UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 29, 2017~~April 1, 2022



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35451

MACOM Technology Solutions Holdings, Inc.

(Exact name of registrant as specified in its charter)



~~Delaware~~

	~~27-0306875~~
Delaware		27-0306875
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Chelmsford Street

Lowell, MA 01851

(Address of principal executive offices and zip code)

(978) 656-2500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.001 per share	MTSI	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x☒

Accelerated filer

¨☐

Non-accelerated filer

¨☐

~~(Do not check if a smaller reporting company)~~

Smaller reporting company

¨☐

Emerging growth company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

As of ~~February 2, 2018~~,April 25, 2022, there were ~~64,405,673~~69,890,536 shares of the registrant’s common stock outstanding.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION



ITEM 1.			FINANCIAL STATEMENTS

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(InUnaudited, in thousands)

~~(Unaudited)~~


	December 29, 2017			September 29, 2017				April 1, 2022		October 1, 2021
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	152,085		$	130,104		Cash and cash equivalents	$	127,575	$	156,537
Short term investments	44,585			84,121
Accounts receivable (less allowances of $8,924 and $9,410, respectively)	97,123			136,096
Short-term investments							Short-term investments	375,449		188,365
Accounts receivable, net							Accounts receivable, net	100,552		84,570
Inventories	143,136			136,074			Inventories	93,352		82,699
Income tax receivable	18,933			18,493
Assets held for sale	—			35,571
Prepaid and other current assets	25,363			22,438			Prepaid and other current assets	9,508		9,365
Total current assets	$	481,225		$	562,897		Total current assets	706,436		521,536
Property and equipment, net	132,010			131,019			Property and equipment, net	122,426		120,526
Goodwill	316,239			313,765			Goodwill	313,185		314,240
Intangible assets, net	601,920			621,092			Intangible assets, net	67,344		84,685
Deferred income taxes	948			948			Deferred income taxes	38,261		39,516
Other investments	41,500			—			Other investments	2,500		15,342
Other long-term assets	7,418			7,402			Other long-term assets	36,341		38,300
TOTAL ASSETS	$	1,581,260		$	1,637,123
Total assets							Total assets	$	1,286,493	$	1,134,145
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:							Current liabilities:
Current portion of lease payable	$	796		$	815
Current portion of long-term debt	6,885			6,885
Current portion of finance lease obligations							Current portion of finance lease obligations	$	949	$	958

Accounts payable	25,807			47,038			Accounts payable	30,999		28,712
Accrued liabilities	50,981			60,237			Accrued liabilities	62,375		63,374
Liabilities held for sale	—			2,144
Total current liabilities	$	84,469		$	117,119		Total current liabilities	94,323		93,044
Lease payable, less current portion	19,163			17,275
Long-term debt, less current portion	660,696			661,471
Warrant liability	26,167			40,775
Deferred income taxes	15,555			15,172
Finance lease obligations, less current portion							Finance lease obligations, less current portion	27,544		28,037
Financing obligation, less current portion							Financing obligation, less current portion	9,544		8,720
Long-term debt							Long-term debt	565,097		492,097
Other long-term liabilities	7,409			7,937			Other long-term liabilities	35,702		40,511
Total liabilities	$	813,459		$	859,749		Total liabilities	732,210		662,409
Commitments and contingencies (see Note 12)							Commitments and contingencies (see Note 12)
Stockholders’ equity:							Stockholders’ equity:
Common stock	64			64			Common stock	70		69
Treasury stock, at cost	(330		)	(330		)	Treasury stock, at cost	(330)		(330)
Accumulated other comprehensive income	2,999			2,977			Accumulated other comprehensive income	195		4,150
Additional paid-in capital	1,055,636			1,041,644			Additional paid-in capital	1,180,204		1,269,601
Accumulated deficit	(290,568		)	(266,981		)	Accumulated deficit	(625,856)		(801,754)
Total stockholders’ equity	$	767,801		$	777,374		Total stockholders’ equity	554,283		471,736
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,581,260		$	1,637,123
Total liabilities and stockholders' equity							Total liabilities and stockholders' equity	$	1,286,493	$	1,134,145

See notes to condensed consolidated financial statements.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(InUnaudited, in thousands, except per share data)

~~(Unaudited)~~

Three Months Ended
December 29,
2017 December 30,
2016
Revenue $ 130,925
$ 151,752
Cost of revenue 69,971
73,257
Gross profit 60,954
78,495
Operating expenses:
Research and development 41,651
30,174
Selling, general and administrative 37,634
36,496
Restructuring charges 4,662
1,287
Total operating expenses 83,947
67,957
(Loss) income from operations (22,993 ) 10,538
Other (expense) income
Warrant liability gain (expense) 14,608
(4,823 )
Interest expense, net (7,239 ) (7,350 )
Other income (expense) 7
(4 )
Total other income (expense), net 7,376
(12,177 )
Loss before income taxes (15,617 ) (1,639 )
Income tax expense 1,353
532
Loss from continuing operations (16,970 ) (2,171 )
(Loss) income from discontinued operations (5,599 ) 1,206
Net loss $ (22,569 ) $ (965 )

Net (loss) income per share:
Basic (loss) income per share:
Loss from continuing operations $ (0.26 ) $ (0.04 )
(Loss) income from discontinued operations (0.09 ) 0.02
Loss per share - basic $ (0.35 ) $ (0.02 )
Diluted (loss) income per share:
Loss from continuing operations $ (0.49 ) $ (0.04 )
(Loss) income from discontinued operations (0.09 ) 0.02
Loss per share - diluted $ (0.57 ) $ (0.02 )
Shares used:
Basic 64,325
53,737
Diluted 65,109
53,737


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenue	$	165,147	$	150,583	$	324,767	$	299,087
Cost of revenue	66,158		66,470		131,636		134,713
Gross profit	98,989		84,113		193,131		164,374
Operating expenses:
Research and development	35,455		34,619		70,925		71,555
Selling, general and administrative	30,963		30,522		62,566		61,774

Total operating expenses	66,418		65,141		133,491		133,329
Income from operations	32,571		18,972		59,640		31,045
Other (expense) income:
Warrant liability expense	—		—		—		(11,130)
Interest expense, net	(1,389)		(4,851)		(3,082)		(9,585)
Other (expense) income, net	(55)		2,879		114,853		(1,624)
Total other (expense) income, net	(1,444)		(1,972)		111,771		(22,339)
Income before income taxes	31,127		17,000		171,411		8,706
Income tax expense	1,569		2,193		3,026		2,867
Net income	$	29,558	$	14,807	$	168,385	$	5,839

Net income per share:
Income per share - Basic	$	0.42	$	0.22	$	2.42	$	0.09
Income per share - Diluted	$	0.42	$	0.21	$	2.37	$	0.08
Weighted average shares used:
Basic	69,788		68,504		69,594		68,130
Diluted	71,107		70,546		71,166		69,983

See notes to condensed consolidated financial statements.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME

(InUnaudited, in thousands)

~~(Unaudited)~~

Three Months Ended
December 29,
2017 December 30,
2016
Net loss $ (22,569 ) $ (965 )
Unrealized loss on short term investments, net of tax (267 ) (46 )
Foreign currency translation gain (loss), net of tax 289
(9,597 )
Other comprehensive income (loss), net of tax 22
(9,643 )
Total comprehensive loss $ (22,547 ) $ (10,608 )


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Net income	$	29,558	$	14,807	$	168,385	$	5,839
Unrealized loss on short term investments, net of tax	(2,335)		(373)		(2,952)		(196)
Foreign currency translation loss, net of tax	(679)		(1,303)		(1,003)		(351)
Other comprehensive loss, net of tax	(3,014)		(1,676)		(3,955)		(547)
Total comprehensive income	$	26,544	$	13,131	$	164,430	$	5,292

See notes to condensed consolidated financial statements.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(InUnaudited, in thousands)

~~(Unaudited)~~


	Three Months Ended
							Accumulated Other Comprehensive Income		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount
Balance as of December 31, 2021	69,709	$	70	(23)	$	(330)	$	3,209	$	1,177,239	$	(655,414)	$	524,774

Vesting of restricted common stock and units	315	—		—	—		—		—		—		—

Shares repurchased for tax withholdings on restricted stock awards	(114)	—		—	—		—		(7,002)		—		(7,002)
Share-based compensation	—	—		—	—		—		9,967		—		9,967
Other comprehensive loss, net of tax	—	—		—	—		(3,014)		—		—		(3,014)

Net income	—	—		—	—		—		—		29,558		29,558
Balance as of April 1, 2022	69,910	$	70	(23)	$	(330)	$	195	$	1,180,204	$	(625,856)	$	554,283

Accumulated
Other
Comprehensive Income

Additional
Paid-in
Capital

Accumulated
Deficit

Total
Stockholders’
Equity
Common Stock Treasury Stock
Shares Amount Shares Amount
Balance at September 29, 2017 64,279
$ 64
(23 ) $ (330 ) $ 2,977
$ 1,041,644
$ (266,981 ) $ 777,374
Cumulative effect of ASU 2016-09 —
—
—
—
—
1,018
(1,018 ) —
Stock options exercises 14
—
—
—
—
46
—
46
Vesting of restricted common stock and units 24
—
—
—
—
—
—
—
Issuance of common stock pursuant to employee stock purchase plan 114
—
—
—
—
3,195
—
3,195
Shares repurchased for stock withholdings on restricted stock awards (9 ) —
—
—
—
(259 ) —
(259 )
Share-based compensation —
—
—
—
—
9,992
—
9,992
Other comprehensive loss, net of tax —
—
—
—
22
—
—
22
Net loss —
—
—
—
—
—
(22,569 ) (22,569 )
Balance at December 29, 2017 64,422
$ 64
(23 ) $ (330 ) $ 2,999
$ 1,055,636
$ (290,568 ) $ 767,801



	Six Months Ended
							Accumulated Other Comprehensive Income		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount
Balance as of October 1, 2021	68,877	$	69	(23)	$	(330)	$	4,150	$	1,269,601	$	(801,754)	$	471,736
Stock option exercises	190	—		—	—		—		2,688		—		2,688
Vesting of restricted common stock and units	1,284	1		—	—		—		—		—		1
Issuance of common stock pursuant to employee stock purchase plan	56	—		—	—		—		2,447		—		2,447
Shares repurchased for tax withholdings on equity awards	(497)	—		—	—		—		(34,758)		—		(34,758)
Share-based compensation	—	—		—	—		—		19,916		—		19,916
Other comprehensive loss, net of tax	—	—		—	—		(3,955)		—		—		(3,955)
Cumulative-effect adjustment from adoption of ASU 2020-06, net	—	—		—	—		—		(79,690)		7,513		(72,177)


Net income	—	—		—	—		—		—		168,385		168,385
Balance as of April 1, 2022	69,910	$	70	(23)	$	(330)	$	195	$	1,180,204	$	(625,856)	$	554,283

See notes to condensed consolidated financial statements.


	Three Months Ended
							Accumulated Other Comprehensive Income		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount
Balance as of January 1, 2021	68,367	$	68	(23)	$	(330)	$	6,138	$	1,172,269	$	(848,695)	$	329,450
Stock option exercises	40	—		—	—		—		642		—		642
Vesting of restricted common stock and units	440	1		—	—		—		—		—		1

Shares repurchased for tax withholdings on equity awards	(155)	—		—	—		—		(10,494)		—		(10,494)
Share-based compensation	—	—		—	—		—		8,569		—		8,569
Other comprehensive loss, net of tax	—	—		—	—		(1,676)		—		—		(1,676)

Equity component of convertible notes, net	—	—		—	—		—		70,834		—		70,834
Net income	—	—		—	—		—		—		14,807		14,807
Balance as of April 2, 2021	68,692	$	69	(23)	$	(330)	$	4,462	$	1,241,820	$	(833,888)	$	412,133



	Six Months Ended
							Accumulated Other Comprehensive Income		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ Equity
	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount
Balance as of October 2, 2020	66,921	$	67	(23)	$	(330)	$	5,009	$	1,135,127	$	(839,727)	$	300,146

Stock option exercises	50	—		—	—		—		817		—		817
Vesting of restricted common stock and units	1,222	1		—	—		—		—		—		1
Issuance of common stock pursuant to employee stock purchase plan	93	—		—	—		—		2,239		—		2,239
Shares repurchased for tax withholdings on equity awards	(452)	—		—	—		—		(22,338)		—		(22,338)
Share-based compensation	—	—		—	—		—		18,700		—		18,700
Other comprehensive loss, net of tax	—	—		—	—		(547)		—		—		(547)
Issuance of common stock for the cashless exercise of warrants	858	1		—	—		—		36,441		—		36,442
Equity component of convertible notes, net	—	—		—	—		—		70,834		—		70,834
Net income	—	—		—	—		—		—		5,839		5,839
Balance as of April 2, 2021	68,692	$	69	(23)	$	(330)	$	4,462	$	1,241,820	$	(833,888)	$	412,133

See notes to condensed consolidated financial statements.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(InUnaudited, in thousands)

~~(Unaudited)~~


	Three Months Ended							Six Months Ended
	December 29, 2017			December 30, 2016				April 1, 2022		April 2, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:							CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(22,569	)	$	(965	)
Adjustments to reconcile net loss to net cash provided by operating activities (net of acquisitions):
Net income							Net income	$	168,385	$	5,839
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangibles amortization	26,874			18,475			Depreciation and intangibles amortization	29,080		35,613
Share-based compensation	9,992			8,183			Share-based compensation	19,916		18,700
Warrant liability (gain) expense	(14,608		)	4,823
Acquired inventory step-up amortization	224			—
Deferred financing cost amortization	1,029			702
Warrant liability expense							Warrant liability expense	—		11,130
Deferred financing cost and discount amortization and write-offs							Deferred financing cost and discount amortization and write-offs	869		4,954

Deferred income taxes	403			(1,054		)	Deferred income taxes	1,284		1,629
Changes in assets held for sale from discontinued operations	(6,219		)	—
Gain on equity method investment, net							Gain on equity method investment, net	(114,908)		(1,738)
Other adjustments, net	966			582			Other adjustments, net	307		331
Change in operating assets and liabilities (net of acquisitions):
Change in operating assets and liabilities:							Change in operating assets and liabilities:
Accounts receivable	38,874			(4,488		)	Accounts receivable	(15,983)		(22,397)
Inventories	(8,017		)	(1,583		)	Inventories	(10,653)		7,068
Prepaid expenses and other assets	(6,583		)	(673		)	Prepaid expenses and other assets	597		(4,033)
Accounts payable	(14,445		)	931			Accounts payable	1,632		3,841
Accrued and other liabilities	(2,225		)	(5,547		)	Accrued and other liabilities	(4,930)		1,324
Income taxes	(3,162		)	1,021			Income taxes	1,001		460
Net cash provided by operating activities	534			20,407			Net cash provided by operating activities	76,597		62,721
CASH FLOWS FROM INVESTING ACTIVITIES:							CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net	—			875
Proceeds from sale of equity method investment							Proceeds from sale of equity method investment	127,750		—
Purchases of property and equipment	(13,823		)	(4,942		)	Purchases of property and equipment	(12,184)		(7,328)
Proceeds from sales and maturities of short-term investments							Proceeds from sales and maturities of short-term investments	91,841		179,426
Purchases of short-term investments							Purchases of short-term investments	(282,642)		(138,149)

Proceeds from sale of assets	—			104			Proceeds from sale of assets	23		63
Proceeds from sales and maturities of investments	57,382			8,822
Purchases of investments	(17,987		)	(8,902		)
Purchases of other investments	(5,000		)	—
Payments associated with discontinued operations	(263		)	—
Net cash provided by (used in) investing activities	20,309			(4,043		)
Net cash (used in) provided by investing activities							Net cash (used in) provided by investing activities	(75,212)		34,012
CASH FLOWS FROM FINANCING ACTIVITIES:							CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes, net of issuance costs							Proceeds from convertible notes, net of issuance costs	—		394,871
Payments on long-term debt							Payments on long-term debt	—		(496,021)
Payments on finance leases							Payments on finance leases	(500)		(666)
Proceeds from stock option exercises and employee stock purchases	3,241			2,600			Proceeds from stock option exercises and employee stock purchases	5,135		3,056
Payments on notes payable	(1,721		)	(1,513		)
Payments of capital leases and assumed debt	(216		)	(288		)
Repurchase of common stock	(259		)	—
Proceeds from corporate facility financing obligation	—			4,250
Other adjustments	—			(38		)
Net cash provided by financing activities	1,045			5,011
Repurchase of common stock - tax withholdings on equity awards							Repurchase of common stock - tax withholdings on equity awards	(34,758)		(22,338)
Net cash used in financing activities							Net cash used in financing activities	(30,123)		(121,098)
Foreign currency effect on cash	93			(435		)	Foreign currency effect on cash	(224)		464
NET CHANGE IN CASH AND CASH EQUIVALENTS	21,981			20,940			NET CHANGE IN CASH AND CASH EQUIVALENTS	(28,962)		(23,901)
CASH AND CASH EQUIVALENTS — Beginning of period	$	130,104		$	332,977		CASH AND CASH EQUIVALENTS — Beginning of period	156,537		129,441
CASH AND CASH EQUIVALENTS — End of period	$	152,085		$	353,917		CASH AND CASH EQUIVALENTS — End of period	$	127,575	$	105,540

See notes to condensed consolidated financial statements.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission ~~(“SEC”~~(the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, ~~condensed consolidated statement of~~ comprehensive income, ~~condensed consolidated statements of~~ stockholders' equity and ~~condensed consolidated statements of~~ cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.

The condensed consolidated balance sheet ~~at September 29, 2017~~as of October 1, 2021 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our ~~September 29, 2017~~October 1, 2021 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended ~~September 29, 2017~~October 1, 2021 filed with the SEC on November 15, ~~2017.~~2021 (the “2021 Annual Report on Form 10-K”). We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our 2021 Annual Report on Form ~~10-K for our fiscal year ended September 29, 2017.~~10-K.

Principles of Consolidation—~~We have one reportable segment, semiconductors and modules.~~ The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

We have a 5252- or 53-week fiscal year ending on the Friday closest to the last day of September. ~~The fiscal~~Fiscal years ~~2018~~2022 and ~~2017~~2021 each include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we ~~typically~~ include the extra week arising in ~~our~~such fiscal years in the first fiscal quarter.

Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ~~generally accepted in the U.S.~~(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; goodwill and long-lived asset valuations and associated impairment assessments; revenue reserves; share-based compensation valuations and income taxes.

Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in ~~the notes to~~ our ~~September 29, 2017 consolidated financial statements, which were included in our~~2021 Annual Report on Form ~~10-K for our fiscal year ended September 29, 2017.~~10-K.

Pronouncements Adopted in Fiscal Year 2022

In ~~May 2014,~~August 2020, the Financial Accounting Standards Board ~~("FASB"~~(the “FASB”) issued Accounting Standards Update ~~("ASU"~~(“ASU”) ~~2014-09,~~ ~~Revenue from~~ 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts ~~with Customers~~in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which ~~supersedes~~simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts on an entity’s own equity. The standard reduces the number of models used to account for convertible instruments, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and requires the if-converted method for calculation of diluted earnings per share for all ~~existing revenue recognition requirements, including most industry-specific guidance. The~~convertible instruments. We early adopted this standard effective October 2, 2021 using the modified retrospective approach transition method. Therefore, the condensed consolidated financial statements for the three and six months ended April 1, 2022 are presented under the new standard, ~~requires a company~~while the comparative periods presented are not adjusted and continue to ~~recognize revenue when it transfers goods or services~~be reported in accordance with the Company's historical accounting policy. Refer to ~~customers~~Note 8 - Debt for the impact of adoption on our 2026 Convertible Notes (as defined below).

Pronouncements for Adoption in ~~an amount that reflects the consideration that the company expects to receive for those goods or services.~~ Subsequent Periods

In ~~August 2015,~~March 2020, the FASB issued ASU ~~2015-14,~~ ~~Revenue from Contracts with Customers: Deferral~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~Effective Date~~ ~~("Topic 606")~~Effects of Reference Rate Reform on Financial Reporting, which ~~delayed~~provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this update was effective ~~date of~~upon its issuance. If elected, the ~~new standard from January 1, 2017~~guidance is to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The standard permits the use of either the retrospective or cumulative effect transition method, and webe applied prospectively through December 31, 2022. We are currently evaluating the ~~method of adoption. We are currently in~~effect the ~~process of completing our analysis on the impact~~potential adoption of this ~~new accounting standards update. We do not expect the adoption of~~ ASU ~~2015-14~~ will have ~~a material impact~~ on ~~our financial position and results of operations.~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation~~ ~~("Topic 718"), which~~simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities. We adopted this ASU as of September 30, 2017. Prior to ASU 2016-09, the accounting for share-based compensation required forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09 requires an entity that elects to account for forfeitures when they occur to apply the accounting change on a modified retrospective basis as a cumulative-effect adjustment to retained

earnings as of the date of adoption. We elected to account for forfeitures when they occur, and recorded a $1.0 million cumulative-effect adjustment to beginning retained earnings as of September 30, 2017. We did not record any adjustments to retained earnings for the tax effect of the adoption of ASU 2016-09 as we are in a full valuation allowance position against our U.S deferred tax asset. ASU 2016-09 requires all excess tax benefits and tax deficiencies to be recorded in the consolidated income statement on a prospective basis when the awards vest or are settled. Due to our full U.S. valuation allowance, ASU 2016-09 had no impact to our tax expense for the three months ended December 29, 2017.

~~2. ACQUISITIONS~~

~~Acquisition of Applied Micro Circuits Corporation—~~ On January 26, 2017, we completed the acquisition of Applied Micro Circuits Corporation (“AppliedMicro”), a global provider of silicon solutions for next-generation cloud infrastructure and Cloud Data Centers, as well as connectivity products for edge, metro and long-haul communications equipment (the “AppliedMicro Acquisition”). We acquired AppliedMicro in order to expand our business in enterprise and Cloud Data Center applications. In connection with the AppliedMicro Acquisition, we acquired all of the outstanding common stock of AppliedMicro for total consideration of $695.4 million, which included cash paid of $287.1 million, less $56.8 million of cash acquired, and equity issued at a fair value of $465.1 million. In conjunction with the equity issued, we granted vested out-of-money stock options and unvested restricted stock units to replace outstanding vested out-of-money stock options and unvested restricted stock units of AppliedMicro. The total fair value of granted vested out-of-money stock options and unvested restricted stock units was $14.5 million, of which $9.3 million was attributable to pre-combination service and was included in the total consideration transferred. We funded the AppliedMicro Acquisition with cash on hand and short term investments. We recorded transaction costs related to the acquisition in selling, general and administrative expense. For the three months ended December 29, 2017, we recorded no transaction costs. For the three months ended December 30, 2016, we recorded transaction costs of $3.5 million. The AppliedMicro Acquisition was accounted for as a stock purchase and the operations of AppliedMicro have been included in our consolidated financial statements, ~~since the date~~including, but not limited to, our Credit Agreement (defined below). For additional information regarding our Credit Agreement, refer to Note 8 - Debt.

2. REVENUE

Disaggregation of ~~acquisition.~~Revenue

We ~~recognized~~disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the ~~AppliedMicro assets acquired~~nature, amount, timing and ~~liabilities assumed based upon the fair value~~uncertainty of ~~such assets~~revenue and ~~liabilities measured~~cash flows are affected by economic factors.

The following tables present our revenue disaggregated by markets and geography (in thousands):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenue by Market:
Telecommunications	$	62,927	$	42,273	$	118,749	$	93,805
Industrial & Defense	67,139		72,090		140,285		133,708
Data Center	35,081		36,220		65,733		71,574
Total	$	165,147	$	150,583	$	324,767	$	299,087


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenue by Geographic Region:
United States	$	74,547	$	72,255	$	148,973	$	136,237
China	46,028		37,199		82,091		79,575
Asia Pacific, excluding China (1)	25,881		25,515		56,531		47,288
Other Countries (2)	18,691		15,614		37,172		35,987
Total	$	165,147	$	150,583	$	324,767	$	299,087

(1)Asia Pacific primarily represents Taiwan, Japan, Singapore, Thailand, South Korea, Australia and Malaysia.

(2)No country or region represented greater than 10% of our total revenue as of the ~~date~~dates presented, other than the United States, China and Asia Pacific region as presented above.

Contract Balances

We record contract assets or contract liabilities depending on the timing of ~~acquisition. The aggregate purchase price~~revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advanced consideration received from customers for ~~AppliedMicro has been allocated~~contracts prior to the ~~tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair value at the date~~transfer of ~~acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific~~control to the ~~Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired,~~customer, and ~~has been allocated to goodwill, none~~therefore revenue is subsequently recognized upon delivery of ~~which will be tax deductible.~~

In connection with the acquisition of AppliedMicro, we entered into a plan to divest a portion of AppliedMicro's business specifically related to its compute business (the "Compute business"). The divestiture of the Compute business was completed on October 27, 2017. See ~~Note 3 - Discontinued Operations~~ ~~for further details of the divestiture.~~products and services.

The following table ~~summarizes~~presents the ~~total estimated acquisition consideration (in thousands):~~

Cash consideration paid to AppliedMicro common stockholders $ 287,060
Common stock issued (9,544,125 shares of our common stock at $47.53 per share) 453,632
Equity consideration for vested "in the money" stock options and unvested restricted stock units 2,143
Fair value of the replacement equity awards attributable to pre-acquisition service 9,307
Total consideration paid, excluding cash acquired $ 752,142

~~We finalized the purchase accounting~~changes in contract liabilities during the ~~fiscal quarter~~six months ended ~~December 29, 2017. The final purchase price allocation is~~April 1, 2022 (in thousands, except percentage):


	April 1, 2022		October 1, 2021		$ Change		% Change
Contract liabilities	$	4,189	$	2,793	$	1,396	50	%

As of April 1, 2022 and October 1, 2021, $0.4 million and $0.9 million, respectively, of our contract liabilities, were recorded as ~~follows (in thousands):~~other long-term liabilities on our balance sheet with the remainder recorded as accrued liabilities. During the three and six months ended April 1, 2022, we recognized net sales of $0.6 million and $1.0 million, respectively, that were included

Preliminary Allocation as of Allocation Adjustments Adjusted Allocation
September 29, 2017 December 29, 2017

Current assets $ 70,434
$ (553 ) $ 69,881
Intangible assets 412,848
—
412,848
Assets held for sale 40,944
—
40,944
Other assets 9,800
—
9,800
Total assets acquired 534,026
(553 ) 533,473
Liabilities assumed:
Liabilities held for sale 4,444
—
4,444
Other liabilities 17,627
651
18,278
Total liabilities assumed 22,071
651
22,722
Net assets acquired 511,955
(1,204 ) 510,751
Consideration:
Cash paid upon closing 230,298
—
230,298
Common stock issued 455,775
—
455,775
Equity instruments issued 9,307
—
9,307
Total consideration $ 695,380
$ —
$ 695,380
Goodwill $ 183,425
$ 1,204
$ 184,629

~~The components of the acquired intangible assets were as follows (in thousands):~~

Included In Assets Held For Sale Included in Retained Business Useful Lives (Years)
Developed technology $ 9,600
$ 78,448
7 years
Customer relationships —
334,400
14 years
Total acquired intangible assets $ 9,600
$ 412,848

~~The overall weighted-average life of the identified intangible assets acquired~~ in the AppliedMicro Acquisition is estimated to be 12.7 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets.

The following is a summary of AppliedMicro revenue and earnings included in our accompanying condensed consolidated statements of operations for the three months ended December 29, 2017 (in thousands):

Three Months Ended
December 29, 2017
Revenue $ 22,624
Loss from continuing operations (5,441 )
Loss from discontinued operations (5,599 )

The pro forma statements of operations data for the three months ended December 30, 2016, below, give effect to the AppliedMicro Acquisition, described above, as if it had occurred at October 2, 2015. These amounts have been calculated after applying our accounting policies and adjusting the results of AppliedMicro to reflect transaction costs, retention compensation expense, the impact of the step-up to the value of acquired inventory, as well as the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 2, 2015. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations.

December 30, 2016
Revenue $ 194,469
Income from continuing operations 9,019
Loss from discontinued operations (17,923 )

~~Acquisition of Assets of Picometrix LLC—~~ On August 9, 2017, we completed the acquisition of certain assets of Picometrix LLC ("Picometrix"), a supplier of optical-to-electrical converters for Cloud Data Center infrastructure (the "Picometrix Acquisition"). We acquired Picometrix in order to expand our business in enterprise and Cloud Data Center applications. The purchase consideration was $33.5 million, comprised of an upfront cash payment of $29.5 million, and $4.0 million placed in escrow for potential satisfaction of certain indemnification obligations that may arise from the closing date through December 15, 2018. For the three months ended December 29, 2017, we recorded no transaction costs. The Picometrix Acquisition was accounted for as an asset purchase, and the operations of Picometrix have been included in our consolidated financial statements since the date of acquisition.

~~We recognized the Picometrix assets acquired based upon the fair value of such assets measured~~contract liabilities balance as of the date of acquisition. The aggregate purchase price for the Picometrix assets has been allocated to the tangible and identifiable intangible assets acquired based on their estimated fair value at the date of acquisition. The excessbeginning of the ~~purchase price over~~period. The increase in contract liabilities during the ~~fair value~~six months ended April 1, 2022 was primarily related to deferral of revenue for invoiced products and services prior to when certain of our customers obtained control of the ~~acquired assets represents cost~~product and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, all of which will be tax deductible.or services.

The purchase accounting is preliminary and subject to completion including certain fair value measurements, particularly the finalization of the valuation assessment of the acquired tangible and intangible assets. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting.

~~The preliminary allocation of purchase price as of December 29, 2017 is as follows (in thousands):~~

Preliminary Allocation as of Allocation Adjustments Adjusted Allocation
September 29, 2017 December 29, 2017

Current assets $ 7,375
$ (1,131 ) $ 6,244
Intangible assets 19,000
—
19,000
Other assets 3,301
—
3,301
Total assets acquired 29,676
(1,131 ) 28,545

Current liabilities 2,169
242
2,411
Other liabilities 190
(77 ) 113
Total liabilities assumed 2,359
165
2,524
Net assets acquired 27,317
(1,296 ) 26,021
Consideration:
Cash paid upon closing, net of cash acquired
33,500
—
33,500
Goodwill $ 6,183
$ 1,296
$ 7,479

~~The pro forma financial information for fiscal years 2018 and 2017, including revenue and net income, is immaterial, and has not been separately presented.~~

3. ~~DISCONTINUED OPERATIONS~~

On October 27, 2017, we entered into a Purchase Agreement with Ampere Computing Holdings LLC (formerly known as Project Denver Holdings LLC) ("Ampere"), to sell the Compute business. In consideration for the transfer and sale of the Compute business, we received an equity interest in Ampere valued at approximately $36.5 million, and representing less than 20% of Ampere's total outstanding equity. The operations of the Compute business were accounted for as discontinued operations through the date of divestiture.

In August 2015, we sold our automotive business (the "Automotive business") to Autoliv ASP Inc. (“Autoliv”), as the Automotive business was not consistent with our long-term strategic vision from both a growth and profitability perspective. Additionally, we entered into a consulting agreement pursuant to which we were to provide Autoliv with certain non-design advisory services for a period of two years following the closing of the transaction for up to $15.0 million (the "Consulting Agreement"). During the three months ended December 30, 2016, we recognized $1.9 million of income from the consulting agreement with Autoliv. No income was recognized during the three months ended December 29, 2017.

~~The accompanying consolidated statements of operations includes the following operating results related to these discontinued operations (in thousands):~~

Three Months Ended
December 29, 2017 December 30, 2016
Revenue (1) $ (2 ) $ —
Cost of revenue (1) (540 ) —
Gross profit 538
—
Operating expenses:
Research and development (1) 4,710
—
Selling, general and administrative (1) 1,427
—
Total operating expenses 6,137
—
Loss from operations (5,599 ) —
Other income (2) —
1,875
(Loss) income before income taxes (5,599 ) 1,875
Income tax provision —
669
(Loss) income from discontinued operations $ (5,599 ) $ 1,206

Cash flow from operating activities (10,309 ) —

~~(1) Amounts are associated with the Compute business.~~

~~(2) Amounts are associated with the Automotive business.~~

4. INVESTMENTS

~~Our short term~~All investments are short-term in nature and are invested in corporate bonds ~~restricted money market funds,~~and commercial paper ~~and agency bonds,~~ and are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses and fair value of our available-for-sale investments by major investment type ~~as of December 29, 2017 and September 29, 2017~~ are summarized in the tables below (in thousands):


	April 1, 2022
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Aggregate Fair Value
Corporate bonds	$	133,697	$	—	$	(2,311)	$	131,386
Commercial paper	244,710		—		(647)		244,063
Total short-term investments	$	378,407	$	—	$	(2,958)	$	375,449


	December 29, 2017										October 1, 2021
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Aggregate Fair Value			Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Aggregate Fair Value
Corporate bonds	$	26,458	$	—	$	(409	)	$	26,049	Corporate bonds	$	73,653	$	151	$	(171)	$	73,633
Commercial paper	18,544		3		(11		)	18,536		Commercial paper	114,718		21		(7)		114,732
Total short term investments	$	45,002	$	3	$	(420	)	$	44,585
Total short-term investments										Total short-term investments	$	188,371	$	172	$	(178)	$	188,365

September 29, 2017

Amortized
Cost

Gross
Unrealized
Holding Gains

Gross
Unrealized
Holding Losses

Aggregate Fair
Value
Corporate bonds $ 26,366
$ 10
$ (166 ) $ 26,210
Commercial paper 57,943
4
(36 ) 57,911
Total short term investments $ 84,309
$ 14
$ (202 ) $ 84,121

The contractual maturities of available-for-sale investments were as follows (in thousands):


	April 1, 2022		October 1, 2021
Less than one year	$	281,096	$	120,590
Over one year	94,353		67,775
Total available-for-sale investments	$	375,449	$	188,365

December 29, 2017 September 29, 2017
Less than 1 year $ 19,561
$ 60,433
Over 1 year 25,024
23,688
Total short term investments $ 44,585
$ 84,121

~~Available-for-sale investments~~We have determined that the gross unrealized losses on available for sale securities as of April 1, 2022 and October 1, 2021 are ~~reported at fair value~~temporary in nature and/or do not relate to credit loss, and ~~as such, their associated unrealized~~therefore there is no expense for credit losses recorded in our condensed consolidated statements of operations. Unrealized gains and losses on available-for-sale investments are reported as a separate component of stockholders’ equity within accumulated other comprehensive income.

Other Investments— ~~We record~~As of April 1, 2022, we held a non-marketable equity ~~investments at cost, which approximates fair value at~~investment in Series B preferred stock of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. As the ~~date of purchase, if we~~equity securities do not have a readily determinable fair value and do not qualify for the ~~ability~~practical expedient under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, we have elected to ~~exercise significant influence or control over the investment.~~account for this investment at cost less any impairment. We ~~determine the appropriate classification of our investments at the time of acquisition and~~ evaluate ~~these investments~~this investment for impairment at each balance sheet date. As of ~~December 29, 2017, we had minority non-marketable equity~~April 1, 2022 and October 1, 2021, the carrying value of this investment was $2.5 million and is classified as a long-term investment.

As of October 1, 2021, also included in long-term investments was a non-controlling investment of less than ~~20.0% of~~10% in the outstanding equity ~~in two privately held companies which were classified as other long-term investments. One~~ of ~~these investments is~~ a ~~minority equity ownership in~~private company, Ampere ~~a technology company, for approximately $36.5 million. This investment~~Computing Holdings LLC (“Ampere”), that was acquired in conjunction with ~~the~~our divestiture of ~~the Compute~~our compute business during our fiscal year 2018. This investment’s carrying value was updated quarterly based on our proportionate share of the ~~fiscal quarter~~gains or losses, as well as any changes in Ampere's equity, utilizing the equity method. As of October 1, 2021, the carrying value of this investment was $12.8 million.

On December 23, 2021, we sold our investment in Ampere to one of Ampere’s other limited liability company members, pursuant to the terms of a previously negotiated call option included in Ampere’s limited liability company agreement, as amended and restated (the “LLC Agreement”), in exchange for a predetermined fixed price as set forth in the LLC Agreement of approximately $127.8 million in cash consideration. As of December 23, 2021, the carrying value of this investment was approximately $9.5 million. As a result of this transaction, during the three months ended December ~~29, 2017. The other~~31, 2021, we recorded a gain of $118.2 million in Other (expense) income, net in our condensed consolidated statements of operations.

During the three months ended December 31, 2021, we also recorded our proportionate share of the losses on this investment isof $3.3 million in Other (expense) income, net in our condensed consolidated statements of operations. We do not

anticipate any further Ampere income or losses to be recorded. During the three and six months ended April 2, 2021, we recorded income of $6.5 million and $1.7 million, respectively, associated with this investment. Amounts for the three and six months ended April 2, 2021 include a ~~Series B preferred stock ownership~~non-cash gain of ~~a manufacturing company~~$9.8 million associated with ~~preferred liquidation rights over other equity shares. This investment had a fair value of $5.0 million at the date of purchase.~~an increase in Ampere's equity.

5.4. FAIR VALUE

We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:



Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

We measure certain assets and liabilities at fair value on a recurring basis such as our financial ~~instruments and derivatives.~~instruments. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three and six months ended ~~December 29, 2017.~~

April 1, 2022.

Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):


	April 1, 2022
	Fair Value		Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets
Money market funds	$	278	$	278	$	—	$	—
Commercial paper	244,063		—		244,063		—
Corporate bonds	131,386		—		131,386		—
Total assets measured at fair value	$	375,727	$	278	$	375,449	$	—


	December 29, 2017									October 1, 2021
	Fair Value		Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)			Fair Value		Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets									Assets
Money market funds	$	268	$	268	$	—	$	—	Money market funds	$	26,363	$	26,363	$	—	$	—
Commercial paper	57,924		—		57,924		—		Commercial paper	114,732		—		114,732		—

Corporate bonds	26,049		—		26,049		—		Corporate bonds	73,633		—		73,633		—
Total assets measured at fair value	$	84,241	$	268	$	83,973	$	—	Total assets measured at fair value	$	214,728	$	26,363	$	188,365	$	—
Liabilities
Contingent consideration	$	1,106	$	—	$	—	$	1,106
Common stock warrant liability	26,167		—		—		26,167
Total liabilities measured at fair value	$	27,273	$	—	$	—	$	27,273

September 29, 2017
Fair Value Active Markets for Identical Assets (Level 1) Observable Inputs (Level 2) Unobservable Inputs (Level 3)
Assets
Money market funds $ 36
$ 36
$ —
$ —
Commercial paper 57,911
—
57,911
—
Corporate bonds 26,210
—
26,210
—
Total assets measured at fair value $ 84,157
$ 36
$ 84,121
$ —
Liabilities
Contingent consideration $ 1,679
$ —
$ —
$ 1,679
Common stock warrant liability 40,775
—
—
40,775
Total liabilities measured at fair value $ 42,454
$ —
$ —
$ 42,454

~~As of December 29, 2017 and September 29, 2017,~~All common stock warrants were exercised during the six months ended April 2, 2021. During the six months ended April 2, 2021, the change in the fair value of the ~~common stock warrants has been estimated using a Black-Scholes option pricing model.~~

~~The quantitative information utilized in the fair value calculation of our Level 3 liabilities is as follows:~~

Inputs
Liabilities Valuation Technique Unobservable Input December 29, 2017 September 29, 2017
Contingent consideration Discounted cash flow Discount rate 9.2% 9.2%
Probability of achievement 80% - 90% 70% - 100%
Timing of cash flows 5 months 2 - 8 months

Warrant liability Black-Scholes model Volatility 47.7% 44.9%
Discount rate 1.98% 1.62%
Expected life 3.0 years 3.2 years
Exercise price $14.05 $14.05
Stock price $32.54 $44.61
Dividend rate —% —%

The fair values of the contingent consideration liabilities were estimated based upon a risk-adjusted present value of the probability-weighted expected payments by us. Specifically, we considered base, upside and downside scenarios for the operating metrics upon which the contingent payments are to be based. Probabilities were assigned to each scenario and the probability weighted payments were discounted to present value using risk-adjusted discount rates.

~~The changes in liabilities with inputs~~warrant liability, classified within Level 3 of the fair value hierarchy, consist of the following (in thousands):


	October 2, 2020		Net Realized Losses Included in Earnings		Sales and Settlements		April 2, 2021
Common stock warrant liability	$	25,312	$	11,130	$	(36,442)	$	—

September 29,
2017 Net Realized/Unrealized Losses Included in Earnings
Purchases
and
Issuances

Sales and
Settlements
December 29,
2017
Contingent consideration $ 1,679
$ (573 ) $ —
$ —
$ 1,106
Common stock warrant liability $ 40,775
$ (14,608 ) $ —
$ —
$ 26,167

September 30,
2016 Net Realized/Unrealized Losses Included in Earnings
Purchases
and
Issuances

Sales and
Settlements
December 30,
2016
Contingent consideration $ 848
$ 18
$ —
$ —
$ 866
Common stock warrant liability $ 38,253
$ 4,823
$ —
$ —
$ 43,076

6.5. INVENTORIES

Inventories consist of the following (in thousands):


	April 1, 2022		October 1, 2021
Raw materials	$	59,239	$	50,950
Work-in-process	11,752		9,201
Finished goods	22,361		22,548
Total inventory, net	$	93,352	$	82,699

December 29,
2017 September 29,
2017
Raw materials $ 81,734
$ 78,999
Work-in-process 13,131
13,962
Finished goods 48,271
43,113
Total $ 143,136
$ 136,074

7.6. PROPERTY ~~PLANT~~ AND EQUIPMENT

Property ~~plant~~ and equipment consists of the following (in thousands):


	December 29, 2017			September 29, 2017				April 1, 2022		October 1, 2021
Construction in process	28,811			22,195			Construction in process	$	17,888	$	24,086
Machinery and equipment	160,936			160,955			Machinery and equipment	220,155		200,843
Leasehold improvements	12,931			13,809			Leasehold improvements	24,802		24,347
Furniture and fixtures	2,399			2,078			Furniture and fixtures	2,390		2,377
Computer equipment and software	16,927			16,539			Computer equipment and software	17,815		17,749
Capital lease assets	20,407			20,410
Finance lease assets							Finance lease assets	34,417		35,589
Total property and equipment	$	242,411		$	235,986		Total property and equipment	317,467		304,991
Less accumulated depreciation and amortization	(110,401		)	(104,967		)	Less accumulated depreciation and amortization	(195,041)		(184,465)
Property and equipment, net	$	132,010		$	131,019		Property and equipment, net	$	122,426	$	120,526

Depreciation and amortization expense related to property ~~plant~~ and equipment for the three and six months ended ~~December 29, 2017~~April 1, 2022 was ~~$7.7 million.~~$5.8 million and $11.7 million, respectively. Depreciation and amortization expense related to property ~~plant~~ and equipment for the three and six months ended ~~December 30, 2016~~April 2, 2021 was $6.0 ~~million.~~million and $12.2 million, respectively.

7. INTANGIBLE ASSETS

Amortization expense related to intangible assets is as follows (in thousands):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Cost of revenue	$	1,778	$	3,806	$	4,283	$	7,683
Selling, general and administrative	6,276		7,601		13,058		15,717
Total	$	8,054	$	11,407	$	17,341	$	23,400

Intangible assets consist of the following (in thousands):


	April 1, 2022		October 1, 2021
Acquired technology	$	179,434	$	179,434
Customer relationships	245,870		245,870
Trade name (indefinite-lived)	3,400		3,400
Total	428,704		428,704
Less accumulated amortization	(361,360)		(344,019)
Intangible assets — net	$	67,344	$	84,685

A summary of the activity in gross intangible assets and goodwill is as follows (in thousands):


	Intangible Assets
	Total Intangible Assets		Acquired Technology		Customer Relationships		Trade Name		Goodwill
Balance as of October 1, 2021	$	428,704	$	179,434	$	245,870	$	3,400	$	314,240

Currency translation adjustment	—		—		—		—		(1,055)

Balance as of April 1, 2022	$	428,704	$	179,434	$	245,870	$	3,400	$	313,185

As of April 1, 2022, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):


	2022 Remaining		2023	2024	2025	2026	Thereafter	Total
Amortization expense	$	16,092	26,048	15,410	3,490	1,644	1,260	$	63,944

Accumulated amortization for acquired technology and customer relationships were $171.6 million and $189.7 million, respectively, as of April 1, 2022, and $167.3 million and $176.7 million, respectively, as of October 1, 2021.

8. DEBT

The following represents the outstanding balances and effective interest rates of our borrowings as of April 1, 2022 and October 1, 2021, (in thousands, except percentages):


	April 1, 2022				October 1, 2021
	Principal Balance		Effective Interest Rate		Principal Balance		Effective Interest Rate
LIBOR plus 2.25% term loans due May 2024	$	120,766	2.46	%	$	120,766	2.33	%
0.25% convertible notes due March 2026	450,000		0.54	%	450,000		4.25	%
Total principal amount outstanding	570,766				570,766
Less: Unamortized discount on term loans and deferred financing costs	(5,669)				(5,567)
Less: Unamortized discount on convertible notes	—				(73,102)

Total long-term debt	$	565,097			$	492,097

Term Loans

As of ~~December 29, 2017,~~April 1, 2022, we are party to a credit agreement, dated as of May 8, 2014, with a syndicate of lenders and Goldman Sachs Bank USA, as administrative agent (as amended on February 13, 2015, August 31, 2016, March 10, 2017, ~~and~~ May 19, 2017, May 2, 2018 and May 9, 2018, the “Credit Agreement”).

As of ~~December 29, 2017,~~April 1, 2022, the Credit Agreement consisted of term loans with an initial aggregate principal amount of $700.0 million ~~(“Term~~(the “Term Loans”) ~~and a revolving credit facility with an aggregate borrowing capacity of $160.0 million (“Revolving Facility”). The Revolving Facility will mature in May 2021 and the Term Loans~~that will mature in May 2024 and bear interest at: (i) for LIBOR loans for any interest period, a rate per annum equal to the LIBOR rate as determined by the administrative agent, plus an applicable margin of 2.25%; and (ii) for base rate loans, a rate per annum equal to the greater of (a) the prime rate quoted in the print edition of the Wall Street Journal, Money Rates Section, (b) the federal funds rate plus one-half of 1.00% and (c) the LIBOR rate applicable to a one-month interest period plus 1.00% (but, in each case, not less than 1.00%), plus an applicable margin of 1.25%.

~~All~~During the fiscal quarter ended April 2, 2021, we repaid $494.3 million in principal ~~amounts outstanding~~under the Term Loans using $394.3 million of the net proceeds from our 2026 Convertible Notes offering, described below, as well as existing cash and ~~interest rate information as~~short-term investments. In connection with this prepayment, we expensed unamortized deferred financing costs and recognized a loss on extinguishment of ~~December 29, 2017,~~debt of $3.8 million for the ~~Credit Agreement were as follows (in millions, except rate data):~~three and six months ended April 2, 2021. The loss on extinguishment is a non-cash adjustment to cash flows from operating activities in our condensed consolidated statements of cash flows for the six months ended April 2, 2021.

Principal Outstanding Base Rate Margin Effective Interest Rate
Term loans $685.0 1.55% 2.25% 3.80%

As of ~~December 29, 2017,~~April 1, 2022, there are no minimum principal repayments on the Term Loans until fiscal year 2024 when the remaining principal balance of $120.8 million becomes due. The fair value of the Term Loans was estimated to be approximately ~~$13.0~~$119.9 million and $120.2 million, as of April 1, 2022 and October 1, 2021, respectively, and was determined using Level 2 inputs, including a quoted price from a financial institution.

As of April 1, 2022, approximately $0.7 million of deferred financing costs remain unamortized ~~of which $11.9 million is~~ related to the Term Loans and is recorded as a direct reduction of the recognized debt liabilities in our accompanying ~~consolidated balance sheet, and $1.1 million is related to the Revolving Facility and is recorded in other assets in our accompanying~~condensed consolidated balance sheet.

The Term Loans are secured by a first priority lien on substantially all of our assets and provide that we must comply with certain financial and non-financial covenants.

As2026 Convertible Notes

On March 25, 2021, we issued 0.25% convertible senior notes due in fiscal year 2026, pursuant to an indenture dated as of such date (the “Indenture”), between the Company and U.S. Bank National Association, as trustee, with an aggregate principal amount of $400.0 million (the “Initial Notes”), and on April 6, 2021, we issued an additional $50.0 million aggregate principal amount (the “Additional Notes”) (together, the “2026 Convertible Notes”). The aggregate principal balance of the 2026 Convertible Notes is $450.0 million. The 2026 Convertible Notes will mature on March 15, 2026, unless earlier converted, redeemed or repurchased.

The Additional Notes were issued and sold to the initial purchaser of the Initial Notes, pursuant to the option to purchase the Additional Notes granted by the Company to the initial purchaser and have the same terms as the Initial Notes.

Holders of the 2026 Convertible Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December ~~29, 2017,~~15, 2025 in multiples of $1,000 principal amount, only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on July 2, 2021 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the notes on each applicable trading day; (ii) during the 5 business day period after any 5 consecutive trading day period (the “Measurement Period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of the notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the notes on each such trading day; (iii) if we ~~had $685.0~~call such notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the applicable redemption date; or (iv) upon the occurrence of specified corporate events described in the Indenture. On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes in multiples of $1,000 principal amount, regardless of the foregoing circumstances.

The initial conversion rate for the 2026 Convertible Notes is 12.1767 shares of common stock per $1,000 principal amount of the notes, equivalent to an initial conversion price of approximately $82.12 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events in the Indenture.

In November 2021, we made an irrevocable election to pay cash for the aggregate principal amount of notes to be converted. Upon conversion of the 2026 Convertible Notes, we are required to pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted (subject to, and in accordance with, the settlement provisions of the Indenture). We may not redeem the notes prior to March 20, 2024. We may redeem for cash all or any portion of the notes, at our option, on or after March 20, 2024 if the last reported sale price per share of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, to, but not including, the redemption date.

The Indenture does not contain any financial or operating covenants or restrictions on the payments of dividends, the making of investments, the incurrence of indebtedness or the purchase or prepayment of securities by us or any of our subsidiaries.

Prior to the adoption of ASU 2020-06 on October 2, 2021, the proceeds from the issuance of the 2026 Convertible Notes were allocated between the conversion feature recorded as equity and the liability for the notes themselves. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was

determined by deducting the fair value of the liability component from the par value of the 2026 Convertible Notes. The difference of $80.7 million between the principal amount of the 2026 Convertible Notes and the liability component (the “Debt Discount”) was amortized to interest expense using the effective interest method over the term of the 2026 Convertible Notes until the adoption of ASU 2020-06. The equity component of the 2026 Convertible Notes was included in additional paid-in capital in the consolidated balance sheet and was not to be remeasured as long as it continued to meet the conditions for equity classification.

Prior to the adoption of ASU 2020-06, to account for the transaction costs related to the 2026 Convertible Notes, we allocated the total amount incurred of approximately $5.7 million to the liability and equity components of the 2026 Convertible Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were approximately $4.7 million, were recorded as additional Debt Discount and were amortized to interest expense over the contractual terms of the 2026 Convertible Notes. Issuance costs attributable to the equity component were approximately $1.0 million and were recorded as a reduction of additional paid in capital in stockholders’ equity.

In connection with the adoption of ASU 2020-06, we reclassified $72.2 million, consisting of $73.1 million of ~~outstanding Term Loan borrowings~~principal and issuance costs of $0.9 million, previously allocated to the conversion feature, from additional paid-in capital to long-term debt on our condensed consolidated balance sheet as of October 2, 2021. The reclassification was recorded to combine the two legacy units of account into a single instrument classified as a liability. We also recognized a cumulative effect adjustment of $7.5 million to accumulated deficit on our condensed consolidated balance sheet as of October 2, 2021, that was primarily driven by the derecognition of interest expense related to the accretion of the Debt Discount as required under the ~~Credit Agreement~~legacy accounting guidance. Under ASU 2020-06, we will no longer incur non-cash interest expense related to the accretion of the debt discount associated with the embedded conversion option.

For the three and ~~$160.0~~six months ended April 2, 2021, accretion of the Debt Discount included in interest expense was $0.3 million and total interest expense for the 2026 Convertible Notes was $0.3 million. For the three and six months ended April 1, 2022, total interest expense for the 2026 Convertible Notes was $0.3 million and $0.6 million, respectively.

The fair value of ~~borrowing capacity under~~ our ~~Revolving Facility.~~2026 Convertible Notes, including the conversion feature, was $454.5 million and $479.4 million, as of April 1, 2022 and October 1, 2021, respectively, and was determined based on quoted prices in markets that are not active, which is considered a Level 2 valuation input.

~~As of December 29, 2017, the following remained outstanding on the Term Loans (in thousands):~~

Principal balance $ 685,019
Unamortized discount (5,532 )
Unamortized deferred financing costs (11,906 )
Total term loans $ 667,581
Current portion 6,885
Long-term, less current portion $ 660,696

~~As of December 29, 2017, the~~There are no future minimum principal payments under the ~~Term Loans in future fiscal years were as follows (in thousands):~~

2018 (rest of fiscal year) $ 5,163
2019 6,885
2020 6,885
2021 6,885
2022 6,885
Thereafter 652,316
Total $ 685,019

~~The fair value of the Term Loans was estimated to be approximately $694.4 million~~notes as of ~~December 29, 2017 and was determined using Level 2 inputs, including a quoted rate from a bank.~~April 1, 2022; the full amount of $450.0 million is due in fiscal year 2026.

9. ~~CAPITAL LEASE AND FINANCING OBLIGATIONS~~FINANCING OBLIGATION

~~Corporate Facility Financing Obligation~~

On ~~May 26, 2016,~~July 17, 2020, we entered into a ~~Purchase~~power purchase agreement, which includes installation of electric power and ~~Sale Agreement (“Purchase and Sale Agreement”) with Calare Properties, Inc., a Delaware corporation (together with its affiliates, the “Buyer”), for the sale and subsequent leaseback of~~thermal energy producing systems at our ~~corporate headquarters, located at 100 Chelmsford Street,~~fabrication facility in Lowell, Massachusetts. ~~The transactions contemplated by~~We do not own these systems; however, we control the ~~Purchase and Sale Agreement closed on December 28, 2016, at which time we also entered into three lease agreements with the Buyer including: (1) a 20 year leaseback~~use of the ~~facility located at 100 Chelmsford Street (the “100 Chelmsford Lease”), (2) a 20 year build-to-suit lease arrangement for the~~assets during construction and ~~subsequent lease back~~operation. As of April 1, 2022 and October 1, 2021, we capitalized $9.8 million and $8.9 million, respectively, to property and equipment, net, and recorded a ~~new facility~~corresponding liability of $9.8 million and $8.9 million, respectively, primarily to be located at 144 Chelmsford Street (the “144 Chelmsford Lease”), and (3) a 14 year building lease renewal of an adjacent facility at 121 Hale Street (the “121 Hale Lease”, and together with the 100 Chelmsford Lease and the 144 Chelmsford Lease, the “Leases”).

Because the transactions contemplated by the Purchase and Sale Agreement and the related Leases were negotiated and consummated at the same time and in contemplation of one another to achieve the same commercial objective, the transactions are accounted for by us as a single unit of accounting. In addition, the Leases were determined to represent a failed sale-leaseback due to our continuing involvement in the properties in the form of non-recourse financing. As a result, the Leases are accounted for under the financing method and we will be deemed the accounting owner under the arrangement, including the assets to be constructed under the 144 Chelmsford Lease. We will continue to recognize the existing building and improvements sold under

the Purchase and Sale Agreement, capitalize the 121 Hale Street building as well as the assets constructed under the Leases, and depreciate the assets over the shorter of their estimated useful lives or the lease terms. The sale proceeds from the Purchase and Sale Agreement of $8.2 million (which includes $4.2 million in cash and $4.0 million in construction allowances) and the fair value of the 121 Hale Street building of $4.0 million were recognized as a financingFinancing obligation, less current portion on our condensed consolidated balance sheet and are being amortized over the 20 year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate. Future construction costs funded by the Buyer under the 144 Chelmsford Lease will be recognized as additional financing obligations on our consolidated balance sheet as incurred, and will be amortized over the 20 year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate.

As a result of the failed sale-leaseback accounting, we calculated a financing obligation as of the December 28, 2016 inception of the lease based on the future minimum lease payments discounted at 8.5%.sheet. The discount rate represents the estimated incremental borrowing rate over the lease term of 20 years. The minimum lease payments are recorded as interest expense and in part as a payment of principal reducing the financing obligation. The real property assets in the transaction remain on the consolidated balance sheets and continue to be depreciated over the remaining useful lives. As of December 29, 2017, approximately $17.9 million of the financing obligation was ~~outstanding~~calculated based on future fixed payments allocated to the power generator of $16.8 million over the 15-year term, discounted at an implied discount rate of 7.4%, and the remaining future minimum payments are for power purchases. In total, we have $27.2 million in fixed payments associated with the ~~Leases, of~~power purchase agreement which ~~$5.7 million was associated with the 144 Chelmsford Lease that~~is expected to commence in fiscal 2022 and has ~~not yet been placed in service.~~a 15-year term.

~~Additionally, we have certain capital equipment lease obligations, of which approximately $2.0 million was outstanding as of December 29, 2017.~~

~~As of December 29, 2017, future minimum payments under capital lease obligations and financing obligations related to the Leases were as follows (in thousands):~~

Fiscal year ending: Amount
2018 (rest of fiscal year) $ 1,405
2019 1,790
2020 1,618
2021 1,485
2022 1,276
Thereafter 19,264
Total minimum capital lease payments 26,838
Less amount representing interest (14,425 )
Present value of net minimum capital lease payments (1) $ 12,413

~~(1) Excludes $5.7 million associated with the 144 Chelmsford Lease that has not yet been placed in service.~~

10. ~~INTANGIBLE ASSETS~~

~~Amortization expense related to intangible assets is as follows (in thousands):~~

Three Months Ended
December 29,
2017 December 30,
2016
Cost of revenue $ 8,147
$ 6,001
Selling, general and administrative 10,993
6,467
Total $ 19,140
$ 12,468

~~Intangible assets consist of the following (in thousands):~~

December 29,
2017 September 29,
2017
Acquired technology $ 251,650
$ 251,655
Customer relationships 556,620
556,648
Trade name 3,400
3,400
Total $ 811,670
$ 811,703
Less accumulated amortization (209,750 ) (190,611 )
Intangible assets — net $ 601,920
$ 621,092

~~Our trade name is an indefinite-lived intangible asset. A summary of the activity in intangible assets and goodwill follows (in thousands):~~

Intangible Assets
Total Intangible Assets
Acquired
Technology
Customer
Relationships Trade Name Goodwill
Balance at September 29, 2017 $ 811,703
$ 251,655
$ 556,648
$ 3,400
$ 313,765
Fair value adjustment —
—
—
—
2,500
Currency translation adjustment (33 ) (5 ) (28 ) —
(26 )
Balance at December 29, 2017 $ 811,670
$ 251,650
$ 556,620
$ 3,400
$ 316,239

~~As of December 29, 2017, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):~~

2018 Remaining 2019 2020 2021 2022 Thereafter Total
Amortization expense $ 63,659
90,420
88,023
79,156
65,463
211,799
$ 598,520

Accumulated amortization for acquired technology and customer relationships were $114.8 million and $94.9 million, respectively, as of December 29, 2017, and $106.8 million and $83.9 million, respectively, as of September 29, 2017.

~~11.~~ STOCKHOLDERS' EQUITY

We have authorized 10 million shares of $0.001 par value preferred stock and 300 million shares of $0.001 par value common stock as of ~~December 29, 2017 and September 29, 2017.~~April 1, 2022.

Common Stock Warrants—In March 2012, we issued warrants to purchase 1,281,358 shares of common stock for $14.05 per share. ~~The warrants expire December 21, 2020, or earlier as per~~During the ~~terms of~~fiscal quarter ended January 1, 2021, the agreement, including immediately following consummation of a sale of all or substantially all assets or capital stock or other equity securities, including by merger, consolidation, recapitalization, or similar transactions. We do not currently have sufficient registered and available shares to immediately satisfy a request for registration, if such a request were made. As of December 29, 2017, no exerciseholders of the warrants ~~had occurred and no request had been~~ made ~~to register the warrants or any underlying securities for resale by the holders.~~

~~We are recording the estimated fair values~~cashless exercises of ~~the warrants as a long-term liability~~1,281,358 shares at an exercise price of $14.05 per share, resulting in the ~~accompanying consolidated financial statements with~~issuance of 857,631 shares of common stock.

During the six months ended April 2, 2021, we recorded the changes in the estimated fair value ~~being recorded~~of the warrants in the accompanying statements of operations. See Note 54 - Fair Value for additional ~~information related to~~information. See Note 11 - Earnings Per Share for impact of the ~~fair value of our warrant liability.~~

common stock warrants on net income per share.

~~12.~~

11. EARNINGS ~~(LOSS)~~ PER SHARE

The following table sets forth the computation for basic and diluted net ~~loss~~income per share of common stock (in thousands, except per share data):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Numerator:


Net income attributable to common stockholders	$	29,558	$	14,807	$	168,385	$	5,839
Denominator:
Weighted average common shares outstanding-basic	69,788		68,504		69,594		68,130
Dilutive effect of stock options, restricted stock and restricted stock units	1,319		2,042		1,572		1,853
Weighted average common shares outstanding-diluted	71,107		70,546		71,166		69,983

Net income to common stockholders per share-Basic:	$	0.42	$	0.22	$	2.42	$	0.09
Net income to common stockholders per share-Diluted:	$	0.42	$	0.21	$	2.37	$	0.08

Three Months Ended
December 29, 2017 December 30, 2016
Numerator:
Loss from continuing operations $ (16,970 ) $ (2,171 )
(Loss) income from discontinued operations (5,599 ) 1,206
Net loss $ (22,569 ) $ (965 )
Warrant liability gain (14,608 ) —
Net loss attributable to common stockholders $ (37,177 ) $ (965 )
Denominator:
Weighted average common shares outstanding-basic 64,325
53,737
Dilutive effect of warrants 784
—
Weighted average common shares outstanding-diluted 65,109
$ 53,737
(Loss) earnings per share-basic:
Continuing operations $ (0.26 ) $ (0.04 )
Discontinued operations (0.09 ) 0.02
Net loss to common stock holders per share-basic $ (0.35 ) $ (0.02 )
(Loss) earnings per share-diluted:
Continuing operations $ (0.49 ) $ (0.04 )
Discontinued operations (0.09 ) 0.02
Net loss to common stock holders per share-diluted $ (0.57 ) $ (0.02 )

~~As of December 29, 2017,~~During the six months ended April 2, 2021, we had warrants outstanding which were ~~reported as a liability on the consolidated balance sheet. During the three months ended December 29, 2017 we recorded a $14.6 million gain, associated with adjusting the~~measured at fair ~~value of the warrants, in the consolidated income statement primarily as a result of changes in our stock price.~~value. When calculating ~~earnings~~net income per share, we are required to adjust for ~~any changes in income or loss~~the dilutive effect of outstanding common stock equivalents, including adjustment to ~~show the maximum dilution possible and therefore during the quarter, we adjusted~~ the numerator byfor the ~~warrant gain~~dilutive effect of ~~$14.6 million and denominator by the incremental shares of 783,508 under the treasury~~contracts that must be settled in stock, ~~method.~~including warrants. The table above excludes the effects of ~~499,831 and 1,875,326~~174,989 shares for the ~~three~~six months ended ~~December 29, 2017 and December 30, 2016, respectively,~~April 2, 2021 of potential shares of common stock issuable upon exercise of ~~stock options, restricted stock and restricted stock units~~warrants as the inclusion would be antidilutive. The 2026 Convertible Notes do not have an impact on diluted net income per share for the three and six months ended April 1, 2022 or April 2, 2021.

~~13.~~12. COMMITMENTS AND CONTINGENCIES

From time to time, we may be subject to commercial disputes, employment issues, claims by other companies in the industry that we have infringed their intellectual property rights and other similar claims and ~~litigations.~~litigation. Any such claims may lead to future litigation and material damages and defense costs. ~~Other than as set forth below, we~~We were not involved in any material pending legal proceedings during the ~~fiscal quarter ended December 29, 2017.~~

~~GaN Lawsuit Against Infineon.~~ ~~On April 26, 2016, we~~three and our wholly-owned subsidiary Nitronex, LLC brought suit against Infineon Technologies Americas Corporation ("Infineon Americas") and Infineon Technologies AG ("Infineon AG" and collectively, with Infineon Americas, "Infineon") in the Federal District Court for the Central District of California, seeking injunctive relief, monetary damages, and specific performance of certain contractual obligations. On July 19, 2016, we filed a first amended complaint, and, on November 21, 2016, we filed a second amended complaint. After motions to dismiss certain claims from MACOM’s second amended complaint were denied on February 28, 2017, Infineon AG answered on March 24, 2017, asserting no counterclaims. Infineon Americas also answered and counterclaimed on March 24, 2017 and then submitted amended counterclaims on April 14, 2017. The district court dismissed one of the counterclaims on June 5, 2017, and Infineon filed further amended counterclaims on June 19, 2017. MACOM answered the counterclaims on August 16, 2017.

The suit arises out of agreements relating to GaN-on-Silicon ("GaN") patents that were executed in 2010 by Nitronex Corporation (acquired by us in 2014) and International Rectifier Corporation ("International Rectifier") (acquired by Infineon AG in 2015). We assert claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory judgment of contractual rights, declaratory judgment of non-infringement of patents, and, against Infineon AG only, intentional interference with contract. If successful, the relief sought in our second amended complaint would, among other remedies, require Infineon to assign back to us certain GaN-related Nitronex patents that were previously assigned to International Rectifier and enjoin Infineon

from proceeding with its marketing and sales of certain types of GaN products. In an order dated October 31, 2016, the district court granted us a preliminary injunction against Infineon, which then issued on December 7, 2016 and was modified on March 6, 2017. The preliminary injunction declared, among other things, that a licensing agreement between us and Infineon that Infineon had purported to terminate is still in effect. On January 29, 2018, the Federal Circuit affirmed the district court’s decision to enter a preliminary injunction declaring the license agreement to still be in effect, although it reversed other aspects of the district court’s decision. Meanwhile, the district court case has been proceeding, with a claim construction hearing set for March 26, 2018 and trial set to begin on February 26, 2019.

With respect to the above legal proceeding, we are not able to reasonably estimate the amount or range of any possible loss, and accordingly have not accrued or disclosed any related amounts of possible loss in the accompanying consolidated financial statements.

~~14. RESTRUCTURINGS~~

We have periodically implemented restructuring actions in connection with broader plans to reduce staffing, reduce our internal manufacturing footprint and, generally, reduce operating costs. The restructuring expenses are primarily comprised of direct and incremental costs related to headcount reductions including severance and outplacement fees for the terminated employees, as well as facility closure costs.

During the fiscal quarter ended December 29, 2017, we initiated plans to restructure our facility in Long Beach, California and to close our facilities in Belfast, United Kingdom and Sydney, Australia. The operations from the Long Beach facility will be consolidated into our other California locations in order to achieve operational synergies. The Belfast and Sydney facilities will be closed as we discontinue certain product development activities that were performed in those locations. The following is a summary of the restructuring charges incurred for the threesix months ended ~~December 29, 2017 under these restructuring plans:~~April 1, 2022.

Three Months Ended
December 29,
2017 December 30,
2016
Employee related expenses $ 2,571
$ 1,287
Facility related expenses 2,091
—
Total restructuring charges $ 4,662
$ 1,287

~~The following is a summary of the costs incurred and remaining balances included in accrued expenses for the three months ended December 29, 2017 (in thousands):~~

Balance as of September 29, 2017 $ 627
Current period expense 4,662
Charges paid/settled, net (1,365 )
Balance as of December 29, 2017 $ 3,924

Our remaining accrued restructuring expenses are expected to be paid through the remainder of fiscal year 2018. We expect to incur additional restructuring costs of approximately $0.7 million to $1.5 million during the remainder of fiscal year 2018 as we complete these restructuring actions.

~~15.~~13. SHARE-BASED COMPENSATION

Stock Plans

As of ~~December 29, 2017,~~April 1, 2022, we had ~~14.3 million shares available for future issuance under our 2012 Omnibus Incentive Plan (as Amended and Restated) (the “2012 Plan”), and 3.4~~5.4 million shares available for issuance under our 2021 Omnibus Incentive Plan (the “2021 Plan”), which replaced our 2012 Omnibus Incentive Plan (as amended and restated) (the “2012 Plan”), and 1.4 million shares available for issuance under our 2021 Employee Stock Purchase Plan ~~(“ESPP”~~(the “Employee Stock Purchase Plan”)., which replaced our 2012 Employee Stock Purchase Plan. We have outstanding awards under the 2021 Plan and the 2012 Plan. Following the adoption of the 2021 Plan, no additional awards have been or will be made under the 2012 Plan. Under the ~~2012~~2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), ~~performance based non-statutory stock options,~~ stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), unrestricted stock awards, stock units (including restricted stock units (“RSUs”), and performance-based restricted stock units (“PRSUs”)), performance ~~shares~~awards, cash awards, and other ~~equity-based~~share-based awards to employees, directors, consultants and ~~outside consultants.~~advisors. The ISOs and NSOs must be granted at an exercise price, and the SARs must be granted at a ~~price~~base value, per share of not less than 100% of the ~~fair value~~closing price of a share of our common stock on the date of ~~grant.~~grant (or, if no closing price is reported on that date, the closing price on the immediately preceding date on which a closing price was reported) (110% in the case of certain ISOs). Options granted ~~to date~~under the 2012 Plan primarily ~~vest~~vested based on certain market-based and performance-based criteria ~~as described below. Options granted~~and generally have a term of ~~seven~~four years to ~~ten~~seven years. Certain of the share-based awards granted and outstanding as of ~~December 29, 2017~~April 1, 2022 are subject to accelerated vesting upon a change in ~~control. There were no modifications~~control of the Company.

Incentive Stock Units

Outside of the equity plans described above, we also grant incentive stock units (“ISUs”) to ~~share-based awards during~~certain of our international employees which typically vest over three or four years and for which the ~~periods presented.~~ fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.

As of ~~December 29, 2017, total unrecognized~~April 1, 2022 and October 1, 2021, the fair value of outstanding awards was $5.3 million and $8.9 million, respectively, and the associated accrued compensation ~~cost related to~~liability was $3.1 million and $6.2 million, respectively. During the ~~employee stock purchase plan was~~three and six months ended April 1, 2022, we recorded a benefit for ISU awards of $0.9 million and expense of $0.6 million,

respectively. During the three and six months ended April 2, 2021, we recorded expense of $1.2 ~~million.~~

million and $4.2 million, respectively. These expenses are not included in the share-based compensation expense totals below.

Share-Based Compensation

The following table shows a summary of share-based compensation expense included in the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations for the three months ended December 29, 2017 and December 30, 2016~~operations (in thousands):


	Three Months Ended					Three Months Ended				Six Months Ended
	December 29, 2017		December 30, 2016			April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Cost of revenue	$	945	$	720	Cost of revenue	$	1,073	$	833	$	2,106	$	1,705
Research and development	3,662		1,945		Research and development	3,511		3,431		7,110		6,985
Selling, general and administrative	5,385		5,518		Selling, general and administrative	5,383		4,305		10,700		10,010
Total share-based compensation expense	$	9,992	$	8,183	Total share-based compensation expense	$	9,967	$	8,569	$	19,916	$	18,700

As of ~~December 29, 2017,~~April 1, 2022, the total unrecognized compensation costs related to ~~outstanding stock options, restricted stock awards~~RSAs, RSUs and ~~units including awards with time-based and performance based vesting~~PRSUs was ~~$75.6~~$62.4 million, which we expect to recognize over a weighted-average period of ~~2.5~~2.2 years.

~~Stock Options~~

~~We had 1.6 million stock options outstanding as~~ As of December 29, 2017, with a weighted-average exercise price per share of $33.17 and weighted-average remaining contractual term of 5.4 years. The aggregate intrinsic value of the stock options outstanding as of December 29, 2017 was $5.2 million which represents our closing stock price value on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding.

We had 0.4 million stock options exercisable as of December 29, 2017, with a weighted-average exercise price per share of $24.52 and weighted-average remaining contractual term of 4.0 years. The aggregate intrinsic value of the stock options exercisable as of December 29, 2017 was $5.1 million which represents our closing stock price value on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options exercisable.

During November 2017, we granted 325,000 non-qualified stock options with a grant date fair value of $5.0 million that are subject to vesting only upon the market price of our underlying public stock closing above a certain price target within seven years of the date of grant. These non-qualified stock options with market related vesting conditions are valued using a Monte Carlo simulation model, using a volatility rate of 45.8%, a risk-free rate of 2.26%, a weighted-average strike price of $36.58 and a term of seven years. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately three years. If the required service period is not met for these options then the share-based compensation expense would be reversed. In the event that our common stock achieves the target price of $98.99 per share based on a 30 days trailing average prior to the end of the estimated service period, any remaining unamortizedApril 1, 2022, total unrecognized compensation cost ~~will be recognized.~~related to our Employee Stock Purchase Plan was $0.2 million.

During November 2017, we also granted 10,924 incentive stock options and 69,076 non-qualified stock options with a total grant date fair value of $1.4 million. These stock options are valued using a Black Scholes model, using a volatility rate of 45.7%, a risk-free rate of 2.21%, a strike price of $36.61 and an expected term of 6.5 years. Share-based compensation expense is recognized on a straight-line basis over the service period of approximately 4.5 years. If the required service period is not met for these options then the share-based compensation expense would be reversed.

~~The total intrinsic value of options exercised was $0.5 million for the three months ended December 29, 2017, and was $1.5 million for the three months ended December 30, 2016.~~

Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock ~~Units~~Unit Awards

A summary of ~~restricted~~ stock ~~restricted stock unit and performance-based restricted stock unit~~award activity for the ~~three~~six months ended ~~December 29, 2017,~~April 1, 2022 is as follows:


	Number of shares (in thousands)	Weighted- Average Grant Date Fair Value
Balance as of October 1, 2021	2,351	$	24.57
Granted	949	53.31
Vested and released	(1,284)	22.69
Forfeited, canceled or expired	(103)	35.88
Balance as of April 1, 2022	1,913	$	39.48

Stock awards that vested during the six months ended April 1, 2022 and April 2, 2021 had combined fair values of $89.3 million and $60.8 million, respectively, as of the vesting date. RSUs granted generally vest over a period of three or four years.

We granted 161,349 market-based PRSUs during the six months ended April 1, 2022, at a weighted average grant date fair value of $89.82 per share, or $14.5 million. Recipients may earn between 0% and 200% of the target number of shares granted, based on our achievement of total shareholder return in comparison to a selected group of peer companies over a three-year performance period. The fair value of these awards was estimated using a Monte Carlo simulation and share-based compensation expense is recognized ratably over the service period, based on the grant date fair value of the awards subject to the market condition. The significant assumptions used in the Monte Carlo simulation to calculate the fair value of these market-based PRSUs are as follows:


	Six Months Ended
	April 1, 2022
Grant date stock price	$	66.12
Average stock price at the start of the performance period	$	64.11
Risk free interest rate	0.8		%
Years to maturity	3.00
Expected volatility rate	57.8		%
Expected dividend yield	—

Stock Options

A summary of stock option activity for the six months ended April 1, 2022 is as follows (in thousands, except per share ~~data)~~amounts and contractual term):

Number of RSUs
Weighted-
Average
Grate Date Fair Value

Aggregate
Intrinsic
Value
(in thousands)
Balance at September 29, 2017 1,907
$ 39.20
$ 72,165
Granted 291
35.55

Vested and released (24 ) 30.04

Forfeited, canceled or expired (75 ) 29.37

Balance at December 29, 2017 2,099
$ 39.16
$ 68,285


	Number of Shares	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Options outstanding as of October 1, 2021	205	$	14.29

Exercised	(190)	14.15
Forfeited, canceled or expired	—	—
Options outstanding as of April 1, 2022	15	$	16.06	3.60	$	635
Options vested and exercisable as of April 1, 2022	15	16.06		3.60	635

~~Restricted~~Aggregate intrinsic value represents the difference between our closing stock ~~restricted stock units~~price on April 1, 2022 and ~~performance-based restricted stock units that vested~~the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was $11.0 million for the six months ended April 1, 2022 and was $1.8 million and $2.1 million for the three and six months ended April 2, 2021, respectively. There were no options exercised during the three months ended ~~December 29, 2017 and December 30, 2016 had fair value of $0.7 million and $0.9 million as of the vesting date, respectively.~~April 1, 2022.

~~16.~~14. INCOME TAXES

We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax. For interim periods, we record a tax provision or benefit based upon the estimated effective tax rate expected for the full fiscal year, adjusted for material discrete taxation matters arising during the interim periods. Our quarterly tax provision or benefit, and its quarterly estimate of the annual effective tax rate, are subject to significant variation due to several factors. These factors include items such as: variability in accurately predicting pre-tax income/loss, the mix of jurisdictions in which we operate, intercompany transactions, changes in how we do business, tax law developments, and relative changes in permanent tax benefits or expenses.

The provision for income taxes and effective income tax rate are as follows (in thousands, except percentages):


	Three Months Ended						Six Months Ended
	April 1, 2022			April 2, 2021			April 1, 2022			April 2, 2021
Income tax expense	$	1,569		$	2,193		$	3,026		$	2,867
Effective income tax rate	5.0		%	12.9		%	1.8		%	32.9		%

The difference between the U.S. federal statutory income tax rate of ~~35%~~21% and our effective income tax ~~rate~~rates for the three and six months ended December 30, 2016, was primarily impacted by changes in fair values of the common stock warrant liability which is neither deductible nor taxable for tax purposes, income taxed in foreign jurisdictions at generally lower tax rates, non-deductible compensation, researchApril 1, 2022 and development tax credits and non-deductible merger expenses, offset by U.S. state income taxes. The difference between the U.S. federal statutory income tax rate of 35% and our effective income tax rate for the three months ended December 29, 2017April 2, 2021 was primarily driven by the continuation of a full valuation allowance against any expense or benefit associated with income or losses in the U.S. ~~losses~~ and income taxed in foreign jurisdictions generally at ~~generally~~ lower tax ~~rates.~~rates and where a valuation allowance does not apply. The gain on the sale of our equity interest in Ampere during the six months ended April 1, 2022 has been offset by our net operating loss carryforwards.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making this determination, we consider available positive and negative ~~evidence and~~evidence. We look at factors that may impact the valuation of our deferred tax asset including results of recent operations, future reversals of existing taxable temporary differences, projected future taxable income, and tax-planning strategies. A significant piece of objective negative evidence evaluated was the cumulative U.S. loss incurred over the three-year period ended March 31, 2017 which we believe limited our ability to consider other subjective evidence, such as our projections for future growth. Certain transaction and integration related expenses incurred in the U.S. primarily associated with the AppliedMicro Acquisition during the three months ended March 31, 2017 resulted for the first time in significant negative objective evidence in the form of adjusted cumulative losses in the U.S. over the past three-year period. This resulted in our determination during the fiscal quarter ended March 31, 2017We have determined that there was not sufficient objectively verifiable positive evidence to offset ~~this~~our significant negative objective evidence, ~~and~~therefore, we concluded that a full valuation allowance ~~was required~~is appropriate for our U.S. deferred tax assets. ~~Significant~~Our negative objective evidence ~~in the form~~consists primarily of adjusted cumulative losses in the U.S. over the ~~past~~ three-year period ended ~~December 29, 2017 resulted in our continued determination that there was not sufficient objectively verifiable positive evidence~~April 1, 2022.

Our deferred income tax asset balance as of April 1, 2022 and October 1, 2021 is primarily attributable to ~~offset~~an initial $39.8 million deferred asset generated from an intra-entity transfer of a license for intellectual property during the fiscal quarter ended September 27, 2019. We expect this ~~negative objective evidence and we concluded that a full valuation allowance was still appropriate for our U.S.~~ deferred tax ~~assets.~~

~~The balance~~asset to amortize over the life of the ~~unrecognized tax benefit as of December 29, 2017 and September 29, 2017 did not change and remained at $1.7 million. The~~intellectual property.

There were no unrecognized tax benefits ~~primarily relate to positions taken by us in our 2014 U.S. tax filings. The entire balance~~as of ~~unrecognized tax benefits, if recognized, will reduce income tax expense.~~April 1, 2022 and October 1, 2021. It is our policy to recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the fiscal ~~quarters~~quarter ended ~~December 29, 2017 and September 29, 2017,~~April 1, 2022, we did not make any accrual or payment of interest ~~and~~or penalties, ~~due to our U.S. Net Operating Loss ("NOL") carryover position.~~nor did we make any payment.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to,

~~reducing the highest marginal U.S. federal corporate income tax rate from 35% in the period ending December 29, 2017 to 21%, effective January 1, 2018;~~

requiring companies to become liable for a one-time deemed repatriation transition tax (“Transition Tax”) based on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our foreign subsidiaries for our year ending September 28, 2018;

~~generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries that would apply to our year beginning September 29, 2018;~~

requiring the inclusion of certain income such as Global Intangible Low Taxed Income (“GILTI”) earned by controlled foreign corporations (“CFCs”) in our U.S. federal taxable income that would apply to our year beginning September 29, 2018;

~~eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized that would apply to our year beginning September 29, 2018;~~

repealing the performance-based compensation exception to the section 162(m) $1.0 million deduction limitation and revising the definition of a covered employee for our year beginning September 29, 2018;

~~creating the base erosion anti-abuse tax, a new minimum tax that would apply to our year beginning September 29, 2018;~~

~~creating a new limitation on deductible interest expense that would apply to our year beginning September 29, 2018;~~

~~limiting the degree to which net operating losses can be utilized against taxable income that would apply to losses created beginning with our year beginning September 29, 2018;~~

~~changing rules related to the ability to apply net operating losses against later or earlier tax years that would apply to losses created beginning with our year beginning September 30, 2017; and~~

~~an increase in the allowable deduction for costs to acquire qualified property placed into service after September 27, 2017.~~

Based on preliminary calculations, we currently estimate that our financial results for the year ending September 28, 2018 will include a non-cash reduction in income tax expense of approximately $3.7 million resulting primarily from the re-measurement of our U.S. deferred tax liabilities to reflect the new 21% U.S. federal tax rate. For the fiscal year ending September 28, 2018 our blended U.S. federal income tax rate is expected to be 24.5%.

To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of E&P of the relevant subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. We were able to make a reasonable estimate of the Transition Tax and have determined that we expect to have sufficient net operating losses to reduce any cash tax payments associated with the one-time repatriation of E&P down to the alternative minimum tax, which we estimate to be less than $1.0 million. On a preliminary basis we have estimated the one-time repatriation of E&P would result in a release of the valuation allowance corresponding with utilization of our NOLs, resulting in no impact to our tax expense for the fiscal quarter ended December 29, 2017. We are continuing to analyze additional information to more precisely compute the amount of the Transition Tax.

The Tax Act creates a new requirement that certain income such as GILTI earned by CFCs must be included in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder's net CFC tested income over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

The Company must assess whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., the Transition Tax, GILTI inclusions and new categories of foreign tax credits). The changes included in the Tax Act are broad and complex. Although we are not able to finalize our evaluation of the impact of the Tax Act at this time due to uncertainties related to any future legislative or regulatory actions related to the Tax Act and availability of information needed to perform the final calculations, we do believe that a full valuation allowance continues to be required. However, we will continue to evaluate the impact the Tax Act may have on our financial statements including the impact on our full valuation allowance against our U.S. deferred tax assets and any impact this would have on our tax expense.

The Securities Exchange Commission has issued Staff Accounting Bulletin No. 118 that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the application of Accounting Standards Codification Topic 740, ~~Income Taxes. We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending September 28, 2018.~~

~~17. RELATED PARTY TRANSACTIONS~~

Cadence Design Systems, Inc. ("Cadence") provides us with certain engineering licenses on an ongoing basis. Geoffrey Ribar, who joined our board of directors on March 22, 2017, served as an officer of Cadence through September 30, 2017 and now serves as a Senior Advisor of Cadence. During the three months ended December 29, 2017, we made payments of $1.8 million to Cadence.

~~18.~~15. SUPPLEMENTAL CASH FLOW INFORMATION

As of December 29, 2017 and December 30, 2016, we had $1.2 million and $1.4 million in unpaid amounts related to purchases of property and equipment included in accounts payable and accrued liabilities during each period, respectively. These amounts have been excluded from the payments for purchases of property and equipment in the accompanying condensed consolidated statements of cash flows until paid.

During the three months ended December 29, 2017, we capitalized $2.1 million of net construction costs relating to the 144 Chelmsford Street facility. This was accounted for as a non-cash transaction as the costs were paid by the developer.

~~During the three months ended December 29, 2017, we divested the Compute business with net assets valued at approximately $36.5 million in exchange for an equity interest in Ampere.~~

The following is a summary of supplemental cash flow information ~~regarding non-cash investing and financing activities~~for the periods presented (in thousands):


	Six Months Ended
	April 1, 2022		April 2, 2021
Cash paid for interest	$	2,953	$	8,863
Cash paid for income taxes	$	695	$	715
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for new lease liabilities	$	2,306	$	2,923

Additions to property and equipment, net included in liabilities	$	2,010	$	1,538
Issuance of common stock for the cashless exercise of warrants	$	—	$	36,442

Three Months Ended
December 29,
2017 December 30,
2016
Cash paid for interest $ 6,938
$ 5,426
Cash paid (refunded) for income taxes $ 4,155
$ (712 )

~~19.~~16. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION

We have ~~one~~1 reportable operating segment that designs, develops, manufactures and markets semiconductors and modules. The determination of the number of reportable operating segments is based on the chief operating decision maker’s (“CODM”) use of financial information provided for the purposes of assessing performance and making operating decisions. The Company's CODM is its President and Chief Executive Officer. In evaluating financial performance and making operating decisions, the ~~chief operating decision maker~~CODM primarily uses consolidated ~~revenue, gross profit~~metrics. The Company assesses its determination of operating segments at least annually. We continue to evaluate our internal reporting structure and ~~operating income (loss).~~the potential impact of any changes on our segment reporting.

~~Information~~For information about our ~~operations~~revenue in different geographic regions, based upon customer locations, see Note 2 - Revenue. Information about net property and equipment in different geographic regions is presented below (in thousands):


	April 1, 2022		October 1, 2021
United States	$	106,782	$	103,527
Europe (1)	12,285		12,766
Other Countries (2)	3,359		4,233
Total	$	122,426	$	120,526

Three Months Ended
Revenue by Geographic Region December 29,
2017 December 30,
2016
United States $ 55,356
$ 43,961
China 37,688
60,301
Asia Pacific, excluding China (1) 22,886
36,929
Other Countries (2) 14,995
10,561
Total $ 130,925
$ 151,752
(1)Europe primarily represents Finland, France, Germany, Ireland and Italy.

(2)Other than the United States and Europe, no country or region represented greater than 10% of the total net property and equipment as of the dates presented.


~~(1)~~	~~Asia Pacific represents Taiwan, Japan, Singapore, India, Thailand, South Korea, Australia, Malaysia, New Zealand, the Philippines and Vietnam.~~


~~(2)~~	~~No international country or region represented greater than 10% of the total revenue as of the dates presented, other than China and the Asia Pacific region as presented above.~~

As of
Long-Lived Assets by Geographic Region December 29,
2017 September 29,
2017
United States $ 100,404
$ 101,044
Asia Pacific (1) 26,641
24,945
Other Countries (2) 4,965
5,030
Total $ 132,010
$ 131,019


~~(1)~~	~~Asia Pacific represents Taiwan, Japan, India, Thailand, South Korea, Australia, Malaysia, New Zealand, the Philippines, Vietnam and China.~~


~~(2)~~	~~No international country or region represented greater than 10% of the total net long-lived assets as of the dates presented, other than the Asia Pacific region as presented above.~~

The following is a summary of customer concentrations as a percentage of revenue and accounts receivable as of and for the periods presented:


	Three Months Ended			Six Months Ended
Revenue	April 1, 2022	April 2, 2021		April 1, 2022	April 2, 2021
Customer A	—	13	%	—	13	%

Three Months Ended
Revenue December 29,
2017
December 30,
2016
Customer A 10 %
12 %
Customer B 9 %
22 %


Accounts Receivable	April 1, 2022	October 1, 2021
Customer A	—	11	%

Accounts Receivable December 29,
2017 September 29,
2017
Customer A 13 % 13 %
Customer C 10 % 14 %

Customer A did not represent more than 10% of our revenue in the three and six months ended April 1, 2022. No other customer represented more than 10% of revenue or accounts receivable in the periods presented in the accompanying condensed consolidated financial statements. For the three and six months ended ~~December 29, 2017,~~April 1, 2022, our top ten customers represented ~~51%~~48% and 45%, respectively, of total revenue, and for the three and six months ended ~~December 30, 2016,~~April 2, 2021, our top ten customers represented ~~63%~~52% and 53%, respectively, of total revenue.


~~ITEM 2.~~	~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended ~~September 29, 2017~~October 1, 2021 filed with the ~~SEC~~United States Securities and Exchange Commission (“SEC”) on November 15, ~~2017.~~2021 (the “2021 Annual Report on Form 10-K”).

In this document, the words “Company,” “we,” “our,” “us,” and similar terms refer only to MACOM Technology Solutions Holdings, Inc. and its consolidated subsidiaries, and not any other person or entity.

“MACOM,” ~~“M/A-COM,” “M/A-COM~~“MACOM Technology Solutions,” ~~“M/A-COM Tech,” “Partners in RF & Microwave”~~ and related logos are trademarks of MACOM Technology Solutions Holdings, Inc. All other brands and names listed are trademarks of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10-Q contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements ~~as to~~regarding our business outlook, strategic plans and priorities, expectations, anticipated drivers of future revenue growth, industry trends, the potential impacts of COVID-19 on our future operations and results, our plans for use of our cash and cash equivalents and short-term investments, our ability to meet working capital requirements, estimates and objectives for future operations, our future results of operations and our ~~future expectations~~financial position and other matters that do not relate strictly to historical facts. ~~These~~Forward-looking statements ~~are often~~generally may be identified by ~~the use of words~~terms such as “anticipates,” “believes,” “could,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” ~~and~~or similar expressions or ~~variations.~~variations or the negatives of those terms. These statements are based on management's beliefs and assumptions as of the date of this Quarterly Report on Form 10-Q, based on information currently available to us. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and ~~our~~the 2021 Annual Report on Form ~~10-K for the fiscal year ended September 29, 2017 filed with the SEC on November 15, 2017.~~10-K. We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. WeExcept as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a leading provider of high-performance analog semiconductor solutions that enable next-generation Internet applications, the cloud connected apps economy and the modern, networked battlefield across the radio frequency ("RF"), microwave, millimeterwave and lightwave spectrum. Our technology enables next-generation radars for air traffic control and weather forecasting, as well as mission success on the modern networked battlefield. We help our customers, including some of the world’s leading communications infrastructure and aerospace and defense companies, solve complex challenges in areas including network capacity, signal coverage, energy efficiency and field reliability, utilizing our best-in-class team and broad portfolio of analog RF, microwave, millimeterwave and photonic semiconductor solutions.

We design and manufacture semiconductor products for Telecommunications (“Telecom”), Industrial and Defense (“I&D”) and Data Center industries. Headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia, we design, develop and manufacture differentiated ~~high-value~~semiconductor products for customers who demand high performance, quality and reliability. We have more than 70 years of application expertise, combined with expertise in analog and mixed signal circuit design, compound semiconductor fabrication (including gallium arsenide (“GaAs”), indium phosphide (“InP”) and specialized silicon), advanced packaging and back-end assembly and test. We offer a broad portfolio of ~~over 5,000~~thousands of standard and custom devices, which include integrated circuits ~~("IC"~~(“IC”), multi-chip modules ~~("MCM"~~(“MCM”), ~~power pallets and transistors,~~ diodes, amplifiers, switches and switch limiters, passive and active components and complete subsystems, across ~~more than 60~~dozens of product lines serving over ~~6,500~~6,000 end customers in three primary markets. Our semiconductor products are electronic components that our customers incorporate into ~~their~~ larger electronic systems, such as ~~point-to-point~~ wireless ~~backhaul radios,~~communication systems including basestations, high ~~density~~capacity optical networks, ~~active antenna arrays,~~data center applications, radar, ~~magnetic resonance imaging~~medical systems ~~("MRI")~~ and ~~unmanned aerial vehicles ("UAVs").~~test and measurement applications. Our primary end markets are: (1) Telecom, which includes carrier infrastructure ~~wired broadband~~such as long-haul/metro, 5G and ~~cellular backhaul, and cellular infrastructure; Datacenter which includes~~Fiber-to-the-X (“FTTx”)/passive optical ~~and photonic components and solutions for Cloud service provider and enterprise applications; and Industrial and Defense ("I&D"~~network (“PON”), among others; (2) I&D, which includes military and commercial radar, RFradio frequency (“RF”) jammers, electronic countermeasures, ~~and~~ communication data ~~links;~~links, satellite communications and multi-market ~~components spanning~~applications, which include industrial, medical, test and measurement and scientific ~~applications.~~applications; and (3) Data Center, which includes intra-Data Center, Data Center Interconnect (“DCI”) applications, at 100G, 200G, 400G, 800G and higher speeds, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers.

COVID-19 Impact

COVID-19 has spread throughout areas of the world where we operate and resulted in authorities implementing numerous measures to try to contain the virus. As a result of these measures and the spread of COVID-19, we have modified our business practices and may further modify our practices as required, or as we determine appropriate. While these measures, as well as

other disruptions, have impacted our operations, the operations of our customers and those of our respective vendors and suppliers, such impacts did not, through the six months ended April 1, 2022, have a material impact on our consolidated operating results.

Given the significant continued economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on the demand for our products. The continued spread of COVID-19 could cause a further economic slowdown or recession and could result in adverse impacts to our overall business, such as increased credit and collectability risks, adverse impacts on our supply chain, asset impairments, declines in the value of our financial instruments and adverse impacts on our capital resources. The degree to which the COVID-19 pandemic impacts our future business, financial condition, results of operations, liquidity and cash flows will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the duration and spread of the outbreak, its severity, any resurgence of COVID-19 cases, including as a result of variant strains of the underlying virus, actions taken to contain the virus or treat its impact, the availability and efficacy of vaccines against COVID-19, how quickly and to what extent normal operating conditions can resume, and the economic impact on local, regional, national and international markets.

For additional information on risk factors that could impact our future results, please refer to the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the 2021 Annual Report on Form 10-K.

Description of Our Revenue

Revenue. ~~Substantially all of our~~ Our revenue is derived from sales of high-performance RF, microwave, ~~millimeterwave~~millimeter wave, optical and ~~lightwave~~photonic semiconductor ~~solutions.~~products. We design, integrate, manufacture and package differentiated ~~product solutions~~semiconductor-based products that we sell to customers through our direct sales organization, our network of independent sales representatives and our distributors.

We believe the primary drivers of our future revenue growth will include:

~~engaging early with~~•continued growth in the demand for high-performance analog, digital and optical semiconductors in our ~~lead customers to develop~~three primary markets;

•introducing new products using advanced technologies, added features, higher levels of integration and improved performance;

•increasing content of our semiconductor solutions ~~that can be driven across multiple growth markets;~~in customers’ systems through cross-selling our product lines;

•leveraging our core strength and leadership position in standard, catalog products that service all of our end applications; and

~~increasing content of~~•engaging early with our ~~semiconductor solutions in our customers’ systems through cross-selling of our more than 60 product lines;~~

~~introducing new products through internal development~~lead customers to develop custom and ~~acquisitions with market reception that command higher prices based on the application of advanced technologies such as GaN, added features, higher levels of integration and improved performance; and~~

~~continued growth in the market for high-performance analog and optical semiconductors in our three primary markets in particular.~~standard products.

Our core strategy is to develop and innovate high-performance products that address our customers’ most difficult technical challenges in our primary markets: Telecom, ~~Datacenter~~I&D and ~~I&D. While sales in any or all of our primary markets may slow or decline from period to period, over the long-term we generally expect to benefit from strength in these markets.~~Data Center.

We expect our revenue in the Telecom market to be ~~primarily~~ driven by 5G deployments, with continued upgrades and expansion of communications equipment, ~~to support the proliferation of mobile computing devices such as smartphones~~ and ~~tablets,~~ increasing adoption of ~~bandwidth rich services such as video on demand and cloud computing. We expect~~ our Datacenter market to be driven by the rapid adoption of cloud-based services and the migration to an application centric architecture, which we expect will drive adoption of higher speed, 100G and higher speedhigh-performance RF, millimeter wave, optical and photonic ~~wireless links.~~components.

We expect our revenue in the I&D market to be driven by the ~~upgrading of~~expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, ~~systems~~industrial, scientific and modern battlefield communications equipment and networks designed to improve situational awareness. Growth in this market is subject to changes in governmental programs and budget funding, which is difficult to predict. We expect revenue in this market to bemedical applications, further supported by growth in applications for our ~~multi-purpose~~multi-market catalog products.

We expect our revenue in the Data Center market to be driven by the adoption of cloud-based services and the upgrade of data center architectures to 100G, 200G, 400G and 800G interconnects, which we expect will drive adoption of higher speed optical and photonic components.

Critical Accounting Policies and ~~Estimates~~Estimates

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements. The preparation of financial statements, in conformity with ~~generally accepted accounting principles in the~~ U.S. ~~(“GAAP”),~~GAAP, requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and could be material if our actual or expected experience were to change unexpectedly. On an ongoing basis, we re-evaluate our estimates and judgments.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date of filing of this Quarterly Report on Form 10-Q with the

SEC. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

We base our estimates and judgments on our historical experience and on other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates and material effects on our operating results and financial position may result. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; goodwill and ~~intangible~~long-lived asset valuations and associated impairment assessments; revenue reserves; ~~restructuring reserves; deferred tax valuation allowances; contingent consideration~~share-based compensation valuations and ~~share-based compensation valuations.~~income taxes.

For additional information related to these and other accounting policies refer to Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements included in Item 8 of Part II, “Financial Statements and Supplementary Data,” of ~~our 2017~~the 2021 Annual Report on Form 10-K ~~for the fiscal year ended September 29, 2017.~~

and Note 1 - Basis of Presentation and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Results of Operations

The following table sets forth, for the periods indicated, our statements of operations data (in thousands):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenue	$	165,147	$	150,583	$	324,767	$	299,087
Cost of revenue (1)	66,158		66,470		131,636		134,713
Gross profit	98,989		84,113		193,131		164,374
Operating expenses:
Research and development (1)	35,455		34,619		70,925		71,555
Selling, general and administrative (1)	30,963		30,522		62,566		61,774

Total operating expenses	66,418		65,141		133,491		133,329
Income from operations	32,571		18,972		59,640		31,045
Other (expense) income:

Warrant liability expense (2)	—		—		—		(11,130)
Interest expense	(1,389)		(4,851)		(3,082)		(9,585)
Other (expense) income, net (3)	(55)		2,879		114,853		(1,624)
Total other (expense) income, net	(1,444)		(1,972)		111,771		(22,339)
Income before income taxes	31,127		17,000		171,411		8,706
Income tax expense	1,569		2,193		3,026		2,867
Net income	$	29,558	$	14,807	$	168,385	$	5,839

(1) Includes (a) Amortization expense related to intangible assets arising from acquisitions and (b) Share-based compensation expense included in our condensed consolidated statements of operations as set forth below (in thousands):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
(a) Intangible amortization expense:
Cost of revenue	$	1,778	$	3,806	$	4,283	$	7,683
Selling, general and administrative	6,276		7,601		13,058		15,717
(b) Share-based compensation expense:
Cost of revenue	$	1,073	$	833	$	2,106	$	1,705
Research and development	3,511		3,431		7,110		6,985
Selling, general and administrative	5,383		4,305		10,700		10,010

Three Months Ended
December 29,
2017 December 30,
2016
Revenue $ 130,925
$ 151,752
Cost of revenue (1) (4) 69,971
73,257
Gross profit $ 60,954
$ 78,495
Operating expenses:
Research and development (1) 41,651
30,174
Selling, general and administrative (1) (2) (5) 37,634
36,496
Restructuring charges 4,662
1,287
Total operating expenses $ 83,947
$ 67,957
(Loss) income from operations $ (22,993 ) $ 10,538
Other (expense) income
Warrant liability gain (expense) (3) 14,608
(4,823 )
Interest expense (7,239 ) (7,350 )
Other income (expense) 7
(4 )
Total other income (expense), net $ 7,376
$ (12,177 )
Loss before income taxes (15,617 ) (1,639 )
Income tax expense 1,353
532
Loss from continuing operations $ (16,970 ) $ (2,171 )
(Loss) income from discontinued operations (6) (5,599 ) 1,206
Net loss $ (22,569 ) $ (965 )


~~(1)~~	Includes (a) Amortization expense related to intangible assets arising from acquisitions and (b) Share-based compensation expense included in our consolidated statements of operations as set forth below (in thousands):

Three Months Ended
December 29,
2017 December 30,
2016
(a) Intangible amortization expense:
Cost of revenue $ 8,147
$ 6,001
Selling, general and administrative 10,993
6,467
(b) Share-based compensation expense:
Cost of revenue $ 945
$ 720
Research and development 3,662
1,945
Selling, general and administrative 5,385
5,518

(2) ~~Includes acquisition and transaction related costs of $3.5 million associated with the AppliedMicro Acquisition during the three months ended December 30, 2016.~~

~~(3)~~ Represents changes in the fair value of common stock warrants recorded as liabilities and adjusted each reporting period to fair value. See Note 10 - Stockholders’ Equity to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

~~(4)~~(3) The six months ended April 1, 2022 includes gain on sale of our equity method investment of $118.2 million. Includes ~~acquisition fair market value inventory step-up related expenses~~net losses of ~~$0.2~~$3.3 million for the six months ended April 1, 2022 and income of $6.5 million and $1.7 million for the three and six months ended

April 2, 2021, respectively, associated with our equity method investment. See Note 3 - Investments to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information. The three and six months ended ~~December 29, 2017, associated with the Picometrix Acquisition.~~

~~(5) Includes specific litigation costs~~April 2, 2021 includes a loss on extinguishment of ~~$0.8~~debt of $3.8 million, ~~and $0.3 million incurred in the three months ended December 29, 2017 and December 30, 2016, respectively, primarily related to the GaN lawsuit. See~~ see Note 138 - ~~Commitments and Contingencies~~Debt to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

~~(6) For additional information related to this item refer to~~ ~~Note 3 - Discontinued Operations~~ ~~to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q.~~

The following table sets forth, for the periods indicated, our statements of operations data expressed as a percentage of our revenue:


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	40.1		44.1		40.5		45.0
Gross profit	59.9		55.9		59.5		55.0
Operating expenses:
Research and development	21.5		23.0		21.8		23.9
Selling, general and administrative	18.7		20.3		19.3		20.7

Total operating expenses	40.2		43.3		41.1		44.6
Income from operations	19.7		12.6		18.4		10.4
Other (expense) income:

Warrant liability expense	—		—		—		(3.7)
Interest expense	(0.8)		(3.2)		(0.9)		(3.2)
Other (expense) income, net	0.0		1.9		35.4		(0.5)
Total other (expense) income, net	(0.9)		(1.3)		34.4		(7.5)
Income before income taxes	18.8		11.3		52.8		2.9
Income tax expense	1.0		1.5		0.9		1.0
Net income	17.9	%	9.8	%	51.8	%	2.0	%

Three Months Ended
December 29,
2017 December 30,
2016
Revenue 100.0 % 100.0 %
Cost of revenue 53.4
48.3
Gross profit 46.6
51.7
Operating expenses:
Research and development 31.8
19.9
Selling, general and administrative 28.7
24.0
Restructuring charges 3.6
0.8
Total operating expenses 64.1
44.8
(Loss) income from operations (17.6 ) 6.9
Other (expense) income
Warrant liability gain (expense) 11.2
(3.2 )
Interest expense (5.5 ) (4.8 )
Other income (expense) —
—
Total other income (expense), net 5.6
(8.0 )
Loss before income taxes (11.9 ) (1.1 )
Income tax expense 1.0
0.4
Loss from continuing operations (13.0 ) (1.4 )
(Loss) income from discontinued operations (4.3 ) 0.8
Net loss (17.2 )% (0.6 )%

Comparison of the Three and Six Months Ended ~~December 29, 2017~~April 1, 2022 to the Three and Six Months Ended ~~December 30, 2016~~April 2, 2021

Revenue. Our revenue ~~decreased~~increased by ~~$20.8~~$14.6 million, or ~~13.7%~~9.7%, to ~~$130.9~~$165.1 million for the three months ended ~~December 29, 2017,~~April 1, 2022, from ~~$151.8~~$150.6 million for the three months ended ~~December 30, 2016.~~April 2, 2021, and our revenue increased by $25.7 million, or 8.6%, to $324.8 million for the six months ended April 1, 2022, from $299.1 million for the six months ended April 2, 2021. The ~~decrease~~increase in revenue in the three and six months ended ~~December 29, 2017~~April 1, 2022 is ~~further~~ described by end market in the following paragraphs.

We have historically reported our revenue by reference to three primary markets: Networks, Aerospace and Defense ("A&D") and Multi-market. Given the recent increase in the size of the Networks market relative to other markets, and our increasing focus on Cloud Data Center applications, beginning in our fiscal year 2018 we are reporting our revenue by reference to the following three primary markets: I&D (roughly corresponding to the former A&D and Multi-market combined), Datacenter and Telecom.

Revenue from our primary markets, the percentage of change between the periods presented, and revenue by primary markets expressed as a percentage of total revenue in the periods presented were (in thousands, except percentages):


		Three Months Ended									Three Months Ended								Six Months Ended
		December 29, 2017			December 30, 2016		% Change				April 1, 2022			April 2, 2021		% Change			April 1, 2022			April 2, 2021		% Change
Telecom	$	55,450		$	91,550		(39.4	)%	Telecom	$	62,927		$	42,273		48.9	%	$	118,749		$	93,805		26.6	%
Datacenter		34,761			16,804		106.9	%
Industrial & Defense		40,714			43,398		(6.2	)%	Industrial & Defense		67,139			72,090		(6.9)	%		140,285			133,708		4.9	%
Data Center									Data Center		35,081			36,220		(3.1)	%		65,733			71,574		(8.2)	%
Total	$	130,925		$	151,752		(13.7	)%	Total	$	165,147		$	150,583		9.7	%	$	324,767		$	299,087		8.6	%

Telecom		42.4	%		60.3	%			Telecom		38.1	%		28.1	%				36.6	%		31.4	%
Datacenter		26.6	%		11.1	%
Industrial & Defense		31.1	%		28.6	%			Industrial & Defense		40.7	%		47.9	%				43.2	%		44.7	%
Data Center									Data Center		21.2	%		24.0	%				20.2	%		23.9	%
Total		100.0	%		100.0	%			Total		100.0	%		100.0	%				100.0	%		100.0	%

In the three months ended ~~December 29, 2017,~~April 1, 2022, our Telecom market revenue increased by $20.7 million, or 48.9%, compared to the three months ended April 2, 2021. In the six months ended April 1, 2022, our Telecom market revenue increased by $24.9 million, or 26.6%, compared to the six months ended April 2, 2021. The increase for the three and six months ended April 1,

2022 was primarily driven by an increase in RF and microwave products for cable and video infrastructure, products targeted for 5G applications and carrier-based optical semiconductor products.

In the three months ended April 1, 2022, our I&D market revenue decreased by ~~$2.7~~$5.0 million, or ~~6.2%~~6.9%, compared to the three months ended ~~December 30, 2016.~~April 2, 2021. In the six months ended April 1, 2022, our I&D market revenue increased by $6.6 million, or 4.9%, compared to the six months ended April 2, 2021. The decrease in the three months ended April 1, 2022 was primarily related to ~~lower revenue from~~timing of shipments and a decrease in sales of ~~certain~~ legacy ~~defense products,~~products. The increase in the six months ended April 1, 2022 was primarily related to new program wins and expansion of our product lines, partially offset by ~~increases in revenue from~~lower sales of ~~products acquired in recent acquisitions.~~legacy products.

In the three months ended ~~December 29, 2017,~~April 1, 2022, our ~~Datacenter~~Data Center market revenue ~~increased~~decreased by ~~$18.0~~$1.1 million, or ~~106.9%~~3.1%, compared to the three months ended ~~December 30, 2016.~~April 2, 2021. In the six months ended April 1, 2022, our Data Center market revenue decreased by $5.8 million, or 8.2%, compared to the six months ended April 2, 2021. The ~~increase~~decrease in the six months ended April 1, 2022 was primarily due to ~~incremental revenue from the~~a decrease in sales of ~~products acquired in the AppliedMicro Acquisition, partially offset by decreased revenue from lower sales of~~our high-performance analog and legacy ~~component products.~~

~~In the three months ended December 29, 2017, our Telecom revenues decreased by $36.1 million, or 39.4%, compared to the three months ended December 30, 2016. The decrease was primarily~~Data Center products due to ~~lower sales of carrier-based optical products to our Asia customer base and lower sales of products targeting fiber to the home applications.~~supply constraints.

Gross profit. Gross margin was ~~46.6%~~59.9% and 55.9% for the three months ended ~~December 29, 2017,~~April 1, 2022 and ~~51.7%~~April 2, 2021, respectively, and 59.5% and 55.0% for the six months ended April 1, 2022 and April 2, 2021, respectively. Gross profit was $99.0 million and $84.1 million for the three months ended ~~December 30, 2016.~~April 1, 2022 and April 2, 2021, respectively, and $193.1 million and $164.4 million for the six months ended April 1, 2022 and April 2, 2021, respectively. Gross profit ~~during~~increased for the three and six months ended ~~December 29, 2017, was negatively impacted by an unfavorable~~April 1, 2022 as compared to the three and six months ended April 2, 2021 primarily as a result of higher sales, favorable revenue mix, ~~higher~~production efficiencies, as well as decreases in intangible amortization, ~~of intangibles~~depreciation and ~~depreciation associated with the AppliedMicro Acquisition,~~warranty expense, partially offset by ~~lower compensation~~increases in production supplies and employee-related costs.

Research and development. Research and development expense increased by ~~$11.5~~$0.8 million, or ~~38.0%~~2.4%, to ~~$41.7~~$35.5 million, or ~~31.8%~~21.5% of our revenue, for the three months ended ~~December 29, 2017,~~April 1, 2022, compared ~~with $30.2~~to $34.6 million, or ~~19.9%~~23.0% of our revenue, for the three months ended ~~December 30, 2016.~~April 2, 2021. Research and development expense ~~has~~decreased by $0.6 million, or 0.9%, to $70.9 million, or 21.8% of our revenue, for six months ended April 1, 2022, compared to $71.6 million, or 23.9% of our revenue, for the six months ended April 2, 2021. Research and development expense increased in the ~~fiscal 2018 period~~three months ended April 1, 2022 primarily as a result of ~~higher acquisition related compensation, share-based compensation~~an increase in employee-related and ~~depreciation expense.~~design software costs, partially offset by lower development supplies and foundry costs. Research and development expense decreased in six months ended April 1, 2022 primarily as a result of lower lease, design supplies and foundry costs, partially offset by increases in employee-related costs.

Selling, general and administrative. Selling, general and administrative expense increased by ~~$1.1~~$0.4 million, or ~~3.1%~~1.4%, to ~~$37.6~~$31.0 million, or ~~28.7%~~18.7% of our revenue, for the three months ended ~~December 29, 2017,~~April 1, 2022, compared ~~with $36.5~~to $30.5 million, or ~~24.0%~~20.3% of our revenue, for the three months ended ~~December 30, 2016.~~April 2, 2021. Selling, general and administrative ~~expenses~~expense increased by $0.8 million, or 1.3%, to $62.6 million, or 19.3% of our revenue, for the six months ended April 1, 2022, compared to $61.8 million, or 20.7% of our revenue, for the six months ended April 2, 2021. Selling, general and administrative expense increased in the ~~fiscal 2018 periods~~three and six months ended April 1, 2022 primarily due to ~~higher intangible amortization~~an increase in employee-related costs, share-based compensation expense and ~~acquisition related compensation,~~variable selling costs, partially offset by ~~lower acquisition related transaction expenses.~~a decrease in intangible amortization.

~~Restructuring charges.~~ ~~Restructuring charges totaled $4.7 million~~Warrant liability expense. There was no warrant liability expense for the three and ~~$1.3 million for~~six months ended April 1, 2022 or the three months ended December 29, 2017 and December 30, 2016, respectively. The increase in restructuring charges during the first three months of fiscal year 2018 was primarily related to our planned exit of facilities in Long Beach, California, Belfast, United Kingdom and Sydney, Australia. We expect to incur additional restructuring costs of approximately $0.7 million to $1.5 million during the remainder of calendar year 2018 as we complete these restructuring actions.

~~Warrant liability. Our warrant liability resulted in a gain of $14.6 million for the three months ended December 29, 2017,~~April 2, 2021, compared to an expense of ~~$4.8~~$11.1 million for the ~~three~~six months ended ~~December 30, 2016.~~April 2, 2021. The ~~differences between periods were primarily~~expense for the six months ended April 2, 2021 was driven by ~~changes~~a change in the estimated fair value of common stock warrants, ~~we issued~~primarily driven by the increase in ~~December 2010,~~the underlying price of our common stock, which ~~we carry~~was recorded as a liability at fair value. During November 2020, all of the warrants were exercised and 857,631 shares of common stock were issued. For additional information refer to Note 10 - Stockholders' Equity to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

~~Provision for income taxes.~~ ~~Income tax~~Interest expense, net. In the three months ended April 1, 2022, interest expense, net was ~~$1.4~~$1.4 million, or 0.8% of our revenue, compared to $4.9 million, or 3.2% of our revenue, for the three months ended ~~December 29, 2017,~~April 2, 2021. In the six months ended April 1, 2022, interest expense, net was $3.1 million, or 0.9% of our revenue, compared to an$9.6 million, or 3.2% of our revenue, for the six months ended April 2, 2021. The decrease for the three and six months ended April 1, 2022 is primarily due to the issuance of our 2026 Convertible Notes with a lower interest rate as compared to our Term Loans, as well as the reduction in our Term Loan balance. For additional information refer to Note 8 - Debt to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Other (expense) income, net. In the three months endedApril 1, 2022, other expense, net was $0.1 million, or 0.03% of ~~$0.5~~our revenue, compared to other income, net of $2.9 million, or 1.9% of our revenue, for the three months ended ~~December 30, 2016.~~April 2, 2021. In the six months ended April 1, 2022, other income, net was $114.9 million, or 35.4% of our revenue, compared to other expense, net of $1.6 million, or 0.5% of our revenue, for the six months ended April 2, 2021. The decrease in other income ~~tax expense for~~the three months ended April 1, 2022 is due to a decrease in net gains from our equity method investment that was sold during the three months ended December ~~29, 2017 resulted~~31, 2021. The increase in the six months ended April 1, 2022 is primarily ~~from income subject~~due to ~~tax in foreign jurisdictions and discrete adjustments~~the gain on sale of

our equity method investment of $118.2 million. See Note 3 - Investments to our ~~U.S. deferred tax liability. The~~Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

Provision for income taxes. Our income tax expense and effective income tax rates for the ~~three months ended December~~periods indicated were (in thousands, except percentages):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Income tax expense	1,569		2,193		3,026		2,867
Effective income tax rate	5.0	%	12.9	%	1.8	%	32.9	%

Our estimated annual effective tax rate for the year ending September 30, ~~2016 results from current period taxable income after adjusting~~2022 is expected to be approximately 2%, adjusted for ~~a non-taxable~~ discrete ~~loss of $4.8 million for changes in fair value of~~taxation matters arising during the ~~stock warrant liability.~~interim periods.

The difference between the U.S. federal statutory income tax rate of ~~35%~~21% and our effective income tax rate for the three and six months ended ~~December 30, 2016,~~April 1, 2022 and the three and six months ended April 2, 2021 was primarily ~~impacted~~driven by ~~changes~~the continuation of a full valuation allowance against any expense associated with income in ~~fair value of~~ the ~~common stock warrant liability which is neither deductible nor taxable for tax purposes,~~U.S. and income taxed in foreign jurisdictions at generally lower tax rates, ~~non-deductible compensation, research~~where we are not in a valuation allowance because it is expected that we will be in a taxable income position. The gain on the sale of our equity interest in Ampere during the three and ~~development tax credits and non-deductible merger expenses, partially~~six months ended April 1, 2022 has been offset by ~~U.S. state income taxes. The difference between the U.S. federal statutory income tax rate~~our net operating loss carryforwards. As of ~~35% and our effective income tax rate for the three months ended December 29, 2017 was primarily driven by~~April 1, 2022, we maintain a full valuation allowance against ~~any benefit associated with~~our U.S. ~~losses and income taxed~~deferred tax assets. We will continue to monitor all evidence in ~~foreign jurisdictions at generally lower~~the future as we assess the impact of the full valuation allowance for U.S. deferred tax ~~rates.~~ assets.For additional information refer to Note 1614 - Income Taxes to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

The following table summarizes our cash flow activities ~~for the three months ended December 29, 2017 and December 30, 2016, respectively~~ (in thousands):


							Six Months Ended
	December 29, 2017		December 30, 2016				April 1, 2022		April 2, 2021
Cash and cash equivalents, beginning of period	$	130,104	$	332,977		Cash and cash equivalents, beginning of period	$	156,537	$	129,441
Net cash provided by operating activities	534		20,407			Net cash provided by operating activities	76,597		62,721
Net cash provided by (used in) investing activities	20,309		(4,043		)
Net cash provided by financing activities	1,045		5,011
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(75,212)		34,012
Net cash used in financing activities						Net cash used in financing activities	(30,123)		(121,098)
Foreign currency effect on cash	93		(435		)	Foreign currency effect on cash	(224)		464
Cash and cash equivalents, end of period	$	152,085	$	353,917		Cash and cash equivalents, end of period	$	127,575	$	105,540

Cash Flow from Operating ~~Activities:~~Activities

Our cash flow from operating activities for the six months ended April 1, 2022 of $76.6 million consisted of a net income of $168.4 million, less adjustments of $63.5 million, to reconcile our net income to cash provided by operating activities, and cash used in operating assets and liabilities of $28.3 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included a net gain of $114.9 million related to the sale of our equity method investment offset by equity method investment losses, depreciation and intangible amortization expense of $29.1 million and share-based compensation expense of $19.9 million. In addition, cash used in operating assets and liabilities was $28.3 million for the six months ended April 1, 2022, primarily driven by an increase in accounts receivable of $16.0 million, an increase in inventories of $10.7 million and a decrease of $4.9 million in accrued and other liabilities.

Our cash flow from operating activities for the ~~three~~six months ended ~~December 29, 2017~~April 2, 2021 of ~~$0.5~~$62.7 million consisted of a net ~~loss~~income of ~~$22.6~~$5.8 million, plus adjustments to reconcile our net ~~loss~~income to cash provided by operating activities of ~~$18.7~~$70.6 million, ~~and changes~~plus cash used in operating assets and liabilities of ~~$4.4~~$13.7 million. Adjustments to reconcile our net ~~loss~~income to cash provided by operating activities ~~of $18.7 million~~ primarily included depreciation and intangible amortization expense of ~~$26.9~~$35.6 million and share-based compensation expense of ~~$10.0~~$18.7 million, ~~partially offset by a~~ warrant liability ~~gain~~expense of ~~$14.6~~$11.1 million deferred financing cost amortization and ~~a change in the net value~~write-offs of ~~assets and liabilities held for sale of $6.2~~$5.0 million. In addition, cash ~~provided by~~used in operating assets and liabilities was ~~$4.4~~$13.7 million for the ~~three~~six months ended December 29, 2017, primarily driven by a decrease in accounts receivable of $38.9 million, partially offset by decreases in accounts payable of $14.4 million, increases in inventory of $8.0 million, increases in prepaid expenses and other assets of $6.6 million and decreases in accrued and other liabilities of $2.2 million.

Our cash flow from operating activities for the three months ended December 30, 2016 of $20.4 million consisted of a net loss of $1.0 million plus adjustments to reconcile our net loss to cash provided by operating activities of $31.7 million less changes in operating assets and liabilities of $10.3 million. Adjustments to reconcile our net loss to cash provided by operating activities of $31.7 million primarily included depreciation and intangible amortization expense of $18.5 million, share-based incentive compensation expense of $8.2 million, and warrant liability expense of $4.8 million. In addition, cash used by operating assets and liabilities was $10.3 million for the three months ended December 30, 2016,April 2, 2021, primarily driven by an increase in accounts receivable of ~~$4.5~~$22.4 million and an increase in ~~inventory~~prepaid and other current assets of ~~$1.6~~$4.0 million, offset by a decrease in inventories of $7.1 million and ~~decreases~~an increase in ~~accrued~~accounts payable of $3.8 million.

Cash Flow from Investing Activities

Our cash flow used in investing activities for the six months ended April 1, 2022 of $75.2 million consisted primarily of purchases of $282.6 million of short-term investments and ~~other liabilities~~capital expenditures of ~~$5.5~~$12.2 million, offset by proceeds from the sale of our equity method investment of $127.8 million and proceeds of $91.8 million for the sale and maturity of short-term investments. For additional information on the sale of our equity method investment, see Note 3 - Investments to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Our cash flow provided by investing activities for the six months ended April 2, 2021 of $34.0 million consisted primarily of proceeds of $179.4 million related to the sale and maturity of short-term investments, offset by purchases of $138.1 million of short-term investments and capital expenditures of $7.3 million.

Cash Flow from ~~Investing Activities:~~

Our cash flow from investing activities for the three months ended December 29, 2017 consisted primarily of proceeds of $57.4 million related to the sale of short term investments, partially offset by capital expenditures of $13.8 million, purchases of $18.0 million of short term investments and a $5.0 million investment in a privately held company.

Our cash flow used by investing activities for the three months ended December 30, 2016 consisted primarily of purchases of $8.9 million of short term investments and capital expenditures of $4.9 million, partially offset by received proceeds of $8.8 million related to the sale of short term investments and $0.9 million related to recovery of a portion of the Aeroflex/Metelics, Inc. acquisition purchase price related to a working capital adjustment.

~~Cash Flow from~~ Financing ~~Activities:~~Activities

During the ~~three~~six months ended ~~December 29, 2017,~~April 1, 2022, our cash ~~provided by~~used in financing activities of ~~$1.0~~$30.1 million was primarily related to ~~$3.2~~$34.8 million of repurchases of common stock associated with employee tax withholdings on vested equity awards, partially offset by $5.1 million of proceeds from stock option exercises and employee stock ~~purchases, partially offset by $1.7 million of payments on notes payable.~~purchases.

During the ~~three~~six months ended ~~December 30, 2016,~~April 2, 2021, our cash ~~provided from~~used in financing activities of ~~$5.0~~$121.1 million was primarily related to ~~$4.3 million of~~ proceeds from the ~~sale~~2026 Convertible Notes, net of ~~our corporate headquarters facility and $2.6~~issuance costs of $394.9 million, ~~of proceeds from stock option exercises and employee stock purchases, partially~~ offset by ~~$1.5~~$496.0 million of payments on ~~notes payable.~~

the Term Loans and $22.3 million of repurchases of stock associated with employee tax withholdings on vested equity awards.

Liquidity

As of ~~December 29, 2017,~~April 1, 2022, we held ~~$152.1~~$127.6 million of cash and cash equivalents, primarily deposited with financial ~~institutions.~~institutions, as well as $375.4 million of liquid short-term investments. During the three months ended December 31, 2021, our revolving credit facility, which had $160.0 million in borrowing capacity, expired and is no longer available. The undistributed earnings of ~~our~~certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings. We believe the decision to reinvest these earnings will not have a significant impact on our liquidity. As of ~~December 29, 2017,~~April 1, 2022, cash held by our indefinitely reinvested foreign subsidiaries was ~~$35.9~~$14.0 million, which, along with cash generated from foreign operations, is expected to be used in the support of international growth and working capital requirements as well as the repayment of certain intercompany loans. ~~As of December 29, 2017, we also held $44.6 million of liquid short term investments, and had $160.0 million in borrowing capacity under our revolving credit facility.~~

We plan to use our remaining available cash and cash equivalents ~~short term~~and short-term investments ~~and as deemed appropriate our borrowing capacity under our revolving credit facility~~ for general corporate purposes, including working capital, or for the acquisition of or investment in complementary technologies, design teams, products and businesses. We believe that our cash and cash equivalents, ~~short term~~short-term investments and cash generated from operations ~~and borrowing availability under our revolving credit facility~~ will be sufficient to meet our working capital requirements for at least the next 12twelve months. We may need to raise additional capital from time to time through the issuance and sale of equity or debt securities, and there is no assurance that we will be able to do so on favorable terms or at all.

As of April 1, 2022, we had no off-balance sheet arrangements.

For additional information related to our Liquidity and ~~Debt,~~Capital Resources, see Note 8 - Debt to our Condensed Consolidated Financial Statements ~~included~~ in this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

See Note 1 - Basis of Presentation and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information about recent accounting pronouncements.

~~Off-Balance Sheet Arrangements~~

~~We did not have any off-balance sheet arrangements as of~~ ~~December 29, 2017~~.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents, ~~short term~~short-term investments and our variable rate debt, as well as foreign exchange rate risk. ~~In addition, the value of our warrant liability is based on the underlying price of our common stock and changes in its value could significantly impact our warrant liability expense.~~

Interest rate risk. The primary objectives of our investment activity are to preserve principal, provide liquidity and invest excess cash for an average rate of return. To minimize market risk, we maintain our portfolio in cash and diversified investments, which may consist of corporate ~~and agency~~ bonds, bank deposits, money market funds and commercial paper. ~~Certain~~The interest rates are variable and fluctuate with current market conditions. The risk associated with fluctuating interest rates is limited to this investment portfolio. We believe that a 10% change in interest rates would not have a material impact on our financial position or results of operations. We do not enter into financial instruments for trading or speculative purposes.

Our exposure to interest rate risk also relates to the increase or decrease in the amount of interest expense we must pay on the outstanding debt under the Credit Agreement. The interest rates on our ~~term loans and revolving credit facility~~Term Loans are variable interest rates based on our lender’s prime rate or a LIBOR rate, in each case plus an applicable margin, which exposes us to market interest rate risk when

we have outstanding borrowings under the Credit Agreement. As of ~~December 29, 2017,~~April 1, 2022, we had ~~$685.0~~$120.8 million of outstanding borrowings under the Credit Agreement. Assuming our outstanding debt remains constant under the Credit Agreement for an entire year and the applicable annual interest rate increases or decreases by 1%, our annual interest expense would increase or decrease by ~~$6.9~~$1.2 million. The interest rates on our 2026 Convertible Notes are fixed and therefore not subject to interest rate risk.

Foreign currency risk. To date, our international customer agreements have been denominated primarily in U.S. dollars. Accordingly, we have limited exposure to foreign currency exchange rates. ~~The foreign operations of one of our subsidiaries located in Japan have transactions which are predominately denominated in Japanese Yen.~~ The functional currency of a majority of our foreign operations continues to be in U.S. dollars with the remaining operations being local currency. Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact demand in certain regions. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our products being more expensive to certain customers and could reduce or delay orders, or otherwise negatively affect how they do business with us. The effects of exchange rate fluctuations on the net assets of the majority of our operations are accounted for as transaction gains or losses. We believe that a change of 10% in such foreign currency exchange rates would not have a material impact on

our financial position or results of operations. In the future, we may enter into foreign currency exchange hedging contracts to reduce our exposure to changes in exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of ~~December 29, 2017.~~April 1, 2022.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during ~~the period covered by this Quarterly Report on Form 10-Q~~our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 1312 - Commitments and Contingencies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information about our legal proceedings.

ITEM 1A. RISK FACTORS

Our business involves a high degree of risk. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2021 Annual Report on Form 10-K, ~~for the fiscal year ended September 29, 2017,~~ which could materially affect our business, financial condition or future results. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes in any of the risk factors described in our 2021 Annual Report on Form 10-K, ~~for the fiscal year ended September 29, 2017,~~ except as noted below.

Our ~~term loan~~business and ~~revolving credit facility~~operations could suffer in the event of a security breach, cybersecurity incident or disruption of our information technology systems.

We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business. Although our internal information technology team actively takes steps to protect our information and operational systems, unauthorized persons or disloyal insiders may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious software programs that compromise our confidential information or that of third parties and cause a disruption or failure of our information and/or operational technology systems. In addition, we have in the past and may in the future be subject to “phishing” attacks in which third parties send emails purporting to be from reputable companies to obtain personal information and infiltrate our systems to initiate wire transfers or otherwise obtain proprietary or confidential information or disrupt operations by deploying malicious code. A number of large, public companies have recently experienced losses based on ransomware and/or phishing attacks and other cyber-attacks. Similarly, attackers could implant malicious code into software that we may purchase, and this supply chain vulnerability could disrupt our operations, compromise our data or lead to other cyber harms.

Any compromise of our information or operational technology systems could result in ~~outstanding debt with a claim to our assets that is senior to that~~unauthorized publication of our ~~stockholders and may have other adverse effects on our results of operations.~~

As of December 29, 2017, we had a term loan outstanding of $685.0 million and a revolving credit facility with $160.0 million of available borrowing capacity. The facility is secured by a first priority lien on our assets and those of our domestic subsidiaries. The amount of our indebtedness could have important consequences, including the following:

•~~we may be unable~~confidential business or ~~limited in our ability to obtain additional financing on favorable terms~~proprietary information; result in the ~~future for working capital, capital expenditures, acquisitions, general corporate~~unauthorized release of customer, supplier or employee data; lead to violations of privacy or other ~~purposes;~~

•~~we may be limited in~~laws; extortion; allow competitors to profit from our ~~ability to make distributions to~~intellectual property or trade secrets; delay or disrupt our ~~stockholders in a sale or liquidation until our debt is repaid in full;~~

•~~we may be more vulnerable to economic downturns, less able to withstand competitive pressures and less flexible in responding to changing business and economic conditions;~~

•~~our cash flow from operations will be allocated to the payment of the principal of and interest on, any outstanding indebtedness; and,~~

•~~we cannot assure you that our business will generate sufficient cash flow from operations or other sources to enable~~operations; expose us to ~~meet~~a risk of investigations and litigation; cause us to incur direct losses if attackers access our ~~payment obligations under the facility~~bank or investment accounts; undermine investor or market confidence, or damage our reputation. The direct and indirect cost and operational consequences of implementing data protection measures either as a response to ~~fund other liquidity needs.~~

~~Our credit facility also contains certain restrictive covenants that may limit~~specific breaches or eliminate our ability to, among other things, incur additional debt, sell, lease or transfer our assets, pay dividends, make investments and loans, make acquisitions, guarantee debt or obligations, create liens, enter into transactions with our affiliates, enter into new lines of business and enter into certain merger, consolidation or other reorganizations transactions. These restrictions could limit our ability to withstand downturns in our business or the economy in general or to take advantage of business opportunities that may arise, any of which could place us at a competitive disadvantage relative to our competitors that are not subject to such restrictions. If we breach a loan covenant, the lenders could either refuse to lend funds to us or accelerate the repayment of any outstanding borrowings under the credit facility. We might not have sufficient assets to repay such indebtedness upon a default. If we are unable to repay the indebtedness, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our subsidiaries securing the facility, which could materially decrease the value of our common stock.

~~Our financial results may be adversely affected by increased tax rates, changes in applicable tax laws and regulations, and exposure to additional tax liabilities.~~

Our effective tax rate is highly dependent upon the geographic composition of our worldwide earnings and tax regulations governing each region, each of which can change from period to period. We are subject to income taxes in both the U.S. and various foreign jurisdictions and significant judgment is required to determine our worldwide tax liabilities. Our effective tax rate as well as the actual tax ultimately payable could be adversely affected by changes in the amount of our earnings attributable to countries with differing statutory tax rates, changes in the valuation of our deferred tax assets, changes in tax laws (or the interpretation of those laws by regulators) or tax rates (particularly in the U.S. or Ireland), increases in non-deductible expenses, the availability of tax credits, material audit assessments or repatriation of non-U.S. earnings, each of which could materially affect our profitability. For example, as of September 29, 2017, we had $1,084.8 million of gross federal net operating loss (NOL) carryforwards, which will expire at various dates through 2036. However, our ability to use these federal NOL carryforwards and other deferred tax assets may be limited and, as a result of evolving risks could be significant. In addition, our ~~conclusion that recovery~~inability to use or access our information or operational systems at critical points in time could adversely affect the timely and efficient operation of our ~~U.S. deferred tax assets, including those assumed in the AppliedMicro Acquisition, is not considered more likely than not, we established~~business. Any delayed sales, significant costs or lost customers resulting from a ~~full valuation allowance against~~technology failure could adversely affect our ~~U.S. deferred tax assets as of September 29, 2017. Any significant increase in our effective tax rates could materially reduce our net income in future periods~~business, operations and ~~decrease the value of your investment in our common stock. In addition, certain~~financial results.

~~intercompany loans could be re-characterized as equity for tax purposes resulting in additional tax on the repatriation of the loan to the U.S.~~

~~Changes in tax laws are introduced from time to time to reform taxation in the U.S., Ireland and other countries in~~Third parties with which we conduct business, such as foundries, assembly and test contractors and distributors, have ~~operations, including~~access to ~~implement or clarify the Tax Act. Depending on the final form of legislation enacted, if any, these consequences may be significant for us due to the large scale~~certain portions of our ~~international business activities. If any of~~sensitive data. In the event that these ~~proposals are enacted into legislation,~~third parties do not properly safeguard our data that they hold, security breaches could ~~have material adverse consequences on the amount of tax we pay~~result and thereby, on our financial position and results of operations. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The changes included in the Tax Act are broad and complex, and we are not able to finalize our evaluation of the impact of the Tax Act at this time due to uncertainties related to final interpretation of the law, any future legislative or regulatory actions related to the Tax Act and availability of information needed to perform the final calculations. However, the Tax Act maynegatively impact our business, operations and financial ~~position.~~results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information with respect to purchases of common stock we made during the fiscal quarter ended April 1, 2022.


Period	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2022-January 28, 2022	824	$	71.62	—	—
January 29, 2022-February 25, 2022	112,636	61.27		—	—
February 26, 2022-April 1, 2022	733	56.22		—	—
Total	114,193	$	61.31	—	—

(1) We employ “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees, pursuant to which, we withheld from employees the shares noted in the table above to cover tax withholding related to the

Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
September 30, 2017 - October 27, 2017 —
$ —
—
—
October 28, 2017 - November 24, 2017 8,638
30.02
—
—
November 25, 2017 - December 29, 2017 —
—
—
—
8,638
$ 30.02
—
—

~~(1)~~

We employ “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees, pursuant to which, we withheld from employees the shares noted in the table above to cover tax withholding related to the vesting of their awards. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld.

ITEM 6. EXHIBITS



Exhibit Number		Description
~~2.1~~3.1		Purchase Agreement by and among MACOM Connectivity Solutions, LLC, Ampere Computing Holdings LLC (f/k/a Project Denver Holdings LLC), and MACOM Technology Solutions Holdings, Inc. dated October 27, 2017 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on October 27, 2017).
~~3.1~~	Fifth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 2, 2016).
3.2		Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on June 2, 2016).
31.1		Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.
~~101.INS~~101		~~XBRL Instance Document~~The following material from the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended April 1, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements and (vii) document and entity information, tagged as blocks of text and including detailed tags.
~~101.SCH~~104		The cover page for the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended April 1, 2022, formatted in Inline XBRL ~~Taxonomy Schema Document~~and included as Exhibit 101
~~101.CAL~~		~~XBRL Taxonomy Calculation Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Definition Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Label Linkbase Document~~
~~101.PRE~~	~~XBRL Taxonomy Presentation Linkbase Document~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


		MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

Dated: April 28, 2022		~~MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.~~By:	/s/ Stephen G. Daly
			Stephen G. Daly
~~Dated: February 7, 2018~~		~~By:~~	~~/s/ John Croteau~~
	~~John Croteau~~
	President and Chief Executive Officer (Principal Executive Officer)

Dated: ~~February 7, 2018~~April 28, 2022		By:	/s/ ~~Robert J. McMullan~~John F. Kober
			~~Robert J. McMullan~~John F. Kober
			Senior Vice President and Chief Financial Officer (Principal Accounting and Principal Financial Officer)



			Page No.
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income ~~Loss~~	3
		Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity	4
		Condensed Consolidated Statements of Cash Flows	56
		Notes to Condensed Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2418
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3025
Item 4.	Controls and Procedures		3126
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		3227
~~Item1A.~~Item 1A.	Risk Factors		3227
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3327
Item 6.	Exhibits		3429
Signatures			3530



Cash consideration paid to AppliedMicro common stockholders	$	287,060
Common stock issued (9,544,125 shares of our common stock at $47.53 per share)	453,632
Equity consideration for vested "in the money" stock options and unvested restricted stock units	2,143
Fair value of the replacement equity awards attributable to pre-acquisition service	9,307
Total consideration paid, excluding cash acquired	$	752,142



	Preliminary Allocation as of		Allocation Adjustments			Adjusted Allocation
	September 29, 2017		Allocation Adjustments			December 29, 2017

Current assets	$	70,434	$	(553	)	$	69,881
Intangible assets	412,848		—			412,848
Assets held for sale	40,944		—			40,944
Other assets	9,800		—			9,800
Total assets acquired	534,026		(553		)	533,473
Liabilities assumed:
Liabilities held for sale	4,444		—			4,444
Other liabilities	17,627		651			18,278
Total liabilities assumed	22,071		651			22,722
Net assets acquired	511,955		(1,204		)	510,751
Consideration:
Cash paid upon closing	230,298		—			230,298
Common stock issued	455,775		—			455,775
Equity instruments issued	9,307		—			9,307
Total consideration	$	695,380	$	—		$	695,380
Goodwill	$	183,425	$	1,204		$	184,629



	Included In Assets Held For Sale		Included in Retained Business		Useful Lives (Years)
Developed technology	$	9,600	$	78,448	7 years
Customer relationships	—		334,400		14 years
Total acquired intangible assets	$	9,600	$	412,848



	December 30, 2016
Revenue	$	194,469
Income from continuing operations	9,019
Loss from discontinued operations	(17,923		)



	December 29, 2017		September 29, 2017
Less than 1 year	$	19,561	$	60,433
Over 1 year	25,024		23,688
Total short term investments	$	44,585	$	84,121



			Inputs
Liabilities	Valuation Technique	Unobservable Input	December 29, 2017	September 29, 2017
Contingent consideration	Discounted cash flow	Discount rate	9.2%	9.2%
		Probability of achievement	80% - 90%	70% - 100%
		Timing of cash flows	5 months	2 - 8 months

Warrant liability	Black-Scholes model	Volatility	47.7%	44.9%
		Discount rate	1.98%	1.62%
		Expected life	3.0 years	3.2 years
		Exercise price	$14.05	$14.05
		Stock price	$32.54	$44.61
		Dividend rate	—%	—%



	September 29, 2017		Net Realized/Unrealized Losses Included in Earnings			Purchases and Issuances		Sales and Settlements		December 29, 2017
Contingent consideration	$	1,679	$	(573	)	$	—	$	—	$	1,106
Common stock warrant liability	$	40,775	$	(14,608	)	$	—	$	—	$	26,167



	September 30, 2016		Net Realized/Unrealized Losses Included in Earnings		Purchases and Issuances		Sales and Settlements		December 30, 2016
Contingent consideration	$	848	$	18	$	—	$	—	$	866
Common stock warrant liability	$	38,253	$	4,823	$	—	$	—	$	43,076



	Principal Outstanding	Base Rate	Margin	Effective Interest Rate
Term loans	$685.0	1.55%	2.25%	3.80%



Principal balance	$	685,019
Unamortized discount	(5,532		)
Unamortized deferred financing costs	(11,906		)
Total term loans	$	667,581
Current portion	6,885
Long-term, less current portion	$	660,696



2018 (rest of fiscal year)	$	5,163
2019	6,885
2020	6,885
2021	6,885
2022	6,885
Thereafter	652,316
Total	$	685,019



Fiscal year ending:	Amount
2018 (rest of fiscal year)	$	1,405
2019	1,790
2020	1,618
2021	1,485
2022	1,276
Thereafter	19,264
Total minimum capital lease payments	26,838
Less amount representing interest	(14,425		)
Present value of net minimum capital lease payments (1)	$	12,413



	2018 Remaining		2019	2020	2021	2022	Thereafter	Total
Amortization expense	$	63,659	90,420	88,023	79,156	65,463	211,799	$	598,520



Balance as of September 29, 2017	$	627
Current period expense	4,662
Charges paid/settled, net	(1,365		)
Balance as of December 29, 2017	$	3,924



	Number of RSUs		Weighted- Average Grate Date Fair Value		Aggregate Intrinsic Value (in thousands)
Balance at September 29, 2017	1,907		$	39.20	$	72,165
Granted	291		35.55
Vested and released	(24	)	30.04
Forfeited, canceled or expired	(75	)	29.37
Balance at December 29, 2017	2,099		$	39.16	$	68,285



	Three Months Ended
Revenue by Geographic Region	December 29, 2017		December 30, 2016
United States	$	55,356	$	43,961
China	37,688		60,301
Asia Pacific, excluding China (1)	22,886		36,929
Other Countries (2)	14,995		10,561
Total	$	130,925	$	151,752



	As of
Long-Lived Assets by Geographic Region	December 29, 2017		September 29, 2017
United States	$	100,404	$	101,044
Asia Pacific (1)	26,641		24,945
Other Countries (2)	4,965		5,030
Total	$	132,010	$	131,019