What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-04-24 compared with 2023-10-25 · 164 added, 158 removed, 164 unchanged (66% of the section changed)

2 unchanged sentences

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those discussed below.

This discussion contains forward-looking statements that involve a number of risks, uncertainties, and assumptions that could cause our actual results to 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 in Part II, Item 1A 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.

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

We are a fabless integrated circuit design company whose products integrate all or substantial portions of a high-speed communication system, including radio frequency, or RF, high-performance analog, mixed-signal, digital signal processing, security engines, data compression and networking layers, and power management.

In most cases, these products are designed on a single silicon-die, using standard digital complementary metal oxide semiconductor, or CMOS, processes and conventional packaging technologies.

We believe this approach enables our solutions to achieve superior power, performance, and cost relative to our industry competition.

Our customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate our products in a wide range of electronic devices.

Examples of such devices include cable Data Over Cable Service Interface Specifications, or DOCSIS, fiber and DSL broadband modems and gateways;

In most cases, these products are designed on a single silicon-die, using standard digital complementary metal oxide semiconductor, or CMOS, manufacturing processes and conventional packaging technologies.

Importantly, our ability to design analog and mixed-signal circuits in CMOS allows us to efficiently combine analog functionality and complex digital signal processing logic in the same integrated circuit.

As a result, we believe our solutions have exceptional levels of functional integration and performance, low manufacturing cost, and reduced power consumption versus competition.

These solutions also enable shorter design cycles, significant design flexibility and low system-level cost across a range of markets.

Our customers primarily include electronics distributors, module makers, original equipment manufacturers, or OEMs and original design manufacturers, or ODMs, which incorporate our products in a wide range of electronic devices.

Examples of such devices include radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

optical transceivers targeting hyperscale data centers;

Wi-Fi and wireline routers for home networking;

radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

fiber-optic modules for data center, metro, and long-haul transport networks;

broadband modems compliant with Data Over Cable Service Interface Specifications, or DOCSIS, passive optical fiber standards, or PON, and digital subscriber line, or DSL;

as well as power management and interface products used in these and many other markets.

Our highly integrated semiconductor devices and platform-level solutions are primarily manufactured using low-cost CMOS process technology.

CMOS processes are ideally suited for large digital logic implementations targeting high-volume and low-cost consumer applications.

As a result, our solutions have exceptional levels of functional integration and performance, low manufacturing cost, and reduced power consumption.

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, 2023, revenues of $567.9 million were 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.

In addition, we generate revenue from certain intellectual property sale agreements.

In the three months ended March 31, 2024, net revenue was $95.3 million, which was derived in part from sales of RF receivers and RF receiver SOC and connectivity solutions and intellectual property 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;

2 unchanged sentences

changes in export control regulations;

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 73% and 82% of net revenue during the three months ended September 30, 2023 and 2022, respectively, including 41% from products shipped to Hong Kong and 10% from products shipped to Taiwan, ROC during the three months ended September 30, 2023 and 51% from products shipped to Hong Kong and 14% from products shipped to mainland China during three months ended September 30, 2022.

Products shipped to Asia accounted for 74% and 81% of net revenue during the nine months ended September 30, 2023 and 2022, respectively, including 34% from products shipped to Hong Kong and 12% from products shipped to mainland China during the nine months ended September 30, 2023 and 43% from products shipped to Hong Kong and 16% from products shipped to mainland China during the nine months ended September 30, 2022.

and our ability to obtain design wins with device manufacturers, in particular manufacturers of 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 59% and 77% of net revenue during the three months ended March 31, 2024 and 2023, respectively, including 28% from products shipped to Hong Kong during the three months ended March 31, 2024 and 31% from products shipped to Hong Kong and 16% from products shipped to mainland China during three months ended March 31, 2023.

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, 2023 and 2022 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, 2024 and 2023 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.

A significant portion of our net revenue has historically been generated by a limited number of customers.

Sales to customers is comprised of both direct sales to customers and indirect sales through distributors.

In the three months ended September 30, 2023, one single customer accounted for 10% or more of our net revenue, and our ten largest customers collectively accounted for 60% of our net revenue, of which distributor customers accounted for 11% of our net revenue.

In the nine months ended September 30, 2023, one single customer accounted for 11% of our net revenue, and our ten largest customers collectively accounted for 55% of our net revenue, of which distributor customers accounted for 11% of our net revenue.

For certain customers, we sell multiple products into disparate end user applications such as cable modems, PON ODUs, Wi-Fi routers, and broadband gateways.

Table of Co ntents

A significant portion of our net revenue has historically been generated by a limited number of customers through both sales of our products, and consideration under intellectual property sale agreements.

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

In the three months ended March 31, 2024, two customers accounted for 36% of our net revenue, and our ten largest customers collectively accounted for 75% of our net revenue, of which distributor customers accounted for 19% of our net revenue.

For certain customers, we sell multiple products into disparate end user applications such as PON outdoor units, or PON ODUs, Wi-Fi routers, broadband gateways, and cable modems.

Our business depends on winning competitive bid selection processes, known as design wins, to develop integrated circuits for use in our customers’ products.

3 unchanged sentences

We do not have any long-term purchase commitments with any of our customers, all of whom purchase our products on a purchase order basis.

Once one of our products is incorporated into a customer’s design, we believe that our product is likely to remain a component of the customer’s product for its life cycle because of the time and expense associated with redesigning the product or substituting an alternative chip.

Once one of our products is incorporated into a customer’s design, however, we believe that our product is likely to remain a component of the customer’s product for its life cycle because of the time and expense associated with redesigning the product or substituting an alternative chip.

Product life cycles in our target markets will vary by application.

For example, in the cable operator modem and gateway sectors, a design-in can have a product life cycle of 24 to 48 months.

For example, in the broadband data modem and gateway sectors, a design-in can have a product life cycle of 24 to 60 months.

In the industrial and wired and wireless infrastructure markets, a design-in can have a product life cycle of 24 to 84 months and beyond.

Impact of the Global Economic Uncertainty and Inventory Build

Inflation, and uncertainty in customer demand and the worldwide economy has continued, and we expect to experience continued volatility in our sales and revenues.

In particular, we believe an economic slowdown and inventory oversupply will continue to add to volatility in managing the business.

Impact of Global Economic Uncertainty and Inventory Build

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we could experience continued decline in our sales and revenues.

In particular, we believe an economic slowdown and inventory oversupply in the channel could continue to add to volatility in managing the business.

In addition, inventory oversupply could potentially lead to more inventory write-downs, including charges for any excess or obsolete inventory which could negatively impact our gross margins.

As customer lead times continue to improve, we have seen and expect to continue to see a more normalized demand-planning horizon.

While we expect inventory to remain elevated in the near term, we expect channel inventory will continue to decline over the coming quarters.

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

As supplier lead times continue to stabilize, we have seen and expect to continue to see a more normalized demand-planning horizon.

While we expect inventory to remain elevated in the near term, we expect channel inventory will continue to decline thereafter.

Terminated Silicon Motion Merger

2 unchanged sentences

On July 26, 2023, we terminated the Merger Agreement and notified Silicon Motion that we were relieved of our obligations to close because, among other reasons, (i) certain conditions to closing set forth in the Merger Agreement were not satisfied and were incapable of being satisfied, (ii) Silicon Motion had suffered a Material Adverse Effect that was continuing, (iii) Silicon Motion was in material breach of representations, warranties, covenants, and agreements in the Merger Agreement that gave rise to the right of the Company to terminate, and (iv) in any event, the First Extended Outside Date had passed and was not automatically extended because certain conditions in Article 6 of the Merger Agreement were not satisfied or waived as of May 5, 2023.

Under the terms of the Merger Agreement, MaxLinear was not required to pay a break-up fee or other fee as a result of the termination of the Merger Agreement.

Under the terms of the Merger Agreement, MaxLinear was not required to pay a break-up fee or other fee as a result of the termination of the Merger Agreement on these grounds.

On August 16, 2023, Silicon Motion delivered a notice to us, which Silicon Motion publicly disclosed, that it was purporting to terminate the Merger Agreement and that Silicon Motion would be commencing an arbitration to seek damages from us arising from our alleged breaches of the Merger Agreement.

2 unchanged sentences

See Part II, Item 1 (Legal Proceedings) of this report for more information on legal proceedings related to the termination of the Merger Agreement.

Table of Co ntents

The second amended and restated commitment letter dated October 24, 2022 with Wells Fargo Bank, N.A., or Wells Fargo Bank, and other lenders, and related financing commitments for the previously pending (now terminated) merger were also terminated upon termination of the Merger Agreement.

As a result of the termination of the financing, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million, which is included in other income (expense), net in the three months ended September 30, 2023.

Acquisition of Company Y

On January 17, 2023, the Company completed its acquisition of a business, or Company Y, pursuant to a Purchase and Sale Agreement, or the Purchase Agreement.

The transaction consideration included $9.7 million in cash.

In addition, Company Y stockholders may receive up to an additional $2.6 million in potential contingent consideration, subject to the acquired business satisfying certain personnel objectives by June 17, 2024.

Company Y is headquartered in Bangalore, India and operates as a provider of engineering design services.

As a result of the termination of the financing, in August 2023, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million.

Workforce Reductions

During the year ended December 31, 2023, we entered into two plans of restructuring to reduce our workforce, or the Workforce Reductions.

The Workforce Reductions were intended to align our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support the long-term business strategy by reducing our operating expenses.

As a result of the Workforce Reductions, in the year ended December 31, 2023, we incurred $19.8 million in restructuring costs primarily related to severance costs and related expenses.

During the three months ended March 31, 2024, we completed notification to the remaining affected employees of the Workforce Reductions, and incurred $22.6 million in restructuring costs, or a cumulative total of $42.4 million.

Restructuring costs in the three months ended March 31, 2024 included $19.9 million in severance costs and related expenses, substantially all of which pertained to statutory severance benefits in the jurisdictions in which the terminated employees were employed, and $2.7 million in non-cash charges related to exiting facilities and writing off of assets.

As of March 31, 2024, estimated restructuring costs remaining to be incurred for the restructuring plans pertain to write off of certain licenses and exiting of leased office space and are anticipated to occur in the remaining periods of 2024.

The remaining restructuring costs are not expected to be material.

The estimate of costs that we expect to incur, and the timing thereof, are subject to a number of assumptions and actual results may differ.

We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Workforce Reductions.

Critical Accounting Policies and Estimates

6 unchanged sentences

Accordingly, those 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, 2022, which we filed with the Securities and Exchange Commission, or SEC, on February 1, 2023, or our Annual Report.

There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2023.

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, 2023, which we filed with the Securities and Exchange Commission, or SEC, on January 31, 2024, or our Annual Report.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024.

Recently Issued Accounting Pronouncements

2 unchanged sentences

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

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.

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

A significant portion of our sales are to distributors, who then resell our products.

Table of Co ntents

Cost of Net Revenue.

1 unchanged sentence

costs associated with our outsourced packaging and assembly, test and shipping;

costs of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance;

amortization of acquired developed technology intangible assets and certain purchased licensed technology intangible assets;

costs of personnel, including salaries, benefits, and stock-based compensation;

equipment associated with manufacturing support, logistics and quality assurance;

amortization of acquired developed technology and purchased licensed technology intangible assets;

inventory fair value adjustments, if any;

amortization of certain production mask costs and computer-aided design software license costs;

2 unchanged sentences

Research and Development.

Research and development expense includes personnel-related expenses, including salaries and benefits and stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs.

Research and development, or R&D, expense includes personnel-related expenses, including salaries and benefits and stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs, partially offset by income from joint R&D projects and/or governmental R&D grants, if any.

Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

1 unchanged sentence

Selling, General and Administrative.

Selling, general and administrative expense includes personnel-related expenses, including salaries and benefits and 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.

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

Impairment Losses.

6 unchanged sentences

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

Other income (expense) consists of income (expense) generated from non-operating transactions, including a ticking fee paid to lenders following the termination of the Silicon Motion merger and unrealized holding gains (losses) from certain investments required to be marked to market value.

Other income (expense) generally consists of income (expense) generated from non-operating transactions, net gains (losses) on sales of investments and/or income from investments, if any, and unrealized holding gains (losses) from certain investments required to be marked to market value, if any.

Income Tax Provision (Benefit).

1 unchanged sentence

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.

Table of Co ntents

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,

2023 2022 2023 2022

Three Months Ended March 31,

Net revenue 100 % 100 %

15 unchanged sentences

Net income (loss) (76) % 4 %

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Broadband $ 33,055 $ 81,681 $ (48,626) (60) %

7 unchanged sentences

Total net revenue $ 95,269 $ 248,442 $ (153,173) (62) %

Net revenue decreased $150.2 million to $135.5 million for the three months ended September 30, 2023, as compared to $285.7 million for the three months ended September 30, 2022, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in the prior year.

The decrease in broadband net revenue of $85.7 million was primarily from gateway revenues, and to a lesser extent, cable.

The decrease in connectivity revenue of $67.6 million was driven by declines in Wi-Fi, ethernet and MoCA revenues.

The increase in infrastructure revenues of $14.4 million was primarily driven by an increase in wireless backhaul product shipments.

The decrease in industrial and multi-market revenue of $11.3 million was related to decreased shipments of high-performance analog and component products.

Net revenue decreased $261.8 million to $567.9 million for the nine months ended September 30, 2023, as compared to $829.7 million for the nine months ended September 30, 2022, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in the prior year.

The decrease in broadband net revenue of $224.2 million was primarily from gateway revenues, and to a lesser extent, cable, tuners and satellite.

The decrease in connectivity revenue of $80.0 million was primarily driven by declines in Wi-Fi, MoCA and ethernet revenues.

The increase in infrastructure revenues of $40.9 million was primarily driven by an increase in wireless backhaul product shipments.

The increase in industrial and multi-market revenue of $1.5 million was related to increased shipments of component products, partially offset by decreased shipments of high-performance analog products.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry, and we may experience further decline in revenue due to current macroeconomic conditions impacting customer demand for various products.

Net revenue decreased $153.2 million to $95.3 million for the three months ended March 31, 2024, as compared to $248.4 million for the three months ended March 31, 2023, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022.

The decrease in broadband net revenue of $48.6 million was driven by decreases in the volume of broadband SOC shipments in this category, partially offset by revenue from certain intellectual property sale agreements.

The decrease in connectivity net revenue of $56.6 million was driven by decreased volume of shipments of certain products associated with residential broadband market decline, partially offset by revenue from certain intellectual property sale agreements.

The decrease in net infrastructure revenues of $13.7 million was driven by a decrease in the volume of wireless backhaul product shipments, partially offset by revenue from certain intellectual property sale agreements.

The decrease in industrial and multi-market net revenue of $34.3 million was driven by decreased volume of shipments of high-performance analog and component products.

Price changes did not have a material impact to revenues period over period.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry.

Table of Co ntents

Cost of Net Revenue and Gross Profit

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Cost of net revenue $ 46,001 $ 108,135 $ (62,134) (57) %

2 unchanged sentences

% of net revenue 52 % 56 %

Cost of net revenue decreased $56.7 million to $61.6 million for the three months ended September 30, 2023, as compared to $118.2 million for the three months ended September 30, 2022.

The decrease was primarily driven by lower sales and expenses.

Gross profit percentage declined for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, due primarily to revenue mix and decreased absorption of amortization of intangible assets.

Cost of net revenue decreased $92.5 million to $250.8 million for the nine months ended September 30, 2023, as compared to $343.2 million for the nine months ended September 30, 2022.

The decrease was primarily driven by lower sales and expenses.

Gross profit percentage declined for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, due primarily to revenue mix and decreased absorption of amortization of intangible assets.

Cost of net revenue decreased $62.1 million to $46.0 million for the three months ended March 31, 2024, as compared to $108.1 million for the three months ended March 31, 2023.

The decrease was driven by a decreased volume of shipments as a result of macroeconomic conditions impacting customer demand for our products as described above under “Net Revenue.” Gross profit percentage declined for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due to reduced absorption of intangible amortization and fixed costs.

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.

Research and Development

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Research and development $ 64,766 $ 67,291 $ (2,525) (4) %

% of net revenue 68 % 27 %

Research and development expense decreased $10.1 million to $66.3 million for the three months ended September 30, 2023, as compared to $76.4 million for the three months ended September 30, 2022.

The decrease was primarily driven by the impact from the decrease in headcount from a reduction in force.

Research and development expense decreased $18.5 million to $204.3 million for the nine months ended September 30, 2023, as compared to $222.7 million for the nine months ended September 30, 2022.

The decrease was primarily driven by the impact from the decrease in headcount from a reduction in force.

Research and development expense decreased $2.5 million to $64.8 million for the three months ended March 31, 2024, as compared to $67.3 million for the three months ended March 31, 2023.

The decrease was driven by decreases in payroll and benefits expense of $6.0 million, CAD design tools expense of $2.1 million, outside services of $1.5 million, stock based compensation of $1.0 million, and depreciation expense of $0.7 million.

These decreases were partially offset by a decrease in income from governmental R&D grants and joint R&D projects offsetting our R&D expense of $7.9 million, and increases in bonuses of $1.3 million.

The decrease in payroll and benefits, outside services, and stock-based compensation are attributable to the Workforce Reductions and cost reduction measures.

The decrease in CAD design tool and consulting expenses are due to timing of project completion.

The decrease in depreciation expense is from acquired assets becoming fully amortized as they reached the end of their useful lives.

The amount of income from governmental R&D grants and joint R&D projects varies from period to period depending on demand for such projects and availability of governmental R&D programs.

The increase in bonus expense is due to improvement in year-to-date achievement against our annual operating plan relative to the prior year.

We are closely managing our research and development expenses to meet evolving demand;

however, we expect our research and development expenses to increase in future years when we return to expanding our product portfolio and enhancing existing products.

however, we expect our research and development expenses to increase in future years as we develop products to drive future growth.

Selling, General and Administrative

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Selling, general and administrative $ 36,488 $ 38,653 $ (2,165) (6) %

% of net revenue 38 % 16 %

Selling, general and administrative expense decreased $13.1 million to $25.4 million for the three months ended September 30, 2023, as compared to $38.5 million for the three months ended September 30, 2022.

The decrease was primarily due to decreased amortization of intangibles and stock based-compensation expenses.

Selling, general and administrative expense decreased $25.8 million to $97.8 million for the nine months ended September 30, 2023, as compared to $123.5 million for the nine months ended September 30, 2022.

The decrease was primarily due to decreased amortization of intangibles and stock based-compensation expenses.

Selling, general and administrative expense decreased $2.2 million to $36.5 million for the three months ended March 31, 2024, as compared to $38.7 million for the three months ended March 31, 2023.

The decrease was a result of decreases in payroll and other benefits expense of $1.9 million, professional fees of $1.2 million, depreciation and amortization of $0.6 million and other miscellaneous expense of $0.8 million.

These decreases were partially offset by increases in stock-based compensation of $1.7 million and bonuses of $0.7 million.

The decreases in payroll and other benefits and other miscellaneous expenses are attributable to recent reductions in workforce and cost reduction measures.

The decrease in professional fees is mainly due to decrease in merger and acquisition related fees following the termination of our merger with Silicon Motion.

Table of Co ntents

decrease in depreciation and amortization is from assets becoming fully amortized as they reached the end of their useful lives.

The increase in stock-based compensation expense is due to incremental grants to executives for retention purposes, while the increase in bonus expense is due to improvement in year-to-date achievement against our annual operating plan relative to the prior year.

We are closely managing our selling, general and administrative expenses;

1 unchanged sentence

Impairment Losses

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Impairment losses $ — $ — $ — N/A $ 2,438 $ — $ 2,438 N/A

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Impairment losses $ — $ 2,438 $ (2,438) (100) %

% of net revenue — % 1 %

Impairment losses in the nine months ended September 30, 2023 related to abandonment of certain intellectual property licenses.

Impairment losses in the three months ended March 31, 2023 related to abandonment of certain intellectual property licenses.

Restructuring Charges

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Restructuring charges $ 22,630 $ 4,648 $17,982 387 %

% of net revenue 24 % 2 %

Restructuring charges decreased $0.6 million to $0.1 million for the three months ended September 30, 2023, compared to $0.6 million for the three months ended September 30, 2022.

Restructuring charges increased $8.0 million to $9.1 million for the nine months ended September 30, 2023, compared to $1.1 million for the nine months ended September 30, 2022.

Restructuring charges in the nine months ended September 30, 2023 consisted primarily of $8.9 million of employee severance-related charges from a reduction in force.

Restructuring charges increased $18.0 million to $22.6 million for the three months ended March 31, 2024, compared to $4.6 million for the three months ended March 31, 2023.

Restructuring charges for the three months ended March 31, 2024 included $19.9 million in employee severance and related charges related to reductions in our workforce and $2.1 million in charges related to reduction of space leased for office facilities.

Substantially all of the employee severance-related charges in this period are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed.

Restructuring charges for the three months ended March 31, 2023 included $4.6 million in employee severance and related charges related to reductions in our workforce.

Interest and Other Income (Expense)

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Interest and other income (expense), net $ 545 $ (2,178) $ 2,723 (125) %

% of net revenue 1 % (1) %

Interest and other income (expense), net changed by $16.3 million from expense of $7.4 million in the three months ended September 30, 2022 to expense of $23.7 million for the three months ended September 30, 2023.

The change in interest and other income (expense), net was primarily due to a loan ticking fee of approximately $18.3 million paid to lenders following the termination of the Silicon Motion merger, partially offset by an increase in interest income of $1.7 million on interest-bearing cash equivalents.

Interest and other income (expense), net changed by $19.1 million from expense of $5.6 million in the nine months ended September 30, 2022 to expense of $24.7 million for the nine months ended September 30, 2023.

The change in interest and other income (expense), net was primarily due to a $22.9 million change in other income (expense), net, from income of $1.7 million in the 2022 period to expense of $21.2 million in the 2023 period, partially offset by the impact of a $4.1 million increase in interest income.

The $22.9 million change in other income (expense), net primarily related to a loan ticking fee of approximately $18.3 million paid to lenders following the termination of the Silicon Motion merger, $2.5 million impact of change from $1.4 million in net unrealized holding loss in the 2022 period to net unrealized holding loss of $3.9 million recognized on equity securities that are marked to market value in other income (expense), net, and $3.4 million impact from foreign currency fluctuations, partially offset by a gain of $1.0 million related to partial curtailment of defined benefit pension obligations.

The $4.1 million increase in interest income is from interest-bearing cash equivalents.

Interest and other income (expense), net changed by $2.7 million from expense of $2.2 million in the three months ended March 31, 2023 to expense of $0.5 million for the three months ended March 31, 2024.

The change in interest and other income (expense), net was due to a foreign currency gain of $1.0 million in first quarter 2024 compared to a currency loss of $40 thousand in first quarter 2023, increase in interest income of $1.2 million on interest-bearing cash equivalents, and income of $0.6 million derived from privately held investments.

Income Tax Provision (Benefit)

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2024 2023 $ Change % Change

(dollars in thousands)

Income tax provision (benefit) $ (1,762) $ 15,566 $ (17,328) (111) %

The income tax benefit for the three months ended September 30, 2023 was $1.7 million compared to an income tax provision of $16.2 million for the three months ended September 30, 2022.

The income tax provision for the nine months ended September 30, 2023 was $13.5 million compared to an income tax provision of $39.5 million for the nine months ended September 30, 2022.

Table of Co ntents

The income tax benefit for the three months ended March 31, 2024 was $1.8 million compared to an income tax provision of $15.6 million for the three months ended March 31, 2023.

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

federal statutory rate for the nine months ended September 30, 2023 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 legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

federal statutory rate for the three months ended March 31, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including tax credits, stock based compensation, and tax shortfalls related to stock-based compensation.

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

federal statutory rate for the nine months ended September 30, 2022 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, release of certain reserves for uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal R&D credits.

federal statutory rate for the three months ended March 31, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, research and development credits, stock based compensation, excess tax benefits related to stock-based compensation, and the release of certain reserves for uncertain tax positions under ASC 740-10.

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

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.

5 unchanged sentences

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

We recorded a tax provision in the nine months ended September 30, 2023 and 2022 at the incentive rate.

We recorded a tax benefit in the three months ended March 31, 2024 and 2023 at the incentive rate.

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.

1 unchanged sentence

Liquidity and Capital Resources

As of September 30, 2023, we had cash and cash equivalents of $187.0 million, restricted cash of $1.1 million and net accounts receivable of $158.2 million.

Additionally, as of September 30, 2023, our working capital was $275.7 million.

As of March 31, 2024, we had cash and cash equivalents of $191.9 million, restricted cash of $1.0 million and net accounts receivable of $126.2 million.

Additionally, as of March 31, 2024, our working capital, which we define as current assets less current liabilities, was $220.8 million.

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable.

Collateral is generally not required for customer receivables.

We limit our exposure to credit loss by placing our cash with high credit quality financial institutions.

At times, such deposits may be in excess of insured limits.

We have not experienced any losses on our deposits of cash and cash equivalents.

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.

1 unchanged sentence

However, on July 26, 2023, we terminated the Merger Agreement and were relieved of our obligations to close.

We also use cash to pay down outstanding debt, and from time to time, make investments.

As of September 30, 2023, $125.0 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 September 30, 2023.

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.

As of March 31, 2024, $125.0 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, 2024.

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.

Table of Co ntents

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.

We could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate.

While we had been mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it would have a material adverse effect our operating results and could affect our ability to service the indebtedness.

Please refer to the Risk Factor entitled “ As of September 30, 2023, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

While we had been mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and could affect our ability to service the indebtedness.

Please refer to the Risk Factor entitled “ As of March 31, 2024, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

Such indebtedness adversely affects our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interest of stockholders, including obtaining additional indebtedness to finance such transactions.

4 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, stock-based compensation, impairment of intangible assets and unrealized holding gains or losses on marketable equity securities.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as, but not limited to, amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of intangible assets, impairment of leased right-of-use assets and gain on extinguishment of lease liabilities.

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 issuance of common stock and debt and cash used to pay down outstanding debt are included in financing activities in our consolidated statements of cash flows.

As of September 30, 2023, 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:

Cash paid to satisfy minimum tax withholdings on behalf of employees for restricted stock units are included in financing activities in our consolidated statements of cash flows.

As of March 31, 2024, 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

2 unchanged sentences

Operating lease obligations 36,876 7,996 18,824 8,460 1,596

Inventory purchase obligations 41,164 23,603 17,561 — —

Purchase obligations 38,277 26,080 12,197 — —

Other obligations 79,126 27,481 47,972 3,673 —

Total $ 279,279 $ 61,557 $ 78,993 $ 137,133 $ 1,596

Our planned capital expenditures as of September 30, 2023 were not material.

Our consolidated balance sheet at September 30, 2023 included $5.2 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment.

Our planned capital expenditures as of March 31, 2024 were not material.

Our consolidated balance sheet at March 31, 2024 included $5.5 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment and $15.0 million received from other parties for jointly funded research and development projects which will be recognized into income when the contingencies associated with the repayment conditions have been resolved.

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.

Table of Co ntents

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers, as well as proceeds that we receive under certain intellectual property sale agreements.

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” (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, 2023 December 31, 2022

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

March 31, 2024 December 31, 2023

(in thousands)

4 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 192,930 $ 188,356

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,

We believe that our $191.9 million of cash and cash equivalents at March 31, 2024 will be sufficient to fund our projected operating requirements for at least the next twelve months.

As of March 31, 2024, our indebtedness totaled $125.0 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, which remained undrawn as of March 31, 2024.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted SOFR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted SOFR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%.

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 SOFR 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 case of SOFR 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.

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

The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

Table of Co ntents

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

Three Months Ended March 31,

(in thousands)

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash (583) 1

Increase (decrease) in cash, cash equivalents and restricted cash $ (205) $ 50,755

Increase in cash, cash equivalents and restricted cash $ 4,574 $ 20,479

Cash Flows from Operating Activities

Net cash provided by operating activities was $59.9 million for the nine months ended September 30, 2023.

Net cash provided by operating activities consisted of non-cash items of $103.1 million, and excess tax benefits and deferred income taxes totaling $6.0 million, partially offset by net loss of $34.6 million and changes in operating assets and liabilities of $14.5 million.

Non-cash items included in net loss for the nine months ended September 30, 2023 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $54.9 million, stock-based compensation of $38.8 million, unrealized holding loss on investments of $3.9 million, impairment losses of $2.4 million, and loss on disposal of property and equipment of $2.1 million.

Net cash provided by operating activities was $319.4 million for the nine months ended September 30, 2022.

Net cash provided by operating activities consisted of positive impact of net income of $94.0 million, non-cash items of $120.3 million, and changes in operating assets and liabilities of $91.5 million, partially offset by excess tax benefits and deferred income taxes totaling $13.6 million.

Non-cash items included in net income for the nine months ended September 30, 2022 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $61.9 million and stock-based compensation of $58.2 million.

Net cash provided by operating activities was $16.0 million for the three months ended March 31, 2024, compared to net cash provided by operating activities of $42.2 million three months ended March 31, 2023.

The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of our products as a result of macroeconomic conditions impacting customer demand for our products (as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in our working capital, which increased $66.5 million, in particular, in the first quarter of 2024, we collected accounts receivable of $68.3 million, which was partially offset by payments against our price protection liability of $18.6 million and severance payments from the Workforce Reductions of $7.0 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $30.8 million for the nine months ended September 30, 2023 and consisted of cash used in acquisitions of Company X and Y of $12.4 million (including $2.7 million contingent consideration paid to shareholders of Company X), purchases of property and equipment of $12.2 million, and purchases of intangible assets of $6.2 million.

Net cash used in investing activities was $74.4 million for the nine months ended September 30, 2022 and consisted of purchases of long-term investments of $29.3 million, purchases of property and equipment of $24.6 million, purchases of intangible assets of $10.4 million, and proceeds loaned under notes receivable of $10.0 million.

While our capital purchases increased $2.9 million in the first quarter of 2024, our use of cash in investing activities declined by $6.8 million, as we did not have an acquisition in the first quarter of 2024.

Net cash used in investing activities was $8.7 million for the three months ended March 31, 2024 and consisted of purchases of property and equipment of $8.3 million, and purchases of intangible assets of $0.4 million.

Net cash used in investing activities was $15.5 million for the three months ended March 31, 2023 and primarily consisted of cash used in the acquisition of Company Y of $9.7 million and purchases of property and equipment of $5.2 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $27.5 million for the nine months ended September 30, 2023.

Net cash used in financing activities consisted primarily of payment of debt commitment, or ticking fees, of $18.3 million in connection with the termination of the merger with Silicon Motion and minimum tax withholding paid on behalf of employees for restricted stock units of $12.4 million, partially offset by net proceeds from issuance of our common stock upon exercise of stock options and purchases made under our ESPP of $3.2 million.

Net cash used in financing activities was $191.8 million for the nine months ended September 30, 2022.

Net cash used in financing activities consisted primarily of repayments of debt of $135.0 million, common stock repurchases of $31.5 million, and minimum tax withholding paid on behalf of employees for restricted stock units of $28.5 million, partially offset by $3.2 million in net proceeds from issuance of our common stock upon exercise of stock options and purchases made under our ESPP.

We believe that our $187.0 million of cash and cash equivalents at September 30, 2023 will be sufficient to fund our projected operating requirements for at least the next twelve months.

As of September 30, 2023, our indebtedness totaled $125.0 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, which remained undrawn as of September 30, 2023.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted LIBOR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted LIBOR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%.

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 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 June 23, 2021 Credit Agreement contains customary provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings.

Our cash and cash equivalents in recent years have been favorably affected by our implementation of an equity-based bonus program for our employees, including executives.

In connection with that bonus program, in February 2023, we issued 0.9 million freely-tradable (subject to restrictions for affiliates) shares of our common stock in settlement of bonus awards for the 2022 performance period.

We expect to implement a similar equity-based plan for fiscal 2023, but our compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.

Our use of cash in financing activities, which was substantially comprised of minimum tax withholding paid on behalf of employees for restricted stock units for both periods, declined due to a smaller amount of restricted stock units released for bonuses and a decline in value of other stock-related awards released during the periods.

Warranties and Indemnifications

In connection with the sale of products in the ordinary course of business, we often make representations affirming, among other things, that our products do not infringe on the intellectual property rights of others, and agree to indemnify customers against third-party claims for such infringement.

Further, our certificate of incorporation and bylaws require us to indemnify our officers and directors against any action that may arise out of their services in that capacity, and we have also entered into indemnification agreements with respect to all of our directors and certain controlling persons.

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