regimes relating to the recognition and enforcement of intellectual property rights in China and South America are particularly limited.
The intellectual property protection and enforcement regimes in certain countries outside the United States are generally not as comprehensive as in the United States, and may not adequately protect our intellectual property. The legal regimes relating to the recognition and enforcement of intellectual property rights in China, Russia and South America are particularly limited.
Any such failure (including any failure to implement 31 new or improved controls, difficulties in the execution of such implementation or deterioration of our current control practices) may result in an inability to prevent fraud, or cause us to fail to meet our reporting obligations.
Any such failure (including any failure to implement new or improved controls, difficulties in the execution of such implementation or deterioration of our current control practices) may result in an inability to prevent fraud, or cause us to fail to meet our reporting obligations.
Non-compliance or deliberate violations of labor, environmental or other laws by our 15 contract manufacturer or suppliers, or a failure of these parties to follow ethical business practices, could lead to negative publicity and harm our reputation or brand.
Non-compliance or deliberate violations of labor, environmental or other laws by our contract manufacturer or suppliers, or a failure of these parties to follow ethical business practices, could lead to negative publicity and harm our reputation or brand.
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.
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.
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 stock-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 • changes in tax law and/or generally accepted accounting principles.
The success of new product introductions depends on a number of factors including, but not limited to, timely and successful research and development, pricing, market and consumer acceptance, the effective forecasting and management of product demand, purchase commitments and inventory levels, the availability of products in appropriate quantities to meet anticipated demand, the management of manufacturing and supply costs, the management of risks associated with new product production ramp-up issues, and the risk that new products may have quality issues or other defects or bugs in the early stages of introduction.
The success of new product introductions depends on a number of factors including, but not limited to, timely and successful research and development, pricing, market and consumer acceptance, the effective forecasting and management of product demand, purchase commitments, inventory levels and vendor deposit levels, the availability of products in appropriate quantities to meet anticipated demand, the management of manufacturing and supply costs, the management of risks associated with new product production ramp-up issues, and the risk that new products may have quality issues or other defects or bugs in the early stages of introduction.
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.
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.
Changes in our products or changes in export and import regulations may create delays in the introduction of our products in other countries, prevent our customers with international operations from deploying our products or, in some cases, prevent the transfer of 28 our products to certain countries altogether.
Changes in our products or changes in export and import regulations may create delays in the introduction of our products in other countries, prevent our customers with international operations from deploying our products or, in some cases, prevent the transfer of our products to certain countries altogether.
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.
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.
The extent to which public health problems will impact our business, results of operations and financial conditions will depend on developments that are highly uncertain and cannot be predicted.
The extent to which public health problems may impact our business, results of operations and financial conditions will depend on developments that are highly uncertain and cannot be predicted.
The market for our wireless broadband networking equipment is emerging and is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles.
The market for our wireless broadband networking equipment is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles.
Our contract manufacturers operate primarily in China, 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 China and Vietnam, where the prosecution of intellectual property infringement and trade secret theft is more difficult than in the United States.
As described in more detail in this Annual Report on Form 10-K for the fiscal year ended June 30, 2017, under Item 9A.
As described in more detail in the Annual Report on Form 10-K for the fiscal year ended June 30, 2017, under Item 9A.
Our business may be negatively affected by political events and foreign policy responses. Geopolitical uncertainties and events could cause damage or disruption to international commerce and the global economy, and thus could have a material adverse effect on us, our suppliers, logistics providers, manufacturing vendors and customers, including our channel partners.
Our business may be negatively affected by political events and foreign policy responses. Geopolitical uncertainties and events could cause damage or disruption to international commerce and the global economy, and thus could have a material adverse effect on us, our suppliers, logistics providers, manufacturing vendors and customers, including our distributors and other channel partners.
We depend upon effective sales channels to reach the consumers who are the ultimate purchasers of our consumer products. In the United States, we primarily sell our consumer products through a mix of retail channels, including, e-commerce, big box, mid-market and specialty retailers, and we reach certain U.S. markets through distributors.
We depend upon effective sales channels to reach the consumers who are the ultimate purchasers of our consumer products. In the United States, we primarily sell our consumer products through a mix of retail channels, including our webstores, e-commerce, big box, mid-market and specialty retailers, and we reach certain U.S. markets and international markets through distributors.
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. 20 Our third-party logistics and warehousing providers in China 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 China, Vietnam and elsewhere may fail to safeguard and accurately manage and report our inventory.
If we experience greater returns from retailers or end customers, or greater warranty claims, in excess of our reserves, our business, revenue and results of operations could be harmed. Security vulnerabilities in our products, services and systems, or in our distribution channel, could lead to reduced revenues and claims against us.
If we experience greater returns from retailers or end customers, or greater warranty claims, in excess of our reserves, our business, revenue and results of operations could be harmed. Security vulnerabilities in our products, services and systems, in our distribution channel, or supply chain could lead to reduced revenues and claims against us.
Existing and new regulations, changes in existing regulations, or the enforcement of any regulations related to our products may result in unanticipated burdens, costs and liabilities and could materially and adversely affect our financial condition, results of operations, and our brand. Our products are subject to governmental regulations in a variety of jurisdictions.
Existing and new regulations, changes in existing regulations, or the enforcement of any regulations related to our products may result in unanticipated burdens, reduced demand, costs and liabilities and could materially and adversely affect our financial condition, results of operations, and our brand. Our products are subject to governmental regulations in a variety of jurisdictions.
The success of new product introductions or updates on existing products depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, our ability to manage the risks associated with new product production ramp-up, the effective management of our inventory and manufacturing schedule and the risk that new products may have defects or other deficiencies in the early stages of introduction.
The success of new product introductions or updates on existing products depends on a number of factors including, but not limited to, timely and successful product development, market acceptance, development of sales channels, our ability to manage the risks associated with new product forecast, production ramp-up, the effective management of our inventory and manufacturing schedule and the risk that new products may have defects or other deficiencies in the early stages of introduction.
If we fail to effectively manage any of these challenges, we could suffer inefficiencies, errors and disruptions in our business, which in turn would adversely affect our results of operations. We rely on a limited number of contract manufacturers to produce our products.
If we fail to effectively manage any of these challenges, we could suffer inefficiencies, errors and disruptions in our business, which in turn would adversely affect our results of operations. We rely upon a limited number of contract manufacturers to produce our products.
Accordingly, the potential effects of the foregoing on our cost of capital cannot yet be determined. Further, the same costs and risks that may lead to the unavailability of LIBOR may make one or more of the alternative rate methods impossible or impracticable to determine.
Accordingly, the potential effects of the foregoing on our cost of capital cannot yet be determined. Further, the same costs and risks that led to the unavailability of LIBOR may make one or more of the alternative rate methods impossible or impracticable to determine.
Data Protection Directive and China Cybersecurity Law, could adversely affect our financial condition, results of operations, and our brand.” We and certain of our vendors have experienced cyber-attacks in the past, and may experience cyber-attacks in the future.
Data Protection Directive and China Cybersecurity Law, could adversely affect our financial condition, results of operations, and our brand.” We and certain of our vendors have experienced cyber-attacks in the past, and we, our vendors, suppliers, and distributors may experience cyber-attacks in the future.
As we expand into other products and services, such as video surveillance equipment, voice communication equipment, security access equipment, wireless backhaul, consumer electronics, and machine-to-machine communications, we may not be able to compete effectively with existing market participants and may not be able to realize a positive return on the investment we have made in these products or services.
As we expand into other products and services, such as video surveillance equipment, voice communication equipment, security access equipment, wireless backhaul, consumer electronics, and Software-as-a-Services, we may not be able to compete effectively with existing market participants and may not be able to realize a positive return on the investment we have made in these products or services.
Additionally, if the assumptions on which we based our forecasts and management of product demand, purchase commitments or inventory levels turn out to be incorrect, our financial performance could suffer and we could be required to write-off the value of excess products or components inventory or not fully utilize firm purchase commitments.
Additionally, if the assumptions on which we based our forecasts and management of product demand, purchase commitments, inventory levels or vendor deposit levels turn out to be incorrect, our financial performance could suffer and we could be required to write-off the value of excess products or components inventory, increase the vendor deposit levels, or not fully utilize firm purchase commitments.
Additional effects may include increased demand for customer finance, difficulties in collection of accounts receivable, higher overhead costs as a percentage of revenue and higher interest expense, risk of supply constraints, risk of excess and obsolete inventories, risk of excess facilities and manufacturing capacity and increased risk of counterparty failures.
Additional effects of unfavorable macroeconomic conditions may include increased demand for customer finance, difficulties in collection of accounts receivable, higher overhead costs as a percentage of revenue and higher interest expense, risk of supply constraints, risk of excess and obsolete inventories, risk of excess facilities and manufacturing capacity and increased risk of counterparty failures.
If we under forecast demand, our ability to fulfill sales orders will be compromised and sales to distributors may be deferred or lost altogether, which would reduce our revenues and could harm our ability to achieve or sustain expected results of operations.
If we under forecast demand, our ability to fulfill sales orders will be compromised and sales to distributors may be deferred or lost altogether, which may impair our distributor relationships, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations.
Decisions to build inventory for new products or to increase or maintain higher inventory levels are typically based upon uncertain forecasts or other assumptions and may expose us to a greater risk of carrying excess or 11 obsolete inventory.
Decisions to build inventory for new products or to increase or maintain higher inventory levels and vendor deposit levels are typically based upon uncertain forecasts or other assumptions and may expose us to a greater risk of carrying excess or obsolete inventory.
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 22 ongoing concern. The steps we have taken may not prevent unauthorized use of our intellectual property.
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.
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; including shortages in labor as a result of, or to mitigate, the spread of COVID-19; • 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: 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.
Tax authorities could challenge our assertions with respect to how we have conducted our business operations as might result in a claim for larger tax payments from us, including, but not limited to, income and withholding taxes. The expense of defending and resolving such audits may be significant.
Tax authorities could challenge our assertions with respect to how we have conducted our business operations which might result in a claim for larger tax payments from us, including, but not limited to, income and withholding taxes and potential fines or penalties. The expense of defending and resolving such audits may be significant.
Pera has the ability to control the management and major strategic investments of our company as a result of his position as our Chief Executive Officer and his ability to control the election or replacement of our directors. In the event of his death, the shares of our stock that Mr. Pera owns will be transferred to his successors.
Pera has the ability to control the management and major strategic investments of our company as a result of his position as our Chief Executive Officer and his ability to control the election or replacement of our directors. In the event of his death, the shares of our stock that Mr.
Should the shortage of chipsets and other components used to manufacture our products continue, there is no assurance that we will be able to obtain sufficient chipsets or other components on acceptable terms, if at all, which could delay or disrupt the supply of our products and affect our business, results of operations and financial condition.
There is also no assurance that we will be able to obtain sufficient chipsets or other components on acceptable terms, if at all, which could delay or disrupt the supply of our products and affect our business, results of operations and financial condition.
Accordingly, our business, financial condition and results of operations and the market price of our shares may be affected by changes in governmental policies, taxation, inflation or interest rates in mainland China and Taiwan and by social instability and diplomatic developments in or affecting mainland China and Taiwan, which are outside of our control.
Accordingly, our product development, supply chain operation and overall business, financial condition and results of operations and the market price of our shares may be affected by changes in governmental policies, taxation, inflation or interest rates in mainland China and Taiwan and by social instability and diplomatic developments in or affecting mainland China and Taiwan, which are outside of our control.
As a result, unauthorized parties have obtained, and may in the future obtain, access to our systems and data and may have obtained, and may in the future obtain, our users’ or customers’ data. Our security measures have in the past, and may in the future, be breached due to employee error, malfeasance, or otherwise.
As a result, unauthorized parties have obtained, and may in the future obtain, access to our systems, our confidential business information and data and may have obtained, and may in the future obtain, our users’ or customers’ data. Our security measures have in the past, and may in the future, be breached due to human error, malfeasance, or otherwise.
The final determination of our income tax liabilities may be materially different than what is reflected in our income tax provisions and accruals. The legislative bodies in many jurisdictions regularly consider proposed legislation that, if adopted, could affect our tax rate in such jurisdictions, and the carrying value of our deferred tax assets or our tax liabilities.
The final determination of our income tax liabilities by taxing authorities may be materially different than what is reflected in our income tax provisions and accruals which could materially affect our tax obligations and effective tax rate. 32 The legislative bodies in many jurisdictions regularly consider proposed legislation that, if adopted, could affect our tax rate in such jurisdictions, and the carrying value of our deferred tax assets or our tax liabilities.
Our distributors do not make long term purchase commitments to us, and do not typically provide us with information about market demand for our products. We endeavor to obtain information on inventory levels and sales data from our distributors.
Sales to our distributors have accounted for the majority of our revenues. Our distributors do not make long term purchase commitments to us, and do not typically provide us with information about market demand for our products. We endeavor to obtain information on inventory levels and sales data from our distributors.
As events continue to evolve our estimates may change materially in future periods. In addition, projections of any evaluation of effectiveness of internal control over financial reporting in future periods are subject to the risk that the control may become inadequate because of changes in conditions or a deterioration in the degree of compliance with the policies or procedures.
In addition, projections of any evaluation of effectiveness of internal control over financial reporting in future periods are subject to the risk that the control may become inadequate because of changes in conditions or a deterioration in the degree of compliance with the policies or procedures.
Public health problems currently cause and, along with the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan, may continue to cause disruptions, delays, shortages, and increased costs within our supply chain, and distribution channels.
Public health problems have caused and, along with the military conflict between Russia and Ukraine and the escalating tensions between China and Taiwan, may cause in the future disruptions, delays, shortages, and increased costs within our supply chain, and distribution channels.
To remain competitive and stimulate customer demand, we must effectively manage product introductions, product transitions and marketing. 18 We believe that we must continually develop and introduce new products, enhance our existing products, effectively stimulate customer demand for new and upgraded products, and successfully manage the transition to these new and upgraded products to maintain or increase our revenue.
We believe that we must continually develop and introduce new products, enhance our existing products, effectively stimulate customer demand for new and upgraded products, and successfully manage the transition to these new and upgraded products to maintain or increase our revenue.
Additionally, our sales to customers through our webstores have increased, which may expose us to liabilities associated with the online collection of customer data, including credit card information, and the costs we may incur to mitigate such risks. Our sales to customers through our webstores require the transmission of confidential information, including credit card information, securely over public networks.
Additionally, our sales to end customers through our webstores have increased, which may expose us to liabilities associated with the online collection of customer data, including credit card information, and the costs we may incur to mitigate such risks.
Unfavorable macroeconomic conditions, such as a recession or continued slowed economic growth, may negatively affect demand for our products and exacerbate some of the other risks that affect our business, results of operations and financial condition.
Failure to manage these fluctuations could adversely impact our results of operations or financial conditions. Unfavorable macroeconomic conditions, such as a recession or continued slowed economic growth, may negatively affect demand for our products and exacerbate some of the other risks that affect our business, results of operations and financial condition.
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 26, 2022, 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 25, 2023, Mr. Pera beneficially owned 56,278,181 shares of our common stock.
While we are continuing to work closely with our suppliers and contract manufacturers to minimize the potential adverse impacts of the supply shortage, there are many companies seeking to purchase the limited supply of chipsets and other components, many of which have greater resources and larger market share than we have, which may limit the effectiveness of our efforts.
If there are shortages of chipsets or other components used to manufacture our products, while we expect to work closely with our suppliers and contract manufacturers to minimize the potential adverse impacts of such supply shortage, there are many companies seeking to purchase the same components, many of which have greater resources and larger market share than we have, which may limit the effectiveness of our efforts.
In international markets, we primarily sell through distributors who in turn sell to local retailers. With some of our consumer products, we depend on retailers to provide adequate and attractive space for our products in their stores. We further depend on our retailers to employ, educate and motivate their sales personnel to effectively sell our consumer products.
With some of our consumer products, we depend on retailers to provide adequate and attractive space for our products in their stores. We further depend on our retailers to employ, educate and motivate their sales personnel to effectively sell our consumer products.
Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our business results of operations and financial condition. 32 Changes in applicable tax regulations could negatively affect our financial results.
Although we believe our interpretation of tax laws and tax estimates are reasonable, there can be no assurance that any final determination by taxing authorities will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our business, results of operations and financial condition.
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.
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.
These conditions have harmed our business and results of operations in the past, and some of these or other conditions in the markets we serve could affect our business and results of operations, liquidity or financial condition in any future period of such slowdowns. We are subject to risks associated with our distributors’ inventory management practices.
These conditions have harmed our business and results of operations in the past, and some of these or other conditions in the markets we serve could affect our business and results of operations, liquidity or financial condition in any future period of such slowdowns.
Accordingly, although an agreement on post-Brexit trade and future European Union-United Kingdom relations (the European Union-United Kingdom Trade and Cooperation Agreement) was reached on December 24, 2020, and the formal ratification process was completed in April 2021, there continues to be uncertainty over some of the practical consequences of Brexit and as to its application, including as to the United Kingdom’s trading policies with the European Union and other countries as it issues new rules and regulations.
Although the formal ratification process was completed in April 2021, there continues to be uncertainty over some of the practical consequences of Brexit and as to its application, including as to the United Kingdom’s trading policies with the European Union and other countries as it issues new rules and regulations.
For example, in April 2016, the E.U. Parliament approved a new data protection regulation, known as the General Data Protection Regulation (“GDPR”), which came into force on May 25, 2018.
Parliament approved a new data protection regulation, known as the General Data Protection Regulation (“GDPR”), which came into force on May 25, 2018.
There is no assurance that the supply of such components will not be delayed or constrained. 16 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.
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.
Because the markets in which the Company competes are volatile, competitive and subject to rapid technology and price changes, if the assumptions on which we base these decisions turn out to be incorrect, our financial performance could suffer and we could be required to write-off the value of excess products or components inventory or not fully utilize firm purchase commitments.
Because the markets in which the Company competes are volatile, competitive and subject to rapid technology changes, price changes, shortages and other disruptions, if the assumptions on which we base these decisions turn out to be incorrect, our financial performance could suffer and we could be required to write-off the value of excess products or components inventory, increase vendor deposits or not fully utilize firm purchase commitments. 11 We rely upon a limited number of distributors, and changes in our relationships with our distributors or changes within our distributors may disrupt our sales.
In addition, negative sentiments towards the U.S. among non-U.S. customers and among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively. 21 The foreign policies of governments may be volatile and may result in rapid changes to import and export requirements, customs classifications, tariffs, trade sanctions and embargoes or other retaliatory trade measures that may cause us to raise prices, prevent us from offering products or providing services to particular entities or markets, may cause us to make changes to our operations, or create delays and inefficiencies in our supply chain.
The foreign policies of governments may be volatile and may result in rapid changes to import and export requirements, customs classifications, tariffs, trade sanctions and embargoes or other retaliatory trade measures that may cause us to raise prices, prevent us from offering products or providing services to particular entities or markets, may cause us to make changes to our operations, or create delays and inefficiencies in our supply chain.
We also sell to distributors in numerous countries throughout the world. Our operations outside of the United States subject us to risks that we generally do not face in the United States.
Our operations outside of the United States subject us to risks that we generally do not face in the United States.
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.
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.
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 COVID-19, may not be predicted in time to design-in different components or qualify other suppliers. Shortages or supply disruptions may also increase the prices of components due to market conditions.
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.
Our research and development teams 24 are organized around small groups or individual contributors for a given platform, and there is little overlap in knowledge and responsibilities.
Our business model relies in part on leanly staffed, independent and efficient research and development teams. Our research and development teams are organized around small groups or individual contributors for a given platform, and there is little overlap in knowledge and responsibilities.
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.
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.
These investments are subject to general credit, liquidity, market, and interest rate risks. As a result, we may experience a reduction in value or loss of liquidity of our investments. These market risks associated with our investment portfolio may have a negative adverse effect on our business, results of operations, and financial condition.
As a result, we may experience a reduction in value or loss of liquidity of our investments. These market risks associated with our investment portfolio may have a negative adverse effect on our business, results of operations, and financial condition. We maintain cash deposits in excess of federally insured limits.
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.
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.
We are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing.
Data Protection Directive and China Cybersecurity Law, could adversely affect our financial condition, results of operations, and our brand. We are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing.

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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 311,000 7/31/2027 R&D, Warehouse 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 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
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, 2022, 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, 2023, all of which we lease. Location Sq.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Information with respect to this item may be found in Note 10 in the Notes to Consolidated Financial Statements included under Part IV, Item 15 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. PART II
Biggest changeItem 3. Legal Proceedings Information with respect to this item may be found in Note 9 in the Notes to Consolidated Financial Statements included under Part IV, Item 15 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. PART II

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 programs and the activity under the available share repurchase programs during fiscal year ended June 30, 2022 (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 Purchases Estimated Remaining Balance Available for Share Repurchases under the Programs Expiration date of Program May 8, 2020 $500 1,074,820 $295.98 $318.1 July 7, 2021 - February 3, 2022 $ — 3/31/2022 February 4, 2022 $300 1,119,033 $268.09 $300 February 4, 2022- May 3, 2022 $ — 6/30/2023 May 6, 2022 $200 — — — — $200 9/30/2023 35 Common stock repurchase activity under the Company's Share Repurchase program during the fourth quarter ended June 30, 2022 was as follows (in millions, except share and per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Estimated Remaining Balance Available for Share Repurchases April 1, 2022 - April 30, 2022 345,492 $ 289.43 345,492 $ 5.1 May 1, 2022 - May 31, 2022 18,122 $ 282.95 18,122 $ — June 1, 2022 - June 30, 2022 — $ — — $ — Total 363,614 $ 289.11 363,614 $ — 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, 2022 and 2021: 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 Year Ended June 30, 2021 Q1 Q2 Q3 Q4 Dividends declared date August 21, 2020 November 6, 2020 February 5, 2021 May 6, 2021 Dividends payment date September 8, 2020 November 23, 2020 February 22, 2021 May 24, 2021 Cash dividend paid per common stock $ 0.40 $ 0.40 $ 0.40 $ 0.40 On August 26, 2022, the Company announced that its Board of Directors declared a cash dividend of $0.60 per share payable on September 13, 2022 to shareholders of record at the close of business on September 6, 2022.
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.
The graph assumes that $100 was invested on June 30, 2017 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 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 Company intends to pay regular quarterly cash dividends of at least $0.60 per share during each remaining quarter of fiscal 2023, 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 2024, however any future dividends will be subject to the approval of the Company’s Board of Directors.
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 Computer & Electronics Retail Index *100 invested on 6/30/17 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. 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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Information As of August 25, 2022, 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 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.
Stock Performance Graph The following graph compares the cumulative total stockholder return for our common stock from June 30, 2017 to June 30, 2022, 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 June 30, 2018 to June 30, 2023, with the comparable cumulative return the NYSE Composite Index and the S&P Computer & Retail Index.
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.
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.
Removed
Securities Authorized for Issuance under Equity Compensation Plans Information regarding the securities authorized for issuance under our equity compensation plans can be found under Item 12 of this Annual Report on Form 10-K. Unregistered Securities Sold During fiscal 2022 We did not sell any unregistered securities during fiscal 2022. Item 6 . Reserved

Item 7. Management's Discussion & Analysis

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

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Biggest changeConsolidated Cash Flow Data The following table sets forth the major components of our consolidated statements of cash flows data for the periods presented: Years Ended June 30, 2022 2021 (In thousands) Net cash provided by operating activities $ 370,259 $ 612,022 Net cash provided by (used in) investing activities (11,180) (19,266) Net cash (used in) financing activities (472,273) (485,955) Net (decrease) increase in cash and cash equivalents $ (113,194) $ 106,801 Cash Flows from Operating Activities Net cash provided by operating activities in fiscal 2022 consisted primarily of net income of $378.7 million, partially offset by the changes in operating assets and liabilities that resulted in net cash outflows of $38.1 million.
Biggest changeWe 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.
The maximum potential amount of future payments we could be required to make under these indemnification agreements is not estimable. We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain 45 limits, while such persons are or were serving at our request in such capacity.
The maximum potential amount of future payments we could be required to make under these indemnification agreements is not estimable. We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We develop technology platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics for professional, home and personal use. We categorize our solutions into three main categories: high performance 36 networking technology for enterprises, service providers and consumers.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We develop technology platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics for professional, home and personal use. We categorize our solutions into three main categories: high performance networking technology for enterprises, service providers and consumers.
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 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, retail 36 chains and, to a lesser extent, the Ubiquiti Community. In addition to Mr.
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.
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.
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- 40 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.
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.
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.
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.
We recognize revenue when obligations under the terms of a contract with our customers are satisfied, generally, upon transfer of 39 control of promised goods or services to customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.
We recognize revenue when obligations under the terms of a contract with our customers are satisfied, generally, upon transfer of control of promised goods or services to customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.
While the impact on our operations in Ukraine and its surrounding countries has not been material to our business or results of operations as of the date hereof, the full impact of the military conflict 37 on our business and results of operations remains uncertain.
While the impact on our operations in Ukraine and its surrounding countries has not been material to our business or results of operations as of the date hereof, the full impact of the military conflict on our business and results of operations remains uncertain.
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 stock-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 of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, professional services, facilities, general liability insurance and travel.
We must assess such potential exposures and, where necessary, provide a reserve to cover any expected loss. To the extent that we establish a reserve, the provision for income taxes would be increased.
We must assess potential exposures and, where necessary, provide a reserve to cover any expected loss. To the extent that we establish a reserve, the provision for income taxes would be increased.
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, 2022. 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, 2023. Contractual Obligations and Off-Balance Sheet Arrangements Our contractual obligations represent material expected or contractually committed future payment obligations.
In addition, cost of revenues includes labor and other costs w hich include salary, benefits and stock-based compensation, in addition to costs associated with tooling, testing and quality assurance, warranty costs, logistics costs, tariffs and excess and obsolete inventory write-downs. We currently operate warehouses located in the U.S., Europe and Asia Pacific.
In addition, cost of revenues includes labor and other costs w hich include salary, benefits and share-based compensation, in addition to costs associated with tooling, testing and quality assurance, warranty costs, logistics costs, tariffs and excess and obsolete inventory write-downs. We currently operate warehouses located in the U.S., Europe and Asia Pacific.
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 to distributors 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. 39 We record amounts billed for shipping and handling costs as revenues.
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, 2022 or 2021.
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.
Operating Expenses We classify our operating expenses as research and development, and sales, general and administrative expenses. • Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, licensed or purchased intellectual property, facilities and travel.
Operating Expenses We classify our operating expenses as research and development, and sales, general and administrative expenses. • Research and development expenses consist primarily of salary and benefit expenses, including share-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, licensed or purchased intellectual property, facilities and travel.
See Note 8 - 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.
Comparison of Year Ended June 30, 2021 and 2020 Pursuant to Regulation S-K item 303, a detailed review of our fiscal 2021 performance compared to our fiscal 2020 performance is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 under the caption “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” , filed with the SEC on August 27, 2021.
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.
The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of customer demand. Customer demand is dependent on various factors and requires us to use judgment in forecasting future demand for these products.
The determination of excess or obsolete inventory is estimated based on a comparison of the quantity and cost of inventory on hand to our forecast of customer demand which is dependent on various factors and requires us to use judgment in forecasting future demand for its products.
Payment of these obligations are expected to be $9.0 million for fiscal 2023, $16.9 million for fiscal 2024, $22.5 million for fiscal 2025 and $28.0 million for fiscal 2026. These obligations are included within Income tax payable and Long-term taxes payable on our Consolidated Balance Sheets.
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.
Recent Developments Russia-Ukraine Military Conflict - We are monitoring the military conflict between Russia and Ukraine, escalating tensions in surrounding countries, and associated economic sanctions.
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 will be able to fund these obligations through our existing cash and cash equivalents, cash generated from operations and the availability of additional funds under the Facilities. Purchase Obligations We subcontract with third parties to manufacture our products and have purchase commitments with key component suppliers.
We believe that we will be able to fund these obligations through our existing cash and cash equivalents, cash generated from operations and the availability of additional funds under the Facilities. Purchase Obligations We subcontract with third parties to manufacture our products and supply key components.
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%.
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.
See Note 10 - 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, 2022 . Transition Tax We have obligations of $76.4 million as of June 30, 2022, 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 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.
Refer to “Part I — Item 1A. Risk Factors — Risks Related to Our International Operations — Our business may be negatively affected by political events and foreign policy responses” for additional information.
Risk Factors — Risks Related to Our International Operations — Our business may be negatively affected by political events and foreign policy responses” for additional information.
These tariffs have already affected our operating results and margins. 38 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.
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.
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 / maturities of our available-for-sale securities. We used $19.3 million of cash in investing activities during fiscal 2021.
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.
During fiscal 2022, we used $618.1 million for repurchase of common stock, $148.1 million for dividends paid on our common stock and received net proceeds from our borrowings of $295.0 million.
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.
Refer to “Part I – Item IA. Risk Factors” for a discussion of these factors and other risks. Key Components of Our Results of Operations and Financial Condition Revenues We operate our business as one reportable and operating segment. Further information regarding Segments can be found in Note 15 to our Consolidated Financial Statements.
Refer to “Part I – Item IA. Risk Factors” for a discussion of these factors and other risks. Key Components of Our Results of Operations and Financial Condition Revenues We operate our business as one reportable and operating segment.
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.
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.
Net cash provided by operating activities in fiscal 2021 consisted primarily of net income of $616.6 million, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $32.3 million.
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.
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.
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.
North America Revenues in North America decreased $45.2 million, or 5.4%, from $836.0 million in fiscal 2021 to $790.8 million in fiscal 2022. The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.
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.
Asia Pacific Revenues in the Asia Pacific region decreased $19.5 million, or 12.7%, from $154.5 million in fiscal 2021 to $135.0 million in fiscal 2022. The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.
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.
As a percentage of revenues, research and development expenses increased from 6% in fiscal 2021 to 8% in fiscal 2022. The increase in R&D expense for fiscal 2022 versus fiscal 2021 was primarily driven by higher employee related expenses, prototype testing expenses, software expenses, depreciation and amortization expenses and rent.
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.
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.
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.
The following are our revenues by geography for fiscal 2022 and fiscal 2021: 42 Years Ended June 30, 2022 2021 (in thousands, except percentages) North America (1) $ 790,809 47% $ 836,032 44% Europe, the Middle East and Africa 675,306 40% 785,288 41% Asia Pacific 134,961 8% 154,536 8% South America 90,616 5% 122,238 7% Total revenues $ 1,691,692 100% $ 1,898,094 100% (1) Revenue for the United States was $734.5 million and $774.3 million in fiscal 2022 and fiscal 2021, respectively.
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.
Our investing activities consisted primarily of $18.3 million of capital expenditures and purchase of intangible assets, and $0.9 million net purchases for our available-for-sale securities. Cash Flows from Financing Activities We used $472.3 million of cash in financing activities during fiscal 2022.
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.
Liquidity We believe our existing cash and cash equivalents, cash provided by operations and the availability of additional funds under the Facilities will be sufficient to meet our working capital, future stock repurchases, dividends, and capital expenditure needs for the next twelve months, as well as long-term liquidity requirements.
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.
Manufacturing overhead costs are capitalized to inventory and are recognized as cost of revenues in future periods based on when the inventory is sold or written-down. Income Taxes We account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.
Income Taxes We account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.
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 and short-term and long-term investments. We had cash and cash equivalents of $136.2 million and $249.4 million at June 30, 2022 and 2021, respectively.
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.
Europe, the Middle East, and Africa (“EMEA”) Revenues in EMEA decreased $110.0 million, or 14.0%, from $785.3 million in fiscal 2021 to $675.3 million in fiscal 2022. The year-over-year decrease was due to decreased revenues from both our Enterprise Technology products and Service Provider Technology products.
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.
Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate the contract manufacturers for any unrecorded liabilities incurred. We may be subject to additional purchase obligations for supply agreements and components ordered by our contract manufacturers based on manufacturing forecasts we provide them each month.
In addition, we may be subject to additional purchase obligations to our contract manufacturers for supply agreements and components ordered by them based on manufacturing forecasts we provide them each month.
Sales, General and Administrative Sales, general and administrative (“SG&A”) expenses increased $16.4 million, or 30.5%, from $53.5 million in fiscal 2021 to $69.9 million in fiscal 2022. As a percentage of revenues, sales, general and administrative expenses increased from 3% in fiscal 2021 to 43 4% in fiscal 2022.
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.
The increase in fiscal 2022 SG&A expenses as compared to fiscal 2021 was primarily driven by increased fees associated with webstore credit card processing, increased travel expense and donations to humanitarian relief organizations addressing the military conflict between Russia and Ukraine, offset in part by lower legal related costs.
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.
If we ultimately sell inventory that has been previously written down, our gross margins in future periods would be positively impacted. We capitalize manufacturing overhead expenditures as part of inventory costs. Capitalized costs primarily include management’s best estimate of the direct labor, tariffs and materials costs incurred related to inventory acquired or produced but not sold during the respective period.
If we ultimately sell inventory that has been previously written down, our gross margins in future periods would be positively impacted. We capitalize manufacturing overhead expenditures as part of inventory costs.
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.
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.
The decline in revenue was primarily driven by a decrease in revenue in the Service Provider Technology platform. During fiscal year ended June 30, 2022, there were no material price changes in our products sold.
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.
As events continue to evolve our estimates may change materially in future periods. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Recognition of Revenues Revenue consists of revenue from sales of hardware and the related essential software (“Products”) as well as related implied PCS.
We classify our revenues into two primary product categories: Enterprise Technology and Service Provider Technology. • Enterprise Technology includes our UniFi platforms, including UniFi Network Wi-Fi, switching and routing solutions, UniFi Protect, UniFi Access, UniFi-Talk and our AmpliFi platform. • Service Provider Technology includes our airMAX, EdgeMAX, UFiber, and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and CPE.
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.
Results of Operations Comparison of Years Ended June 30, 2022 and 2021 41 Years Ended June 30, 2022 2021 (In thousands, except percentages) Revenues $ 1,691,692 100 % $ 1,898,094 100 % Cost of revenues (1) 1,021,880 60 % 985,818 52 % Gross profit 669,812 40 % 912,276 48 % Operating expenses: Research and development (1) 137,689 8 % 116,171 6 % Sales, general and administrative (1) 69,859 4 % 53,513 3 % Total operating expenses 207,548 12 % 169,684 9 % Income from operations 462,264 28 % 742,592 39 % Interest expense and other, net (17,815) (1) % (14,938) * Income before income taxes 444,449 27 % 727,654 38 % Provision for income taxes 65,792 4 % 111,070 6 % Net income $ 378,657 23 % $ 616,584 32 % * Less than 1% (1) Includes stock-based compensation as follows Cost of revenues $ 74 $ 102 Research and development 2,541 2,114 Sales, general and administrative 901 813 Total stock-based compensation $ 3,516 $ 3,029 Revenues Total revenues decreased $206.4 million, or 10.9%, from $1,898.1 million in fiscal 2021 to $1,691.7 million in fiscal 2022.
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.
See Note 8 - 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 used $486.0 million of cash in financing activities during fiscal 2021.
The proceeds from this new term loan were used to repay a portion of the outstanding revolver loans under the revolving facility. 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.
South America Revenues in South America decreased $31.6 million, or 25.9%, from $122.2 million in fiscal 2021 to $90.6 million in fiscal 2022. The year-over-year decrease was primarily due to decreased revenues from our Service Provider Technology products offset in part by increased revenue from Enterprise Technology products.
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.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Additionally, as the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. As events continue to evolve our estimates may change materially in future periods.
D uring the normal course of business, our contract manufacturers procure components and manufacture products based upon orders placed by us. If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products.
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.
Provision for Income Taxes Our provision for income taxes decreased 40.8% from $111.1 million for fiscal 2021 to $65.8 million for fiscal 2022. Our effective tax rate decreased to 14.8% in fiscal 2022 as compared to 15.3% for fiscal 2021.
Our effective tax rate increased to 16.2% in fiscal 2023 as compared to 14.8% for fiscal 2022.
Revenues by Product Type Years Ended June 30, 2022 2021 (in thousands, except percentages) Enterprise Technology 1,316,685 78 % 1,274,931 67 % Service Provider Technology $ 375,007 22 % $ 623,163 33 % Total revenues $ 1,691,692 100 % $ 1,898,094 100 % Enterprise Technology revenues increased $41.8 million, or 3.3%, from $1,274.9 million in fiscal 2021, to $1,316.7 million in fiscal 2022 primarily due to increased revenue from our UniFi technology platform across all geographic regions other than EMEA.
We 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.
Sales to distributors accounted for 65% and 83% of our revenues in the year ended June 30, 2022 and 2021, respectively. Direct sales accounted for 35% and 17% of our revenues in the year ended June 30, 2022 and 2021, respectively.
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.
Gross profit margin decreased to 39.6% in fiscal 2022 from 48.1% in fiscal 2021. The decline in GAAP gross margin for full fiscal 2022 versus full fiscal 2021 was primarily driven by higher shipping costs, increased component costs and an increase in general operating expenses.
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.
Other Obligations As of June 30, 2022, we have other obligations of $3.4 million which consisted primarily of commitments related to raw materials and research and development projects. Unrecognized Tax Benefits As of June 30, 2022, we had $32.7 million and an additional $3.5 million for accrued interest, classified as non-current liabilities.
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.
During fiscal 2021, we used $161.3 million of net funds for repayments under the Facilities, $219.8 million related to repurchase of common stock, $100.8 million related to dividends paid on our common stock and $3.3 million of debt issuance costs related to the amended and restated credit agreement.
During fiscal 2023, in order to support the increase in inventories we borrowed a net of $291.9 million under our facilities, we also paid $145.0 million for dividends on our common stock and debt issuance costs of $1.2 million. During fiscal 2023 we increased the size of our facility to include an additional $250.0 million term loan.
Removed
COVID-19 Update - The 2019 novel coronavirus (COVID-19), which the World Health Organization (“WHO”) characterized as a pandemic in March 2020, continues to disrupt global economies, and has spread to the major markets in which we operate, including the United States, Asia, Europe and South America.
Added
Our efforts to mitigate these supply constraints have included, for example, increasing our inventory build in an attempt to secure supply and meet customer demand, paying higher component and shipping costs to secure supply and modifying our product designs to leverage alternate suppliers.
Removed
The COVID-19 pandemic has resulted in significant governmental measures being implemented to control the spread of the virus, including, among others, restrictions on travel, stay-at-home orders or work remote or from home conditions in many of the locations where we have offices.
Added
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.
Removed
We have taken and will continue to take precautionary measures intended to help minimize the risk of COVID-19 to our employees.
Added
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.
Removed
While we have not yet experienced a significant disruption to the productivity of our employees as a result of the COVID-19 pandemic, if the stay-at-home orders or work remote or from home conditions in any of our facilities continue for an extended period of time, or if an outbreak occurs in any of our facilities, we may, among other issues, experience delays in product development, a decreased ability to support our customers, disruptions in sales and an overall lack of productivity.
Added
Further information regarding Segments can be found in Note 13, "Segment Information, Revenues by Geography and Significant Customers," to our Consolidated Financial Statements. Our revenues are derived principally from the sale of networking hardware.
Removed
We have experienced a disruption in our supply chain and production as a result of the COVID-19 related restrictions and the global shortage of components. The current environment has impacted our suppliers’ ability to manufacture or provide key components or services, and we have incurred, and continue to incur, additional cost to expedite deliveries of components and services.
Added
Capitalized costs primarily include management’s best estimate of the indirect labor, tariffs, shipping and logistics costs incurred related to inventory acquired or produced but not sold during the respective period. Manufacturing overhead costs are capitalized to inventory and are recognized as cost of revenues in future periods based on when the inventory is sold or written-down.
Removed
For example, in fiscal 2022, we experienced reduced availability of components (including the chipsets) used to manufacture our products, which has impacted, and we expect will continue to impact our ability and costs to manufacture our products.
Added
We establish valuation allowances when necessary to reduce deferred tax assets to the amount we expect to realize.
Removed
These supply shortages have resulted in increased component delivery lead times and increased costs to obtain components, particularly the chipsets, and may result in delays in product production, which shortages may be further exacerbated by increasing global shipping lead times and delays.
Added
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.
Removed
We do not stockpile sufficient components, particularly the chipsets, to cover the time it would take to re-engineer our products to replace the chipsets used to manufacture our products.
Added
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.
Removed
While we are continuing to work closely with our suppliers and contract manufacturers to minimize the potential adverse impacts of the supply shortage, there are many companies seeking to purchase the limited supply of chipsets and other components, many of which have greater resources and larger market share than we have, which may limit the effectiveness of our efforts.
Added
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.
Removed
We expect that shortages of chipsets and other components will continue and may have an adverse impact on our ability to manufacture our products and meet demand for our products.

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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 changeThese amounts were held primarily in cash deposit accounts in U.S. dollars. The fair value of our cash and cash equivalents would not be significantly affected by either a 10% 46 increase or decrease in interest rates due mainly to the short-term nature of these instruments.
Biggest changeThese amounts were held primarily in cash deposit accounts in U.S. dollars. The fair value of our cash and cash equivalents would not be significantly affected by either a 10% increase or decrease in interest rates due mainly to the short-term nature of these instruments. Debt We are exposed to interest rates risks primarily through borrowing under our credit facility.
Based on a sensitivity analysis, as of June 30, 2022, 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 $15.8 million over the next twelve months.
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Sensitivity We had cash and cash equivalents of $136.2 million and $249.4 million as of June 30, 2022 and 2021. Cash and cash equivalents includes securities that have a maturity of three months or less at the date of purchase.
Item 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.
Certain of our operating expenses 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.
Foreign Currency Risk Certain of our sales, labor and other costs included in costs of revenue and operating expenses 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.
A 10% appreciation or depreciation in the value of the U.S. dollar relative to the other currencies in which our expenses are denominated would result in a charge or benefit to our income before income taxes of approximately $17.3 million for fiscal year June 30, 2022.
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.
Debt We are exposed to interest rates risks primarily through borrowing under our credit facility. Interest on our borrowings is based on variable rates.
Interest on our borrowings is based on variable rates.
Removed
Foreign Currency Risk The majority of our sales are denominated in U.S. dollars, and therefore substantially most of our revenues are not directly subject to foreign currency risk. However, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company's net sales and gross margins as expressed in the U.S. dollars.

Other UI 10-K year-over-year comparisons