What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-27 compared with 2021-10-27 · 121 added, 220 removed, 163 unchanged (68% of the section changed)

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Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report.

We are a provider of communications systems-on-chip solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications.

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In addition, our proprietary CMOS-based radio and digital system architectures also enable shorter design cycles, significant design flexibility and low system-level cost across a wide range of broadband communications, wired and wireless infrastructure, and industrial and multi-market customer applications.

In the nine months ended September 30, 2021, revenues were $644.5 million.

In the nine months ended September 30, 2021, our net revenue was derived in part from sales of RF receivers and RF receiver systems-on-chip and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications, and in part from revenues attributable to our acquisition of the Wi-Fi and Broadband assets business.

In the three months ended March 31, 2022, revenues were $263.9 million derived from sales of RF receivers and RF receiver systems-on-chip and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications.

Our ability to achieve revenue growth in the future will depend, among other factors, on our ability to further penetrate existing markets;

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and our ability to obtain design wins with device manufacturers, in particular manufacturers of set-top boxes, data modems, and gateways for the broadband service provider, storage networking market, cable infrastructure market, industrial and automotive markets, and optical module and telecommunications infrastructure markets.

Products shipped to Asia accounted for 83% and 82% of net revenue during the three months ended September 30, 2021 and 2020, respectively, including 40% from products shipped to Hong Kong, 12% from products shipped to mainland China, and 11% from products shipped to Vietnam during the three months ended September 30, 2021 and 44% from products shipped to Hong Kong and 21% from products shipped to mainland China during the three months ended September 30, 2020.

Products shipped to Asia accounted for 83% and 82% of net revenue during the nine months ended September 30, 2021 and 2020, respectively, including 40% from products shipped to Hong Kong, 12% from products shipped to Vietnam, and 11% from products shipped to mainland China during the nine months ended September 30, 2021 and 45% from products shipped to Hong Kong and 16% from products shipped to mainland China during the nine months ended September 30, 2020.

Products shipped to Asia accounted for 80% and 82% of net revenue during the three months ended March 31, 2022 and 2021, respectively, including 38% from products shipped to Hong Kong, 11% from products shipped to mainland China, and 13% from products shipped to Vietnam during the three months ended March 31, 2022 and 37% from products shipped to Hong Kong, 14% from products shipped to mainland China, and 12% from products shipped to Vietnam during the three months ended March 31, 2021.

Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia.

For example, revenue generated from sales of our products during the nine months ended September 30, 2021 and 2020 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets.

For example, revenue generated from sales of our products during the three months ended March 31, 2022 and 2021 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets.

To date, all of our sales have been denominated in United States dollars.

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Sales to customers comprise both direct sales to customers and indirect sales through distributors.

In the three months ended September 30, 2021, our top two customers accounted for 27% of our net revenue, and our ten largest customers collectively accounted for 69% of our net revenue, of which distributor customers accounted for 26% of our net revenue.

In the nine months ended September 30, 2021, our top two customers accounted for 26% of our net revenue, and our ten largest customers collectively accounted for 69% of our net revenue, of which distributor customers accounted for 27% of our net revenue.

In the three months ended March 31, 2022, our top three customers accounted for 37% of our net revenue, and our ten largest customers collectively accounted for 71% of our net revenue, of which distributor customers accounted for 32% of our net revenue.

For certain customers, we sell multiple products into disparate end user applications such as cable modems, satellite set-top boxes and broadband gateways.

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In the industrial and wired and wireless infrastructure markets, a design-in can have a product life cycle of 24 to 60 months and beyond.

Impact of COVID-19 and the Global Semiconductor Chip Shortage

In late January 2020 and early February 2020, in response to a severe outbreak of the novel coronavirus disease, or COVID-19, the government of China instituted mandatory quarantines in Wuhan, China, extended lunar new year holiday closures, and restricted shipments out of the country.

This resulted in a temporary delay in our product shipments in the first quarter of 2020.

On March 11, 2020, the World Health Organization declared a global pandemic regarding COVID-19.

COVID-19 pandemic has reached all of the countries and states in which we operate, including in California where our headquarters and central engineering team are located, as well as Massachusetts, Spain, India, Singapore, Taiwan, Canada, France, Japan, South Korea, Hong Kong, Israel, Germany, and Austria, where additional engineering, sales, and administrative personnel are located.

In many of these jurisdictions, local authorities have instituted stay-at-home or shelter-in-place orders.

To protect the health and safety of our employees, we adopted social distancing policies including suspending employee travel and implementing remote work arrangements for substantially all of our workforce worldwide.

As of September 30, 2021, much of our workforce has received COVID-19 vaccinations and subsequently, most of our employees have returned to the office at full or reduced capacity adhering to local health authority guidelines in the jurisdictions in which we operate.

While we experienced some negative impact to our net revenue and gross profits in the first half of 2020 due to several industry-wide dynamics related to COVID-19, including the supply constraints described above, as well as certain customer order push-out requests, since then, we have been benefiting from the work-from-home environment that is driving an increase in demand for certain of our products.

However, a sudden increase in demand for electronics containing semiconductor chips and stockpiling of chips by certain firms in China blacklisted by the U.S.

has exacerbated bottlenecks in the supply chain, resulting in a global semiconductor chip shortage impacting our industry.

Impact of COVID-19 and the Global Semiconductor Supply Shortage

During the COVID-19 global pandemic, which is still ongoing, various restrictions were put in place causing a temporary decline in demand for certain items such as automobiles.

As restrictions began easing across the world, a sudden increase in demand for electronics containing semiconductor chips and stockpiling of chips by certain firms in China blacklisted by the U.S.

has exacerbated bottlenecks in the supply chain, resulting in a global semiconductor supply shortage impacting our industry.

Some chip manufacturers are estimating this supply shortage may continue into 2023.

While these chip manufacturers are working to increase capacity in the future, and we are continuing to work closely with our suppliers and customers to minimize the potential adverse impacts of the supply shortage, such shortage may have a near-term impact on our ability to meet increased demand on certain products which may continue into 2023.

Further, global financial markets reacted negatively to the COVID-19 pandemic’s impacts causing significant declines in the stock price and market capitalization of many companies across all industries, although some have recovered.

Heightened volatility, global supply shortages, and uncertainty in customer demand and the worldwide economy has continued as a result of the COVID-19 pandemic, and we may experience increased volatility in our sales and revenues in the near future.

Global supply shortages, and uncertainty in customer demand and the worldwide economy has continued as a result of the COVID-19 pandemic and may be further exacerbated by the impacts of high inflation, and we may experience increased volatility in our sales and revenues in the near future.

However, the magnitude of such volatility on our business and its duration is uncertain and cannot be reasonably estimated at this time.

Acquisition of Home Gateway Platform Division of Intel Corporation

On July 31, 2020, we completed our acquisition of the Home Gateway Platform Division, which we refer to as the Wi-Fi and Broadband assets business, pursuant to an Asset Purchase Agreement with Intel, dated April 5, 2020, and related agreements.

We paid cash consideration of $150.0 million for the purchase of certain assets of the Wi-Fi and Broadband assets business, and assumed certain liabilities related to specified employment matters.

The transaction was funded with a portion of the proceeds from a secured incremental term loan with an aggregate principal amount of $350.0 million (Note 8).

Acquisition of NanoSemi, Inc.

On September 9, 2020, we completed our acquisition of NanoSemi pursuant to the Merger Agreement.

The initial closing transaction consideration consisted of $10 million in cash and 804,163 shares of our common stock.

In addition, the NanoSemi stockholders received $35 million in deferred cash payments in 2021, and certain NanoSemi stockholders may also receive up to an additional $35 million in potential contingent consideration, subject to the acquired business’s satisfying certain financial objectives from July 1, 2020 through December 31, 2022.

The stock consideration was issued in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended.

In connection with the acquisition, we agreed to provide the NanoSemi stockholders with certain registration rights with respect to the shares of our common stock they received in the acquisition.

For more information, please refer to Note 3 of our unaudited consolidated financial statements.

Stock Repurchase Program

On February 23, 2021, our board of directors authorized a plan to repurchase up to $100 million of our common stock over a period ending February 16, 2024.

The amount and timing of repurchases are subject to a variety of factors including liquidity, share price, market conditions, and legal requirements.

Any purchases will be funded from available working capital and may be effected through open market purchases, block transactions, and privately negotiated transactions.

The share repurchase program does not obligate us to make any repurchases and may be modified, suspended, or terminated by us at any time without prior notice.

For more information, please refer to Note 16 of our unaudited consolidated financial statements.

On June 23, 2021, the Company entered into a Credit Agreement (the “June 23, 2021 Credit Agreement”), by and among the Company, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent and collateral agent, that provides for a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement,” in an aggregate principal amount of $350.0 million and a senior secured revolving credit facility, or the “Revolving Facility,” in an aggregate principal amount of up to $100.0 million.

The proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement were used (i) to repay in full all outstanding indebtedness under that certain Credit Agreement dated May 12, 2017, by and among the Company, MUFG Bank Ltd., as administrative agent and MUFG Union Bank, N.A., as collateral agent and the lenders from time to time party thereto (as amended by Amendment No.

1, dated July 31, 2020 and as further amended, amended and restated, waived, supplemented or otherwise modified from time to time, the “May 12, 2017 Credit Agreement”) and (ii) to pay fees and expenses incurred in connection therewith.

The remaining proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement are available for general corporate purposes and the proceeds of the Revolving Facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

As of September 30, 2021, the Revolving Facility was undrawn.

In connection with the settlement of the indebtedness under the May 12, 2017 Credit Agreement, the Company recognized an aggregate loss on debt extinguishment of $5.2 million consisting of unamortized debt issuance costs and discounts.

For more information, please refer to Note 8 of our unaudited consolidated financial statements.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements which are prepared in accordance with accounting principles that are generally accepted in the United States.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

We continually evaluate our estimates and judgments, the most critical of which are those related to business combinations, revenue recognition, inventory valuation, production masks, goodwill and other intangible assets valuation, income taxes and stock-based compensation.

We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.

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We believe that accounting policies we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies.

Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

For a summary of our critical accounting policies and estimates, refer to Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2020, which we filed with the Securities and Exchange Commission, or SEC, on February 11, 2021, or our Annual Report.

There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2021.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12 Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes , to remove certain exceptions related to the approach for intraperiod tax allocation, recognition of deferred tax liabilities for outside basis differences and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

The amendments in this update are effective for us beginning with fiscal year 2021.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The adoption of the amendments in this update did not have a material impact on our consolidated financial position and results of operations as of and for the nine months ended September 30, 2021, and is also not expected to have a material impact on our financial position and results of operations for the year ending December 31, 2021.

Accordingly, those are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Commission, or SEC, on February 2, 2022, or our Annual Report.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2022.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2020-10 Codification Improvements , to make incremental improvements to GAAP and address stakeholder suggestions, including, among other things, clarifying that the requirement to provide comparative information in the financial statements extends to the corresponding disclosures section.

The amendments in this update are effective for us beginning with fiscal year 2021.

The amendments in this update should be applied retrospectively and at the beginning of the period that includes the adoption date.

The adoption of the amendments in this update did not have a material impact on our financial disclosures as of and for the nine months ended September 30, 2021, and is also not expected

to have a material impact on our financial disclosures for the year ending December 31, 2021.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilties from Contracts with Customers , to provide specific guidance to eliminate diversity in practice on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts from customers in a business combination consistent with revenue contracts with customers not acquired in an acquisition.

The amendments in this update provide that the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date.

These amendments are effective for us beginning with fiscal year 2023.

The impact of the adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a business combination in 2023 and beyond.

Results of Operations

The following describes the line items set forth in our unaudited consolidated statements of operations.

The following describes the line items set forth in our unaudited consolidated statements of income.

Net revenue is generated from sales of radio-frequency, analog, digital, and mixed-signal integrated circuits for access and connectivity, wired and wireless infrastructure, and industrial and multi-market applications.

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amortization of acquired developed technology intangible assets;

inventory fair value adjustments;

amortization of certain production mask costs;

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Selling, general and administrative expense includes personnel-related expenses, including stock-based compensation, amortization of certain acquired intangible assets, merger, acquisition and integration costs, third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legal fees, depreciation expense and allocated occupancy costs.

Impairment Losses.

Impairment losses consist of charges resulting from the impairment of intangible assets.

Restructuring Charges .

Restructuring charges consist of severance, lease and leasehold impairment charges, and other charges related to restructuring plans.

Loss on Extinguishment of Debt.

Loss on extinguishment of debt consists of the charge-off of remaining unamortized debt discount and issuance cost on debt we repaid early with a majority of the proceeds from a new term loan.

Interest and Other Income (Expense), Net.

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Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances.

Interest expense consists of interest accrued on debt.

Other income (expense) generally consists of income (expense) generated from non-operating transactions.

Income Tax Provision (Benefit).

Interest expense consists of interest accrued on debt and amortization of discounts on debt and other liabilities.

Other income (expense) generally consists of income (expense) generated from non-operating transactions and unrealized holding gains (losses) from certain investments required to be marked to market value.

Income Tax Provision.

We make certain estimates and judgments in determining income taxes for financial statement purposes.

These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expenses for tax and financial statement purposes and the realizability of assets in future years.

The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

The following table sets forth our consolidated statement of income data as a percentage of net revenue for the periods indicated:

Three Months Ended March 31,

Net revenue 100 % 100 %

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Selling, general and administrative 15 17

Impairment losses — — — —

Restructuring charges — 1

Total operating expenses 40 49

Income (loss) from operations 10 (22) 6 (27)

Income from operations 18 5

Interest income — —

Interest expense (1) (3)

Loss on extinguishment of debt — — (1) —

Other income (expense), net — —

Total other income (expense), net (1) (2)

Income (loss) before income taxes 9 (25) 3 (30)

Income tax provision (benefit) 5 (1) 1 (4)

Net income (loss) 4 % (23) % 2 % (26) %

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 (1)

Income before income taxes 17 3

Income tax provision 4 1

Net income 13 % 2 %

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

(dollars in thousands)

Broadband $ 134,556 $ 124,190 $ 10,366 8 %

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Total net revenue $ 263,927 $ 209,359 $ 54,568 26 %

_______________

(1) Our net revenues by market categories were revised in the fourth quarter of 2020 to align with changing end-market conditions, our current business priorities, as well as spending requirements and growth opportunities in the four categories.

The broadband category includes our prior connected home category plus the SoC business from the Wi-Fi and Broadband assets business, but excludes wired connectivity.

The infrastructure category remains unchanged.

Industrial and multi-market includes the previously reported revenue plus component revenues from the Wi-Fi and Broadband assets business.

Our connectivity category includes primarily our MoCA/G.hn products and Wi-Fi and Ethernet revenues from the Wi-Fi and Broadband assets business.

The 2020 amounts have been retroactively adjusted above to reflect the change in market categories.

Net revenue increased $73.1 million to $229.8 million for the three months ended September 30, 2021, as compared to $156.6 million for the three months ended September 30, 2020.

The increase in broadband net revenue of $44.1 million was primarily the result of the contribution of gateway revenues attributable to our acquisition of the Wi-Fi and Broadband assets business on July 31, 2020 and, to a lesser extent, improvements in tuner and satellite shipments.

The increase in connectivity revenue of $13.8 million was primarily driven by the contribution of Wi-Fi and ethernet revenues attributable to our Wi-Fi and Broadband assets business acquisition and an increase in MoCA and G.hn product shipments.

The increase in infrastructure revenues of $7.7 million was primarily driven by an increase in high-performance analog and wireless access product shipments and, to a lesser extent, increased shipments of G.hn and MoCA last-mile Access products in this category.

The increase in industrial and multi-market revenue of $7.6 million was related to increased shipments of high-performance analog products as well as component products attributable to our Wi-Fi and Broadband assets business acquisition.

Net revenue increased $360.6 million to $644.5 million for the nine months ended September 30, 2021, as compared to $283.9 million for the nine months ended September 30, 2020.

The increase in broadband net revenue of $231.9 million was primarily the result of contribution of gateway revenues attributable to our acquisition of the Wi-Fi and Broadband assets business on July 31, 2020 and, to a lesser extent, improvements in cable front-end and tuner shipments.

The increase in connectivity revenue of $60.4 million was primarily driven by a partial-year contribution of Wi-Fi and ethernet revenues attributable to our Wi-Fi and Broadband assets business acquisition, further supplemented by an increase in MoCA and G.hn product shipments.

The increase in industrial and multi-market revenue of $39.3 million was related to increased shipments of component products attributable to our Wi-Fi and Broadband assets business acquisition, further aided by an increase in shipments of high-performance analog products in this category.

The increase in infrastructure revenues of $29.1 million was primarily driven by an increase in shipments of high-performance analog, wireless backhaul and wireless access deployments and to a lesser extent, increased MoCA and G.hn last-mile Access product shipments in this category.

Net revenue increased $54.6 million to $263.9 million for the three months ended March 31, 2022, as compared to $209.4 million for the three months ended March 31, 2021, due to improvement in supply and market strength attributed to the work-from-home environment.

The increase in broadband net revenue of $10.4 million was primarily from gateway revenues and, to a lesser extent, improvements in satellite and tuner shipments.

The increase in connectivity revenue of $32.7 million was primarily driven by higher Wi-Fi and ethernet revenues as our supply improved and an increase in MoCA product shipments.

The increase in infrastructure revenues of $4.4 million was primarily driven by an increase in 5G wireless access product shipments and, to a lesser extent, increased shipments of wireless backhaul, high-performance analog, and G.hn and MoCA last-mile access products in this category.

The increase in industrial and multi-market revenue of $7.1 million was related to increased shipments of component and high-performance analog products.

We currently expect that revenue will fluctuate in the future, from period-to-period, based on evolving customer demand for existing products, the pace of adoption of newer products, and macroeconomic conditions.

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Cost of Net Revenue and Gross Profit

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Cost of net revenue $ 109,337 $ 97,640 $ 11,697 12 %

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% of net revenue 59 % 53 %

Cost of net revenue increased $9.6 million to $100.0 million for the three months ended September 30, 2021, as compared to $90.4 million for the three months ended September 30, 2020.

The increase was primarily driven by higher sales and incremental expenses, primarily driven by our acquisition of the Wi-Fi and Broadband assets business on July 31, 2020, partially offset by a reduction in acquisition-related amortization of inventory fair value adjustments.

Gross profit percentage improved for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, due primarily to a reduction in acquisition-related amortization of inventory fair value adjustments and improved absorption of amortization of intangible costs.

Cost of net revenue increased $136.3 million to $290.5 million for the nine months ended September 30, 2021, as compared to $154.2 million for the nine months ended September 30, 2020.

The increase was primarily driven by higher sales and incremental expenses, primarily driven by our acquisition of the Wi-Fi and Broadband assets business.

Gross profit percentage improved for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, due primarily to a reduction in acquisition-related amortization of inventory fair value adjustments and improved absorption of amortization of intangible costs.

Cost of net revenue increased $11.7 million to $109.3 million for the three months ended March 31, 2022, as compared to $97.6 million for the three months ended March 31, 2021.

The increase was primarily driven by higher sales and incremental expenses.

Gross profit percentage improved for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, due primarily to improved absorption of amortization of intangible assets.

We currently expect that gross profit percentage will fluctuate in the future, from period-to-period, based on changes in product mix, average selling prices, and average manufacturing costs.

Further, due to heightened volatility and uncertainty in customer demand resulting from the COVID-19 pandemic and global semiconductor chip shortages, we may experience increased volatility in our cost of net revenues as a result.

Further, due to heightened volatility and uncertainty in customer demand resulting from the COVID-19 pandemic and global semiconductor supply shortages, we may experience increased volatility in our cost of net revenues as a result.

Research and Development

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Research and development $ 65,886 $ 63,166 $ 2,720 4 %

% of net revenue 25 % 30 %

Research and development expense increased $11.7 million to $67.5 million for the three months ended September 30, 2021 from $55.8 million in the three months ended September 30, 2020.

The increase was primarily due to our business acquisitions of the Wi-Fi and Broadband assets business on July 31, 2020 and NanoSemi on September 9, 2020, which resulted in added engineering headcount, facilities, and related expenses, as well as an increase in bonuses and performance stock-based compensation expenses.

There were increases in personnel-related expense of $7.4 million, of which $2.1 million is from performance-based bonus accruals and stock-based compensation expense, outside services of $2.4 million which primarily includes computer aided design expense, occupancy expenses of $1.1 million, and depreciation expense of $0.8 million.

Research and development expense increased $95.6 million to $205.1 million for the nine months ended September 30, 2021 from $109.5 million in the nine months ended September 30, 2020.

The increase was primarily due to our 2020 business acquisitions, which resulted in added engineering headcount, facilities, and related expenses, as well as an increase in bonuses and performance stock-based compensation expenses.

There were increases in personnel-related expense of $62.6 million, of which $16.8 million is from performance-based bonus accruals and stock-based compensation expense, outside services of $17.7 million which primarily includes consulting and computer aided design expense of $7.9 million and consulting expense of $7.8 million, prototype expense of $6.4 million, depreciation expense of $4.1 million, occupancy expenses of $3.8 million and miscellaneous small tools and equipment expenses totaling $0.9 million.

Research and development expense increased $2.7 million to $65.9 million for the three months ended March 31, 2022 from $63.2 million in the three months ended March 31, 2021.There were increases in computer aided design expense of $0.9 million, equipment and tools expense of $0.8 million, and occupancy expense of $0.4 million.

We expect our research and development expenses to increase in future years as we continue to expand our product portfolio and enhance existing products.

Selling, General and Administrative

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Selling, general and administrative $ 40,577 $ 36,469 $ 4,108 11 %

% of net revenue 15 % 17 %

Selling, general and administrative expense decreased $3.2 million to $38.5 million for the three months ended September 30, 2021, as compared to $41.7 million for the three months ended September 30, 2020.

The decrease was primarily due to impacts from our 2020 business acquisitions, including a decrease in acquisition transaction and integration expenses of $7.6 million, partially offset by increases in personnel-related expense of $3.2 million due to incremental headcount, occupancy expense of $0.4 million, and other professional fees of $0.4 million.

Selling, general and administrative expense increased $17.0 million to $110.8 million for the nine months ended September 30, 2021, as compared to $93.8 million for the nine months ended September 30, 2020.

The increase was primarily due impacts from our 2020 business acquisitions, which resulted in added personnel, facilities, and related expenses as well as an increase in performance-based bonuses and stock-based compensation expenses.

There were increases in personnel expense of $17.8 million, including $6.2 million from performance-based bonus accruals and stock-based compensation expenses, outside services of $3.9 million primarily consisting of acquisition transition service costs and consulting fees, occupancy expenses of $2.1 million, small tools expense of $0.8 million, and depreciation expense of $0.7 million.

These increases were partially offset by a decrease in acquisition transaction and integration expenses of $9.0 million.

Selling, general and administrative expense increased $4.1 million to $40.6 million for the three months ended March 31, 2022, as compared to $36.5 million for the three months ended March 31, 2021.

The increase was primarily due to increases in headcount.

There were increases in personnel expense of $4.6 million, including $3.3 million from performance-based bonus accruals and stock-based compensation.

We expect selling, general and administrative expenses to increase in future years as we grow our sales and marketing organization to expand into existing and new markets.

Impairment Losses

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Impairment losses $ — $ — $ — N/A $ — $ 86 $(86) (100)%

% of net revenue — % — % — % — %

Impairment losses in the nine months ended September 30, 2020 related to abandonment of a license of intellectual property.

Restructuring Charges

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Restructuring charges $ — $ 2,166 $ (2,166) (100) %

% of net revenue — % 1 %

Restructuring charges decreased $3.3 million to $0 for the three months ended September 30, 2021, compared to $3.3 million for the three months ended September 30, 2020.

Restructuring charges in the three months ended September 30, 2020 primarily consisted of $1.7 million of lease-related charges, which included impairment of leased right-of-use assets of $1.5 million related to a reduction in expected cash inflows from subleases, and $1.5 million in employee severance-related charges.

Restructuring charges decreased $1.6 million to $2.2 million for the nine months ended September 30, 2021, compared to $3.8 million for the nine months ended September 30, 2020.

Restructuring charges for the nine months ended September 30, 2021 primarily consisted of $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which primarily consisted of impairment of leased right-of-use assets and leasehold improvements.

Restructuring charges in the nine months ended September 30, 2020 primarily consisted of $2.0 million of lease-related charges, which included

impairment of leased right-of-use assets of $1.5 million as described above, and $1.6 million in employee severance-related charges.

Loss on Extinguishment of Debt

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Loss on extinguishment of debt $ — $ — $ — N/A $ (5,221) $ — $(5,221) N/A

% of net revenue — % — % (1) % — %

Loss on extinguishment of debt in the nine months ended September 30, 2021 consists of the charge-off of remaining unamortized debt discount and issuance costs on debt we repaid early with proceeds from a new term loan in June 2021.

Restructuring charges decreased $2.2 million to $0 for the three months ended March 31, 2022, compared to $2.2 million for the three months ended March 31, 2021.

Restructuring charges in the three months ended March 31, 2021 primarily consisted of $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which primarily consisted of impairment of leased right-of-use assets and leasehold improvements.

Interest and Other Income (Expense )

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Interest and other income (expense), net $ (3,088) $ (4,310) $ 1,222 (28) %

% of net revenue (1) % (2) %

Interest and other income (expense), net changed by $1.5 million from a net expense of $4.3 million in the three months ended September 30, 2020 to a net expense of $2.7 million for the three months ended September 30, 2021.

The change in

interest and other income (expense), net was primarily due to the impact of a $0.9 million decrease in interest expense on outstanding debt, mostly related to a lower average balance of term loan debt outstanding.

The remaining change included a $0.6 million decrease in other income (expense), net, from income of $0.7 million in the 2020 period to expense of $0.1 million primarily related to foreign currency fluctuations.

Interest and other income (expense), net changed by $2.7 million from a net expense of $8.6 million in the nine months ended September 30, 2020 to a net expense of $11.3 million for the nine months ended September 30, 2021.

The change in interest and other income (expense), net was primarily due to the impact of a $2.4 million increase in interest expense on outstanding debt, mostly related to a higher average balance of term loan debt outstanding.

Income Tax Provision (Benefit)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

(dollars in thousands) (dollars in thousands)

Income tax provision (benefit) $ 11,802 $ (2,191) $ 13,993 (639) % $ 5,598 $ (12,128) $ 17,726 (146) %

The income tax provision for the three months ended September 30, 2021 was $11.8 million compared to an income tax benefit of $2.2 million for the three months ended September 30, 2020.

The income tax provision for the nine months ended September 30, 2021 was $5.6 million compared to an income tax benefit of $12.1 million for the nine months ended September 30, 2020.

Interest and other income (expense), net changed by $1.2 million from a net expense of $4.3 million in the three months ended March 31, 2021 to a net expense of $3.1 million for the three months ended March 31, 2022.

The change in interest and other income (expense), net was primarily due to the impact of a $1.6 million decrease in interest expense on outstanding debt, mostly related to a lower average balance of term loan debt outstanding.

The remaining change included a $0.7 million increase in other income (expense), net, from expense of $0.1 million in the 2021 period to expense of $0.8 million in the 2022 period primarily related to $1.0 million in unrealized holding losses on equity securities that are marked to market value on the balance sheet, partially offset by the impact of foreign currency fluctuations.

Income Tax Provision

Three Months Ended March 31,

2022 2021 $ Change % Change

(dollars in thousands)

Income tax provision $ 11,453 $ 1,806 $ 9,647 534 %

The income tax provision for the three months ended March 31, 2022 was $11.5 million compared to an income tax provision of $1.8 million for the three months ended March 31, 2021.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the three and nine months ended September 30, 2021, respectively, resulted primarily from foreign earnings taxed at rates other than the federal statutory rate, a tax on global intangible low-taxed income (“GILTI”), non-deductible foreign stock-based compensation, partially offset by a benefit related to release of uncertain tax positions under ASC 740-10.

federal statutory rate for the three months ended March 31, 2022 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal R&D credits.

The permanent tax item related to global intangible low-taxed income also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the three and nine months ended September 30, 2020, respectively, resulted primarily from foreign earnings taxed at rates other than the federal statutory rate, a benefit related to release of uncertain tax positions under ASC 740-10, and excess tax benefits related to stock-based compensation.

federal statutory rate for the three months ended March 31, 2021 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including the tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10.

We continue to maintain a valuation allowance to offset state and certain federal and foreign deferred tax assets, as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines.

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We do not incur income tax expense or benefit in certain tax-free jurisdictions in which we operate.

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2022 and may be extended through March 2027.

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are effective through March 2027.

Under these incentives, qualifying income derived from certain sales of our integrated circuits is taxed at a concessionary rate over the incentive period.

We also receive a reduced withholding tax rate on certain intercompany royalty payments made by our Singapore subsidiary during the incentive period.

Such incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

We recorded a tax provision in the three months ended March 31, 2022 at the incentive rate.

In the three months ended March 31, 2021, due to our Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on our income tax provision.

The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

We currently believe that we will be able to satisfy these conditions without material risk.

Primarily because of our Singapore net operating losses and our full valuation allowance in Singapore, we do not believe the incentives will have a material impact on our income tax position in the year ending December 31, 2021.

Liquidity and Capital Resources

As of September 30, 2021, we had cash and cash equivalents of $169.4 million, restricted cash of $1.1 million and net accounts receivable of $106.9 million.

Additionally, as of September 30, 2021, our working capital was $187.0 million.

As of March 31, 2022, we had cash and cash equivalents of $151.1 million, restricted cash of $1.1 million and net accounts receivable of $125.7 million.

Additionally, as of March 31, 2022, our working capital was $219.8 million.

Our primary uses of cash are to fund operating expenses and purchases of inventory, property and equipment, and from time to time, the acquisition of businesses.

We also use cash to pay down outstanding debt, repurchase our common stock under our stock repurchase plan, and from time to time, make investments.

In June 2021, the Company used a portion of funds from a

new senior secured term B loan facility or the “Initial Term Loan under the June 23, 2021 Credit Agreement,” in an aggregate principal amount of $350.0 million to repay in full all outstanding indebtedness under the May 12, 2017 Credit Agreement and related fees and expenses incurred.

The remaining proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement are available for general corporate purposes.

The Company also entered into a senior secured revolving credit facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of September 30, 2021.

As of March 31, 2022, $290.0 million of principal was outstanding under a senior secured term B loan facility or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available a senior secured revolving credit facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of March 31, 2022.

The proceeds of the revolving facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

In July 2020, we funded our $150.0 million acquisition of the Wi-Fi and Broadband assets business with a portion of the net proceeds of an $175.0 million incremental term loan, which we repaid in full in June 2021.

In September 2020, we paid $10.0 million in cash to acquire NanoSemi and in the nine months ended September 30, 2021, we paid an aggregate of $35.0 million in additional cash payments to stockholders of NanoSemi, which were previously deferred.

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement will amortize in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on June 23, 2028.

Heightened volatility, global semiconductor chip shortages, and uncertainty in customer demand and the worldwide economy in general continues to impact business and financial markets as a result of the COVID-19 pandemic, and we may experience decreased sales and revenues in the near future.

A material adverse impact from COVID-19 and the global semiconductor chip shortage could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions.

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement has amortized in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on June 23, 2028.

Heightened volatility, global semiconductor supply shortages, and uncertainty in customer demand and the worldwide economy in general continues to impact business and financial markets as a result of the COVID-19 pandemic and may be further exacerbated by the impacts of high inflation, and we may experience decreased sales and revenues in the near future.

A material adverse impact from COVID-19 and the global semiconductor supply shortage could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions.

Our future capital requirements will depend on many factors, including changes in revenue, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services or technologies.

2 unchanged sentences

Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, inventory fair value adjustments, stock-based compensation, loss on extinguishment of debt and impairment of leased right-of-use assets and related leasehold improvements.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of leased right-of-use assets and related leasehold improvements and unrealized holding gains or losses on marketable equity securities.

Cash used to fund capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows.

Cash proceeds from debt and issuance of common stock and cash used to pay down outstanding debt or repurchase common stock is included in financing activities in our consolidated statements of cash flows.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers, and through January 2021, from billings made on our behalf to customers for products sold by Intel under a transition services agreement.

Cash proceeds from issuance of common stock and cash used to pay down outstanding debt or repurchase common stock is included in financing activities in our consolidated statements of cash flows.

As of March 31, 2022, our material cash requirements include long-term debt, non-cancelable operating leases, inventory purchase obligations and other obligations, which primarily consist of contractual payments due for computer-aided design software, as follows:

Total Less than 1 year 1-3 years 3-5 years More than 5 years

(in thousands)

Long-term debt obligations $ 290,000 $ — $ — $ — $ 290,000

Operating lease obligations 42,388 7,243 17,831 12,984 4,330

Inventory purchase obligations 183,300 176,447 6,853 — —

Other obligations 34,084 17,858 16,115 111 —

Total $ 549,772 $ 201,548 $ 40,799 $ 13,095 $ 294,330

Our planned capital expenditures as of March 31, 2022 were not material.

Our consolidated balance sheet at March 31, 2022 included $7.7 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment.

The future payments related to uncertain tax positions recorded as other long-term liabilities have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers.

Aside from the amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period depending on the payment cycles of our major distributor customers, and relative linearity of shipments period-to-period.

The June 23, 2021 Credit Agreement, under which we entered into a senior secured term B loan facility and a revolving credit facility, permits us to request incremental loans in an aggregate principal amount not to exceed the sum of an amount equal to the greater of (x) $175.0 million and (y) 100% of consolidated EBITDA, plus the amount of certain voluntary prepayments, plus an unlimited amount that is subject to pro forma compliance with certain first lien net leverage ratio, secured net leverage ratio and total net leverage ratio tests.

The June 23, 2021 Credit Agreement, under which we entered into a senior secured term B loan facility and a revolving credit facility, permits us to request incremental loans in an aggregate principal amount not to exceed the sum of an amount equal to the greater of (x) $175.0 million and (y) 100% of “Consolidated EBITDA” (as defined in such agreement), plus the amount of certain voluntary prepayments, plus an unlimited amount that is subject to pro forma compliance with certain first lien net leverage ratio, secured net leverage ratio and total net leverage ratio tests.

Following is a summary of our working capital, cash and cash equivalents, and restricted cash for the periods indicated:

September 30, December 31,

March 31, December 31,

(in thousands)

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Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net cash provided by (used in) operating activities $ 152,200 $ (676)

Net cash provided by operating activities $ 134,166 $ 40,272

Net cash used in investing activities (42,762) (12,264)

Net cash provided by (used in) financing activities (56,897) 174,682

Net cash used in financing activities (70,659) (28,817)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (230) (32)

Increase in cash, cash equivalents and restricted cash $ 20,520 $ 3,625

Increase (decrease) in cash, cash equivalents and restricted cash $ 20,515 $ (841)

Cash Flows from Operating Activities

Net cash provided by operating activities was $152.2 million for the nine months ended September 30, 2021.

Net cash provided by operating activities was $134.2 million for the three months ended March 31, 2022.

Net cash provided by operating activities consisted of positive impact of net income of $33.6 million, non-cash items of $43.7 million, and changes in operating assets and liabilities of $57.1 million, partially offset by excess tax benefits and deferred income taxes totaling $0.3 million.

Non-cash items included in net income for the nine months ended September 30, 2021 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $67.4 million, stock-based compensation of $42.9 million, loss on extinguishment of debt of $5.2 million, and amortization of debt issuance costs and discounts of $2.6 million.

Net cash used in operating activities was $0.7 million for the nine months ended September 30, 2020.

Net cash used in operating activities consisted of the negative impact of net loss of $73.9 million, $26.0 million in changes in operating assets and liabilities, and deferred income taxes and excess tax benefits totaling $5.8 million, partially offset by positive impact from $105.0 million in non-cash items.

Non-cash items included in net loss for the nine months ended September 30, 2020 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $53.8 million, stock-based compensation of $33.1 million, and inventory fair value adjustments of $14.4 million.

Non-cash items included in net income for the three months ended March 31, 2022 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $23.9 million and stock-based compensation of $18.6 million.

Net cash provided by operating activities was $40.3 million for the three months ended March 31, 2021.

Net cash used in operating activities consisted of the positive impact of non-cash items of $37.2 million and net income of $3.8 million, partially offset by the negative impact of deferred income taxes and excess tax benefits totaling $1.3 million and changes in operating assets and liabilities of $0.6 million.

Non-cash items included in net income for the three months ended March 31, 2021 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $22.3 million and stock-based compensation of $13.0 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $73.6 million for the nine months ended September 30, 2021 and consisted of $35.0 million in payments of purchase price that were previously deferred from our 2020 acquisition of NanoSemi, $26.9 million in purchases of property and equipment, $6.6 million in purchases of intangible assets, and $5.0 million in purchases of long-term investments in a private entity.

Net cash used in investing activities was $170.5 million for the nine months ended September 30, 2020 and consisted primarily of $160.0 million in cash used in the acquisitions, comprising $150.0 million for the WiFi and Broadband assets business and $10.0 million in initial cash for NanoSemi, and $10.1 million in purchases of property and equipment.

Net cash used in investing activities was $42.8 million for the three months ended March 31, 2022 and consisted of purchases of investments of $23.3 million, proceeds loaned under notes receivable of $10.0 million, purchases of property and equipment of $4.8 million and purchases of intangible assets of $4.6 million.

Net cash used in investing activities was $12.3 million for the three months ended March 31, 2021 and consisted primarily of purchases of property and equipment of $6.2 million, purchases of investments of $5.0 million, and purchases of intangible assets of $1.1 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $56.9 million for the nine months ended September 30, 2021.

Net cash used in financing activities consisted primarily of $389.8 million in repayments of debt, $11.1 million in minimum tax withholding paid on behalf of employees for restricted stock units, $8.1 million in common stock repurchases, $4.1 million in debt issuance costs, partially offset by cash inflows from net proceeds from the issuance of debt of $350.0 million and from issuance of common stock upon exercise of stock options of $6.3 million.

Net cash provided by financing activities was $174.7 million for the nine months ended September 30, 2020.

Net cash provided by financing activities consisted primarily of $175.0 million in proceeds from borrowings under an incremental term loan we entered into in July 2020 in part in connection with the acquisition of the WiFi and Broadband assets business, and cash inflows from net proceeds from issuance of common stock upon exercise of stock options of $5.3 million, partially offset by payments of debt issuance costs of $2.7 million and minimum tax withholding paid on behalf of employees for restricted stock units of $2.9 million.

We believe that our $169.4 million of cash and cash equivalents at September 30, 2021 will be sufficient to fund our projected operating requirements for at least the next twelve months.

As of September 30, 2021, our indebtedness totaled $330.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

Net cash used in financing activities was $70.7 million for the three months ended March 31, 2022.

Net cash used in financing activities consisted primarily of common stock repurchases of $26.3 million, minimum tax withholding paid on behalf of employees for restricted stock units of $24.4 million, and repayments of debt of $20.0 million.

Net cash used in financing activities was $28.8 million for the three months ended March 31, 2021.

Net cash used in financing activities consisted primarily of repayments of debt of $20.0 million, minimum tax withholding paid on behalf of employees for restricted stock units of $7.4 million, and common stock repurchases of $2.7 million, partially offset by net proceeds from issuance of common stock upon exercise of stock options of $1.3 million.

We believe that our $151.1 million of cash and cash equivalents at March 31, 2022 will be sufficient to fund our projected operating requirements for at least the next twelve months.

As of March 31, 2022, our indebtedness totaled $290.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million.

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Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00%, or (ii) an adjusted LIBOR rate (as calculated above) plus an applicable margin of 1.00%.

Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00% to 0.75% in the case of base rate loans and 1.00% to 1.75% in the care of LIBOR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00% to 0.75% in the case of base rate loans and 1.00% to 1.75% in the case of LIBOR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

The Company is required to pay commitment fees ranging from 0.175% to 0.25% per annum on the daily undrawn commitments under the Revolving Facility, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

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As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, or SPEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of September 30, 2021, we were not involved in any unconsolidated SPE transactions.

Contractual Obligations

As of September 30, 2021, future minimum payments under long-term debt, non-cancelable operating leases, inventory purchase obligations and other obligations were as follows:

Total Less than 1 year 1-3 years 3-5 years More than 5 years

(in thousands)

Long-term debt obligations $ 330,000 $ — $ — $ — $ 330,000

Operating lease obligations 32,910 2,813 15,438 9,152 5,507

Inventory purchase obligations 150,309 124,347 25,962 — —

Other obligations 43,949 8,566 34,848 535 —

Total $ 557,168 $ 135,726 $ 76,248 $ 9,687 $ 335,507

Other obligations consist of contractual payments due for software licenses.

Our consolidated balance sheet at September 30, 2021 included $5.6 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment.

Our contractual obligations including long-term debt, leases, inventory purchase obligations and other obligations, increased by $35.0 million to $557.2 million as of September 30, 2021, from $522.2 million as of December 31, 2020.

The increase was primarily due to increased orders of inventory placed with our vendors and with Intel under the supply agreement during the period.

As of March 31, 2022, we were not involved in any unconsolidated SPE transactions.

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