Marvell Technology, Inc. 10-Q

Item 1. Financial Statements MARVELL TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value per share) May 1, 2021 January 30, 2021 ASSETS Current assets: Cash and cash equivalents $ 522,512 $ 748,467 Accounts receivable, net 694,395 536,668 Inventories 538,117 268,228 Prepaid expenses and other current assets 132,787 63,782 Total current assets 1,887,811 1,617,145 Property and equipment, net 424,733 326,125 Goodwill 10,965,666 5,336,961 Acquired intangible assets, net 6,562,061 2,270,700 Deferred tax assets 725,636 672,424 Other non-current assets 664,030 541,569 Total assets $ 21,229,937 $ 10,764,924 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 304,425 $ 252,419 Accrued liabilities 478,158 435,616 Accrued employee compensation 153,943 189,421 Short-term convertible debt 193,269 — Short-term debt 30,308 199,641 Total current liabilities 1,160,103 1,077,097 Long-term convertible debt 1,146 — Long-term debt 4,673,707 993,170 Other non-current liabilities 539,611 258,853 Total liabilities 6,374,567 2,329,120 Commitments and contingencies (Note 10) Stockholders’ equity: Common shares, $ 0.002 par value 1,633 1,350 Additional paid-in capital 12,879,095 6,331,013 Retained earnings 1,974,642 2,103,441 Total stockholders’ equity 14,855,370 8,435,804 Total liabilities and stockholders’ equity $ 21,229,937 $ 10,764,924 See accompanying notes to unaudited condensed consolidated financial statements 2 Table of Contents MARVELL TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended May 1, 2021 May 2, 2020 Net revenue $ 832,279 $ 693,641 Cost of goods sold 414,138 366,739 Gross profit 418,141 326,902 Operating expenses: Research and development 286,100 279,584 Selling, general and administrative 201,466 122,027 Restructuring related charges 12,886 21,287 Total operating expenses 500,452 422,898 Operating loss ( 82,311 ) ( 95,996 ) Interest income 222 1,058 Interest expense ( 35,141 ) ( 16,830 ) Other income, net 1,223 3,754 Interest and other income (loss), net ( 33,696 ) ( 12,018 ) Loss before income taxes ( 116,007 ) ( 108,014 ) Provision (benefit) for income taxes ( 27,765 ) 5,019 Net loss $ ( 88,242 ) $ ( 113,033 ) Net loss per share - basic $ ( 0.13 ) $ ( 0.17 ) Net loss per share - diluted $ ( 0.13 ) $ ( 0.17 ) Weighted-average shares: Basic 693,378 663,547 Diluted 693,378 663,547 See accompanying notes to unaudited condensed consolidated financial statements 3 Table of Contents MARVELL TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Three Months Ended May 1, 2021 May 2, 2020 Net loss $ ( 88,242 ) $ ( 113,033 ) Other comprehensive income (loss), net of tax: Net change in unrealized gain (loss) on cash flow hedges — 868 Other comprehensive income (loss), net of tax — 868 Comprehensive loss, net of tax $ ( 88,242 ) $ ( 112,165 ) See accompanying notes to unaudited condensed consolidated financial statements 4 Table of Contents MARVELL TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except per share amounts) Common Stock Additional Paid-in-Capital Shares Amount Retained Earnings Total Balance at January 30, 2021 675,402 $ 1,350 $ 6,331,013 $ 2,103,441 $ 8,435,804 Issuance of common shares in connection with equity incentive plans 2,179 5 505 — 510 Tax withholdings related to net share settlement of restricted stock units — — ( 68,416 ) — ( 68,416 ) Share-based compensation — — 92,705 — 92,705 Common stock issued to Inphi common stockholders 128,030 256 5,871,869 — 5,872,125 Stock consideration for Inphi accelerated awards 1,192 3 39,058 — 39,061 Equity related issuance cost — — ( 8,177 ) — ( 8,177 ) Replacement equity awards attributable to pre-acquisition service — — 82,346 — 82,346 Conversion feature of convertible notes — — 244,155 — 244,155 Impact of repurchases of convertible notes 7,115 14 234,333 — 234,347 Conversion of convertible notes to common stock 2,502 5 59,704 — 59,709 Cash dividends declared and paid ($ 0.06 per share) — — — ( 40,557 ) ( 40,557 ) Net loss — — — ( 88,242 ) ( 88,242 ) Balance at May 1, 2021 816,420 1,633 12,879,095 1,974,642 14,855,370 Common Stock Additional Paid-in-Capital Accumulated Other Comprehensive Income (Loss) Shares Amount Retained Earnings Total Balance at February 1, 2020 663,481 $ 1,328 $ 6,135,939 $ — $ 2,541,313 $ 8,678,580 Issuance of common shares in connection with equity incentive plans 2,993 5 5,466 — — 5,471 Tax withholdings related to net share settlement of restricted stock units — — ( 31,498 ) — — ( 31,498 ) Share-based compensation — — 60,199 — — 60,199 Repurchase of common stock ( 1,251 ) ( 3 ) ( 25,199 ) — — ( 25,202 ) Cash dividends declared and paid ($ 0.06 per share) — — — — ( 39,763 ) ( 39,763 ) Net loss — — — — ( 113,033 ) ( 113,033 ) Other comprehensive income — — — 868 — 868 Balance at May 2, 2020 665,223 $ 1,330 $ 6,144,907 $ 868 $ 2,388,517 $ 8,535,622 See accompanying notes to unaudited condensed consolidated financial statements 5 Table of Contents MARVELL TECHNOLOGY, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended May 1, 2021 May 2, 2020 Cash flows from operating activities: Net loss $ ( 88,242 ) $ ( 113,033 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 51,837 50,483 Share-based compensation 92,727 59,687 Amortization of acquired intangible assets 128,639 112,922 Amortization of inventory fair value adjustment associated with acquisitions 13,720 17,284 Other expense, net 31,309 11,451 Deferred income taxes ( 22,581 ) 2,372 Changes in assets and liabilities, net of acquisition: Accounts receivable ( 57,999 ) 23,586 Prepaid expenses and other assets 4,413 ( 6,694 ) Inventories ( 13,249 ) 35,834 Accounts payable ( 51,609 ) ( 3,557 ) Accrued employee compensation ( 55,693 ) ( 25,503 ) Accrued liabilities and other non-current liabilities ( 46,999 ) 10,796 Net cash provided by (used in) operating activities ( 13,727 ) 175,628 Cash flows from investing activities: Purchases of technology licenses ( 3,443 ) ( 3,684 ) Purchases of property and equipment ( 21,444 ) ( 35,343 ) Cash payment for acquisition, net of cash and cash equivalents acquired ( 3,600,165 ) — Other, net 447 665 Net cash used in investing activities ( 3,624,605 ) ( 38,362 ) Cash flows from financing activities: Repurchases of common stock — ( 25,202 ) Proceeds from employee stock plans 549 5,458 Tax withholding paid on behalf of employees for net share settlement ( 73,175 ) ( 31,501 ) Dividend payments to stockholders ( 40,557 ) ( 39,763 ) Payments on technology license obligations ( 44,132 ) ( 23,807 ) Proceeds from issuance of debt 3,731,096 — Principal payments of debt ( 200,000 ) — Payment for repurchases and settlement of convertible notes ( 71,079 ) — Proceeds from capped calls 111,154 — Payment of equity and debt financing costs ( 1,479 ) — Other, net — ( 2,507 ) Net cash provided by (used in) financing activities 3,412,377 ( 117,322 ) Net increase (decrease) in cash and cash equivalents ( 225,955 ) 19,944 Cash and cash equivalents at beginning of period 748,467 647,604 Cash and cash equivalents at end of period $ 522,512 $ 667,548 See accompanying notes to unaudited condensed consolidated financial statements 6 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The unaudited condensed consolidated financial statements of Marvell Technology, Inc. (“MTI”), a Delaware corporation, and its wholly owned subsidiaries (the “Company”), as of and for the three months ended May 1, 2021, have been prepared as required by the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted as permitted by the SEC. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s fiscal year 2021 audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021. In the opinion of management, the financial statements include all adjustments, including normal recurring adjustments and other adjustments, that are considered necessary for fair presentation of the Company’s financial position and results of operations. All inter-company accounts and transactions have been eliminated. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for the entire year. These financial statements should also be read in conjunction with the Company’s critical accounting policies included in the Company’s Annual Report on Form 10-K for the year ended January 30, 2021 and those included in this Form 10-Q below. The Company’s fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31. Accordingly, every fifth or sixth fiscal year will have a 53-week period. The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks. Fiscal 2021 had a 52-week year. Fiscal 2022 is a 52-week year. On April 20, 2021, the Company completed its acquisition of Inphi Corporation (“Inphi”). Inphi is a global leader in high-speed data movement enabled by optical interconnects. The unaudited condensed consolidated financial statements include the operating results of Inphi for the period from the date of acquisition to the Company’s first quarter ended May 1, 2021. See “Note 3 - Business Combinations”, “Note 4 - Goodwill and Acquired Intangible Assets, Net” and “Note 5 - Debt” for more information. In conjunction with the acquisition transaction, Marvell and Inphi became wholly owned subsidiaries of the new parent company, MTI, on April 20, 2021. The parent company is domiciled in and subject to taxation in the United States. See “Note 12 - Income Taxes” for more information. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provisions for sales returns and allowances, inventory excess and obsolescence, goodwill and other intangible assets, assets acquired and liabilities assumed in connection with acquisitions, restructuring, income taxes, litigation and other contingencies. Actual results could differ from these estimates and such differences could affect the results of operations reported in future periods. In the current macroeconomic environment affected by COVID-19, these estimates require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change materially in future periods. Note 2. Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In December 2019, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update that simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation and modified the methodology for calculating income taxes in an interim period. It also clarifies and simplifies other aspects of the accounting for income taxes. The guidance is effective for the Company beginning in the first quarter of fiscal year 2022, with early adoption permitted. The new standard was adopted by the Company on January 31, 2021 on a prospective basis and did not have a material effect on the Company's consolidated financial statements. 7 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Accounting Pronouncements Not Yet Effective In August 2020, the FASB issued an accounting standards update that simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. The standard requires a convertible debt instrument to be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. It also made changes to the disclosures for convertible instruments and earnings-per-share guidance, among other updates. The guidance is effective for the Company beginning in the first quarter of fiscal year 2023, with early adoption permitted and permits the use of either the modified retrospective or fully retrospective method of transition. The Company is evaluating the impact that this new standard will have on the Company’s consolidated financial statements. Note 3. Business Combinations Inphi On April 20, 2021, the Company completed the acquisition of Inphi (the “Inphi acquisition”). Inphi is a global leader in high-speed data movement enabled by optical interconnects. The Inphi acquisition was primarily intended to create an opportunity for the combined company to be uniquely positioned to serve the data-driven world, addressing high growth, attractive end markets such as cloud data center and 5G. In accordance with the terms of the Agreement and Plan of Merger dated as of October 29, 2020, by and among the Company and Inphi (the “Inphi merger agreement”), the Company acquired all outstanding shares of common stock of Inphi for $ 66 per share in cash and 2.323 shares of the Company’s common stock exchanged for each share of Inphi common stock. The merger consideration paid in cash was funded with a combination of cash on hand and funds from the Company’s debt financing. See “Note 5 - Debt” for additional information. The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill recorded for the Inphi acquisition is not expected to be deductible for tax purposes. The following table summarized the total merger consideration (in thousands): Cash consideration to Inphi common stockholders $ 3,639,559 Common stock ( 128,100,446 shares of the Company’s common stock at $ 45.84 per share) 5,872,125 Cash consideration for director and employee accelerated equity awards 33,658 Stock consideration for director and employee accelerated equity awards 45,686 Stock consideration for replacement equity awards attributable to pre-combination service 82,346 Equity component of convertible debt 244,155 Total merger consideration $ 9,917,529 The merger consideration allocation set forth herein is preliminary and may be revised with adjustment to goodwill as additional information becomes available during the measurement period from the closing date of the acquisition to finalize such preliminary estimates. Any such revisions or changes may be material. In accordance with U.S. GAAP requirements for business combinations, the Company allocated the fair value of the purchase consideration to the tangible assets, liabilities and intangible assets acquired, including in-process research and development (“IPR&D”), generally based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Acquisition-related costs are expensed in the periods in which such costs are incurred. See “Note 4 - Goodwill and Acquired Intangible Assets, Net” for additional information. 8 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) The purchase price allocation is as follows (in thousands): Cash and cash equivalents $ 72,251 Accounts receivable, net 99,728 Inventories 270,382 Prepaid expenses and other current assets 213,292 Property and equipment, net 98,528 Acquired intangible assets, net 4,420,000 Other non-current assets 145,856 Goodwill 5,628,705 Accounts payable and accrued liabilities ( 189,807 ) Convertible debt - short term ( 313,664 ) Convertible debt - long term ( 240,317 ) Other non-current liabilities ( 287,425 ) Total merger consideration $ 9,917,529 During the three months ended May 1, 2021, the Company incurred $ 45.8 million in acquisition related costs which were recorded in selling, general and administrative expense in the unaudited condensed consolidated statements of operations. The Company also incurred $ 39.8 million of debt financing costs. As of May 1, 2021, $ 2.5 million is included in short-term debt, and $ 37.3 million is included in long-term debt on the accompanying unaudited condensed consolidated balance sheets. See “Note 5 - Debt” for additional information. Additionally, the Company incurred $ 8.2 million of equity issuance costs, which were recorded in additional paid-in capital in the unaudited condensed consolidated balance sheets. Since the date of the acquisition, Inphi contributed $ 21.8 million of the consolidated net revenue for the three months ended May 1, 2021. Inphi net loss incurred in the period ended May 1, 2021 was $ 13.9 million, which included restructuring costs of $ 9.8 million. Unaudited Supplemental Pro Forma Information The unaudited supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisitions had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions the Company believes are reasonable under the circumstances. The following unaudited supplemental pro forma information presents the combined results of operations for each of the periods presented, as if Inphi had been acquired as of the beginning of fiscal year 2021. The unaudited supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to share-based compensation expense, the purchase accounting effect on inventories acquired, interest expense, and transaction costs. For fiscal year 2021, non-recurring pro forma adjustments directly attributable to the Inphi acquisition included in the pro forma information presented below include (i) share-based compensation expense of $ 43.8 million, (ii) the purchase accounting effect of inventories acquired of $ 113.5 million, (iii) interest expense of $ 11.4 million and (iv) transaction costs of $ 64.0 million. The unaudited supplemental pro forma information presented below is for informational purposes only and is not necessarily indicative of our unaudited condensed consolidated results of operations of the combined business had the Inphi acquisition actually occurred at the beginning of fiscal year 2021 or of the results of our future operations of the combined business. The unaudited supplemental pro forma financial information for the periods presented is as follows (in thousands): Three Months Ended May 1, 2021 May 2, 2020 Pro forma net revenue $ 987,913 $ 833,071 Pro forma net loss $ ( 85,925 ) $ ( 526,296 ) 9 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Note 4. Goodwill and Acquired Intangible Assets, Net Goodwill Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired in a business combination. The carrying value of goodwill as of May 1, 2021 and January 30, 2021 is $ 11.0 billion and $ 5.3 billion respectively. See “Note 3 - Business Combinations” for discussion of acquisitions and changes to the carrying value of goodwill. Acquired Intangible Assets, Net During the first quarter ended May 1, 2021, the Company acquired $ 4.4 billion of intangible assets associated with the Inphi acquisition. The valuation of these Inphi identifiable intangible assets and their estimated useful lives are as follows (in thousands, except for weighted-average useful life): Preliminary Estimated Asset Fair Value Weighted-Average Useful Life (Years) Developed technology $ 2,010,000 6.00 Customer contracts and related relationships 1,470,000 6.00 Order backlog 70,000 0.80 Trade name 50,000 5.00 IPR&D 820,000 n/a $ 4,420,000 In connection with the Cavium acquisition on July 6, 2018, the Aquantia acquisition on September 19, 2019, and the Avera acquisition on November 5, 2019, the Company acquired $ 3.3 billion of intangible assets. As of May 1, 2021 and January 30, 2021, net carrying amounts are as follows (in thousands, except for weighted-average remaining amortization period): May 1, 2021 Gross Carrying Amounts Accumulated Amortization Net Carrying Amounts Weighted-Average Remaining Amortization Period (Years) Developed technologies $ 4,464,000 $ ( 818,027 ) $ 3,645,973 5.67 Customer contracts and related relationships 2,113,000 ( 259,391 ) 1,853,609 5.85 Order backlog 70,000 ( 2,601 ) 67,399 0.78 Trade names 73,000 ( 15,920 ) 57,080 4.59 Total acquired amortizable intangible assets $ 6,720,000 $ ( 1,095,939 ) $ 5,624,061 5.66 IPR&D 938,000 — 938,000 n/a Total acquired intangible assets $ 7,658,000 $ ( 1,095,939 ) $ 6,562,061 10 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) January 30, 2021 Gross Carrying Amounts Accumulated Amortization Net Carrying Amounts Weighted-Average Remaining Amortization Period (Years) Developed technologies $ 2,454,000 $ ( 724,215 ) $ 1,729,785 5.54 Customer contracts and related relationships 643,000 ( 228,845 ) 414,155 5.62 Trade names 23,000 ( 14,240 ) 8,760 2.20 Total acquired amortizable intangible assets $ 3,120,000 $ ( 967,300 ) $ 2,152,700 5.54 IPR&D 118,000 — 118,000 n/a Total acquired intangible assets $ 3,238,000 $ ( 967,300 ) $ 2,270,700 The intangible assets are amortized on a straight-line basis over the estimated useful lives, except for certain Cavium customer contracts and related relationships, which are amortized using an accelerated method of amortization over the expected customer lives, which more closely align with the pattern of realization of economic benefits expected to be obtained. The IPR&D will be accounted for as an indefinite-lived intangible asset and will not be amortized until the underlying projects reach technological feasibility and commercial production at which point the IPR&D will be amortized over the estimated useful life. Useful lives for these IPR&D projects are expected to range between 3 to 10 years. In the event the IPR&D is abandoned, the related assets will be written off. Amortization expense for acquired intangible assets for the three months ended May 1, 2021 and May 2, 2020 was $ 128.6 million and $ 112.9 million, respectively. The following table presents the estimated future amortization expense of acquired amortizable intangible assets as of May 1, 2021 (in thousands): Fiscal Year Amount Remainder of 2022 $ 827,776 2023 1,008,210 2024 995,653 2025 944,447 2026 859,591 Thereafter 988,384 $ 5,624,061 11 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Note 5. Debt The following table summarizes the Company’s outstanding debt at May 1, 2021 and January 30, 2021 (in thousands): May 1, 2021 January 30, 2021 Face Value Outstanding: 2018 Term Loan $ — $ 200,000 2020 Term Loan - 3 Year Tranche 875,000 — 2020 Term Loan - 5 Year Tranche 875,000 — Term Loan Total 1,750,000 200,000 2020 Revolving Credit Facility — — Revolving Credit Facility Total — — 4.200% MTG 2023 Senior Notes 500,000 500,000 4.875% MTG 2028 Senior Notes 500,000 500,000 1.650% 2026 Senior Notes 500,000 — 2.450% 2028 Senior Notes 750,000 — 2.950% 2031 Senior Notes 750,000 — Senior Notes Total 3,000,000 1,000,000 0.75% Inphi 2021 Convertible Notes 1,867 — 0.75% Inphi 2025 Convertible Notes 192,548 — Inphi Convertible Notes Total 194,415 — Total borrowings $ 4,944,415 $ 1,200,000 Less: Unamortized debt discount and issuance cost ( 45,985 ) ( 7,189 ) Net carrying amount of debt $ 4,898,430 $ 1,192,811 Less: Current portion - Term Loan (1) 30,308 199,641 Less: Current portion - Inphi Convertible Notes (2) 193,269 — Non-current portion $ 4,674,853 $ 993,170 (1) As of May 1, 2021, the current portion of outstanding debt includes the 2020 Term Loan - 5 Year Tranche, which is due within twelve months. The Company intends to repay the amount with operating cash flow. (2) As of May 1, 2021, as the Inphi 2021 Convertible Notes are currently convertible, the Company has classified $ 0.7 million, which is the cash portion the Company would be required to pay upon conversion, as current. As of May 1, 2021, as the Inphi 2025 Convertible Notes are currently redeemable, the Company has classified $ 192.5 million, which is the cash redemption price the Company would be required to pay if noteholders accepted the fundamental change repurchase offer, as current. The Company intends to repay the amount with operating cash flow. On April 20, 2021, the Company completed its acquisition of Inphi. As part of the acquisition, the Company assumed $ 15.7 million principal amount of Inphi’s 0.75 % convertible senior notes due 2021 (the “Inphi 2021 Convertible Notes”) and $ 506.0 million principal amount of Inphi’s 0.75 % convertible senior notes due 2025 (the “Inphi 2025 Convertible Notes”, and together with the 2021 Notes, the “Inphi Convertible Notes”) See “Note 3 - Business Combinations” for more information. In connection with the acquisition, the Company executed a series of financing arrangements from December 2020 through April 2021 as summarized below. In April 2021, the Company also terminated a $ 2.5 billion bridge loan commitment. This bridge loan commitment was provided by the underwriting bankers at the time of the Inphi merger agreement execution in October 2020. The bridge loan was never drawn upon. The Company recognized a write-off of $ 11.4 million in capitalized debt issuance cost related to the termination of the bridge loan commitment during the quarter ended May 1, 2021. 12 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) In December 2020, the Company executed a debt agreement to obtain an $ 875.0 million 3-year term loan and an $ 875.0 million 5-year term loan. The Company also executed a debt agreement to obtain a 5-year $ 750.0 million revolving credit facility in December 2020, replacing its previous $ 500 million revolving credit facility. On April 12, 2021, the Company completed a debt offering and issued (i) $ 500.0 million of Senior Notes with a 5 year term due in 2026, (ii) $ 750.0 million of Senior Notes with a 7 year term due in 2028, and (iii) $ 750.0 million of Senior Notes with a 10 year term due in 2031. In addition, in conjunction with the U.S. domiciliation, the Company exchanged certain of its existing senior notes due in 2023 and 2028 that were previously issued by the Company’s former Bermuda-based parent company with like notes that are now issued by the Company’s new parent company domiciled in Delaware. Below is further discussion of the terms of the various debt agreements. 2020 Term Loan Agreement On December 7, 2020, the Company entered into a term loan credit agreement with a lending syndicate led by JPMorgan Chase Bank, N.A (the “2020 Term Loan Agreement”) in order to finance the expected merger with Inphi. The 2020 Term Loan Agreement provided for borrowings of up to $ 1.75 billion consisting of: (i) $ 875.0 million loan with a three-year term from the funding date (the “3-Year Tranche Loan”) and (ii) $ 875.0 million loan with a five-year term from the funding date (the “5-Year Tranche Loan” and, together with the 3-Year Tranche Loan, the “2020 Term Loans”). The 3-Year Tranche Loan has a stated floating interest rate which equates to reserve-adjusted LIBOR + 125 bps. The 5-Year Tranche Loan has a stated floating interest rate which equates to reserve-adjusted LIBOR + 137.5 bps. The 3-Year Tranche Loan does not require any scheduled principal payments prior to final maturity but do permit the Company to make early principal payments without premium or penalty. The 5-year Tranche Loan requires scheduled principal payments at the end of each fiscal quarter equal to (i) 1.25 % of the aggregate principal amount on the term funding date for the first four full fiscal quarters following the term loan funding date, (ii) 2.50 % of the aggregate principal amount on the term funding date for the fifth through twelfth full fiscal quarters following the term loan funding date, (iii) 3.75 % of the aggregate principal amount on the term funding date for each fiscal quarter following the twelfth full fiscal quarter following the term loan funding date. The 2020 Term Loan Agreement requires that the Company and its subsidiaries comply with covenants relating to customary matters, including with respect to creating or permitting certain liens, entering into sale and leaseback transactions, and consolidating, merging, liquidating or dissolving. It also prohibits subsidiaries of the Company from incurring additional indebtedness, subject to certain exceptions, and requires that the Company maintain a leverage ratio financial covenant as of the end of any fiscal quarter. The term loan was drawn in full in April 2021 to fund the purchase price of the Inphi acquisition. As of May 1, 2021, the Company has $ 1.75 billion Term Loan borrowings outstanding, and is in compliance with its debt covenants. 2020 Revolving Credit Facility On December 7, 2020, the Company entered into a revolving line of credit agreement (the “2020 Revolving Credit Facility”) with a lending syndicate led by JPMorgan Chase Bank, N.A for borrowings of up to $ 750.0 million. Borrowings from the 2020 Revolving Credit Facility are intended for general corporate use, which may include among other things, the financing of acquisitions, the refinancing of other indebtedness and the payment of transaction expenses related to the foregoing. The 2020 Revolving Credit Facility has a five-year term and a stated floating interest rate which equates to reserve-adjusted LIBOR plus an applicable margin. The Company may prepay any borrowings at any time without premium or penalty through December 7, 2025. An unused commitment fee is payable quarterly based on unused balances at a rate that is based on the ratings of the Company’s senior unsecured long-term indebtedness. This annual rate was 0.175 % at May 1, 2021. As of May 1, 2021, the 2020 Revolving Credit Facility is undrawn. Subsequent to quarter end, on May 4, 2021, the Company drew down $ 75.0 million on the 2020 Revolving Credit Facility. The Company intends to repay prior to the end of the second quarter of fiscal year 2022. The 2020 Revolving Credit Facility requires that the Company and its subsidiaries comply with covenants relating to customary matters. The covenants are consistent with the 2020 Term Loan covenants discussed above. The Company currently carries debt that relies on LIBOR as the benchmark rate. LIBOR is expected to be phased out as a benchmark rate starting at the end of 2021. To the extent LIBOR ceases to exist, the 2020 Term Loans and 2020 Revolving Credit Facility agreements contemplate an alternative benchmark rate without the need for any amendment thereto. 13 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) 2026, 2028 and 2031 Senior Unsecured Notes On April 12, 2021, the Company completed an offering of (i) $ 500.0 million aggregate principal amount of the Company’s 1.650 % Senior Notes due 2026 (the “2026 Senior Notes”), (ii) $ 750.0 million aggregate principal amount of the Company’s 2.450 % Senior Notes due 2028 (the “2028 Senior Notes”) and (iii) $ 750.0 million aggregate principal amount of the Company’s 2.950 % Senior Notes due 2031 (the “2031 Senior Notes”, and, together with the 2026 Senior Notes and the 2028 Senior Notes, the “Senior Notes”). The Senior Notes were sold pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), to purchasers in the United States and pursuant to Regulation S under the Securities Act to purchasers outside of the United States. The 2026 Senior Notes mature on April 15, 2026, the 2028 Senior Notes matures on April 15, 2028, and the 2031 Senior Notes mature on April 15, 2031. The stated and effective interest rates for the 2026 Senior Notes are 1.650 % and 1.863 %, respectively. The stated and effective interest rates for the 2028 Senior Notes are 2.450 % and 2.589 %, respectively. The stated and effective interest rates for the 2031 Senior Notes are 2.950 % and 3.085 %, respectively. The Company may redeem the Senior Notes, in whole or in part, at any time prior to their maturity at the redemption prices set forth in associated debt agreements. In addition, upon the occurrence of a change of control repurchase event (which involves the occurrence of both a change of control and a ratings event involving the Senior Notes being rated below investment grade), the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101 % of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the Senior Notes also contains certain limited covenants restricting the Company’s ability to incur certain liens, enter into certain sale and leaseback transactions and merge or consolidate with any other entity or convey, transfer or lease all or substantially all of the Company’s properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions. As of May 1, 2021, the Company has $ 2.0 billion Senior Notes borrowings outstanding. 2023 and 2028 Senior Unsecured Notes On June 22, 2018, the Company’s Bermuda-based parent company Marvell Technology Group, Inc. (“MTG”) completed a public offering of (i) $ 500.0 million aggregate principal amount of the Company’s 4.200 % Senior Notes due 2023 (the “MTG 2023 Notes”) and (ii) $ 500.0 million aggregate principal amount of the Company’s 4.875 % Senior Notes due 2028 (the “MTG 2028 Notes” and, together with the 2023 Notes, the “MTG Senior Notes”). The proceeds of the MTG Senior Notes were used to fund a portion of the cash consideration for the Cavium acquisition, repay Cavium’s debt, and pay transaction expenses in connection with the Cavium acquisition. In April 2021, in alignment with the Company’s U.S. domiciliation, the Company commenced Exchange Offers on April 19, 2021 for the outstanding $ 1.0 billion in aggregate principal amount of MTG Senior Notes outstanding in exchange for corresponding senior notes to be issued by the Company’s new U.S. domiciled parent Marvell Technology, Inc. (“MTI”). MTI made an offer to (i) exchange any and all of the outstanding MTG 2023 Notes for up to an aggregate principal amount of $ 500.0 million of new 4.200 % Senior Notes due 2023 issued by MTI (the “MTI 2023 Notes”) and to (ii) exchange any and all of the outstanding MTG 2028 Notes for up to an aggregate principal amount of $ 500.0 million of new 4.875 % Senior Notes due 2028 issued by MTI (the “MTI 2028 Notes” and, together with the MTI 2023 Notes, the “MTI Senior Notes”). Each new series of MTI Senior Notes will have the same interest rate, maturity date, redemption terms and interest payment dates and will be subject to substantially similar covenants as the corresponding series of the MTG Senior Notes for which they are being offered in exchange. The MTI 2023 Notes mature on June 22, 2023 and the MTI 2028 Notes mature on June 22, 2028. The stated and effective interest rates for the MTI 2023 Notes are 4.200 % and 4.423 %, respectively. The stated and effective interest rates for the MTI 2028 Notes are 4.875 % and 5.012 %, respectively. The Company may redeem the MTI Senior Notes, in whole or in part, at any time prior to their maturity at the redemption prices set forth in MTI Senior Notes. In addition, upon the occurrence of a change of control repurchase event (which involves the occurrence of both a change of control and a ratings event involving the MTI Senior Notes being rated below investment grade), the Company will be required to make an offer to repurchase the MTI Senior Notes at a price equal to 101 % of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the MTI Senior Notes also contains certain limited covenants restricting the Company’s ability to incur certain liens, enter into certain sale and leaseback transactions and merge or consolidate with any other entity or convey, transfer or lease all or substantially all of the Company’s properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions. As of May 1, 2021, the Company has $ 1.0 billion MTG Senior Notes borrowings outstanding. 14 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) The settlement of the Exchange Offers occurred subsequent to quarter end on May 4, 2021. $ 433.9 million aggregate principal amount of the MTG 2023 Notes and $ 479.5 million aggregate principal amount of the MTG 2028 Notes were exchanged. The exchange will be accounted for as a debt modification in accordance with applicable accounting guidance. Inphi Convertible Notes As a result of the Inphi acquisition, the Company assumed all of Inphi’s outstanding convertible notes. Inphi 2021 Convertible Notes In September 2016, Inphi issued $ 287.5 million of 0.75 % convertible senior notes due 2021. The Inphi 2021 Convertible Notes are governed by the terms of an indenture dated September 12, 2016 (the “Inphi 2021 Convertible Notes Indenture”). The Inphi 2021 Convertible Notes will mature September 1, 2021, unless earlier converted or repurchased. Interest on the Inphi 2021 Convertible Notes is payable on March 1 and September 1 of each year. Under the Inphi 2021 Convertible Notes Indenture, on or after March 1, 2021, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. The Inphi 2021 Convertible Notes are not redeemable at the Company’s option prior to maturity. The initial conversion rate at issuance in September 2016 was 17.7508 shares of Inphi common stock per $1,000 principal amount of Inphi 2021 Convertible Notes, which represented an initial conversion price of approximately $ 56.34 per Inphi share. The conversion rate for the Inphi 2021 Convertible Notes is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain fundamental changes that occur prior to the maturity date, the Company will increase the conversion rate of the Inphi 2021 Convertible Notes for a holder who elects to convert in connection with such a fundamental change in certain circumstances. Upon the occurrence of certain fundamental changes, the holders of the Inphi 2021 Convertible Notes may require the Company to repurchase all or a portion of their Inphi 2021 Convertible Notes for cash at a price equal to 100 % of the principal amount of the Inphi 2021 Convertible notes, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Inphi 2021 Convertible Notes are not redeemable at the Company’s option prior to maturity. As part of the Inphi acquisition, the Company assumed $ 15.7 million principal amount of Inphi’s 2021 Convertible Notes with a fair value of $ 48.0 million. The Inphi acquisition constitutes a fundamental change under the Inphi 2021 Convertible Notes Indenture. As a result, the Inphi 2021 Convertible Notes are currently convertible into Inphi conversion units of 17.7522 per $1,000 in principal amount of such notes. Based on the terms of the merger agreement, the holders of the Inphi 2021 Convertible Notes would receive 41.2384 shares of the Company’s common stock and $1,171.65 in cash per $1,000 in principal amount of such notes upon conversion. The Company has elected to measure the Inphi 2021 Convertible Notes at fair value. A total of $ 9.6 million in aggregate principal of the Inphi 2021 Convertible Notes was settled pursuant to the Exchange Agreements (discussed below). Between April 20 and May 1, 2021, $ 5.5 million in aggregate principal of the Inphi 2021 Convertible Notes was converted into 0.2 million shares of the Company’s common stock and $ 6.4 million in cash pursuant to the contractual terms of the Inphi 2021 Convertible Notes Indenture. Inphi 2025 Convertible Notes In April 2020, Inphi issued $ 506.0 million 0.75 % convertible senior notes due 2025. The Inphi 2025 Convertible Notes are governed by an indenture dated April 24, 2020 (the “Inphi 2025 Notes Indenture”). The Inphi 2025 Convertible Notes will mature on April 15, 2025, unless earlier converted or repurchased. Interest on the Inphi 2025 Convertible Notes is payable on April 15 and October 15 of each year. 15 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Under the 2025 Notes Indenture, the Inphi 2025 Convertible Notes are convertible at the option of the holders at any time, prior to the close of business on the business day immediately preceding October 15, 2024, only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the Inphi 2025 Notes on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading per $1,000 principal amount of Inphi 2025 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the Inphi 2025 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events. On or after October 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Inphi 2025 Convertible Notes at any time, regardless of the foregoing circumstances. The Company may redeem for cash all or any portion of the Inphi 2025 Convertible Notes, at its option, on or after April 20, 2023 if the last reported sale price of the common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Inphi 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon the occurrence of certain fundamental changes, the holders of the Inphi 2025 Convertible Notes may require the Company to repurchase all or a portion of the Inphi 2025 Convertible Notes for cash at a price equal to 100 % of the principal amount of the Inphi 2025 Convertible Notes, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The initial conversion rate at issuance in April 2020 was 8.0059 shares of Inphi common stock per $1,000 principal amount of Inphi 2025 Convertible Notes, which represented an initial conversion price of approximately $ 124.91 per Inphi share. The conversion rate for the Inphi 2025 Convertible Notes is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain fundamental changes that occur prior to the maturity date or following the Company’s issuance of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate of the Inphi 2025 Convertible Notes for a holder who elects to convert in connection with such a fundamental change or notice of redemption, as the case may be. As part of the Inphi acquisition, the Company assumed $ 506.0 million in principal of Inphi 2025 Convertible Notes with a fair value of $ 750.2 million. The Inphi acquisition constitutes a fundamental change under the Inphi 2025 Convertible Notes Indenture. As a result, the Inphi 2025 Convertible Notes are convertible into Inphi conversion units of 8.595 per $1,000 in principal amount of such notes. Based on the terms of the merger agreement, the holders of the Inphi 2025 Convertible Notes would receive 19.9662 shares of the Company’s common stock and $ 567.27 in cash per $1,000 in principal amount of such notes upon conversion. A total of $ 199.5 million in aggregate principal of the Inphi 2025 Convertible Notes was settled pursuant to the Exchange Agreements (discussed below). Between April 20 and May 1, 2021, $ 114.0 million in aggregate principal of the Inphi 2025 Convertible Notes was converted pursuant to the contractual terms of the Inphi 2025 Convertible Notes Indenture into 2.3 million shares of the Company’s common stock and $ 64.7 million in cash. Between May 2, 2021 and June 3, 2021, $ 192.5 million in aggregate principal of the Inphi 2025 Convertible Notes was converted pursuant to the contractual terms of the Inphi 2025 Convertible Notes Indenture into 3.8 million shares of the Company's common stock and $ 109.2 million in cash. In accounting for the Inphi 2025 Convertible Notes as of April 20, 2021, the Company separated the Inphi 2025 Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the fair value of the Inphi 2025 Convertible Notes as a whole. The fair value of $ 750.2 million was accordingly allocated between debt for $ 506.0 million and stockholders’ equity for $ 244.2 million. 16 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Inphi Capped Calls In connection with the issuance of each of the Inphi Convertible Notes, Inphi entered into capped call transactions (the “Inphi 2021 Capped Calls” and the “Inphi 2025 Capped Calls,” collectively, the “Inphi Capped Calls”) in private transactions. Under the Inphi Capped Calls, Inphi purchased capped call options that in aggregate relate to 100 % of the total number of shares of the Company’s common stock underlying the Inphi Convertible Notes, with a strike price approximately equal to the conversion price of the Inphi 2021 Convertible Notes and the Inphi 2025 Convertible Notes, respectively, and with a capped price equal to $ 73.03 per Inphi share and $ 188.54 per Inphi share, respectively. The purchased Inphi Capped Calls allowed Inphi to receive shares of its common stock and/or cash from counterparties equal to the amounts of common stock and/or cash related to the excess of the market price per share of the common stock, as measured under the terms of the Inphi Capped Calls, over the strike prices of the Inphi Capped Calls during the relevant valuation period. The purchased Inphi Capped Calls were intended to reduce the potential dilution to common stock upon future conversion of the Inphi 2021 Convertible Notes and Inphi 2025 Convertible Notes by effectively increasing the initial conversion price to approximately $ 73.03 and $ 188.54 , respectively, as well as to offset potential cash payments that Inphi would be required to make in excess of the principal amount of the Inphi Convertible Notes in applicable events. The Inphi Capped Calls were separate transactions entered into by Inphi with the option counterparties, are not part of the terms of the Inphi Convertible Notes, and will not change the holders’ rights under the Inphi Convertible Notes. In connection with the Inphi acquisition, the Company entered into unwind agreements related to the Inphi Capped Calls. Based on the terms of the unwind agreements, the Inphi Capped Calls do not qualify for equity classification. As such, the Company has classified the Inphi Capped Calls as assets and included in “prepaid expenses and other current assets” in the unaudited condensed consolidated balance sheet. Under the unwind agreements, the Company and the counterparties agreed to settle a portion of Inphi Capped Calls for a fixed payment of $ 74.1 million, which were settled on April 23, 2021. The remaining Inphi Capped Calls provide for variable cash settlement based on the Company’s stock price. These capped calls qualify as derivatives and, accordingly, the Company measures these capped calls at fair value, with changes in fair value reported in earnings. The Company reports cash flows from capped calls in cash flows from financing activities. In connection with the Exchange Agreements (discussed below), a portion of the remaining Inphi Capped Calls were settled for $ 35.5 million on April 29, 2021. As of May 1, 2021, the fair value of the remaining capped calls was $ 50.1 million. Exchange Agreements On April 20, 2021, the Company entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with a limited number of holders (“Noteholders”) of the Inphi Convertible Notes. Under the terms of the Exchange Agreements, the Noteholders agreed to exchange approximately $ 9.6 million in aggregate principal amount of Inphi 2021 Convertible Notes and $ 199.5 million in aggregate principal amount of Inphi 2025 Convertible Notes for a number of shares of the Company’s common stock that was partially based on a trailing daily volume-weighted average of the Company’s stock price. The Exchange Agreements were accounted for as liabilities and measured at fair value, with changes in fair value recorded in earnings. For the three months ended May 1, 2021, the Company recognized interest expense of $ 5.0 million on the remeasurement of the Exchange Agreements in its unaudited condensed statements of operations. The Exchange Agreements were settled on April 29, 2021. In exchange for $ 9.6 million and $ 199.5 million in aggregate principal of the Inphi 2021 Convertible Notes and Inphi 2025 Convertible Notes, respectively, the Company issued a total of 7.1 million shares of its common stock to the Noteholders. 2018 Term Loan and 2018 Revolving Credit Facility On June 13, 2018, the Company entered into a credit agreement (“Credit Agreement”) with twelve lenders. The Credit Agreement provides for borrowings of: (i) up to $ 500.0 million in the form of a revolving line of credit (the “2018 Revolving Credit Facility”) and (ii) $ 900.0 million in the form of a term loan (the “2018 Term Loan”) due July 6, 2021. The proceeds of the 2018 Term Loan were used to fund a portion of the cash consideration for the Cavium acquisition, repay Cavium’s debt, and pay transaction expenses in connection with the Cavium acquisition. On December 7, 2020, the 2018 Revolving Credit Facility under the 2018 Credit Agreement was terminated and replaced by the 2020 Revolving Credit Facility. The 2018 Term Loan borrowings were repaid in full in the first quarter ended May 1, 2021. 17 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Summary of Outstanding Debt During the three months ended May 1, 2021, the Company recognized $ 22.1 million of interest expense in its unaudited condensed consolidated statements of operations related to interest, amortization of debt issuance costs and accretion of discount associated with the outstanding borrowings. During the three months ended May 2, 2020, the Company recognized $ 15.4 million of interest expense in its unaudited condensed consolidated statements of operations related to interest, amortization of debt issuance costs and accretion of discount associated with the outstanding borrowings. As of May 1, 2021, the aggregate future contractual maturities of the Company’s outstanding debt, at face value, were as follows (in thousands): Fiscal Year Amount Remainder of 2022 $ 1,867 2023 — 2024 1,375,000 2025 — 2026 1,067,548 Thereafter 2,500,000 Total $ 4,944,415 Note 6. Revenue The majority of the Company’s revenue is generated from sales of the Company’s products. The following table summarizes net revenue disaggregated by product group (in thousands, except percentages): Three Months Ended May 1, 2021 % of Total May 2, 2020 % of Total Net revenue by product group: Networking (1) $ 498,250 60 % $ 393,920 57 % Storage (2) 302,918 36 % 258,688 37 % Other (3) 31,111 4 % 41,033 6 % $ 832,279 $ 693,641 (1) Networking products are comprised primarily of ethernet solutions, embedded processors, custom ASICs and electro-optics solutions. (2) Storage products are comprised primarily of storage controllers and fibre channel adapters. (3) Other products are comprised primarily of printer solutions. 18 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) The following table summarizes net revenue disaggregated by primary geographical market based on destination of shipment (in thousands, except percentages): Three Months Ended May 1, 2021 % of Total May 2, 2020 % of Total Net revenue based on destination of shipment: China $ 341,078 41 % $ 280,146 40 % United States 87,414 11 % 81,232 12 % Thailand 77,792 9 % 67,544 10 % Malaysia 58,579 7 % 64,668 9 % Singapore 51,510 6 % 38,706 6 % Philippines 47,618 6 % 24,574 4 % Other 168,288 20 % 136,771 19 % $ 832,279 $ 693,641 These destinations of shipment are not necessarily indicative of the geographic location of the Company’s end customers or the country in which the Company’s end customers sell devices containing the Company’s products. For example, a substantial majority of the shipments made to China relate to sales to non-China based customers that have factories or contract manufacturing operations located within China. The following table summarizes net revenue disaggregated by customer type (in thousands, except percentages): Three Months Ended May 1, 2021 % of Total May 2, 2020 % of Total Net revenue by customer type: Direct customers $ 570,306 69 % $ 531,404 77 % Distributors 261,973 31 % 162,237 23 % $ 832,279 $ 693,641 Contract Liabilities Contract liabilities consist of the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration or the amount is due from the customer. As of May 1, 2021, contract liability balances are comprised of variable consideration estimated based on a portfolio basis using the expected value methodology based on analysis of historical data, current economic conditions, and contractual terms. Variable consideration estimates consist of the estimated returns, price discounts, price protection, rebates, and stock rotation programs. As of the end of a reporting period, some of the performance obligations associated with contracts will have been unsatisfied or only partially satisfied. In accordance with the practical expedients available in the guidance, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Contract liabilities are included in accrued liabilities in the unaudited condensed consolidated balance sheets. The opening balance of contract liabilities at the beginning of the first quarter of fiscal year 2022 was $ 181.0 million. During the three months ended May 1, 2021, contract liabilities increased by $ 238.2 million associated with variable consideration estimates, offset by $ 248.7 million decrease in such reserves primarily due to credit memos issued to customers. The ending balance of contract liabilities as of the first quarter of fiscal year 2022 was $ 170.5 million. The amount of revenue recognized during the three months ended May 1, 2021 that was included in the contract liabilities balance at January 30, 2021 was no t material. Sales Commissions The Company has elected to apply the practical expedient to expense commissions when incurred as the amortization period is typically one year or less. These costs are recorded in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations. 19 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Note 7. Restructuring The Company continuously evaluates its existing operations to increase operational efficiency, decrease costs and increase profitability. A restructuring plan was initiated in Q1 fiscal 2022 (the "Fiscal 2022 Plan") in order to realign the organization and enable further investment in key priority areas. Restructuring charges are mainly comprised of severance and other one-time termination benefits, facility closures where sites may be redundant within the same region or no longer suitably sized for the local employee base, and other costs. The Company recorded restructuring and other related charges of $ 12.9 million for the three months ended May 1, 2021, which includes $ 9.8 million of charges related to the Fiscal 2022 Plan. The Company expects to complete these restructuring actions by the end of fiscal 2023. In prior years, the Company initiated restructuring plans in order to realign the organization and enable further investment in key priority areas. Restructuring charges were mainly comprised of severance and other one-time termination benefits, facility closures where sites were redundant within the same region or no longer suitably sized for the local employee base, and other costs. These plans are substantially complete. The Company recorded restructuring related charges of $ 21.3 million for the three months ended May 2, 2020. The following table sets forth a reconciliation of the beginning and ending restructuring liability balances by each major type of cost associated with the restructuring charges (in thousands): Employee Severance Other Total Liability at January 30, 2021 $ 5,596 $ 5,204 $ 10,800 Charges 9,631 3,255 12,886 Cash payments ( 11,332 ) ( 2,252 ) ( 13,584 ) Non-cash items — ( 1,582 ) ( 1,582 ) Liability at May 1, 2021 $ 3,895 $ 4,625 $ 8,520 The current and non-current portions of the restructuring liability at May 1, 2021 of $ 6.8 million and $ 1.7 million are included as a component of accrued liabilities and other non-current liabilities respectively in the accompanying unaudited condensed consolidated balance sheet. Note 8. Supplemental Financial Information (in thousands) Consolidated Balance Sheets May 1, 2021 January 30, 2021 Inventories: Work-in-process $ 383,305 $ 187,351 Finished goods 154,812 80,877 Inventories $ 538,117 $ 268,228 The inventory balance at May 1, 2021 includes $ 173.5 million related to the inventory step-up adjustment from the Inphi acquisition. 20 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) May 1, 2021 January 30, 2021 Property and equipment, net: Machinery and equipment $ 786,468 $ 693,689 Land, buildings, and leasehold improvements 299,853 284,532 Computer software 104,256 103,789 Furniture and fixtures 28,746 26,990 1,219,323 1,109,000 Less: Accumulated depreciation and amortization ( 794,590 ) ( 782,875 ) Property and equipment, net $ 424,733 $ 326,125 May 1, 2021 January 30, 2021 Other non-current assets: Technology and other licenses $ 278,413 $ 242,244 Operating right-of-use assets 155,903 101,411 Prepaid ship and debits 149,110 131,657 Non-marketable equity investments 35,271 7,646 Other 45,333 58,611 Other non-current assets $ 664,030 $ 541,569 May 1, 2021 January 30, 2021 Accrued liabilities: Contract liabilities * $ 170,527 $ 180,995 Technology license obligations 106,264 71,130 Deferred non-recurring engineering credits 39,471 37,300 Lease liabilities - current portion 38,797 32,461 Accrued legal reserve 34,477 50,101 Accrued interest 22,762 8,709 Accrued royalty 16,339 12,740 Deferred revenue 8,146 16,146 Other 41,375 26,034 Accrued liabilities $ 478,158 $ 435,616 * Contract liabilities consist of the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration or the amount is due from the customer. See “Note 6 - Revenue” for further details. 21 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) May 1, 2021 January 30, 2021 Other non-current liabilities Deferred tax liabilities $ 253,830 $ 22,359 Lease liabilities-non current 151,382 104,417 Technology license obligations 79,907 86,241 Non-current income tax payable 23,668 22,526 Other 30,824 23,310 Other non-current liabilities $ 539,611 $ 258,853 Accumulated Other Comprehensive Income As of May 1, 2021, there are no changes in accumulated other comprehensive income (loss) by components. The changes in accumulated other comprehensive income (loss) by components for the comparative period are presented in the following table: Unrealized Gain (Loss) on Cash Flow Hedges Balance at February 1, 2020 $ — Other comprehensive income before reclassifications 995 Amounts reclassified from accumulated other comprehensive income ( 127 ) Net current-period other comprehensive income, net of tax 868 Balance at May 2, 2020 $ 868 Consolidated Statements of Cash Flows The noncash consideration paid for the acquisition of Inphi was $ 6.2 billion for the three months ended May 1, 2021. Share Repurchase Program On November 17, 2016, the Company announced that its Board of Directors authorized a $ 1.0 billion share repurchase plan. The newly authorized stock repurchase program replaced in its entirety the prior $ 3.25 billion stock repurchase program. On October 16, 2018, the Company announced that its Board of Directors authorized a $ 700 million addition to the balance of its existing share repurchase program. As of May 1, 2021, there was $ 564.5 million remaining available for future share repurchases. The Company intends to effect share repurchases in accordance with the conditions of Rule 10b-18 under the Exchange Act, but may also make repurchases in the open market outside of Rule 10b-18 or in privately negotiated transactions. The share repurchase program will be subject to market conditions and other factors, and does not obligate the Company to repurchase any dollar amount or number of its common shares and the repurchase program may be extended, modified, suspended or discontinued at any time. The Company temporarily suspended the share repurchase program in late March 2020 to preserve cash during the COVID-19 pandemic and the program remains suspended as the Company focuses on reducing its debt and de-levering its balance sheet. As a result, the Company did no t repurchase any shares during the three months ended May 1, 2021. The Company repurchased 1.3 million of its common shares for $ 25.2 million during the three months ended May 2, 2020. The Company records all repurchases, as well as investment purchases and sales, based on their trade date. The repurchased shares are retired immediately after repurchases are completed. 22 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Note 9. Fair Value Measurements Fair value is an exit price representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1—Observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2—Other inputs that are directly or indirectly observable in the marketplace. Level 3—Unobservable inputs that are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s Level 1 assets include institutional money-market funds that are classified as cash equivalents, and marketable equity investments that are classified as other non-current assets and which are valued primarily using quoted market prices. The Company’s Level 2 assets include time deposits, as the market inputs used to value these instruments consist of market yields. In addition, the convertible debt capped calls and the severance pay fund are classified as a Level 2 asset as the valuation inputs are based on quoted prices and market observable data of similar instruments. The tables below set forth, by level, the Company’s assets and liabilities that are measured at fair value on a recurring basis. The tables do not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands): Fair Value Measurements at May 1, 2021 Level 1 Level 2 Level 3 Total Items measured at fair value on a recurring basis: Assets Cash equivalents: Money market funds $ 65 $ — $ — $ 65 Time deposits — 115,663 — 115,663 Prepaid expenses and other current assets: Convertible debt capped calls — 50,127 — 50,127 Other non-current assets: Marketable equity investments 1,607 — — 1,607 Severance pay fund — 650 — 650 Total assets $ 1,672 $ 166,440 $ — $ 168,112 Liabilities Short term convertible debt: Convertible notes $ — $ 721 $ — $ 721 Long term convertible debt: Convertible notes — 1,146 — 1,146 Total liabilities $ — $ 1,867 $ — $ 1,867 The carrying value of investments in non-marketable equity securities recorded to fair value on a non-recurring basis is adjusted for observable transactions for identical or similar investments of the same issuer or for impairment. These securities relate to equity investments in privately-held companies. They are classified as Level 3 in the fair value hierarchy because the value is estimated based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights and obligations of the securities held. As of May 1, 2021, non-marketable equity investments had a carrying value of $ 35.3 million and are included in other non-current assets in the Company’s unaudited condensed consolidated balance sheets. 23 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Fair Value Measurements at January 30, 2021 Level 1 Level 2 Level 3 Total Items measured at fair value on a recurring basis: Assets Cash equivalents: Time deposits $ — $ 114,645 $ — $ 114,645 Other non-current assets: Severance pay fund — 623 — 623 Total assets $ — $ 115,268 $ — $ 115,268 Fair Value of Debt and Inphi Capped Calls The Inphi 2021 Convertible Notes are carried in the unaudited condensed consolidated balance sheets at fair value. As of May 1, 2021, the fair value of convertible notes was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See “Note 5 - Debt” for information on the fair value of the Inphi 2021 Convertible Notes. The 2025 Inphi Convertible Notes are carried in the unaudited condensed consolidated balance sheets at fair value at Inphi acquisition when assumed. The Inphi 2025 Convertible Notes are not marked to fair value at the end of each reporting period. The Company classified the 2020 Term Loan, the 2023 Notes, the 2026 Notes, 2028 Notes and 2031 Notes as Level 2 in the fair value measurement hierarchy. The carrying value of the 2020 Term Loan approximates its fair value as the 2020 Term Loan is carried at a market observable interest rate that resets periodically. The estimated aggregate fair value of the unsecured senior notes was $ 3.1 billion at May 1, 2021 and $ 1.1 billion at January 30, 2021, and were classified as Level 2 as there are quoted prices from less active markets for the notes. The Inphi convertible debt capped calls provide for variable cash settlement based on the Company’s stock price. These capped calls qualify as derivatives and, accordingly, the Company measures these capped calls at fair value, with changes in fair value reported in earnings. As of May 1, 2021, the fair value of the remaining capped calls was $ 50.1 million. Note 10. Commitments and Contingencies Purchase Commitments Under the Company’s manufacturing relationships with its foundry partners, cancellation of outstanding purchase orders is allowed but requires payment of all costs and expenses incurred through the date of cancellation. At May 1, 2021, the Company had approximately $ 819.5 million in outstanding purchase orders with foundries. Contingencies and Legal Proceedings The Company currently is, and may from time to time become, a party to claims, lawsuits, governmental inquiries, inspections or investigations and other legal proceedings (collectively, “Legal Matters”) arising in the course of its business. Such Legal Matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. The Company is currently unable to predict the final outcome of its pending Legal Matters and therefore cannot determine the likelihood of loss or estimate a range of possible loss, except with respect to amounts where it has determined a loss is both probable and estimable and has made an accrual. The Company evaluates, at least on a quarterly basis, developments in its Legal Matters that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. The ultimate outcome of any Legal Matter involves judgments, estimates and inherent uncertainties. An unfavorable outcome in a Legal Matter, particularly in a patent dispute, could require the Company to pay damages or could prevent the Company from selling some of its products in certain jurisdictions. While the Company cannot predict with certainty the results of the Legal Matters in which it is currently involved, the Company does not expect that the ultimate costs to resolve these Legal Matters will individually or in the aggregate have a material adverse effect on its financial condition, however, there can be no assurance that the current or any future Legal Matters will be resolved in a manner that is not adverse to the Company’s business, financial condition, results of operations or cash flows. 24 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Indemnities, Commitments and Guarantees During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities may include indemnities for general commercial obligations, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of Bermuda. In addition, the Company has contractual commitments to various customers, which could require the Company to incur costs to repair an epidemic defect with respect to its products outside of the normal warranty period if such defect were to occur. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Some of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments that the Company could be obligated to make. In general, the Company does not record any liability for these indemnities, commitments and guarantees in the accompanying unaudited condensed consolidated balance sheets as the amounts cannot be reasonably estimated and are not considered probable. The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and estimable. Intellectual Property Indemnification In addition to the above indemnities, the Company has agreed to indemnify certain customers for claims made against the Company’s products where such claims allege infringement of third-party intellectual property rights, including, but not limited to, patents, registered trademarks, and/or copyrights. Under the aforementioned indemnification clauses, the Company may be obligated to defend the customer and pay for the damages awarded against the customer as well as the attorneys’ fees and costs under an infringement claim. The Company’s indemnification obligations generally do not expire after termination or expiration of the agreement containing the indemnification obligation. Generally, but not always, there are limits on and exceptions to the Company’s potential liability for indemnification. Historically the Company has not made significant payments under these indemnification obligations and the Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. The maximum potential amount of any future payments that the Company could be required to make under these indemnification obligations could be significant. Note 11. Stockholders ’ Equity Following the Inphi acquisition and in accordance with the Inphi merger agreement, certain outstanding options to purchase shares of Inphi common stock and certain restricted stock units with respect to Inphi common stock, each granted under the Inphi Amended and Restated 2010 Stock Incentive Plan (“Inphi 2010 EIP”), were assumed by the Company and converted into options to purchase common shares of the Company and restricted stock units with respect to common shares of the Company, respectively. The Company filed a registration statement on April 20, 2021 to register 10,301,589 common shares of the Company, issuable under the Inphi 2010 EIP, comprised of 127,249 common shares issuable pursuant to outstanding but unexercised options under the Inphi 2010 EIP, 10,040,693 common shares issuable pursuant to outstanding unvested restricted stock units under the Inphi 2010 EIP, and 133,647 common shares issuable pursuant to outstanding unvested performance stock units under the Inphi 2010 EIP. Inphi 2010 EIP The Inphi 2010 EIP was adopted by Inphi on June 7, 2010. The 2010 Plan provided for the grants of restricted stock, stock appreciation rights and stock unit awards to employees, non-employee directors, advisors and consultants. Awards under the Inphi 2010 EIP generally vest over 3 to 4 years. 25 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Inphi Acquisition-related Equity Awards The awards under the Inphi Plans assumed by the Company in the Inphi acquisition were measured at the acquisition date based on the estimated fair value of $ 589.7 million. A portion of that fair value, $ 161.7 million, which represented the pre-acquisition service provided by employees to Inphi, was included in the total consideration transferred as part of the acquisition. As of the acquisition date, the remaining portion of the fair value of those awards was $ 428.0 million, representing post-acquisition share-based compensation expense that will be recognized as these employees provide service over the remaining vesting periods. During the three months ended May 1, 2021, the Company recognized $ 49.6 million of share-based compensation expense in connection with the acquisition of Inphi, of which $ 43.8 million was due to the accelerated vesting of outstanding equity awards of certain Inphi employees. During the three months ended May 1, 2021, Inphi merger equity consideration related tax withholdings of $ 14.6 million were included as a component of tax withholdings for net share settlement of restricted stock units in the accompanying unaudited condensed consolidated statement of stockholders’ equity. Summary of Share-based Compensation Expense The following table summarizes share-based compensation expense (in thousands): Three Months Ended May 1, 2021 May 2, 2020 Cost of goods sold $ 9,803 $ 3,538 Research and development 38,377 37,815 Selling, general and administrative 61,413 18,334 Total share-based compensation $ 109,593 $ 59,687 Share-based compensation capitalized in inventory was $ 4.3 million at May 1, 2021, $ 3.8 million at January 30, 2021. Note 12. Income Tax The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The Company’s quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in accurately predicting our pre-tax income or loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in tax laws, the applicability of special tax regimes, changes in how we do business, discrete items, and acquisitions, as well as the integration of such acquisitions. On April 20, 2021, the Company completed its acquisition of Inphi Corporation. As a result of this transaction, the parent company was domiciled in the United States and not Bermuda. Therefore, for periods after closing, the income from all foreign subsidiaries is now subject to the U.S. provisions applicable to Global Intangible Low Taxed Income (“GILTI”), which generally requires for GILTI income to be included in the taxable income of U.S. entities, and which may adversely impact future effective tax rates and tax liabilities. The Company’s estimated effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to a substantial portion of its earnings, or in some cases, losses being taxed or benefited at rates lower than the U.S. statutory rate. The Company’s effective tax rate is the result of an anticipated annual net income tax benefit and includes the effects of certain non-U.S. tax jurisdictions with tax rates lower than 21%. The income tax benefit of $ 27.8 million for the three months ended May 1, 2021 includes a discrete tax benefit related to stock-based compensation in addition to the release of unrecognized benefits that were recorded in prior periods. The income tax expense of $ 5.0 million for the three months ended May 2, 2020 included a tax benefit related to the release of unrecognized tax benefits that were recorded in prior periods, offset by tax expense due on certain foreign undistributed earnings that were previously considered to be indefinitely reinvested. 26 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) The Company’s gross unrecognized tax benefits were $ 319.2 million and $ 242.2 million on May 1, 2021 and January 30, 2021, respectively. The net increase to the Company’s gross unrecognized tax benefits of $ 77.0 million is primarily the result of certain unrecognized tax benefits recorded in the Company’s accounting for the acquisition of Inphi. If the gross unrecognized tax benefits as of May 1, 2021 were realized in a subsequent period, the Company would record a tax benefit of $ 198.7 million within its provision for income taxes at such time. The amount of interest and penalties accrued as of May 1, 2021, and January 30, 2021 was $ 3.8 million and $ 4.0 million, respectively. It is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly due to changes in tax law in various jurisdictions, new tax audits and changes in the U.S. dollar as compared to foreign currencies within the next 12 months. Excluding these factors, it is reasonably possible that uncertain tax positions may decrease by as much as $ 2.5 million from the lapse of statutes of limitation in various jurisdictions during the next 12 months. Government tax authorities from certain non-U.S. jurisdictions are examining the Company’s income tax returns. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to its tax audits and that any settlement will not have a material effect on its results or financial position at this time. The Company operates under tax incentives in certain countries that may be extended and/or renewed if certain additional requirements are satisfied. The tax incentives are conditional upon meeting certain employment and investment thresholds. In the three months ended May 1, 2021, tax savings associated with these tax holidays were approximately $ 7.8 million, which if paid would impact the Company’s earnings per share by less than $ 0.02 per share in the three months ended May 1, 2021. There were no such tax savings recognized in three months ended May 2, 2020. The Company’s principal source of liquidity as of May 1, 2021 consisted of approximately $ 522.5 million of cash and cash equivalents, of which approximately $ 350.3 million was held by subsidiaries outside of the United States. The Company has not recognized a deferred tax liability on $ 280.3 million of these assets as those amounts are deemed to be indefinitely reinvested. The Company manages its worldwide cash requirements by, among other things, reviewing available funds held by its foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. Note 13. Net Loss Per Share The Company reports both basic net loss per share, which is based on the weighted-average number of common shares outstanding during the period, and diluted net loss per share, which is based on the weighted-average number of common shares outstanding and potentially dilutive shares outstanding during the period. The computations of basic and diluted net loss per share are presented in the following table (in thousands, except per share amounts): Three Months Ended May 1, 2021 May 2, 2020 Numerator: Net loss $ ( 88,242 ) $ ( 113,033 ) Denominator: Weighted-average shares — basic 693,378 663,547 Effect of dilutive securities: Share-based awards — — Convertible debt — — Weighted-average shares — diluted 693,378 663,547 Net loss per share: Basic $ ( 0.13 ) $ ( 0.17 ) Diluted $ ( 0.13 ) $ ( 0.17 ) 27 Table of Contents MARVELL TECHNOLOGY, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued) Potential dilutive securities include dilutive common shares from share-based awards attributable to the assumed exercise of stock options, restricted stock units and employee stock purchase plan shares using the treasury stock method. Potential dilutive securities include dilutive common shares from share-based awards attributable to the shares that could be issued upon conversion of the Company’s convertible debt using the if-converted method. Under the treasury stock method and if-converted method, potential common shares outstanding are not included in the computation of diluted net income per share if their effect is anti-dilutive. Anti-dilutive potential shares are presented in the following table (in thousands): Three Months Ended May 1, 2021 May 2, 2020 Weighted-average shares outstanding: Share-based awards 16,829 12,416 Convertible debt 1,581 — Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted earnings per share for all periods reported above because either their exercise price exceeded the average market price during the period or the share-based awards were determined to be anti-dilutive based on applying the treasury stock method. Anti-dilutive potential shares from convertible debt are excluded from the calculation of diluted earnings per share for all periods reported above because the shares that would be issued upon conversion of the Company’s convertible debt were determined to be anti-dilutive based on applying the if-converted method. Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted earnings per share for the three months ended May 1, 2021 and May 2, 2020 due to the net losses reported in those periods. 28 Table of Contents