What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-06 compared with 2024-08-02 · 222 added, 335 removed, 745 unchanged (43% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

Current assets:

54 unchanged sentences

(In thousands, except per-share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

226,853 193,453 432,297 385,738

280,578 247,675 533,019 506,455

Operating expenses:

Research and development

77,945 63,688 153,935 127,397

Selling, general and administrative

86,097 71,662 167,061 142,457

Total operating expenses

164,042 135,350 320,996 269,854

Operating income

116,536 112,325 212,023 236,601

Other income, net

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

Income before income taxes

124,048 118,868 229,075 248,441

Income tax expense

23,682 19,364 36,168 39,135

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

Net income per share:

$ 2.06 $ 2.10 $ 3.96 $ 4.42

$ 2.05 $ 2.04 $ 3.94 $ 4.30

Weighted-average shares outstanding:

48,687 47,489 48,660 47,361

48,945 48,756 48,935 48,705

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 144,430 $ 121,163 $ 337,337 $ 330,469

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

22,321 ( 4,838 ) 4,186 ( 28,099 )

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

Changes in unrealized gains and losses on available-for-sale securities, net of tax of $ 37 , $ 156 , $( 161 ) and $ 625 , respectively

977 1,132 1,680 4,073

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

23,298 ( 3,706 ) 5,866 ( 24,026 )

9 unchanged sentences

Stockholders’

Three Months Ended June 30, 2024

Balance as of April 1, 2024

Three Months Ended September 30, 2024

Balance as of July 1, 2024

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

- - 144,430 - 144,430

Other comprehensive loss

Other comprehensive income

- - - 23,298 23,298

2 unchanged sentences

Common stock issued under the employee equity incentive plan

Common stock issued under the employee stock purchase plan

7 4,121 4,121

Repurchases of common stock

2 unchanged sentences

- 51,396 - - 51,396

Balance as of June 30, 2024

Balance as of September 30, 2024

48,779 $ 1,274,127 $ 1,098,759 $ ( 21,196 ) $ 2,351,690

3 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 $ 1,055,130 $ 827,356 $ ( 43,397 ) $ 1,839,089

5 unchanged sentences

Common stock issued under the employee equity incentive plan

Common stock issued under the employee stock purchase plan

9 3,831 - - 3,831

Stock-based compensation expense

- 33,604 - - 33,604

Balance as of June 30, 2023

Balance as of September 30, 2023

47,911 $ 1,092,569 $ 899,398 $ ( 47,103 ) $ 1,944,864

3 unchanged sentences

Stockholders’

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Balance as of January 1, 2024

1 unchanged sentence

- - 337,337 - 337,337

Other comprehensive loss

Other comprehensive income

- - - 5,866 5,866

8 unchanged sentences

- 149,623 - - 149,623

Balance as of June 30, 2024

Balance as of September 30, 2024

48,779 $ 1,274,127 $ 1,098,759 $ ( 21,196 ) $ 2,351,690

3 unchanged sentences

Stockholders’

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Balance as of January 1, 2023

11 unchanged sentences

- 108,607 - - 108,607

Balance as of June 30, 2023

Balance as of September 30, 2023

47,911 $ 1,092,569 $ 899,398 $ ( 47,103 ) $ 1,944,864

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

$ 192,907 $ 209,306

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

16,942 19,940

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

( 10,040 ) 56

Amortization of discount on available-for-sale securities

Gain on deferred compensation plan investments

( 5,285 ) ( 5,022 )

Gain on sale of equity investments

Deferred taxes, net

( 5,821 ) ( 984 )

Stock-based compensation expense

98,232 75,001

Changes in operating assets and liabilities:

Accounts receivable

21,951 13,544

( 42,350 ) 19,847

60,590 ( 4,881 )

Accounts payable

30,725 12,653

Accrued compensation and related benefits

8,353 ( 20,613 )

Income tax liabilities

7,459 ( 14,802 )

Other accrued liabilities

Net cash provided by operating activities

389,026 308,992

Cash flows from investing activities:

Purchases of property and equipment

( 47,498 ) ( 16,681 )

Cash paid for an assumed lease

Purchases of investments

( 589,615 ) ( 211,407 )

Maturities and sales of investments

420,514 232,206

Cash paid for acquisition, net of cash acquired

Contributions to deferred compensation plan, net

( 1,309 ) ( 3,855 )

Net cash provided by (used in) investing activities

( 269,366 ) 263

Net cash used in investing activities

Cash flows from financing activities:

Property and equipment purchased on extended payment terms

( 2,010 ) ( 1,192 )

Proceeds from common stock issued under the employee equity incentive plan

2 unchanged sentences

Dividends and dividend equivalents paid

( 117,608 ) ( 85,863 )

Net cash used in financing activities

( 123,638 ) ( 82,204 )

Effect of change in exchange rates

( 6,603 ) ( 8,696 )

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

( 10,581 ) 218,355

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

561,181 288,729

Cash, cash equivalents and restricted cash, end of period

$ 550,600 $ 507,084

Supplemental disclosures for cash flow information:

Cash paid for income taxes, net

$ 34,064 $ 58,216

Non-cash investing and financing activities:

Liability accrued for property and equipment purchases

$ 7,488 $ 2,586

Liability accrued for dividends and dividend equivalents

$ 62,949 $ 51,037

See accompanying notes to unaudited condensed consolidated financial statements.

10 unchanged sentences

Summary of Significant Accounting Policies

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.

There have been no changes to the Company’s significant accounting policies during the three and nine months ended September 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 its recent acquisition.

Goodwill and Acquisition-Related Intangible Assets

10 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 June 30, 2024

New Accounting Pronouncements Not Yet Adopted as of September 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 each of the three and six months ended June 30, 2024 and 2023 .

These product sales accounted for 99 % of the Company’s total revenue for each of the three and nine months ended September 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 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.

For the three months ended September 30, 2024 and 2023, 88 % and 77 %, respectively, of the Company’s product sales were made through distribution arrangements.

For the nine months ended September 30, 2024 and 2023, 87 % and 79 %, 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.

17 unchanged sentences

The Company records a credit against accounts receivable for the estimated price adjustments, with a corresponding reduction to revenue.

Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months’ purchases in accordance with the contract terms.

Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous nine months’ purchases in accordance with the contract terms.

The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel.

13 unchanged sentences

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

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.

As of September 30, 2024 and December 31, 2023, customer prepayments totaled $ 6.3 million and $ 2.8 million, respectively.

The increase in the customer prepayment balance for the nine months ended September 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 June 30, 2024 , 3.9 million shares remained available for future issuance under the Amended and Restated 2014 Plan.

As of September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

$ 1,611 $ 1,150 $ 3,009 $ 2,297

Research and development

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

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

39,013 27,529 73,094 54,777

Total stock-based compensation expense

$ 52,306 $ 37,992 $ 98,232 $ 75,001

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.

8 unchanged sentences

Outstanding at January 1, 2024

102 $ 411.11 482 $ 397.77 1,502 $ 152.89 2,086 $ 222.04

30 $ 635.67 344 (1)

$ 593.33 - $ - 374 $ 596.68

( 31 ) $ 363.82 ( 77 ) $ 307.93 ( 563 ) $ 68.48 ( 671 ) $ 109.62

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

Outstanding at June 30, 2024

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

Outstanding at September 30, 2024

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 $ 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.

The intrinsic value related to vested RSUs was $ 65.7 million and $ 148.9 million for the three months ended September 30, 2024 and 2023, respectively.

The intrinsic value related to vested RSUs was $ 494.4 million and $ 388.6 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the total intrinsic value of all outstanding RSUs was $ 1.6 billion, based on the closing stock price of $ 924.50 .

As of September 30, 2024, unamortized compensation expense related to all outstanding RSUs was $ 299.6 million with a weighted-average remaining recognition period of approximately two years.

Time-Based RSUs:

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.

For the nine months ended September 30, 2024, the Compensation Committee granted 31,000 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.

In February 2024, the Compensation Committee granted 50,000 PSUs to the executive officers, which represent a target number of shares that can be earned based on the degree of achievement of three sets of performance goals ( “2024 Executive PSUs”).

In February 2024, the Compensation Committee granted 50,000 PSUs to the executive officers, which represent the target number of shares that can be earned based on the degree of achievement of three sets of independent performance goals (“2024 Executive PSUs”).

For the first goal, the executive officers can earn up to 300 % of the target number of the 2024 Executive PSUs based on the achievement of the Company’s average three-year (2024 through 2026) revenue growth rate in excess of the analog industry’s average three-year revenue growth rate as published by the Semiconductor Industry Association (the “SIA”).

For the second goal, the executive officers can earn an additional 100 % of the target number of the 2024 Executive PSUs if the Company achieves a reduction in 2026 of 25% global combined Scope 1 and Scope 2 greenhouse gas emissions against the 2022 baseline.

For the second goal, the executive officers can earn 100 % of the target number of the 2024 Executive PSUs if the Company achieves a reduction in 2026 of 25% global combined Scope 1 and Scope 2 greenhouse gas emissions against the 2022 baseline.

For the third goal, the executive officers can earn 50 % of the target number of the 2024 Executive PSUs if more than one-third of the Company’s total 2026 revenue in the automotive market is generated from Electronic Vehicle (“EV”) automakers.

3 unchanged sentences

Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2024 Executive PSUs will be $ 154.3 million.

In February 2024, the Compensation Committee granted 11,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned based on the degree of achievement of the Company’s 2025 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two -year ( 2024 and 2025 ) revenue growth rate compared against the analog industry’s average two -year revenue growth rate as published by the SIA ( “2024 Non-Executive PSUs”).

In February 2024, the Compensation Committee granted 11,000 PSUs to certain non-executive employees, which represent the target number of shares that can be earned based on the degree of achievement of the Company’s 2025 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two-year (2024 and 2025) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA (“2024 Non-Executive PSUs”).

The maximum number of shares that an employee can earn is either 200 % or 300 % of the target number of the 2024 Non-Executive PSUs, depending on the job classification of the employee.

10 unchanged sentences

The 2004 ESPP will expire on August 16, 2038.

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.

For the three months ended September 30, 2024 and 2023, 7,000 and 9,000 shares were issued under the 2004 ESPP, respectively.

For the nine months ended September 30, 2024 and 2023, 18,000 and 18,000 shares were issued under the 2004 ESPP, respectively.

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

The intrinsic value of the shares issued was $ 2.0 million and $ 0.7 million for the three months ended September 30, 2024 and 2023, respectively.

The intrinsic value of the shares issued was $ 5.4 million and $ 1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, the unamortized expense was $ 1.4 million, which will be recognized through the first quarter of 2025.

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)

0.5 0.5 0.5 0.5

Expected volatility

1 unchanged sentence

Risk-free interest rate

5.0 % 5.5 % 5.2 % 5.3 %

Dividend yield

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.

0.6 % 0.8 % 0.6 % 0.8 %

Cash proceeds from the shares issued under the 2004 ESPP were $ 8.7 million and $ 7.6 million for the nine months ended September 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.

19 unchanged sentences

Inventories consist of the following (in thousands):

September 30,

Raw materials

$ 93,435 $ 118,917

Work in process

164,116 112,750

Finished goods

169,200 152,035

$ 426,751 $ 383,702

Other Current Assets

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

September 30,

Prepaid wafer purchases (1)

Prepaid expenses

27,570 28,964

RSU tax withholding proceeds receivable

1 unchanged sentence

Restricted cash (2)

17,906 15,154

$ 105,547 $ 147,463

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.

The Company held $ 60 million in prepaid wafer purchases as of September 30, 2024 related to deposits made to a supplier under a long-term wafer supply agreement.

The Company held $ 50 million in other receivables as of December 31, 2023 associated with those deposits.

See Note 9 for details about the supply agreement.

3 unchanged sentences

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

September 30,

Deferred compensation plan assets

$ 84,975 $ 78,381

Prepaid wafer purchases (1)

60,000 120,000

Operating lease right-of-use (“ROU”) and related assets (2)

$ 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 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.

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

Other Accrued Liabilities

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

September 30,

Dividends and dividend equivalents

$ 62,524 $ 57,697

Stock rotation and sales returns

21,716 18,843

14,702 16,906

Customer prepayments

Accrued legal expenses

Income tax payable

12,952 10,213

$ 131,348 $ 115,791

Other Long-Term Liabilities

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

September 30,

Deferred compensation plan liabilities

$ 80,115 $ 80,903

Operating lease liabilities

Dividend equivalents

$ 96,675 $ 88,655

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

3 unchanged sentences

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

September 30,

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 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

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

ROU assets obtained in exchange for new operating lease liabilities

$ 7,809 $ 290 $ 9,271 $ 4,835

September 30,

Weighted-average remaining lease term (in years)

Weighted-average discount rate

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

2024 (remaining six months)

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

2024 (remaining three months)

Total remaining lease payments

1 unchanged sentence

Total lease liabilities

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

As of September 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.

1 unchanged sentence

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)

For the three months ended September 30, 2024 and 2023, income related to lease payments was $ 0.3 million and $ 0.4 million, respectively.

For the nine months ended September 30, 2024 and 2023, income related to lease payments was $ 0.7 million and $ 1.2 million, respectively.

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

2024 (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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted-average outstanding shares — basic

48,687 47,489 48,660 47,361

Effect of dilutive securities

258 1,267 275 1,344

Weighted-average outstanding shares — diluted

48,945 48,756 48,935 48,705

Net income per share:

$ 2.06 $ 2.10 $ 3.96 $ 4.42

$ 2.05 $ 2.04 $ 3.94 $ 4.30

Anti-dilutive common stock equivalents were not material in any of the periods presented.

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.

In October 2023, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $ 640.0 million in the aggregate of its common stock through October 29, 2026.

Shares are retired upon repurchase.

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.

The Company repurchased 6,000 and 19,000 shares of its common stock for an aggregate purchase price of $ 5.5 million and $ 14.2 million during the three and nine months ended September 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 and six months ended June 30, 2024 .

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

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Distributor A

4 unchanged sentences

* 11 % * 10 %

* Represents less than 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.

1 unchanged sentence

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

Distributor C

* Represents less than 10%

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

$ 282,514 $ 216,172 $ 545,554 $ 441,224

127,396 70,212 227,846 119,045

39,513 40,669 75,050 86,349

19,105 36,348 36,847 79,451

United States

13,927 27,571 28,747 58,588

Southeast Asia

11,352 21,708 24,591 48,140

13,552 28,288 26,500 59,103

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.

1 unchanged sentence

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

$ 501,302 $ 418,175 $ 947,367 $ 843,356

Lighting Control

6,129 22,953 17,949 48,837

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

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

$ 207,614 $ 184,685

September 30,

United States

124,000 119,430

37,071 39,419

31,849 25,418

$ 400,534 $ 368,952

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

$ 12,873 $ 19,726 $ 16,906 $ 24,082

Warranties issued

2,225 580 2,325 942

Repairs, replacement and refund

( 116 ) ( 1,581 ) ( 4,130 ) ( 2,253 )

Changes in liability for pre-existing warranties

( 280 ) ( 1,071 ) ( 399 ) ( 5,117 )

Balance at end of period

$ 14,702 $ 17,654 $ 14,702 $ 17,654

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, 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)

As of September 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 September 30, 2024 were as follows (in thousands):

2024 (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.

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The Company defends itself vigorously against any such claims.

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

As of September 30, 2024 , 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):

$ 357,743 $ 392,329

September 30,

Money market funds

192,732 135,514

Certificates of deposit

165,120 127,123

Corporate debt securities

22,729 95,101

treasuries and government agency bonds

568,921 358,409

Auction-rate securities backed by student-loan notes

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

September 30,

Cash and cash equivalents

$ 550,475 $ 527,843

Short-term investments

756,770 580,633

Investment within other long-term assets

$ 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 June 30, 2024 (in thousands):

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

Amortized Cost

Due in less than 1 year

$ 722,601 $ 721,901

Due in 1 - 5 years

34,969 34,869

Due in greater than 5 years

$ 757,920 $ 757,115

Gross realized gains and losses recognized on the sales of available-for-sale investments were not material for the periods presented.

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

June 30, 2024

September 30, 2024

Amortized Cost

2 unchanged sentences

Money market funds

$ 192,732 $ - $ - $ 192,732

Certificates of deposit

165,120 - - 165,120

Corporate debt securities

23,285 1 ( 557 ) 22,729

treasuries and government agency bonds

569,165 5 ( 249 ) 568,921

Auction-rate securities backed by student-loan notes

350 - ( 5 ) 345

$ 950,652 $ 6 $ ( 811 ) $ 949,847

December 31, 2023

3 unchanged sentences

Money market funds

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

Certificates of deposit

127,123 - - 127,123

Corporate debt securities

96,636 4 ( 1,539 ) 95,101

treasuries and government agency bonds

358,177 327 ( 95 ) 358,409

Auction-rate securities backed by student-loan notes

574 - ( 7 ) 567

$ 718,024 $ 331 $ ( 1,641 ) $ 716,714

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, 2024

September 30, 2024

Less than 12 Months

4 unchanged sentences

Corporate debt securities

$ - $ - $ 22,278 $ ( 557 ) $ 22,278 $ ( 557 )

treasuries and government agency bonds

474,947 ( 214 ) 17,351 ( 35 ) 492,298 ( 249 )

Auction-rate securities backed by student-loan notes

- - 345 ( 5 ) 345 ( 5 )

$ 474,947 $ ( 214 ) $ 39,974 $ ( 597 ) $ 514,921 $ ( 811 )

December 31, 2023

5 unchanged sentences

Corporate debt securities

$ 20,792 $ ( 19 ) $ 70,806 $ ( 1,520 ) $ 91,598 $ ( 1,539 )

treasuries and government agency bonds

97,599 ( 95 ) - - 97,599 ( 95 )

Auction-rate securities backed by student-loan notes

- - 567 ( 7 ) 567 ( 7 )

$ 118,391 $ ( 114 ) $ 71,373 $ ( 1,527 ) $ 189,764 $ ( 1,641 )

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

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.

As of September 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.

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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

$ 550,475 $ 527,843

Restricted cash included in other current assets (1)

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Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows

$ 550,600 $ 561,181

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.

See Note 4 for additional information.

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 restricted cash included in other long-term assets as of September 30, 2024 and December 31, 2023 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.

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

June 30, 2024

September 30, 2024

Money market funds

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

September 30,

Deferred compensation plan asset components:

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The components of other income, 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

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

Amortization of discount on available-for-sale securities

Gain (loss) on deferred compensation plan investments

Charitable contributions

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 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 income tax expense for the three months ended September 30, 2024 was $ 29.9 million, or 17.1 % of pre-tax income.

The income tax expense for the nine months ended September 30, 2024 was $ 66.0 million, or 16.4 % 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 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.

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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 June 30, 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 September 30, 2024.

In September 2024, a subsidiary of the Company was granted a tax credit with a ten-year life by a foreign jurisdiction.

The tax credit may be utilized beginning in tax year 2025 to offset income tax liabilities in that jurisdiction, subject to various criteria as outlined by the granting authorities.

As of September 30, 2024, the Company has evaluated the sources of income necessary to benefit from the tax credit and has determined that it currently does not meet the more likely than not criteria for realization of this deferred tax asset.

As a result, the Company has recorded a full valuation allowance on this deferred tax asset.

The Company is evaluating the steps necessary, some of which are not within its immediate control, to generate sufficient future taxable income in the required jurisdiction and will reassess the realizability of this deferred tax asset each reporting period.

ACCUMULATED OTHER COMPREHENSIVE LOSS

3 unchanged sentences

Balance as of January 1, 2024

$ ( 2,184 ) $ ( 24,878 ) $ ( 27,062 )

Other comprehensive income (loss) before reclassifications

87 ( 13,822 ) ( 13,735 )

Net current period other comprehensive income (loss)

335 ( 13,822 ) ( 13,487 )

Balance as of March 31, 2024

( 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 )

Other comprehensive income before reclassifications

Net current period other comprehensive income

Balance as of September 30, 2024

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.

1 unchanged sentence

Cash Dividend Program

The Company has a dividend program approved by the Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock.

The Company has a dividend program approved by its Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock.

Based on the Company’s 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.

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

$ 1.25 $ 1.00 $ 2.50 $ 2.00

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

As of June 30, 2024 and December 31, 2023 , accrued dividends totaled $ 60.9 million and $ 47.9 million, respectively.

As of September 30, 2024 and December 31, 2023, accrued dividends totaled $ 61.0 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.

6 unchanged sentences

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

As of September 30, 2024 and December 31, 2023 , accrued dividend equivalents totaled $ 5.8 million and $ 11.9 million, respectively.

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

4 unchanged sentences

our mission statement to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future;

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

the effects of macroeconomic factors, including global economic uncertainties, the Russia-Ukraine conflict and the Middle East conflict on the semiconductor industry and our business;

the effect that liquidity of our investments has on our capital resources;

15 unchanged sentences

In some cases, words such as “would,” “could,” “may,” “should,” “predict,” “potential,” “targets,” “continue,” “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “will,” 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 global economic downturn, the Russia-Ukraine conflict and the Middle East 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 global economic uncertainties, the Russia-Ukraine conflict and the Middle East 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 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.

Our revenue from sales to customers in Asia was 94% and 89% of our total revenue for the three months ended September 30, 2024 and 2023, respectively, and 93% and 86% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively.

Our revenue from indirect sales to one customer, which primarily comprised power management solutions for artificial intelligence (“AI”) applications, was 15% and 12% of our total revenue for the three months ended September 30, 2024 and 2023, respectively, and 18% and 7% of our total revenue for the nine months ended September 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.

9 unchanged sentences

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 global economic downturn, Russia-Ukraine conflict and the Middle East conflict.

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 global economic uncertainties, Russia-Ukraine conflict and the Middle East conflict.

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

1 unchanged sentence

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)

9 unchanged sentences

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)

2 unchanged sentences

Communications

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.

Revenue for the three months ended September 30, 2024 was $620.1 million, an increase of $145.2 million, or 30.6%, from $474.9 million for the three months ended September 30, 2023.

The increase in revenue was primarily due to higher shipment volume.

For the three months ended September 30, 2024, revenue from the enterprise data market increased $85.5 million, or 86.4%, 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 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.

Revenue from the storage and computing market for the three months ended September 30, 2024 increased $14.5 million, or 11.2%, from the same period in 2023.

This increase was primarily due to higher sales of commercial notebook and storage applications.

Third quarter 2024 automotive revenue increased $16.2 million, or 17.0%, from the same period in 2023.

This increase was primarily due to higher sales of applications supporting advanced driver assistance systems and lighting, partially offset by lower sales of applications supporting infotainment.

Revenue from the communications market increased $25.1 million, or 53.6%, from the same period in 2023.

This increase was primarily driven by higher demand for infrastructure related products and wireless applications.

Third quarter 2024 revenue from the consumer market increased $2.0 million, or 3.3%, from the same period in 2023.

Revenue from the industrial market increased $1.9 million, or 4.5%, from the same period in 2023.

Revenue for the nine months ended September 30, 2024 was $1,585.4 million, an increase of $218.3 million, or 16.0%, from $1,367.1 million for the nine months ended September 30, 2023.

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

For the nine months ended September 30, 2024, revenue from the enterprise data market increased $327.3 million, or 168.6%, from the same period in 2023.

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

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 storage and computing market for the first nine months of 2024 decreased $8.8 million, or 2.3%, from the same period in 2023.

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

Revenue from the automotive market for the first nine months of 2024 decreased $19.3 million, or 6.3%, from the same period in 2023.

This decrease was primarily due to lower sales of applications supporting infotainment, body electronics and USB connectors, partially offset by higher sales of applications supporting advanced driver assistance systems.

Revenue from the communications market decreased $1.9 million, or 1.2%, from the same period in 2023.

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

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.

For the nine months ended September 30, 2024, consumer revenue decreased $46.2 million, or 24.2%, from the same period in 2023.

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

Revenue from the industrial market decreased $32.8 million, or 23.5%, from the same period in 2023.

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

This decrease was mainly driven by lower sales of products related to industrial meter, security and instrumentation 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except percentages)

1 unchanged sentence

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.

Cost of revenue was $276.7 million, or 44.6% of revenue, for the three months ended September 30, 2024, and $211.3 million, or 44.5% of revenue, for the three months ended September 30, 2023.

The $65.4 million increase in cost of revenue was primarily driven by higher shipment volume, particularly of power management solutions for AI applications.

Gross margin was 55.4% for the three months ended September 30, 2024, compared with 55.5% for the three months ended September 30, 2023.

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

Cost of revenue was $709.0 million, or 44.7% of revenue, for the nine months ended September 30, 2024, and $597.1 million, or 43.7% of revenue, for the nine months ended September 30, 2023.

The $111.9 million increase in cost of revenue was primarily driven by higher average costs due to product mix.

Gross margin was 55.3% for the nine months ended September 30, 2024, compared with 56.3% for the nine months ended September 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.

1 unchanged sentence

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except percentages)

As a percentage of revenue

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.

R&D expenses were $85.1 million, or 13.7% of revenue, for the three months ended September 30, 2024, and $64.8 million, or 13.6% of revenue, for the three months ended September 30, 2023.

The $20.3 million increase in R&D expenses was primarily due to a $6.9 million increase in cash compensation and benefits, a $3.5 million increase in new product development expenses, a $3.0 million increase in stock-based compensation expenses and related payroll taxes, a $1.9 million increase in expense related to changes in the value of deferred compensation plan liabilities, and a $0.9 million increase in laboratory supplies.

R&D expenses were $239.0 million, or 15.1% of revenue, for the nine months ended September 30, 2024, and $192.2 million, or 14.1% of revenue, for the nine months ended September 30, 2023.

The $46.8 million increase in R&D expenses was primarily due to a $22.2 million increase in cash compensation and benefits, a $9.0 million increase in stock-based compensation expenses and related payroll taxes, a $3.2 million increase in new product development expenses, a $1.9 million increase in expense related to changes in the value of deferred compensation plan liabilities, and $1.9 million increase in laboratory supplies.

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except percentages)

1 unchanged sentence

As a percentage of revenue

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.

SG&A expenses were $94.4 million, or 15.2% of revenue, for the three months ended September 30, 2024, and $63.2 million, or 13.3% of revenue, for the three months ended September 30, 2023.

The $31.2 million increase in SG&A expenses was primarily driven by a $14.4 million increase in stock-based compensation expenses, a $5.5 million increase in cash compensation and benefits, a $2.8 million increase in expense related to changes in the value of deferred compensation plan liabilities, a $2.6 million increase in sales commissions, and a $2.2 million increase in legal expenses.

SG&A expenses were $261.4 million, or 16.5% of revenue, for the nine months ended September 30, 2024, and $205.6 million, or 15.0% of revenue, for the nine months ended September 30, 2023.

The $55.8 million increase in SG&A expenses was primarily driven by a $32.7 million increase in stock-based compensation expenses, a $6.9 million increase in cash compensation and benefits, a $3.9 million increase in professional services, and a $2.7 million increase in expense related to changes in the value of deferred compensation plan liabilities.

Other Income, Net

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.

Other income, net, was $10.3 million for the three months ended September 30, 2024, compared with $2.3 million for the three months ended September 30, 2023.

The increase in other income was primarily due to an increase in amortization of discount on available-for-sale securities, and an increase in income related to changes in the value of deferred compensation plan investments.

Other income, net, was $27.3 million for the nine months ended September 30, 2024, compared with $14.1 million for the nine months ended September 30, 2023.

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, 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 income tax expense for the three months ended September 30, 2024 was $29.9 million, or 17.1% of pre-tax income.

The income tax expense for the nine months ended September 30, 2024 was $66.0 million, or 16.4% 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 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.

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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 and six months ended June 30, 2024.

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

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

See Note 14 for further details.

In September 2024, one of our subsidiaries was granted a tax credit with a ten-year life by a foreign jurisdiction.

The tax credit may be utilized beginning in tax year 2025 to offset income tax liabilities in that jurisdiction, subject to various criteria as outlined by the granting authorities.

As of September 30, 2024, we have evaluated the sources of income necessary to benefit from the tax credit and have determined that we currently do not meet the more likely than not criteria for realization of this deferred tax asset.

As a result, we have recorded a full valuation allowance on this deferred tax asset.

We are evaluating the steps necessary, some of which are not within our immediate control, to generate sufficient future taxable income in the required jurisdiction and will reassess the realizability of this deferred tax asset each reporting period.

A release of the valuation allowance could result in a significant one-time noncash tax benefit.

Liquidity and Capital Resources

September 30,

(In thousands, except percentages)

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Working capital

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.

As of September 30, 2024, we had cash and cash equivalents of $700.3 million and short-term investments of $762.0 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 September 30, 2024, $506.5 million of cash and cash equivalents and $725.5 million of short-term investments were held by our international subsidiaries.

We have repatriated and will likely repatriate cash from our Bermuda subsidiary to fund our expenditures.

We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

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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 (used in) investing activities

Net cash used in investing activities

Net cash used in financing activities

Effect of change in exchange rates

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

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.

Net increase in cash, cash equivalents and restricted cash

For the nine months ended September 30, 2024, the $135.8 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 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.

For the nine months ended September 30, 2024, the $83.4 million increase in cash used in investing activities compared to the same period in 2023 was primarily due to an increase of $37.2 million in purchases of property and equipment and the $33.3 million acquisition in the nine months ended September 30, 2024.

For the nine months ended September 30, 2024, the $57.5 million increase in cash used in financing activities compared to the same period in 2023 was primarily due to an increase of $43.5 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 $1,307.2 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.

Although consequences of economic uncertainties 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 $1,462.4 million as of September 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 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.

As of September 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 September 30, 2024, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, were $586.9 million, of which $470.9 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, 2024, the remaining liability totaled $6.2 million, all of which was classified as short-term.

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

As of September 30, 2024, these obligations totaled $16.3 million, of which $2.8 million was classified as short-term.

Capital Return to Stockholders

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.

In October 2023, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $640.0 million in the aggregate of our common stock through October 29, 2026.

Shares are retired upon repurchase.

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 repurchased 6,000 and 19,000 shares of our common stock for an aggregate purchase price of $5.5 million and $14.2 million during the three and nine months ended September 30, 2024, respectively.

As of September 30, 2024, $622.1 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 June 30, 2024, accrued dividends totaled $60.9 million.

As of September 30, 2024, accrued dividends totaled $61.0 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, 2024, these obligations totaled $83.6 million.

As of September 30, 2024, these obligations totaled $88.3 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