The following tables present details of the Company’s operating and reportable segments and a reconciliation of the "All other" category (in thousands):
Three Months Ended
Six Months Ended
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Revenue:
HPA
$
148,251
$
149,804
$
277,719
$
289,496
CSG
146,822
103,622
261,675
202,885
ACG
751,436
850,067
1,393,786
1,262,276
Total revenue
$
1,046,509
$
1,103,493
$
1,933,180
$
1,754,657
Operating income (loss):
HPA
$
13,066
$
25,446
$
17,947
$
49,410
CSG
(8,974)
(27,725)
(28,475)
(47,886)
ACG
215,057
284,805
331,506
329,803
All other
(209,474)
(131,098)
(306,697)
(228,035)
Operating income
9,675
151,428
14,281
103,292
Interest expense
(22,594)
(17,121)
(39,688)
(34,382)
Other income, net
15,422
5,211
27,187
18,927
Income before income taxes
$
2,503
$
139,518
$
1,780
$
87,837
Three Months Ended
Six Months Ended
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Reconciliation of "All other" category:
Stock-based compensation expense
$
(38,181)
$
(39,053)
$
(80,547)
$
(77,498)
Amortization of intangible assets
(29,482)
(29,963)
(59,956)
(60,835)
Restructuring-related charges (1)
(34,396)
(8,418)
(53,970)
(31,154)
Acquisition and integration-related costs
(1,211)
(852)
(3,793)
(2,047)
Goodwill impairment (2)
(96,458)
(48,000)
(96,458)
(48,000)
Other
(9,746)
(4,812)
(11,973)
(8,501)
Loss from operations for "All other"
$
(209,474)
$
(131,098)
$
(306,697)
$
(228,035)
(1) Refer to Note 11 for additional information.
(2) Refer to Note 5 for additional information.
13. INCOME TAXES
The Company’s income tax expense was $19.9 million and $18.8 million for the three and six months ended September 28, 2024, respectively, and $42.1 million and $34.0 million for the three and six months ended September 30, 2023, respectively. The Company’s effective tax rate was 796.5% and 1,056.4% for the three and six months ended September 28, 2024, respectively, and 30.1% and 38.7% for the three and six months ended September 30, 2023, respectively.
The Company's effective tax rate for the three and six months ended September 28, 2024 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, Global Intangible Low-Taxed Income ("GILTI"), domestic tax credits generated, discrete pretax items (including a non-deductible goodwill impairment charge) and discrete tax items. After consideration of pretax items taxed discretely in the period, the Company recognized tax expense associated with its ongoing operations and the year-to-date income, which was partially offset by discrete tax benefits of $4.3 million and discrete tax expense of $0.2 million for the three and six months ended September 28, 2024, respectively. The discrete tax benefit for the three months ended September 28, 2024 primarily related to the tax impacts of the 2025 Restructuring Initiative (refer to Note
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
11 for additional information). For the six months ended September 28, 2024, this tax benefit was offset by the tax effects of the sale of the Company's assembly and test operations in China (refer to Note 4 for additional information).
The Company's effective tax rate for the three and six months ended September 30, 2023 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, GILTI, domestic tax credits generated, discrete pretax items (including a non-deductible goodwill impairment charge) and discrete tax items. A discrete tax expense of $5.6 million and $5.5 million was recorded during the three and six months ended September 30, 2023, respectively, and primarily resulted from foreign currency gains recognized for tax purposes.
14. NET (LOSS) INCOME PER SHARE
The following table sets forth the computation of basic and diluted net (loss) income per share (in thousands, except per share data):
Three Months Ended
Six Months Ended
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Numerator:
Numerator for basic and diluted net (loss) income per share — net (loss) income available to common stockholders
$
(17,435)
$
97,461
$
(17,021)
$
53,881
Denominator:
Denominator for basic net (loss) income per share — weighted-average shares
94,886
97,945
95,116
98,167
Effect of dilutive securities:
Stock-based awards
—
645
—
725
Denominator for diluted net (loss) income per share — adjusted weighted-average shares and assumed conversions
94,886
98,590
95,116
98,892
Basic net (loss) income per share
$
(0.18)
$
1.00
$
(0.18)
$
0.55
Diluted net (loss) income per share
$
(0.18)
$
0.99
$
(0.18)
$
0.54
An immaterial number of shares of outstanding stock-based awards were excluded from the computation of diluted net income (net loss) per share for the three and six months ended September 28, 2024 and September 30, 2023, because the effect of their inclusion would have been anti-dilutive.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions, and are not historical facts and typically are identified by terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "forecast," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations as of the date the statement is first made, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We caution you not to place undue reliance upon any such forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under U.S. federal securities laws. Our business is subject to numerous risks and uncertainties, including those relating to fluctuations in our operating results on a quarterly and annual basis; our substantial dependence on developing new products and achieving design wins; our dependence on several large customers for a substantial portion of our revenue; a loss of revenue if defense and aerospace contracts are canceled or delayed; our dependence on third parties; risks related to sales through distributors; risks associated with the operation of our manufacturing facilities; business disruptions; poor manufacturing yields; increased inventory risks and costs, due to timing of customers' forecasts; our inability to effectively manage or maintain relationships with chipset suppliers; our ability to continue to innovate in a very competitive industry; underutilization of manufacturing facilities; unfavorable changes in interest rates, pricing of certain precious metals, utility rates and foreign currency exchange rates; our acquisitions, divestitures and other strategic investments failing to achieve financial or strategic objectives; our ability to attract, retain and motivate key employees; warranty claims, product recalls and product liability; changes in our effective tax rate; enactment of international or domestic tax legislation, or changes in regulatory guidance; changes in the favorable tax status of certain of our subsidiaries; risks associated with social, environmental, health and safety regulations, and climate change; risks from international sales and operations; economic regulation in China; changes in government trade policies, including imposition of tariffs and export restrictions; we may not be able to generate sufficient cash to service all of our debt; restrictions imposed by the agreements governing our debt; our reliance on our intellectual property portfolio; claims of infringement of third-party intellectual property rights; security breaches, failed system upgrades or regular maintenance and other similar disruptions to our IT systems; theft, loss or misuse of personal data by or about our employees, customers or third parties; provisions in our governing documents and Delaware law may discourage takeovers and business combinations that our stockholders might consider to be in their best interests; and volatility in the price of our common stock. These and other risks and uncertainties, which are described in more detail under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 30, 2024, and Qorvo's subsequent reports and statements that we file with the SEC, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the consolidated results of operations and financial condition of Qorvo, Inc. and Subsidiaries (together, the "Company" or "Qorvo"). MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and accompanying Notes to Condensed Consolidated Financial Statements.
Qorvo® is a global leader in the development and commercialization of technologies and products for wireless, wired and power markets.
We design, develop, manufacture and market our products to U.S. and international original equipment manufacturers and original design manufacturers in three reportable operating segments: High Performance Analog ("HPA"), Connectivity and Sensors Group ("CSG") and Advanced Cellular Group ("ACG"). Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information regarding our reportable operating segments as of September 28, 2024.
HPA is a leading global supplier of radio frequency ("RF"), analog mixed signal and power management solutions. HPA leverages a diverse portfolio of differentiated process technologies and products to serve customers in automotive, consumer, defense and aerospace, infrastructure, industrial and enterprise, and mobile markets.
CSG is a leading global supplier of connectivity and sensor solutions. CSG leverages broad expertise spanning ultra-wideband, Matter®, Bluetooth® Low Energy, Zigbee®, Thread®, Wi-Fi®, cellular Internet of Things, and microelectromechanical force sensing touch sensors to serve customers in automotive, consumer, industrial and enterprise, and mobile markets.
ACG is a leading global supplier of advanced cellular RF solutions for smartphones and consumer devices including tablets and wearables. ACG leverages world-class technology and systems-level expertise to deliver a broad portfolio of high-performance discrete and highly integrated cellular products.
•Revenue for the second quarter of fiscal 2025 decreased 5.2% as compared to the second quarter of fiscal 2024, driven by a mix shift among smartphone customers to lower RF content 5G smartphones and a higher percentage of entry-level Android smartphones, which contain less RF content. Revenue increased for our Wi-Fi components and automotive connectivity products, reflecting new product releases and improved channel inventory levels compared to the prior year.
•Gross margin decreased to 42.6% for the second quarter of fiscal 2025 as compared to 44.4% for the second quarter of fiscal 2024, driven by higher average selling price erosion in Android mass market 5G smartphones and restructuring-related charges, while improved factory utilization positively impacted gross margin.
•Operating income was $9.7 million for the second quarter of fiscal 2025 as compared to $151.4 million for the second quarter of fiscal 2024, driven by a decrease in gross profit of $44.4 million for the reasons described above, a goodwill impairment charge of $96.5 million and other restructuring-related charges.
•Net loss per share was $0.18 for the second quarter of fiscal 2025 as compared to net income per diluted share of $0.99 for the second quarter of fiscal 2024.
•Net cash provided by operating activities was $127.8 million for the second quarter of fiscal 2025 as compared to $93.0 million for the second quarter of fiscal 2024.
•Capital expenditures were $33.0 million for the second quarter of fiscal 2025 as compared to $28.6 million for the second quarter of fiscal 2024.
•We recorded $129.5 million in restructuring-related charges in connection with an initiative to seek strategic alternatives for our silicon carbide power device business.
The following tables present a summary of our results of operations (in thousands, except percentages):
Three Months Ended
September 28, 2024
% of Revenue
September 30, 2023
% of Revenue
Increase (Decrease)
Percentage Change
Revenue
$
1,046,509
100.0
%
$
1,103,493
100.0
%
$
(56,984)
(5.2)
%
Cost of goods sold
601,203
57.4
613,803
55.6
(12,600)
(2.1)
Gross profit
445,306
42.6
489,690
44.4
(44,384)
(9.1)
Research and development
201,050
19.2
174,947
15.9
26,103
14.9
Selling, general and administrative
107,760
10.3
103,696
9.4
4,064
3.9
Other operating expense (1)
126,821
12.2
59,619
5.4
67,202
112.7
Operating income
$
9,675
0.9
%
$
151,428
13.7
%
$
(141,753)
(93.6)
%
Six Months Ended
September 28, 2024
% of Revenue
September 30, 2023
% of Revenue
Increase (Decrease)
Percentage Change
Revenue
$
1,933,180
100.0
%
$
1,754,657
100.0
%
$
178,523
10.2
%
Cost of goods sold
1,155,570
59.8
1,035,897
59.0
119,673
11.6
Gross profit
777,610
40.2
718,760
41.0
58,850
8.2
Research and development
388,652
20.1
338,037
19.3
50,615
15.0
Selling, general and administrative
222,683
11.5
209,119
11.9
13,564
6.5
Other operating expense (1)
151,994
7.9
68,312
3.9
83,682
122.5
Operating income
$
14,281
0.7
%
$
103,292
5.9
%
$
(89,011)
(86.2)
%
(1) Other operating expense includes goodwill impairment charges.
Three months ended September 28, 2024 compared to the three months ended September 30, 2023
The decrease in consolidated revenue resulted from decreases in revenue of $98.6 million and $1.6 million in ACG and HPA, respectively, and an increase in revenue of $43.2 million in CSG, which are further discussed in our Operating Segments results below.
The decrease in gross margin was driven by higher average selling price erosion in Android mass market 5G smartphones and restructuring-related charges, while improved factory utilization positively impacted gross margin.
R&D expense increased driven by a $16.8 million increase in employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense) and an $8.9 million increase in product development costs related to developing new process technologies and new product categories.
Selling, general and administrative expense increased driven by $3.0 million of higher employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense).
In the three months ended September 28, 2024, "Other operating expense" includes a goodwill impairment charge of $96.5 million, other restructuring-related charges of $18.9 million and $6.9 million of expenses associated with a multiyear project to upgrade the core systems we use to run our business. In the three months ended September 30, 2023, "Other operating expense" includes a goodwill impairment charge of $48.0 million, restructuring-related charges of $5.9 million and $3.1 million of expenses associated with a multiyear project to upgrade the core systems we use to run our business. Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the goodwill impairment charges and Note 11 of the Notes to Condensed Consolidated Financial Statements for additional information on restructuring-related charges.
Six months ended September 28, 2024 compared to the six months ended September 30, 2023
The increase in consolidated revenue resulted from increases in revenue of $131.5 million and $58.8 million in ACG and CSG, respectively, and a decrease in revenue of $11.8 million in HPA, which are further discussed in our Operating Segments results below.
The decrease in gross margin was driven by higher average selling price erosion in Android mass market 5G smartphones, while improved factory utilization positively impacted gross margin.
R&D expense increased driven by a $29.3 million increase in employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense) and a $19.1 million increase in product development costs related to developing new process technologies and new product categories.
Selling, general and administrative expense increased driven by a $7.5 million increase in employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense).
In the six months ended September 28, 2024, "Other operating expense" includes a goodwill impairment charge of $96.5 million, other restructuring-related charges of $38.6 million and $10.6 million of expenses associated with a multiyear project to upgrade the core systems we use to run our business. In the six months ended September 30, 2023, "Other operating expense" includes a goodwill impairment charge of $48.0 million, $9.7 million of restructuring-related charges and $5.2 million of expenses associated with a multiyear project to upgrade the core systems we use to run our business. Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for additional information regarding the goodwill impairment charges and Note 11 of the Notes to Condensed Consolidated Financial Statements for additional information on restructuring-related charges.
Operating Segments
High Performance Analog
Three Months Ended
(In thousands, except percentages)
September 28, 2024
September 30, 2023
Dollar Change
Percentage Change
Revenue
$
148,251
$
149,804
$
(1,553)
(1.0)
%
Operating income
13,066
25,446
(12,380)
(48.7)
Operating income as a % of revenue
8.8
%
17.0
%
Six Months Ended
(In thousands, except percentages)
September 28, 2024
September 30, 2023
Dollar Change
Percentage Change
Revenue
$
277,719
$
289,496
$
(11,777)
(4.1)
%
Operating income
17,947
49,410
(31,463)
(63.7)
Operating income as a % of revenue
6.5
%
17.1
%
Three months ended September 28, 2024 compared to the three months ended September 30, 2023
HPA revenue was relatively flat, with decreases in defense and aerospace driven by the timing of defense programs, partially offset by incremental revenue resulting from the acquisition of Anokiwave, Inc. ("Anokiwave").
The decrease in HPA operating income was due to an increase in operating expenses of $12.6 million, resulting from the acquisition of Anokiwave and higher employee-related costs (including salaries and benefits, as well as incentive-based cash compensation).
Six months ended September 28, 2024 compared to the six months ended September 30, 2023
The $11.8 million decrease in HPA revenue was attributable to revenue decreases of $18.7 million and $8.8 million in defense and aerospace, and infrastructure, respectively. These revenue decreases were driven by the timing of defense programs and infrastructure deployment cycles and were partially offset by a $14.9 million increase in power management revenue.
The decrease in HPA operating income was due to lower revenue and an increase in operating expenses of $20.5 million, resulting from the acquisition of Anokiwave and higher employee-related costs (including salaries and benefits, as well as incentive-based cash compensation).
Connectivity and Sensors Group
Three Months Ended
(In thousands, except percentages)
September 28, 2024
September 30, 2023
Dollar Change
Percentage Change
Revenue
$
146,822
$
103,622
$
43,200
41.7
%
Operating loss
(8,974)
(27,725)
18,751
67.6
Operating loss as a % of revenue
(6.1)
%
(26.8)
%
Six Months Ended
(In thousands, except percentages)
September 28, 2024
September 30, 2023
Dollar Change
Percentage Change
Revenue
$
261,675
$
202,885
$
58,790
29.0
%
Operating loss
(28,475)
(47,886)
19,411
40.5
Operating loss as a % of revenue
(10.9)
%
(23.6)
%
Three months ended September 28, 2024 compared to the three months ended September 30, 2023
The $43.2 million increase in CSG revenue was attributable to a $40.6 million increase in revenue for our Wi-Fi components and automotive connectivity products, reflecting new product releases and improved channel inventory levels compared to the prior year.
The decrease in CSG operating loss was due to the impact of higher revenue and improved factory utilization.
Six months ended September 28, 2024 compared to the six months ended September 30, 2023
The $58.8 million increase in CSG revenue was attributable to a $64.8 million increase in revenue for our Wi-Fi components, ultra-wideband solutions and automotive connectivity products, reflecting new product releases and improved channel inventory levels compared to the prior year. These revenue increases were partially offset by a $6.9 million decrease in revenue from our biotechnology business, which was sold in fiscal 2024.
The decrease in CSG operating loss was due to the impact of higher revenue and improved factory utilization, partially offset by an increase in operating expenses of $6.3 million. The increase in operating expenses was driven by R&D activities related to developing new process technologies and new product categories, including salaries and benefits, as well as incentive-based cash compensation. In addition, our biotechnology business, which was sold in fiscal 2024, generated an operating loss of $8.9 million for the six months ended September 30, 2023.
Three months ended September 28, 2024 compared to the three months ended September 30, 2023
The $98.6 million decrease in ACG revenue was driven by a mix shift among smartphone customers to lower RF content 5G smartphones and a higher percentage of entry-level Android smartphones, which contain less RF content.
The decrease in ACG operating income was driven by lower revenue and an increase in operating expenses of $16.2 million. The increase in operating expenses was driven by R&D activities related to developing new process technologies and new product categories, including salaries and benefits, as well as incentive-based cash compensation. In addition, higher average selling price erosion in Android mass market 5G smartphones offset improved factory utilization.
Six months ended September 28, 2024 compared to the six months ended September 30, 2023
The $131.5 million increase in ACG revenue was driven by increased revenue from our largest customers in the first quarter of fiscal 2025, offset by a mix shift during the second quarter of fiscal 2025 among smartphone customers to lower RF content 5G smartphones and a higher percentage of entry-level Android smartphones, which contain less RF content.
ACG operating income was relatively flat reflecting higher revenue and improved factory utilization, offset by an increase in operating expenses of $33.5 million and higher average selling price erosion in Android mass market 5G smartphones. The increase in operating expenses was driven by R&D activities related to developing new process technologies and new product categories, including salaries and benefits, as well as incentive-based cash compensation.
Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of reportable segment operating income (loss) to the consolidated operating income for the three and six months ended September 28, 2024 and September 30, 2023.
INTEREST, OTHER INCOME AND INCOME TAXES
Three Months Ended
Six Months Ended
(In thousands)
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Interest expense
$
(22,594)
$
(17,121)
$
(39,688)
$
(34,382)
Other income, net
15,422
5,211
27,187
18,927
Income tax expense
(19,938)
(42,057)
(18,801)
(33,956)
Interest expense
During the three and six months ended September 28, 2024 and September 30, 2023, we recorded interest expense primarily related to our 1.750% senior notes due 2024 (the "2024 Notes"), our 4.375% senior notes due 2029 (the "2029 Notes") and our 3.375% senior notes due 2031 (the "2031 Notes"). Refer to Note 7 of the Notes to Condensed Consolidated Financial
Statements for additional information. Interest expense for the three and six months ended September 28, 2024 also includes financing costs related to certain inventory (subject to repurchase) in connection with a supply agreement.
Other income, net
During the three months ended September 28, 2024, we recorded interest income of $13.8 million and net gains of $1.7 million from our share of the profit or loss from our limited partnership investments and gains or losses from other investments. During the six months ended September 28, 2024, we recorded interest income of $26.2 million and net gains of $0.6 million from our share of the profit or loss from our limited partnership investments and gains or losses from other investments.
During the three months ended September 30, 2023, we recorded interest income of $7.7 million and net losses of $2.5 million from our share of the profit or loss from our limited partnership investments and gains or losses from other investments. During the six months ended September 30, 2023, we recorded interest income of $15.9 million and net gains of $2.1 million from our share of the profit or loss from our limited partnership investments and gains or losses from other investments.
Income tax expense
During the three and six months ended September 28, 2024, we recorded income tax expense of $19.9 million and $18.8 million, respectively, comprised primarily of tax expense related to international operations generating pre-tax book income and the impact of Global Intangible Low-Taxed Income ("GILTI"), partially offset by tax benefits related to domestic and international operations generating pre-tax book losses, domestic tax credits and discrete tax items. The discrete tax benefit for the three months ended September 28, 2024 primarily related to the impacts of restructuring activities initiated in fiscal 2025 (refer to Note 11 of the Notes to Condensed Consolidated Financial Statements for additional information). For the six months ended September 28, 2024, this tax benefit was offset by the discrete tax effects of the sale of the Company's assembly and test operations in China (refer to Note 4 of the Notes to Condensed Consolidated Financial Statements for additional information).
During the three and six months ended September 30, 2023, we recorded income tax expense of $42.1 million and $34.0 million, respectively, comprised primarily of tax expense related to international operations generating pre-tax book income, the impact of GILTI and discrete tax items, partially offset by tax benefits related to domestic and international operations generating pre-tax book losses and domestic tax credits recorded during the period. The discrete tax expense for the three and six months ended September 30, 2023 primarily resulted from foreign currency gains recognized for tax purposes.
A valuation allowance remained against certain domestic and foreign net deferred tax assets as it is more likely than not that the related deferred tax assets will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated by operations is our primary source of liquidity. As of September 28, 2024, we had working capital of approximately $1,198.7 million, including $1,096.5 million in cash and cash equivalents, compared to working capital of approximately $1,215.9 million, including $1,029.3 million in cash and cash equivalents as of March 30, 2024.
Our $1,096.5 million of total cash and cash equivalents as of September 28, 2024, includes approximately $888.0 million held by our foreign subsidiaries, of which $691.1 million is held by Qorvo International Pte. Ltd. in Singapore. If the undistributed earnings of our foreign subsidiaries are needed in the U.S., we may be required to pay state income and/or foreign local withholding taxes to repatriate these earnings.
We may from time to time seek to retire or make additional optional payments on our outstanding debt obligations through repurchases or exchanges of our outstanding notes, which may be effected through privately negotiated transactions, market transactions, tender offers, redemptions or otherwise. Such tenders, exchanges, purchases, or other transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In the first quarter of fiscal 2025, we repurchased $27.3 million of the principal amount of our 2024 Notes, plus accrued and unpaid interest, on the open market. The remaining principal amount of the 2024 Notes of $412.5 million is included in "Current portion of long-term debt" in the Condensed Consolidated Balance Sheet as of September 28, 2024.
In August 2022, the Creating Helpful Incentives to Produce Semiconductors and Science Act (the "CHIPS Act") was signed into law. The CHIPS Act provides for a 25% refundable tax credit on certain investments in domestic semiconductor
manufacturing. The tax credit is provided for qualifying property which is placed in service after December 31, 2022, and for which construction begins before January 1, 2027. We recognized an anticipated tax credit during the three months ended September 28, 2024 within other non-current assets and will receive the cash benefit in future periods when applied against our tax obligations.
Stock Repurchases
During the six months ended September 28, 2024, we repurchased approximately 2.0 million shares of our common stock for approximately $207.5 million (including transaction costs and excise tax) under our share repurchase program. As of September 28, 2024, approximately $1,098.7 million remains authorized for repurchases under the program.
Cash Flows from Operating Activities
Net cash provided by operating activities was $208.9 million and $137.9 million for the six months ended September 28, 2024 and September 30, 2023, respectively. This increase in cash provided by operating activities was driven by changes in working capital, partially offset by decreased profitability.
Cash Flows from Investing Activities
Net cash used in investing activities was $52.0 million and $24.2 million for the six months ended September 28, 2024 and September 30, 2023, respectively. During the six months ended September 28, 2024, the Company purchased $30.0 million of short-term investments and received proceeds of $55.6 million from the divestiture of our assembly and test operations in China. During the six months ended September 30, 2023, the Company received proceeds of $47.3 million, primarily from the sale of our manufacturing facility in Farmers Branch, Texas.
Cash Flows from Financing Activities
Net cash used in financing activities was $109.3 million and $214.3 million for the six months ended September 28, 2024 and September 30, 2023, respectively. During the six months ended September 28, 2024, we received net proceeds of $142.8 million from Luxshare Precision Industry Co., Ltd. for inventory (subject to repurchase) in connection with our supply agreement (refer to Note 4 of the Notes to Condensed Consolidated Financial Statements for additional information) and we repurchased $27.3 million of the principal amount of our 2024 Notes for $26.7 million.
COMMITMENTS AND CONTINGENCIES
Credit AgreementOn April 23, 2024, we entered into a five-year unsecured senior credit facility pursuant to a credit agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and a syndicate of lenders (the “Credit Agreement”), which replaced our previous credit agreement. The Credit Agreement provides for a $325.0 million senior revolving line of credit (the “Revolving Facility”). We may request at any time that the Revolving Facility be increased by up to $325.0 million, subject to securing additional funding commitments from existing or new lenders. The Revolving Facility is available to finance working capital, capital expenditures and other lawful corporate purposes.
During the six months ended September 28, 2024, there were no borrowings under the Revolving Facility.
The Credit Agreement contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds and to avoid an event of default. As of September 28, 2024, we were in compliance with these covenants.
2024 NotesOn December 14, 2021, we issued $500.0 million aggregate principal amount of our 2024 Notes. Interest on the 2024 Notes is payable on June 15 and December 15 of each year at a rate of 1.750% per annum. The remaining principal amount of the 2024 Notes of $412.5 million is included in "Current portion of long-term debt" in the Condensed Consolidated Balance Sheet as of September 28, 2024 and will mature on December 15, 2024, unless earlier redeemed in accordance with their terms. The 2024 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by certain of the Company's U.S. subsidiaries (the "Guarantors").
2029 Notes On September 30, 2019, we issued $350.0 million aggregate principal amount of our 2029 Notes. On December 20, 2019, and June 11, 2020, we issued an additional $200.0 million and $300.0 million, respectively, aggregate principal amount of our 2029 Notes. Interest on the 2029 Notes is payable on April 15 and October 15 of each year at a rate of 4.375%
per annum. The 2029 Notes will mature on October 15, 2029, unless earlier redeemed in accordance with their terms. The 2029 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by the Guarantors.
2031 NotesOn September 29, 2020, we issued $700.0 million aggregate principal amount of our 2031 Notes. Interest on the 2031 Notes is payable on April 1 and October 1 of each year at a rate of 3.375% per annum. The 2031 Notes will mature on April 1, 2031, unless earlier redeemed in accordance with their terms. The 2031 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by the Guarantors.
For additional information regarding our debt, refer to Note 7 of the Notes to Condensed Consolidated Financial Statements.
Capital Commitments As of September 28, 2024, we had capital commitments of approximately $116.3 million primarily for expanding capability to develop and support new products, equipment and facility upgrades and cost savings initiatives.
Future Sources of Funding Our future capital requirements may differ materially from those currently anticipated and will depend on many factors, including market acceptance of and demand for our products, acquisition opportunities, technological advances and our relationships with suppliers and customers. Based on current and projected levels of cash flows from operations, coupled with our existing cash and cash equivalents and availability from the Revolving Facility, we believe that we have sufficient liquidity to meet both our short-term and long-term cash requirements. However, if there is a significant decrease in demand for our products, or if investments in our business outpace revenue growth, operating cash flows may be insufficient to meet our needs. If existing resources and cash from operations are not sufficient to meet our future requirements or if we perceive conditions to be favorable, we may seek additional debt or equity financing. Additional debt or equity financing could be dilutive to holders of our common stock. Further, we cannot be sure that additional debt or equity financing, if required, will be available on favorable terms, if at all.
LegalWe are involved in various legal proceedings and claims that have arisen in the ordinary course of business that have not been fully adjudicated. We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate developments in our legal matters that could affect the amount of the previously accrued liability and record adjustments as appropriate. Although it is not possible to predict with certainty the outcome of the unresolved legal matters, it is the opinion of management that these matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position or results of operations. We believe the aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal matters is not material.
Taxes We are subject to income and other taxes in the United States and in numerous foreign jurisdictions. Our domestic and foreign tax liabilities are subject to the allocation of revenue and expenses in different jurisdictions. Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate. We are subject to audits by tax authorities. While we endeavor to comply with all applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law than we do or that we will comply in all respects with applicable tax laws, which could result in additional taxes. There can be no assurance that the outcomes from tax audits will not have an adverse effect on our results of operations in the period during which the review is conducted.
SUPPLEMENTAL PARENT AND GUARANTOR FINANCIAL INFORMATION
In accordance with the indentures governing the 2024 Notes, the 2029 Notes and the 2031 Notes (together, the "Notes"), our obligations under the Notes are fully and unconditionally guaranteed on a joint and several unsecured basis by the Guarantors, which are listed on Exhibit 22 to this Quarterly Report on Form 10-Q. Each Guarantor is 100% owned, directly or indirectly, by Qorvo, Inc. ("Parent"). A Guarantor can be released in certain customary circumstances. Our other U.S. subsidiaries and our non-U.S. subsidiaries do not guarantee the Notes (such subsidiaries are referred to as the "Non-Guarantors").
The following presents summarized financial information for the Parent and the Guarantors on a combined basis as of and for the periods indicated, after eliminating (i) intercompany transactions and balances among the Parent and the Guarantors, and (ii) equity earnings from, and investments in, any Non-Guarantor. The summarized financial information may not necessarily be indicative of the financial position and results of operations had the combined Parent and Guarantors operated independently from the Non-Guarantors.
(1) Includes net amounts due from Non-Guarantor subsidiaries of $332.3 million and $129.8 million as of September 28, 2024 and March 30, 2024, respectively.
(2) Includes net amounts due to Non-Guarantor subsidiaries of $651.9 million and $597.3 million as of September 28, 2024 and March 30, 2024, respectively.
Summarized Statement of Operations
Six Months Ended
(In thousands)
September 28, 2024
Revenue
$
571,250
Gross profit
118,405
Net loss
(228,665)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes to our market risk exposures during the second quarter of fiscal 2025. For a discussion of our exposure to market risk, refer to Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in Qorvo's Annual Report on Form 10-K for the fiscal year ended March 30, 2024.
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, the Company’s management, with the participation of the Company’s Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective, as of such date, to enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in its Exchange Act reports, and to accumulate and communicate such information to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 28, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In addition to the other information set forth in this report and in our other reports and statements that we file with the SEC, careful consideration should be given to the factors discussed in Part I, Item 1A., "Risk Factors" in Qorvo's Annual Report on Form 10-K for the fiscal year ended March 30, 2024, which could materially affect our business, financial condition or future results. The risks described in Qorvo's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(c) Issuer Purchases of Equity Securities
Period
Total number of shares purchased (in thousands)
Average price paid per share
Total number of shares purchased as part of publicly announced plans or programs (in thousands)
Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
June 30, 2024 to July 27, 2024
125
$
121.83
125
$
1,164.8
July 28, 2024 to August 24, 2024
434
108.44
434
1,117.7
August 25, 2024 to September 28, 2024
179
106.51
179
1,098.7
Total
738
$
110.24
738
On November 2, 2022, we announced that our Board of Directors authorized a share repurchase program to repurchase up to $2.0 billion of our outstanding common stock, which included the remaining authorized dollar amount under a prior program terminated concurrent with the new authorization. Under this program, share repurchases are made in accordance with applicable securities laws on the open market or in privately negotiated transactions. The extent to which we repurchase our shares, the number of shares and the timing of any repurchases depends on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The program does not require us to repurchase a minimum number of shares, does not have a fixed term, and may be modified, suspended, or terminated at any time without prior notice.
As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. The excise tax is recognized as part of the cost basis of shares acquired in the Condensed Consolidated Statements of Stockholders' Equity and is excluded from amounts presented above.
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
The following table describes actions by our directors or Section 16 officers with respect to plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the second quarter of fiscal 2025. None of our directors or Section 16 officers 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 second quarter of fiscal 2025.
Name and Title
Action
Date
Expiration of Plan
Number of Shares to be Sold (1)
Frank P. StewartSenior Vice President and President of Advanced Cellular
Adoption
8/5/2024
10/2/2025
2,309
Philip J. ChesleySenior Vice President and President of High Performance Analog
Adoption
8/5/2024
8/29/2025
24,357
(1) Represents the gross number of shares subject to the Rule 10b5-1 plan, excluding the potential effect of shares withheld for taxes. Amounts may include shares to be earned as performance-based restricted stock unit awards ("PBRSUs") and are presented at their target amounts. The actual number of PBRSUs earned following the end of the applicable performance period, if any, will depend on the relative attainment of the performance metrics.
The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 28, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income; (iv) the Condensed Consolidated Statements of Stockholders' Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements
104
The cover page from our Quarterly Report on Form 10-Q for the quarter ended September 28, 2024, formatted in iXBRL
Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 001-36801.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
