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Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-10 · 113 added, 122 removed, 259 unchanged (48% of the section changed)

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The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Annual Report on Form 10-K.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties, including those discussed under Part I, Item 1A, “Risk Factors.” These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

We are a leading supplier of infrastructure semiconductor solutions, spanning the data center core to network edge.

This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, including those discussed under Part I, Item 1A, “Risk Factors.” These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

We are a leading supplier of data infrastructure semiconductor solutions, spanning the data center core to network edge.

We are a fabless semiconductor supplier of high-performance standard and semi-custom products with core strengths in developing and scaling complex System-on-a-Chip architectures, integrating analog, mixed-signal and digital signal processing functionality.

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 fiscal 2023 was $5.9 billion and was 33% higher than net revenue of $4.5 billion in fiscal 2022.

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

Revenue increased from the data center end market by 71%, from the carrier infrastructure end market by 37%, from the enterprise networking end market by 43%, from the consumer end market by 22%, and from the automotive/industrial end market by 112% co mpared to fiscal 2021.

On April 20, 2021, we completed our acquisition of Inphi in a cash and stock transaction.

Inphi is a global leader in high-speed data movement enabled by optical interconnects.

The consolidated financial statements include the operating results of Inphi for the period from the date of acquisition through our year ended January 29, 2022.

In conjunction with the acquisition, Marvell Technology Group Ltd.

and Inphi became wholly owned subsidiaries of the new parent company, Marvell Technology, Inc.

on April 20, 2021.

The parent company is domiciled in and subject to taxation in the United States.

On October 5, 2021, we completed our acquisition of Innovium, a leading provider of networking solutions for cloud and edge data centers, in an all-stock transaction.

The consolidated financial statements include the operating results of Innovium for the period from the date of acquisition through our year ended January 29, 2022.

See “Note 4 - Business Combinations” and “Note 5 - Goodwill and Acquired Intangible Assets, Net” for more information.

In response to increased demand from customers for our products, our operations team is continuing to ramp production with our global supply chain partners.

However, we are experiencing a number of industry-wide supply constraints affecting the type of high complexity products we provide for data infrastructure.

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.

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

Sales increased from the data center end market by 35%, from the enterprise networking end market by 51%, from the carrier infrastructure end market by 32%, and from the automotive/industrial end market by 43% co mpared to fiscal 2022.

The sales from our consumer end market were relatively flat for fiscal 2023 compared to fiscal 2022.

Starting in fiscal 2022 and through the first half of fiscal 2023, in response to a large increase in demand from our customers for our products in a majority of our end markets as they continued to invest in data infrastructure, our operations team continued to increase production with our global supply chain partners to alleviate supply constraints.

However, with the start of a broad inventory correction in the semiconductor industry, supply constraints have now mostly resolved.

During the second half of fiscal 2023, in response to a softening demand environment, customers started requesting to push out shipments and reschedule orders to manage their inventory.

In the fourth quarter, we saw the largest impact from our storage customers.

In addition, demand for our products has come down significantly from our OEM customers in China, as they deal with a changing macroeconomic situation.

To secure capacity over the long term, we have entered into and expect to continue to enter into capacity reservation arrangements with certain foundries and partners for substrates.

See “Note 6 – Commitments and Contingencies” in the Notes to the Consolidated Financial Statements for additional information.

Securing capacity for growth remains a high priority for our operations team, even as this supply expansion comes with an increase in input costs.

As we have done throughout the supply constraints, we are working with our customers to adjust prices to offset the impact of these cost increases, which lets us jointly benefit from sustained growth.

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

While many of our offices around the world remain open to enable critical on-site business functions in accordance with local government guidelines, the majority of our employees continue to work from home.

We expect COVID-19 to continue to impact our business and for a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “ We face risks related to the COVID-19 pandemic which currently has, and may continue in the future to, significantly disrupt and adversely impact our manufacturing, research and development, operations, sales and financial results.

As part of our response to the effects of COVID-19, we adopted a hybrid work policy where most of our employees have the option to split their time between working from home and the office.

We continue to expect lingering impacts with respect to COVID-19 on our business, for a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part I, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “ We face risks related to the COVID-19 pandemic which currently has, and may continue in the future to, significantly disrupt and adversely impact our manufacturing, research and development, operations, sales and financial results.

We expect that the U.S.

government's export restrictions on certain Chinese customers will continue to impact our revenue in fiscal year 2023.

government’s export restrictions on certain Chinese customers to continue to impact our revenue.

Moreover, concerns that U.S.

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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.

See also Part I, Item IA, “Risk Factors,” including, but not limited to, the risk detailed under the caption “ Adverse changes in the political and economic policies of the U.S.

government in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business.

Our fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31.

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Fiscal 2023, fiscal 2022 and fiscal 2021 each had a 52-week period.

Restructuring.

We continuously evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

In the first quarter of fiscal 2022, a restructuring plan was initiated in order to realign the organization and enable further investment in key priority areas as part of our integration of the acquisitions as described in “Note 4 - Business Combinations.”

During fiscal 2022, we recorded restructuring and other related charges of $31.6 million.

See “Note 10 - Restructuring” in the Notes to the Consolidated Financial Statements for further information.

Capital Return Program.

We remain committed to delivering stockholder value through our stock repurchase and dividend programs.

On October 16, 2018, we announced that our Board of Directors authorized a $700 million addition to the balance of our existing stock repurchase program.

Under the program authorized by our Board of Directors, we may repurchase shares of stock in the open-market or through privately negotiated transactions.

Under the program authorized by our Board of Directors, we may repurchase shares of our common stock in the open-market or through privately negotiated transactions.

The extent to which we repurchase our stock and the timing of such repurchases will depend upon market conditions, legal rules and regulations, and other corporate considerations, as determined by our management team.

The stock repurchase program was temporarily suspended in late March 2020 to preserve cash during the COVID-19 pandemic.

We are focusing on reducing our debt and de-levering our balance sheet.

As a result, we did not repurchase any stock during fiscal 2022.

We will continue to evaluate business conditions to decide when to restart the stock repurchase program.

As of January 29, 2022, there was $564.5 million remaining available for future stock repurchases.

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 our fiscal year ended January 28, 2023, we repurchased 2.3 million shares of our common stock for $115.0 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 January 28, 2023, $449.5 million remained available under our stock repurchase program for future stock repurchases.

See “Note 11 – Stockholders’ Equity” in the Notes to the Consolidated Financial Statements for further information.

We returned $191.0 million to stockholders in fiscal 2022 in cash dividends.

As of January 28, 2023, a total of 310.4 million shares have been repurchased since inception of our current and previous stock repurchase programs for an aggregate total of $4.4 billion in cash.

We returned $319.4 million to stockholders in fiscal 2023 through $115.0 million in repurchases of shares of common stock and $204.4 million in cash dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $613.5 million at January 29, 2022, which were $135.0 million lower than our balance at our fiscal year ended January 30, 2021 of $748.5 million.

We had cash flow provided by operations of $819.4 million during fiscal 2022.

Our cash and cash equivalents were $911.0 million at January 28, 2023, which were $297.5 million higher than our balance at our fiscal year ended January 29, 2022 of $613.5 million .

Sales and Customer Composition.

We continuously monitor the creditworthiness of our customers and distributors and believe these distributors’ sales to diverse end customers and geographies further serve to mitigate our exposure to credit risk.

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 78% of our net revenues in fiscal 2022, 80% of our net revenue in fiscal 2021 and 82% of our net revenue in fiscal 2020.

We regularly monitor the creditworthiness of our customers and distributors and believe these distributors’ sales to diverse end customers and geographies further serve to mitigate our exposure to credit risk.

Most of our sales are made to customers with operations 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 fiscal 2023, 78% of our net revenue in fiscal 2022 and 80% of our net revenue in fiscal 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.

For risks related to our global operations, see Part I, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “ We face additional risks due to the extent of our global operations since a majority of our products, and those of our customers, are manufactured and sold outside of the United States.

For risks related to our global operations, see Part I, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “ We face additional risks due to the extent of our global operations since a majority of our products, and those of many of our customers, are manufactured and sold outside of the United States.

The occurrence of any or a combination of the additional risks described below would significantly and negatively impact our business and results of operations.”

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If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our gross margin.

Conversely, we may have insufficient inventory, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.”

Conversely, we may have insufficient inventory, or be unable to obtain the supplies or contract manufacturing capacity to meet that demand, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.”

Critical Accounting Policies and Estimates

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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, our estimates could require increased judgment and carry a higher degree of variability and volatility.

In the macroeconomic environment affected by COVID-19, 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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Total operating expenses 46.5 54.0

Operating loss (7.7) (8.7)

Operating income (loss) 4.0 (7.7)

Interest income 0.1 —

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Other income, net 0.2 —

Loss before income taxes (10.8) (10.8)

Benefit for income taxes (1.4) (1.5)

Loss, net of tax (9.4) % (9.3) %

Income (loss) before income taxes 1.4 (10.8)

Provision (benefit) for income taxes 4.2 (1.4)

Net loss (2.8) % (9.4) %

2023 January 29,

2022 % Change

(in thousands, except percentage)

(in millions, except percentage)

Net revenue $ 5,919.6 $ 4,462.4 32.7 %

Our net revenue for fiscal 2023 increased by $1.5 billion compared to net revenue for fiscal 2022.

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

Average selling prices increased 20% compared to fiscal 2021, and unit shipments were 30% higher compared to fiscal 2021, for an overall increase in net revenue of 50%.

This was primarily driven by organic growth of our business and the acquisition of Inphi, which increased our unit shipments, and relatively higher sales of our products where we supply more content and features to our customers, which increased our average selling prices.

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

The sales from the consumer end market were relatively flat for fiscal 2023 compared to fiscal 2022.

The overall increase in revenue of 33% for fiscal 2023 was primarily driven by relatively higher sales of products with higher average selling prices associated with higher content and more features.

In addition, the overall increase in net revenue was also driven by an increase in demand for our products and the year-over-year impact of acquisitions made in fiscal 2022, with both factors contributing to higher sales of products and higher unit shipments.

Cost of Goods Sold and Gross Profit

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Cost of goods sold $ 2,932.1 $ 2,398.2 22.3 %

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% of net revenue 50.5 % 46.3 %

Cost of goods sold as a percentage of net revenue increased for fiscal 2022 compared to fiscal 2021 primarily due to increased costs associated with the Inphi and Innovium acquisitions including amortization of inventory fair value adjustment and amortization of acquired intangible assets.

As a result, gross margin for fiscal 2022 decreased 3.8 percentage points compared to fiscal 2021.

Cost of goods sold as a percentage of net revenue decreased for fiscal 2023 compared to fiscal 2022 primarily due to lower amortization of inventory fair value adjustment and acquired intangible assets as a percentage of net revenue.

As a result, gross profit for fiscal 2023 increased 4.2 percentage points compared to fiscal 2022.

Research and Development

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Research and development $ 1,784.3 $ 1,424.2 25.3 %

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Research and development expense increased by $360.1 million in fiscal 2023 compared to fiscal 2022.

The increase was primarily due to additional costs from our acquisition of Inphi and Innovium, including $268.0 million of higher personnel-related costs, $39.3 million of higher computer-aided design software related costs, $20.8 million of higher depreciation and amortization costs and $18.7 million of higher engineering design and supplies costs.

The increase was partially offset by $55.6 million of higher non-recurring engineering credits recognized in the current period compared to fiscal 2021.

The increase was primarily due to $255.1 million of higher employee personnel-related costs, including $99.2 million of higher stock-based compensation expense, as a result of headcount increases, including the addition of new employees from our recent acquisitions, $42.0 million of higher engineering design costs, and $24.9 million higher depreciation and amortization costs.

Selling, General and Administrative

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Selling, general and administrative $ 843.6 $ 955.3 (11.7) %

% of net revenue 14.3 % 21.4 %

Selling, general and administrative expense increased by $488.0 million in fiscal 2022 compared to fiscal 2021.

The increase was due primarily to additional costs from our acquisitions of Inphi and Innovium, including $264.5 million of higher amortization of acquired intangible assets, $140.2 million of higher employee personnel-related costs and $95.4 million higher merger and integration costs.

Selling, general and administrative expense decreased by $111.7 million in fiscal 2023 compared to fiscal 2022.

The decrease was primarily due to a $97.9 million decrease in transaction and integration costs associated with our acquisitions of Inphi and Innovium, Inc.

(“Innovium”) that were incurred in the prior year.

In addition, our employee personnel-related costs were lower by $13.7 million due to lower stock based compensation expense mainly related to accelerated vesting of Inphi equity awards incurred in the prior year as part of the Inphi acquisition.

Stock-Based Compensation Expense

2023 January 29,

(in thousands)

(in millions)

Cost of goods sold $ 43.3 $ 31.1

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Stock-based compensation expense increased by $74.9 million in fiscal 2023 compared to fiscal 2022.

The increase was mainly due to additional equity awards assumed upon the Inphi and Innovium acquisitions as described in “Note 4 - Business Combinations” and “Note 13 - Employee Benefit Plans” in the Notes to the Consolidated Financial Statements.

Stock-based compensation under research and development and cost of goods sold increased by $99.2 million and $12.2 million, respectively, partially offset by decrease under selling, general and administrative expense by $36.5 million.

The increase was mainly due to additional equity awards assumed as part of the Inphi and Innovium acquisitions as described in “Note 7 – Business Combinations” and “Note 12 – Employee Benefit Plans” in the Notes to the Consolidated Financial Statements.

The decrease in stock-based compensation expense under selling, general and administrative expense was mainly related to accelerated vesting of Inphi/Innovium equity awards incurred in the prior year as part of the Inphi and Innovium acquisitions.

Legal Settlement

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Legal settlement $ 100.0 $ — *

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*Not meaningful

In connection with a dispute, we recorded a charge of $36 million in fiscal year 2021.

We recorded a charge of $100.0 million in fiscal year 2023 related to the settlement of a contractual dispute.

Refer to “Note 6 – Commitments and Contingencies” in the Notes to the Consolidated Financial Statements for a discussion of this settlement.

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2023 January 29,

(in thousands)

2022 January 30,

(in millions)

Restructuring related charges $ 21.6 $ 32.4 $ 170.8

Fiscal 2023 vs Fiscal 2022 :

We recorded total restructuring related charges of $21.6 million in fiscal 2023 as we integrated the acquired businesses and continued to evaluate our existing operations to increase operational efficiency, decrease costs and improve profitability.

Fiscal 2022 vs Fiscal 2021 :

During the second quarter of fiscal 2021, we made changes to the scope of our server processor product line in response to changes in the associated market.

We transitioned our product offering from standard server processors to the broad server market to focus only on customized server processors for a few targeted customers.

This change in strategy required us to assess whether the carrying value of the associated assets would be recoverable.

As a result of the assessment, we determined the carrying amount of certain impacted assets were not recoverable, which resulted in recognition of $119.0 million of restructuring related charges associated with the server processor product line during the second quarter of fiscal 2021.

The charges included $50.3 million in impairment of acquired intangibles, $36.0 million in impairment of purchased IP licenses and $32.7 million in equipment and inventory impairment and other related restructuring charges.

The remaining restructuring charges of $61.4 million include approximately $36.9 million in severance and related costs and $24.5 million in other costs.

The severance costs primarily relate to the employee separation costs in connection with the acquisitions.

The other costs primarily relate to the remaining payments under lease obligations upon vacating certain worldwide office locations, and ongoing operating expenses of vacated facilities.

See “Note 10 – Restructuring” in the Notes to the Consolidated Financial Statements for further information.

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Interest income $ 5.3 $ 0.8 562.5 %

% of net revenue 0.1 % — %

Interest income decreased by $1.8 million in fiscal 2022 compared to fiscal 2021 primarily due to lower interest rates on our invested cash.

Interest income increased by $4.5 million in fiscal 2023 compared to fiscal 2022 due to higher interest rates on our invested cash and higher cash balance.

Interest Expense

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Interest expense $ (170.6) $ (139.3) 22.5 %

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Interest expense increased by $31.3 million in fiscal 2023 compared to fiscal 2022.

The increase was primarily due to the interest expense on the 2020 Term Loans in addition to the new 2026, 2028, and 2031 Senior Notes issued in the first quarter of fiscal 2022, as well as the write-off of issuance costs related to the bridge loan when the loan was terminated in the first quarter of fiscal 2022.

See “Note 8 - Debt” in the Notes to the Consolidated Financial Statements for additional information.

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

Other Income, net

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2022 % Change

(in thousands, except percentages)

(in millions, except percentages)

Other income, net $ 12.4 $ 2.7 359.3%

% of net revenue 0.2 % — %

Other income, net was relatively flat in fiscal 2022 compared to fiscal 2021.

Other income, net increased by $9.7 million in fiscal 2023 compared to fiscal 2022.

The increase was primarily due to gains from equity investments and exchange rate fluctuations.

Provision (Benefit) for Income Taxes

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2022 % Change

(in thousands, except percentage)

(in millions, except percentage)

Provision (benefit) for income taxes $ 248.6 $ (62.5) (497.8) %

The income tax benefit for fiscal 2022 differs from the U.S.

The income tax expense for fiscal 2023 differs from the U.S.

federal statutory rate of 21% primarily due to the remeasurement of Singapore deferred taxes upon extension of the Company’s tax incentive in Singapore, tax benefits attributable to reduction in tax reserves as a result of settled income tax audits in combination with the lapsing of statute of limitations, offset by foreign income inclusions in the U.S., and a tax expense related to the recapture of Israel corporate income taxes.

The income tax expense for fiscal 2023 is also impacted by a substantial portion of the Company’s earnings, or in some cases, losses being taxed or benefited at rates lower than the U.S.

statutory rate, stock compensation tax benefits, and disallowed deductions related to non-deductible compensation.

The income tax benefit for fiscal 2022 differed from the U.S.

federal statutory rate of 21% primarily due to tax benefits of stock-based compensation, offset by foreign income inclusions in the U.S.

and non-deductible compensation.

The income tax benefit for fiscal 2021 differed from the U.S.

federal statutory rate of 21% primarily due to pretax losses of subsidiaries with income tax rates that differed from the U.S.

statutory tax rate, combined with a net reduction of unreco gnized tax benefits inclusive of interest and penalties, offset by tax expenses attributable to non-deductible compensation.

We continue to evaluate potential changes to our legal entity structure in response to guidelines and requirements in various international tax jurisdictions where we conduct business, as well as changes to our business, and acquisitions and divestitures.

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Additionally, please see the information in “Item 1A:

Risk Factors” under the caption “ Changes in existing taxation benefits, rules or practices may adversely affect our financial results .”

Our Annual Report on Form 10-K for the year ended January 30, 2021 includes a discussion and analysis of our financial condition and results of operations for the year ended February 1, 2020 and year-to-year comparisons between the fiscal years ended January 30, 2021 and February 1, 2020 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risk Factors” under the caption “ Changes in existing taxation benefits, tax rules or tax practices may adversely affect our financial results .”

Our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 includes a discussion and analysis of our financial condition and results of operations for the year ended January 30, 2021 and year-to-year comparisons between the fiscal years ended January 29, 2022 and January 30, 2021 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Liquidity and Capital Resources

Our principal source of liquidity as of January 29, 2022 consisted of approximately $613.5 million of cash and cash equivalents, of which approximate ly $498.0 million was held by subsidiaries outside of the United States.

Our principal source of liquidity as of January 28, 2023 consisted of approximately $911.0 million of cash and cash equivalents, of which approximately $642.0 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.

See “Note 13 – Income Taxes” in the Notes to the Consolidated Financial Statements for further information.

In April 2021, we assumed $15.7 million in principal of Inphi’s 0.75% convertible senior notes due 2021 and $506 million in principal of Inphi’s 0.75% convertible senior notes due 2025 from Inphi.

We also acquired capped call assets in relation to the convertible debt.

See “Note 8 - Debt” in the Notes to the Consolidated Financial Statements for additional information.

As of January 29, 2022, the Inphi convertible notes have been settled.

In December 2020, to fund the Inphi acquisition, we executed a debt agreement to obtain a $875 million 3-year term loan and a $875 million 5-year term loan.

During the year ended January 29, 2022, the Company repaid $140 million and $21.9 million of the principal outstanding of the 3-year term loan and 5-year term loan, respectively.

We also executed a debt agreement to obtain a $750 million revolving credit facility.

In April 2021, we completed an offering and issued (i) $500 million of senior notes with a 5-year term due in 2026, (ii) $750 million of senior notes with a 7-year term due in 2028, and (iii) $750 million of senior notes with a 10-year term due in 2031 (collectively, the “Senior Notes”).

On October 8, 2021, the Senior Notes were exchanged for new notes.

The terms of the new notes issued in the exchange are substantially identical to the Senior Notes issued in April 2021, except that the new notes are registered under the Securities Act of 1933 and the transfer restrictions and registration rights applicable to the Senior Notes issued in April 2021 do not apply to the new notes.

In addition, in May 2021, in conjunction with the U.S.

domiciliation, we exchanged certain of our existing senior notes due in 2023 (“MTG 2023 Notes”) and 2028 (“MTG 2028 Notes”) (collectively, the “MTG Senior Notes”) that were previously issued by the former Bermuda-based parent with like notes that were issued by the new parent domiciled in Delaware (the “MTI Senior Notes”).

On December 16, 2021, the MTI Senior Notes were exchanged for new notes.

The terms of the new notes issued in the exchange are substantially identical to the MTI Senior Notes issued in May 2021, except that the new notes are registered under the Securities Act of 1933 and the transfer restrictions and registration rights applicable to the MTI Senior Notes issued in May 2021 do not apply to the new notes.

See “Note 8 - Debt” in the Notes to the Consolidated Financial Statements for additional information.

In December 2020, to fund the Inphi acquisition, we executed the 2024 and 2026 Term Loan Agreement to obtain the 2024 and 2026 Term Loans.

For the year ended January 28, 2023, we repaid $65.6 million of the principal outstanding on the 2026 Term Loan.

As of January 28, 2023, we had $735.0 million borrowings outstanding under the 2024 Term Loan and $787.5 million borrowings outstanding under the 2026 Term Loan.

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

During the year ended January 28, 2023 we drew down $200.0 million on the 2020 Revolving Credit Facility which has been fully repaid at January 28, 2023.

As of January 28, 2023, we had $2.0 billion aggregate principal amount of Senior Notes outstanding and $1.0 billion in aggregate principal amount of the MTG/MTI Senior Notes outstanding.

The notes are registered under the Securities Act.

For a description of our contractual obligations including debt, leases, and purchase commitments, see “Note 4 – Debt,” “Note 5 – Leases,” and “Note 6 – Commitments and Contingencies” in the Notes to the Consolidated Financial Statements.

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We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.

We believe that our existing cash, cash equivalents, together with cash generated from operations, and funds from our 2020 Revolving Credit Facility will be sufficient to cover our working capital needs, capital expenditures, investment requirements and any declared dividends, repurchase of our common stock and commitments for at least the next twelve months.

Our capital requirements will depend on many factors, including our rate of sales growth, market acceptance of our products, costs of securing access to adequate manufacturing capacity, the timing and extent of research and development projects and increases in operating expenses, which are all subject to uncertainty.

We believe that our existing cash, cash equivalents, together with cash generated from operations, and funds from our 2020 Revolving Credit Facility will be sufficient to cover our working capital needs, capital expenditures, investment requirements, any declared dividends, repurchases of our common stock and commitments (including those discussed in “Note 6 – Commitments and Contingencies” in the Notes to the Consolidated Financial Statements) for at least the next twelve months.

To the extent that our existing cash and cash equivalents together with cash generated by operations, and funds available under our 2020 Revolving Credit Facility are insufficient to fund our future activities, we may need to raise additional funds through public or private debt or equity financing.

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Our dividend payments and repurchases of common stock may change from time to time, and we cannot provide assurance that we will continue to declare dividends or repurchase stock at all or in any particular amounts.

Our stock repurchase program was temporarily suspended in late March 2020 to preserve cash during the COVID-19 pandemic.

We are focusing on reducing our debt and de-levering our balance sheet.

We will continue to evaluate business conditions to decide when to restart the stock repurchase program.

Cash Flows from Operating Activities

Net cash provided by operating activities was $819.4 million for fiscal 2022 compared to net cash provided by operating activities of $817.3 million for fiscal 2021.

The cash inflows from operations for fiscal 2022 were primarily due to $421.0 million of net loss adjusted for $1.9 billion of non-cash items and a net decrease from changes in working capital of $662.9 million.

The cash outflow from working capital for fiscal 2022 was primarily driven by an increase in accounts receivable, an increase in inventories and an increase in prepaid expenses and other assets.

Net cash provided by operating activities was $1.3 billion for fiscal 2023 compared to net cash provided by operating activities of $819.3 million for fiscal 2022.

We had a net loss of $163.5 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $1.1 billion, stock-based compensation expense of $552.4 million, depreciation and amortization of $304.9 million, deferred income tax expense of $50.4 million, amortization of inventory fair value adjustment associated with Innovium acquisition of $38.7 million, amortization of deferred debt issuance costs and debt discounts of $10.3 million, restructuring related impairment charges of $5.6 million and $52.4 million net loss from other non-cash items.

Cash outflow from working capital of $649.8 million for fiscal 2023 was primarily driven by an increase in accounts receivable, an increase in inventories, an increase in prepaid expenses and other assets, and a decrease in accounts payable partially offset by cash inflows due to an increase in accrued liabilities and other non-current liabilities and an increase in accrued employee compensation.

The increase in accounts receivable was primarily due to increase sales, as well as changes to the timing of shipments due to evolving supply chain dynamics.

We increased inventory in order to better support unfulfilled backlog, new product ramps and the impact from inventory correction late in the year.

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

The decrease in accounts payable was primarily due to the timing of payments.

The increase in accrued liabilities and other non-current liabilities was primarily due to accruals relating to settlement of contractual disputes and an increase in ship and debit claim reserve due to price increases and stock replenishment.

The increase in accrued employee compensation was due to increases in our bonus accrual and in employee contributions to the employee stock purchase plan, net of payments.

Net cash provided by operating activities was $819.3 million for fiscal 2022.

We had a net loss of $421.0 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $979.4 million, stock-based compensation expense of $460.7 million, depreciation and amortization of $265.9 million, amortization of inventory fair value adjustment associated with Inphi and Innovium acquisitions of $194.3 million, deferred income tax benefit of $93.9 million, amortization of deferred debt issuance costs and debt discounts of $21.6 million, restructuring related impairment charges of $6.2 million and $69.0 million net loss from other non-cash items.

Cash outflow from working capital of $662.9 million was primarily driven by an increase in accounts receivable, an increase in inventories and an increase in prepaid expenses and other assets.

Such increases were partially offset by cash inflows due to an increase in accounts payable, an increase in accrued liabilities and other non-current liabilities and an increase in accrued employee compensation.

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The increase in accrued employee compensation was due to the increase in our bonus accrual.

Net cash provided by operating activities was $817.3 million for fiscal 2021.

The cash inflows from operations for fiscal 2021 were primarily due to $277.3 million of net loss adjusted for $1.0 billion of non-cash items and a net increase from changes in working capital of $67.9 million.

The cash inflow from working capital for fiscal 2021 was primarily driven by an increase in accrued liabilities and other non-current liabilities, an increase in accounts payable, and an increase in accrued employee compensation, as well as a decrease in inventories.

Such increase was partially offset by cash outflows due to an increase in accounts receivable and an increase in prepaid expenses and other assets.

The increase in accrued liabilities and other non-current liabilities was mainly due to an increase in legal reserves.

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

The increase in accrued employee compensation was due to the increase in our bonus accrual and increase in employee contributions to the employee stock purchase plan.

The decrease in inventories was due to improved supply chain management.

The increase in accounts receivable was driven primarily by the increase in revenue and stable collections.

The increase in prepaid expenses and other assets was due to an increase in ship and debit reserve.

Cash Flows from Investing Activities

Net cash used in investing activities of $328.4 million in fiscal 2023 was primarily driven by the purchases of property and equipment of $206.2 million, net cash consideration for business acquisitions of $112.3 million , and purchases of technology licenses of $11.1 million.

Net cash used in investing activities of $3.7 billion in fiscal 2022 was primarily driven by the net cash consideration for business acquisitions of $3.6 billion, purchases of property and equipment of $169.2 million and purchases of technology licenses of $17.7 million.

Net cash used in investing activities of $119.6 million in fiscal year 2021 was primarily driven by purchases of property and equipment of $106.8 million, and purchases of technology licenses of $12.7 million.

Cash Flows from Financing Activities

Net cash provided by financing activities of $2.8 billion in fiscal 2022 was primarily attributable to proceeds from issuance of debt of $3.9 billion, $160.3 million proceeds from capped calls and $84.5 million proceeds from the issuance of our common stock under our equity inventive plans.

The increases were partially offset by $526.9 million repayment of debt principal, $305.7 million for withholding tax paid on behalf of employees for net share settlement, $191.0 million payment for our quarterly dividends, $181.2 million payment for repurchases and settlement of convertible notes, $134.4 million payments for technology license obligations and $11.9 million payments for debt financing and equity issuance costs associated with the Inphi acquisition.

Net cash used in financing activities of $596.8 million in fiscal year 2021 was primarily attributable to $250.0 million repayment of debt principal, $160.6 million payment for our quarterly dividends, $100.0 million payment for technology license obligations and $38.0 million payments for debt financing and equity issuance costs associated with the Inphi acquisition.

Net cash used in financing activities of $662.9 million in fiscal 2023 was primarily attributable to $265.6 million repayment of debt principal, $227.6 million for withholding tax paid on behalf of employees for net share settlement, $204.4 million payment for our quarterly dividends, $142.5 million payments for technology license obligations and $115.0 million repurchases of common stock.

These outflows were partially offset by proceeds from issuance of debt of $200.0 million, and $91.3 million proceeds from the issuance of our common stock under our equity inventive plans.

Net cash provided by financing activities of $2.8 billion in fiscal year 2022 was primarily attributable to proceeds from issuance of debt of $3.9 billion, $160.3 million proceeds from capped calls and $84.5 million proceeds from the issuance of our common stock under our equity inventive plans.

These inflows were partially offset by $526.8 million repayment of debt principal, $305.8 million for withholding tax paid on behalf of employees for net share settlement, $191.0 million payment for our quarterly dividends, $181.2 million payment for repurchases and settlement of convertible notes, $134.5 million payments for technology license obligations and $11.8 million payments for debt financing and equity issuance costs associated with the Inphi acquisition.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis