What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-12-01 compared with 2023-08-25 · 128 added, 127 removed, 185 unchanged (58% of the section changed)

34 unchanged sentences

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, enterprise networking, carrier infrastructure, consumer, and automotive/industrial end markets.

Net revenue in the second quarter of fiscal 2024 was $1.3 billion and was 12% lower than net revenue of $1.5 billion in the second quarter of fiscal 2023.

This was due to a decrease in sales to the data center end market by 29%, a decrease in sales to the enterprise networking end market by 4% and a decrease in sales to the carrier infrastructure end market by 3%.

These decreases were partially offset by an increase in sales to the automotive/industrial end market by 32% and an increase in sales to the consumer end market by 2%.

Net revenue in the third quarter of fiscal 2024 was $1.4 billion and was 8% lower than net revenue of $1.5 billion in the third quarter of fiscal 2023.

This was due to a decrease in sales to the data center end market by 11%, a decrease in sales to the enterprise networking end market by 28% and a decrease in sales to the consumer end market by 5%.

These decreases were partially offset by an increase in sales to the automotive/industrial end market by 26% and an increase in sales to the carrier infrastructure end market by 17%.

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.

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In the first quarter of fiscal 2024, we initiated a restructuring plan to streamline our organization and optimize resources.

The restructuring and other related charges recorded were $42.0 million and $101.9 million for the three and six months ended July 29, 2023.

The restructuring and other related charges recorded were $3.4 million and $105.3 million for the three and nine months ended October 28, 2023.

See “Note 8 - Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

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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.

During the six months ended July 29, 2023, we did not repurchase shares of our common stock.

As of July 29, 2023, $449.5 million remained available for future stock repurchases.

As of July 29, 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 $103.1 million to stockholders in the six months ended July 29, 2023 in cas h dividends.

Subsequent to quarter end through August 18, 2023, we repurchased 0.8 million shares of our common stock for $50.0 million pursuant to a 10b5-1 trading plan.

During the nine months ended October 28, 2023, the Company repurchased 0.8 million shares of its common stock for $50.0 million pursuant to a 10b5-1 trading plan.

As of October 28, 2023, $399.5 million remained available for future stock repurchases.

As of October 28, 2023, a total of 311.3 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 $204.9 million to stockholders in the nine months ended October 28, 2023, including our repurchases of common stock and $154.9 million in cas h dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $423.4 million at July 29, 2023, which were $487.6 million lower than our balance at our fiscal year ended January 28, 2023 of $911.0 million.

Our cash and cash equivalents were $725.6 million at October 28, 2023, which were $185.4 million lower than our balance at our fiscal year ended January 28, 2023 of $911.0 million.

Sales and Customer Composition.

Our accounts receivable was concentrated with four customers at July 29, 2023, who represented a total of 70% of gross accounts receivable, compared with four customers at July 30, 2022, who represented 56% of gross accounts receivable.

During the three months ended July 29, 2023, there was no net revenue attributable to a customer, other than one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

During the six months ended July 29, 2023, there was one customer, in addition to two distributors, 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, there was no net revenue attributable to a customer, other than one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

Our accounts receivable was concentrated with four customers at October 28, 2023, who represented a total of 72% of gross accounts receivable, compared with four customers at October 29, 2022, who represented 56% of gross accounts receivable.

During the three months ended October 28, 2023, there was one customer in addition to one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

During the nine months ended October 28, 2023, there were two customers, in addition to one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue.

During the three and nine months ended October 29, 2022, there was no net revenue attributable to a 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 significant customers 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 Six Months Ended

2023 July 30,

2022 July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Customer A 16% * 11% *

Distributor A 24% 22% 21% 22%

Distributor B * * 10% *

*Less than 10% of net revenue.

1 unchanged sentence

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 68% and 69% of our net revenue in the three and six months ended July 29, 2023, respectively, and approximately 76% of net revenue in the three and six months ended July 30, 2022.

Sales shipped to customers with operations in Asia represented approximately 66% and 68% of our net revenue in the three and nine months ended October 28, 2023, respectively, and approximately 75% and 76% of net revenue in the three and nine months ended October 29, 2022, respectively.

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 July 29, 2023 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, 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 28, 2023.

There have been no material changes during the three months ended October 28, 2023 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, 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 28, 2023.

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

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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 Six Months Ended

2023 July 30,

2022 July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Net revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Net income (loss) (11.5) % 1.0 % (13.2) % (3.2) %

Three and six months ended July 29, 2023 and July 30, 2022

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three and nine months ended October 28, 2023 and October 29, 2022

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

Net revenue $ 1,418.6 $ 1,537.3 (7.7)% $ 4,081.2 $ 4,501.1 (9.3)%

Our net revenue for the three months ended July 29, 2023 decreased by $176.0 million compared to net revenue for the three months ended July 30, 2022.

The decreases were partially offset by an increase in sales to the automotive/industrial end market by 32% and an increase in sales to the consumer end market by 2%.

Our net revenue for the six months ended July 29, 2023 decreased by $301.2 million compared to net revenue for the six months ended July 30, 2022.

This was due to a decrease in sales to the data center end market by 30% and a decrease in sales to the consumer end market by 10%.

The decreases were partially offset by an increase in sales to the automotive/industrial end market by 15%, an increase in sales to the enterprise networking end market by 10% and an increase in sales to the carrier infrastructure end market by 5%.

The ove rall decreases in net revenue of 12% and 10%, respectively, for the three and six months ended July 29, 2023 compared to the three and six months ended July 30, 2022, were primarily driven by lower unit shipments related to storage products.

Our net revenue for the three months ended October 28, 2023 decreased by $118.7 million compared to net revenue for the three months ended October 29, 2022.

This was due to a decrease in sales to the data center end market by 11%, a decrease in sales to the enterprise networking end market by 28% and a decrease in sales to the consumer end market by 5%.

The decreases were partially offset by an increase in sales to the automotive/industrial end market by 26% and an increase in sales to the carrier infrastructure end market by 17%.

Our net revenue for the nine months ended October 28, 2023 decreased by $419.9 million compared to net revenue for the nine months ended October 29, 2022.

This was due to a decrease in sales to the data center end market by 24%, a decrease in sales to the consumer end market by 8% and a decrease in sales to the enterprise networking end market by 4%.

The decreases were partially offset by an increase in sales to the automotive/industrial end market by 19% and an increase in sales to the carrier infrastructure end market by 9%.

The ove rall decreases in net revenue of 8% and 9%, respectively, for the three and nine months ended October 28, 2023 compared to the three and nine months ended October 29, 2022, were primarily driven by lower unit shipments related to storage products.

Cost of Goods Sold and Gross Profit

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

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% of net revenue 38.9 % 50.6 % 39.9 % 51.4 %

Cost of goods sold as a percentage of net revenue increased for the three and six months ended July 29, 2023 compared to the three and six months ended July 30, 2022, which is primarily due to a shift in product mix and charges for product claim related matters.

As a result, gross margin for the three and six months ended July 29, 2023 decreased by 12.9 and 11.4 percentage points compared to the three and six months ended July 30, 2022.

Cost of goods sold as a percentage of net revenue increased for the three and nine months ended October 28, 2023 compared to the three and nine months ended October 29, 2022, which is primarily due to charges for product claim related matters.

Refer to “Note 5 - Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

As a result, gross margin for the three and nine months ended October 28, 2023 decreased by 11.7 and 11.5 percentage points compared to the three and nine months ended October 29, 2022.

Research and Development

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 33.9 % 29.1 % 35.2 % 29.8 %

Research and development expense increased by $25.8 million in the three months ended July 29, 2023 compared to the three months ended July 30, 2022.

The increase was primarily due to higher employee compensation related costs, higher facility expenses and higher other engineering materials and supplies costs.

Research and development expense increased by $62.4 million in the six months ended July 29, 2023 compared to the six months ended July 30, 2022.

The increase was primarily due to $33.7 million of higher employee compensation related costs and $5.8 million of higher facility expenses.

Research and development expense increased by $33.0 million in the three months ended October 28, 2023 compared to the three months ended October 29, 2022.

The increase was primarily due to higher mask prototyping expenses and higher employee compensation related costs.

Research and development expense increased by $95.4 million in the nine months ended October 28, 2023 compared to the nine months ended October 29, 2022.

The increase was primarily due to higher mask prototyping expenses and higher employee compensation related costs.

Selling, General and Administrative

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 15.0 % 13.5 % 15.2 % 14.2 %

Selling, general and administrative expense was relatively flat for the three months ended July 29, 2023 compared to the three months ended July 30, 2022.

Selling, general and administrative expense decreased by $23.4 million in the six months ended July 29, 2023 compared to the six months ended July 30, 2022.

The decrease was primarily due to $13.5 million of lower intangibles amortization expense related to intangibles that were fully amortized during the first quarter of fiscal 2023 and $12.4 million of lower integration costs associated with our prior acquisitions.

Selling, general and administrative expense increased by $5.2 million in the three months ended October 28, 2023 compared to the three months ended October 29, 2022.

The increase was primarily due to charges for an intellectual property matter.

The increase was partially offset by lower intangibles amortization expense related to intangibles that were fully amortized during fiscal 2024 and lower other marketing expenses.

Selling, general and administrative expense decreased by $18.2 million in the nine months ended October 28, 2023 compared to the nine months ended October 29, 2022.

The decrease was primarily due to $16.0 million of lower intangibles amortization expense related to intangibles that were fully amortized during fiscal 2023 and fiscal 2024 and $3.3 million of lower employee compensation related costs.

Legal Settlement

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

2 unchanged sentences

*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 of a contractual dispute.

Refer to “Note 4 - Commitments and Contingencies” for further information.

We recorded a charge of $100.0 million in the nine months ended October 29, 2022 related to the settlement of a contractual dispute.

Refer to “Note 5 - Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Restructuring Related Charges

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 0.2 % 1.0 % 2.6 % 0.4 %

We recognized $42.0 million and $101.9 million of total restructuring related charges in the three and six months ended July 29, 2023 as a result of our restructuring plan to streamline our organization and optimize resources.

See “Note 7 – Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

We recognized $3.4 million and $105.3 million of total restructuring related charges in the three and nine months ended October 28, 2023 as a result of our restructuring plan to streamline our organization and optimize resources.

Refer to “Note 8 – Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Interest Income

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 0.1 % 0.1 % 0.2 % 0.1 %

Interest income increased by $0.8 million and $2.8 million in the three and six m onths ended July 29, 2023, respectively, compared to the three and six months ended July 30, 2022 due to higher interest rates on our invested cash.

Interest income was relatively flat for the three months ended October 28, 2023, compared to the three months ended October 29, 2022.

Interest income increased by $3.0 million in the nine months ended October 28, 2023, compared to the nine months ended October 29, 2022 due to higher interest rates on our invested cash.

Interest Expense

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue (3.7) % (2.9) % (3.9) % (2.7) %

Interest expense increased by $14.0 million and $30.4 million in the three and six months ended July 29, 2023, respectively, compared to the three and six months ended July 30, 2022.

Interest expense increased by $7.4 million and $37.8 million in the three and nine months ended October 28, 2023, respectively, compared to the three and nine months ended October 29, 2022.

The increase was primarily due to higher interest expense associated with the 2024 and 2026 Term Loans.

Other Income, Net

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

1 unchanged sentence

% of net revenue 0.7 % 0.2 % 0.4 % 0.3 %

Other income, net, increased by $2.6 million in the three months ended July 29, 2023, compared to the three months ended July 30, 2022.

The increase was primarily due to a gain recognized from marketable equity investment, partially offset by change in foreign currency rate fluctuations.

Other income, net, decreased by $2.3 million in the six months ended July 29, 2023, compared to the six months ended July 30, 2022.

The decrease was primarily due to change in foreign currency rate fluctuations, partially offset by higher gains recognized from equity investments.

Other income, net, increased by $6.5 million and $4.2 million in the three months and nine months ended October 28, 2023 , respectively, compared to the three and nine months ended October 29, 2022 .

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

Provision (Benefit) for Income Taxes

Three Months Ended Six Months Ended

2023 July 30,

Change July 29,

2023 July 30,

Three Months Ended Nine Months Ended

2023 October 29,

Change October 28,

2023 October 29,

(in millions, except percentage)

Provision (benefit) for income taxes $ (23.2) $ 52.0 (144.6)% $ (130.7) $ 256.4 (151.0)%

Our income tax benefit for the three months ended July 29, 2023 was $44.1 million compared to a tax benefit of $0.5 million for the three months ended July 30, 2022.

Our income tax benefit of $44.1 million for the three months ended July 29, 2023 differed from the 21% federal income tax rate, primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S.

Our income tax benefit for the three months ended October 28, 2023 was $23.2 million compared to a tax expense of $52.0 million for the three months ended October 29, 2022.

Our income tax benefit of $23.2 million for the three months ended October 28, 2023 differed from the 21% federal income tax rate, primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S.

statutory rate, net of the impact of U.S.

taxation of foreign operations, benefits from tax credits, valuation allowance releases, and discrete tax benefits and expenses for excess deductions and deficiencies on stock-based compensation, respectively.

Our income tax benefit for the three months ended July 30, 2022 differed from the U.S.

federal tax rate of 21% primarily due to a substantial portion of earnings or losses being taxed or benefits at rates lower than the U.S.

statutory rate, net of the impact of U.S.

taxation of foreign operations, benefits from tax credits, valuation allowance releases, and discrete tax benefits related to stock-based compensation.

Our income tax benefit for the six months ended July 29, 2023, was $107.5 million compared to a tax expense of $204.4 million for the six months ended July 30, 2022.

Our income tax benefit of $107.5 million for the six months ended July 29, 2023, differs from the federal statutory tax rate of 21% primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S.

Our income tax benefit for the three months ended October 29, 2022 differed from the U.S.

federal tax rate of 21% primarily due to a discrete income tax expense related to the Israel clawback tax on earnings prior to fiscal 2023.

Our income tax benefit for the nine months ended October 28, 2023, was $130.7 million compared to a tax expense of $256.4 million for the nine months ended October 29, 2022.

Our income tax benefit of $130.7 million for the nine months ended October 28, 2023, differs from the federal statutory tax rate of 21% primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S.

statutory rate, net of the impact of U.S.

Our income tax expense of $204.4 million for the six months ended July 30, 2022, differed from the 21% federal statutory tax rate 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 expense of $256.4 million for the nine months ended October 29, 2022, differed from the 21% federal statutory tax rate primarily due to the $213.6 million tax impact of the remeasurement of deferred taxes in Singapore and $22.4 million tax impact of the Israel clawback taxes on prior earnings, offset by the recognition of discrete tax benefits related to stock-based compensation.

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 July 29, 2023 consisted of approximately $423.4 million of cash and cash equivalents, of which approximately $352.1 million was held by subsidiaries outside of the United States.

Our principal source of liquidity as of October 28, 2023 consisted of approximately $725.6 million of cash and cash equivalents, of which approximately $408.3 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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The amendment modifies the existing agreement to, among other things, adopt SOFR interest rates and conform the maximum leverage ratio financial covenant with the amended and restated revolving credit agreement.

For the six months ended July 29, 2023, we repaid $43.7 million of the principal outstanding of the 2026 Term Loan.

As of July 29, 2023, we had $735.0 million borrowings outstanding under the 2024 Term Loan and $743.8 million borrowings outstanding under the 2026 Term Loan.

During the quarter ended October 28, 2023, we repaid in full the 3-Year Tranche Loan, due on April 19, 2024 (“2024 Term Loan”), which had a remaining principal of $735.0 million.

For the three and nine months ended October 28, 2023, we repaid $21.9 million and $65.6 million of the principal outstanding of the 5-Year Tranche Loan (“2026 Term Loan”).

As of October 28, 2023, we had $721.9 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.

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During the quarter ended April 29, 2023, we drew down $200.0 million on the 2023 Revolving Credit Facility.

During the quarter ended July 29, 2023, we drew down an additional $50.0 million on the 2023 Revolving Credit Facility and repaid $50.0 million in the same quarter.

We intend to repay the outstanding amount of $200.0 million during fiscal 2024.

As of July 29, 2023, $800.0 million of the $1.0 billion of the 2023 Revolving Credit Facility was undrawn and will be available for draw down through April 14, 2028.

During the quarter ended October 28, 2023, we repaid the outstanding 2023 Revolving Credit Facility of $200.0 million.

Further, we drew down an additional $50.0 million on the 2023 Revolving Credit Facility and repaid $50.0 million in the same quarter.

As of October 28, 2023, the 2023 Revolving Credit Facility is undrawn and will be available for draw down through April 14, 2028.

During the quarter ended July 29, 2023, the MTI 2023 Notes and MTG 2023 Notes with aggregate principal of $500.0 million matured on June 22, 2023 and was repaid.

As of July 29, 2023, we had $2.0 billion aggregate principal amount of the Senior Notes outstanding and $499.9 million aggregate principal amount of the MTG/MTI Senior Notes outstanding.

As of October 28, 2023, we had $2.0 billion aggregate principal amount of the Senior Notes outstanding and $499.9 million aggregate principal amount of the MTG/MTI Senior Notes outstanding.

The notes are registered under the Securities Act.

On September 18, 2023, we completed a debt offering and issued (i) $500.0 million of Senior Notes with a 5.5-year term due in 2029 and (ii) $500.0 million of Senior Note with a 10-year term due in 2033.

See “Note 4 – Debt” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

We may elect to factor trade accounts receivable from time to time as part of our overall liquidity and working capital management strategy.

During the three months ended October 28, 2023, we generated cash from operations from the sale of certain trade accounts receivable on a non-recourse basis to a third-party financial institution pursuant to a factoring arrangement.

See “Note 11 - Supplemental Financial Information” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

We believe that our existing cash, cash equivalents, together with cash generated from operations, and funds from our 2023 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 5 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements) 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, all of which are subject to uncertainty.

We may also access the debt capital markets from time to time to refinance upcoming debt maturities.

To the extent that our existing cash and cash equivalents, together with cash generated by operations, and funds available under our 2023 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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Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended July 29, 2023 was $320.9 million.

Net cash provided by operating activities for the nine months ended October 28, 2023 was $823.9 million.

We had a net loss of $540.7 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $811.6 million, stock-based compensation expense of $454.5 million, deferred income tax benefit of $283.7 million, depreciation and amortization of $226.0 million, restructuring related impairment charges of $32.2 million, and $39.9 million of net loss from other non-cash items.

Cash outflow from working capital of $120.8 million for the six months ended July 29, 2023 was primarily driven by decreases in accounts payable and accrued employee compensation, and increases in prepaid expenses and other assets and accounts receivable, partially offset by decreases in inventory and accrued liabilities and other non-current liabilities.

Cash inflow from working capital of $84.1 million for the nine months ended October 28, 2023 was primarily driven by decreases in inventory and prepaid expenses and other assets and increases in accrued liabilities and other non-current liabilities, partially offset by the decrease in accounts payable and the increase in accounts receivable.

The decrease in inventory was as a result of managing down our inventory balance.

The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to decreased inventory at distributors.

The increase in accrued liabilities and other non-current liabilities was primarily driven by increases in settlement accruals and income tax payable.

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

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

The increase in prepaid expenses and other assets was primarily driven by an increase in prepaid ship and debits due to increased inventory at distributors, partially offset by refunds on supply capacity reservation agreements.

The increase in accounts receivable was primarily due to increased sales, as well as timing of shipments.

The decrease in inventory was primarily a result of managing the supply chain in a slower demand environment.

The increase in accrued liabilities and other non-current liabilities was primarily driven by higher ship and debit claims accrual due to increased inventory at distributors, and increases in restructuring accruals and income tax payable.

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

The increase in accounts receivable was primarily due to increased sales partially offset by collections, which included factored receivables.

Net cash provided by operating activities for the nine months ended October 29, 2022 was $937.3 million.

We had a net loss of $148.1 million adjusted for the following non-cash items:

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, restructuring related impairment charges of $1.9 million, and $22.3 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.

amortization of acquired intangible assets of $814.2 million, stock-based compensation expense of $421.7 million, depreciation and amortization of $227.0 million, deferred income tax expense of $53.6 million, amortization of inventory fair value adjustment associated with the Innovium acquisition of $26.0 million, restructuring related impairment charges of $4.9 million, and $53.6 million net loss from other non-cash items.

Cash outflow from working capital of $515.6 million for the nine months ended October 29, 2022 was primarily driven by increases in accounts receivable, inventory, and prepaid expenses and other assets and a decrease in accounts payable, partially offset by increases in accrued liabilities and other non-current liabilities and 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.

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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 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 an accrual related to a settlement of a contractual dispute and an increase in the 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.

Cash Flows from Investing Activities

For the six months ended July 29, 2023, net cash used in investing activities of $219.7 million was primarily driven by purchases of property and equipment of $210.9 million, net cash paid for business acquisitions of $5.5 million and purchases of technology licenses of $3.0 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 nine months ended October 28, 2023, net cash used in investing activities of $274.3 million was primarily driven by purchases of property and equipment of $265.3 million, net cash paid for business acquisitions of $5.5 million and purchases of technology licenses of $3.3 million.

For the nine months ended October 29, 2022, net cash used in investing activities of $264.2 million was primarily driven by purchases of property and equipment of $152.2 million, net cash paid for business acquisitions of $103.0 million and purchases of technology licenses of $9.1 million.

Cash Flows from Financing Activities

For the six months ended July 29, 2023, net cash used in financing activities of $588.8 million was primarily attributable to $593.7 million repayment of debt, $123.8 million for tax withholding payments on behalf of employees for net share settlements, $103.1 million for payment of our quarterly dividends, and $78.6 million payments on technology license obligations, partially offset by $250.0 million drawdown from our 2023 Revolving Credit Facility and $60.4 million in proceeds from our employee stock plans.

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 on 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 nine months ended October 28, 2023, net cash used in financing activities of $735.0 million was primarily attributable to $1.6 billion repayment of debt, $168.7 million for tax withholding payments on behalf of employees for net share settlements, $154.9 million for payment of our quarterly dividends, and $110.2 million payments on technology license obligations, partially offset by $1.3 billion net proceeds from the issuance of the 2029 and 2033 bonds and from the 2023 Revolving Credit Facility and $61.1 million in proceeds from our employee stock plans.

For the nine months ended October 29, 2022, net cash used in financing activities of $563.2 million was primarily attributable to $243.8 million for repayment of debt, $201.2 million for tax withholding payments on behalf of employees for net share settlements, $153.1 million for the payment of our quarterly dividends, $115.0 million for repurchases of common stock and $103.6 million for payments for technology license obligations, partially offset by a $200.0 million drawdown from our 2020 Revolving Credit Facility and $52.5 million in proceeds from our employee stock plans.

Capital Resources and Material Cash Requirements

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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 29, 2023.

Other than as described above, there were no material changes to our capital resources and material cash requirements during the nine months ended October 28, 2023.

Indemnification Obligations

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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-Q

Item 2. Management’s Discussion and Analysis