Forward-looking Statements
Business and Executive Overview
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Business Overview
Financial Overview
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Critical Accounting Estimates
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Results of Operations
The following table sets forth the unaudited condensed consolidated statements of operations for the periods presented.
46,026 10.6 % 46,415 7.4 % Sales and marketing 34,546 15.5 % 35,740 11.5 %
70,132 16.2 % 73,555 11.7 % General and administrative
(1,802 ) (0.4 )% 147 0.1 % Income (loss) before income taxes (10,870 ) (4.9 )% 22,203 7.2 %
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Net Revenue by Geographic Region
For reporting purposes, revenue is generally attributed to each geographic region based upon the location of the customer.
EMEA
Net revenue in EMEA decreased in the three and six months ended July 3, 2022, compared to the prior year periods, as pandemic driven demand across the Connected Home segment receded, noting declines of 61.1% and 66.0%, respectively, which were partially offset by increases of 10.5% and 1.7%, respectively, in SMB net revenue.
APAC
For further discussions specific to our Connected Home and SMB business, refer to the “Segment Information” section below.
Cost of Revenue and Gross Margin
Cost of revenue consists primarily of the following: the cost of finished products from our third party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-
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downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings.
(In thousands, except percentage data) July 3, 2022 % Change
June 27, 2021 July 3, 2022 % Change June 27, 2021 Cost of revenue
$ 215,455 $ 313,458 (25.8 )% $ 422,439 Gross margin percentage
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(In thousands, except percentage data) July 3, 2022 % Change
June 27, 2021 July 3, 2022 % Change June 27, 2021 Research and development
(In thousands, except percentage data) July 3, 2022 % Change
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Marketing expenditure committed with a customer is generally recorded as a reduction of revenue per authoritative guidance.
General and Administrative
(In thousands, except percentage data) July 3, 2022 % Change
June 27, 2021 July 3, 2022 % Change June 27, 2021 General and administrative
Goodwill impairment charge
The following table presents goodwill impairment charge for the periods indicated:
(In thousands, except percentage data) July 3, 2022 % Change June 27, 2021 July 3, 2022 % Change June 27, 2021 Goodwill impairment charge
**Percentage change not meaningful.
The increase in goodwill impairment charge for the six months ended July 3, 2022, compared to the prior year period, was due to an impairment charge recognized for the Connected Home segment resulting from an interim goodwill impairment assessment performed, in the first fiscal quarter of 2022. For a detailed discussion of goodwill impairment charge, refer to Note 4, Balance Sheet Components, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.
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Other operating expenses (income), net
Other operating expenses (income), net consists of restructuring and other charges, litigation reserves, net, and change in fair value of contingent consideration. The following table presents Other operating expenses (income), net for the periods indicated:
(In thousands, except percentage data) July 3, 2022 % Change June 27, 2021 July 3, 2022 % Change June 27, 2021 Other operating expenses (income), net $ 573
**Percentage change not meaningful.
(In thousands, except percentage data) July 3, 2022 % Change June 27, 2021 July 3, 2022 % Change June 27, 2021 Other income (expenses), net
**Percentage change not meaningful.
Provision for (Benefit from) Income Taxes
(In thousands, except percentage data) July 3, 2022 % Change
June 27, 2021 July 3, 2022 % Change June 27, 2021 Provision for (benefit from) income taxes $ (2,336 ) (153.5 )% $ 4,369 $ (4,653 ) (138.2 )% $ 12,184 Effective tax rate
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