What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-04 · 250 added, 350 removed, 895 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30,

Current assets:

74 unchanged sentences

(in thousands, except per-share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

13 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 121,163  

7 unchanged sentences

( 28,099 )  

Change in unrealized gain (loss) on available-for-sale securities, net of tax of $ 158 , $ 170 , $ 469 and $ 735 , respectively

Change in unrealized gains and losses on available-for-sale securities, net of tax of $( 156 ), $ 130 , $( 625 ) and $ 865 , respectively

( 1,157 )  

16 unchanged sentences

Stockholders’

Three Months Ended June 30, 2023

Balance as of April 1, 2023

Three Months Ended September 30, 2023

Balance as of July 1, 2023

47,611  

10 unchanged sentences

Common stock issued under the employee equity incentive plan

Common stock issued under the employee stock purchase plan

Stock-based compensation expense

1 unchanged sentence

33,604  

Balance as of June 30, 2023

Balance as of September 30, 2023

47,911  

3 unchanged sentences

$ 1,944,864  

Accumulated  

Common Stock and

2 unchanged sentences

Stockholders’

Three Months Ended June 30, 2022

Income (Loss)

Balance as of April 1, 2022

Three Months Ended September 30, 2022

Balance as of July 1, 2022

46,787  

10 unchanged sentences

Common stock issued under the employee equity incentive plan

Common stock issued under the employee stock purchase plan

Stock-based compensation expense

1 unchanged sentence

43,000  

Balance as of June 30, 2022

Balance as of September 30, 2022

46,941  

3 unchanged sentences

$ 1,530,709  

Accumulated  

Common Stock and

2 unchanged sentences

Stockholders’

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Balance as of January 1, 2023

15 unchanged sentences

108,607  

Balance as of June 30, 2023

Balance as of September 30, 2023

47,911  

3 unchanged sentences

$ 1,944,864  

Accumulated  

Common Stock and

2 unchanged sentences

Stockholders’

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Income (Loss)

16 unchanged sentences

125,545  

Balance as of June 30, 2022

Balance as of September 30, 2022

46,941  

7 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Amortization of premium on available-for-sale securities

Amortization of premium (discount) on available-for-sale securities

(Gain) loss on deferred compensation plan investments

14 unchanged sentences

Contributions to deferred compensation plan, net

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

23 unchanged sentences

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented.

The financial statements contained in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other future periods.

The financial statements contained in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results that may be expected for the year ending December 31, 

2023 or for any other future periods.

Use of Estimates

5 unchanged sentences

The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits (“ICs”), as well as dies in wafer form.

These product sales accounted for 99 % of the Company’s total revenue for both the three and six months ended June 30, 2023, and 98 % of the Company’s total revenue for both the three and six months ended June 30, 2022.

These product sales accounted for 99 % of the Company’s total revenue for both the three and nine months ended September 30, 2023 , and 98 % of the Company’s total revenue for both the three and nine months ended September 30, 2022 .

The remaining revenue primarily includes royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties, which have not been significant for the periods presented.

1 unchanged sentence

The Company sells its products primarily through third -party distributors, value-added resellers, original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”) and electronic manufacturing service (“EMS”) providers.

For the three months ended June 30, 2023 and 2022, 80 % and 85 % of the Company’s product sales were made through distribution arrangements, respectively.

For the six months ended June 30, 2023 and 2022, 80 % and 84 % of the Company’s product sales were made through distribution arrangements, respectively.

For the three months ended September 30, 2023 and 2022 , 77 % and 

83 % of the Company’s product sales were made through distribution arrangements, respectively.

For the nine months ended September 30, 2023 and 2022 , 79 % and 83 % of the Company’s product sales were made through distribution arrangements, respectively.

These distribution arrangements contain enforceable rights and obligations specific to those distributors and not the end customers.

Purchase orders, which are generally governed by sales agreements or the Company’s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed by both parties.

Purchase orders, which are generally governed by sales agreements or the Company’s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed between the Company and the customer.

The Company considers purchase orders to be the contracts with customers.

28 unchanged sentences

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.

As of June 30, 2023 and December 31, 2022 , accounts receivable totaled $ 169.2 million and $ 182.7 million, respectively.

September 30, 2023 and December 31, 2022 , accounts receivable totaled $ 185.8  million and $ 182.7  million, respectively.

The Company’s accounts receivable are short-term, with standard payment terms generally ranging from 30 to 90 days.

8 unchanged sentences

The Company records these payments received in advance of performance as customer prepayments within current accrued liabilities.

As of June 30, 2023 and December 31, 2022 , customer prepayments totaled $ 2.7 million and $ 3.6 million, respectively.

The decrease in the customer prepayment balance for the six months ended June 30, 2023 resulted from a decrease in unfulfilled customer orders for which the Company had received payments.

For the six months ended June 30, 2023 , the Company recognized substantially all of the revenue that was included in the customer prepayment balance as of December 31, 2022 .

As of September 30, 2023 and December 31, 2022 , customer prepayments totaled $ 1.5  million and $ 3.6 million, respectively.

The decrease in the customer prepayment balance for the 

nine months ended September 30, 2023 resulted from a decrease in unfulfilled customer orders for which the Company had received payments.

For the nine months ended September 30, 2023 , the Company recognized substantially all of the revenue that was included in the customer prepayment balance as of December 31, 2022 .

Practical Expedients

13 unchanged sentences

The Amended and Restated 2014 Plan will expire on June 11, 2030.

As of June 30, 2023, 4.2  million shares remained available for future issuance under the Amended and Restated 2014 Plan.

As of September 30, 2023 , 4.2  million shares remained available for future issuance under the Amended and Restated 2014 Plan.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

3 unchanged sentences

$ 3,691  

Research and development

Research and development (“R&D”)

26,406  

26,875  

Selling, general and administrative

Selling, general and administrative (“SG&A”)

24,103  

37 unchanged sentences

$ 187.56  

Outstanding at June 30, 2023

$ 376.82  

2 unchanged sentences

$ 104.16  

( 23 )  

$ 192.23  

Outstanding at September 30, 2023

$ 406.52  

$ 380.12  

$ 146.51  

$ 209.67  

Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period.

The intrinsic value related to vested RSUs was $ 98.1  million and $ 64.0 million for the three months ended June 30, 2023 and 2022, respectively.

The intrinsic value related to vested RSUs was $ 239.7  million and $ 215.7 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, the total intrinsic value of all outstanding RSUs was $ 1.3  billion, based on the closing stock price of $ 540.23 .

As of June 30, 2023, unamortized compensation expense related to all outstanding RSUs was $ 269.9  million with a weighted-average remaining recognition period of approximately two  years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $ 1.1 million and $ 3.3 million for the six months ended June 30, 2023 and 2022, respectively.

The intrinsic value related to vested RSUs was $ 148.9 million and $ 62.3 million for the three months ended September 30, 2023 and 2022 , respectively.

The intrinsic value related to vested RSUs was $ 388.6 million and $ 277.9 million for the nine months ended September 30, 2023 and 2022 , respectively.

As of September 30, 2023 , the total intrinsic value of all outstanding RSUs was $ 987.4 million, based on the closing stock price of $ 462.00 .

As of September 30, 2023 , unamortized compensation expense related to all outstanding RSUs was $ 236.5 million with a weighted-average remaining recognition period of approximately two  years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $ 1.1 million and $ 4.3 million for the nine months ended September 30, 2023 and 2022 , respectively.

Time-Based RSUs:

For the six months ended June 30, 2023, the Compensation Committee granted 38,000 RSUs with service conditions to non-executive employees and non-employee directors.

For the nine months ended September 30, 2023 , the Compensation Committee granted 45,000 RSUs with service conditions to non-executive employees and non-employee directors.

The RSUs generally vest over four years for employees and one year for directors, subject to continued service with the Company.

14 unchanged sentences

There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions.

2004 Employee Stock Purchase Plan (the “

2004 Employee Stock Purchase Plan (as amended and restated, the “

2004 ESPP ”

No shares were issued under the 2004 ESPP for the three months ended June 30, 2023 and 2022.

For the six months ended June 30, 2023 and 2022, 9,000 and 7,000 shares were issued under the 2004 ESPP, respectively.

As of June 30, 2023, 4.5  million shares were available for future issuance under the 2004 ESPP.

The intrinsic value of the shares issued was $ 0.7 million for both the six months ended June 30, 2023 and 2022.

As of June 30, 2023, the unamortized expense was $ 0.4  million, which will be recognized through the third quarter of 2023.

On August 16, 2023, the 2004 ESPP was amended and restated to, among other changes, provide for the issuance of up to 4.4 million shares of the Company’s common stock.

The 2004 ESPP will expire on 

August 16, 2038.

For the 

three  months ended 

September 30, 2023 

9,000 and 7,000  shares were issued under the 2004 ESPP, respectively.

For the nine months ended September 30, 2023 and 2022, 18,000 and 14,000 shares were issued under the 2004 ESPP, respectively.

As of September 30, 2023, 4.4  million shares were available for future issuance under the 2004 ESPP.

The intrinsic value of the shares issued was $ 0.7  million and $ 0.9  million for the 

three  months ended 

September 30, 2023 

2022,  respectively.

The intrinsic value of the shares issued was $ 1.4  million and $ 1.6  million for the 

nine  months ended 

September 30, 2023 

2022,  respectively.

As of September 30, 2023, the unamortized expense was $ 1.2  million, which will be recognized through the first quarter of 2024.

The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Expected term (in years)

Expected volatility

50.8 %  

63.2 %  

53.3 %  

Risk-free interest rate

Dividend yield

Cash proceeds from the shares issued under the 2004 ESPP were $ 3.7 million and $ 2.8 million for the six months ended June 30, 2023 and 2022, respectively.

Cash proceeds from the shares issued under the 

2004 ESPP were $ 7.6 million and $ 5.9 million for the nine months ended September 30, 2023 and 2022, respectively.

BALANCE SHEET COMPONENTS

Inventories consist of the following (in thousands):

September 30,

Raw materials

$ 126,606  

$ 126,760  

Work in process

106,455  

134,071  

Finished goods

194,371  

186,459  

$ 427,432  

$ 447,290  

Other Current Assets

Other current assets consist of the following (in thousands):

September 30,

Prepaid wafer purchase

$ 50,000  

RSU tax withholding proceeds receivable

17,767  

14,480  

Prepaid expenses

15,444  

11,045  

Accrued interest receivable

$ 95,253  

$ 42,742  

Prepaid wafer purchase of $ 50.0 million relates to a deposit made to a supplier under a long-term wafer supply agreement.

2 unchanged sentences

Other long-term assets consist of the following (in thousands):

September 30,

Prepaid wafer purchase

$ 120,000  

$ 170,000  

Deferred compensation plan assets

71,900  

63,022  

12,132  

16,264  

$ 204,032  

$ 249,286  

Prepaid wafer purchase relates to a deposit made to a supplier under a long-term wafer supply agreement.

2 unchanged sentences

Other accrued liabilities consist of the following (in thousands):

September 30,

Dividends and dividend equivalents

$ 59,553  

$ 42,170  

17,654  

24,082  

Stock rotation and sales returns

19,444  

14,931  

Income tax payable

15,595  

16,507  

16,901  

$ 113,410  

$ 113,679  

As of June 30, 2023, stock rotation and sales returns included a $ 17.2 million stock rotation reserve, compared with a $ 14.3 million reserve as of December 31, 2022.

The change in the reserve is affected by the timing of returns and the level of inventory in the distribution channel.

As of September 30, 2023 , stock rotation and sales returns included a $ 25.0  million stock rotation reserve, compared with a $ 14.3  million reserve as of December 31, 2022 .

The change in the reserve is affected by the timing of customer returns and the level of inventory in the distribution channel.

Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

September 30,

Deferred compensation plan liabilities

$ 70,071  

$ 64,863  

Dividend equivalents

$ 76,658  

$ 73,374  

The Company has operating leases primarily for administrative, sales and marketing offices, manufacturing operations and research and development facilities, employee housing units and certain equipment.

These leases have remaining lease terms from less than one year to eight years.

Some of these leases include options to renew the lease term for up to two years or on a month-to-month basis.

The Company has operating leases primarily for administrative, sales and marketing offices, manufacturing operations and research and development facilities, employee housing units and certain equipment.

These leases have remaining lease terms from less than one year to seven years.

Some of these leases include options to renew the lease term for up to five years or on a month-to-month basis.

The Company does not have finance lease arrangements.

The following table summarizes the balances of operating lease right-of-use (“ROU”) assets and liabilities (in thousands):

September 30,

Financial Statement Line Item

1 unchanged sentence

Other long-term assets

$ 7,167  

$ 4,288  

Operating lease liabilities

Other accrued liabilities

$ 1,947  

$ 2,133  

Other long-term liabilities

$ 4,634  

$ 1,664  

The following tables summarize certain information related to the leases (in thousands, except percentages):

Three Months Ended June 30,

Six Months Ended June 30,

The following tables summarize certain information related to the leases (in thousands, except percentages and years):

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease costs

$ 1,475  

$ 1,405  

Total lease costs

$ 1,313  

$ 1,114  

$ 2,567  

$ 2,210  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$ 1,638  

$ 1,466  

ROU assets obtained in exchange for new operating lease liabilities

$ 4,835  

$ 1,058  

September 30,

Weighted-average remaining lease term (in years)

Weighted-average discount rate

As of June 30, 2023, the maturities of the lease liabilities were as follows (in thousands):

2023 (remaining six months)

$ 1,098  

As of September 30, 2023 , the maturities of the lease liabilities were as follows (in thousands):

2023 (remaining three months)

Total remaining lease payments

1 unchanged sentence

Total lease liabilities

$ 6,581  

As of June 30, 2023 , the Company had no operating leases that had not yet commenced.

As of September 30, 2023 , the Company had no operating leases that had not yet commenced.

The Company owns certain office buildings and leases a portion of these properties to third parties under arrangements that are classified as operating leases.

1 unchanged sentence

Some of these leases include options to renew the lease term for up to five years.

For the three months ended June 30, 2023 and 2022, income related to lease payments was $ 0.3 million and $ 0.5 million, respectively.

For the six months ended June 30, 2023 and 2022, income related to lease payments was $ 0.8 million and $ 1.1 million, respectively.

As of June 30, 2023, future income related to lease payments was as follows (in thousands):

2023 (remaining six months)

$ 1,418  

For the three months ended September 30, 2023 and 2022 , income related to lease payments was $ 0.4  million and $ 0.6 million, respectively.

For the nine months ended September 30, 2023 and 2022 , income related to lease payments was $ 1.2 million and $ 1.7  million, respectively.

As of September 30, 2023 , future income related to lease payments was as follows (in thousands):

2023 (remaining three months)

NET INCOME PER SHARE

7 unchanged sentences

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted-average outstanding shares - basic

10 unchanged sentences

The following table summarizes those customers with sales equal to 10% or more of the Company’s total revenue:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Distributor A

4 unchanged sentences

The following table summarizes those customers with accounts receivable equal to 10% or more of the Company’s total accounts receivable:

September 30,

Distributor A

1 unchanged sentence

The following is a summary of revenue by geographic region (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Country or Region

$ 216,172  

$ 249,778  

$ 441,224  

$ 455,858  

70,212  

69,668  

119,045  

126,105  

40,669  

43,046  

86,349  

83,418  

36,348  

31,179  

79,451  

56,394  

United States

27,571  

23,973  

58,588  

37,419  

28,288  

22,136  

59,103  

41,291  

Southeast Asia

21,708  

21,114  

48,140  

38,002  

$ 441,128  

$ 461,004  

$ 892,193  

$ 838,718  

The following is a summary of revenue by product family (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Product Family

Direct Current (“DC”) to DC

$ 418,175  

$ 442,250  

$ 843,356  

$ 801,099  

Lighting Control

22,953  

18,754  

48,837  

37,619  

$ 441,128  

$ 461,004  

$ 892,193  

$ 838,718  

The following is a summary of long-lived assets by geographic region (in thousands):

$ 184,186  

$ 200,508  

September 30,

United States

116,816  

113,996  

19,093  

20,074  

21,816  

22,579  

$ 341,911  

$ 357,157  

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

The changes in warranty reserves are as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Balance at beginning of period

$ 19,726  

$ 23,833  

$ 24,082  

$ 20,989  

Warranties issued

Repairs, replacements and refunds

( 1,581 )  

( 139 )  

( 2,253 )  

Repairs, replacement and refund

Changes in liability for pre-existing warranties

( 1,071 )  

( 5,117 )  

Balance at end of period

$ 17,654  

$ 25,209  

$ 17,654  

$ 25,209  

Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods.

3 unchanged sentences

In May 2022, the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four -year period.

As of June 30, 2023, the Company had made prepayments under this agreement of $ 170.0 million, of which $ 50.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties as of June 30, 2023 were as follows (in thousands):

2023 (remaining six months)

$ 160,296  

297,556  

293,702  

$ 751,554  

As of September 30, 2023 , the Company had made prepayments under this agreement of $ 170.0 million, of which $ 50.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties as of September 30, 2023 were as follows (in thousands):

2023 (remaining three months)

The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters.

2 unchanged sentences

The Company defends itself vigorously against any such claims.

As of June 30, 2023 , there were no material pending legal proceedings to which the Company was a party.

As of September 30, 2023 , there were no material pending legal proceedings to which the Company was a party.

CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands):

September 30,

$ 377,324  

11 unchanged sentences

17,928  

treasuries and government agency bonds

3 unchanged sentences

$ 739,584  

September 30,

Cash and cash equivalents

7 unchanged sentences

$ 739,584  

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of June 30, 2023 ( in thousands):

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of September 30, 2023 (in thousands):

Amortized Cost

10 unchanged sentences

The following tables summarize the unrealized gain and loss positions related to the available-for-sale investments (in thousands):

June 30, 2023

September 30, 2023

Amortized Cost

2 unchanged sentences

Money market funds

$ 47,814  

Certificates of deposit

124,043  

Corporate debt securities

187,961  

( 4,267 )  

183,695  

Commercial paper

11,376  

treasuries and government agency bonds

114,970  

( 568 )  

114,413  

Auction-rate securities backed by student-loan notes

$ 486,814  

$ ( 4,836 )  

$ 481,990  

December 31, 2022

23 unchanged sentences

The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than 12 months and for greater than 12 months (in thousands):

June 30, 2023

September 30, 2023

Less than 12 Months

13 unchanged sentences

238,501  

110,232  

Auction-rate securities backed by student-loan notes

26 unchanged sentences

An impairment exists when the fair value of an investment is less than its amortized cost basis.

As of June 30, 2023 and December 31, 2022, the Company did not consider the impairment of its investments to be a result of credit losses.

As of September 30, 2023 and December 31, 2022 , the Company did not consider the impairment of its investments to be a result of credit losses.

The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.

9 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the amounts reported on the Condensed Consolidated Statements of Cash Flows (in thousands):

September 30,

Cash and cash equivalents

5 unchanged sentences

$ 288,729  

As of June 30, 2023 and December 31, 2022 , restricted cash included a security deposit that is set aside in a bank account and cannot be withdrawn by the Company under the terms of a lease agreement.

As of September 30, 2023 and December 31, 2022 , restricted cash included a security deposit that is set aside in a bank account and cannot be withdrawn by the Company under the terms of a lease agreement.

The restriction will end upon the expiration of the lease.

1 unchanged sentence

The following tables summarize the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

June 30, 2023

September 30, 2023

Money market funds

21 unchanged sentences

The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands):

September 30,

Deferred compensation plan asset components:

8 unchanged sentences

The components of other income (expense), net, are as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest income

5 unchanged sentences

Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for the three months ended June 30, 2023 was $ 19.4 million, or 16.3 % of pre-tax income.

The income tax expense for the six months ended June 30, 2023 was $ 39.1 million, or 15.8 % of pre-tax income.

The effective tax rates were lower than the federal statutory rate of 21 % primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax.

The income tax expense for the three months ended June 30, 2022 was $ 22.1 million, or 16.2 % of pre-tax income.

The income tax expense for the six months ended June 30, 2022 was $ 38.1 million, or 16.4 % of pre-tax income.

The income tax expense for the three months ended September 30, 2023 was $ 16.7 million, or 12.1 % of pre-tax income.

The income tax expense for the nine months ended September 30, 2023 was $ 55.8 million, or 14.5 % of pre-tax income.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax and the addition of a valuation allowance against China deferred tax assets arising from the indefinite extension of the R&D super deduction policy in China.

The income tax expense for the three months ended 

September 30, 2022 was $ 27.5 million, or 

18.1 % of pre-tax income.

The income tax expense for the 

nine months ended September 30, 2022 was $ 65.6 million, or 

17.1 % of pre-tax income.

The effective tax rates were lower than the federal statutory rate of 21 % primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

3 unchanged sentences

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law.

The IRA, among other things, introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations, and imposes a 1% surcharge on stock repurchases.

The IRA, among other things, introduced a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations, and imposes a 1% surcharge on stock repurchases.

This excise tax was effective January 1, 2023.

The Company does not believe the CHIPS Act or the IRA had a material impact on the Company’s income tax provisions, results of operations or financial condition for the three and 

six months ended June 30, 2023.

The Company does not believe the CHIPS Act or the IRA had a material impact on the Company’s income tax provisions, results of operations or financial condition for the three and nine months ended September 30, 2023 .

ACCUMULATED OTHER COMPREHENSIVE LOSS

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Unrealized Gains

Available-for-Sale

Foreign Currency

Available-for-Sale

Balance as of January 1, 2023

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Balance as of June 30, 2023

Other comprehensive loss before reclassifications

Net current period other comprehensive loss

Balance as of September 30, 2023

DIVIDENDS AND DIVIDEND EQUIVALENTS

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The Board of Directors declared the following cash dividends (in thousands, except per-share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Dividend declared per share

$ 1.00  

$ 0.75  

$ 2.00  

$ 1.50  

$ 47,530  

$ 35,029  

$ 94,860  

$ 69,937  

As of June 30, 2023 and December 31, 2022, accrued dividends totaled $ 47.5 million and $ 35.3 million, respectively.

As of September 30, 2023 and December 31, 2022 , accrued dividends totaled $ 47.8  million and $ 35.3 million, respectively.

The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the Company’s stockholders.

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Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest.

As of June 30, 2023 and December 31, 2022 , accrued dividend equivalents totaled $ 14.0 million and $ 13.8 million, respectively.

As of September 30, 2023 and December 31, 2022 , accrued dividend equivalents totaled $ 13.4  million and $ 13.8  million, respectively.

SUBSEQUENT EVENT

Stock Repurchase Program

In October 2023, 

the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $ 640.0 million in the aggregate of its common stock through October 29, 2026. 

The repurchases will be funded from available working capital and cash repatriation from its Bermuda subsidiary.

Management ’

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the cyclical nature of the semiconductor industry;

the effects of macroeconomic factors, including the recent banking crisis, the global economic downturn and the Russia-Ukraine conflict, on the semiconductor industry and our business;

the effects of macroeconomic factors, including the 2023 banking crisis, the global economic downturn, the Russia-Ukraine conflict and the Israel-Gaza conflict on the semiconductor industry and our business;

protection of our proprietary technology;

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our plan to repatriate cash from our subsidiary in Bermuda;

our intention and ability to pay cash dividends and dividend equivalents;

our intention and ability to execute our stock repurchase program and pay cash dividends and dividend equivalents;

the factors that differentiate us from our competitors.

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the negative of these terms or other variations of such terms and similar expressions relating to the future identify forward-looking statements.

All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, such as the ongoing banking crisis, the global economic downturn and the Russia-Ukraine conflict on the semiconductor industry and our business.

All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, such as the ongoing banking crisis, the global economic downturn, the Russia-Ukraine conflict and the Israel-Gaza conflict on the semiconductor industry and our business.

These statements are not guarantees of future performance and are subject to significant risks and uncertainties.

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We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products.

Our revenue from direct and indirect sales to customers in Asia was 85% and 88% of our total revenue for the three months ended June 30, 2023 and 2022, respectively, and 84% and 89% of our total revenue for the six months ended June 30, 2023 and 2022, respectively.

Our revenue from direct and indirect sales to customers in Asia was 89% and 86% of our total revenue for the three months ended September 30, 2023 and 2022, respectively, and 86% and 88% of our total revenue for the nine months ended September 30, 2023 and 2022, respectively.

We derive a majority of our revenue from the sales of our DC to DC converter products which serve the storage and computing, enterprise data, automotive, industrial, communications and consumer markets.

We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.

Macroeconomic Conditions and Recent Regulations

The semiconductor industry has been facing a number of macro-economic challenges including reduced consumer spending on nonessential goods, fluctuations in demand for semiconductors, rising inflation, increased interest rates, and fluctuations in currency rates.

We remain cautious in light of changing macroeconomic conditions and will continue to monitor the potential impact on our operations.

Macroeconomic Conditions and Regulations

The semiconductor industry has been facing, and continues to face, a number of macro-economic challenges including reduced consumer spending, fluctuations in demand for semiconductors, rising inflation, increased interest rates, and fluctuations in currency rates.

We remain cautious in light of continued challenging macroeconomic conditions and will continue to monitor the potential impact on our operations.

The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments.

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In preparing our condensed consolidated financial statements in accordance with GAAP, we are required to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying disclosures.

Estimates and judgments used in the preparation of our condensed consolidated financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, including the impact of the recent banking crisis and the global economic downturn.

Estimates and judgments used in the preparation of our condensed consolidated financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, including the impact of the banking crisis earlier this year and the global economic downturn.

Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements.

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The table below sets forth the data on the Condensed Consolidated Statements of Operations as a percentage of revenue:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)

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The following table summarizes our revenue by end market:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)

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Communications

Revenue for the three months ended June 30, 2023 was $441.1 million, a decrease of $19.9 million, or 4.3%, from $461.0 million for the three months ended June 30, 2022.

The decrease in revenue was primarily due to lower shipment volume, which was partially offset by higher average selling prices resulting primarily from product mix.

For the three months ended June 30, 2023, revenue from the storage and computing market increased $2.3 million, or 1.8%, from the same period in 2022.

This increase was primarily due to higher sales of storage and graphic card applications, partially offset by lower sales of commercial notebooks.

Revenue from the enterprise data market decreased $17.2 million, or 26.4%, from the same period in 2022.

This decrease was primarily due to lower demand for our cloud-based CPU server applications, partially offset by initial shipments of new generative AI applications.

Revenue from the automotive market increased $43.4 million, or 71.1%, from the same period in 2022.

This increase was broad-based and included higher sales of our highly integrated solutions for advanced driver assistance systems, digital cockpits, USB connectors and lighting applications.

Revenue from the industrial market decreased $6.1 million, or 11.0%, from the same period in 2022.

This decrease was mainly driven by lower sales of power sources, security and other industrial equipment, partially offset by higher sales in industrial meter applications.

Revenue from the communications market decreased $10.0 million, or 16.9%, from the same period in 2022.

This decrease was broad-based and driven by lower demand.

Revenue from the consumer market decreased $32.1 million, or 33.0%, from the same period in 2022.

This decrease was broad-based and primarily driven by lower sales of products for home appliances and gaming.

Revenue for the six months ended June 30, 2023 was $892.2 million, an increase of $53.5 million, or 6.4%, from $838.7 million for the six months ended June 30, 2022.

The increase in revenue was primarily due to increases in the average selling prices resulting primarily from product mix, which was partially offset by lower shipment volume.

For the six months ended June 30, 2023, revenue from the storage and computing market increased $25.5 million, or 11.6%, from the same period in 2022.

This increase was primarily due to higher sales of storage and graphic card applications.

Revenue from the enterprise data market decreased $12.6 million, or 11.7%, from the same period in 2022.

This decrease was primarily due to lower demand for our cloud-based CPU server applications, partially offset by initial shipments of new generative AI applications.

Revenue from the automotive market increased $94.2 million, or 81.5%, from the same period in 2022.

This increase was broad-based and included higher sales of our highly integrated solutions for advanced driver assistance systems, digital cockpits, USB connectors and lighting applications.

Revenue from the industrial market decreased $7.2 million, or 6.9%, from the same period in 2022.

This decrease was mainly driven by lower sales of power sources, security and other industrial equipment, partially offset by higher sales in industrial meter applications.

Revenue from the communications market increased $2.3 million, or 2.0%, from the same period in 2022.

This increase primarily reflected higher revenue related to wireless applications.

Revenue from the consumer market decreased $48.7 million, or 27.5%, from the same period in 2022.

This decrease was broad-based and primarily driven by lower sales of products for gaming, home appliances and mobile devices.

Revenue for the three months ended September 30, 2023 was $474.9 million, a decrease of $20.5 million, or 4.1%, from $495.4 million for the three months ended September 30, 2022.

The decrease in revenue was primarily due to lower shipment volume, which was partially offset by higher average selling prices resulting primarily from product mix.

For the three months ended September 30, 2023, revenue from the storage and computing market increased $16.6 million, or 14.7%, from the same period in 2022.

This increase was primarily due to higher sales in commercial notebooks, partially offset by lower sales of storage applications.

Revenue from the enterprise data market increased $23.7 million, or 31.4%, from the same period in 2022.

This increase was primarily due to higher demand for generative AI applications, partially offset by lower sales of cloud-based CPU server applications.

Revenue from the automotive market increased $8.1 million, or 9.3%, from the same period in 2022.

This increase was primarily due to higher sales of our highly integrated solutions for advanced driver assistance systems.

Revenue from the industrial market decreased $16.6 million, or 28.2%, from the same period in 2022.

This decrease was mainly driven by lower sales of power sources, security and industrial equipment applications.

Revenue from the communications market decreased $25.5 million, or 35.3%, from the same period in 2022.

This decrease was primarily driven by lower demand for infrastructure related products.

Revenue from the consumer market decreased $26.8 million, or 30.1%, from the same period in 2022.

This decrease was broad-based and primarily driven by lower sales of products for home appliances.

Revenue for the nine months ended September 30, 2023 was $1,367.1 million, an increase of $33.0 million, or 2.5%, from $1,334.1 million for the nine months ended September 30, 2022.

The increase in revenue was primarily due to increases in the average selling prices resulting primarily from product mix, which was partially offset by lower shipment volume.

For the nine months ended September 30, 2023, revenue from the storage and computing market increased $42.1 million, or 12.7%, from the same period in 2022.

This increase was primarily due to higher sales in commercial notebooks and graphic card applications.

Revenue from the enterprise data market increased $11.1 million, or 6.1%, from the same period in 2022.

This increase was primarily due to higher demand for generative AI applications, partially offset by lower sales of our cloud-based CPU server applications.

Revenue from the automotive market increased $102.3 million, or 50.5%, from the same period in 2022.

This increase was broad-based and included higher sales of our highly integrated solutions for advanced driver assistance systems, body electronics and digital cockpits.

Revenue from the industrial market decreased $23.8 million, or 14.6%, from the same period in 2022.

This decrease was mainly driven by lower sales of power sources, security and industrial equipment applications, partially offset by higher sales in industrial meter applications.

Revenue from the communications market decreased $23.2 million, or 12.4%, from the same period in 2022.

This decrease primarily reflected lower revenue related to infrastructure related products.

Revenue from the consumer market decreased $75.6 million, or 28.4%, from the same period in 2022.

This decrease was broad-based and primarily driven by lower sales of products for home appliances, gaming, mobile devices and smart TVs.

Cost of Revenue and Gross Margin

Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expenses.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)

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As a percentage of revenue

Cost of revenue was $193.5 million, or 43.9% of revenue, for the three months ended June 30, 2023, and $190.0 million, or 41.2% of revenue, for the three months ended June 30, 2022.

The $3.5 million increase in cost of revenue was primarily driven by product mix and higher manufacturing overhead costs, which were partially offset by lower shipment volume and lower inventory write-downs and warranty expenses.

Gross margin was 56.1% for the three months ended June 30, 2023, compared with 58.8% for the three months ended June 30, 2022.

The decrease in gross margin was mainly driven by higher manufacturing overhead costs, which was partially offset by lower inventory write-downs and warranty expenses as a percentage of revenue.

Cost of revenue was $385.7 million, or 43.2% of revenue, for the six months ended June 30, 2023, and $348.9 million, or 41.6% of revenue, for the six months ended June 30, 2022.

The $36.8 million increase in cost of revenue was primarily driven by product mix and higher manufacturing overhead costs, which were partially offset by lower shipment volume and lower warranty expenses and inventory write-downs.

Gross margin was 56.8% for the six months ended June 30, 2023, compared with 58.4% for the six months ended June 30, 2022.

The decrease in gross margin was mainly driven by product mix and higher manufacturing overhead costs, which was partially offset by lower warranty expenses and inventory write-downs as a percentage of revenue.

Research and Development ( “

R&D expenses primarily consist of salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue was $211.3 million, or 44.5% of revenue, for the three months ended September 30, 2023, and $204.5 million, or 41.3% of revenue, for the three months ended September 30, 2022.

The $6.8 million increase in cost of revenue was primarily driven by product mix partially offset by lower shipment volume and lower inventory write-downs.

Gross margin was 55.5% for the three months ended September 30, 2023, compared with 58.7% for the three months ended September 30, 2022.

The decrease in gross margin was mainly driven by product mix, partially offset by lower inventory write-downs as a percentage of revenue.

Cost of revenue was $597.1 million, or 43.7% of revenue, for the nine months ended September 30, 2023, and $553.4 million, or 41.5% of revenue, for the nine months ended September 30, 2022.

The $43.7 million increase in cost of revenue was primarily driven by product mix and higher manufacturing overhead costs, partially offset by lower shipment volume and lower inventory write-downs and warranty expenses.

Gross margin was 56.3% for the nine months ended September 30, 2023, compared with 58.5% for the nine months ended September 30, 2022.

The decrease in gross margin was mainly driven by product mix and higher manufacturing overhead costs, partially offset by lower inventory write-downs and warranty expenses as a percentage of revenue.

Research and Development 

R&D expenses primarily consist of cash compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)

As a percentage of revenue

R&D expenses were $63.7 million, or 14.4% of revenue, for the three months ended June 30, 2023, and $57.1 million, or 12.4% of revenue, for the three months ended June 30, 2022.

The $6.6 million increase in R&D expenses was primarily due to a $7.2 million increase in new product development expenses and a $3.0 million increase in expenses related to the changes in the value of deferred compensation plan liabilities, partially offset by a decrease of $3.8 million in cash compensation expenses, which include salary, benefits and bonuses.

R&D expenses were $127.4 million, or 14.3% of revenue, for the six months ended June 30, 2023, and $111.2 million, or 13.3% of revenue, for the six months ended June 30, 2022.

The $16.2 million increase in R&D expenses was primarily due to a $13.9 million increase in new product development expenses, and a $4.7 million increase in expenses related to the changes in the value of deferred compensation plan liabilities, partially offset by a decrease of $3.0 million in cash compensation expenses, which include salary, benefits and bonuses.

Selling, General and Administrative ( “

SG&A ”

SG&A expenses primarily include salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, third party service fees and litigation expenses.

Three Months Ended June 30,

Six Months Ended June 30,

R&D expenses were $64.8 million, or 13.6% of revenue, for the three months ended September 30, 2023, and $67.3 million, or 13.6% of revenue, for the three months ended September 30, 2022.

The $2.5 million decrease in R&D expenses was primarily due to a $6.5 million decrease in cash compensation expenses.

This decrease was partially offset by a $4.0 million increase in new product development expenses.

R&D expenses were $192.2 million, or 14.1% of revenue, for the nine months ended September 30, 2023, and $178.5 million, or 13.4% of revenue, for the nine months ended September 30, 2022.

The $13.7 million increase in R&D expenses was primarily due to a $17.8 million increase in new product development expenses, and a $4.7 million increase in expenses related to the changes in the value of deferred compensation plan liabilities, partially offset by a $9.5 million decrease in cash compensation expenses.

Selling, General and Administrative 

SG&A expenses primarily include cash compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, third party service fees and litigation expenses.

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)

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As a percentage of revenue

SG&A expenses were $71.7 million, or 16.2% of revenue, for the three months ended June 30, 2023, and $71.9 million, or 15.6% of revenue, for the three months ended June 30, 2022. 

SG&A expenses were $142.5 million, or 16.0% of revenue, for the six months ended June 30, 2023, and $140.6 million, or 16.7% of revenue, for the six months ended June 30, 2022.

The $1.9 million increase in SG&A expenses was driven by an increase of $2.9 million in litigation expenses and $4.2 million in other miscellaneous expenses, partially offset by a decrease of $4.1 million in compensation related expenses and $1.2 million in sales commissions.

SG&A expenses were $63.2 million, or 13.3% of revenue, for the three months ended September 30, 2023, and $71.8 million, or 14.4% of revenue, for the three months ended September 30, 2022. The $8.6 million decrease in SG&A expenses was driven by an $8.4 million decrease in stock-based compensation expenses, and a $3.3 million decrease in net litigation expenses, partially offset by a $1.5 million increase in travel and professional service expenses and a $1.4 million increase in cash compensation expenses.

SG&A expenses were $205.6 million, or 15.0% of revenue, for the nine months ended September 30, 2023, and $212.4 million, or 15.9% of revenue, for the nine months ended September 30, 2022.

The $6.8 million decrease in SG&A expenses was driven by a $16.3 million decrease in stock-based compensation expenses, and a $4.4 million decrease in cash compensation expenses, partially offset by an $8.0 million increase in expense related to changes in the value of the deferred compensation plan liabilities, and a $7.0 million increase consisting mostly of travel related expenses, professional services and software licensing fees.

Other Income (Expense), Net

Other income, net, was $6.5 million for the three months ended June 30, 2023, compared with other expense, net, of $5.1 million for the three months ended June 30, 2022.

The increase in other income was primarily due to an increase of $7.6 million in income related to changes in the value of the deferred compensation plan investments and an increase of $4.1 million in net interest income.

Other income, net, was $11.8 million for the six months ended June 30, 2023, compared with other expense, net, of $5.7 million for the six months ended June 30, 2022.

The increase in other income was primarily due to an increase of $12.3 million in income related to changes in the value of the deferred compensation plan investments and an increase of $6.5 million in net interest income, partially offset by an increase of $2.8 million in charitable contributions.

Other income, net, was $2.3 million for the three months ended September 30, 2023, compared with $5 thousand for the three months ended September 30, 2022.

The increase in other income was primarily due to an increase of $5.2 million in net interest income, partially offset by an increase of $2.2 million in charitable contributions.

Other income, net, was $14.1 million for the nine months ended September 30, 2023, compared with other expense, net, of $5.7 million for the nine months ended September 30, 2022.

The increase in other income was primarily due to an increase of $12.0 million in income related to changes in the value of the deferred compensation plan investments and an increase of $11.7 million in net interest income, partially offset by an increase of $5.0 million in charitable contributions.

Income Tax Expense

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Each quarter the estimate of the annual effective tax rate is updated, and if our estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for the three months ended June 30, 2023 was $19.4 million, or 16.3% of pre-tax income.

The income tax expense for the six months ended June 30, 2023 was $39.1 million, or 15.8% of pre-tax income.

The income tax expense for the three months ended September 30, 2023 was $16.7 million, or 12.1% of pre-tax income.

The income tax expense for the nine months ended September 30, 2023 was $55.8 million, or 14.5% of pre-tax income.

The effective tax rates were lower than the federal statutory rate of 21% primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

The income tax expense for the three months ended June 30, 2022 was $22.1 million, or 16.2% of pre-tax income.

The income tax expense for the six months ended June 30, 2022 was $38.1 million, or 16.4% of pre-tax income.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax and the addition of a valuation allowance against China deferred tax assets arising from the indefinite extension of the R&D super deduction policy in China.

The income tax expense for the three months ended September 30, 2022 was $27.5 million, or 18.1% of pre-tax income.

The income tax expense for the nine months ended September 30, 2022 was $65.6 million, or 17.1% of pre-tax income.

The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

In August 2022, the CHIPS Act and the IRA were enacted and signed into law, neither of which had a material impact on our income tax provisions, results of operations or financial condition for the three and six months ended June 30, 2023.

See Note 13 for further details.

Liquidity and Capital Resources

September 30,

(in thousands, except percentages)

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Working capital

As of June 30, 2023, we had cash and cash equivalents of $507.0 million and short-term investments of $433.5 million, compared with cash and cash equivalents of $288.6 million and short-term investments of $449.3 million as of December 31, 2022.

As of June 30, 2023, $450.8 million of cash and cash equivalents and $324.2 million of short-term investments were held by our international subsidiaries.

As of September 30, 2023, we had cash and cash equivalents of $421.2 million and short-term investments of $621.1 million, compared with cash and cash equivalents of $288.6 million and short-term investments of $449.3 million as of December 31, 2022.

As of September 30, 2023, $365.8 million of cash and cash equivalents and $544.4 million of short-term investments were held by our international subsidiaries.

We have repatriated and may continue to repatriate cash from our Bermuda subsidiary with minimal tax impact to fund our expenditures in future periods.

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The following table summarizes our cash flow activities:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

Net cash provided by operating activities

Net cash provided by investing activities

Net cash used in financing activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Effect of change in exchange rates

Net increase in cash, cash equivalents and restricted cash

For the six months ended June 30, 2023, the $96.7 million increase in cash provided by operating activities compared to the prior period was primarily due to increased accounts receivable collections.

For the six months ended June 30, 2023, the $6.4 million increase in cash used in investing activities compared to the prior period was primarily due to an increase of $193.1 million in purchases of investments, partially offset by an increase of $166.2 million in sales of investments and a decrease of $22.0 million in capital expenditures.

For the six months ended June 30, 2023, the $21.8 million increase in cash used in financing activities compared to the prior period was primarily due to an increase of $20.6 million in dividend and dividend equivalent payments.

For the nine months ended September 30, 2023, the $290.4 million increase in cash provided by operating activities compared to the prior period was primarily due to decreased prepaid wafer expenses, decreased inventory purchases, increased accounts receivable collections and other changes in working capital.

For the nine months ended September 30, 2023, the $250.4 million increase in cash used in investing activities compared to the prior period was primarily due to an increase of $474.3 million in purchases of investments, partially offset by an increase of $223.2 million in sales of investments.

For the nine months ended September 30, 2023, the $36.4 million increase in cash used in financing activities compared to the prior period was primarily due to an increase of $33.7 million in dividend and dividend equivalent payments.

In the future, in order to strengthen our financial position, respond to adverse developments, changes in our circumstance or unforeseen events or conditions, or fund our growth, we may need to raise additional funds by any one or a combination of the following:

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Cash Requirements

Although consequences of economic uncertainty and macroeconomic conditions and other factors could adversely affect our liquidity and capital resources in the future, and our cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $940.5 million as of June 30, 2023, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.

Although consequences of economic uncertainty and macroeconomic conditions and other factors could adversely affect our liquidity and capital resources in the future, and our cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,042.3 million as of September 30, 2023, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.

Our material cash requirements include the following contractual and other obligations:

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Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services.

Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements.

Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and research and development facilities, purchases of production and other equipment, and license arrangements.

In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period.

As of June 30, 2023, the Company had made prepayments under this agreement of $170.0 million, of which $50.0 million was classified as short-term.

As of June 30, 2023, total estimated future unconditional purchase commitments to all suppliers and other parties were $751.6 million, of which $357.4 million was classified as short-term.

As of September 30, 2023, the Company had made prepayments under this agreement of $170.0 million, of which $50.0 million was classified as short-term.

As of September 30, 2023, total estimated future unconditional purchase commitments to all suppliers and other parties were $656.5 million, of which $343.2 million was classified as short-term.

Transition Tax Liability

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As permitted by the 2017 Tax Act, we have elected to pay the tax liability in installments on an interest-free basis through 2025.

As of June 30, 2023, the remaining liability totaled $11.1 million, of which $4.9 million was classified as short-term.

As of September 30, 2023, the remaining liability totaled $11.1 million, of which $4.9 million was classified as short-term.

Operating Leases

Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities and equipment.

As of June 30, 2023, these obligations totaled $6.6 million, of which $1.9 million was classified as short-term.

As of September 30, 2023, these obligations totaled $8.0 million, of which $2.2 million was classified as short-term.

We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock.

Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month.

As of June 30, 2023, accrued dividends totaled $47.5 million.

As of September 30, 2023, accrued dividends totaled $47.8 million.

The declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of our stockholders.

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Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents.

As of June 30, 2023, these obligations totaled $72.0 million.

As of September 30, 2023, these obligations totaled $71.6 million.

Stock Repurchase Program

In October 2023, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $640.0 million in the aggregate of our common stock through October 29, 2026. The repurchases will be funded from available working capital and cash repatriation from our Bermuda subsidiary.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements