What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-04 compared with 2024-08-30 · 113 added, 130 removed, 155 unchanged (61% of the section changed)

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• risks related to our ability to design, develop and introduce new and enhanced products, in particular in the 5G, Cloud and Artificial Intelligence (“AI”) markets, in a timely and effective manner, as well as our ability to anticipate and adapt to changes in technology;

• risks related to our dependence on a few customers for a significant portion of our revenue, particularly as our major customers comprise an increasing percentage of our revenue, as well as risks related to a significant portion of our sales being concentrated in the data center end market;

• 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;

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

• risks related to our dependence on a few customers for a significant portion of our revenue including 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 our ability to execute on changes in strategy and realize the expected benefits from restructuring activities;

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• risks related to seasonality or volatility related to sales into the infrastructure, semiconductor and related industries and end markets;

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

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

Net revenue in the second quarter of fiscal 2025 was $1.3 billion and was 5% lower than net revenue in the second quarter of fiscal 2024.

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

Sales decreased from the carrier infrastructure end market by 72%, from the enterprise networking end market by 54%, from the consumer end market by 47% and from the automotive/industrial end market by 31%.

The decreases were partially offset by a 92% increase in sales from the data center end market compared to the three months ended July 29, 2023.

We have seen strong revenue growth from our data center end market, driven by demand for our electro-optics products from AI applications.

In addition, we have also started to benefit from initial shipments of our custom AI compute products.

In our enterprise networking and carrier infrastructure end markets, following a period of inventory correction, we have seen demand stabilize in the second quarter of fiscal 2025.

We continue to see low demand from our OEM customers in China.

Net revenue in the third quarter of fiscal 2025 was $1.5 billion and was 7% higher than net revenue in the third quarter of fiscal 2024.

This was due to a 98% increase in sales from the data center end market compared to the three months ended October 28, 2023.

The increase was partially offset by decreases in sales from the carrier infrastructure end market by 73%, from the enterprise networking end market by 44%, from the consumer end market by 43% and from the automotive/industrial end market by 22%.

We have seen strong revenue growth from our data center end market, driven by robust demand for our electro-optics and custom compute products from AI applications.

In addition, following a period of inventory correction, we have started to see demand stabilize in our enterprise networking and carrier infrastructure end markets.

To secure capacity over the long term, we have entered into capacity reservation arrangements with certain foundries and partners.

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See also Part II, Item IA, “Risk Factors,” including, but not limited to, the risk detailed under the caption “Adverse changes in the political, regulatory and economic policies of governments in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business.”

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Restructuring.

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

A restructuring plan was initiated during the third quarter of fiscal 2025 to increase research and development investment in the data center end market and reduce investment in new product development in other end markets including the cancellation of certain future product releases.

We recognized $715.1 million of restructuring related charges for the quarter ended November 2, 2024, mainly comprised of impairment and write-off of acquired intangible assets, purchased technology licenses, inventories, property and equipment, and other non-current assets, as well as recognition of future contractual obligations, accrued legal reserve, severance, other one-time termination benefits, and other costs.

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

Capital Return Program.

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On March 7, 2024, we announced that our Board of Directors authorized a $3.0 billion addition to the balance of our existing stock repurchase program.

During the six months ended August 3, 2024, we repurchased 4.7 million shares of our common stock for $325.0 million.

As of August 3, 2024, $3.0 billion remained available for future stock repurchases.

We returned $428.7 million to stockholders in the six months ended August 3, 2024 through $325.0 million in repurchases of shares of our common stock and $103.7 million in cash dividends.

During the nine months ended November 2, 2024, we repurchased 7.3 million shares of our common stock for $525.0 million.

As of November 2, 2024, $2.8 billion remained available for future stock repurchases.

We returned $680.6 million to stockholders in the nine months ended November 2, 2024 through $525.0 million in repurchases of shares of our common stock and $155.6 million in cash dividends.

Cash and Short-Term Investments.

Our cash and cash equivalents were $808.7 million at August 3, 2024, which were $142.1 million lower than our balance at February 3, 2024 of $950.8 million.

Our cash and cash equivalents were $868.1 million at November 2, 2024, which were $82.7 million lower than our balance at February 3, 2024 of $950.8 million.

Sales and Customer Composition.

Our accounts receivable was concentrated with four customers at August 3, 2024 and July 29, 2023, who represented a total of 70% of gross accounts receivable.

During the three and six months ended August 3, 2024, 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 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.

Our accounts receivable was concentrated with four customers at November 2, 2024, who represented a total of 67% of gross accounts receivable, compared with four customers at October 28, 2023, who represented a total of 72% of gross accounts receivable.

During the three and nine months ended November 2, 2024, 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 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.

Net revenue attributable to significant customers and distributors 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

2024 July 29,

2023 August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

2023 November 2,

2024 October 28,

Distributor A 33% 24% 35% 21%

Distributor B * * * 10%

*Less than 10% of net revenue.

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

Sales shipped to customers with operations in Asia represented approximately 77% and 75% of our net revenue in the three and six months ended August 3, 2024, respectively, and approximately 68% and 69% of our net revenue in the three and six months ended July 29, 2023, respectively.

Sales shipped to customers with operations in Asia represented approximately 74% and 75% of our net revenue in the three and nine months ended November 2, 2024, respectively, and approximately 66% and 68% of our net revenue in the three and nine months ended October 28, 2023, 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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Conversely, we may have insufficient inventory or be unable to obtain the supplies or contract manufacturing capacity to meet demand, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.”

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Critical Accounting Policies and Estimates

There have been no material changes during the three months ended August 3, 2024 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 February 3, 2024.

There have been no material changes during the three months ended November 2, 2024 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 February 3, 2024.

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

2024 July 29,

2023 August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

2023 November 2,

2024 October 28,

Net revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Loss before income taxes (49.5) (13.1) (27.7) (16.4)

Provision (benefit) for income taxes 3.7 (3.3) 2.7 (4.0)

Benefit from income taxes (4.9) (1.6) (0.2) (3.2)

Net loss (44.6) % (11.5) % (27.5) % (13.2) %

Three and six months ended August 3, 2024 and July 29, 2023

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three and nine months ended November 2, 2024 and October 28, 2023

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

Net revenue $ 1,516.1 $ 1,418.6 6.9% $ 3,949.9 $ 4,081.2 (3.2)%

Our net revenue for the three months ended August 3, 2024 decreased by $68.0 million compared to net revenue for the three months ended July 29, 2023.

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

The decreases were partially offset by a 92% increase in sales from the data center end market compared to the three months ended July 29, 2023.

Our net revenue for the six months ended August 3, 2024 decreased by $228.8 million compared to net revenue for the six months ended July 29, 2023.

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

Sales decreased from the carrier infrastructure end market by 74%, from the enterprise networking end market by 56%, from the consumer end market by 58% and from the automotive/industrial end market by 23%.

The decreases were partially offset by a 90% increase in sales from the data center end market compared to the six months ended July 29, 2023.

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The overall decreases in net revenue of 5% and 9%, respectively, for the three and six months ended August 3, 2024 compared to the three and six months ended July 29, 2023, were primarily driven by lower unit shipments across all of our end markets except the data center end market, partially offset by higher average selling prices for certain products as well as an increase in demand for our optical products, driven by AI applications.

Our net revenue for the three months ended November 2, 2024 increased by $97.5 million, or 7%, compared to net revenue for the three months ended October 28, 2023.

This was primarily due to a 98% increase in sales from the data center end market which benefited from strong AI demand.

Our net revenue for the nine months ended November 2, 2024 decreased by $131.3 million, or 3%, compared to net revenue for the nine months ended October 28, 2023.

This was primarily due to decreases in sales from the carrier infrastructure end market by 74%, from the enterprise networking end market by 53%, from the consumer end market by 52% and from the automotive/industrial end market by 23%, which have been navigating inventory corrections and soft industry demand.

The decreases were partially offset by a 93% increase in sales from the data center end market which benefited from strong AI demand.

Cost of Goods Sold and Gross Profit

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

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% of net revenue 23.0 % 38.9 % 37.1 % 39.9 %

Cost of goods sold as a percentage of net revenue decreased for the three and six months ended August 3, 2024 compared to the three and six months ended July 29, 2023, which was primarily due to a shift in product mix, as well as charges for product related claim matters in the second quarter of fiscal 2024, that were fully resolved in the fourth quarter of fiscal 2024.

As a result, gross margin for the three and six months ended August 3, 2024 increased by 7.3 and 5.3 percentage points, respectively, compared to the three and six months ended July 29, 2023.

Cost of goods sold as a percentage of net revenue increased for the three and nine months ended November 2, 2024 compared to the three and nine months ended October 28, 2023, which was primarily due to impairment charges of $356.8 million for acquired intangible assets, inventories, property and equipment, and other non-current assets associated with restructuring actions during the quarter ended November 2, 2024.

The increase was partially offset by charges for product related claim matters in the three and nine months ended October 28, 2023, that were fully resolved in the fourth quarter of fiscal 2024.

As a result, gross margin for the three and nine months ended November 2, 2024 decreased by 15.9 and 2.8 percentage points, respectively, compared to the three and nine months ended October 28, 2023.

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

Research and Development

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

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% of net revenue 32.2 % 33.9 % 36.7 % 35.2 %

Research and development expense increased by $11.9 million in the three months ended August 3, 2024 compared to the three months ended July 29, 2023.

The increase was primarily due to higher engineering design costs, depreciation and amortization expense, and employee compensation related costs.

Research and development expense was relatively flat in the six months ended August 3, 2024 compared to the six months ended July 29, 2023.

Research and development expense was relatively flat in the three and nine months ended November 2, 2024 compared to the three and nine months ended October 28, 2023.

Selling, General and Administrative

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

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% of net revenue 13.6 % 15.0 % 15.3 % 15.2 %

Selling, general and administrative expense decreased by $12.7 million and $11.8 million, respectively, in the three and six months ended August 3, 2024 compared to the three and six months ended July 29, 2023.

The decreases were primarily due to lower acquisition related costs, as well as lower depreciation and amortization expense.

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Selling, general and administrative expense decreased by $7.7 million and $19.5 million, respectively, in the three and nine months ended November 2, 2024 compared to the three and nine months ended October 28, 2023.

The decreases were primarily due to charges for an intellectual property matter during the third quarter of fiscal 2024, as well as lower depreciation and amortization expense.

The decreases were partially offset by higher employee compensation related costs.

Restructuring Related Charges

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

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% of net revenue 23.6 % 0.2 % 9.3 % 2.6 %

We recognized $4.0 million and $8.1 million of total restructuring related charges in the three and six months ended August 3, 2024, respectively, as a result of our restructuring plan to streamline our organization and optimize resources.

We recognized $358.3 million and $366.4 million of total restructuring related charges in the three and nine months ended November 2, 2024, respectively, as we continued to evaluate our existing operations to increase operational efficiency, decrease costs and increase profitability.

Restructuring charges for the three and nine months ended November 2, 2024 were mainly comprised of impairment and write-off of purchased technology licenses and property and equipment, as well as recognition of future contractual obligations, accrued legal reserve, severance, other one-time termination benefits, and other costs.

Refer to “Note 4 – Restructuring” in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Interest and Other Loss, Net

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

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% of net revenue (3.1) % (2.9) % (3.5) % (3.3) %

Interest and other loss, net was relatively flat in the three months ended August 3, 2024 compared to the three months ended July 29, 2023.

Interest and other loss, net decreased by $4.5 million in the six months ended August 3, 2024 compared to the six months ended July 29, 2023.

The decrease was primarily due to a decrease in interest expense driven by lower outstanding term loan balances, partially offset by interest expense associated with the 2029 and 2033 Senior Notes issued during the third quarter of fiscal 2024.

In addition, we incurred factoring fees for the sales of receivables in the six months ended August 3, 2024 that were not applicable in the six months ended July 29, 2023.

Provision (Benefit) for Income Taxes

Three Months Ended Six Months Ended

2024 July 29,

Change August 3,

2024 July 29,

Interest and other loss, net increased by $6.5 million in the three months ended November 2, 2024 compared to the three months ended October 28, 2023.

The increase was primarily due to exchange rate fluctuations, as well as lower net gains recognized from equity investments.

The increase was partially offset by a decrease in interest expense and an increase in interest income.

Interest and other loss, net was relatively flat in the nine months ended November 2, 2024 compared to the nine months ended October 28, 2023.

Benefit from income taxes

Three Months Ended Nine Months Ended

2024 October 28,

Change November 2,

2024 October 28,

(in millions, except percentage)

Provision (benefit) for income taxes $ 47.1 $ (44.1) (206.8)% $ 64.9 $ (107.5) (160.4)%

Our income tax expense for the three months ended August 3, 2024 was $47.1 million compared to a tax benefit of $44.1 million for the three months ended July 29, 2023.

Our income tax expense of $47.1 million for the three months ended August 3, 2024 differed from the U.S.

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.

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 of $44.1 million for the three months ended July 29, 2023 differed from the U.S.

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.

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Our income tax expense for the six months ended August 3, 2024, was $64.9 million compared to a tax benefit of $107.5 million for the six months ended July 29, 2023.

Our income tax expense of $64.9 million for the six months ended August 3, 2024 differed from the U.S.

Benefit from income taxes $ (74.2) $ (23.2) 219.8% $ (9.3) $ (130.7) (92.9)%

Our income tax benefit for the three months ended November 2, 2024 was $74.2 million compared to a tax benefit of $23.2 million for the three months ended October 28, 2023.

These amounts differed from the U.S.

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 benefit of $107.5 million for the six months ended July 29, 2023 differed from the 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.

The tax benefits recorded are based on year-to-date pretax results, forecasted pretax results, forecasted annual tax expense and discrete adjustments for the respective periods.

Our income tax benefit for the nine months ended November 2, 2024, was $9.3 million compared to a tax benefit of $130.7 million for the nine months ended October 28, 2023.

These amounts differed from the U.S.

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.

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.

The tax benefits recorded are based on year-to-date pretax results, forecasted pretax results, forecasted annual tax expense and discrete adjustments for the respective periods.

Through the third quarter of fiscal 2024, prior to the issuance of IRS guidance in December of 2023, certain R&D costs were treated as subject to capitalization which resulted in utilization of R&D tax credits and a corresponding release of valuation allowances associated with those credits.

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Liquidity and Capital Resources

Our principal source of liquidity as of August 3, 2024 consisted of approximately $808.7 million of cash and cash equivalents, of which approximately $580.5 million was held by subsidiaries outside of the United States, a portion of which are deemed to be indefinitely reinvested.

Our principal source of liquidity as of November 2, 2024 consisted of approximately $868.1 million of cash and cash equivalents, of which approximately $675.8 million was held by subsidiaries outside of the United States, a portion of which are deemed to be indefinitely reinvested.

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.

As of August 3, 2024, we had total borrowings outstanding of $4.2 billion, consisting of $3.5 billion of senior notes outstanding and $656.2 million outstanding under our 5-Year Tranche Loan (“2026 Term Loan”).

During the three and six months ended August 3, 2024, we repaid $21.9 million and $43.8 million of the principal outstanding of the 2026 Term Loan.

As of November 2, 2024, we had total borrowings outstanding of $4.1 billion, consisting of $3.5 billion of senior notes outstanding and $623.4 million outstanding under our 5-Year Tranche Loan (“2026 Term Loan”).

During the three and nine months ended November 2, 2024, we repaid $32.8 million and $76.6 million of the principal outstanding of the 2026 Term Loan.

We have a revolving credit facility with a borrowing capacity of up to $1.0 billion and a 5-year term (“2023 Revolving Credit Facility”).

As of August 3, 2024, the 2023 Revolving Credit Facility is undrawn and will be available for draw down through April 14, 2028.

As of November 2, 2024, the 2023 Revolving Credit Facility is undrawn and will be available for draw down through April 14, 2028.

For a description of our contractual obligations including debt and purchase commitments, see “Note 7 – Debt,” and “Note 8 – Commitments and Contingencies” in the Notes to Unaudited Condensed Consolidated Financial Statements.

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

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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 and six months ended August 3, 2024, 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.

During the three and nine months ended November 2, 2024, 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 Unaudited Condensed Consolidated Financial Statements for additional information.

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Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended August 3, 2024 was $630.9 million.

We had a net loss of $408.9 million adjusted for the following non-cash items:

amortization of acquired intangible assets of $540.6 million, stock-based compensation expense of $291.4 million, depreciation and amortization of $148.9 million, deferred income tax benefit of $58.3 million, and $33.1 million of net loss from other non-cash items.

Cash inflow from working capital of $81.8 million for the six months ended August 3, 2024 was primarily driven by decreases in accounts receivable, prepaid expenses and other assets, and inventories, and an increase in accounts payable, partially offset by decreases in accrued liabilities and other non-current liabilities, and accrued employee compensation.

The decrease in accounts receivable was primarily due to decreased sales.

The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to lower inventory balances at distributors, and a decrease in prepaid corporate income tax, partially offset by payments on supply capacity reservation agreements, net of refunds.

The decrease in inventories was primarily due to an increase in demand and focused effort on supply chain efficiency as demand improves.

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

The decrease in accrued liabilities and other non-current liabilities was primarily driven by lower ship and debit claims accrual due to lower inventory balances at distributors, partially offset by increases in income tax payable, interest accruals, and stock rotation accruals.

The decrease in accrued employee compensation was due to bonus payout of our annual employee bonus plan.

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 November 2, 2024 was $1.2 billion.

We had a net loss of $1.1 billion adjusted for the following non-cash items:

amortization of acquired intangible assets of $805.5 million, restructuring related impairment charges of $524.1 million, stock-based compensation expense of $449.8 million, depreciation and amortization of $225.5 million, deferred income tax benefit of $106.2 million, and $42.1 million of net loss from other non-cash items.

Cash inflow from working capital of $311.6 million for the nine months ended November 2, 2024 was primarily driven by decreases in prepaid expenses and other assets, and accounts receivable, and increase in accounts payable, partially offset by a decrease in accrued liabilities and other non-current liabilities.

The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to lower inventory balances at distributors as a result of increased sell through, and a decrease in prepaid corporate income tax, partially offset by payments on supply capacity reservation agreements, net of refunds.

The decrease in accounts receivable was primarily due to higher factored receivables and higher distribution sales reserves.

The increase in accounts payable was primarily due to payment timing management.

The decrease in accrued liabilities and other non-current liabilities was primarily driven by lower ship and debit claims accrual due to lower inventory balances at distributors as a result of increased sell through, payments of accruals, partially offset by increases in restructuring accruals.

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 inventories 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 inventories 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.

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

Cash Flows from Investing Activities

For the six months ended August 3, 2024, net cash used in investing activities of $154.9 million was primarily driven by purchases of property and equipment of $139.7 million.

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.

For the nine months ended November 2, 2024, net cash used in investing activities of $230.4 million was primarily driven by purchases of property and equipment of $214.7 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.

Cash Flows from Financing Activities

For the six months ended August 3, 2024, net cash used in financing activities of $618.1 million was primarily attributable to $325.0 million repurchases of common stock, $131.7 million for tax withholding payments on behalf of employees for net share settlements, $103.7 million for payment of our quarterly dividends, $65.5 million payments on technology license obligations, and $43.8 million repayment of debt principal, partially offset by $51.6 million in proceeds from the issuance of common stock under our employee stock plans.

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 nine months ended November 2, 2024, net cash used in financing activities of $1.0 billion was primarily attributable to $525.0 million repurchases of common stock, $190.3 million for tax withholding payments on behalf of employees for net share settlements, $155.6 million for payment of our quarterly dividends, $124.4 million payments on technology license obligations, and $76.6 million repayment of debt principal, partially offset by $52.4 million in proceeds from the issuance of common stock under our 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, $110.2 million payments on technology license obligations, and $50.0 million repurchases of common stock, 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.

Capital Resources and Material Cash Requirements

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We also discuss updates of our significant commitments in “Note 8 – Commitments and Contingencies” in the Notes to 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 August 3, 2024.

Other than as described above, there were no material changes to our capital resources and material cash requirements during the nine months ended November 2, 2024.

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