What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 249 added, 160 removed, 831 unchanged (33% of the section changed)

59 unchanged sentences

(In thousands, except per-share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 507,431 $ 441,128 $ 965,316 $ 892,193

12 unchanged sentences

Other income, net

7,512 6,543 17,052 11,840

Income before income taxes

13 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 100,366 $ 99,504 $ 192,907 $ 209,306

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments

1 unchanged sentence

Change in unrealized gains and losses on available-for-sale securities, net of tax of $ 50 , $ 158 , $( 198 ) and $ 469 , respectively

Other comprehensive income (loss), net of tax:

368 728 703 2,941

Other comprehensive loss, net of tax:

( 3,945 ) ( 25,452 ) ( 17,432 ) ( 20,320 )

Comprehensive income

8 unchanged sentences

Stockholders’

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Balance as of April 1, 2024

48,667 $ 1,176,382 $ 977,724 $ ( 40,549 ) $ 2,113,557

- - 100,366 - 100,366

Other comprehensive loss

- - - ( 3,945 ) ( 3,945 )

Dividends and dividend equivalents declared ($ 1.25 per share)

- - ( 61,882 ) - ( 61,882 )

Common stock issued under the employee equity incentive plan

Repurchases of common stock

( 6 ) ( 4,550 ) - - ( 4,550 )

Stock-based compensation expense

- 52,312 - - 52,312

Balance as of June 30, 2024

48,698 $ 1,224,144 $ 1,016,208 $ ( 44,494 ) $ 2,195,858

Common Stock and

Additional Paid-in Capital

Comprehensive

Stockholders’

Three Months Ended June 30, 2023

Balance as of April 1, 2023

47,411 $ 1,017,131 $ 777,075 $ ( 17,945 ) $ 1,776,261

- - 99,504 - 99,504

Other comprehensive loss

- - - ( 25,452 ) ( 25,452 )

Dividends and dividend equivalents declared ($ 1.00 per share)

- - ( 49,223 ) - ( 49,223 )

Common stock issued under the employee equity incentive plan

Stock-based compensation expense

- 37,995 - - 37,995

Balance as of June 30, 2023

47,611 $ 1,055,130 $ 827,356 $ ( 43,397 ) $ 1,839,089

Common Stock and

Additional Paid-in Capital

Comprehensive

Stockholders’

Six Months Ended June 30, 2024

Balance as of January 1, 2024

12 unchanged sentences

- 98,227 - - 98,227

Balance as of March 31, 2024

Balance as of June 30, 2024

48,698 $ 1,224,144 $ 1,016,208 $ ( 44,494 ) $ 2,195,858

3 unchanged sentences

Stockholders’

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Balance as of January 1, 2023

1 unchanged sentence

- - 209,306 - 209,306

Other comprehensive income

Other comprehensive loss

- - - ( 20,320 ) ( 20,320 )

7 unchanged sentences

- 75,003 - - 75,003

Balance as of March 31, 2023

Balance as of June 30, 2023

47,611 $ 1,055,130 $ 827,356 $ ( 43,397 ) $ 1,839,089

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

16,942 19,940

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

2 unchanged sentences

( 5,285 ) ( 5,022 )

Gain on sale of equity investments

Deferred taxes, net

( 5,821 ) ( 984 )

Stock-based compensation expense

4 unchanged sentences

( 42,350 ) 19,847

60,590 ( 4,881 )

Accounts payable

3 unchanged sentences

Income tax liabilities

7,459 ( 14,802 )

Other accrued liabilities

4 unchanged sentences

( 47,498 ) ( 16,681 )

Cash paid for an assumed lease

Purchases of investments

26 unchanged sentences

Supplemental disclosures for cash flow information:

Cash paid (refunded) for income taxes, net

Cash paid for income taxes, net

$ 34,064 $ 58,216

16 unchanged sentences

Summary of Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2024.

There have been no changes to the Company’s significant accounting policies during the three and six months ended June 30, 2024 .

In addition to those described in the Company’s audited consolidated financial statements included in the Annual Report on Form 10 -K for the year ended December 31, 2023, the Company is subject to the following significant accounting policy due to the recent acquisition.

11 unchanged sentences

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

New Accounting Pronouncements Not Yet Adopted as of March 31, 2024

New Accounting Pronouncements Not Yet Adopted as of June 30, 2024

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023 - 07, Segment Reporting (Topic 280 ):

10 unchanged sentences

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

These product sales accounted for 99 % of the Company’s total revenue for both the three months ended March 31, 2024 and 2023 .

These product sales accounted for 99 % of the Company’s total revenue for each of the three and six months ended June 30, 2024 and 2023 .

The remaining revenue primarily includes royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties.

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 March 31, 2024 and 2023 , 85 % and 81 % of the Company’s product sales were made through distribution arrangements, respectively.

For the three months ended June 30, 2024 and 2023 , 90 % and 80 %, respectively, of the Company’s product sales were made through distribution arrangements.

For the six months ended June 30, 2024 and 2023 , 87 % and 80 %, respectively, of the Company’s product sales were made through distribution arrangements.

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

33 unchanged sentences

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

As of March 31, 2024 and December 31, 2023 , customer prepayments totaled $ 2.7 million and $ 2.8 million, respectively.

For the three months ended March 31, 2024 , the Company recognized all revenue that was included in the customer prepayment balance as of December 31, 2023 .

As of June 30, 2024 and December 31, 2023 , customer prepayments totaled $ 5.6 million and $ 2.8 million, respectively.

The increase in the customer prepayment balance for the six months ended June 30, 2024 resulted from an increase in unfulfilled customer orders for which the Company had received payments.

Practical Expedients

13 unchanged sentences

The Amended and Restated 2014 Plan will cease being available for new awards on June 11, 2030.

As of March 31, 2024 , 3.9 million shares remained available for future issuance under the Amended and Restated 2014 Plan.

As of June 30, 2024 , 3.9 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue

1 unchanged sentence

Research and development

11,682 9,313 22,129 17,927

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

3 unchanged sentences

Tax benefit related to stock-based compensation (1)

$ 798 $ 663 $ 1,506 $ 1,086

Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods.

13 unchanged sentences

( 3 ) $ 465.22 ( 1 ) $ 396.40 ( 1 ) $ 270.15 ( 5 ) $ 412.40

Outstanding at March 31, 2024

Outstanding at June 30, 2024

98 $ 493.16 748 $ 496.84 938 $ 203.33 1,784 $ 342.19

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 $ 403.0 million and $ 141.6 million for the three months ended March 31, 2024 and 2023 , respectively.

As of March 31, 2024 , the total intrinsic value of all outstanding RSUs was $ 1.1 billion, based on the closing stock price of $ 677.42 .

As of March 31, 2024 , unamortized compensation expense related to all outstanding RSUs was $ 339.5 million with a weighted-average remaining recognition period of approximately two years.

The intrinsic value related to vested RSUs was $ 25.5 million and $ 98.1 million for the three months ended June 30, 2024 and 2023 , respectively.

The intrinsic value related to vested RSUs was $ 428.6 million and $ 239.7 million for the six months ended June 30, 2024 and 2023 , respectively.

As of June 30, 2024 , the total intrinsic value of all outstanding RSUs was $ 1.4 billion, based on the closing stock price of $ 821.68 .

As of June 30, 2024 , unamortized compensation expense related to all outstanding RSUs was $ 350.8 million with a weighted-average remaining recognition period of approximately two years.

Time-Based RSUs:

For the three months ended March 31, 2024 , the Compensation Committee granted 21,000 RSUs with service conditions to non-executive employees and non-employee directors.

For the six months ended June 30, 2024 , the Compensation Committee granted 30,000 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.

20 unchanged sentences

The 2004 ESPP will expire on August 16, 2038.

For the three months ended March 31, 2024 and 2023 , 11,000 and 9,000 shares were issued under the 2004 ESPP, respectively.

As of March 31, 2024 , 4.4 million shares were available for future issuance under the 2004 ESPP.

The intrinsic value of the shares issued was $ 3.5 million and $ 0.7 million for the three months ended March 31, 2024 and 2023 , respectively.

As of March 31, 2024 , the unamortized expense was $ 1.1 million, which will be recognized through the third quarter of 2024.

No shares were issued under the 2004 ESPP for the three months ended June 30, 2024 and 2023.

For the six months ended June 30, 2024 and 2023 , 11,000 and 9,000 shares were issued under the 2004 ESPP, respectively.

As of June 30, 2024 , 4.4 million shares were available for future issuance under the 2004 ESPP.

The intrinsic value of the shares issued was $ 3.5 million and $ 0.7 million for the six months ended June 30, 2024 and 2023 , respectively.

As of June 30, 2024 , the unamortized expense was $ 0.4 million, which will be recognized through the third quarter of 2024.

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

Three Months Ended March 31,

Six Months Ended June 30,

Expected term (in years)

3 unchanged sentences

Dividend yield

Cash proceeds from the shares issued under the 2004 ESPP were $ 4.6 million and $ 3.7 million for the three months ended March 31, 2024 and 2023 , respectively.

Cash proceeds from the shares issued under the 2004 ESPP were $ 4.6 million and $ 3.7 million for the six months ended June 30, 2024 and 2023 , respectively.

On January 3, 2024 ( the “Acquisition Date”), the Company acquired 100 % of the outstanding capital stock of Axign B.V.

2 unchanged sentences

Purchase Consideration

The preliminary purchase consideration was approximately $ 33.7 million in cash and includes an estimated working capital adjustment and other adjustments.

Cash paid at the Acquisition Date included $ 3.8 million that is being held in an escrow account for a one -year period until Axign’s satisfaction of certain representations and warranties.

The purchase consideration was $ 33.4 million in cash.

Cash paid at the Acquisition Date included $ 3.8 million that is being held in an escrow account for a one -year period as recourse in the event of a breach of Axign’s representations and warranties.

In connection with the acquisition, the Company incurred $ 0.4 million in transaction costs that were expensed as incurred and included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

Preliminary Purchase Price Allocation

The preliminary purchase price allocation for Axign is as follows (in thousands):

Estimated Net Asset

Purchase Price Allocation

The purchase price allocation for Axign is as follows (in thousands):

Other tangible assets acquired, net of liabilities assumed

8 unchanged sentences

The goodwill is not expected to be deductible for tax purposes.

The Company is still in the process of determining the final fair values of the assets acquired and liabilities assumed.

As a result, the purchase price allocation for Axign is not complete as of March 31, 2024.

The Company expects to finalize the allocation by the quarter ending June 30, 2024.

Final determination of the fair values could result in an adjustment to the preliminary purchase price allocation with a corresponding adjustment to goodwill.

BALANCE SHEET COMPONENTS

9 unchanged sentences

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

Prepaid wafer expenses

Prepaid wafer purchases

Prepaid expenses

5 unchanged sentences

$ 105,547 $ 147,463

As of March 31, 2024 and December 31, 2023, the Company held $ 60 million in prepaid wafer expenses and $ 50 million in other receivables, respectively, related to deposits made to a supplier under a long-term wafer supply agreement.

See Note 9 for further details.

The Company held $ 60 million in prepaid wafer purchases as of June 30, 2024 and $ 50 million in other receivables as of December 31, 2023 related to deposits made to a supplier under a long-term wafer supply agreement.

See Note 9 for details about the supply agreement.

The restricted cash included in other current assets as of December 31, 2023 was related to preliminary purchase consideration held in a trust account in connection with the Company’s acquisition of Axign and was paid in January 2024.

6 unchanged sentences

60,000 120,000

13,973 12,896

Operating lease right-of-use (“ROU”) and related assets

$ 183,866 $ 211,277

Prepaid wafer purchases relate to a deposit made to a supplier under a long-term wafer supply agreement.

See Note 9 for further details.

See Note 9 for details about the supply agreement.

The operating lease ROU and related assets as of June 30, 2024 includes a fair value measurement related to favorable market terms on a building lease.

Other Accrued Liabilities

5 unchanged sentences

14,702 16,906

Customer prepayments

Accrued legal expenses

Income tax payable

1 unchanged sentence

$ 131,348 $ 115,791

As of March 31, 2024 , stock rotation and sales returns included a $ 24.7 million stock rotation reserve, compared with a $ 16.7 million reserve as of December 31, 2023 .

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

6 unchanged sentences

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

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

These leases have remaining lease terms from less than one year to 20 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):

The following table summarizes the balances of operating lease ROU assets and liabilities (in thousands):

Financial Statement Line Item

8 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease costs

$ 1,014 $ 759 $ 1,911 $ 1,475

648 554 1,198 1,092

Total lease costs

$ 1,662 $ 1,313 $ 3,109 $ 2,567

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

Operating cash flows for operating leases

$ 1,027 $ 774 $ 1,700 $ 1,638

ROU assets obtained in exchange for new operating lease liabilities

2 unchanged sentences

Weighted-average discount rate

As of March 31, 2024 , the maturities of the lease liabilities were as follows (in thousands):

2024 (remaining nine months)

As of June 30, 2024 , the maturities of the lease liabilities were as follows (in thousands):

2024 (remaining six months)

Total remaining lease payments

1 unchanged sentence

Total lease liabilities

As of March 31, 2024 , operating leases that have not yet commenced are not material.

As of June 30, 2024 , operating leases that have not yet commenced are not material.

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

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

One of these leases includes a tenant option to renew the lease term for up to five years.

For the three months ended March 31, 2024 and 2023 , income related to lease payments was $ 0.2 million and $ 0.5 million, respectively.

As of March 31, 2024 , future income related to lease payments was as follows (in thousands):

2024 (remaining nine months)

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

Some of these leases include a tenant option to renew the lease term for up to five years.

For the three months ended June 30, 2024 and 2023 , income related to lease payments was $ 0.2 million and $ 0.3 million, respectively.

For the six months ended June 30, 2024 and 2023 , income related to lease payments was $ 0.4 million and $ 0.8 million, respectively.

As of June 30, 2024 , future income related to lease payments was as follows (in thousands):

2024 (remaining six 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 100,366 $ 99,504 $ 192,907 $ 209,306

2 unchanged sentences

Effect of dilutive securities

258 1,267 275 1,344

Weighted-average outstanding shares — diluted

7 unchanged sentences

Shares are retired upon repurchase.

The Company repurchased 6,100 shares of its common stock for an aggregate purchase price of $ 4.1 million during the three months ended March 31, 2024 .

The Company repurchased 6,300 and 12,400 shares of its common stock for an aggregate purchase price of $ 4.5 million and $ 8.6 million during the three and six months ended June 30, 2024 , respectively.

Stock repurchased under the program may be made through open market repurchases, privately negotiated transactions or other structures in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate.

2 unchanged sentences

Inflation Reduction Act of 2022 requires a 1% excise tax based on the value of certain stock repurchases in excess of stock issued for employee compensation made after December 31, 2022.

This provision did not have an impact on the Company’s condensed consolidated financial statements for the three months ended March 31, 2024 .

This provision did not have an impact on the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2024 .

SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

4 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Distributor A

38 % 22 % 40 % 21 %

Distributor B

17 % 20 % 15 % 21 %

Distributor C

* 11 % * 10 %

The Company’s agreements with these third -party customers were made in the ordinary course of business and may be terminated with or without cause by these customers with advance notice.

6 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Country or Region

9 unchanged sentences

72 160 181 293

$ 507,431 $ 441,128 $ 965,316 $ 892,193

In the second quarter of 2024, the Company reclassified certain products in its product families.

The prior periods in the table below have been updated to conform with the new methodology.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Product Family

17 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Balance at beginning of period

1 unchanged sentence

Warranties issued

2,225 580 2,325 942

Repairs, replacement and refund

9 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 March 31, 2024 , the Company had remaining prepayments under this agreement of $ 120.0 million, of which $ 60.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, as of March 31, 2024 were as follows (in thousands):

2024 (remaining nine months)

As of June 30, 2024 , the Company had remaining prepayments under this agreement of $ 120.0 million, of which $ 60.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, as of June 30, 2024 were as follows (in thousands):

2024 (remaining six 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 March 31, 2024 , there were no material pending legal proceedings to which the Company was a party.

As of June 30, 2024 , there were no material pending legal proceedings to which the Company was a party.

CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

17 unchanged sentences

$ 1,307,590 $ 1,109,043

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of March 31, 2024 (in thousands):

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of June 30, 2024 (in thousands):

Amortized Cost

7 unchanged sentences

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

March 31, 2024

June 30, 2024

Amortized Cost

28 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):

March 31, 2024

June 30, 2024

Less than 12 Months

24 unchanged sentences

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

As of March 31, 2024 and December 31, 2023 , the Company did not consider the impairment of its investments to be a result of credit losses.

As of June 30, 2024 and December 31, 2023 , 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.

11 unchanged sentences

See Note 4 for additional information.

As of March 31, 2024 and December 31, 2023 , restricted cash included in other long-term assets was related to 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 June 30, 2024 and December 31, 2023 , restricted cash included in other long-term assets was related to 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.

9 unchanged sentences

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

March 31, 2024

June 30, 2024

Money market funds

$ 125,235 $ 125,235 $ - $ -

Certificates of deposit

166,157 - 166,157 -

Corporate debt securities

60,380 - 60,380 -

treasuries and government agency bonds

571,579 - 571,579 -

Auction-rate securities backed by student-loan notes

Mutual funds and money market funds under deferred compensation plan

57,373 57,373 - -

$ 981,242 $ 182,608 $ 798,116 $ 518

December 31, 2023

Money market funds

$ 135,514 $ 135,514 $ - $ -

Certificates of deposit

127,123 - 127,123 -

Corporate debt securities

95,101 - 95,101 -

treasuries and government agency bonds

358,409 - 358,409 -

Auction-rate securities backed by student-loan notes

Mutual funds and money market funds under deferred compensation plan

54,836 54,836 - -

$ 771,550 $ 190,350 $ 580,633 $ 567

Redemptions and changes in the fair value of the auction-rate securities classified as Level 3 assets were not material for the periods presented.

3 unchanged sentences

Cash surrender value of corporate-owned life insurance policies

$ 25,677 $ 23,545

Fair value of mutual funds and money market funds

57,373 54,836

$ 83,050 $ 78,381

Deferred compensation plan assets reported in:

Other long-term assets

$ 83,050 $ 78,381

Deferred compensation plan liabilities reported in:

Accrued compensation and related benefits (short-term)

$ 7,534 $ 384

Other long-term liabilities

78,085 80,903

$ 85,619 $ 81,287

OTHER INCOME, NET

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest income

$ 6,914 $ 4,808

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

4,123 ( 260 )

Gain on deferred compensation plan investments

Charitable contributions

( 5,850 ) ( 2,000 )

$ 9,540 $ 5,297

The income tax provision or benefit for interim periods is generally determined using an estimate of the Company’s annual effective tax rate and adjusted for discrete items, if any, in the relevant period.

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 March 31, 2024 was $ 12.5 million, or 11.9 % of pre-tax income.

The effective tax rate was 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 rate 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 March 31, 2023 was $ 19.8 million, or 15.3 % of pre-tax income.

The decrease in the effective tax rate 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, 2024 was $ 23.7 million, or 19.1 % of pre-tax income.

The income tax expense for the six months ended June 30, 2024 was $ 36.2 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, 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 decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

On December 27, 2023, the Bermuda Corporate Income Tax Act of 2023 (the “Bermuda CIT Act”) was enacted and signed into law.

3 unchanged sentences

As the Bermuda CIT Act is not effective until January 1, 2025, the Company is evaluating whether or not to adopt this ETA.

Based on the information available, the Company has not recorded any changes to income tax expense related to the Bermuda CIT Act as of March 31, 2024 .

Based on the information available, the Company has not recorded any changes to income tax expense related to the Bermuda CIT Act as of June 30, 2024 .

ACCUMULATED OTHER COMPREHENSIVE LOSS

10 unchanged sentences

( 1,849 ) ( 38,700 ) ( 40,549 )

Other comprehensive income (loss) before reclassifications

355 ( 4,313 ) ( 3,958 )

Amounts reclassified from accumulated other comprehensive loss

( 50 ) - ( 50 )

Net current period other comprehensive income (loss)

368 ( 4,313 ) ( 3,945 )

Balance as of June 30, 2024

$ ( 1,481 ) $ ( 43,013 ) $ ( 44,494 )

The amount reclassified from accumulated other comprehensive loss for the period presented was recorded in other income, net, on the Condensed Consolidated Statements of Operations.

DIVIDENDS AND DIVIDEND EQUIVALENTS

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Dividend declared per share

1 unchanged sentence

$ 60,872 $ 47,530 $ 121,706 $ 94,860

As of March 31, 2024 and December 31, 2023 , accrued dividends totaled $ 60.8 million and $ 47.9 million, respectively.

As of June 30, 2024 and December 31, 2023 , accrued dividends totaled $ 60.9 million and $ 47.9 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 March 31, 2024 and December 31, 2023 , accrued dividend equivalents totaled $ 11.4 million and $ 11.9 million, respectively.

As of June 30, 2024 and December 31, 2023 , accrued dividend equivalents totaled $ 5.2 million and $ 11.9 million, respectively.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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our ability to identify, acquire and integrate companies, businesses and products, and achieve the anticipated benefits from such acquisitions and integrations;

the expected impact of various tax laws and regulations on our income tax provision, financial position and cash flows;

the expected impact of various U.S.

and international tax laws and regulations on our income tax provision, financial position and cash flows;

our plan to repatriate cash from our subsidiary in Bermuda;

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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 93% and 84% of our total revenue for the three months ended March 31, 2024 and 2023, respectively.

Our revenue from direct and indirect sales to customers in Asia was 93% and 85% of our total revenue for the three months ended June 30, 2024 and 2023, respectively, and 93% and 84% of our total revenue for the six months ended June 30, 2024 and 2023, respectively.

Our revenue from indirect sales to one customer, which primarily comprised power management solutions for AI applications, was 21% and 5% of our total revenue for the three months ended June 30, 2024 and 2023, respectively, and 19% and 4% of our total revenue for the six months ended June 30, 2024 and 2023, respectively.

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

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Macroeconomic Conditions and Regulations

The semiconductor industry 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.

The semiconductor industry has historically been impacted by various macro-economic challenges including fluctuations in 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.

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except percentages)

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The following table summarizes our revenue by end market:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except percentages)

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Communications

Revenue for the three months ended March 31, 2024 was $457.9 million, an increase of $6.8 million, or 1.5%, from $451.1 million for the three months ended March 31, 2023.

Revenue for the three months ended June 30, 2024 was $507.4 million, an increase of $66.3 million, or 15.0%, from $441.1 million for the three months ended June 30, 2023.

The increase in revenue was primarily due to higher average selling prices resulting primarily from product mix.

For the three months ended June 30, 2024, revenue from the enterprise data market increased $139.2 million, or 290.2%, from the same period in 2023.

This increase was primarily due to higher sales of our power management solutions for AI applications.

Revenue from the storage and computing market for the three months ended June 30, 2024 decreased $9.6 million, or 7.7%, from the same period in 2023.

This decrease was primarily due to lower sales of storage and graphic card applications.

Second quarter 2024 automotive revenue decreased $17.2 million, or 16.5%, from the same period in 2023.

This decrease was primarily due to lower sales of applications supporting body electronics, digital cockpits and infotainment.

Revenue from the communications market decreased $5.7 million, or 11.6%, from the same period in 2023.

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

Second quarter 2024 revenue from the consumer market decreased $23.0 million, or 35.2%, from the same period in 2023.

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

Revenue from the industrial market decreased $17.5 million, or 35.1%, from the same period in 2023.

This decrease was mainly driven by lower sales of products related to industrial meter, power source and security applications.

Revenue for the six months ended June 30, 2024 was $965.3 million, an increase of $73.1 million, or 8.2%, from $892.2 million for the six months ended June 30, 2023.

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

For the three months ended March 31, 2024, revenue from the enterprise data market increased $102.6 million, or 217.5%, from the same period in 2023.

For the six months ended June 30, 2024, revenue from the enterprise data market increased $241.8 million, or 254.1%, from the same period in 2023.

This increase was primarily due to higher sales of our power management solutions for AI applications.

Revenue from the storage and computing market decreased $13.7 million, or 11.4%, from the same period in 2023.

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

Revenue from the automotive market decreased $18.3 million, or 17.3%, from the same period in 2023.

This decrease was primarily due to lower sales of our highly integrated applications supporting infotainment, USB connector and body electronics.

First half 2024 revenue from the storage and computing market decreased $23.3 million, or 9.5%, from the same period in 2023.

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

Revenue from the automotive market for the first six months of 2024 decreased $35.5 million, or 16.9%, from the same period in 2023.

This decrease was primarily due to lower sales of applications supporting digital cockpits, body electronics and USB connectors.

Revenue from the communications market decreased $27.0 million, or 23.0%, from the same period in 2023.

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

Revenue from the consumer market decreased $25.3 million, or 39.9%, from the same period in 2023.

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

For the six months ended June 30, 2024, consumer revenue decreased $48.2 million, or 37.5%, from the same period in 2023.

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

Revenue from the industrial market decreased $34.7 million, or 35.7%, from the same period in 2023.

This decrease was mainly driven by lower sales of security and industrial meters applications.

This decrease was mainly driven by lower sales of products related to industrial meter, security and power source applications.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except percentages)

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As a percentage of revenue

Cost of revenue was $205.4 million, or 44.9% of revenue, for the three months ended March 31, 2024, and $192.3 million, or 42.6% of revenue, for the three months ended March 31, 2023.

The $13.2 million increase in cost of revenue was primarily driven by product mix, higher inventory write-downs and higher warranty expenses, partially offset by lower shipment volume.

Gross margin was 55.1% for the three months ended March 31, 2024, compared with 57.4% for the three months ended March 31, 2023.

The decrease in gross margin was mainly driven by an increase in inventory write-downs and warranty expenses as a percentage of revenue.

Cost of revenue was $226.9 million, or 44.7% of revenue, for the three months ended June 30, 2024, and $193.5 million, or 43.9% of revenue, for the three months ended June 30, 2023.

The $33.4 million increase in cost of revenue was primarily driven by increases in the average costs due to product mix.

Gross margin was 55.3% for the three months ended June 30, 2024, compared with 56.1% for the three months ended June 30, 2023.

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

Cost of revenue was $432.3 million, or 44.8% of revenue, for the six months ended June 30, 2024, and $385.7 million, or 43.2% of revenue, for the six months ended June 30, 2023.

The $46.6 million increase in cost of revenue was primarily driven by increases in the average costs due to product mix, higher inventory write-downs and higher warranty expenses, partially offset by lower shipment volume.

Gross margin was 55.2% for the six months ended June 30, 2024, compared with 56.8% for the six months ended June 30, 2023.

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

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except percentages)

As a percentage of revenue

R&D expenses were $76.0 million, or 16.6% of revenue, for the three months ended March 31, 2024, and $63.7 million, or 14.1% of revenue, for the three months ended March 31, 2023.

The $12.3 million increase in R&D expenses was primarily due to a $5.8 million increase in cash compensation expenses, a $3.5 million increase in stock-based compensation expenses and related employer payroll taxes, and a $1.1 million increase in third party service fees.

R&D expenses were $77.9 million, or 15.3% of revenue, for the three months ended June 30, 2024, and $63.7 million, or 14.4% of revenue, for the three months ended June 30, 2023.

The $14.3 million increase in R&D expenses was primarily due to a $9.0 million increase in cash compensation and benefits and a $2.4 million increase in stock-based compensation expenses.

R&D expenses were $153.9 million, or 15.9% of revenue, for the six months ended June 30, 2024, and $127.4 million, or 14.3% of revenue, for the six months ended June 30, 2023.

The $26.5 million increase in R&D expenses was primarily due to a $15.3 million increase in cash compensation and benefits, a $6.0 million increase in stock-based compensation expenses and related payroll taxes and a $1.4 million increase in professional services.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except percentages)

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As a percentage of revenue

SG&A expenses were $81.0 million, or 17.7% of revenue, for the three months ended March 31, 2024, and $70.8 million, or 15.7% of revenue, for the three months ended March 31, 2023.

The $10.2 million increase in SG&A expenses was driven by a $10.5 million increase in stock-based compensation expenses and related employer payroll taxes.

SG&A expenses were $86.1 million, or 17.0% of revenue, for the three months ended June 30, 2024, and $71.7 million, or 16.2% of revenue, for the three months ended June 30, 2023.

The $14.4 million increase in SG&A expenses was primarily driven by an $11.5 million increase in stock-based compensation expenses and a $1.8 million increase in sales commissions.

SG&A expenses were $167.1 million, or 17.3% of revenue, for the six months ended June 30, 2024, and $142.5 million, or 16.0% of revenue, for the six months ended June 30, 2023.

The $24.6 million increase in SG&A expenses was primarily driven by an $18.3 million increase in stock-based compensation expenses, a $2.0 million increase in professional services and a $1.4 million increase in cash compensation and benefits.

Other Income, Net

Other income, net, was $9.5 million for the three months ended March 31, 2024, compared with $5.3 million for the three months ended March 31, 2023.

The increase in other income was primarily due to an increase of $6.5 million in net interest income and $1.5 million in income related to changes in the value of deferred compensation plan investments, partially offset by an increase in charitable contributions.

Other income, net, was $7.5 million for the three months ended June 30, 2024, compared with $6.5 million for the three months ended June 30, 2023.

The increase in other income was primarily due to an increase in net interest income, partially offset by a decrease in income related to changes in the value of deferred compensation plan investments.

Other income, net, was $17.1 million for the six months ended June 30, 2024, compared with $11.8 million for the six months ended June 30, 2023.

The increase in other income was primarily due to an increase of $12.9 million in net interest income, partially offset by an increase 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 March 31, 2024 was $12.5 million, or 11.9% of pre-tax income.

The effective tax rate was 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 rate 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 March 31, 2023 was $19.8 million, or 15.3% of pre-tax income.

The decrease in the effective tax rate 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, 2024 was $23.7 million, or 19.1% of pre-tax income.

The income tax expense for the six months ended June 30, 2024 was $36.2 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 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, 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 decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

The Organization for Economic Co-operation and Development enacted model rules for a new global minimum tax framework, also known as Pillar Two, and certain governments globally have enacted, or are in the process of enacting, legislation considering these model rules.

These rules did not have a material impact on our taxes for the three months ended March 31, 2024.

These rules did not have a material impact on our taxes for the three and six months ended June 30, 2024.

In December 2023, the Bermuda CIT Act was enacted and signed into law.

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Working capital

As of March 31, 2024, we had cash and cash equivalents of $488.3 million and short-term investments of $798.1 million, compared with cash and cash equivalents of $527.8 million and short-term investments of $580.6 million as of December 31, 2023.

As of March 31, 2024, $310.3 million of cash and cash equivalents and $769.4 million of short-term investments were held by our international subsidiaries.

As of June 30, 2024, we had cash and cash equivalents of $550.5 million and short-term investments of $756.8 million, compared with cash and cash equivalents of $527.8 million and short-term investments of $580.6 million as of December 31, 2023.

As of June 30, 2024, $335.3 million of cash and cash equivalents and $715.1 million of short-term investments were held by our international subsidiaries.

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

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The following table summarizes our cash flow activities:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Net increase (decrease) in cash, cash equivalents and restricted cash

For the three months ended March 31, 2024, the $29.2 million increase in cash provided by operating activities compared to the same period in 2023 was primarily due to the collection of $50.0 million of other receivables related to a long-term wafer supply agreement, partially offset by increased inventory purchases.

For the six months ended June 30, 2024, the $80.0 million increase in cash provided by operating activities compared to the same period in 2023 was primarily due to increased accounts receivable collections and the collection of $50.0 million of other receivables related to a long-term wafer supply agreement, partially offset by increased inventory purchases.

This increase was also affected by changes in other working capital.

For the three months ended March 31, 2024, the $278.3 million increase in cash used in investing activities compared to the same period in 2023 was primarily due to an increase of $236.5 million in purchases of investments and $33.3 million paid for the acquisition of Axign.

For the three months ended March 31, 2024, the $17.7 million increase in cash used in financing activities compared to the same period in 2023 was primarily due to an increase of $12.8 million in dividend and dividend equivalent payments.

For the six months ended June 30, 2024, the $269.6 million increase in cash used in investing activities compared to the same period in 2023 was primarily due to an increase of $378.2 million in purchases of investments, partially offset by an increase of $188.3 million in sales of investments.

For the six months ended June 30, 2024, the $41.4 million increase in cash used in financing activities compared to the same period in 2023 was primarily due to an increase of $31.7 million in dividend and dividend equivalent payments.

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 $1,286.4 million as of March 31, 2024, 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 $1,307.2 million as of June 30, 2024, 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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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 March 31, 2024, we had remaining prepayments under this agreement of $120.0 million, of which $60.0 million was classified as short-term.

As of March 31, 2024, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, were $630.2 million, of which $341.3 million was classified as short-term.

As of June 30, 2024, we had remaining prepayments under this agreement of $120.0 million, of which $60.0 million was classified as short-term.

As of June 30, 2024, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, were $571.6 million, of which $394.1 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 March 31, 2024, the remaining liability totaled $11.1 million, of which $4.9 million was classified as short-term.

As of June 30, 2024, the remaining liability totaled $6.2 million, all of which 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 March 31, 2024, these obligations totaled $8.6 million, of which $2.6 million was classified as short-term.

As of June 30, 2024, these obligations totaled $15.5 million, of which $2.4 million was classified as short-term.

Capital Return to Stockholders

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Shares are retired upon repurchase.

We repurchased 6,100 shares of our common stock for an aggregate purchase price of $4.1 million during the three months ended March 31, 2024.

As of March 31, 2024, $632.2 million remained available for future repurchases under the program.

We repurchased 6,300 and 12,400 shares of our common stock for an aggregate purchase price of $4.5 million and $8.6 million during the three and six months ended June 30, 2024, respectively.

As of June 30, 2024, $627.6 million remained available for future repurchases under the program.

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 March 31, 2024, accrued dividends totaled $60.8 million.

As of June 30, 2024, accrued dividends totaled $60.9 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 March 31, 2024, these obligations totaled $81.0 million.

As of June 30, 2024, these obligations totaled $83.6 million.

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