Restructuring

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

In September 2023, as a result of a review of current strategic priorities and resource allocation, we approved a restructuring plan (the “Plan”) intended to realign our operational focus to support our multi-year growth, scale the business, and improve our cost structure and operating margins. The Plan included (i) an optimization of our workforce across multiple functions, (ii) a relocation of our repair and overhaul (“R&O”) department of our manufacturing and warehousing facility in Newark, Delaware, to Mexico, and (iii) a closure of a manufacturing, warehousing, research and development (“R&D”) facility in Sunnyvale, California. We began executing the Plan in September 2023 and expect these efforts to continue in subsequent quarters. The restructuring activities are expected to be completed in the first half of fiscal 2024, subject to local law and consultation requirements, as well as our business needs. We evaluate restructuring charges in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”).

According to the Plan, 74 full-time employees and 48 contractors separated from the Company in September 2023. An additional 71 full-time employees and 8 contractors separated from the Company in October 2023. Both full-time employees and contractors who were impacted by the restructuring were eligible to receive severance benefits.

In the third quarter of fiscal 2023, we incurred $2.2 million in restructuring costs recorded as severance expenses. We expect to incur another $16.4 million in restructuring costs in subsequent quarters, out of which we expect $10.0 million will relate to the closure of our manufacturing, warehousing, and R&D facility in Sunnyvale, California, $3.0 million will relate to severance costs, $2.7 million will relate to relocation costs, and $0.7 million will relate to other one-time employee termination benefits. However, the actual timing and amount of costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.

The following table presents our current and non-current liability as accrued for restructuring charges on our condensed consolidated balance sheets. The table sets forth an analysis of the components of the restructuring charges and payments and other deductions made against the accrual for the three months ended September 30, 2023 (in thousands):


	Three Months Ended, September 30, 2023
	Severance

Balance at June 30, 2023	$	—
Restructuring accruals	2,219
Payments	(1,047)
Balance at September 30, 2023	$	1,172

Severance expense recorded in the third quarter of fiscal 2023 in accordance with ASC 420 was a result of the separation of 74 full-time employees and 48 contractors associated with the Plan. At September 30, 2023, $1.2 million of accrued severance-related costs were included in accrued expenses and other current liabilities in our condensed consolidated balance sheets.

The following table summarizes restructuring costs included in the accompanying condensed consolidated statements of operations (in thousands):


	Three Months Ended, September 30, 2023

Cost of product revenue	$	677
Cost of service revenue	48
Operating expenses:
Sales and marketing	1,387
General and administrative	107
Total	$	2,219