UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 202229, 2023
or
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
(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 classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareMTSINasdaq 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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer  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  
As of January 30, 2023,29, 2024, there were 70,734,92972,067,141 shares of the registrant’s common stock outstanding.



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS
 Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.



PART I—FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
December 30,
2022
September 30,
2022
December 29,
2023
December 29,
2023
September 29,
2023
ASSETSASSETS
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$126,155 $119,952 
Short-term investmentsShort-term investments468,577 466,580 
Accounts receivable, netAccounts receivable, net112,039 101,551 
InventoriesInventories121,335 114,960 
Prepaid and other current assetsPrepaid and other current assets19,527 10,040 
Total current assetsTotal current assets847,633 813,083 
Property and equipment, netProperty and equipment, net118,945 123,701 
GoodwillGoodwill312,152 311,417 
Intangible assets, netIntangible assets, net44,441 51,254 
Deferred income taxesDeferred income taxes229,253 237,415 
Other long-term assetsOther long-term assets35,288 34,947 
Other long-term assets
Other long-term assets
Total assetsTotal assets$1,587,712 $1,571,817 
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Current portion of finance lease obligationsCurrent portion of finance lease obligations$1,034 $1,006 
Current portion of finance lease obligations
Current portion of finance lease obligations
Accounts payableAccounts payable35,647 30,733 
Accrued liabilitiesAccrued liabilities57,103 65,475 
Total current liabilitiesTotal current liabilities93,784 97,214 
Finance lease obligations, less current portionFinance lease obligations, less current portion26,761 27,032 
Financing obligationFinancing obligation9,500 9,544 
Long-term debtLong-term debt566,332 565,920 
Other long-term liabilitiesOther long-term liabilities28,791 29,359 
Total liabilitiesTotal liabilities725,168 729,069 
Commitments and contingencies (see Note 11)
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Stockholders’ equity:
Stockholders’ equity:Stockholders’ equity:
Common stockCommon stock71 70 
Common stock
Common stock
Treasury stock, at costTreasury stock, at cost(330)(330)
Accumulated other comprehensive income(2,567)(5,851)
Accumulated other comprehensive loss
Additional paid-in capitalAdditional paid-in capital1,190,137 1,203,145 
Accumulated deficitAccumulated deficit(324,767)(354,286)
Total stockholders’ equityTotal stockholders’ equity862,544 842,748 
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$1,587,712 $1,571,817 
See notes to condensed consolidated financial statements.
1



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

 
Three Months Ended
December 30,
2022
December 31,
2021
RevenueRevenue$180,104 $159,620 
Revenue
Revenue
Cost of revenue
Cost of revenue
Cost of revenueCost of revenue69,749 65,477 
Gross profitGross profit110,355 94,143 
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Operating expenses:Operating expenses:
Research and developmentResearch and development38,832 35,470 
Research and development
Research and development
Selling, general and administrative
Selling, general and administrative
Selling, general and administrativeSelling, general and administrative32,940 31,604 
Total operating expensesTotal operating expenses71,772 67,074 
Total operating expenses
Total operating expenses
Income from operations
Income from operations
Income from operationsIncome from operations38,583 27,069 
Other income (expense):Other income (expense):
Interest income (expense), net602 (1,693)
Other (expense) income, net(55)114,908 
Total other income, net547 113,215 
Other income (expense):
Other income (expense):
Interest income
Interest income
Interest income
Interest expense
Interest expense
Interest expense
Other expense, net
Other expense, net
Other expense, net
Total other income
Total other income
Total other income
Income before income taxes
Income before income taxes
Income before income taxesIncome before income taxes39,130 140,284 
Income tax expenseIncome tax expense9,611 1,457 
Income tax expense
Income tax expense
Net income
Net income
Net incomeNet income$29,519 $138,827 
Net income per share:Net income per share:
Net income per share:
Net income per share:
Income per share - Basic
Income per share - Basic
Income per share - BasicIncome per share - Basic$0.42 $2.00 
Income per share - DilutedIncome per share - Diluted$0.41 $1.95 
Income per share - Diluted
Income per share - Diluted
Weighted average shares used:
Weighted average shares used:
Weighted average shares used: Weighted average shares used:
BasicBasic70,481 69,400 
Basic
Basic
DilutedDiluted71,374 71,224 
Diluted
Diluted
See notes to condensed consolidated financial statements.

2


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
 Three Months Ended
 December 30,
2022
December 31,
2021
Net income$29,519 $138,827 
Unrealized gain (loss) on short term investments, net of tax2,547 (616)
Foreign currency translation gain (loss), net of tax737 (325)
Other comprehensive income (loss), net of tax3,284 (941)
Total comprehensive income$32,803 $137,886 
 Three Months Ended
 December 29,
2023
December 30,
2022
Net income$12,526 $29,519 
Unrealized gain on short term investments, net of tax1,295 2,547 
Foreign currency translation gain, net of tax1,944 737 
Other comprehensive income, net of tax3,239 3,284 
Total comprehensive income$15,765 $32,803 
See notes to condensed consolidated financial statements.
3


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)

Three Months Ended December 29, 2023Three Months Ended December 29, 2023
  Accumulated
Other
Comprehensive (Loss) Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Three Months Ended Common StockTreasury Stock
  Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmountSharesAmount
Common StockTreasury Stock
SharesAmountSharesAmount
Balance as of September 30, 202270,022 $70 (23)$(330)$(5,851)$1,203,145 $(354,286)$842,748 
Balance as of September 29, 2023
Stock option exercises
Vesting of restricted common stock and unitsVesting of restricted common stock and units1,126 — — — — — 
Issuance of common stock pursuant to employee stock purchase planIssuance of common stock pursuant to employee stock purchase plan52 — — — — 2,320 — 2,320 
Shares repurchased for tax withholdings on restricted stock awardsShares repurchased for tax withholdings on restricted stock awards(443)— — — — (26,375)— (26,375)
Share-based compensationShare-based compensation— — — — — 11,047 — 11,047 
Issuance of common stock as consideration for acquisition
Other comprehensive income, net of taxOther comprehensive income, net of tax— — — — 3,284 — — 3,284 
Net incomeNet income— — — — — — 29,519 29,519 
Balance as of December 30, 202270,757 $71 (23)$(330)$(2,567)$1,190,137 $(324,767)$862,544 
Net income
Net income
Balance as of December 29, 2023
See notes to condensed consolidated financial statements.
Three Months Ended
   Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of October 1, 202168,877 $69 (23)$(330)$4,150 $1,269,601 $(801,754)$471,736 
Stock option exercises190 — — — — 2,688 — 2,688 
Vesting of restricted common stock and units969 — — — — — 
Issuance of common stock pursuant to employee stock purchase plan56 — — — — 2,447 — 2,447 
Shares repurchased for tax withholdings on equity awards(383)— — — — (27,756)— (27,756)
Share-based compensation— — — — — 9,949 — 9,949 
Other comprehensive loss, net of tax— — — — (941)— — (941)
Cumulative-effect adjustment from adoption of ASU 2020-06— — — — — (79,690)7,513 (72,177)
Net income— — — — — — 138,827 138,827 
Balance as of December 31, 202169,709 $70 (23)$(330)$3,209 $1,177,239 $(655,414)$524,774 

Three Months Ended December 30, 2022
   Accumulated
Other
Comprehensive (Loss) Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of September 30, 202270,022 $70 (23)$(330)$(5,851)$1,203,145 $(354,286)$842,748 
Vesting of restricted common stock and units1,126 — — — — — 
Issuance of common stock pursuant to employee stock purchase plan52 — — — — 2,320 — 2,320 
Shares repurchased for tax withholdings on equity awards(443)— — — — (26,375)— (26,375)
Share-based compensation— — — — — 11,047 — 11,047 
Other comprehensive income, net of tax— — — — 3,284 — — 3,284 
Net income— — — — — — 29,519 29,519 
Balance as of December 30, 202270,757 $71 (23)$(330)$(2,567)$1,190,137 $(324,767)$862,544 
See notes to condensed consolidated financial statements.
4


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended Three Months Ended
December 30, 2022December 31, 2021 December 29, 2023December 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Net incomeNet income$29,519 $138,827 
Net income
Net income
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
Depreciation and intangibles amortization
Depreciation and intangibles amortizationDepreciation and intangibles amortization12,855 15,234 
Share-based compensationShare-based compensation11,047 9,949 
Deferred income taxesDeferred income taxes9,067 662 
Gain on equity method investment, net— (114,908)
Deferred income taxes
Deferred income taxes
Other adjustments, net
Other adjustments, net
Other adjustments, netOther adjustments, net(381)627 
Change in operating assets and liabilities:Change in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivableAccounts receivable(10,489)(12,875)
InventoriesInventories(6,375)(5,839)
Prepaid expenses and other assetsPrepaid expenses and other assets(556)3,009 
Accounts payableAccounts payable3,689 5,687 
Accrued and other liabilitiesAccrued and other liabilities(10,349)(6,868)
Income taxesIncome taxes246 599 
Net cash provided by operating activitiesNet cash provided by operating activities38,273 34,104 
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equity method investment— 127,750 
Acquisition of a business
Acquisition of a business
Acquisition of a business
Purchases of property and equipmentPurchases of property and equipment(9,616)(5,095)
Purchases of property and equipment
Purchases of property and equipment
Proceeds from sales and maturities of short-term investments
Proceeds from sales and maturities of short-term investments
Proceeds from sales and maturities of short-term investmentsProceeds from sales and maturities of short-term investments146,966 58,500 
Purchases of short-term investmentsPurchases of short-term investments(145,300)(75,437)
Proceeds from sale of property and equipment— 19 
Net cash (used in) provided by investing activities(7,950)105,737 
Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on finance leases and other
Payments on finance leases and other
Payments on finance leases and otherPayments on finance leases and other(278)(279)
Proceeds from stock option exercises and employee stock purchasesProceeds from stock option exercises and employee stock purchases2,320 5,135 
Repurchase of common stock - tax withholdings on equity awardsRepurchase of common stock - tax withholdings on equity awards(26,375)(27,756)
Net cash used in financing activitiesNet cash used in financing activities(24,333)(22,900)
Foreign currency effect on cashForeign currency effect on cash213 (82)
NET CHANGE IN CASH AND CASH EQUIVALENTSNET CHANGE IN CASH AND CASH EQUIVALENTS6,203 116,859 
CASH AND CASH EQUIVALENTS — Beginning of periodCASH AND CASH EQUIVALENTS — Beginning of period119,952 156,537 
CASH AND CASH EQUIVALENTS — End of periodCASH AND CASH EQUIVALENTS — End of period$126,155 $273,396 
Supplemental disclosure of non-cash activities
Supplemental disclosure of non-cash activities
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the RF Business Acquisition (See Note 3 - Acquisitions)
Issuance of common stock in connection with the RF Business Acquisition (See Note 3 - Acquisitions)
Issuance of common stock in connection with the RF Business Acquisition (See Note 3 - Acquisitions)
See notes to condensed consolidated financial statements.
5


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 (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, comprehensive income, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”,MACOM,” the “Company”, “us”,“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 as of September 30, 202229, 2023 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our September 30, 202229, 2023 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended September 30, 202229, 2023 filed with the SEC on November 14, 202213, 2023 (the “2022“2023 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 20222023 Annual Report on Form 10-K.
Principles of Consolidation, Basis of Presentation and Reclassification—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. In the condensed consolidated financial statements, Interest income has been reclassified to conform to the current year presentation.
We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 20232024 and 20222023 each include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in 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 (“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; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.
Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in our 20222023 Annual Report on Form 10-K.
Pronouncements for Adoption in Subsequent Periods
TheIn November 2023, the FASB issued ASU 2020-04,2023-07, Reference Rate ReformSegment Reporting (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, amended by ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848280) Improvements to Reportable Segment Disclosures, which provides optional expedientsimproves disclosures about a public entity’s reportable segments and exceptions to applying the guidance on contract modifications, hedge accounting,addresses requests from investors and other transactions, to simplify the accountingallocators of capital for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates.additional, more detail information about a reportable segment’s expenses. The guidanceamendments in this update was effective upon its issuance. If elected, the guidance isimprove financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. This ASU should be applied prospectively throughon a retrospective basis. The amendments in this update are effective for fiscal years beginning after December 31, 2024.15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the future effect the potential adoption of this ASU will have on our consolidated financial statements including, but not limitedand related disclosures.
6


In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which require greater disaggregation of income tax disclosures. The amendments in this update improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. Other amendments in this update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) and (2) removing disclosures that no longer are considered cost beneficial or relevant. This ASU should be applied on a prospective basis, with retrospective application permitted. The guidance in this update is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the potential effect of the adoption of this ASU will have on our Credit Agreement (defined below). For additional information regarding our Credit Agreement, refer to Note 8 - Debt.consolidated financial statements and related disclosures.
2. REVENUE
Disaggregation of Revenue
We disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
6


The following tables present our revenue disaggregated by markets and geography (in thousands):
Three Months Ended
December 30, 2022December 31, 2021
Three Months Ended
Three Months Ended
Three Months Ended
December 29, 2023
December 29, 2023
December 29, 2023
Revenue by Market:Revenue by Market:
Telecommunications$61,450 $55,822 
Revenue by Market:
Revenue by Market:
Industrial & Defense
Industrial & Defense
Industrial & DefenseIndustrial & Defense77,169 73,146 
Data CenterData Center41,485 30,652 
Data Center
Data Center
Telecom
Telecom
Telecom
TotalTotal$180,104 $159,620 
Total
Total
Three Months Ended
December 30, 2022December 31, 2021
Three Months Ended
Three Months Ended
Three Months Ended
December 29, 2023
December 29, 2023
December 29, 2023
Revenue by Geographic Region:
Revenue by Geographic Region:
Revenue by Geographic Region:Revenue by Geographic Region:
United StatesUnited States$88,589 $74,426 
United States
United States
China
China
ChinaChina41,156 36,063 
Asia Pacific, excluding China (1)
Asia Pacific, excluding China (1)
21,534 30,650 
Asia Pacific, excluding China (1)
Asia Pacific, excluding China (1)
Cayman Islands
Cayman Islands
Cayman Islands
Other Countries (2)
Other Countries (2)
Other Countries (2)
Other Countries (2)
28,825 18,481 
TotalTotal$180,104 $159,620 
Total
Total
(1)Asia Pacific primarily represents Australia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand.
(2)No country or region represented greater than 10% of our total revenue as of the dates presented, other than the United States, China, and Asia Pacific region and Cayman Islands as presented above.
Revenue by geographic region is aggregated by customer billing address.
Contract Balances
We record contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advanced consideration received from customers for contracts prior to the transfer of control to the customer, and, therefore, revenue is subsequently recognized upon delivery of products and services.
The following table presents the changes in contract liabilities during the three months ended December 30, 202229, 2023 (in thousands, except percentage):
December 30, 2022September 30, 2022$ Change% Change
 Contract liabilities$3,404 $3,916 $(512)(13)%
December 29, 2023September 29, 2023$ Change% Change
 Contract liabilities$5,604 $2,762 $2,842 103 %
During the three months ended December 30, 2022,29, 2023, we recognized sales of $1.4$2.4 million that were included in the contract liabilities balance as of the beginning of the period. The decreaseincrease in contract liabilities during the three months ended December 30, 202229, 2023 was primarily related to recognition of revenue that was previously deferred for products and services invoicedinvoicing prior to when certain of our customers obtainedobtain control of such products and/and or
7


services.
3. ACQUISITIONS
RF Business of Wolfspeed, Inc.— On December 2, 2023, we completed the acquisition of certain assets and specified liabilities of the radio frequency (“RF”) business of Wolfspeed, Inc. (“Wolfspeed”) (the “RF Business,”), which was accounted for as a business combination (the “RF Business Acquisition”). The RF Business includes a portfolio of gallium nitride (“GaN”) on Silicon Carbide (“SiC”) products used in high-performance RF and microwave applications. In connection with the RF Business Acquisition, we expect to assume control of a wafer fabrication facility in Research Triangle Park, North Carolina (the “RTP Fab”) approximately two years following the closing of the RF Business Acquisition (the “RTP Fab Transfer”). Prior to the RTP Fab Transfer, Wolfspeed will continue to operate the facility and supply wafer product and other fabrication services to us pursuant to various agreements entered into between the parties concurrently with the closing of the RF Business Acquisition.
The purchase price for the RF Business Acquisition consisted of $75.0 million payable in cash, subject to customary purchase price adjustments and 711,528 shares of our common stock, with a fair value of $60.8 million, which were issued at the closing of the RF Business Acquisition. The shares of our common stock issued in connection with the RF Business Acquisition are subject to restrictions on the sale of shares until transfer of the RTP Fab to the Company is complete. In addition, if the RTP Fab has not transferred by the fourth anniversary of the closing date of the RF Business Acquisition, Wolfspeed will forfeit 25% of the share consideration. We funded the cash purchase price for the RF Business Acquisition through cash-on-hand.
During the three months ended December 29, 2023, we incurred acquisition-related transaction costs of approximately $7.1 million, which are included in selling, general and administrative expense. We did not incur acquisition-related transaction costs associated with the RF Business Acquisition during the three months ended December 30, 2022.
The following table summarizes the preliminary estimate of the purchase price (in thousands, except shares and closing share price amount):
At Acquisition Date as Reported
December 29, 2023
Cash purchase consideration$75,000 
Number of shares of MACOM common stock issued at closing711,528 
MACOM closing stock price on acquisition date$85.41 
Equity purchase consideration60,772 
Total purchase consideration$135,772 

The purchase price for the RF Business Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
At Acquisition Date as Reported
December 29, 2023
Current assets$160 
Inventory23,574 
Property and equipment35,415 
Intangible assets60,000 
Prepayment for net assets associated with the RTP Fab Transfer19,450 
Other non-current assets6,735 
Total assets acquired145,334 
Current liabilities6,474 
Long-term liabilities3,088 
Total liabilities assumed9,562 
Purchase Price$135,772 
8



Intangible assets consist of technology, customer relationships, a favorable contract and backlog with fair values of $22.0 million, $21.5 million, $15.0 million and $1.5 million, respectively, and useful lives of 4.8 years, 8.8 years, 2.0 years and 0.8 years, respectively. We used variations of income approaches with estimates and assumptions developed by us to determine the fair values of technology, customer relationships, the favorable contract and backlog. We valued technology by using the relief-from-royalty method, customer relationships and backlog by using the multi-period excess earnings method, and the favorable contract by using the discounted cash flow method. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, royalty rates, operating margin, and discount rates. We used the cost and market approaches to determine the fair value of our property and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets.
The prepayment of $19.5 million for the net assets associated with the RTP Fab Transfer, classified in Other long-term assets in our condensed consolidated balance sheet, relates to the estimated future fair value of property and equipment, inventory and liabilities that we will assume control of at the time of the RTP Fab Transfer. The cost and market approaches were used in determining the fair value of $14.1 million for property and equipment at the RTP Fab Transfer date.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of December 29, 2023, the purchase price allocation for the RF Business remains open as we gather additional information regarding the fair value of consideration transferred, the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, the prepayment for the assets and liabilities to be conveyed with the RTP Fab Transfer and contingencies.
The RF Business has been included in our consolidated financial statements since the date of acquisition. During the fiscal quarter ended December 29, 2023, the RF Business contributed approximately $6.2 million of our total revenue. The net income associated with the RF Business did not materially impact our consolidated net income for the quarter ended December 29, 2023.
Consolidated estimated pro forma unaudited revenue for the fiscal quarters ended December 29, 2023 and December 30, 2022, as if the RF Business Acquisition had occurred on October 1, 2022, is $184.0 million and $222.4 million, respectively. Consolidated pro forma net loss for the fiscal quarters ended December 29, 2023 and December 30, 2022, as if the RF Business Acquisition had occurred on October 1, 2022, is $13.9 million and $31.3 million, respectively. Pro forma revenue and net loss was prepared for comparative purposes only and is not indicative of what would have occurred had the acquisition actually occurred on October 1, 2022, or of the results that may occur in the future. Pro forma net loss includes business combination accounting effects from the RF Business Acquisition, primarily amortization expense from acquired intangible assets, acquisition transaction costs and tax-related effects. Pro forma earnings for the three months ended December 29, 2023 was adjusted to exclude transaction costs of $15.5 million incurred during the quarter and pro forma earnings for the three months ended December 30, 2022 was adjusted to include $41.8 million of transaction costs incurred associated with the RF Business Acquisition.
MESC— On May 31, 2023, we completed the acquisition of the key manufacturing facilities, capabilities, technologies and other assets and certain specified liabilities of OMMIC SAS, a semiconductor manufacturer based in Limeil-Brévannes, France with expertise in wafer fabrication, epitaxial growth and monolithic microwave integrated circuit (“MMIC”) processing and design. We are referring to this acquisition as the MACOM European Semiconductor Center Acquisition (the “MESC Acquisition”) and it was accounted for as a business combination. We completed the MESC Acquisition to expand our European footprint and to enable us to offer higher frequency gallium arsenide (“GaAs”) and GaN MMICs. Total cash consideration paid for the MESC Acquisition was approximately $36.9 million and was funded with cash-on-hand. During the three months ended December 29, 2023 and December 30, 2022, we incurred acquisition-related transaction costs of approximately $0.3 million and $0.8 million, respectively, which are included in selling, general and administrative expense.
The purchase price for the MESC Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
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At Acquisition Date as Reported
December 29, 2023
Current assets$297 
Inventory3,790 
Property and equipment30,538 
Intangible assets5,966 
Total assets acquired40,591 
Current liabilities3,734 
Total liabilities assumed3,734 
Purchase Price$36,857 
As part of the acquisition, we assumed a lease agreement for the manufacturing facilities in France that provides us with the option to purchase the real property for an immaterial price at the end of the lease term, in October 2024. We expect to exercise this bargain purchase option and have recorded a right-of-use-asset of $24.7 million in Property and equipment. The real property was valued using a market approach.
Intangible assets consist of technology and customer relationships of $4.9 million and $1.1 million, respectively, and both having useful lives of 8.3 years. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of December 29, 2023, the purchase price allocation for the MESC Acquisition remains open as we gather additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, liabilities and contingencies. We did not recognize goodwill associated with this acquisition and there were no measurement period adjustments recognized during the quarter ended December 29, 2023.
Linearizer Technology, Inc.— On March 3, 2023, we completed the acquisition of Linearizer Technology, Inc. (“Linearizer”), a developer of modules and subsystems, including SSPAs, microwave predistortion linearizers and microwave photonics based in Hamilton, New Jersey (the “Linearizer Acquisition”), which was accounted for as a business combination. We acquired Linearizer to further strengthen our component and subsystem design expertise in our target markets. In connection with the Linearizer Acquisition, we acquired all of the outstanding shares of Linearizer for total cash consideration of approximately $51.6 million, subject to customary purchase price adjustments. We funded the Linearizer Acquisition with cash-on-hand. During the three months ended December 29, 2023, we incurred acquisition-related transaction costs of approximately less than $0.1 million which are included in selling, general and administrative expense. There were no transaction costs for the three months ended December 30, 2022. The Linearizer Acquisition was accounted for as a business combination and the operations of Linearizer have been included in our consolidated financial statements since the date of acquisition.
The purchase price for the Linearizer Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
At Acquisition Date as Reported
September 29, 2023
Measurement Period AdjustmentsAt Acquisition Date as Reported
December 29, 2023
Current assets$2,819 $— $2,819 
Inventory8,907 1,407 10,314 
Property and equipment5,485 — 5,485 
Intangible assets29,600 — 29,600 
Goodwill12,332 (1,407)10,925 
Total assets acquired59,143 — 59,143 
Current liabilities7,544 — 7,544 
Total liabilities assumed7,544 — 7,544 
Purchase Price$51,599 $— $51,599 
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Intangible assets consist of customer relationships, technology and trade name with fair values of $20.7 million, $7.1 million and $1.8 million, respectively, and useful lives of 8.6 years, 7.6 years and 7.6 years, respectively. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets. The intangible assets and goodwill acquired will be amortizable for tax purposes due to the Internal Revenue Code of 1986 (IRC) Section 338 election filed.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). During the three months ended December 29, 2023, we increased the fair value of inventory by $1.4 million with an offsetting reduction to Goodwill. As of December 29, 2023, the purchase price allocation for Linearizer remains open as we gather additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of contingencies.
4. INVESTMENTS
All investments are short-term in nature and are invested in corporate bonds, and commercial paper, and U.S. Treasury securities and are classified as available-for-sale. These certificates of deposit, corporate bonds, commercial paper and U.S. Treasury securities are owned directly by the Company and are segregated in brokerage custody accounts. The amortized cost, gross unrealized holding gains or losses and fair value of our available-for-sale investments by major investment type are summarized in the tables below (in thousands):
December 30, 2022 December 29, 2023
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
Certificates of deposit
Corporate bondsCorporate bonds$146,334 $$(3,707)$142,634 
Commercial paperCommercial paper326,614 32 (703)325,943 
U.S. Treasury securities
Total short-term investmentsTotal short-term investments$472,948 $39 $(4,410)$468,577 
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September 30, 2022
September 29, 2023September 29, 2023
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Corporate bondsCorporate bonds$146,163 $$(4,492)$141,676 
Commercial paperCommercial paper326,318 — (1,414)324,904 
U.S. Treasury securities
Total short-term investmentsTotal short-term investments$472,481 $$(5,906)$466,580 
    
The contractual maturities of available-for-sale investments were as follows (in thousands):
December 30, 2022September 30, 2022 December 29, 2023September 29, 2023
Less than one yearLess than one year$358,416 $368,141 
Over one yearOver one year110,161 98,439 
Total available-for-sale investmentsTotal available-for-sale investments$468,577 $466,580 

We have determined that the gross unrealized losses on available for sale securities as of December 30, 202229, 2023 and September 30, 202229, 2023 are temporary in nature and/or do not relate to credit loss, and 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.
During the three months ended December 30, 2022 and December 31, 2021, Interest income (expense), net included interest income on short-term investments of $3.7 million and $0.3 million, respectively.
Other Investments—As of December 30, 2022,29, 2023, we held a non-marketable equity investment in Series B preferred stock of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. As the equity securities do not have a readily determinable fair value and do not qualify for the practical expedient under Accounting Standards Codification 820, Fair Value Measurement, we have elected to account for this investment at cost less any impairment. We
11


evaluate this investment for impairment at each balance sheet date. As of December 30, 202229, 2023 and September 30, 2022,29, 2023, the carrying value of this investment was $2.5 million and it was classified as a long-term investment.
On December 23, 2021, we sold our non-controlling investment of less than 10% in the outstanding equity of a private company to one of the other limited liability company members, pursuant to the terms of a previously negotiated call option included in the private company’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 31, 2021, we recorded a gain of $118.2 million in Other (expense) income, net in our condensed consolidated statements of operations.
4.5. 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. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three months ended December 30, 2022.
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29, 2023.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
December 30, 2022
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
December 29, 2023December 29, 2023
Fair ValueFair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
AssetsAssets
Money market fundsMoney market funds$29,448 $29,448 $— $— 
Money market funds
Money market funds
U.S. Treasury securities
Certificates of deposit
Commercial paperCommercial paper325,943 — 325,943 — 
Corporate bondsCorporate bonds142,634 — 142,634 — 
Total assets measured at fair valueTotal assets measured at fair value$498,025 $29,448 $468,577 $— 
September 29, 2023September 29, 2023
Fair ValueFair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds
Money market funds
Money market funds
U.S. Treasury securities
Commercial paper
September 30, 2022
Corporate bonds
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$1,392 $1,392 $— $— 
Commercial paper324,904 — 324,904 — 
Corporate bonds
Corporate bondsCorporate bonds141,676 — 141,676 — 
Total assets measured at fair valueTotal assets measured at fair value$467,972 $1,392 $466,580 $— 
5.6. INVENTORIES
Inventories consist of the following (in thousands):
December 30,
2022
September 30,
2022
December 29,
2023
December 29,
2023
September 29,
2023
Raw materialsRaw materials$78,786 $72,595 
Work-in-processWork-in-process10,820 12,455 
Finished goodsFinished goods31,729 29,910 
Total inventory, netTotal inventory, net$121,335 $114,960 

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6.

7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
December 30,
2022
September 30,
2022
December 29,
2023
December 29,
2023
September 29,
2023
Construction in processConstruction in process$18,095 $10,837 
Machinery and equipmentMachinery and equipment219,676 227,844 
Leasehold improvementsLeasehold improvements35,434 35,651 
Furniture and fixturesFurniture and fixtures2,538 2,535 
Computer equipment and softwareComputer equipment and software18,618 18,347 
Finance lease assetsFinance lease assets34,417 34,417 
Total property and equipmentTotal property and equipment328,778 329,631 
Less accumulated depreciation and amortizationLess accumulated depreciation and amortization(209,833)(205,930)
Property and equipment, netProperty and equipment, net$118,945 $123,701 
Depreciation and amortization expense related to property and equipment for the three months ended December 29, 2023 and December 30, 2022 and December 31, 2021 was $6.0$6.5 million and $5.9$6.0 million, respectively. Accumulated amortization on finance lease assets as of December 30, 202229, 2023 and September 30, 202229, 2023 was $6.3$8.4 million and $5.8$7.8 million, respectively.
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7.8. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 Three Months Ended
 December 30,
2022
December 31,
2021
Cost of revenue$910 $2,505 
Selling, general and administrative5,903 6,782 
Total$6,813 $9,287 
Intangible assets consist of the following (in thousands):
December 30,
2022
September 30,
2022
Acquired technology$179,434 $179,434 
Customer relationships245,870 245,870 
Trade name (indefinite-lived)3,400 3,400 
Total428,704 428,704 
Less accumulated amortization(384,263)(377,450)
Intangible assets — net$44,441 $51,254 
 Three Months Ended
 December 29,
2023
December 30,
2022
Cost of revenue$1,942 $910 
Research and development1,044 — 
Selling, general and administrative4,798 5,903 
Total$7,784 $6,813 
A summary of the activity in gross intangible assets as of December 29, 2023 and goodwillSeptember 29, 2023 is as follows (in thousands):
Intangible Assets
Total Intangible AssetsAcquired
Technology
Customer
Relationships
Trade NameGoodwill
Balance as of September 30, 2022$428,704 $179,434 $245,870 $3,400 $311,417 
Currency translation adjustment— — — — 735 
Balance as of December 30, 2022$428,704 $179,434 $245,870 $3,400 $312,152 

December 29,
2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$213,646 $(180,685)$32,961 
Backlog1,500 (129)1,371 
Customer relationships289,181 (230,435)58,746 
Favorable contract15,000 (831)14,169 
Internal-use software8,350 (1,044)7,306 
Trade name (1)
5,200 (226)4,974 
Balance as of December 29, 2023 (2)
$532,877 $(413,350)$119,527 
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September 29,
2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$191,369 $(179,558)$11,811 
Customer relationships267,621 (225,827)41,794 
Internal-use software8,350 — 8,350 
Trade name (1)
5,200 (161)5,039 
Balance as of September 29, 2023 (2)
$472,540 $(405,546)$66,994 
(1)     Includes an indefinite-lived trade name of $3.4 million that is not amortized.
(2) Foreign intangible asset carrying amounts were affected by foreign currency translation.
As of December 30, 2022,29, 2023, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
2023 Remaining2024202520262027ThereafterTotal
Amortization expense$19,237 15,410 3,490 1,644 1,260 — $41,041 
2024 Remaining2025202620272028ThereafterTotal
Amortization expense$32,372 26,595 15,170 12,787 9,919 19,284 $116,127 
Accumulated amortization for acquired technology and customer relationships were $176.1 million and $208.2 million, respectively,A summary of the changes in goodwill as of December 30, 2022,29, 2023 and $175.2September 29, 2023 is as follows (in thousands):
December 29,
2023
Balance as of September 29, 2023$323,398 
Acquired (1)
(1,407)
Foreign currency translation adjustment498 
Balance as of December 29, 2023$322,489 
(1)     The reduction of $1.4 million and $202.3 million, respectively, as of September 30, 2022.to goodwill is related to a measurement period adjustment for the Linearizer Acquisition. For additional information refer to Note 3 - Acquisitions.
8.9. DEBT
The following represents the outstanding balances and effective interest rates of our borrowings as of December 30, 202229, 2023 and September 30, 2022,29, 2023, (in thousands, except percentages):
December 30, 2022September 30, 2022
Principal BalanceEffective Interest RatePrincipal BalanceEffective Interest Rate
LIBOR plus 2.25% term loans due May 2024$120,766 6.32 %$120,766 4.77 %
0.25% convertible notes due March 2026450,000 0.54 %450,000 0.54 %
Total principal amount outstanding570,766 570,766 
Less: Unamortized discount on term loans and deferred financing costs(4,434)(4,846)
Total long-term debt$566,332 $565,920 
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Term Loans
As of December 30, 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, May 19, 2017, May 2, 2018 and May 9, 2018, the “Credit Agreement”).
As of December 30, 2022, the Credit Agreement consisted of term loans with an initial aggregate principal amount of $700.0 million (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%.
As of December 30, 2022, there are no minimum principal repayments on the Term Loans until May 2024 when the remaining principal balance of $120.8 million becomes due. The fair value of the Term Loans was estimated to be approximately $119.6 million and $120.2 million as of December 30, 2022 and September 30, 2022, respectively, and was determined using Level 2 inputs, including a quoted price from a financial institution.
As of December 30, 2022, approximately $0.5 million of deferred financing costs remain unamortized related to the Term Loans and is recorded as a direct reduction of the recognized debt liabilities 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.
December 29, 2023September 29, 2023
Principal BalanceEffective Interest RatePrincipal BalanceEffective Interest Rate
0.25% convertible notes due March 2026450,000 0.54 %450,000 0.54 %
Unamortized discount on deferred financing costs(2,579)(2,866)
Total long-term debt, less current portion$447,421 $447,134 
2026 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 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)
14


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 five business day period after any five 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 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
11


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.
In connection with the adoption of ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on October 2, 2021 we reclassified $72.2 million, consisting of $73.1 million of 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 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 months ended December 30, 202229, 2023 and December 31, 2021,30, 2022, total interest expense for the 2026 Convertible Notes was $0.3 million.million and $0.3 million, respectively.
The fair value of our 2026 Convertible Notes including the conversion feature, was $448.4556.2 million and $411.4$512.5 million as of December 30, 202229, 2023 and September 30, 2022,29, 2023, respectively, and was determined based on quoted prices in markets that are not active, which is considered a Level 2 valuation input.
There are no future minimum principal payments under the notes as of December 30, 2022;29, 2023; the full amount of $450.0 million is due in fiscal year 2026.
Term Loans
As of December 30, 2022, we were 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, May 19, 2017, May 2, 2018 and May 9, 2018, the “Credit Agreement”).
On August 2, 2023, the Credit Agreement was terminated when we paid the total outstanding principal balance on our Term Loans of $120.8 million and accrued interest of less than $0.1 million with cash-on-hand.
There was no interest expense for the Term Loans for the three months ended December 29, 2023. For the three months ended December 30, 2022, total interest expense for the Term Loans was $1.8 million.
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9.10. FINANCING OBLIGATION
We are party to a power purchase agreement for the use of electric power and thermal energy producing systems at our fabrication facility in Lowell, Massachusetts. These systems are expected to reduce our consumption of energy while delivering sustainable, resilient energy for heating and cooling. We do not own these systems; however, we control the use of the assets during operation. As of December 30, 202229, 2023 and September 30, 202229, 2023, the net book value of the systems in Property and equipment, net was $9.3$8.7 million and $9.8$8.9 million, respectively, and the corresponding liability was $9.7$9.5 million and $9.8$9.6 million, respectively, primarily classified in Financing obligation on our condensed consolidated balance sheet. The initial financing obligation was 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,As of December 29, 2023 and September 29, 2023, we have $27.2$25.3 million and $25.5 million, respectively, in remaining fixed payments over a 14-year term associated with the power purchase agreement, of which has$15.7 million and $15.9 million, respectively, is included in our consolidated balance sheets on a 15-year term.discounted basis.
As of December 30, 2022,29, 2023, expected future minimum payments for the financing obligation were as follows (in thousands):
Fiscal year ending:Amount
2023$699 
2024958 
2025982 
20261,007 
20271,031 
Thereafter11,914 
Total payments$16,591 
Less: interest6,865 
Present value of liabilities$9,726 
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Fiscal year ending:Amount
2024$718 
2025982 
20261,007 
20271,031 
20281,057 
Thereafter10,857 
Total payments$15,652 
Less: interest6,152 
Present value of liabilities$9,500 


10.11. EARNINGS PER SHARE
The following table sets forth the computation for basic and diluted net income per share of common stock (in thousands, except per share data):
Three Months Ended
December 30, 2022December 31, 2021
Three Months Ended
Three Months Ended
Three Months Ended
December 29, 2023
December 29, 2023
December 29, 2023
Numerator:
Numerator:
Numerator:Numerator:
Net income attributable to common stockholdersNet income attributable to common stockholders$29,519 $138,827 
Net income attributable to common stockholders
Net income attributable to common stockholders
Denominator:
Denominator:
Denominator:Denominator:
Weighted average common shares outstanding-basicWeighted average common shares outstanding-basic70,481 69,400 
Dilutive effect of stock options, restricted stock and restricted stock units893 1,824 
Weighted average common shares outstanding-basic
Weighted average common shares outstanding-basic
Dilutive effect of convertible debt, stock options, restricted stock and restricted stock units
Dilutive effect of convertible debt, stock options, restricted stock and restricted stock units
Dilutive effect of convertible debt, stock options, restricted stock and restricted stock units
Weighted average common shares outstanding-diluted
Weighted average common shares outstanding-diluted
Weighted average common shares outstanding-dilutedWeighted average common shares outstanding-diluted71,374 71,224 
Net income to common stockholders per share-Basic:Net income to common stockholders per share-Basic:$0.42 $2.00 
Net income to common stockholders per share-Basic:
Net income to common stockholders per share-Basic:
Net income to common stockholders per share-Diluted:Net income to common stockholders per share-Diluted:$0.41 $1.95 
Net income to common stockholders per share-Diluted:
Net income to common stockholders per share-Diluted:
The table above includes the dilutive effect of 7,404 potential common shares for the 2026 Convertible Notes for the three months ended December 29, 2023. The 2026 Convertible Notes did not have an impact on diluted net income per share for the three months ended December 30, 2022 or December 31, 2021.2022.
11.12. 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 litigation. Any such claims may lead to future litigation and material damages and defense costs. We were not involved in any material pending legal proceedings during the three months ended December 30, 2022.29, 2023.
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12.

13. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION
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 30, 2022.29, 2023.
Stock Plans
As of December 30, 2022,29, 2023, we had 4.63.9 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 1.31.2 million shares available for issuance under our 2021 Employee Stock Purchase Plan (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 2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), 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 awards, cash awards, and other share-based awards to employees, directors, consultants and advisors. The ISOs and NSOs must be granted at an exercise price, and the SARs must be granted at a base value, per share of not less than 100% of the closing price of a share of our common stock on the date of 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 under the 2012 Plan primarily vested based on certain market-based and performance-based criteria and generally have a term of four years to seven years. Certain of the share-based awards granted and outstanding as of December 30, 202229, 2023 are subject to accelerated vesting upon a change in control of the Company.
Incentive Stock Units
Outside ofAside from the equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over three or four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.
As of December 30, 202229, 2023 and September 30, 2022,29, 2023, the fair value of outstanding ISUs was $5.4$6.0 million and $4.9$5.0 million, respectively, and the associated accrued compensation liability was $2.5$2.3 million and $3.6$3.3 million, respectively. During the three
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months ended December 29, 2023 and December 30, 2022, and December 31, 2021, we recorded an expense for ISU awards of $1.3$0.5 million and $1.4$1.3 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 of operations (in thousands):
Three Months Ended
December 30,
2022
December 31,
2021
Cost of revenueCost of revenue$1,150 $1,033 
Cost of revenue
Cost of revenue
Research and development
Research and development
Research and developmentResearch and development4,232 3,599 
Selling, general and administrativeSelling, general and administrative5,665 5,317 
Selling, general and administrative
Selling, general and administrative
Total share-based compensation expenseTotal share-based compensation expense$11,047 $9,949 
Total share-based compensation expense
Total share-based compensation expense
As of December 30, 2022,29, 2023, the total unrecognized compensation costs related to RSAs, RSUs and PRSUs was $76.8$93.2 million, which we expect to recognize over a weighted-average period of 2.3 years. As of December 30, 2022,29, 2023, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $0.9 million.

Restricted Stock Restricted Stock Units and Performance-Based Restricted Stock Unit AwardsUnits
A summary of stock award activity for the three months ended December 30, 202229, 2023 is as follows:
Number of shares
(in thousands)
Weighted-
Average
Grant Date Fair Value
 Balance as of September 30, 20221,872 $40.44 
Granted669 62.31 
Performance-based adjustment (1)311 27.13 
Vested and released(1,126)28.78 
Forfeited, canceled or expired(7)45.15 
Balance as of December 30, 20221,719 $54.17 
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Number of shares
(in thousands)
Weighted-
Average
Grant Date Fair Value
 Balance as of September 29, 20231,501 $60.90 
Granted692 78.22 
Performance-based adjustment (1)
62 35.43 
Vested and released(459)48.46 
Forfeited, canceled or expired(87)65.05 
Balance as of December 29, 20231,709 $70.12 
(1) The amount shown represents performance adjustments for performance-based awards. These were granted in prior fiscal years and vested during the three months ended December 30, 202229, 2023 based on the Company’s achievement of adjusted earnings per share performance conditions.
Stock awards that vested during the three months ended December 30, 202229, 2023 and December 31, 202130, 2022 had combined fair values of $66.8$33.3 million and $69.9$66.8 million, respectively, as of the vesting date. RSUs granted generally vest over a period of three or four years.
Market-based PRSUs
We granted 166,452132,247 market-based PRSUs during the three months ended December 30, 2022,29, 2023, at a weighted average grant date fair value of $80.38$88.88 per share, and none were forfeited.share. Recipients may earn between 0% and 200% of the target number of shares based on the Company’s achievement of total stockholder return in comparison to a peer group of companies in the PHLX Semiconductor Sector Index (^SOX) over a period of approximately 3three years. The fair value of the awards was estimated using a Monte Carlo simulation and 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 expected volatility of the Company’s common stock was estimated based on the historical average volatility rate over the three-year period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free rate assumption was based on observed interest rates consistent with the three-year measurement period. The assumptions used to value the awards are as follows:
Three Months Ended
December 30,
2022
Grant date stock price$56.15
Average stock price at the start of the performance period$54.12
Risk free interest rate4.2%
Years to maturity2.90
Expected volatility rate52.4%
Expected dividend yield
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Three Months Ended
December 29,
2023
Grant date stock price$73.01
Average stock price at the start of the performance period$79.43
Risk free interest rate4.6%
Years to maturity2.9
Expected volatility rate41.7%
Expected dividend yield
Stock Options
As of December 30, 202229, 2023 and September 30, 2022,29, 2023 there were 10,000 and 15,000 stock options outstanding, respectively, with a weighted-average exercise price per share of $16.06. As of December 30, 2022,29, 2023, the weighted-average remaining contractual term was 2.851.85 years and the aggregate intrinsic value was $0.7$0.8 million. Aggregate intrinsic value representsis calculated using the difference between our closing stock price on December 30, 202229, 2023 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was $11.0 million forduring the three months ended December 31, 2021.29, 2023 was $0.3 million. There were no options exercised during the three months ended December 30, 2022.
13.14. 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, the realizability of our deferred tax assets and related valuation allowance 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
December 30,
2022
December 31,
2021
Income tax expense$9,611 $1,457 
Effective income tax rate24.6 %1.0 %
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Three Months Ended
December 29,
2023
December 30,
2022
Income tax expense$2,750 $9,611 
Effective income tax rate18.0 %24.6 %
The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 29, 2023 was primarily driven by favorable stock based compensation and research and development (“R&D”) tax credits, partially offset by foreign withholding taxes and global intangible low taxed income (“GILTI”). The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 30, 2022 was primarily driven by tax on global intangible low-taxed income (“GILTI”),GILTI and non-deductible compensation, and state income taxes partially offset by income taxed in foreign jurisdictions generally at lowerR&D tax rates, and research and development (“R&D”) tax credits. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for
During the three months ended December 31, 2021 was primarily driven by the full valuation allowance against any29, 2023, we changed our position on having earnings permanently reinvested for one of our entities in India to no longer having its earnings permanently reinvested. The result of this change in position required us to record a foreign withholding tax expense of $1.0 million associated with income inundistributed earnings during the U.S. and income taxed in foreign jurisdictions generally at lower tax rates, where a valuation allowance does not apply.three months ended December 29, 2023.
On September 30, 2022, we released the majority of the valuation allowances against U.S. federal and state deferred tax assets including operating loss (“NOL”) carryforwards, R&D tax credit carryforwards and other deferred tax items relating to temporary differences. We continued our ongoing assessment of the realizability of our deferred tax assets and did not note any significant changes from our assessment on September 30, 2022. We continue to maintain a partial valuation allowance against certain of our deferred tax assets primarily relating to state NOLs and R&D tax credit carryforwards which are not expected to be realized. 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. We look at factors that may impact the valuation of our deferred tax assets including results of recent operations, future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies.
There were no unrecognized tax benefits as of December 30, 202229, 2023 and September 30, 2022.29, 2023. It is our policy to recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the fiscal quarter ended December 30, 2022,29, 2023, we did not make any accrual or payment of interest or penalties.
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14.15. SUPPLEMENTAL CASH FLOW INFORMATION
The following is a summary of supplemental cash flow information for the periods presented (in thousands):
Three Months Ended
December 30,
2022
December 31,
2021
Three Months EndedThree Months Ended
December 29,
2023
December 29,
2023
December 30,
2022
Cash paid for interestCash paid for interest$2,258 $1,197 
Cash paid for income taxesCash paid for income taxes$297 $178 
Non-cash activities:Non-cash activities:
Operating lease right-of-use assets obtained in exchange for new lease liabilitiesOperating lease right-of-use assets obtained in exchange for new lease liabilities$1,305 $280 
Operating lease right-of-use assets obtained in exchange for new lease liabilities
Operating lease right-of-use assets obtained in exchange for new lease liabilities
Additions to property and equipment, net included in liabilitiesAdditions to property and equipment, net included in liabilities$1,364 $1,618 
Additions to property and equipment, net included in liabilities
Additions to property and equipment, net included in liabilities

DuringOperating lease right-of-use assets obtained in exchange for new lease liabilities includes $5.6 million operating lease right-of-use assets acquired as part of the three months ended December 31, 2021, we capitalized $0.5 million of non-cash costs to property and equipment associated with construction of a power generator that were paid by our service provider and included in non-cash capital expenditures above. SeeRF Business Acquisition. For additional information on the RF Business Acquisition, see Note 93 - Financing ObligationAcquisitions.
15.16. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
We have one 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 CODM primarily uses consolidated metrics. The Company assesses its determination of operating segments at least annually. We continue to evaluate our internal reporting structure and the potential impact of any changes on our segment reporting.
For information about our 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):
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December 30,
2022
September 30,
2022
December 29,
2023
December 29,
2023
September 29,
2023
United StatesUnited States$113,492 $108,569 
France
Other Countries (1)
Other Countries (1)
5,453 15,132 
TotalTotal$118,945 $123,701 
(1)Other than the United States and France, no country or region represented greater than 10% of the total net property and equipment as of the dates presented.
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
RevenueDecember 29,
2023
December 30,
2022
Customer A13 %— 
Accounts ReceivableDecember 29,
2023
September 29,
2023
Customer B14 %— 
Customer C12 %
— 

Customer Concentration
Customer A did not represent more than 10% of our revenue in the three months ended December 30, 2022. Customer B and Customer C did not represent more than 10% of our revenue in the three months ended December 29, 2023 and December 30, 2022, respectively. No other customer represented more than 10% of revenue or more than 10% of accounts receivable in the periods presented in the accompanying condensed consolidated financial statements. For the three months ended December 30, 202229, 2023 and December 31, 2021,30, 2022, our top ten customers represented 52%57% and 44%52%, respectively, of total revenue, respectively.
16. SUBSEQUENT EVENTS
On December 23, 2022, we entered into a definitive agreement to acquire substantially all of the assets and certain specified liabilities of OMMIC SAS, a semiconductor manufacturer based in France with expertise in wafer fabrication, epitaxial growth and monolithic microwave integrated circuit semiconductor processing and integrated circuit design. The purchase price is expected to be approximately €38.5 million, funded by cash-on-hand, and the proposed transaction is expected to close in our fiscal second quarter of 2023, subject to regulatory approvals and the satisfaction of certain customary closing conditions.

revenue.

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 30, 202229, 2023 filed with the United States Securities and Exchange Commission (“SEC”) on November 14, 202213, 2023 (the “2022“2023 Annual Report on Form 10-K”).
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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,” “MACOM Technology Solutions,” 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.statements.” In addition, we may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements regarding our business outlook, strategic plans and priorities, expectations, anticipated drivers of future revenue growth, our pending acquisitionability to develop new products, achieve market acceptance of OMMIC SAS,those products and better address certain markets, expand our capabilities and extend our product offerings through the Linearizer Acquisition, the MESC Acquisition and the RF Business Acquisition, industry trends, the potential impacts of COVID-19 on our future operations and results, our estimated annual effective tax rate, our plans for use of our cash and cash equivalents and short-term investments, interest rate and foreign currency risks, our ability to meet working capital requirements, estimates and objectives for future operations, our future results of operations and our financial position, including liquidity, and other matters that do not relate strictly to historical facts. Forward-looking statements generally may be identified by terms such as “anticipates,” “believes,” “could,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” or similar expressions or 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
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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 the 20222023 Annual Report on Form 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. Except 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 design and manufacture semiconductor products for Telecommunications (“Telecom”),the Industrial and Defense (“I&D”), Data Center and Data CenterTelecommunications (“Telecom”) industries. Headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia, we design, develop and manufacture differentiated 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, gallium nitride,GaAs, GaN, indium phosphide (“InP”) and specialized silicon), advanced packaging and back-end assembly and test. We offer a broad portfolio of thousands of standard and custom devices, which include integrated circuits (“IC”), multi-chip modules (“MCM”), diodes, amplifiers, switches and switch limiters, passive and active components and completeradio frequency (“RF”) and optical subsystems, acrosswhich make up dozens of product lines servingthat service over 6,000 end customers in our three primary markets. Our semiconductor products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless communication systems including basestations, high capacityhigh-capacity optical networks, data center applications,networks, radar, medical systems and test and measurement applications. Our primary end markets are: (1) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and Fiber-to-the-X/passive optical network, among others; (2) I&D, which includes military and commercial radar, radio frequency (“RF”)RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; and (3)(2) 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 operatecustomers; and resulted in authorities implementing numerous measures to try to contain the virus. As a result of these measures(3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G satellite communications 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 three months ended December 30, 2022, have a material impact on our consolidated operating results. However, the degree to which COVID-19 may impact our business, financial condition, results of operations, liquidity and cash flows will continue to depend on future developments, which remain highly uncertain and cannot be predicted.
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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 2022 Annual Report on Form 10-K.Fiber-to-the-X (“FTTx”)/passive optical network (“PON”), among others.
Description of Our Revenue
Revenue. Our revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical and photonic semiconductor products. We design, integrate, manufacture and package differentiated, 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:
continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets;
introducing new products using advanced technologies, added features, higher levels of integration and improved performance;
increasing content of our semiconductor solutions 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
engaging early with our lead customers to develop custom and 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, I&D, Data Center and Data Center.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.Telecom.
We expect our revenue in the I&D market to be driven by the expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, industrial, automotive, scientific and medical applications, further supported by growth in applications for our 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.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, satellite communications networks and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.
Critical Accounting Policies and Estimates
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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 GAAP, requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements. 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.
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; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.
Business combinations
We apply significant estimates and judgments in order to determine the fair value of the identified tangible and intangible assets acquired, liabilities assumed and goodwill recognized in business combinations. The value of all assets and liabilities are recognized at fair value as of the acquisition date using a market participant approach. In measuring the fair value, we utilize a number of valuation techniques. When determining the fair value of property and equipment acquired, generally we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, typically determined using a discounted cash flow valuation method, we use assumptions such as the timing and amount of future cash flows, discount rates, weighted average cost of capital and estimated useful lives. These assessments can be significantly affected by our judgments.
Goodwill and intangible asset valuation
Significant management judgment is required in our valuation of goodwill and intangible assets, many of which are based on the creation of forecasts of future operating results that are used in the valuation, including (i) estimation of future cash flows, (ii) estimation of the long-term rate of growth for our business, (iii) estimation of the useful life over which cash flows will occur, (iv) terminal values, if applicable, and (v) the determination of our weighted average cost of capital, which helps determine the discount rate. It is possible that these forecasts may change, and our performance projections included in our forecasts of future results may prove to be inaccurate. The value of our goodwill and purchased intangible assets could also be impacted by future adverse changes, such as a decline in the valuation of technology company stocks, including the valuation of our common stock, or a significant slowdown in the worldwide economy or in the optical communications equipment or semiconductor industry.
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 the 20222023 Annual Report on Form 10-K 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.
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Results of Operations
The following table sets forth, for the periods indicated, our statements of operations data (in thousands):
Three Months Ended
December 30,
2022
December 31,
2021
RevenueRevenue$180,104 $159,620 
Revenue
Revenue
Cost of revenue (1)
Cost of revenue (1)
Cost of revenue (1)
Cost of revenue (1)
69,749 65,477 
Gross profitGross profit110,355 94,143 
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Operating expenses:Operating expenses:
Research and development (1)
Research and development (1)
38,832 35,470 
Selling, general and administrative (1)
32,940 31,604 
Research and development (1)
Research and development (1)
Selling, general and administrative (1) (2)
Selling, general and administrative (1) (2)
Selling, general and administrative (1) (2)
Total operating expenses
Total operating expenses
Total operating expensesTotal operating expenses71,772 67,074 
Income from operationsIncome from operations38,583 27,069 
Income from operations
Income from operations
Other income (expense):
Other income (expense):
Other income (expense):Other income (expense):
Interest income
Interest income (expense), net602 (1,693)
Other (expense) income, net (2)
(55)114,908 
Total other income, net547 113,215 
Interest income
Interest income
Interest expense
Interest expense
Interest expense
Other expense, net
Other expense, net
Other expense, net
Total other income
Total other income
Total other income
Income before income taxes
Income before income taxes
Income before income taxesIncome before income taxes39,130 140,284 
Income tax expenseIncome tax expense9,611 1,457 
Income tax expense
Income tax expense
Net incomeNet income$29,519 $138,827 
Net income
Net income
(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
December 30,
2022
December 31,
2021
(a) Intangible amortization expense:(a) Intangible amortization expense:
(a) Intangible amortization expense:
(a) Intangible amortization expense:
Cost of revenueCost of revenue$910 $2,505 
Cost of revenue
Cost of revenue
Research and development
Research and development
Research and development
Selling, general and administrative
Selling, general and administrative
Selling, general and administrativeSelling, general and administrative5,903 6,782 
(b) Share-based compensation expense:(b) Share-based compensation expense:
(b) Share-based compensation expense:
(b) Share-based compensation expense:
Cost of revenue
Cost of revenue
Cost of revenueCost of revenue$1,150 $1,033 
Research and developmentResearch and development4,232 3,599 
Research and development
Research and development
Selling, general and administrativeSelling, general and administrative5,665 5,317 
Selling, general and administrative
Selling, general and administrative
23



(2) The three months ended December 31, 2021 includes a gain on the sale of our equity method investment of $118.229, 2023 and December 30, 2022 include $8.4 million and net losses$0.8 million, respectively, of $3.3 million associated with such equity method investment. See acquisition-related professional fee and other expenseNote 3 - Investments. to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.
19



The following table sets forth, for the periods indicated, our statements of operations data expressed as a percentage of our revenue: 
Three Months Ended
December 30,
2022
December 31,
2021
RevenueRevenue100.0 %100.0 %
Revenue
Revenue
Cost of revenue
Cost of revenue
Cost of revenueCost of revenue38.7 41.0 
Gross profitGross profit61.3 59.0 
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Operating expenses:Operating expenses:
Research and developmentResearch and development21.6 22.2 
Research and development
Research and development
Selling, general and administrative
Selling, general and administrative
Selling, general and administrativeSelling, general and administrative18.3 19.8 
Total operating expensesTotal operating expenses39.9 42.0 
Total operating expenses
Total operating expenses
Income from operations
Income from operations
Income from operationsIncome from operations21.4 17.0 
Other income (expense):Other income (expense):
Other income (expense):
Other income (expense):
Interest income
Interest income (expense), net0.3 (1.1)
Other (expense) income, net0.0 72.0 
Total other income, net0.3 70.9 
Interest income
Interest income
Interest expense
Interest expense
Interest expense
Other expense, net
Other expense, net
Other expense, net
Total other income
Total other income
Total other income
Income before income taxes
Income before income taxes
Income before income taxesIncome before income taxes21.7 87.9 
Income tax expenseIncome tax expense5.3 0.9 
Income tax expense
Income tax expense
Net incomeNet income16.4 %87.0 %
Net income
Net income
Comparison of the Three Months Ended December 30, 202229, 2023 to the Three Months Ended December 31, 202130, 2022
Revenue. Our revenue increaseddecreased by $20.5$23.0 million, or 12.8%12.7%, to $157.1 million for the three months ended December 29, 2023, from $180.1 million for the three months ended December 30, 2022, from $159.6 million for the three months ended December 31, 2021.2022. The increasedecrease in revenue in the three months ended December 30, 202229, 2023 is described by end market in the following paragraphs.
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 
December 30,
2022
December 31,
2021
%
Change
Telecom$61,450$55,82210.1 %
Industrial & Defense
Industrial & Defense
Industrial & DefenseIndustrial & Defense77,16973,1465.5 %
Data CenterData Center41,48530,65235.3 %
Data Center
Data Center
Telecom
Telecom
Telecom
Total
Total
TotalTotal$180,104$159,62012.8 %
Telecom34.1 %35.0 %
Industrial & Defense
Industrial & Defense
Industrial & DefenseIndustrial & Defense42.9 %45.8 %
Data CenterData Center23.0 %19.2 %
Data Center
Data Center
Telecom
Telecom
Telecom
TotalTotal100.0 %100.0 %
Total
Total

In the three months ended December 30, 2022,29, 2023, our TelecomI&D market revenue increaseddecreased by $5.6$0.2 million, or 10.1%0.2%, compared to the three months ended December 31, 2021.30, 2022. The decrease in the three months ended December 29, 2023 was primarily driven by lower sales of legacy products for industrial markets, partially offset by incremental revenue from recent acquisitions and an increase forin defense program shipments.
In the three months ended December 29, 2023, our Data Center market revenue increased by $8.0 million, or 19.3%, compared to the three months ended December 30, 20222022. The increase in the three months ended December 29, 2023 was
24


primarily driven by an increase in RFsales of 400G and microwave800G high-performance analog Data Center products, for metro long-haul broadband access and video infrastructure, products targeted for carrier-based optical semiconductor products and non-recurring license revenue of $2.0 million, partially offset by a decrease in sales of our legacy connectivity products.
In the three months ended December 30, 2022,29, 2023, our I&DTelecom market revenue increaseddecreased by $4.0$30.8 million, or 5.5%50.1%, compared to the three months ended December 31, 2021.30, 2022. The increase indecrease for the three months ended December 30, 202229, 2023 was primarily related to ongoing defense program shipments and expansion of high-performance analog product lines into the I&D market.
20


In the three months ended December 30, 2022, our Data Center market revenue increased by $10.8 million, or 35.3%, compared to the three months ended December 31, 2021. The increase in the three months ended December 30, 2022 was primarily due to an increase in sales of our high-performance analog Data Center products and certain legacy products which were supply constrained in prior periods, partially offsetdriven by a decrease in sales of carrier-based optical semiconductor products.products, a decrease in sales of RF and microwave products for broadband access and a decrease in sales of legacy products, partially offset by incremental revenue from recent acquisitions.
We continue to be negatively impacted by the current macroeconomic conditions, which we expect may result in weaker near-term demand for our products across all three of our primary markets.
Gross profit. Gross margin was 61.3%55.6% and 59.0%61.3% for the three months ended December 30, 202229, 2023 and December 31, 2021,30, 2022, respectively. Gross profit was $110.4$87.3 million and $94.1$110.4 million for the three months ended December 30, 202229, 2023 and December 31, 2021,30, 2022, respectively. Gross profit increaseddecreased for the three months ended December 30, 202229, 2023 as compared to the three months ended December 31, 202130, 2022 primarily as a result of lower sales, increases in employee headcount associated with acquisitions, higher sales, including $2.0 million of license revenue, favorable revenue mix, production efficiencies, lower intangible asset amortization and depreciation expense, partially offset by increasesdecreases in production supplies, employee headcount and employee-related costs.supplies.
Research and development. Research and development expense increased by $3.4$0.6 million, or 9.5%1.5%, to $39.4 million, or 25.1% of our revenue, for the three months ended December 29, 2023, compared to $38.8 million, or 21.6% of our revenue, for the three months ended December 30, 2022, compared to $35.5 million, or 22.2% of our revenue, for the three months ended December 31, 2021.2022. Research and development expense increased in the three months ended December 30, 202229, 2023 primarily as a result of an increaseincreases in employee headcount employee-relateddue to acquisitions, design software costs share-based compensationand supplies expense, partially offset primarily by decreases in development foundry costs and a loss on disposal of equipment.share-based compensation expense.
Selling, general and administrative. Selling, general and administrative expense increased by $1.3$3.9 million, or 4.2%12.0%, to $36.9 million, or 23.5% of our revenue, for the three months ended December 29, 2023, compared to $32.9 million, or 18.3% of our revenue, for the three months ended December 30, 2022, compared to $31.6 million, or 19.8% of our revenue, for the three months ended December 31, 2021.2022. Selling, general and administrative expense increased in the three months ended December 30, 202229, 2023 primarily due to an increase in outside professional fees,acquisition-related costs and employee headcount due to acquisitions, partially offset primarily by lower intangible amortization and share-based compensation expense and variable costs, partially offset by a decrease in intangible amortization.expense.
Interest income (expense), netincome. .In the three months ended December 30, 2022,29, 2023, interest income net was $0.6$5.6 million, or 0.3% of our revenue, compared to interest expense, net of $1.7$3.7 million or 1.1% of our revenue, for the three months ended December 31, 2021. The change for the three months ended December 30, 2022 is primarily due to an2022. The increase in interest income on short-term investments and an increase in short-term investments, partially offset by an increase in interest expense on the Term Loans.
Other (expense) income, net. In the three months endedDecember 30, 2022, other expense, net was $0.1 million, or less than 0.1% of our revenue, compared to other income, net of $114.9 million, or 72.0% of our revenue, for the three months ended December 31, 2021. The29, 2023 is primarily due to the general increase in interest rates on both our short-term investments and our money market balances.
Interest expense. In the three months ended December 31, 2021 includes a gain on29, 2023, interest expense was $1.3 million, compared to $3.1 million for the salethree months ended December 30, 2022. The decrease for the three months ended December 29, 2023 is primarily due to the August 2023 payment of our equity method investmentthe total outstanding principal balance of $118.2 million and net losses of $3.3 million associated with such 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 Term Loans.
Provision for income taxes. OurIn the three months ended December 29, 2023, income tax expense andwas $2.8 million, compared to $9.6 million for the three months ended December 30, 2022. In the three months ended December 29, 2023, the effective income tax ratesrate was 18.0%, compared to 24.6% for the periods indicated were (in thousands, except percentages):
Three Months Ended
December 30,
2022
December 31,
2021
Income tax expense9,611 1,457 
Effective income tax rate24.6 %1.0 %

three months ended December 30, 2022. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 29, 2023 was primarily driven by favorable stock based compensation and R&D tax credits, partially offset by foreign withholding taxes and GILTI. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 30, 2022, was primarily driven by tax on GILTI and non-deductible compensation, and state income taxes partially offset by income taxed in foreign jurisdictions generally at lower tax rates, and R&D tax credits. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 31, 2021 was primarily driven by the full valuation allowance against any expense associated with income in the U.S. and income taxed in foreign jurisdictions generally at lower tax rates, where a valuation allowance does not apply. Our estimated annual effective tax rate for the year ending September 29, 202327, 2024 is expected to be approximately 30%23%, adjusted for discrete taxation matters arising during the interim periods.
For additional information refer to Note 1314 - Income Taxes to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
2125


Liquidity and Capital Resources
The following table summarizes our cash flow activities (in thousands):
Three Months Ended
December 30, 2022December 31, 2021
Three Months EndedThree Months Ended
December 29, 2023December 29, 2023December 30, 2022
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period$119,952 $156,537 
Net cash provided by operating activitiesNet cash provided by operating activities38,273 34,104 
Net cash (used in) provided by investing activities(7,950)105,737 
Net cash used in investing activities
Net cash used in financing activitiesNet cash used in financing activities(24,333)(22,900)
Foreign currency effect on cashForeign currency effect on cash213 (82)
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$126,155 $273,396 
Cash Flow from Operating Activities
Our cash flow from operating activities for the three months ended December 29, 2023 of $33.1 million consisted of a net income of $12.5 million plus adjustments of $21.5 million, to reconcile our net income to cash provided by operating activities, less cash used in operating assets and liabilities of $0.9 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included depreciation and intangible amortization expense of $14.3 million and share-based compensation expense of $8.7 million. In addition, cash used in operating assets and liabilities was $0.9 million for the three months ended December 29, 2023, primarily driven by an increase in accounts receivables of $12.2 million, partially offset by an increase of $6.6 million in accrued and other liabilities, an increase of $2.1 million in accounts payable and a decrease in inventories of $1.6 million.
Our cash flow from operating activities for the three months ended December 30, 2022 of $38.3 million consisted of a net income of $29.5 million plus adjustments of $32.6 million, to reconcile our net income to cash provided by operating activities less cash used in operating assets and liabilities of $23.8 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included depreciation and intangible amortization expense of $12.9 million, share-based compensation expense of $11.0 million, and deferred income tax expense of $9.1 million. In addition, cash used in operating assets and liabilities was $23.8 million for the three months ended December 30, 2022, primarily driven by an increase in accounts receivable of $10.5 million, an increase in inventories of $6.4 million and a decrease of $10.3 million in accrued and other liabilities, partially offset by an increase in accounts payable of $3.7 million.
Cash Flow from Investing Activities
Our cash flow from operatingused in investing activities for the three months ended December 31, 202129, 2023 of $34.1$34.8 million consisted primarily of a net income$75.0 million for acquisitions, capital expenditures of $138.8 million, less adjustments to reconcile our net income to cash provided by operating activities of $88.4$4.7 million and cash used in operating assets and liabilitiespurchases of $16.3 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included a net gain$55.4 million of $114.9 million related to the sale of our equity method investmentshort-term investments, offset by equity method investment losses, depreciation and intangible amortization expenseproceeds of $15.2 million and share-based compensation expense of $9.9 million. In addition, cash used in operating assets and liabilities was $16.3$100.3 million for the three months ended December 31, 2021, primarily driven by an increasesale and maturity of short-term investments. For additional information on the cash paid for our acquisitions, see Note 3 - Acquisitions to our Condensed Consolidated Financial Statements in accounts receivable of $12.9 million and an increase in inventories of $5.8 million.
Cash Flow from Investing Activitiesthis Quarterly Report on Form 10-Q.
Our cash flow used in investing activities for the three months ended December 30, 2022 of $8.0 million consisted primarily of purchases of $145.3 million of short-term investments and capital expenditures of $9.6 million, offset by proceeds of $147.0 million for the sale and maturity of short-term investments.
Our cash flow provided by investing activities forCash Flow from Financing Activities
During the three months ended December 31, 202129, 2023, our cash used in financing activities of $105.7$9.1 million consistedwas primarily related to $11.6 million of repurchases of common stock associated with employee tax withholdings on vested equity awards, partially offset by $2.8 million of proceeds from the sale of our equity method investment of $127.8 million, proceeds of $58.5 million for the salestock option exercises and maturity of short-term investments, offset by purchases of $75.4 million of short-term investments and capital expenditures of $5.1 million. 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.
Cash Flow from Financing Activitiesemployee stock purchases.
During the three months ended December 30, 2022, our cash used in financing activities of $24.3 million was primarily related to $26.4 million of repurchases of common stock associated with employee tax withholdings on vested equity awards, partially offset by $2.3 million of proceeds from employee stock purchases.
During the three months ended December 31, 2021, our cash used in financing activities of $22.9 million was primarily related to $27.8 million of repurchases of 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.
2226


Liquidity
As of December 30, 2022,29, 2023, we held $126.2$163.6 million of cash and cash equivalents, primarily deposited with financial institutions, as well as $468.6$299.7 million of liquid short-term investments. The undistributed earnings of 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 30, 2022,29, 2023, cash held by our indefinitely reinvested foreign subsidiaries was $14.1$7.3 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.
We plan to use our remaining available cash and cash equivalents and short-term investments 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 investments and cash generated from operations will be sufficient to meet our working capital requirements for at least the next twelve 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 December 30, 2022,29, 2023, we had no off-balance sheet arrangements.
For additional information related to our Liquidity and Capital Resources, see Note 89 - Debt to our Condensed Consolidated Financial Statements 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.
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 investments and our variable rate debt, as well as foreign exchange rate risk.
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 bonds, bank deposits, money market funds, commercial paper and commercial paper.U.S. Treasury securities. 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 toOn August 2, 2023, we paid the increase or decrease in the amount of interest expense we must pay on thetotal outstanding debt under the Credit Agreement. The interest ratesprincipal balance on our 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 30, 2022, we had $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 $1.2 million.Loans. The interest rates on our 2026 Convertible Notes are fixed and therefore not subject to interest rate risk. For additional information regarding our Term Loans and Convertible Notes, refer to Note 9 - Debt.
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 functional currency of a majority of our foreign operations continues to be in U.S. dollars with the remaining operations being local currency. Changes 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, reduce or delay customer orders, or otherwise negatively affect how customers 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.
23


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 30, 2022.29, 2023.
27


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 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.
2428


PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 1112 - 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 20222023 Annual Report on Form 10-K, 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 20222023 Annual Report on Form 10-K.
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 December 30, 2022.29, 2023. 
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 ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1, 2022-October 28, 202272,262 $56.29 — — 
October 29, 2022-November 25, 2022370,519 60.09 — — 
November 26, 2022-December 30, 2022627 65.68 — — 
Total443,408 $59.48 — — 
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 ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
September 30, 2023-October 27, 2023105,456 $72.04 — — 
October 28, 2023-November 24, 202352,590 73.44 — — 
November 25, 2023-December 29, 20231,006 92.89 — — 
Total159,052 $72.63 — — 
(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 5. OTHER INFORMATION
Insider Trading Arrangements
The following table describes actions by our directors and Section 16 officers with respect to plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the three months ended December 29, 2023. None of our directors or Section 16 officers terminated a Rule 10b5-1 trading arrangement or took actions with respect to a “non-Rule 10b5-1 trading arrangement,” as such term is defined in Item 408(c) of Regulation S-K, during the three months ended December 29, 2023.
Name and TitleActionDateExpiration of Plan (1)Potential Number of Shares to be Sold
Charles Bland
Director
AdoptionNovember 13, 2023February 14, 2025Sale of up to 10,000 shares
(1)     Date of plan termination or such earlier date upon which all transactions are completed or expire without execution.
25
29


ITEM 6. EXHIBITS
Exhibit
Number
Description
3.1
3.2
10.110.1*
19.1
31.1
31.2
32.1
101The following material from the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended December 30, 2022,29, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (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.
104The cover page for the Quarterly Report on Form 10-Q of MACOM Technology Solutions Holdings, Inc. for the fiscal quarter ended December 30, 2022,29, 2023, formatted in Inline XBRL and included as Exhibit 101101.
*Management compensation plan or arrangement.


2630


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: February 2, 20231, 2024By:/s/ Stephen G. Daly
Stephen G. Daly
President and Chief Executive Officer
(Principal Executive Officer)
Dated: February 2, 20231, 2024By:/s/ John F. Kober
John F. Kober
Senior Vice President and Chief Financial Officer
(Principal Accounting and Principal Financial Officer)