What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-26 compared with 2022-05-27 · 142 added, 83 removed, 156 unchanged (59% of the section changed)

7 unchanged sentences

• risks related to our ability to scale our business;

• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products and our kitting process, and constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to changes in general economic conditions, such as economic slowdowns and recessions, inflation and stagflation, or political conditions, such as the tariffs and trade restrictions with China, Russia and other foreign nations, and specific conditions in the end markets we address, including the continuing volatility in the technology sector and semiconductor industry;

• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products and kitting process, and constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to changes in general economic conditions such as economic slowdowns, inflation, stagflation, rising interest rates, and recessions or political conditions, such as the tariffs and trade restrictions with China, Russia and other foreign nations, and specific conditions in the end markets we address, including the continuing volatility in the technology sector and semiconductor industry and the U.S.

National Science and Technology Council’s designation of semiconductors as a critical and emerging technology;

• risks related to the ability of our customers, particularly in jurisdictions such as China that may be subject to trade restrictions (including the need to obtain export licenses) to develop their own solutions or acquire fully developed solutions from third-parties;

• risks related to cancellations, rescheduling or deferrals of significant customer orders or shipments, as well as the ability of our customers to manage inventory;

• risks related to our ability to successfully integrate and to realize anticipated synergies, on a timely basis or at all, in connection with our acquisitions, divestitures, significant investments or strategic transactions;

• risks related to our ability to successfully integrate and to realize anticipated benefits or synergies, on a timely basis or at all, in connection with our past, current, or any future acquisitions, divestitures, significant investments or strategic transactions;

• risks related to our debt obligations;

• risks related to the effects of any future acquisitions, divestitures or significant investments;

• risks related to the highly competitive nature of the end markets we serve, particularly within the semiconductor and infrastructure industries;

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• risks related to our ability to attract, retain and motivate a highly skilled workforce, especially engineering, managerial, sales and marketing personnel;

• risks related to any current and future litigation and regulatory investigations that could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully maintain and grow our business;

• risks related to any current and future litigation, regulatory investigations, and contractual disputes with customers that could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully maintain and grow our business;

• risks related to gain or loss of a design win or key customer;

• risks related to seasonality or volatility related to sales into the infrastructure market;

• risks related to seasonality or volatility related to sales into the infrastructure market or other end markets;

• risks related to failures to qualify our products or our suppliers’ manufacturing lines;

1 unchanged sentence

• risks related to failures to protect our intellectual property, particularly outside the United States;

• risks related to the potential impact of a significant natural disasters, or the effects of climate change (such as drought, flooding, wildfires, increased storm severity and sea level rise), particularly in certain regions in which we operate or own buildings, such as Santa Clara, California, and where our third party suppliers operate, such as Taiwan and elsewhere in the Pacific Rim;

• risks related to the potential impact of a significant events or natural disasters, or the effects of climate change (such as droughts, flooding, wildfires, increased storm severity, sea level rise, and power outages), particularly in certain regions in which we operate or own buildings, such as Santa Clara, California, and where our third-party manufacturing partners or suppliers operate, such as Taiwan and elsewhere in the Pacific Rim;

• risks related to our Environmental, Social and Governance (ESG) programs;

• risks related to severe financial hardship or bankruptcy of one or more of our major customers;

• risks related to failures of our customers to agree to pay for NRE (non-recurring engineering) costs or failure to pay enough to cover the costs we incur in connection with NREs.

• risks related to severe financial hardship or bankruptcy or other attrition of one or more of our major customers, particularly as our major customers comprise an increasing percentage of our revenue;

• risks related to failures of our customers to agree to pay for NRE (non-recurring engineering) costs, failure to pay enough to cover the costs we incur in connection with NREs, or non-payment of previously agreed NRE costs due to us.

Additional factors which could cause actual results to differ materially include those set forth in the following discussion, as well as the risks discussed in Part II, Item 1A, “Risk Factors,” and other sections of this Quarterly Report on Form 10-Q.

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Leveraging leading intellectual property and deep system-level expertise, as well as highly innovative security firmware, our solutions are empowering the data economy and enabling the data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial end markets.

Net revenue in the first quarter of fiscal 2023 was $1,446.9 million and was 74% higher than net revenue of $832.3 million in the first quarter of fiscal 2022.

This was due to an increase in sales from all our end markets.

Revenue increased from the data center end market by 131% , from the carrier infrastructure end market by 50%, from the enterprise networking end market by 64%, from the consumer end market by 7%, and the automotive/industrial end market by 94% compared to the three months ended May 1, 2021 .

The overall increase in net revenue of 74% was primarily driven by an increase in demand for our products and the year-over-year impact of acquisitions in fiscal 2022, with both factors contributing to higher unit shipments.

Net revenue in the second quarter of fiscal 2023 was $1.5 billion and was 41% higher than net revenue of $1.1 billion in the second quarter of fiscal 2022.

This was due to an increase in sales from a majority of our end markets.

Revenue increased from the data center end market by 48% , from the carrier infrastructure end market by 45%, from the enterprise networking end market by 53%, and from the automotive/industrial end market by 46% compared to the three months ended July 31, 2021 .

The sales from the consumer end market were relatively flat for the three months ended July 30, 2022 co mpared to the three months ended July 31, 2021 .

The overall increase in net revenue of 41% was primarily driven by an increase in demand for our products that led to higher unit shipments.

In addition, our average selling prices increased year-over-year driven by relatively higher sales of products which had higher content and more features.

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These supply challenges are currently limiting our ability to fully satisfy the increase in demand for some of our products.

To secure additional capacity, we entered into capacity reservation arrangements with certain foundries and test & assembly partners.

To secure additional capacity, we entered into and continue to enter into capacity reservation arrangements with certain foundries and test & assembly partners.

See “Note 5 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

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We continue to monitor the impact of COVID-19 on our business.

While our offices around the world generally remain open to enable critical on-site business functions in accordance with local government guidelines, in response to the COVID-19 pandemic we modified our workplace practices globally, which resulted in many of our employees working remotely for extended periods of time.

While our offices around the world generally remained open to enable critical on-site business functions in accordance with local government guidelines, in response to the COVID-19 pandemic we modified our workplace practices globally, which resulted in many of our employees working remotely for extended periods of time.

As a result, many of our employees have expressed a preference to continue to work from home two to three days a week post-pandemic.

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export controls.

In addition, there may be indirect impacts to our business that we can not easily quantify such as the fact that some of our other customers’ products which use our solutions may also be impacted by export restrictions.

In addition, there may be indirect impacts to our business that we cannot easily quantify such as the fact that some of our other customers’ products which use our solutions may also be impacted by export restrictions.

Capital Return Program.

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We resumed our stock repurchase program in the first quarter of fiscal 2023, which had been temporarily suspended in fiscal 2021 to preserve cash during the COVID-19 pandemic.

During the three months ended April 30, 2022, we repurchased 0.3 million shares of our common stock for $15.0 million.

As of April 30, 2022, there was $549.5 million remaining available for future stock repurchases.

As of April 30, 2022, a total of 308.4 million shares have been repurchased to date under our share repurchase programs for a total $4.3 billion in cash.

We returned $65.9 million to stockholders in the three months ended April 30, 2022, including our repurchases of common stock and $50.9 million in cas h dividends.

Subsequent to quarter end through May 20, 2022, we repurchased an additional 0.9 million shares of our common stock for $50.0 million pursuant to a 10b5-1 trading plan.

During the six months ended July 30, 2022, we repurchased 1.2 million shares of our common stock for $65.0 million, including 0.9 million shares of our common stock repurchased for $50.0 million pursuant to a 10b5-1 trading plan during the second quarter of fiscal 2023.

As of July 30, 2022, there was $499.5 million remaining available for future stock repurchases.

As of July 30, 2022, a total of 309.3 million shares have been repurchased to date under our current and previous share repurchase programs for an aggregate total of $4.3 billion in cash.

We returned $167.0 million to stockholders in the six months ended July 30, 2022, including our repurchases of common stock and $102.0 million in cas h dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $465.0 million at April 30, 2022, which was $148.5 million lower than our balance at our fiscal year ended January 29, 2022 of $613.5 million.

Our cash and cash equivalents were $617.1 million at July 30, 2022, which was $3.6 million higher than our balance at our fiscal year ended January 29, 2022 of $613.5 million.

Sales and Customer Composition.

Our accounts receivable was concentrated with four customers at April 30, 2022, who comprise a total of 52% of gross accounts receivable, compared with five customers at May 1, 2021, who represented 54% of gross accounts receivable, respectively.

Our accounts receivable was concentrated with four customers at July 30, 2022, who comprise a total of 56% of gross accounts receivable, compared with six customers at July 31, 2021, who represented 51% of gross accounts receivable, respectively.

This presentation is at the customer consolidated level.

During the three months ended April 30, 2022 and May 1, 2021, there was no net revenue attributable to a single customer, other than one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

During the three and six months ended July 30, 2022 and July 31, 2021, there was no net revenue attributable to a single customer, other than one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

Net revenue attributable to a distributor whose revenue as a percentage of net revenue was 10% or greater of total net revenue is presented in the following table:

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

2021 July 30,

2022 July 31,

Distributor A 24 % 15 % 22 % 17 %

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Most of our sales are made to customers located outside of the United States, primarily in Asia, and majority of our products are manufactured outside the United States.

Sales shipped to customers with operations in Asia represented approximately 75% of our net revenue in the three months ended April 30, 2022, and approximately 80% of net revenue in the three months ended May 1, 2021.

Sales shipped to customers with operations in Asia represented approximately 76% of our net revenue in the three and six months ended July 30, 2022, and approximately 80% of net revenue in the three and six months ended July 31, 2021.

Because many manufacturers and manufacturing subcontractors of our customers are located in Asia, we expect that most of our net revenue will continue to be represented by sales to our customers in that region.

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Critical Accounting Policies and Estimates

There have been no material changes during the three months ended April 30, 2022 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In the current macroeconomic environment affected by COVID-19, our estimates could require increased judgment and carry a higher degree of variability and volatility.

There have been no material changes during the three months ended July 30, 2022 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In the current macroeconomic environment, our estimates could require increased judgment and carry a higher degree of variability and volatility.

We continue to monitor and assess our estimates in light of developments, and as events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

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The following table sets forth information derived from our Unaudited Condensed Consolidated Statements of Operations expressed as a percentage of net revenue:

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

2021 July 30,

2022 July 31,

Net revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Selling, general and administrative 14.0 24.1 14.6 24.1

Legal settlement 5.6 — 3.4 —

Restructuring related charges 0.1 1.1 0.1 1.3

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Interest expense (2.6) (3.1) (2.6) (3.6)

Other income, net 0.4 0.1

Other income (loss), net 0.2 (0.2) 0.3 —

Income (loss) before income taxes 0.2 (28.0) 1.4 (21.8)

Provision (benefit) for income taxes — (2.4) 6.9 (2.8)

Net loss (11.5) % (10.7) %

Three months ended April 30, 2022 and May 1, 2021

Three Months Ended

Net income (loss) 0.2 % (25.6) % (5.5) % (19.0) %

Three and six months ended July 30, 2022 and July 31, 2021

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

Net revenue $ 1,516.9 $ 1,075.9 41.0% $ 2,963.8 $ 1,908.2 55.3%

Our net revenue for the three months ended April 30, 2022 increased by $614.6 million compared to net revenue for the three months ended May 1, 2021.

Our net revenue for the three months ended July 30, 2022 increased by $441.0 million compared to net revenue for the three months ended July 31, 2021.

This was due to an increase in sales from a majority of our end markets.

Revenue increased from the data center end market by 48%, from the carrier infrastructure end market by 45%, from the enterprise networking end market by 53%, and from the automotive/industrial end market by 46% co mpared to the three months ended July 31, 2021 .

The sales from the consumer end market were relatively flat for the three months ended July 30, 2022 co mpared to the three months ended July 31, 2021.

Our net revenue for the six months ended July 30, 2022 increased by $1.1 billion compared to net revenue for the six months ended July 31, 2021.

This was due to an increase in sales from all our end markets.

Revenue increased from the data center end market by 131% from the carrier infrastructure end market by 50%, from the enterprise networking end market by 64%, from the consumer end market by 7%, and from the automotive/industrial end market by 94% co mpared to the three months ended May 1, 2021 .

Revenue increased from the data center end market by 81%, from the carrier infrastructure end market by 47%, from the enterprise networking end market by 58%, from the consumer end market by 3%, and from the automotive/industrial end market by 67% co mpared to the six months ended July 31, 2021 .

The overall increases in net revenue of 41% for the three months was primarily driven by an increase in demand for our products that led to higher unit shipment.

The overall increase in net revenue of 55% for the six months was primarily driven by an increase in demand for our products and the year-over-year impact of acquisitions in fiscal 2022, with both factors contributing to higher unit shipments.

In addition, our average selling prices increased year-over-year driven by relatively higher sales of products which had higher content and more features.

Cost of Goods Sold and Gross Profit

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

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% of net revenue 51.8 % 34.6 % 51.9 % 41.4 %

Cost of goods sold as a percentage of net revenue decreased for the three months ended April 30, 2022 compared to the three months ended May 1, 2021, which is primarily due to operational efficiencies with increased sales and lower amortization of inventory fair value adjustment.

As a result, gross margin for the three months ended April 30, 2022 increased 1.7% percentage points compared to the three months ended May 1, 2021.

Cost of goods sold as a percentage of net revenue decreased for the three and six months ended July 30, 2022 compared to the three and six months ended July 31, 2021, which is primarily due to lower amortization of inventory fair value adjustment.

As a result, gross margin for the three and six months ended July 30, 2022 increased 17.2 and 10.5 percentage points compared to the three and six months ended July 31, 2021.

Research and Development

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

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% of net revenue 29.6 % 34.1 % 30.1 % 34.2 %

Research and development expense increased by $158.0 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021.

The increase was primarily due to additional costs from our acquisitions of Inphi and Innovium in fiscal 2022, including $125.0 million of higher employee personnel-related costs and $32.9 million of higher product development and qualification costs recognized in the current period.

Research and development expense increased by $82.0 million in the three months ended July 30, 2022 compared to the three months ended July 31, 2021.

The increase was primarily due to $76.9 million of higher employee personnel-related costs as a result of headcount increases including new employees from our recent acquisitions.

Research and development expense increased by $240.0 million in the six months ended July 30, 2022 compared to the six months ended July 31, 2021.

The increase was primarily due to additional costs from our acquisitions of Inphi and Innovium in fiscal 2022, including $202.0 million of higher employee personnel-related costs recognized in the current period.

Selling, general and administrative

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 14.0 % 24.1 % 14.6 % 24.1 %

Selling, general and administrative expense increased by $34.2 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021.

The increase was primarily due to additional costs from our acquisitions of Inphi and Innovium in fiscal 2022, including $63.1 million of higher intangibles amortization expense, partially offset by $35.3 million of lower integration costs in the current period.

Selling, general and administrative expense decreased by $47.5 million in the three months ended July 30, 2022 compared to the three months ended July 31, 2021.

The decrease was primarily due to $30.3 million of lower integration costs associated with our acquisition of Inphi in fiscal 2022 and $21.5 million of lower intangibles amortization expense related to intangibles that were fully amortized during the first quarter of fiscal 2023.

The decrease was partially offset by $2.5 million of higher employee personnel-related costs as a result of headcount increases including new employees from our recent acquisitions.

Selling, general and administrative expense decreased by $28.3 million in the six months ended July 30, 2022 compared to the six months ended July 31, 2021.

The decrease was reflective of $65.5 million of lower transaction and integration costs associated with our acquisition of Inphi and $32.1 million of lower stock based compensation expense mainly related to accelerated vesting of Inphi equity awards incurred in the prior year when the deal was closing.

The decrease was partially offset by $41.7 million of higher intangibles amortization expense and $17.6 million of higher employee personnel-related costs associated with our acquisitions of Inphi and Innovium in fiscal 2022, as well as acquisitions in the current period.

Legal Settlement

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

Legal settlement $ 85.0 $ — * $ 100.0 $ — *

% of net revenue 5.6 % — % 3.4 % — %

*Not meaningful

We recorded a charge of $85.0 million and $100.0 million in the three and six months ended July 30, 2022 related to a settlement in principle of a contractual dispute.

Refer to “Note 5 - Commitments and Contingencies” for further information.

Restructuring Related Charges

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

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% of net revenue 0.1 % 1.1 % 0.1 % 1.3 %

We recognized $1.3 million of total restructuring related charges in the three months ended April 30, 2022 as we continue to evaluate our existing operations to increase operational efficiency, decrease costs, and increase profitability.

We recognized $1.2 million and $2.5 million of total restructuring related charges in the three and six months ended July 30, 2022 as we continue to evaluate our existing operations to increase operational efficiency, decrease costs, and increase profitability.

See “Note 9 – Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Interest Income

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 0.1 % — % — % — %

Interest income increased by $0.3 million in the three m onths ended April 30, 2022 compared to the three months ended May 1, 2021 due to higher interest rates on our invested cash.

Interest income increased by $0.6 million and $0.9 million in the three and six m onths ended July 30, 2022 compared to the three and six months ended July 31, 2021 due to higher interest rates on our invested cash.

Interest Expense

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

1 unchanged sentence

% of net revenue (2.6) % (3.1) % (2.6) % (3.6) %

Interest expense increased by $1.2 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021.

The increase was primarily due to higher interest expense and amortization of debt issuance costs associated with the 2020 Term Loans and 2026, 2028 and 2031 Senior Notes, partially offset by prior period costs associated with the bridge loan termination.

Interest expense increased by $6.0 million and $7.2 million in the three and six months ended July 30, 2022 compared to the three and six months ended July 31, 2021.

The increase was primarily due to higher interest expense and amortization of debt issuance costs associated with the 2024 and 2026 Term Loans and 2026, 2028 and 2031 Senior Notes, partially offset by prior period costs associated with the bridge loan termination.

Other Income, Net

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 0.2 % (0.2) % 0.3 % — %

Other income, net, increased by $4.0 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021.

The increase was primarily due to a gain from an equity investment in a privately-held company.

Other income, net, increased by $5.4 million and $9.4 million in the three months and six months ended July 30, 2022 compared to the three and six months ended July 31, 2021.

The increase was primarily due to gain from equity investments.

Provision (benefit) for Income Taxes

Three Months Ended

Three Months Ended Six Months Ended

2022 July 31,

Change July 30,

2022 July 31,

(in millions, except percentage)

Provision (benefit) for income taxes $ (0.5) $ (25.6) (98.0)% $ 204.4 $ (53.4) (482.8)%

Our income tax expense for the three months ended April 30, 2022 was $204.9 million compared to a tax benefit of $27.8 million for the three months ended May 1, 2021.

Our income tax expense for the three months ended April 30, 2022 differed from the 21% federal income tax rate, primarily because of the remeasurement of our deferred taxes in Singapore upon the five year extension of our DEI status until June 30, 2029 at the new incentive tax rates that are expected to apply during these future periods for existing deferred tax items, resulting in a net reduction to our Singapore deferred tax assets of $213.6 million and a corresponding income tax expense.

In addition, our tax rate for the three months ended April 30, 2022 was affected by the recognition of benefits for tax credits, discrete tax benefits from stock-based compensation deductions and the tax rate differential on foreign income.

The income tax benefit for the three months ended May 1, 2021 differed from the federal statutory tax rate of 21% primarily because of tax rate differentials on foreign income, tax benefits for stock based compensation and the recognition of tax benefits on the expiration of the statutes of limitations for the assessment of certain foreign taxes.

Our income tax benefit for the three months ended July 30, 2022 was $0.5 million compared to a tax benefit of $25.6 million for the three months ended July 31, 2021.

Our income tax benefit $0.5 million for the three months ended July 30, 2022 differed from the 21% federal income tax rate, primarily because of discrete income tax benefits for stock-based compensation.

Our income tax benefit for the three months ended July 31, 2021 differed from the U.S.

federal tax rate of 21% primarily because of the recognition of a $10.0 million tax benefit for tax basis on the transfer of certain intellectual property from the Inphi acquisition to a subsidiary in Singapore as well as discrete tax benefits related to stock-based compensation.

Our income tax expense for the six months ended July 30, 2022, was $204.4 million compared to a tax benefit of $53.4 million for the six months ended July 31, 2021.

Our income tax expense of $204.4 million for the six months ended July 30, 2022, differs from the federal statutory tax rate of 21% primarily due to the $213.6 million tax impact of the remeasurement of deferred taxes in Singapore, offset by the recognition of discrete tax benefits related to stock-based compensation.

Our income tax benefit of $53.4 million for the quarter ended July 31, 2021, differed from the 21% federal statutory tax rate primarily because of the recognition of a $10.0 million tax benefit attributable to Singapore tax basis in intellectual property, tax benefits related to stock-based compensation, and benefits from expirations of the statutes of limitations related to certain previously unrecognized tax benefits that were recorded in prior periods.

Our provision for incomes taxes may be affected by changes in the geographic mix of earnings with different applicable tax rates, acquisitions, changes in the realizability of deferred tax assets, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of income tax audits, the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities and changes in tax laws and regulations.

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Liquidity and Capital Resources

Our principal source of liquidity as of April 30, 2022 consisted of approximately $465.0 million of cash and cash equivalents, of which approximately $415.6 million was held by subsidiaries outside of the United States.

Our principal source of liquidity as of July 30, 2022 consisted of approximately $617.1 million of cash and cash equivalents, of which approximately $431.3 million was held by subsidiaries outside of the United States.

We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States.

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In December 2020, to fund the Inphi acquisition, we executed a debt agreement to obtain a 3-year term loan of $875.0 million and a 5-year term loan of $875.0 million.

For the quarter ended April 30, 2022, the Company repaid $10.9 million of the principal outstanding of the 5-year term loan.

For the six months ended July 30, 2022, we repaid $21.8 million of the principal outstanding of the 5-year term loan.

In December 2020, we also executed a debt agreement to obtain a $750.0 million revolving credit facility (“2020 Revolving Credit Facility”).

Subsequent to quarter end, on May 3, 2022, the Company drew down $150.0 million on the 2020 Revolving Credit Facility.

The Company intends to repay the drawn amount during the second quarter of fiscal 2023.

During the quarter ended July 30, 2022, we drew down $200.0 million on the 2020 Revolving Credit Facility of which $130.0 million was repaid in the same quarter and $70.0 million of aggregate principal amount of borrowings remained outstanding at July 30, 2022.

In April 2021, we completed an offering and issued (i) 5-year $500.0 million senior notes due in 2026, (ii) 7-year $750.0 million senior notes due in 2028, and (iii) 10-year $750.0 million senior notes due in 2031 (collectively, the “Senior Notes”).

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Cash Flows from Operating Activities

Net cash flow provided by operating activities for the three months ended April 30, 2022 was $194.8 million.

Net cash flow provided by operating activities for the six months ended July 30, 2022 was $526.3 million.

We had a net loss of $161.4 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $272.5 million, deferred income tax expense of $165.0 million, stock-based compensation expense of $131.1 million, depreciation and amortization of $75.7 million, amortization of inventory fair value adjustment associated with the Innovium acquisition of $9.3 million, and $6.7 million net loss from other non-cash items.

Cash outflow from working capital of $299.8 million for the three months ended April 30, 2022 was primarily driven by increases in accounts receivable, inventory, and prepaid expenses and other assets and decrease in accrued employee compensation, partially offset by increases in accounts payable and accrued liabilities and other non-current liabilities.

The increase in accounts receivable was driven primarily by higher revenue and uniform collections.

The increase in inventory is to support future customer demand.

The increase in prepaid expenses and other assets is primarily due to prepayments on supply capacity reservation agreements.

The decrease in accrued employee compensation is due to bonus payout.

amortization of acquired intangible assets of $544.3 million, stock-based compensation expense of $275.6 million, deferred income tax expense of $178.4 million, depreciation and amortization of $152.6 million, amortization of inventory fair value adjustment associated with the Innovium acquisition of $15.6 million, and $24.2 million net loss from other non-cash items.

Cash outflow from working capital of $503.0 million for the six months ended July 30, 2022 was primarily driven by increases in accounts receivable, inventory, and prepaid expenses and other assets and decrease in accrued employee compensation, partially offset by increases in accrued liabilities and other non-current liabilities and accounts payable.

The increase in accounts receivable was primarily due to increased sales, as well as the timing of shipments due to ongoing supply chain challenges.

The increase in inventory was to better support unfulfilled backlog, future customer demand and new product ramps.

The increase in prepaid expenses and other assets was primarily due to prepayments on supply capacity reservation agreements.

The decrease in accrued employee compensation was due to bonus payout.

The increase in accrued liabilities and other non-current liabilities was mainly due to an accrual related to a settlement in principle of a contractual dispute and an increase in ship and debit claim reserve due to price increase and stock replenishment.

The increase in accounts payable was mainly due to timing of payments.

The increase in accrued liabilities and other non-current liabilities is mainly due to an increase in ship and debit claim reserve due to price increase and stock replenishment.

Net cash flow used in operating activities for the three months ended May 1, 2021 was $13.7 million.

Net cash flow provided by operating activities for the six months ended July 31, 2021 was $208.4 million.

We had a net loss of $364.6 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $128.6 million, stock-based compensation expense of $92.7 million, depreciation and amortization of $51.8 million, deferred income tax benefit of $22.6 million, amortization of inventory fair value adjustment associated with the Inphi acquisition of $13.7 million and $31.4 million net loss from other non-cash items.

Cash outflow from working capital of $221.1 million for the three months ended May 1, 2021 was primarily driven by a decrease in accrued employee compensation, decrease in accounts payable, a decrease in accrued liabilities and other non-current liabilities as well as an increase in accounts receivable.

The decrease in accrued employee compensation is due to our annual bonus payment in the period.

The decrease in accounts payable and accrued liabilities and other non-current liabilities is primarily due to payment of banker success fees.

The increase in accounts receivable is due to revenue linearity and lower sales reserves.

amortization of acquired intangible assets of $405.3 million, stock-based compensation expense of $206.8 million, amortization of inventory fair value adjustment associated with the Inphi acquisition of $169.6 million, depreciation and amortization of $118.0 million, deferred income tax benefit of $51.6 million, and $66.1 million net loss from other non-cash items.

Cash outflow from working capital of $341.2 million for the six months ended July 31, 2021 was primarily driven by an increase in accounts receivable and inventory and a decrease in accrued employee compensation.

The increase in accounts receivable was primarily due to increased sales, as well as the timing of shipments due to ongoing supply chain challenges.

The increase in inventory was to better support unfulfilled backlog, future customer demand and new product ramps.

The decrease in accrued employee compensation was due to our annual bonus payment.

Cash Flows from Investing Activities

For the three months ended April 30, 2022, net cash used in investing activities of $82.4 million was primarily driven by net cash paid for business acquisitions of $44.0 million, purchases of property and equipment of $36.9 million, and purchases of technology licenses of $1.6 million.

For the three months ended May 1, 2021, net cash used in investing activities of $3.6 billion was primarily driven by the net cash paid to acquire Inphi of $3.6 billion, purchases of property and equipment of $21.4 million and purchases of technology licenses of $3.4 million.

For the six months ended July 30, 2022, net cash used in investing activities of $212.3 million was primarily driven by purchases of property and equipment of $109.5 million, net cash paid for business acquisitions of $98.6 million, and purchases of technology licenses of $4.2 million.

For the six months ended July 31, 2021, net cash used in investing activities of $3.7 billion was primarily driven by the net cash paid to acquire Inphi of $3.6 billion, purchases of property and equipment of $53.6 million and purchases of technology licenses of $6.6 million.

Cash Flows from Financing Activities

For the three months ended April 30, 2022, net cash used in financing activities of $260.9 million was primarily attributable to $137.6 million tax withholding payments on behalf of employees for net share settlements, $50.9 million for payment of our quarterly dividends, $49.0 million payments on technology license obligations, $15.0 million of repurchases of common stock and $10.9 million repayment of debt, partially offset by $2.5 million proceeds from employee stock plans.

For the three months ended May 1, 2021, net cash provided by financing activities of $3.4 billion was primarily attributable to proceeds from issuance of debt of $3.7 billion, proceeds from capped calls of $111.2 million, partially offset by $200.0 million repayment of debt principal, $73.2 million tax withholding payments on behalf of employees for net share settlements, $71.1 million of repurchase and settlement of convertible notes, $44.1 million payments for technology license obligations and $40.6 million for payment of our quarterly dividends.

For the six months ended July 30, 2022, net cash used in financing activities of $310.4 million was primarily attributable to $171.7 million tax withholding payments on behalf of employees for net share settlements, $151.9 million repayment of debt, $102.0 million for payment of our quarterly dividends, $71.2 million payments for technology license obligations, and $65.0 million of repurchases of common stock, partially offset by $200.0 million drawdown from 2020 Revolving Credit Facility and $51.4 million proceeds from employee stock plans.

For the six months ended July 31, 2021, net cash provided by financing activities of $3.3 billion was primarily attributable to proceeds from issuance of debt of $3.8 billion, proceeds from capped calls of $160.3 million, partially offset by $275.0 million repayment of debt principal, $180.9 million of repurchase and settlement of convertible notes, $116.2 million tax withholding payments on behalf of employees for net share settlements, $89.9 million for payment of our quarterly dividends and $67.3 million payments for technology license obligations.

Capital Resources and Material Cash Requirements

A summary of our capital resources and material cash requirements is presented in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

Other than as described above, there were no material changes to our capital resources and material cash requirements during the three months ended April 30, 2022.

We also discuss updates of our significant commitments in “Note 5 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements.

Other than as described above, there were no material changes to our capital resources and material cash requirements during the six months ended July 30, 2022.

Indemnification Obligations

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What changed 10-Q

Item 2. Management’s Discussion and Analysis