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美國
證券和交易委員會
華盛頓特區 20549 
____________________________________
表格 10-Q
____________________________________
（標記一）
☒根據1934年證券交易法第13條或第15(d)條規定的季度報告
截至季度結束日期的財務報告2024年10月27日
or
☐根據1934年證券交易法第13或第15(d)條款的過渡報告
對於從             到             的過渡期
委員會文件號 001-06395
____________________________________ 
先科電子CORATION
(根據其章程規定的註冊人準確名稱)
 ____________________________________
特拉華州 95-2119684
（國家或其他管轄區的
公司成立或組織）		 （IRS僱主
唯一識別號碼）

200 Flynn Road, 卡馬里約, 加利福尼亞, 93012-8790
(總部地址, 郵政編碼)

報告人電話號碼，包括區號：（805) 498-2111
每個交易所的名稱
每個類別的標題交易標的 在其上註冊的交易所的名稱
每股普通股的面值爲$0.01SMTC 納斯達克全球精選市場
____________________________________
 
請勾選以下內容。申報人是否（1）在過去12個月內（或申報人需要報告這些報告的時間較短的期間內）已提交證券交易法規定的第13或15（d）條要求提交的所有報告；以及（2）過去90天內已被要求提交此類報告。    是   x不是¨
請勾選以下內容。申報人是否已在過去12個月內（或申報人需要提交此類文件的時間較短的期間內）逐個以電子方式提交了根據規則405提交的互動數據文件。這章的交易中規定。    是   x不是¨
勾選表示註冊人是大型規模加速報告人、加速報告人、非加速報告人、小型報告公司或新興成長公司。請參閱證交所法規120億.2中「大型規模加速報告人」、「加速報告人」、「小型報告公司」和「新興成長公司」的定義。
大型加速報告人 x  加速文件申報人  
☐
非加速文件提交人 
☐
  更小的報告公司  
☐
新興成長公司
☐
如果是新興成長型企業，請勾選複選標記，表明註冊者已選擇不使用延長過渡期來符合根據證券交易法第13(a)條規定提供的任何新財務會計準則。 ☐
請勾選以下內容。申報人是否是外殼公司（根據證券交易法規則12b-2定義）。    是  ☐不是x 
截至2024年11月29日，已發行普通股數量，面值每股0.01美元： 75,682,863




先科電子公司
10-Q表格索引
截至2024年10月27日的本季度
 
2



除非上下文另有要求，本季度10-Q表格報告中使用的術語「先科電子」、「公司」、「我們」、「我們」和「我們的」指的是先科電子公司及其合併的子公司。本季度10-Q表格報告中可能包含對公司的商標和其他實體的商標的引用。出於方便起見，本季度10-Q表格報告中提到的商標和商號，包括徽標、藝術作品及其他視覺展示，可能未顯示 ® 或其他符號，但這種引用並不意味着我們不會在適用法律下充分行使我們對這些商標和商號的權利，或者適用許可方對這些商標和商號的權利。我們並不想通過使用或顯示其他公司的商號或商標來暗示與任何其他公司的關係，或暗示任何其他公司對我們的認可或贊助。 是有資格參加FORTITUDE-OLE 我不想通過使用或顯示其他公司的商號或商標來暗示與任何其他公司的關係，或暗示任何其他公司對我們的認可或贊助。
關於前瞻性和謹慎聲明的特別說明
本第10-Q表格季度報告包含根據1995年修訂的《私人證券訴訟改革法案》的"安全港"規定，基於我們對自身業務、行業、財務狀況、表現、業績和流動性的當前預期、估計和投影的"前瞻性陳述"。前瞻性陳述是指與歷史信息或當前狀況的陳述不同，涉及未來財務表現、未來運營表現、特定事項對未來收益的預期影響，以及我們的計劃、目標和期望之類的事項。包含"可能"、"相信"、"期待"、"預期"、"打算"、"計劃"、"項目"、"估計"、"應該"、"可能的目的"、"投影"或"業務展望"等詞語的陳述構成前瞻性陳述。前瞻性陳述涉及已知和未知的風險和不確定性，可能導致實際結果和事件與預期不符。可能導致實際結果與前瞻性陳述中的結果不符的潛在因素包括但不限於：公司遵守或追求由管理債務的協議約束能力的業務策略以解決; 公司解決內部財務報告控制上的重大缺陷、發現其他重大缺陷以及無法實現和維持有效的披露控制和程序和內部控制上的波動；公司在週期性經濟不確定性的情況下進行預測並實現預期的淨銷售和盈利估計的風險；未能實現我們收購Sierra Wireless, Inc.的所有或任何預期好處的風險或預期的好處可能沒有完全實現或實現時間超出預期；圍繞供應鏈約束及相關干擾的影響和持續時間的不確定性；影響公司貿易和關稅或貿易戰發生的出口限制和法律；全球經濟和政治干擾，包括通貨膨脹和當前的地緣政治衝突的結果；與美國緊縮信貸相關的信貸條件收緊；市場的競爭性變化，包括但不限於適用產品或技術的增長或採納速度；商業週期的衰退；公司對有限數量供應商和分包商提供元件和材料的依賴性；預期的或預期的最終用戶市場的變化；未來對公共衛生危機的回應和影響；以及公司的年度報告中設定的其他風險因素"風險因素" 在提交給美國證券交易委員會（"SEC"）的2024年1月28日截止的財年的第10-k表格中於2024年3月28日提交，此類風險因素可能會被修改、補充或隨着我們不時提交給SEC的其他報告所取代。考慮到現有前瞻性信息中固有的重大風險和不確定性，可能導致實際表現和結果與預期有所不同，任何此類前瞻性信息均不應被視爲公司對未來表現或結果的陳述或保證，或其目標或計劃將獲得的或將獲得的保障，或公司的任何運營預期或財務預測將被實現。 公佈的結果不應被視爲未來績效的標誌。我們警告投資者不要過度依賴此處包含的任何前瞻性信息，這些信息僅反映了管理在此日期的分析。除法律要求外，公司不承擔公開發布對可能更新或修改的任何前瞻性陳述結果的責任，以反映此後的新信息，事件或情況的發生，或他方。
In addition to regarding forward-looking statements with caution, you should consider that the preparation of the consolidated financial statements requires us to draw conclusions and make interpretations, judgments, assumptions and estimates with respect to certain factual, legal, and accounting matters. Our consolidated financial statements might have been materially impacted if we had reached different conclusions or made different interpretations, judgments, assumptions or estimates.
3



PART I - FINANCIAL INFORMATION
 
ITEM 1.Financial Statements

SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 Three Months EndedNine Months Ended
 October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net sales$236,825 $200,899 $658,285 $675,810 
Cost of sales113,576 97,925 325,420 347,734 
Amortization of acquired technology2,281 10,008 6,841 31,436 
Total cost of sales115,857 107,933 332,261 379,170 
Gross profit120,968 92,966 326,024 296,640 
Operating expenses, net:
Product development and engineering42,563 46,911 124,251 144,945 
Selling, general and administrative59,777 47,663 167,835 165,022 
Intangible amortization148 4,853 737 14,606 
Restructuring695 3,646 4,505 14,608 
Goodwill impairment— 2,266 — 281,821 
Total operating expenses, net103,183 105,339 297,328 621,002 
Operating income (loss)17,785 (12,373)28,696 (324,362)
Interest expense(20,807)(28,305)(72,614)(72,986)
Interest income527 574 1,502 2,317 
Loss on extinguishment of debt— — (144,688)— 
Non-operating (expense) income, net(1,072)3,542 (1,687)1,503 
Investment impairments and credit loss reserves, net— (1,990)(1,109)(2,250)
Loss before taxes and equity method (loss) income(3,567)(38,552)(189,900)(395,778)
Provision (benefit) for income taxes4,007 (311)11,178 53,864 
Net loss before equity method (loss) income(7,574)(38,241)(201,078)(449,642)
Equity method (loss) income(12)(11)38 (30)
Net loss(7,586)(38,252)(201,040)(449,672)
Net loss attributable to noncontrolling interest— (2)— (5)
Net loss attributable to common stockholders$(7,586)$(38,250)$(201,040)$(449,667)
Loss per share:
Basic$(0.10)$(0.60)$(2.94)$(7.02)
Diluted$(0.10)$(0.60)$(2.94)$(7.02)
Weighted-average number of shares used in computing loss per share:
Basic75,319 64,216 68,385 64,048 
Diluted75,319 64,216 68,385 64,048 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
4



SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

  Three Months EndedNine Months Ended
 October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net loss$(7,586)$(38,252)$(201,040)$(449,672)
Other comprehensive (loss) income, net:
Unrealized gain (loss) on foreign currency cash flow hedges, net32 (65)(142)(92)
Reclassifications of realized gain (loss) on foreign currency cash flow hedges, net, to net loss7 (165)(2)(441)
Unrealized (loss) gain on interest rate cash flow hedges, net(143)7,713 4,498 21,900 
Reclassifications of realized gain on interest rate cash flow hedges, net, to net loss(2,205)(2,163)(6,598)(5,755)
Cumulative translation adjustment(1,144)(5,664)(912)(13,362)
Change in defined benefit plans, net(18)(51)(52)(153)
Other comprehensive (loss) income, net(3,471)(395)(3,208)2,097 
Comprehensive loss(11,057)(38,647)(204,248)(447,575)
Comprehensive loss attributable to noncontrolling interest— (2)— (5)
Comprehensive loss attributable to common stockholders$(11,057)$(38,645)$(204,248)$(447,570)
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.









5



SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
October 27, 2024January 28, 2024
Assets
Current assets:
Cash and cash equivalents$136,504 $128,585 
Accounts receivable, less allowances of $5,065 and $4,161, respectively
142,456 134,322 
Inventories163,451 144,992 
Prepaid taxes7,803 11,969 
Other current assets107,572 114,329 
Total current assets557,786 534,197 
Non-current assets:
Property, plant and equipment, net of accumulated depreciation of $307,679 and $283,725, respectively
133,164 153,618 
Deferred tax assets18,711 18,014 
Goodwill541,283 541,227 
Other intangible assets, net36,813 35,566 
Other assets91,247 91,113 
TOTAL ASSETS$1,379,004 $1,373,735 
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable$63,869 $45,051 
Accrued liabilities171,622 172,105 
Total current liabilities235,491 217,156 
Non-current liabilities:
Deferred tax liabilities— 829 
Long-term debt1,190,304 1,371,039 
Other long-term liabilities92,893 91,961 
Commitments and contingencies (Note 12)
Stockholders' equity (deficit) :
Common stock, $0.01 par value, 250,000,000 shares authorized, 88,514,575 issued and 75,401,839 outstanding and 78,136,144 issued and 64,415,861 outstanding, respectively
885 785 
Treasury stock, at cost, 13,112,736 shares and 13,720,283 shares, respectively
(536,291)(556,888)
Additional paid-in capital836,753 485,452 
Retained deficit(434,830)(233,790)
Accumulated other comprehensive loss, net(6,201)(2,993)
Total stockholders' deficit(139,684)(307,434)
Noncontrolling interest— 184 
Total deficit(139,684)(307,250)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)$1,379,004 $1,373,735 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
6



SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
(unaudited)
Three Months Ended October 27, 2024
Common StockAccumulated Other Comprehensive Income (Loss), Net
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained Earnings (Deficit)Stockholders' Equity (Deficit)Noncontrolling InterestTotal Equity (Deficit)
Balance at July 28, 202475,118,173 $885 $(548,619)$836,271 $(427,244)$(2,730)$(141,437)$— $(141,437)
Net loss— — — — (7,586)— (7,586)— (7,586)
Other comprehensive loss— — — — — (3,471)(3,471)— (3,471)
Share-based compensation— — — 15,317 — — 15,317 — 15,317 
Treasury stock reissued to settle share-based awards283,666 — 12,328 (14,835)— — (2,507)— (2,507)
Balance at October 27, 202475,401,839 $885 $(536,291)$836,753 $(434,830)$(6,201)$(139,684)$— $(139,684)
Nine Months Ended October 27, 2024
Common StockAccumulated Other Comprehensive Income (Loss), Net
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained Earnings (Deficit)Stockholders' Equity (Deficit)Noncontrolling InterestTotal Equity (Deficit)
Balance at January 28, 202464,415,861 $785 $(556,888)$485,452 $(233,790)$(2,993)$(307,434)$184 $(307,250)
Net loss— — — — (201,040)— (201,040)— (201,040)
Other comprehensive loss— — — — — (3,208)(3,208)— (3,208)
Distribution to outside interest upon liquidation of a consolidated subsidiary— — — — — — — (184)(184)
Issuance of common stock upon exchange of 2028 Notes (as defined in Note 9)
10,378,431 100 — 333,155 — — 333,255 — 333,255 
Share-based compensation— — — 44,792 — — 44,792 — 44,792 
Treasury stock reissued to settle share-based awards607,547 — 20,597 (26,646)— — (6,049)— (6,049)
Balance at October 27, 202475,401,839 $885 $(536,291)$836,753 $(434,830)$(6,201)$(139,684)$— $(139,684)
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

7



SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
(in thousands, except share data)
(unaudited)
Three Months Ended October 29, 2023
Common StockAccumulated Other Comprehensive Income, Net
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained Earnings (Deficit)Stockholders' Equity (Deficit)Noncontrolling InterestTotal Equity (Deficit)
Balance at July 30, 202364,030,212 $785 $(572,990)$486,365 $446,823 $5,852 $366,835 $180 $367,015 
Net loss— — — — (38,250)— (38,250)(2)(38,252)
Other comprehensive loss— — — — — (395)(395)— (395)
Share-based compensation— — — 9,132 — — 9,132 — 9,132 
Treasury stock reissued to settle share-based awards254,548 — 12,096 (15,157)— — (3,061)— (3,061)
Balance at October 29, 202364,284,760 $785 $(560,894)$480,340 $408,573 $5,457 $334,261 $178 $334,439 
Nine Months Ended October 29, 2023
Common StockAccumulated Other Comprehensive Income, Net
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained Earnings (Deficit)Stockholders' Equity (Deficit)Noncontrolling InterestTotal Equity (Deficit)
Balance at January 29, 202363,870,581 $785 $(577,907)$471,374 $858,240 $3,360 $755,852 $183 $756,035 
Net loss— — — — (449,667)— (449,667)(5)(449,672)
Other comprehensive income— — — — — 2,097 2,097 — 2,097 
Share-based compensation— — — 31,455 — — 31,455 — 31,455 
Treasury stock reissued to settle share-based awards414,179 — 17,013 (22,489)— — (5,476)— (5,476)
Balance at October 29, 202364,284,760 $785 $(560,894)$480,340 $408,573 $5,457 $334,261 $178 $334,439 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
8



SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
 October 27, 2024October 29, 2023
Cash flows from operating activities:
Net loss$(201,040)$(449,672)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization33,211 69,104 
Amortization of right-of-use assets4,542 4,954 
Investment impairments and credit loss reserves, net1,109 2,250 
Goodwill impairment— 281,821 
Accretion of deferred financing costs6,814 4,940 
Write-off of deferred financing costs5,497 4,446 
Loss on extinguishment of debt143,467 — 
Deferred income taxes(944)56,355 
Share-based compensation50,777 28,341 
Loss (gain) on disposition of business operations and assets124 (259)
Equity method (income) loss(38)30 
Gain from sale of investments(277)— 
Corporate-owned life insurance, net2,722 2,797 
Amortization of inventory step-up— 3,314 
Changes in assets and liabilities:
Accounts receivable, net(8,142)5,016 
Inventories(18,446)41,631 
Other assets597 (13,203)
Accounts payable18,911 (33,768)
Accrued liabilities(8,813)(109,127)
Other liabilities(5,580)(6,809)
Net cash provided by (used in) operating activities24,491 (107,839)
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment73 408 
Purchase of property, plant and equipment(5,228)(27,473)
Proceeds from sale of investments2,650 — 
Purchase of investments(434)(930)
Purchase of intangibles(5,948)(771)
Proceeds from corporate-owned life insurance4,802 2,500 
Net cash used in investing activities(4,085)(26,266)
Cash flows from financing activities:
Proceeds from revolving line of credit— 70,000 
Payments of revolving line of credit(5,000)— 
Payments of term loans— (272,375)
Proceeds from convertible senior notes— 250,000 
Deferred financing costs(824)(17,812)
Payments for employee share-based compensation payroll taxes(7,297)(5,476)
Proceeds from exercise of stock options1,248 — 
Distributions to noncontrolling interest(184)— 
Net cash (used in) provided by financing activities(12,057)24,337 
Effect of foreign exchange rate changes on cash and cash equivalents(430)(1,922)
Net increase (decrease) in cash and cash equivalents7,919 (111,690)
Cash and cash equivalents at beginning of period128,585 235,510 
Cash and cash equivalents at end of period$136,504 $123,820 



9




SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
(unaudited)
Nine Months Ended
October 27, 2024October 29, 2023
Supplemental disclosure of cash flow information:
Interest paid$60,563 $63,525 
Income taxes paid$6,881 $19,655 
Non-cash investing and financing activities:
Accounts payable related to capital expenditures$511 $281 
Accrued deferred financing costs$— $8,418 
Accrued purchases of intangibles$2,950 $— 
Debt extinguished in exchange for common stock$188,050 $— 
Conversion of notes into equity$— $1,271 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
10



SEMTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Organization and Basis of Presentation
Nature of Business
Semtech Corporation (together with its consolidated subsidiaries, the "Company" or "Semtech") is a high-performance semiconductor, Internet of Things ("IoT") systems and cloud connectivity service provider. The end customers for the Company's silicon solutions are primarily original equipment manufacturers that produce and sell technology solutions. The Company's IoT module, router, gateway (together "IoT Hardware") and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices.
The Company designs, develops, manufactures and markets a wide range of products for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets.
Basis of Presentation
The Company reports results on the basis of 52 and 53-week periods and ends its fiscal year on the last Sunday in January. The other quarters generally end on the last Sunday of April, July and October. All quarters consist of 13 weeks except for one 14-week period in the fourth quarter of 53-week years. The third quarter of fiscal years 2025 and 2024 each consisted of 13 weeks.
Principles of Consolidation
The accompanying interim unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and on the same basis as the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2024 ("Annual Report"). The Company's interim unaudited condensed consolidated statements of operations are referred to herein as the "Statements of Operations," the Company's interim unaudited condensed consolidated balance sheets are referred to herein as the "Balance Sheets," and the Company's interim unaudited condensed consolidated statements of cash flows are referred to herein as the "Statements of Cash Flows." In the opinion of the Company, these interim unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the financial position and results of operations of the Company for the interim periods presented. All intercompany balances have been eliminated. Because the interim unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report. The results reported in these interim unaudited condensed consolidated financial statements should not be regarded as indicative of results that may be expected for any subsequent period or for the entire year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Liquidity
The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements.
As of October 27, 2024, the Company was in compliance with the financial covenants in the Credit Agreement (as defined in Note 9, Long-Term Debt).
Based on the Company's current amount of debt outstanding and financial projections, management believes the Company will maintain compliance with its financial covenants in the Credit Agreement (as defined in Note 9, Long-Term Debt), and that the Company's existing cash, projected operating cash flows and available borrowing capacity under its Revolving Credit Facility (as defined in Note 9, Long-Term Debt) are adequate to meet its operating needs, liabilities and commitments over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements.
11



Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to require public business entities to disclose sufficient information to enable users of financial statements to understand the nature and magnitude of factors contributing to the difference between the effective tax rate and the statutory tax rate. The amendments in this update provide that a business entity disclose (1) a tabular income tax rate reconciliation, using both percentages and amounts, (2) separate disclosure of any individual reconciling items that are equal to or greater than 5% of the amount computed by multiplying the income (loss) from continuing operations before income taxes by the applicable statutory income tax rate, and disaggregation of certain items that are significant and (3) amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions, including separate disclosure of any individual jurisdictions representing greater than 5% of total income taxes paid. The amendments are effective for the Company for fiscal years beginning after December 15, 2024. Early adoption is permitted and entities may apply the amendments prospectively or may elect retrospective application. The Company is currently evaluating the impact of this guidance on its disclosures within the consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify the circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments require retrospective application to all periods presented. The amendments are effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its disclosures within the consolidated financial statements.


12



Note 2: Acquisition
Acquisition of Sierra Wireless, Inc.
On January 12, 2023 (the "Acquisition Date"), the Company completed the acquisition of all of the issued and outstanding common shares of Sierra Wireless, Inc. ("Sierra Wireless") in an all-cash transaction representing a total purchase consideration of approximately $1.3 billion (the "Sierra Wireless Acquisition"). The results of operations of Sierra Wireless have been included in the Statements of Operations since the Acquisition Date.
The transaction was accounted for as a business combination in accordance with Accounting Standards Codification ("ASC") 805, "Business Combinations." The purchase price allocation for the Sierra Wireless Acquisition was completed during the third quarter of fiscal year 2024. The fair values of acquired intangibles were determined based on estimates and assumptions that were deemed reasonable by the Company. In the fourth quarter of fiscal year 2023, a preliminary goodwill balance of $931.4 million was recognized for the excess of the consideration transferred over the net assets acquired and represented the expected revenue and cost synergies of the combined company and assembled workforce. During the first three quarters of fiscal year 2024, the Company finalized measurement period adjustments related to identifiable intangible assets, inventories, property, plant, and equipment, income and non-income based taxes, legal matters, and other assets and liabilities, which have been recorded to reflect facts and circumstances that existed as of the Acquisition Date. These adjustments increased the goodwill balance by $23.9 million to $955.3 million. In fiscal year 2024, the Company also finalized its determination of the reporting units related to the Sierra Wireless Acquisition and completed an allocation of the goodwill balance to these reporting units.
The following table presents the fair values of assets and liabilities assumed on the Acquisition Date based on valuations and management's estimates:
(in thousands)Amounts recognized as of Acquisition Date (as initially reported)Measurement period adjustmentAmounts recognized as of Acquisition Date (as adjusted)
Total purchase price consideration, net of cash acquired $68,794
$1,240,757 $1,240,757 
Assets:
Accounts receivable, net92,633 — 92,633 
Inventories96,339 (1,899)94,440 
Other current assets72,724 5,003 77,727 
Property, plant and equipment29,086 (2,628)26,458 
Intangible assets214,780 — 214,780 
Prepaid taxes3,001 — 3,001 
Deferred tax assets22,595 285 22,880 
Other assets14,878 — 14,878 
Liabilities:
Accounts payable50,413 210 50,623 
Accrued liabilities148,654 26,232 174,886 
Deferred tax liabilities4,824 350 5,174 
Other long-term liabilities32,785 (2,106)30,679 
Net assets acquired, excluding goodwill$309,360 $(23,925)$285,435 
Goodwill$931,397 $23,925 $955,322 

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Note 3: Loss per Share
The computation of basic and diluted loss per share was as follows:
 Three Months EndedNine Months Ended
(in thousands, except per share data)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net loss attributable to common stockholders$(7,586)$(38,250)$(201,040)$(449,667)
Weighted-average shares outstanding–basic75,319 64,216 68,385 64,048 
Weighted-average shares outstanding–diluted75,319 64,216 68,385 64,048 
Loss per share:
Basic$(0.10)$(0.60)$(2.94)$(7.02)
Diluted$(0.10)$(0.60)$(2.94)$(7.02)
Anti-dilutive shares not included in the above calculations:
Share-based compensation431 2,034 1,023 2,179 
Warrants8,573 8,573 8,573 8,573 
Total anti-dilutive shares9,004 10,607 9,596 10,752 
Basic earnings or loss per share is computed by dividing income or loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period. Diluted earnings or loss per share incorporates the incremental shares issuable, calculated using the treasury stock method, upon the assumed exercise of non-qualified stock options and the vesting of restricted stock units, market-condition restricted stock units and financial metric-based restricted stock units if certain conditions have been met, but excludes such incremental shares that would have an anti-dilutive effect. Due to the Company's net loss for the three and nine months ended October 27, 2024, all shares underlying stock options and restricted stock units are considered anti-dilutive.
Any dilutive effect of the Warrants (as defined in Note 9, Long-Term Debt) is calculated using the treasury-stock method. During the three and nine months ended October 27, 2024, the Warrants were excluded from diluted shares outstanding because the exercise price exceeded the average market price of the Company's common stock for the reporting periods and due to net loss in such reporting periods.
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Note 4: Share-Based Compensation
Financial Statement Effects and Presentation
Pre-tax share-based compensation was included in the Statements of Operations as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Cost of sales$809 $507 $2,205 $1,395 
Product development and engineering3,823 2,972 10,426 9,976 
Selling, general and administrative13,773 3,059 38,146 16,970 
Total share-based compensation$18,405 $6,538 $50,777 $28,341 
Restricted Stock Units, Employees
The Company grants restricted stock units to certain employees of which a portion are expected to be settled with shares of the Company's common stock and a portion are expected to be settled in cash. The restricted stock units that are to be settled with shares are accounted for as equity. The grant date for these awards is equal to the measurement date and they are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically between 1 and 4 years). The restricted stock units that are to be settled in cash are accounted for as liabilities and the value of the awards is re-measured at the end of each reporting period until settlement at the end of the requisite vesting period (typically 3 years). In the nine months ended October 27, 2024, the Company granted to certain employees 1,573,689 restricted stock units that settle in shares with a weighted-average grant date fair value of $31.47.
Restricted Stock Units, Non-Employee Directors
The Company maintains a compensation program pursuant to which restricted stock units are granted to the Company's directors who are not employed by the Company or any of its subsidiaries. Under the Company's director compensation program, a portion of the restricted stock units granted under the program would be settled in cash and a portion would be settled in shares of the Company's common stock. Restricted stock units awarded under the program are generally scheduled to vest on the earlier of (i) one year after the grant date or (ii) the day immediately preceding the first annual meeting of the Company's stockholders following the grant. The portion of a restricted stock unit award under the program that is to be settled in cash will, subject to vesting, be settled when the director who received the award separates from service. The portion of a restricted stock unit award under the program that is to be settled in shares of stock will, subject to vesting, be settled promptly following vesting. In the nine months ended October 27, 2024, the Company granted to certain non-employee directors 25,713 restricted stock units that settle in cash and 25,713 restricted stock units that settle in shares with a weighted-average grant date fair value of $31.50.
The restricted stock units that are to be settled in cash are accounted for as liabilities. These awards are not typically settled until a non-employee director's separation from service. The value of both the unvested and vested but unsettled awards are re-measured at the end of each reporting period until settlement. In the nine months ended October 27, 2024, $1.4 million was paid to settle the vesting of 44,018 cash-settled restricted stock unit awards upon the separation of service of a former director. As of October 27, 2024, the total number of vested, but unsettled, shares subject to cash-settled restricted stock unit awards was 208,392 and the liability associated with these awards was $9.0 million, of which $3.2 million was included in "Accrued liabilities" in the Balance Sheets relating to two previous non-employee directors currently serving short-term non-employee consultancies for the Company. The remaining $5.8 million was included in "Other long-term liabilities" in the Balance Sheets as of October 27, 2024. As of January 28, 2024, the total number of vested, but unsettled, shares subject to cash-settled restricted stock unit awards was 230,231 and the liability associated with these awards was $4.4 million, of which $1.8 million was included in "Accrued liabilities" in the Balance Sheets relating to two previous non-employee directors currently serving short-term non-employee consultancies for the Company. The remaining $2.6 million was included in "Other long-term liabilities" in the Balance Sheets as of January 28, 2024.
Financial Metric-Based Restricted Stock Units with a Market Condition
The Company grants financial metric-based restricted stock units with a market condition (the "Performance Awards") to certain executives of the Company, which are settled in shares and accounted for as equity awards. The Performance Awards have both a financial metric-based performance condition and a pre-defined market condition, which together determine the number of shares that ultimately vest, in addition to the condition of continued service. The number of vested shares for each of the three tranches of the awards, which are the one, two and three-year performance periods, is determined based on the Company's attainment of pre-established revenue and non-GAAP operating income targets for the respective performance period. The vesting for tranches after the initial performance period is dependent on revenue and non-GAAP operating income for the preceding performance period. The market condition is determined based upon the Company's total stockholder return
15



("TSR") benchmarked against the TSR of an index over the three-year performance period. For fiscal year 2025 grants, the benchmark was against the Russell 3000 Index. The market condition functions as a catch-up provision in determining the vesting of the third tranche of the awards based on the performance over the full three-year performance period. Generally, the award recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards.
The grant-date fair values of the first and second tranches of the Performance Awards are valued using the closing stock price on the grant date and the grant-date fair value of the third tranche of the Performance Awards is valued using a Monte Carlo simulation, which takes into consideration the possible outcomes pertaining to the TSR market condition. The compensation cost of the Performance Awards is recognized using the accelerated attribution method over the requisite service period based on the number of shares that are probable of attainment for each fiscal year.
In the nine months ended October 27, 2024, the Company granted 443,943 Performance Awards. The weighted-average grant-date fair values for each of the one, two and three-year performance periods over which the Performance Awards vest were $36.26, $36.26 and $57.08, respectively. Under the terms of these awards, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2025, 2026 and 2027 performance periods would be 887,886 shares. In the nine months ended October 27, 2024, 75,011 Performance Awards were forfeited due to the terminations of certain officers.
Market-Condition Restricted Stock Units, Employees
In the fiscal year ended January 30, 2022, the Company granted 54,928 restricted stock units to certain executives of the Company, which had a pre-defined market condition that determined the number of shares that would ultimately vest. These market-condition restricted stock unit awards ("Market-Condition Awards") were eligible to vest during the period that commenced on March 9, 2021 and ended on March 5, 2024 (the "Performance Period") as follows: the restricted stock units covered by the Market-Condition Awards would vest if, during any consecutive 30 trading day period that commenced and ended during the Performance Period, the average per-share closing price of the Company's common stock equaled or exceeded $95.00. The Market-Condition Awards were valued as of the grant date using a Monte Carlo simulation model and expense was recognized on a straight-line basis over the requisite service period, adjusted for any actual forfeitures. The grant-date fair value per unit of the awards granted in fiscal year 2022 was $49.55. In fiscal years 2024 and 2023, 18,309 and 14,084, respectively, of the Market-Condition Awards were forfeited due to the terminations of certain officers. In the first quarter of fiscal year 2025, the Performance Period ended and the remaining 22,535 Market-Condition Awards were canceled as the target achievement level was not met.
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Note 5: Available-for-sale securities
The following table summarizes the values of the Company's available-for-sale securities:
 October 27, 2024January 28, 2024
(in thousands)Fair ValueAmortized
Cost		Gross
Unrealized Loss		Fair ValueAmortized
Cost		Gross
Unrealized Loss
Convertible debt investments$12,502 $14,512 $(2,010)$12,117 $14,454 $(2,337)
Total available-for-sale securities$12,502 $14,512 $(2,010)$12,117 $14,454 $(2,337)
The following table summarizes the maturities of the Company's available-for-sale securities:
October 27, 2024
(in thousands)Fair ValueAmortized Cost
Within 1 year$12,502 $14,512 
After 1 year through 5 years— — 
Total available-for-sale securities$12,502 $14,512 
The Company's available-for-sale securities consist of investments in convertible debt instruments issued by privately-held companies and are recorded at fair value. See Note 6, Fair Value Measurements, for further discussion of the valuation of the available-for-sale securities. The available-for-sale securities with maturities within one year are included in "Other current assets". Unrealized gains or losses, net of tax, are recorded in "Accumulated other comprehensive loss, net" in the Balance Sheets, and realized gains or losses, as well as current expected credit loss reserves were recorded in "Non-operating expense, net" in the Statements of Operations.






17



Note 6: Fair Value Measurements
The following fair value hierarchy is applied for disclosure of the inputs used to measure fair value and prioritizes the inputs into three levels as follows:
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 and liabilities in active markets or other inputs that are observable for the assets or liabilities, either directly or indirectly.
Level 3—Unobservable inputs based on the Company's own assumptions, requiring significant management judgment or estimation.
Instruments Measured at Fair Value on a Recurring Basis
The fair values of financial assets and liabilities measured and recorded at fair value on a recurring basis were presented in the Balance Sheets as follows:
 October 27, 2024January 28, 2024
(in thousands)Total(Level 1)(Level 2)(Level 3)Total(Level 1)(Level 2)(Level 3)
Financial assets:
Interest rate swap agreement$4,588 $— $4,588 $— $7,321 $— $7,321 $— 
Convertible debt investments12,502 — — 12,502 12,117 — — 12,117 
Foreign currency forward contracts— — — — 169 — 169 — 
Total financial assets$17,090 $— $4,588 $12,502 $19,607 $— $7,490 $12,117 
Financial liabilities:
Interest rate swap agreement$— $— $— $— $7 $— $7 $— 
Foreign currency forward contracts27 — 27 — — — — — 
Total financial liabilities$27 $— $27 $— $7 $— $7 $— 
During the nine months ended October 27, 2024, the Company had no transfers of financial assets or liabilities between Level 1, Level 2 or Level 3. As of October 27, 2024 and January 28, 2024, the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.
The convertible debt investments are valued utilizing a combination of estimates that are based on the estimated discounted cash flows associated with the debt and the fair value of the equity into which the debt may be converted, all of which are Level 3 inputs.
The following table presents a reconciliation of the changes in convertible debt investments in the nine months ended October 27, 2024:
(in thousands)
Balance at January 28, 2024$12,117 
Sales(222)
Interest accrued607 
Balance at October 27, 2024$12,502 
The interest rate swap agreements are measured at fair value using readily available interest rate curves (Level 2 inputs). The fair value of each agreement is determined by comparing, for each settlement, the contract rate to the forward rate and discounting to the present value. Contracts in a gain position are recorded in "Other current assets" and "Other assets" in the Balance Sheets and the value of contracts in a loss position are recorded in "Accrued liabilities" and "Other long-term liabilities" in the Balance Sheets.
The foreign currency forward contracts are measured at fair value using readily available foreign currency forward and interest rate curves (Level 2 inputs). The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to the present value. Contracts in a gain position are recorded in "Other current assets" in the Balance Sheets and the value of contracts in a loss position are recorded in "Accrued liabilities" in the Balance Sheets.
See Note 17, Derivatives and Hedging Activities, for further discussion of the Company's derivative instruments.
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Instruments Not Recorded at Fair Value
Some of the Company's financial instruments are not measured at fair value, but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include: cash and cash equivalents including money market deposits, net receivables, certain other assets, accounts payable, accrued expenses, accrued personnel costs, and other current liabilities. The Company's revolving loans and Term Loans (as defined in Note 9, Long-Term Debt) are recorded at cost, which approximates fair value as the debt instruments bear interest at a floating rate. The 2027 Notes and 2028 Notes (as defined in Note 9, Long-Term Debt) are carried at face value less unamortized debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the capitalized issuance costs. The estimated fair values are determined based on the actual bid prices of the 2027 Notes and 2028 Notes as of the last business day of the period.
The following table displays the carrying values and fair values of the 2027 Notes and 2028 Notes:
 October 27, 2024January 28, 2024
(in thousands)Fair Value HierarchyCarrying ValueFair ValueCarrying ValueFair Value
1.625% convertible senior notes due 2027, net (1)
Level 2$312,371 $444,088 $310,563 $262,571 
4.00% convertible senior notes due 2028, net (2)
Level 260,246 146,976 241,829 313,299 
Total long-term debt, net of debt issuance costs$372,617 $591,064 $552,392 $575,870 
(1) The 1.625% convertible senior notes due 2027, net, are reflected net of $7.1 million and $8.9 million of unamortized debt issuance costs as of October 27, 2024 and January 28, 2024, respectively.
(2) The 4.00% convertible senior notes due 2028, net, are reflected net of $1.7 million and $8.2 million of unamortized debt issuance costs as of October 27, 2024 and January 28, 2024, respectively.
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
The Company reduces the carrying amounts of its intangible assets, long-lived assets and non-marketable equity securities to fair value when it determines they are impaired.
Investment Impairments and Credit Loss Reserves
The total credit loss reserve for the Company's held-to-maturity debt securities and available-for-sale debt securities remained flat at $4.5 million as of October 27, 2024 and January 28, 2024. In the nine months ended October 27, 2024, the Company recorded an other-than-temporary impairment of $1.1 million on one of its non-marketable equity investments. Credit loss reserves related to the Company's available-for-sale debt securities and held-to-maturity debt securities with maturities within one year are included in "Other current assets" in the Balance Sheets.





19



Note 7: Inventories
Inventories, consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
(in thousands)October 27, 2024January 28, 2024
Raw materials and electronic components$47,203 $46,425 
Work in progress90,628 69,404 
Finished goods25,620 29,163 
Total inventories$163,451 $144,992 

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Note 8: Goodwill and Intangible Assets
Goodwill
The carrying amounts of goodwill by applicable operating segment were as follows:
(in thousands)Signal Integrity
Analog Mixed Signal and Wireless
IoT Systems and ConnectivityTotal
Balance at January 28, 2024$267,205 $83,101 $190,921 $541,227 
Cumulative translation adjustment— — 56 56 
Balance at October 27, 2024$267,205 $83,101 $190,977 $541,283 
In the first quarter of fiscal year 2025, as a result of organizational restructuring, the Company combined the IoT Systems operating segment and the IoT Connected Services operating segment into the newly formed IoT Systems and Connectivity operating segment. There was no change to the reporting units. See Note 15, Segment Information, for further discussion of the Company's operating segments.
Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during the fourth quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair market value of the reporting unit. As of October 27, 2024, there was no indication of impairment of the Company's goodwill balances and no goodwill impairment was recorded in the nine months ended October 27, 2024.
During the second quarter of fiscal year 2024, as a result of reduced earnings forecasts associated with the business acquired from Sierra Wireless and macroeconomic conditions, including a rising interest rate environment, the Company performed an interim impairment test using a quantitative assessment of the reporting units related to the Sierra Wireless Acquisition (specifically, the IoT Connected Services, IoT System–Modules and IoT System–Routers reporting units). The interim impairment test resulted in $279.6 million of total pre-tax non-cash goodwill impairment charges recorded in the Statements of Operations during the second quarter of fiscal year 2024, consisting of $69.0 million of goodwill impairment for the IoT Connected Services reporting unit, $109.9 million of goodwill impairment for the IoT System–Modules reporting unit and $100.7 million goodwill impairment for the IoT System–Routers reporting unit. The fair values of these reporting units were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach). Significant inputs to the reporting unit fair value measurements included forecasted cash flows, discount rates, terminal growth rates and earnings multiples, which were determined by management estimates and assumptions. The reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.
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Purchased and Other Intangibles
The following table sets forth the Company's finite-lived intangible assets, which are amortized over their estimated useful lives:
 October 27, 2024
(in thousands, except estimated useful life)Estimated
Useful Life		Gross
Carrying
Amount		Accumulated
Amortization		Accumulated ImpairmentNet Carrying
Amount
Core technologies
1-8 years
$154,914 $(41,893)$(91,792)$21,229 
Customer relationships
1-10 years
52,250 (13,713)(34,777)3,760 
Trade name
2-10 years
9,000 (3,092)(4,816)1,092 
Capitalized development costs
3 years
295 (74)— 221 
Software licenses7 years200 (7)— 193 
Total finite-lived intangible assets$216,659 $(58,779)$(131,385)$26,495 
January 28, 2024
(in thousands, except estimated useful life)Estimated
Useful Life		Gross
Carrying
Amount		Accumulated
Amortization		Accumulated ImpairmentNet Carrying
Amount
Core technologies
1-8 years
$154,985 $(35,130)$(91,792)$28,063 
Customer relationships
1-10 years
52,272 (13,391)(34,777)4,104 
Trade name
2-10 years
9,000 (2,700)(4,816)1,484 
Total finite-lived intangible assets$216,257 $(51,221)$(131,385)$33,651 
Amortization expense of finite-lived intangible assets was as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Core technologies$2,281 $10,008 $6,841 $31,436 
Customer relationships116 4,061 345 12,231 
Trade name33 792 392 2,375 
Capitalized development costs25 — 74 — 
Software licenses7 — 7 — 
Total amortization expense$2,462 $14,861 $7,659 $46,042 
Amortization expense of finite-lived intangible assets related to core technologies was recorded in "Amortization of acquired technology" within "Total cost of sales" in the Statements of Operations, and amortization expense of finite-lived intangible assets related to customer relationships and trade name was recorded in "Intangible amortization" within "Total operating expenses, net" in the Statements of Operations. Amortization expense of finite-lived intangible assets related to software licenses was recorded in "Cost of sales" in the Statements of Operations and amortization expense of finite-lived intangible assets related to capitalized development costs was recorded in "Product development and engineering" in the Statements of Operations.
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Future amortization expense of finite-lived intangible assets is expected as follows:
(in thousands)Core TechnologiesCustomer RelationshipsTrade NameCapitalized Development CostsSoftware LicensesTotal
2025 (remaining three months)$2,267 $114 $33 $25 $7 $2,446 
20268,605 458 133 98 29 9,323 
20273,713 458 133 98 29 4,431 
20283,557 458 133 — 29 4,177 
20293,087 383 133 — 29 3,632 
Thereafter— 1,889 527 — 70 2,486 
Total expected amortization expense$21,229 $3,760 $1,092 $221 $193 $26,495 
Also in "Other intangible assets, net" in the Balance Sheets, are finite-lived intangible assets to be amortized upon placement in service. The following table sets forth the Company's finite-lived intangible assets not yet placed in service:
(in thousands)Capitalized Development CostsSoftware LicensesTotal
Balance at January 28, 2024$1,000 $915 $1,915 
Additions523 8,375 8,898 
Placed in service(295)(200)(495)
Balance at October 27, 2024$1,228 $9,090 $10,318 
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Note 9: Long-Term Debt
Long-term debt and the current period interest rates were as follows:
(in thousands, except percentages)October 27, 2024January 28, 2024
Revolving loans$210,000 $215,000 
Term loans622,625 622,625 
1.625% convertible senior notes due 2027
319,500 319,500 
4.00% convertible senior notes due 2028
61,950 250,000 
Total debt$1,214,075 $1,407,125 
Debt issuance costs(23,771)(36,086)
Total long-term debt, net of debt issuance costs$1,190,304 $1,371,039 
Weighted-average effective interest rate (1)
6.04 %5.86 %
(1) The revolving loans and Term Loans (as defined below) bear interest at variable rates based on Adjusted Term SOFR or a Base Rate (as defined in the Credit Agreement), at the Company’s option, plus an applicable margin that varies based on the Company's consolidated leverage ratio. In the first quarter of fiscal year 2024, the Company entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a fixed Term SOFR rate of 3.58%, plus a variable margin and spread based on the Company’s consolidated leverage ratio. In the fourth quarter of fiscal year 2023, the Company entered into an interest rate swap agreement with a 5 year term to hedge the variability of interest payments on $450.0 million of debt outstanding on the Term Loans at a fixed Term SOFR rate of 3.44%, plus a variable margin and spread based on the Company’s consolidated leverage ratio. As of October 27, 2024, the effective interest rate was a weighted-average rate that represented (a) interest on the revolving loans at a floating SOFR rate of 4.86% plus a margin and spread of 3.86% (total floating rate of 8.72%), (b) interest on $450.0 million of the debt outstanding on the Term Loans at a fixed SOFR rate of 3.44% plus a margin and spread of 3.85% (total fixed rate of 7.29%), (c) interest on $150.0 million of the debt outstanding on the Term Loans at a fixed SOFR rate of 3.58% plus a margin and spread of 3.85% (total fixed rate of 7.43%), (d) interest on the remaining debt outstanding on the Term Loans at a floating SOFR rate of 4.85% plus a margin and spread of 3.85% (total floating rate of 8.70%), (e) interest on the 2027 Notes outstanding at a fixed rate of 1.625%, and (f) interest on the 2028 Notes outstanding at a fixed rate of 4.00%. As of January 28, 2024, the effective interest rate was a weighted average-rate that represented (a) interest on the revolving loans at a floating SOFR rate of 5.34% plus a margin and spread of 3.86% (total floating rate of 9.20%) (b) interest on $450.0 million of the debt outstanding on the Term Loans at a fixed SOFR rate of 3.44% plus a margin and spread of 3.85% (total fixed rate of 7.29%), (c) interest on $150.0 million of the debt outstanding on the Term Loans at a fixed SOFR rate of 3.58% plus a margin and spread of 3.85% (total fixed rate of 7.43%), (d) interest on the remaining debt outstanding on the Term Loans at a floating SOFR rate of 5.34% plus a margin and spread of 3.85% (total floating rate of 9.19%),(e) interest on the 2027 Notes outstanding at a fixed rate of 1.625%, and (f) interest on the 2028 Notes outstanding at a fixed rate of 4.00%.
Credit Agreement
On November 7, 2019, we, with certain of our domestic subsidiaries as guarantors, entered into a credit agreement with the lenders party thereto and HSBC Bank USA, National Association ("HSBC Bank"), as administrative agent, swing line lender and letter of credit issuer. On September 26, 2022 (the "Third Restatement Effective Date"), the Company entered into a third amended and restated credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with the lenders party thereto, HSBC Bank, as resigning administrative agent, and JPMorgan Chase Bank, N.A. ("JPM"), as successor administrative agent, swing line lender and letter of credit issuer. The restated Credit Agreement, which was entered into substantially concurrently with the completion of the Sierra Wireless Acquisition on January 12, 2023 was entered into to, among other things, (i) extend the maturity date of $405.0 million of the $600.0 million in aggregate principal amount of revolving commitments thereunder from November 7, 2024 to January 12, 2028, (ii) provide for incurrence by the Company on January 12, 2023 of term loans (the "Term Loans") in an aggregate principal amount of $895.0 million, which was used to fund a portion of the cash consideration for the Sierra Wireless Acquisition, (iii) provide for JPM to succeed HSBC Bank as administrative agent and collateral agent under the Credit Agreement on January 12, 2023, (iv) modify the maximum consolidated leverage covenant as set forth in the Credit Agreement, (v) replace LIBOR with adjusted term SOFR and (vi) make certain other changes as set forth in the restated Credit Agreement, including changes consequential to the incorporation of the Term Loan Facility.
After effectiveness of the Third Amendment (as defined and described below), the borrowing capacity on the revolving credit facility under the Credit Agreement (the "Revolving Credit Facility") is $500.0 million, of which $162.5 million matured on November 7, 2024 and $337.5 million is scheduled to mature on January 12, 2028, and the Term Loans are scheduled to mature on January 12, 2028 (subject to, in certain circumstances, an earlier springing maturity).
As of October 27, 2024, the Company had $622.6 million outstanding under the Term Loans and $210.0 million outstanding under the Revolving Credit Facility, which had available undrawn borrowing capacity of $287.2 million, subject to net leverage limitations and customary conditions precedent, including the accuracy of representations and warranties and the absence of defaults.
Up to $40.0 million of the Revolving Credit Facility may be used to obtain letters of credit, up to $25.0 million of the Revolving Credit Facility may be used to obtain swing line loans, and up to $75.0 million of the Revolving Credit Facility may be used to obtain revolving loans and letters of credit in certain currencies other than U.S. Dollars ("Alternative Currencies").
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The proceeds of the Revolving Credit Facility may be used by the Company for capital expenditures, permitted acquisitions, permitted dividends, working capital and general corporate purposes.
On February 24, 2023, the Company entered into the first amendment (the "First Amendment") to the Credit Agreement, in order to, among other things, (i) increase the maximum consolidated leverage ratio covenant for certain test periods as set forth therein, (ii) reduce the minimum consolidated interest coverage ratio covenant for certain test periods as set forth therein, (iii) provide that, during the period that financial covenant relief pursuant to the First Amendment is in effect, the interest rate margin for (1) Term SOFR loans is deemed to be 2.50% and (2) Base Rate (as defined in the Credit Agreement) loans is deemed to be 1.50% per annum and (iv) make certain other changes as set forth therein.
On June 6, 2023, the Company entered into the second amendment (the "Second Amendment") to the Credit Agreement, in order to, among other things, (i) increase the maximum consolidated leverage ratio covenant for certain test periods as set forth therein and described below, (ii) reduce the minimum consolidated interest coverage ratio covenant for certain test periods as set forth therein and described below, (iii) modify the pricing grid applicable to loans under the Credit Agreement during the covenant relief period as set forth therein and described below, (iv) impose a minimum liquidity covenant for certain periods during the covenant relief period as set forth therein and described below, (v) increase the annual amortization in respect of the term loans thereunder to 7.5% per annum for certain periods as set forth therein, (vi) impose an "anti-cash hoarding" condition to the borrowing of revolving loans as set forth therein, (vii) provide that the maturity date for the Term Loans and revolving loans shall be the day that is 91 days prior to the stated maturity date of the 2027 Notes and the 2028 Notes if such notes have not otherwise been refinanced or extended to at least 91 days after the stated maturity date of the Term Loans and revolving loans, the aggregate principal amount of non-extended outstanding 2027 Notes and 2028 Notes and certain replacement debt exceeds $50 million and a minimum liquidity condition is not satisfied, (viii) provide for the reduction of the aggregate revolving commitments thereunder by $100 million, (ix) require that the Company appoint a financial advisor and (x) make certain other modifications to the mandatory prepayments (including the imposition of an excess cash flow mandatory prepayment), collateral provisions and covenants (including additional limitations on debt, liens, investments and restricted payments such as dividends) as set forth therein.
Effective June 6, 2023, in connection with the Second Amendment, interest on loans made under the Credit Agreement in U.S. Dollars accrues, at the Company's option, at a rate per annum equal to (1) (x) the Base Rate (as defined in the Credit Agreement) plus (y) a margin ranging from 0.25% to 2.75% depending upon the Company's consolidated leverage ratio (except that, during the period that financial covenant relief is in effect (including during the extended covenant relief period provided pursuant to the Third Amendment), the margin will not be less than 2.25% per annum) or (2) (x) Term SOFR Rate (as defined in the Credit Agreement) plus (y) a credit spread adjustment of (i) for term loans, 0.10% and (ii) for revolving credit borrowings, 0.11%, 0.26% or 0.43% for one, three and six month interest periods, respectively, plus (z) a margin ranging from 1.25% to 3.75% depending upon the Company's consolidated leverage ratio (except that, during the period that financial covenant relief pursuant to the Third Amendment is in effect, the margin will not be less than 3.25% per annum) (such margin, the "Applicable Margin"). Interest on loans made under the Revolving Credit Facility in Alternative Currencies accrues at a rate per annum equal to a customary benchmark rate (including, in certain cases, credit spread adjustments) plus the Applicable Margin.
On October 19, 2023, the Company entered into the third amendment (the "Third Amendment") to the Credit Agreement, in order to, among other things, (i) extend the financial covenant relief period by one year to April 30, 2026, (ii) increase the maximum consolidated leverage ratio covenant for certain test periods as set forth in the Third Amendment, (iii) reduce the minimum consolidated interest coverage ratio covenant for certain test periods as set forth in the Third Amendment and (iv) make certain other changes as set forth therein. These amendments had the effect of extending and temporarily expanding financial covenant relief under the Credit Agreement previously provided for in the First Amendment and Second Amendment.
All of the Company's obligations under the Credit Agreement are unconditionally guaranteed by all of the Company's direct and indirect domestic subsidiaries, other than certain excluded subsidiaries, including, but not limited to, any domestic subsidiary the primary assets of which consist of equity or debt of non-U.S. subsidiaries, certain immaterial non-wholly-owned domestic subsidiaries and subsidiaries that are prohibited from providing a guarantee under applicable law or that would require governmental approval to provide such guarantee. The Company and the guarantors have also pledged substantially all of their assets to secure their obligations under the Credit Agreement.
No amortization is required with respect to the revolving loans. Effective June 6, 2023, in connection with the Second Amendment, the Term Loans amortize (x) during the period that financial covenant relief is in effect (including during the extended covenant relief period provided pursuant to the Third Amendment), in equal quarterly installments of 1.875% of the aggregate principal amount outstanding on the Third Restatement Effective Date, and (y) otherwise, in equal quarterly installments of 1.25% of the aggregate principal amount outstanding on the Third Restatement Effective Date, with the balance due at maturity. The Company may voluntarily prepay borrowings at any time and from time to time, without premium or penalty, other than customary "breakage costs" in certain circumstances. In the third quarter of fiscal year 2024, the Company
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made a $250 million prepayment on the Term Loans in connection with the Third Amendment, after which there is no scheduled amortization remaining on the Term Loans.
The Credit Agreement contains customary representation and warranties, and affirmative and negative covenants, including limitations on the Company's ability to, among other things, incur indebtedness, create liens on assets, engage in certain fundamental corporate changes, make investments, repurchase stock, pay dividends or make similar distributions, engage in certain affiliate transactions, or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments. In addition, the Company must comply with financial covenants which, after effectiveness of the Third Amendment are as follows (in each case, during the covenant relief period):
•maintaining a maximum consolidated leverage ratio, determined as of the last day of each fiscal quarter, of (i) 8.17 to 1.00 for the fiscal quarter ending on or around October 31, 2023, (ii) 10.27 to 1.00 for the fiscal quarter ending on or around January 31, 2024, (iii) 10.21 to 1.00 for the fiscal quarter ending on or around April 30, 2024, (iv) 9.93 to 1.00 for the fiscal quarter ending on or around July 31, 2024, (v) 8.42 to 1.00 for the fiscal quarter ending on or around October 31, 2024, (vi) 7.68 to 1.00 for the fiscal quarter ending on or around January 31, 2025, (vii) ) 6.75 to 1.00 for the fiscal quarter ending on or around April 30, 2025, (viii) 6.28 to 1.00 for the fiscal quarter ending on or around July 31, 2025, (ix) 5.81 to 1.00 for the fiscal quarter ending on or around October 31, 2025, (x) 5.30 to 1.00 for the fiscal quarter ending on or around January 31, 2026, and (xi) 3.75 to 1.00 for the fiscal quarter ending on or around April 30, 2026 and each fiscal quarter thereafter, subject to increase to 4.25 to 1.00 for the four full consecutive fiscal quarters ending on or after the date of consummation of a permitted acquisition that constitutes a "Material Acquisition" under the Credit Agreement, subject to the satisfaction of certain conditions;
•maintaining a minimum consolidated interest expense coverage ratio, determined as of the last day of each fiscal quarter, of (i) 1.66 to 1.00 for the fiscal quarter ending on or around October 31, 2023, (ii) 1.40 to 1.00 for the fiscal quarter ending on or around January 31, 2024, (iii) 1.37 to 1.00 for the fiscal quarter ending on or around April 30, 2024, (iv) 1.41 to 1.00 for the fiscal quarter ending on or around July 31, 2024, (v) 1.73 to 1.00 for the fiscal quarter ending on or around October 31, 2024, (vi) 1.90 to 1.00 for the fiscal quarter ending on or around January 31, 2025, (vii) 2.14 to 1.00 for the fiscal quarter ending on or around April 30, 2025, (viii) 2.37 to 1.00 for the fiscal quarter ending on or around July 31, 2025, (ix) 2.68 to 1.00 for the fiscal quarter ending on or around October 31, 2025, (x) 3.01 to 1.00 for the fiscal quarter ending on or around January 31, 2026, and (xi) 3.50 to 1.00 for the fiscal quarter ending on or around April 30, 2026 and each fiscal quarter thereafter; and
•until January 31, 2025, maintaining a minimum consolidated liquidity (as further defined in the Credit Agreement but excluding revolving credit commitments scheduled to expire in 2024) of $150 million as of the last day of each monthly accounting period of the Company.
Upon the termination of the covenant relief period under the Third Amendment, the ratio levels set forth above with respect to the leverage and interest expense coverage financial covenants are subject to step-up as set forth in the Credit Agreement, and the liquidity covenant shall no longer apply.
Compliance with the leverage and interest expense coverage financial covenants is measured quarterly based upon the Company's performance over the most recent four quarters, and compliance with the liquidity covenant is measured as of the last day of each monthly accounting period. As of October 27, 2024, the Company was in compliance with the financial covenants in the Credit Agreement. See "Liquidity" in Note 1, Organization and Basis of Presentation, for additional information about compliance with the financial covenants.
The Credit Agreement also contains customary provisions pertaining to events of default. If any event of default occurs, the obligations under the Credit Agreement may be declared due and payable, terminated upon written notice to us and existing letters of credit may be required to be cash collateralized.
Convertible Senior Notes Due 2027
On October 12, 2022 and October 21, 2022, the Company issued and sold $300.0 million and $19.5 million, respectively, in aggregate principal amount of 1.625% Convertible Senior Notes due 2027 (the "2027 Notes") in a private placement. The 2027 Notes were issued pursuant to an indenture, dated October 12, 2022, by and among the Company, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (the "2027 Indenture"). The 2027 Notes are jointly and severally and fully and unconditionally guaranteed by each of the Company's current and future direct and indirect wholly-owned domestic subsidiaries that guarantee its borrowings under its Credit Agreement. The 2027 Notes bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The 2027 Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased.
The initial conversion rate of the 2027 Notes is 26.8325 shares of the Company's common stock per $1,000 principal amount of 2027 Notes (which is equivalent to an initial conversion price of approximately $37.27 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2027 Indenture but will not be adjusted for accrued
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and unpaid interest. In addition, upon the occurrence of a Make-Whole Fundamental Change (as defined in the 2027 Indenture) or if the Company delivers a Notice of Sale Price Redemption (as defined in the 2027 Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock as described in the 2027 Indenture for a holder who elects to convert its 2027 Notes in connection with such Make-Whole Fundamental Change or to convert its 2027 Notes called (or deemed called as provided in the 2027 Indenture) for redemption in connection with such Notice of Sale Price Redemption, as the case may be.
Prior to the close of business on the business day immediately preceding July 1, 2027, the 2027 Notes are convertible at the option of the holders thereof only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on January 29, 2023 (and only during such fiscal quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which, for each trading day of that period, the Trading Price (as defined in the 2027 Indenture), as determined following a request by a holder of the 2027 Notes in accordance with the procedures described in the 2027 Indenture, per $1,000 principal amount of the 2027 Notes for such trading day was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls such 2027 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2027 Notes called (or deemed called as provided in the 2027 Indenture) for redemption; or (4) upon the occurrence of specified corporate events described in the 2027 Indenture. As of October 27, 2024, none of the conditions allowing holders of the 2027 Notes to convert had been met. On or after July 1, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2027 Notes, holders of the 2027 Notes may convert all or a portion of their 2027 Notes, regardless of the foregoing conditions. Upon conversion, the 2027 Notes will be settled in cash up to the aggregate principal amount of the 2027 Notes to be converted, and in cash, shares of the Company's common stock or any combination thereof, at the Company's option, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 2027 Notes being converted.
The Company may not redeem the 2027 Notes prior to November 5, 2025. The Company may redeem for cash all or any portion of the 2027 Notes (subject to the limitation described below), at the Company's option, on or after November 5, 2025 and before the 61st scheduled trading day immediately preceding the maturity date if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of sale price redemption, at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding 2027 Notes, at least $75.0 million aggregate principal amount of the 2027 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the 2027 Notes.
Upon the occurrence of a Fundamental Change (as defined in the 2027 Indenture) prior to the maturity date of the 2027 Notes, holders of the 2027 Notes may require the Company to repurchase all or a portion of the 2027 Notes for cash at a price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the Fundamental Change Repurchase Date (as defined in the 2027 Indenture).
Convertible Note Hedge Transactions
On October 6, 2022 and October 19, 2022, the Company entered into privately negotiated convertible note hedge transactions (the "Convertible Note Hedge Transactions") with an affiliate of one of the initial purchasers of the 2027 Notes and another financial institution (collectively, the "Counterparties") whereby the Company has the option to purchase the same number of shares of the Company's common stock initially underlying the 2027 Notes in the aggregate for approximately $37.27 per share, which is subject to anti-dilution adjustments substantially similar to those in the 2027 Notes. The Convertible Note Hedge Transactions will expire upon the maturity of the 2027 Notes, if not earlier exercised. The Convertible Note Hedge Transactions are expected to reduce the potential dilution to the common stock upon the conversion of the 2027 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2027 Notes, as the case may be, in the event that the market price per share of common stock, as measured under the terms of the Convertible Note Hedge Transactions, is greater than the strike price of the Convertible Note Hedge Transactions, which initially corresponds to the initial conversion price of the 2027 Notes, or approximately $37.27 per share of the common stock. The Convertible Note Hedge Transactions are separate transactions, entered into by the Company with each of the Counterparties, and are not part of the terms of the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Convertible Note Hedge Transactions. The Company used approximately $72.6 million of the net proceeds from the offering of the 2027 Notes to pay the cost of the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions are recorded in additional paid-
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in capital in the Balance Sheets as they do not require classification outside of equity pursuant to Accounting Standards Codification ("ASC") 480 and qualify for equity classification pursuant to ASC 815.
Warrant Transactions
On October 6, 2022 and on October 19, 2022, the Company separately entered into privately negotiated warrant transactions (the "Warrants") with the Counterparties whereby the holders of the Warrants have the option to acquire, collectively, subject to anti-dilution adjustments, approximately 8.6 million shares of the Company's common stock at an initial strike price of approximately $51.15 per share. The Warrants were sold in private placements to the Counterparties pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), afforded by Section 4(a)(2) of the Securities Act. If the market price per share of the common stock, as measured under the terms of the Warrants, exceeds the strike price of the Warrants, the Warrants could have a dilutive effect on the common stock, unless the Company elects, subject to certain conditions, to settle the Warrants in cash. The Warrants will expire over a period beginning in February 2028.
The Warrants are separate transactions, entered into by the Company with each of the Counterparties, and are not part of the terms of the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Warrants. The Company received aggregate proceeds of approximately $42.9 million from the sale of the Warrants to the Counterparties. The Warrants are recorded in additional paid-in capital in the Balance Sheets as they do not require classification outside of equity pursuant to ASC 480 and qualify for equity classification pursuant to ASC 815.
In combination, the Convertible Note Hedge Transactions and the Warrants are intended to synthetically increase the strike price of the conversion option of the 2027 Notes from approximately $37.27 to $51.15 (subject to adjustment in accordance with the terms of the agreements governing such transactions), with the expected result of reducing the dilutive effect of the 2027 Notes in exchange for a net cash premium of $29.7 million.
Convertible Senior Notes Due 2028
On October 26, 2023, the Company issued and sold $250.0 million in aggregate principal amount of 4.00% Convertible Senior Notes due 2028 (the "2028 Notes") in a private placement. The 2028 Notes were issued pursuant to an indenture, dated October 26, 2023, by and among the Company, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (the "2028 Indenture"). The 2028 Notes are jointly and severally and fully and unconditionally guaranteed by each of the Company's current and future direct and indirect wholly-owned domestic subsidiaries that guarantee its borrowings under its Credit Agreement. The 2028 Notes bear interest at a rate of 4.00% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2024. The 2028 Notes will mature on November 1, 2028, unless earlier converted, redeemed or repurchased. As of October 27, 2024, approximately $62.0 million of the 2028 Notes remained outstanding.
The initial conversion rate of the 2028 Notes is 49.0810 shares of the Company's common stock per $1,000 principal amount of 2028 Notes (which is equivalent to an initial conversion price of approximately $20.37 per share). The conversion rate is subject to adjustment upon the occurrence of certain events specified in the 2028 Indenture but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a Make-Whole Fundamental Change (as defined in the 2028 Indenture) or if the Company delivers a Notice of Redemption (as defined in the 2028 Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock as described in the 2028 Indenture for a holder who elects to convert its 2028 Notes in connection with such Make-Whole Fundamental Change or to convert its 2028 Notes called (or deemed called as provided in the 2028 Indenture) for redemption in connection with such Notice of Redemption, as the case may be.
Prior to the close of business on the business day immediately preceding August 1, 2028, the 2028 Notes will be convertible at the option of the holders thereof only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ended on January 28, 2024 (and only during such fiscal quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which, for each trading day of that period, the Trading Price (as defined in the 2028 Indenture), as determined following a request by a holder of the 2028 Notes in accordance with the procedures described in the Indenture, per $1,000 principal amount of the 2028 Notes for such trading day was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; (3) if the Company calls such 2028 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2028 Notes called (or deemed called as provided in the 2028 Indenture) for redemption; or (4) upon the occurrence of specified corporate events described in the 2028 Indenture. As of October 27, 2024, one of the conditions allowing the holders of the 2028 Notes to convert had been met. The trading price of the Company's common stock remained above 130% of the applicable $20.37 conversion price for at least 20 trading days during the 30 consecutive-trading day period ending on, and including October 25, 2024 (the last trading day of the fiscal quarter ended October 27, 2024) resulting in the
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right of the holders of the 2028 Notes to convert the 2028 Notes beginning October 28, 2024 through January 24, 2025 (the last trading day of the fiscal quarter ending January 26, 2025).
In addition, on or after August 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2028 Notes, holders of the 2028 Notes may convert all or a portion of their 2028 Notes, regardless of the foregoing conditions. Upon conversion, the 2028 Notes will be settled in cash up to the aggregate principal amount of the 2028 Notes to be converted, and in cash, shares of the Company's common stock or any combination thereof, at the Company's option, in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the 2028 Notes being converted.
The Company may not redeem the 2028 Notes prior to November 5, 2026. The Company may redeem for cash all or any portion of the 2028 Notes (subject to the limitation described below), at the Company's option, on or after November 5, 2026 and before the 41st scheduled trading day immediately preceding the maturity date if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of sale price redemption, at a redemption price equal to 100% of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding 2028 Notes, at least $75.0 million aggregate principal amount of the 2028 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the 2028 Notes.
Upon the occurrence of a Fundamental Change (as defined in the 2028 Indenture) prior to the maturity date of the 2028 Notes, holders of the 2028 Notes may require the Company to repurchase all or a portion of the 2028 Notes for cash at a price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the Fundamental Change Repurchase Date (as defined in the 2028 Indenture).
Exchange of 2028 Notes
On July 11, 2024 and July 15, 2024, the Company entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of the 2028 Notes. Pursuant to the Exchange Agreements, on July 24, 2024 certain holders exchanged with the Company approximately $188.1 million in aggregate principal amount of the 2028 Notes held by them for an aggregate of 10,378,431 shares of the Company's common stock, which number of shares was determined over an averaging period that commenced on July 12, 2024. The Company accounted for these exchange transactions as a partial debt extinguishment and recognized a loss on extinguishment of debt equal to the difference between the fair value of the Company's common stock delivered to certain holders of the 2028 Notes and the carrying value of the outstanding debt, accrued interest and third-party fees related to the Exchange Agreements. In the nine months ended October 27, 2024, in connection with the exchange transactions, the Company recognized $144.7 million of loss included in "Loss on extinguishment of debt" in the Statements of Operations and $5.5 million of loss resulting from the write-off of deferred financing costs included in "Interest expense" in the Statements of Operations.
Interest Expense
Interest expense was comprised of the following components for the periods presented:
 Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Contractual interest$21,323 $25,566 $68,470 $70,963 
Interest swap agreement(2,572)(2,773)(8,167)(7,363)
Amortization of deferred financing costs2,056 1,837 6,814 4,940 
Write-off of deferred financing costs—3,675 5,497 4,446 
Total interest expense$20,807 $28,305 $72,614 $72,986 
As of October 27, 2024 and January 28, 2024, there was $2.9 million outstanding under the letters of credit, swing line loans and alternative currency sub-facilities under the Revolving Credit Facility.
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Note 10: Income Taxes
The Company's effective tax rate differs from the statutory federal income tax rate of 21% primarily due to the regional mix of income, changes in valuation allowance, research and development ("R&D") tax credits and nondeductible loss on extinguishment of debt. The Tax Cuts and Jobs Act requires R&D costs incurred for tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted. The Company has elected to treat global intangible low-taxed income ("GILTI") as a period cost and the additional capitalization of R&D costs within GILTI increases the Company's provision for income taxes.
In December 2021, the Organization for Economic Cooperation and Development ("OECD") published a framework for a new global minimum tax of 15% ("Pillar Two") on income arising in low-tax jurisdictions, and certain governments in countries where the Company operates have enacted local Pillar Two legislation, with an effective date from January 1, 2024. The Company currently does not expect Pillar Two to have a material impact on its provision for income taxes; however, any future changes in OECD guidance or interpretations could adversely impact the Company’s initial assessment.
The Company uses a two-step approach to recognize and measure uncertain tax positions ("UTP"). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (before the federal impact of state items) is as follows:
(in thousands)
Balance at January 28, 2024$36,548 
Additions based on tax positions related to the current fiscal year 986 
Decreases based on tax positions related to prior fiscal years(25)
Balance at October 27, 2024$37,509 
Included in the balance of gross unrecognized tax benefits at October 27, 2024 and January 28, 2024 are $14.9 million and $14.6 million, respectively, of net tax benefits (after the federal impact of state items), that, if recognized, would impact the effective tax rate, prior to consideration of any required valuation allowance. The Company believes that it is reasonably possible that its balance of gross unrecognized tax benefits may decrease by approximately $16 million during the fourth quarter of fiscal year 2025 due to expiration of a statute of limitations.
The liability for UTP is reflected in the Balance Sheets as follows:        
(in thousands)October 27, 2024January 28, 2024
Deferred tax assets - non-current$21,201 $20,519 
Other long-term liabilities14,901 14,632 
Total accrued taxes$36,102 $35,151 
The Company's policy is to include net interest and penalties related to unrecognized tax benefits in the "Provision (benefit) for income taxes" in the Statements of Operations.
Tax years prior to 2013 (the Company's fiscal year 2014) are generally not subject to examination by the U.S. Internal Revenue Service except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. For state returns in the U.S., the Company is generally not subject to income tax examinations for calendar years prior to 2012 (the Company's fiscal year 2013). The Company has a significant tax presence in Switzerland for which Swiss tax filings have been examined through fiscal year 2020. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed in the Company's tax examinations are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
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The Company's regional income or loss before taxes and equity method income or loss was as follows:
 Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Domestic$(11,147)$21,165 $(200,607)$(71,146)
Foreign7,580 (59,717)10,707 (324,632)
Total$(3,567)$(38,552)$(189,900)$(395,778)
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Note 11: Leases
The Company has operating leases for real estate, vehicles, and office equipment, which are accounted for in accordance with ASC 842, "Leases." Real estate leases are used to secure office space for the Company's administrative, engineering, production support and manufacturing activities. The Company's leases have remaining lease terms of up to approximately eight years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.
The components of lease expense were as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Operating lease cost$1,801 $2,181 $5,497 $6,497 
Short-term lease cost22 380 186 1,473 
Sublease income(136)(163)(432)(483)
Total lease cost$1,687 $2,398 $5,251 $7,487 
Supplemental cash flow information related to leases was as follows:
Nine Months Ended
(in thousands)October 27, 2024October 29, 2023
Cash paid for amounts included in the measurement of lease liabilities$6,051 $6,415 
Right-of-use assets obtained in exchange for new operating lease liabilities$2,603 $3,050 
October 27, 2024
Weighted-average remaining lease term–operating leases (in years)4.9
Weighted-average discount rate on remaining lease payments–operating leases7.0 %
Supplemental balance sheet information related to leases was as follows:
(in thousands)October 27, 2024January 28, 2024
Operating lease right-of-use assets in "Other assets"$22,323 $23,870 
Operating lease liabilities in "Accrued liabilities"$6,508 $6,560 
Operating lease liabilities in "Other long-term liabilities"19,441 22,033 
Total operating lease liabilities$25,949 $28,593 
Maturities of lease liabilities as of October 27, 2024 are as follows:
(in thousands)
Fiscal Year Ending:
2025 (remaining three months)$2,594 
20267,543 
20275,643 
20285,128 
20294,244 
Thereafter5,982 
Total lease payments31,134 
Less: imputed interest(5,185)
Total$25,949 

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Note 12: Commitments and Contingencies
Legal Matters
From time to time, the Company is involved in various claims, litigation, and other legal actions that are normal to the nature of its business, including with respect to intellectual property, contract, product liability, employment, and environmental matters. In accordance with ASC 450-20, "Loss Contingencies," the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. The Company also discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if material and if the amount can be reasonably estimated. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. However, for liabilities that are reasonably possible but not probable, the Company discloses the amount of reasonably possible loss or range of reasonably possible loss, if material and if the amount can be reasonably estimated. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued, and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. The Company may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are indeterminate, (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements, (iv) if there are significant factual issues to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.
Because the outcomes of litigation and other legal matters are inherently unpredictable, the Company's evaluation of legal matters or proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. While the consequences of certain unresolved matters and proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material adverse effect on the Company's financial condition and results of operations in any given reporting period. In the opinion of management, after consulting with legal counsel, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the Company's financial condition, results of operations or cash flows. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company's control.
As such, even though the Company intends to vigorously defend itself with respect to its legal matters, there can be no assurance that the final outcome of these matters will not materially and adversely affect the Company's business, financial condition, operating results, or cash flows.
On June 14, 2022, Denso Corporation, and several of its affiliates (collectively "Denso"), filed a complaint against Sierra Wireless and several of its affiliates ("Sierra Entities") in the Superior Court of California, County of San Diego. Denso asserted eight causes of action, including claims for breach of express and implied warranties, equitable indemnification, negligent and intentional misrepresentation, unjust enrichment, promissory estoppel, and declaratory judgment, based on an alleged defect related to the GPS week number rollover date. Denso alleged that it incurred in excess of $84 million in damages and costs to implement a firmware update provided by Sierra Entities' supplier in late 2018, before Sierra Wireless disposed of the automotive business, to address the alleged product defect. Denso filed an amended complaint on September 23, 2022, asserting essentially the same eight causes of action. After briefing on a demurrer and initial discovery, the parties' reached a settlement agreement on September 18, 2023 with payments to Denso to be made in four quarterly installments. The final installment payment was made in June 2024 and the case was dismissed with prejudice.
On March 25, 2022, Harman Becker Automotive Systems GmbH, and several of its affiliates (collectively "Harman"), filed a complaint against certain Sierra Entities in the District Court of Munich, Germany. Harman asserted claims that the Sierra Entities, in connection with the delivery of certain modules by the Sierra Entities, violated a frame supply agreement, a quality assurance agreement and the United Nations Convention on Contracts for the International Sales of Goods. Harman alleged that it incurred approximately $16 million in damages and costs, the bulk of which amount related to settling with a customer that had to implement a firmware update provided by Sierra Entities' supplier in late 2018, before Sierra Wireless disposed of the automotive business, to address the alleged product defect. At this stage, the Company is unable to form a conclusion as to the likelihood of an unfavorable outcome or an estimate of the amount or range of any possible loss resulting from the alleged claims. The Company intends to defend the claims vigorously.
Environmental Matters
The Company vacated a former facility in Newbury Park, California in 2002, but continues to address groundwater and soil contamination at the site. The Company's efforts to address site conditions have been at the direction of the Los Angeles Regional Water Quality Control Board ("RWQCB"). In October 2013, an order was issued including a scope of proposed additional site work, monitoring, and remediation activities. The Company has been complying with RWQCB orders and
direction, and continues to implement an approved remedial action plan addressing the soil, groundwater, and soil vapor at the site. 
The Company has accrued liabilities where it is probable that a loss will be incurred and the cost or amount of loss can be reasonably estimated. Based on the latest determinations by the RWQCB and the most recent actions taken pursuant to the remedial action plan, the Company estimates the total range of probable loss to be between $7.9 million and $9.4 million. To date, the Company has made $7.5 million in payments towards the remedial action plan. As of October 27, 2024, the estimated range of probable loss remaining was between $0.4 million and $1.9 million. Given the uncertainties associated with environmental assessment and the remediation activities, the Company is unable to determine a best estimate within the range of loss. Therefore, the Company has recorded the minimum amount of probable loss and as of October 27, 2024, has a remaining accrual of $0.4 million related to this matter. These estimates could change as a result of changes in planned remedial actions, further actions from the regulatory agency, remediation technology, and other factors.
Indemnification
The Company has entered into agreements with its current and former executives and directors indemnifying them against certain liabilities incurred in connection with the performance of their duties. The Company's Certificate of Incorporation and Bylaws also contain indemnification obligations with respect to the Company's current directors and employees.
The Company is a party to a variety of agreements in the ordinary course of business under which the Company may be obligated to indemnify a third party with respect to certain matters. The impact on the Company's future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of any claims and whether claims will be made.
Product Warranties
The Company's general warranty policy provides for repair or replacement of defective parts. In some cases, a refund of the purchase price is offered. In certain instances, the Company has agreed to other or additional warranty terms, including indemnification provisions.
The product warranty accrual reflects the Company's best estimate of probable liability under its product warranties. The Company accrues for known warranty issues if a loss is probable and can be reasonably estimated, and accrues for estimated incurred but unidentified issues based on historical experience. Historically, warranty expense and the related accrual has been immaterial to the Company's consolidated financial statements.
Licenses
Under certain license agreements, the Company is committed to make royalty payments based on the sales of products using certain technologies. The Company recognizes royalty obligations as determinable in accordance with agreement terms.
Deferred Compensation
The Company maintains a deferred compensation plan for certain officers and key executives that allows participants to defer a portion of their compensation for future distribution at various times permitted by the plan. This plan provides for a discretionary Company match up to a defined portion of the employee's deferral, with any match subject to a defined vesting schedule.
The Company's liability for the deferred compensation plan is presented below:
(in thousands)October 27, 2024January 28, 2024
Accrued liabilities$3,588 $7,412 
Other long-term liabilities34,350 32,288 
Total deferred compensation liabilities under this plan$37,938 $39,700 
The Company has purchased whole life insurance on the lives of certain current deferred compensation plan participants. This corporate-owned life insurance is held in a grantor trust and is intended to cover a majority of the Company's costs of the deferred compensation plan.
The cash surrender value of the Company's corporate-owned life insurance is presented below:
(in thousands)October 27, 2024January 28, 2024
Other current assets$— $4,538 
Other assets28,676 25,098 
Total cash surrender value of corporate-owned life insurance$28,676 $29,636 
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Note 13: Restructuring
The Company has undertaken structural reorganization actions to reduce its workforce as a result of cost-saving measures and internal resource alignment including from the realization of synergies of the Sierra Wireless Acquisition. The Company had restructuring charges of $0.7 million and $4.5 million in the three and nine months ended October 27, 2024, respectively, compared to restructuring charges of $3.6 million and $15.5 million in the three and nine months ended October 29, 2023, respectively. Restructuring related liabilities are included in "Accrued liabilities" in the Balance Sheets.
Restructuring activity is summarized as follows:
(in thousands)One-time employee termination benefitsOther restructuringTotal
Balance at January 28, 2024$5,799 $478 $6,277 
Charges 4,297 208 4,505 
Cash payments(8,744)(686)(9,430)
Balance at October 27, 2024$1,352 $— $1,352 
Restructuring charges were included in the Statements of Operations as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Cost of sales$— $— $— $859 
Restructuring695 3,646 4,505 14,608 
Total restructuring charges$695 $3,646 $4,505 $15,467 
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Note 14: Concentration of Risk
The following significant customers accounted for at least 10% of the Company's net sales in one or more of the periods indicated:
Three Months EndedNine Months Ended
(percentage of net sales) (1)
October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Frontek Technology Corporation (and affiliates)13%14%13%*
Trend-tek Technology Ltd. (and affiliates)11%*11%*
(1) In each period with an asterisk, the customer represented less than 10% of the Company's net sales.
The following table shows the customers that have an outstanding receivable balance that represents at least 10% of the Company's total net receivables as of one or more of the dates indicated:
(percentage of net receivables) (1)
October 27, 2024January 28, 2024
Trend-tek Technology Ltd (and affiliates)14%*
Frontek Technology Corporation (and affiliates)*15%
(1) In each period with an asterisk, the customer represented less than 10% of the Company's total net receivables.
Outside Subcontractors and Suppliers
The Company relies on a limited number of third-party subcontractors and suppliers for the supply of silicon wafers, chipsets and other electronic components, and for product manufacturing, packaging, testing and certain other tasks. Disruption or termination of supply sources or subcontractors have delayed and could in the future delay shipments and could have a material adverse effect on the Company. Although there are generally alternate sources for these materials and services, qualification of the alternate sources could cause delays sufficient to have a material adverse effect on the Company. A significant amount of the Company's third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in the U.S., China, and Taiwan. A significant amount of the Company's assembly and test operations are conducted by third-party contractors in China, Malaysia, Mexico, Taiwan, and Vietnam.
35



Note 15: Segment Information
The Company's Chief Executive Officer functions as the chief operating decision maker ("CODM"). The CODM makes operating decisions and assesses performance based on the Company's major product lines, which represent its operating segments. The Company currently has three operating segments—Signal Integrity, Analog Mixed Signal and Wireless, and IoT Systems and Connectivity—that represent three separate reportable segments.
Prior to the fourth quarter of fiscal year 2024, the Company had four operating segments—Signal Integrity, Advanced Protection and Sensing, IoT Systems and IoT Connected Services. In the fourth quarter of fiscal year 2024, as a result of organizational restructuring, the wireless business, which was previously included in the former IoT Systems operating segment, and the software defined video over ethernet business, which was previously included in the Signal Integrity operating segment, were moved into the Analog Mixed Signal and Wireless operating segment, formerly the Advanced Protection and Sensing operating segment, which also includes the proximity sensing, power and protection businesses. In the first quarter of fiscal year 2025, as a result of organizational restructuring, the Company combined the IoT Systems operating segment and the IoT Connected Services operating segment into the newly formed IoT Systems and Connectivity operating segment. As a result of the reorganization, the Company has three reportable segments. All prior year information in the tables below has been revised retrospectively to reflect the change to the Company's reportable segments.
The Company's assets are commingled among the various operating segments and the CODM does not use asset information in making operating decisions or assessing performance. Therefore, the Company has not included asset information by reportable segment in the segment disclosures below.
Net sales and gross profit by reportable segment were as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net sales:
Signal Integrity $71,509 30 %$47,185 23 %$189,242 29 %$134,202 20 %
Analog Mixed Signal and Wireless 82,829 35 %70,233 35 %237,484 36 %199,841 30 %
IoT Systems and Connectivity82,487 35 %83,481 42 %231,559 35 %341,767 50 %
Total net sales$236,825 100 %$200,899 100 %$658,285 100 %$675,810 100 %
Gross profit:
Signal Integrity$45,123 $24,368 $116,652 $76,461 
Analog Mixed Signal and Wireless47,355 35,469 133,458 115,066 
IoT Systems and Connectivity33,831 42,469 88,036 143,626 
Unallocated costs, including share-based compensation and amortization of acquired technology(5,341)(9,340)(12,122)(38,513)
Total gross profit$120,968 $92,966 $326,024 $296,640 
Geographic Information
Net sales activity by geographic region was as follows:
 Three Months EndedNine Months Ended
(percentage of total net sales)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Asia-Pacific63%59%64%58%
North America23%26%22%27%
Europe14%15%14%15%
100%100%100%100%
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The Company attributes sales to a country based on the ship-to address. The table below summarizes sales activity to geographies that represented greater than 10% of total sales for at least one of the periods presented:
 Three Months EndedNine Months Ended
(percentage of total net sales)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
China (including Hong Kong)44%39%44%30%
United States21%22%21%24%
Although a large percentage of the Company's products is shipped into the Asia-Pacific region, a significant number of products produced by these customers and incorporating the Company's semiconductor products are then sold outside this region.
Sales by Revenue Type
Net sales by revenue type were as follows:
Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net sales:
Product sales$207,729 88 %$172,362 86 %$571,183 87 %$589,939 87 %
Service revenue29,096 12 %28,537 14 %87,102 13 %85,871 13 %
Total net sales$236,825 100 %$200,899 100 %$658,285 100 %$675,810 100 %


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Note 16: Stock Repurchase Program
The Company maintains a stock repurchase program that was initially approved by its board of directors (the "Board of Directors") in March 2008. The stock repurchase program does not have an expiration date and the Board of Directors has authorized expansion of the program over the years. On March 11, 2021, the Board of Directors approved the expansion of the stock repurchase program by an additional $350.0 million. There was no activity under the stock repurchase program during the three and nine months ended October 27, 2024 and October 29, 2023. As of October 27, 2024, the remaining authorization under the program was $209.4 million. Under the program, the Company may repurchase its common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. The Company's repurchases may be made through Rule 10b5-1 and/or Rule 10b-18 or other trading plans, open market purchases, privately negotiated transactions, block purchases or other transactions. To the extent the Company repurchases any shares of its common stock under the program in the future, the Company expects to fund such repurchases from cash on hand and borrowings on its Revolving Credit Facility. The Company has no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
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Note 17: Derivatives and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions and principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company, on a routine basis and in the normal course of business, experiences expenses denominated in Swiss Franc ("CHF"), Canadian Dollar ("CAD") and Great British Pound ("GBP"). Such expenses expose the Company to exchange rate fluctuations between these foreign currencies and the U.S. Dollar ("USD"). The Company occasionally uses derivative financial instruments, in the form of forward contracts, to mitigate a portion of the risk associated with adverse movements in these foreign currency exchange rates during a twelve-month window. Currency forward contracts involve fixing the exchange rate for delivery of a specified amount of foreign currency on a specified date. The Company's accounting treatment for these instruments is based on whether or not the instruments are designated as a hedging instrument. The Company applied hedge accounting to all foreign currency derivatives and designated these hedges as cash flow hedges.
The Company's foreign currency forward contracts had the following outstanding balances:
October 27, 2024January 28, 2024
(in thousands, except number of instruments)Number of InstrumentsSell Notional ValueBuy Notional ValueNumber of InstrumentsSell Notional ValueBuy Notional Value
Sell USD/Buy CAD Forward Contract1$1,215 $1,650 10$12,899 $17,550 
Total110
These foreign currency forward contracts were designated as cash flows hedges and the unrealized gains or losses, net of tax, were recorded as a component of "Accumulated other comprehensive income or loss, net" ("AOCI") in the Balance Sheets. The effective portions of the cash flow hedges were recorded in AOCI until the hedged items were recognized in either "Selling, general and administrative expense" or "Product development and engineering expense" in the Statements of Operations once the foreign exchange contract matured, offsetting the underlying hedged expenses. Any ineffective portions of the cash flow hedges were recorded in "Non-operating income, net" in the Statements of Operations. The Company presents its derivative assets and liabilities at their gross fair values in the Balance Sheets.
In the first quarter of fiscal year 2024, the Company entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.58%, plus a variable margin and spread based on the Company's consolidated leverage ratio.
In the fourth quarter of fiscal year 2023, the Company entered into an interest rate swap agreement with a 5 year term to hedge the variability of interest payments on $450.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.44%, plus a variable margin and spread based on the Company's consolidated leverage ratio.
The interest rate swap agreements have been designated as cash flow hedges and unrealized gains or losses, net of income tax, are recorded as a component of AOCI in the Balance Sheets. As the various settlements are made on a monthly basis, the realized gain or loss on the settlements are recorded in "Interest expense" in the Statements of Operations. The interest rate swap agreements resulted in a realized gain of $2.6 million for the three months ended October 27, 2024, compared to a realized gain of $2.8 million for the three months ended October 29, 2023. The interest rate swap agreements resulted in a realized gain of $8.2 million for the nine months ended October 27, 2024, compared to a realized gain of $7.4 million for the nine months ended October 29, 2023.
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The fair values of the Company's instruments that qualify as cash flow hedges in the Balance Sheets were as follows:
(in thousands)October 27, 2024January 28, 2024
Interest rate swap agreement$3,641 $7,144 
Foreign currency forward contracts— 168 
Total other current assets$3,641 $7,312 
Interest rate swap agreement$947 $178 
Total other long-term assets$947 $178 
Foreign currency forward contracts$27 $— 
Total accrued liabilities$27 $— 
Interest rate swap agreement— 7 
Total other long-term liabilities$— $7 
During fiscal year 2021, the Company entered into an economic hedge program that used total return swap contracts to hedge the market risk associated with the unfunded portion of the Company's deferred compensation liability. The total return swap contracts generally had a duration of one month and were rebalanced and re-hedged at the end of each monthly term. While the total return swap contracts were treated as economic hedges, the Company did not designate them as hedges for accounting purposes. The total return swap contracts were measured at fair value and recognized in the Balance Sheets in "Accrued Liabilities" if the instruments were in a loss position and in "Other Current Assets" if the instruments were in a gain position. Unrealized gains and losses, as well as realized gains and losses for settlements, on the total return swap contracts were recognized in "Selling, general and administrative expenses" in the Statements of Operations. The total return swap contracts, which matured during fiscal year 2024, resulted in net loss recognized in earnings of $0.9 million and $0.7 million for the three and nine months ended October 29, 2023, respectively.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following "Management’s Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with our interim unaudited condensed consolidated financial statements and the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Quarterly Report") and "Special Note Regarding Forward-Looking and Cautionary Statements" in this Quarterly Report as well as "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 filed with the Securities and Exchange Commission (the "SEC") on March 28, 2024.
Our interim unaudited condensed consolidated balance sheets are referred to herein as the "Balance Sheets" and interim unaudited condensed consolidated statements of operations are referred to herein as the "Statements of Operations." Amounts and percentages may not add precisely due to rounding.
Overview
Semtech Corporation (together with its consolidated subsidiaries, the "Company," "we," "our" or "us") is a high-performance, semiconductor, Internet of Things ("IoT") systems and cloud connectivity service provider. We have three operating segments—Signal Integrity, Analog Mixed Signal and Wireless, and IoT Systems and Connectivity—that represent three separate reportable segments. Prior to the fourth quarter of fiscal year 2024, the Company had four operating segments—Signal Integrity, Advanced Protection and Sensing, IoT Systems and IoT Connected Services. In the fourth quarter of fiscal year 2024, as a result of organizational restructuring, the wireless business, which was previously included in the former IoT Systems operating segment, and the software defined video over ethernet business, which was previously included in the Signal Integrity operating segment, were moved into the Analog Mixed Signal and Wireless operating segment, formerly the Advanced Protection and Sensing operating segment, which also includes the proximity sensing, power and protection businesses. In the first quarter of fiscal year 2025, as a result of organizational restructuring, the Company combined the IoT Systems operating segment and the IoT Connected Services operating segment into the newly formed IoT Systems and Connectivity operating segment. As a result of the reorganization, the Company has three reportable segments. All prior year information in the tables below has been revised retrospectively to reflect the change to the Company's reportable segments. See Part I, Item 1, Note 15, Segment Information, to our interim unaudited condensed consolidated financial statements for additional information on our reportable segments.
Signal Integrity. We design, develop, manufacture and market a portfolio of optical and copper data communications and video transport products used in a wide variety of infrastructure and industrial applications. Our comprehensive portfolio includes integrated circuits ("ICs") for data centers, enterprise networks, passive optical networks ("PON"), and wireless base station optical transceivers. Our high-speed interfaces range from 100Mbps to 1.6Tbps and support key industry standards such as Fibre Channel, InfiniBand, Ethernet, PON and synchronous optical networks. Our video products offer advanced solutions for next generation high-definition broadcast applications.
Analog Mixed Signal and Wireless. We design, develop, manufacture and market high-performance protection devices, which are often referred to as transient voltage suppressors ("TVS") and specialized sensing products. TVS devices provide protection for electronic systems where voltage spikes (called transients), such as electrostatic discharge, electrical over stress or secondary lightning surge energy, can permanently damage sensitive ICs. Our portfolio of protection solutions include filter and termination devices that are integrated with the TVS device. Our products provide robust protection while preserving signal integrity in high-speed communications, networking and video interfaces. These products also operate at very low voltage. Our protection products can be found in a broad range of applications including smart phones, LCD and organic light-emitting diode TVs and displays, set-top boxes, monitors and displays, tablets, computers, notebooks, base stations, routers, automobile and industrial systems. Our unique sensing technology enables proximity sensing and advanced user interface solutions for our mobile and consumer products. We also design, develop, manufacture and market a portfolio of specialized radio frequency products used in a wide variety of industrial, medical and communications applications. Our wireless products, which include our LoRa® devices and wireless radio frequency technology ("LoRa Technology"), feature industry leading and longest range industrial, scientific and medical radio, enabling a lower total cost of ownership and increased reliability. These features make these products particularly suitable for machine-to-machine and IoT applications. We also design, develop, and market power product devices that control, alter, regulate, and condition the power within electronic systems focused on the LoRa and IoT infrastructure segment. The highest volume product types within this category are switching voltage regulators, combination switching and linear regulators, smart regulators, isolated switches, and wireless charging. Our video products offer advanced solutions for highly differentiated audio video-over-IP technology for professional audio video applications.
IoT Systems and Connectivity. We design, develop, operate and market a comprehensive product portfolio of IoT solutions that enable businesses to connect and manage their devices, collect and analyze data, and improve decision-making. The portfolio includes a wide range of modules, gateways, routers, and connected services that are designed to meet the specific needs of different industries and applications. Our modules are available in a variety of form factors and connectivity options, including LTE-M, NB-IoT and 5G, and can be integrated into an array of devices and systems. Our gateways and routers are designed to provide reliable and secure connectivity for IoT devices, while our connected services enable businesses to manage devices and connectivity so businesses can navigate the complex IoT landscape and realize the full potential of connected devices. We also
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design, develop, operate and market a portfolio of connected services used in a wide variety of industrial, medical and communications applications. Our connected services include wireless connectivity and cloud-based services for customers to deploy, connect, and operate their end applications. Our services have been purpose-built for IoT applications and include features such as SIM and subscription management, device and data management, geolocation support, as well as reporting and alerting that can be configured or tailored to a variety of IoT use cases.
Our net sales by reportable segment were as follows:
 Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Signal Integrity$71,509 $47,185 $189,242 $134,202 
Analog Mixed Signal and Wireless
82,829 70,233 237,484 199,841 
IoT Systems and Connectivity82,487 83,481 231,559 341,767 
Total$236,825 $200,899 $658,285 $675,810 
We design, develop, manufacture and market a wide range of products for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets.
Infrastructure: data centers, PON, base stations, optical networks, servers, carrier networks, switches and routers, cable modems, wireless local area network and other communication infrastructure equipment.
High-End Consumer: smartphones, tablets, wearables, desktops, notebooks, and other handheld products, wireless charging, set-top boxes, digital televisions, monitors and displays, digital video recorders and other consumer equipment.
Industrial: IoT applications, analog and digital video broadcast equipment, video-over-IP solutions, automated meter reading, smart grid, wireless charging, medical, security systems, automotive, industrial and home automation and other industrial equipment.
Our end customers for our silicon solutions are primarily original equipment manufacturers that produce and sell technology solutions. Our IoT module, router, gateway (together "IoT Hardware") and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices.
Recent Developments
Convertible Note Exchange
On July 11, 2024 and July 15, 2024, we entered into separate, privately negotiated exchange agreements (the "Exchange Agreements") with certain holders of our 4.00% Convertible Senior Notes due 2028 (the "2028 Notes"). Pursuant to the Exchange Agreements, on July 24, 2024 certain holders exchanged with us approximately $188.1 million in aggregate principal amount of the 2028 Notes held by them for an aggregate of 10,378,431 shares of our common stock, which number of shares was determined over an averaging period that commenced on July 12, 2024. We accounted for these exchange transactions as a partial debt extinguishment and recognized a loss on extinguishment of debt equal to the difference between the fair value of our common stock delivered to certain holders of the 2028 Notes and the carrying value of the outstanding debt, accrued interest and third-party fees related to the Exchange Agreements. In the nine months ended October 27, 2024, in connection with the exchange transactions, we recognized $144.7 million of loss included in "Loss on extinguishment of debt" in the Statements of Operations and $5.5 million of loss resulting from the write-off of deferred financing costs included in "Interest expense" in the Statements of Operations.
Impact of Macroeconomic Conditions
In recent periods, macroeconomic factors such as market volatility, inflationary pressures, elevated interest rates, geopolitical tensions and recessionary concerns have caused uncertainty in end customer demand, which resulted in elevated channel inventories. We believe that we can continue to take appropriate actions to align our inventory levels with anticipated customer demand profiles.
Factors Affecting Our Performance
Most of our sales to customers are made on the basis of individual customer purchase orders and many customers include cancellation provisions in their purchase orders. We rely on orders received and shipped within the same quarter for a meaningful portion of our sales. Net sales made through independent distributors during the third quarters of fiscal years 2025 and 2024 were each 72% of net sales and the remainder were made directly to customers.
We are a global business with customers and suppliers around the world. A significant amount of our third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located outside the United States, including China and Taiwan. A significant amount of our assembly and test operations are conducted by third-party contractors located outside the United States, including China, Malaysia, Mexico, Taiwan and Vietnam. Net sales outside the United States constituted
42



79% and 78% during the third quarters of fiscal years 2025 and 2024, respectively. Approximately 63% and 59% of our net sales during the third quarters of fiscal years 2025 and 2024, respectively, were to customers located in the Asia-Pacific region. We are subject to export restrictions and trade regulations, which have limited our ability to sell to certain customers in certain regions.
We use several metrics as indicators of future potential growth. The indicators that we believe best correlate to potential future sales growth are design wins and new product releases. There are many factors that may cause a design win or new product release to not result in sales, including a customer's decision not to go to system production, a change in a customer's perspective regarding a product's value or a customer's product failing in the end market. As a result, although a design win or new product introduction is an important step towards generating future sales, it does not necessarily result in us being awarded business or receiving a purchase commitment.
Inflationary factors have in the past affected, and could continue to affect, our performance if we are unable to pass higher costs on to our customers.
Results of Operations
The following table sets forth, for the periods indicated, our Statements of Operations expressed as a percentage of net sales.
 Three Months EndedNine Months Ended
October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of sales48.0 %48.7 %49.4 %51.5 %
Amortization of acquired technology1.0 %5.0 %1.0 %4.7 %
Total cost of sales49.0 %53.7 %50.4 %56.2 %
Gross profit51.1 %46.3 %49.5 %43.8 %
Operating expenses, net:
Product development and engineering18.0 %23.4 %18.9 %21.4 %
Selling, general and administrative25.2 %23.7 %25.5 %24.4 %
Intangible amortization0.1 %2.4 %0.1 %2.2 %
Restructuring0.3 %1.8 %0.7 %2.2 %
Goodwill impairment— %1.1 %— %41.7 %
Total operating expenses, net43.6 %52.4 %45.2 %91.9 %
Operating income (loss)7.5 %(6.2)%4.4 %(48.0)%
Interest expense(8.8)%(14.1)%(11.0)%(10.8)%
Interest income0.2 %0.3 %0.2 %0.3 %
Loss on extinguishment of debt— %— %(22.0)%— %
Non-operating (expense) income, net(0.5)%1.8 %(0.3)%0.2 %
Investment impairments and credit loss reserves, net— %(1.0)%(0.2)%(0.3)%
Loss before taxes and equity method (loss) income(1.5)%(19.2)%(28.8)%(58.6)%
Provision (benefit) for income taxes1.7 %(0.2)%1.7 %8.0 %
Net loss before equity method (loss) income(3.2)%(19.0)%(30.5)%(66.5)%
Equity method (loss) income— %— %— %— %
Net loss(3.2)%(19.0)%(30.5)%(66.5)%
Net loss attributable to noncontrolling interest— %— %— %— %
Net loss attributable to common stockholders(3.2)%(19.0)%(30.5)%(66.5)%
Percentages may not add precisely due to rounding.
Our regional mix of loss before taxes and equity method (loss) income was as follows:
 Three Months EndedNine Months Ended
(in thousands)October 27, 2024October 29, 2023October 27, 2024October 29, 2023
Domestic$(11,147)$21,165 $(200,607)$(71,146)
Foreign7,580 (59,717)10,707 (324,632)
Total$(3,567)$(38,552)$(189,900)$(395,778)
Domestic performance includes higher levels of share-based compensation compared to foreign operations.
43



Comparison of the Three Months Ended October 27, 2024 and October 29, 2023
Net Sales
The following table summarizes our net sales by major end markets:
Three Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Net Sales% Net SalesNet Sales% Net SalesChange
Infrastructure$65,801 28 %$43,191 21 %52 %
High-End Consumer40,019 17 %37,553 19 %7 %
Industrial131,005 55 %120,155 60 %9 %
Total$236,825 100 %$200,899 100 %18 %
Net sales in the third quarter of fiscal year 2025 were $236.8 million, an increase of 17.9% compared to $200.9 million in the third quarter of fiscal year 2024, which was primarily driven by higher net sales from our infrastructure and industrial end markets due to stronger demand and increased sales volume. Net sales from our infrastructure end market increased $22.6 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024, primarily driven by a $18.8 million increase in data center sales and a $4.5 million increase in telecommunications sales, partially offset by a $0.7 million decrease in TVS infrastructure and other product sales. Net sales from our industrial end market increased $10.9 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024, primarily driven by a $14.8 million increase in LoRa-enabled sales in industrial applications, partially offset by a $1.4 million decrease in IoT Hardware sales. Net sales from our high-end consumer end market increased $2.5 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024, primarily driven by an increase in TVS consumer product sales.
The following table summarizes our net sales by reportable segment:
Three Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Net Sales% Net SalesNet Sales% Net SalesChange
Signal Integrity $71,509 30 %$47,185 23 %52 %
Analog Mixed Signal and Wireless82,829 35 %70,233 35 %18 %
IoT Systems and Connectivity82,487 35 %83,481 42 %(1)%
Total$236,825 100 %$200,899 100 %18 %
Net sales in the third quarter of fiscal year 2025, as compared to the third quarter of fiscal year 2024, benefited from stronger demand and increased sales volumes in the Signal Integrity and Analog Mixed Signal and Wireless reportable segments. Net sales from Signal Integrity increased $24.3 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024, primarily driven by a $18.8 million increase in data center sales, a $4.5 million increase in telecommunications sales and a $1.2 million increase in broadcast sales. Net sales from Analog Mixed Signal and Wireless increased $12.6 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024, primarily driven by a $13.5 million increase in LoRa-enabled product sales, partially offset by a $1.0 million decrease in Pro-AV product sales. Net sales from IoT Systems and Connectivity decreased $1.0 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024 primarily driven by a $1.4 million decrease in IoT Hardware sales.
44



Gross Profit
The following table summarizes our gross profit and gross margin by reportable segment:
Three Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Gross ProfitGross MarginGross ProfitGross Margin
Signal Integrity$45,123 63.1 %$24,368 51.6 %
Analog Mixed Signal and Wireless
47,355 57.2 %35,469 50.5 %
IoT Systems and Connectivity33,831 41.0 %42,469 50.9 %
Unallocated costs, including share-based compensation and amortization of acquired technology(5,341)(9,340)
Total$120,968 51.1 %$92,966 46.3 %
In the third quarter of fiscal year 2025, gross profit increased $28.0 million to $121.0 million from $93.0 million in the third quarter of fiscal year 2024. This increase was primarily driven by a $20.8 million increase from Signal Integrity, which experienced higher sales led by data center and 10G PON due to stronger demand, a $11.9 million increase from Analog Mixed Signal and Wireless, which experienced higher sales led by LoRa-enabled product due to stronger demand, a $7.7 million decrease in the amortization of acquired technology intangible assets related to the acquisition of all of the issued and outstanding common shares of Sierra Wireless, Inc. on January 12, 2023 (the "Sierra Wireless Acquisition") due to impairments in the fourth quarter of fiscal year 2024, partially offset by a $8.6 million decrease from IoT Systems and Connectivity due to royalty expense recoveries in the third quarter of fiscal year 2024.
Our gross margin was 51.1% in the third quarter of fiscal year 2025, compared to 46.3% in the third quarter of fiscal year 2024. Gross margin for our Signal Integrity segment was 63.1% in the third quarter of fiscal year 2025, compared to 51.6% in the third quarter of fiscal year 2024, primarily due to higher volume reducing overhead. Gross margin for our Analog Mixed Signal and Wireless segment was 57.2% in the third quarter of fiscal year 2025, compared to 50.5% in the third quarter of fiscal year 2024, primarily due to higher overhead absorption and favorable product mix. Gross margin for our IoT Systems and Connectivity segment was 41.0% in the third quarter of fiscal year 2025, compared to 50.9% in the third quarter of fiscal year 2024, primarily due to royalty expense recoveries in the third quarter of fiscal year 2024.
Operating Expenses, net
The following table summarizes our operating expenses, net:
Three Months EndedChange
(in thousands, except percentages)October 27, 2024October 29, 2023
Product development and engineering$42,563 41 %$46,911 45 %(9)%
Selling, general and administrative59,777 58 %47,663 45 %25 %
Intangible amortization148 — %4,853 5 %(97)%
Restructuring695 1 %3,646 3 %(81)%
Goodwill impairment— — %2,266 2 %(100)%
Total operating expenses, net$103,183 100 %$105,339 100 %(2)%
Product Development and Engineering Expenses
Product development and engineering expenses decreased $4.3 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024 primarily as a result of a $6.3 million decrease in new product introduction expenses and a $0.5 million decrease in facilities expenses, partially offset by a $2.5 million net increase in staffing-related costs, which reflects higher supplemental compensation. The levels of product development and engineering expenses reported in a fiscal period can be significantly impacted, and therefore experience period over period volatility, by the number of new product tape-outs and by the timing of recoveries from engineering services, which are typically recorded as a reduction to product development and engineering expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $12.1 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024 primarily as a result of a $13.9 million net increase in staffing-related costs, which reflects higher share-based and supplemental compensation, a $0.8 million increase in litigation expenses, and a $0.5 million increase in depreciation, partially offset by a decrease of $2.7 million in transaction and integration costs primarily related to the Sierra Wireless Acquisition.
45



Intangible Amortization
Intangible amortization decreased by $4.7 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024 due to impairment of intangible assets acquired in the Sierra Wireless Acquisition related to customer relationships and trade name in the fourth quarter of fiscal year 2024. The amortization of acquired technology intangible assets is reflected in cost of sales.
Restructuring
Restructuring decreased by $3.0 million in the third quarter of fiscal year 2025 compared to the third quarter of fiscal year 2024 due to the structural reorganization actions primarily in the prior year period to reduce our workforce as a result of cost-saving measures and internal resource alignment including from the realization of synergies of the Sierra Wireless Acquisition.
Goodwill Impairment
There was no goodwill impairment in the third quarter of fiscal year 2025 compared to $2.3 million of goodwill impairment in the third quarter of fiscal year 2024 due to valuation adjustments of goodwill related to the Sierra Wireless Acquisition. See Note 8, Goodwill and Intangible Assets, to our interim unaudited condensed consolidated financial statements for additional information.
Interest Expense
Interest expense, including amortization and a write-off of deferred financing costs, was $20.8 million and $28.3 million for the third quarters of fiscal years 2025 and 2024, respectively. The decrease was primarily due to interest savings as a result of approximately $188.1 million of 2028 Notes extinguished in exchange for common stock in the second quarter of fiscal year 2025.
Investment Impairments and Credit Loss Reserves, Net
During the third quarter of fiscal year 2025, we did not record any investment impairments and credit loss reserves. During the third quarter of fiscal year 2024, investment impairments and credit loss reserves, net totaled a loss of $2.0 million due to adjustments to our credit loss reserve for our available-for-sale debt securities.
Provision for Income Taxes
We recorded income tax expense of $4.0 million in the third quarter of fiscal year 2025, compared to income tax benefit of $0.3 million in the third quarter of fiscal year 2024. The change in our tax provision for the three months ended October 27, 2024, compared to the three months ended October 29, 2023 was primarily due to a regional mix of income, nondeductible loss on extinguishment of debt and changes in valuation allowance. The effective tax rates in the third quarters of fiscal years 2025 and 2024 differ from the statutory federal income tax rate of 21% primarily due to a regional mix of income, changes in valuation allowance, impact of global intangible low-taxed income ("GILTI"), research and development ("R&D") credits and nondeductible loss on extinguishment of debt. The Tax Cuts and Jobs Act ("Tax Act") requires R&D costs incurred for tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted. We have elected to treat GILTI as a period cost and the additional capitalization of R&D costs within GILTI increases our provision for income taxes.
We receive a tax benefit from a tax holiday that was granted in Switzerland. The tax holiday commenced on January 30, 2017, and was effective for five years (the "Initial Term"). Since we met certain staffing targets, the holiday has been extended for an additional five years commencing on January 31, 2022. The maximum benefit under this tax holiday is CHF 500.0 million of cumulative after tax profit, which equates to a maximum potential tax savings of CHF 44.0 million. The extended term of the tax holiday is effective until fiscal year 2027. However, Switzerland implemented the Organization of Economic Co-operation and Development's ("OECD") global minimum tax ("Pillar Two") rules effective from January 1, 2024. Based on the administrative guidance issued by OECD in December 2023, we have determined that Pillar Two rules are applicable in the current fiscal year; therefore, we do not benefit from the tax holiday.
As a global organization, we are subject to audit by taxing authorities in various jurisdictions. To the extent that an audit, or the closure of a statute of limitations, results in adjusting our reserves for uncertain tax positions, our effective tax rate could experience extreme volatility since any adjustment would be recorded as a discrete item in the period of adjustment.
For further information on the effective tax rate and the Tax Act's impact, see Note 10, Income Taxes, to our interim unaudited condensed consolidated financial statements.
46



Comparison of the Nine Months Ended October 27, 2024 and October 29, 2023
Net Sales
The following table summarizes our net sales by major end market:
Nine Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Net Sales% Net SalesNet Sales% Net SalesChange
Infrastructure$174,720 27 %$124,560 18 %40 %
High-End Consumer111,638 17 %93,163 14 %20 %
Industrial371,927 56 %458,087 68 %(19)%
Total$658,285 100 %$675,810 100 %(3)%
Net sales for the first nine months of fiscal year 2025 were $658.3 million, a decrease of 2.6% compared to $675.8 million for the first nine months of fiscal year 2024 primarily driven by lower net sales from our industrial end market related to decreased sales volume and pricing pressures, offset by higher demand. Comparing the same periods, our infrastructure and high-end consumer end markets had stronger demand and resulting net sales. Net sales from our infrastructure end market increased $50.2 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $34.2 million increase in data center sales and a $20.9 million increase in telecommunications sales, partially offset by a $5.0 million decrease in TVS infrastructure product sales. Net sales from our high-end consumer end market increased $18.5 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $19.2 million increase in TVS consumer product sales and a $4.7 million increase in proximity sensing sales, partially offset by a $4.2 million decrease in LoRa-enabled sales in consumer applications. Net sales from our industrial end market decreased $86.2 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $110.9 million decrease in IoT Hardware sales and a $3.9 million decrease in TVS industrial product sales, partially offset by a $30.2 million increase in LoRa-enabled sales in industrial applications.
The following table summarizes our net sales by reportable segment:

Nine Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Net Sales% Net SalesNet Sales% Net SalesChange
Signal Integrity $189,242 29 %$134,202 20 %41 %
Analog Mixed Signal and Wireless237,484 36 %199,841 30 %19 %
IoT Systems and Connectivity231,559 35 %341,767 50 %(32)%
Total$658,285 100 %$675,810 100 %(3)%
Net sales in the first nine months of fiscal year 2025, compared to the first nine months of fiscal year 2024, were impacted by softer demand in the IoT Systems and Connectivity reportable segment, which contributed to lower sales volume and pricing pressures, but benefited from stronger demand in the Signal Integrity and Analog Mixed Signal and Wireless reportable segments. Net sales from Signal Integrity increased $55.0 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $34.2 million increase in data center sales and a $20.9 million increase in telecommunications sales. Net sales from Analog Mixed Signal and Wireless increased $37.6 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $26.0 million increase in LoRa-enabled sales, a $10.2 million increase in TVS product sales, and a $4.7 million increase in proximity sensing sales. Net sales from IoT Systems and Connectivity decreased $110.2 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by a $110.9 million decrease in IoT Hardware sales, partially offset by a $0.6 million increase in managed connectivity sales.
47



Gross Profit
The following table summarizes our gross profit and gross margin by reportable segment:
Nine Months Ended
October 27, 2024October 29, 2023
(in thousands, except percentages)Gross ProfitGross MarginGross ProfitGross Margin
Signal Integrity $116,652 61.6 %$76,461 57.0 %
Analog Mixed Signal and Wireless133,458 56.2 %115,066 57.6 %
IoT Systems and Connectivity88,036 38.0 %143,626 42.0 %
Unallocated costs, including share-based compensation(12,122)(38,513)
Total$326,024 49.5 %$296,640 43.9 %
In the first nine months of fiscal year 2025, gross profit increased $29.4 million to $326.0 million from $296.6 million in the first nine months of fiscal year 2024. This increase was primarily driven by a $40.2 million increase from Signal Integrity, which experienced higher sales led by data center and 10G PON due to stronger demand, a $24.6 million decrease in the amortization of acquired technology intangible assets related to the Sierra Wireless Acquisition due to impairments in the fourth quarter of fiscal year 2024, a $18.4 million increase from Analog Mixed Signal and Wireless, which experienced higher sales due to stronger demand, particularly with TVS consumer products, a $3.3 million decrease for amortization of inventory step-up due to the finalization of measurement period adjustments in the second quarter of fiscal year 2024 related to the Sierra Wireless Acquisition, partially offset by a $55.6 million decrease from IoT Systems and Connectivity due to lower IoT Hardware sales primarily driven by soft demand causing decreased sales volume and pricing pressures.
Our gross margin was 49.5% in the first nine months of fiscal year 2025, compared to 43.9% in the first nine months of fiscal year 2024. Gross margin from Signal Integrity was 61.6% in the first nine months of fiscal year 2025, compared to 57.0% in the first nine months of fiscal year 2024, primarily due to higher volume reducing overhead. Gross margin from Analog Mixed Signal and Wireless was 56.2% in the first nine months of fiscal year 2025, compared to 57.6% in the first nine months of fiscal year 2024, primarily due to higher overhead and price erosion. Gross margin from IoT Systems and Connectivity was 38.0% in the first nine months of fiscal year 2025, compared to 42.0% in the first nine months of fiscal year 2024, primarily driven by softer demand and pricing pressures.
Operating Expenses, net
Nine Months EndedChange
(in thousands, except percentages)October 27, 2024October 29, 2023
Product development and engineering$124,251 42 %$144,945 23 %(14)%
Selling, general and administrative167,835 56 %165,022 28 %2 %
Intangible amortization737 — %14,606 2 %(95)%
Restructuring 4,505 2 %14,608 2 %(69)%
Goodwill impairment— — %281,821 45 %(100)%
Total operating expenses, net$297,328 100 %$621,002 100 %(52)%
Product Development and Engineering Expenses
Product development and engineering expenses decreased $20.7 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024 primarily as a result of a $10.0 million decrease in new product introduction expenses, a $9.5 million net decrease in staffing-related costs due to lower headcount and a $2.3 million decrease in facilities expenses, partially offset by a $1.6 million reduction in tax credits.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $2.8 million in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024 primarily as a result of a $12.7 million net increase in staffing related costs, which reflects higher share-based and other supplemental compensation offset by lower headcount from restructuring, a $3.0 million increase in consulting expenses, a $2.0 million increase in depreciation and a $1.2 million increase in bad debt expense, partially offset by a $13.7 million decrease in transaction and integration expenses primarily related to the Sierra Wireless Acquisition and a $1.0 million reduction in travel expenses.
48



Intangible Amortization
Intangible amortization decreased by $13.9 million for the first nine months of fiscal year 2025 compared to the same period in fiscal year 2024 due to impairment of intangible assets acquired in the Sierra Wireless Acquisition related to customer relationships and trade name in the fourth quarter of fiscal year 2024. The amortization of acquired technology intangible assets is reflected in cost of sales.
Restructuring
Restructuring decreased by $10.1 million for the first nine months of fiscal year 2025 compared to the same period in fiscal year 2024 primarily due to structural reorganization actions primarily in the prior year period to reduce our workforce as a result of cost-saving measures and internal resource alignment including from the realization of synergies of the Sierra Wireless Acquisition.
Goodwill Impairment
There was no goodwill impairment for the first nine months of fiscal year 2025 compared to $281.8 million of goodwill impairment for the same period in fiscal year 2024 due to valuation adjustments of goodwill related to the Sierra Wireless Acquisition. See Note 8, Goodwill and Intangible Assets, to our interim unaudited condensed consolidated financial statements for additional information.
Interest Expense
Interest expense, including amortization and write-off of deferred financing costs, remained relatively consistent at $72.6 million and $73.0 million for the first nine months of fiscal years 2025 and 2024, respectively.
Loss on Extinguishment of Debt
In addition to the write-off of $5.5 million of deferred financing costs as a result of approximately $188.1 million of 2028 Notes extinguished in exchange for common stock in the first nine months of fiscal year 2025, which was recorded in "Interest expense" in the Statements of Operations, we recognized a loss on extinguishment of debt equal to the difference between the fair value of our common stock delivered to certain holders of the 2028 Notes and the carrying value of the outstanding debt, accrued interest and third-party fees related to the Exchange Agreements. In the first nine months of fiscal year 2025, in connection with the exchange transactions, we recognized $144.7 million of loss included in "Loss on extinguishment of debt" in the Statements of Operations.
Investment Impairments and Credit Loss Reserves, Net
During the first nine months of fiscal year 2025, investment impairments and credit loss reserves, net totaled a loss of $1.1 million due to an other-than-temporary impairment on one of our non-marketable equity investments. During the first nine months of 2024, investment impairments and credit loss reserves, net totaled a loss of $2.3 million due to adjustments to our credit loss reserve for our available-for-sale debt securities.
Provision for Income Taxes
In the first nine months of fiscal year 2025, we recorded income tax expense of $11.2 million, compared to income tax expense of $53.9 million in the first nine months of fiscal year 2024. The change in our tax provision for the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024 was primarily due to a regional mix of income, nondeductible loss on extinguishment of debt and changes in valuation allowance. The effective tax rates in the first nine months of fiscal years 2025 and 2024 differ from the statutory federal income tax rate of 21% primarily due to a regional mix of income, changes in valuation allowance, non-deductibility of goodwill impairment, impact of GILTI, R&D credits and nondeductible loss on extinguishment of debt.
During the second quarter of fiscal year 2024, we recorded a valuation allowance against our U.S. deferred tax assets of approximately $52.8 million. We are required to assess whether a valuation allowance should be recorded against our deferred tax assets ("DTAs") based on the consideration of all available evidence, using a "more likely than not" realization standard. The four sources of taxable income that must be considered in determining whether DTAs will be realized are: (1) future reversals of existing taxable temporary differences (i.e. offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards.
After a review of the four sources of taxable income described above and in view of our three-year cumulative loss, we were not able to conclude that it is more likely than not that our DTAs will be realized. As a result, we recorded an additional valuation allowance on our DTAs, with a corresponding charge to our income tax provision, of approximately $52.8 million during the second quarter of fiscal year 2024.
49



Liquidity and Capital Resources
Our capital requirements depend on a variety of factors including, but not limited to, the rate of increase or decrease in our existing business base; the success, timing and amount of investment required to bring new products to market; sales growth or decline; potential acquisitions or divestitures; the general economic environment in which we operate; and our ability to generate cash flows from operating activities.
We believe that our cash on hand, cash available from future operations and available borrowing capacity under our Revolving Credit Facility (as defined below) are sufficient to meet liquidity requirements for at least the next 12 months, including funds needed for our material cash requirements. As of October 27, 2024, we had $136.5 million in cash and cash equivalents and $287.2 million of available undrawn borrowing capacity on our Revolving Credit Facility, subject to net leverage limitations and customary conditions precedent, including the accuracy of representations and warranties and the absence of defaults. Over the longer-term, we expect to fund our business using cash flows from operating activities.
As of October 27, 2024, we were in compliance with the financial covenants in the Credit Agreement (as defined below). Based on our current amount of debt outstanding and financial projections, management believes we will maintain compliance with our financial covenants and that our existing cash, projected operating cash flows and available borrowing capacity under the Revolving Credit Facility are adequate to meet our operating needs, liabilities and commitments over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements.
As of October 27, 2024 and January 28, 2024, there was $2.9 million outstanding under the letters of credit, swing line loans and alternative currency sub-facilities outstanding under the Revolving Credit Facility.
A meaningful portion of our capital resources, and the liquidity they represent, are held by our subsidiaries outside of the U.S. As of October 27, 2024, our foreign subsidiaries held $119.1 million of cash and cash equivalents, compared to $104.6 million at January 28, 2024. Our liquidity may be impacted by fluctuating exchange rates. For additional information on exchange rates, see Item 3–Quantitative and Qualitative Disclosures About Market Risk.
In connection with the enactment of the Tax Act, all historic and current foreign earnings are taxed in the U.S. Depending on the jurisdiction, these foreign earnings are potentially subject to a withholding tax, if repatriated. As of October 27, 2024, our historical undistributed earnings prior to fiscal year 2023 of our foreign subsidiaries are intended to be permanently reinvested outside of the U.S. With the enactment of the Tax Act, which amended the Internal Revenue Code of 1986, all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax. As a result of the U.S. taxation of these amounts, we have determined that none of the foreign earnings from fiscal year 2023 onward will be permanently reinvested outside of the U.S. If we needed to remit all or a portion of our historical undistributed earnings to the U.S. for investment in our domestic operations, any such remittance could result in increased tax liabilities and a higher effective tax rate. Determination of the amount of the unrecognized potential deferred tax liability on these unremitted earnings is not practicable.
We expect our future non-operating uses of cash will be for capital expenditures and debt repayment. We expect to fund these cash requirements through cash flows from operating activities.
Credit Agreement
On September 26, 2022 (the "Third Restatement Effective Date"), we entered into a third amended and restated credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, swing line lender and letter of credit issuer.
As of October 27, 2024, the borrowing capacity on the revolving credit facility under the Credit Agreement (the "Revolving Credit Facility") is $500.0 million, of which $162.5 million matured on November 7, 2024 and $337.5 million is scheduled to mature on January 12, 2028 (subject to, in certain circumstances, an earlier springing maturity), and the term loans thereunder (the "Term Loans") are scheduled to mature on January 12, 2028 (subject to, in certain circumstances, an earlier springing maturity).
As of October 27, 2024, we had $622.6 million outstanding under the Term Loans and $210.0 million outstanding under the Revolving Credit Facility, which had available undrawn borrowing capacity of $287.2 million, subject to net leverage limitations and customary conditions precedent, including the accuracy of representations and warranties and the absence of defaults.
Up to $40.0 million of the Revolving Credit Facility may be used to obtain letters of credit, up to $25.0 million of the Revolving Credit Facility may be used to obtain swing line loans, and up to $75.0 million of the Revolving Credit Facility may be used to obtain revolving loans and letters of credit in certain currencies other than U.S. Dollars. The proceeds of the Revolving Credit Facility may be used by us for capital expenditures, permitted acquisitions, permitted dividends, working capital and general corporate purposes.
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As of October 27, 2024, we were in compliance with the financial covenants in our Credit Agreement. The Credit Agreement also contains customary provisions pertaining to events of default. If any event of default occurs, the obligations under the Credit Agreement may be declared due and payable, terminated upon written notice to us and existing letters of credit may be required to be cash collateralized.
See Note 9, Long-Term Debt to our interim unaudited condensed consolidated financial statements for additional information regarding the terms of the Credit Agreement.
We have entered into interest rate swap agreements to hedge the variability of interest payments on debt outstanding under the Term Loans. See Note 17, Derivatives and Hedging Activities, to our interim unaudited condensed consolidated financial statements for additional information.
Convertible Senior Notes Due 2027
On October 6, 2022 and October 21, 2022, we issued and sold $300.0 million and $19.5 million, respectively, in aggregate principal amount of 1.625% Convertible Senior Notes due 2027 (the "2027 Notes") in a private placement. The 2027 Notes were issued pursuant to an indenture dated October 12, 2022, by and among us, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. The 2027 Notes bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The 2027 Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased. The 2027 Notes are not currently redeemable and, as of April 28, 2024, none of the conditions allowing holders of the 2027 Notes to convert had been met. The 2027 Notes were initially issued pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
We used approximately $72.6 million of the net proceeds from the 2027 Notes to pay for the cost of the Convertible Note Hedge Transactions, after such cost was partially offset by approximately $42.9 million of proceeds to us from the sale of Warrants in connection with the issuance of the 2027 Notes, all as defined and described in Note 9, Long-Term Debt to our interim unaudited condensed consolidated financial statements. The Convertible Note Hedge Transactions and Warrants transactions are indexed to, and potentially settled in, our common stock and the net cost of $29.7 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of stockholders' equity (deficit). We used the remaining net proceeds to fund a portion of the consideration in the Sierra Wireless Acquisition and to pay related fees and expenses. For additional information on the 2027 Notes, Convertible Note Hedge Transactions and the Warrants, see Note 9, Long-Term Debt to our interim unaudited condensed consolidated financial statements.
Convertible Senior Notes Due 2028
On October 26, 2023, we issued and sold $250.0 million in aggregate principal amount of 2028 Notes in a private placement. The 2028 Notes were issued pursuant to an indenture, dated October 26, 2023, by and among the Company, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. The 2028 Notes bear interest at a rate of 4.00% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2024. The 2028 Notes will mature on November 1, 2028, unless earlier converted, redeemed or repurchased. As of October 27, 2024, approximately $62.0 million of the 2028 Notes remained outstanding. The 2028 Notes were offered and sold only to eligible purchasers who are both "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act and "accredited investors" within the meaning of Rule 501(a) under the Securities Act, in reliance on Section 4(a)(2) under the Securities Act.
The 2028 Notes are not currently redeemable. The 2028 Notes may be converted at the option of the holders at the times and under the circumstances and at the conversion rate described in Note 9, Long-Term Debt, to our interim unaudited condensed consolidated financial statements. As of October 27, 2024, one of the conditions allowing holders of the 2028 Notes to convert had been met. The trading price of our common stock remained above 130% of the applicable $20.37 conversion price for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, October 25, 2024 (the last trading day of the quarter ended October 27, 2024), resulting in the right of the holders of the 2028 Notes to convert their 2028 Notes beginning October 28, 2024 through January 24, 2025 (the last trading day of the quarter ending January 26, 2025). If converted, we will settle in cash the aggregate principal amount of the 2028 Notes to be converted, and for the remainder of the conversion obligations in excess of the aggregate principal amount of the notes being converted, we will settle the obligations in either cash, shares of our common stock, or any combination thereof, at our option.
On July 11, 2024 and July 15, 2024, we entered into the Exchange Agreements with certain holders of the 2028 Notes. Pursuant to the Exchange Agreements, certain holders of the 2028 Notes exchanged with us approximately $188.1 million in aggregate principal amount of 2028 Notes held by them for an aggregate of 10,378,431 shares of our common stock, which number of shares was determined over an averaging period that commenced on July 12, 2024. We accounted for these exchange transactions as a partial debt extinguishment and recognized a loss on extinguishment of debt equal to the difference between the fair value of our common stock delivered to certain holders of the 2028 Notes and the carrying value of the outstanding debt, accrued interest and third-party fees related to the Exchange Agreements. In the nine months ended October 27, 2024, in
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connection with the exchange transactions, we recognized $144.7 million of loss included in "Loss on extinguishment of debt" in the Statements of Operations and $5.5 million of loss resulting from the write-off of deferred financing costs included in "Interest expense" in the Statements of Operations.
For additional information on the 2028 Notes, see Note 9, Long-Term Debt to our interim unaudited condensed consolidated financial statements.
Capital Expenditures and Research and Development
We incur significant expenditures in order to fund the development, design and manufacture of new products. We intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities, which may require additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products. Certain of these expenditures, particularly the addition of design engineers, do not generate significant payback in the short-term. We plan to finance these expenditures with cash generated by our operating activities, our existing cash balances and additional draws on our Revolving Credit Facility, as needed. Borrowings under our Revolving Credit Facility are subject to customary conditions precedent, including the accuracy of representations and warranties and the absence of any defaults under the facility.
Purchases under our Stock Repurchase Program
We currently have in effect a stock repurchase program that was initially approved by our Board of Directors in March 2008. On March 11, 2021, the Board of Directors approved the expansion of the stock repurchase program by an additional $350.0 million. Under the program, subject to the terms of the Credit Agreement, we may repurchase our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. Our repurchases may be made through Rule 10b5-1 and/or Rule 10b-18 or other trading plans, open market purchases, privately negotiated transactions, block purchases or other transactions.
We did not repurchase any shares of our common stock under the program in the first nine months of fiscal year 2025 or in the first nine months of fiscal year 2024. As of October 27, 2024, the remaining authorization under the program was $209.4 million. To the extent we repurchase any shares of our common stock under the program in the future, we expect to fund such repurchases from cash on hand and borrowings on our Revolving Credit Facility. We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
Working Capital
Working capital, defined as total current assets less total current liabilities including the current portion of long-term debt, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. In times of escalating demand, our working capital requirements may increase as we purchase additional manufacturing materials and increase production. In addition, our working capital may be affected by potential acquisitions and transactions involving our debt instruments. Although investments made to fund working capital will reduce our cash balances, these investments are necessary to support business and operating initiatives.
Material Cash Requirements
Except as disclosed above, there have been no material changes to our cash requirements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.
Cash Flows
In summary, our cash flows for each period were as follows:
Nine Months Ended
(in thousands)October 27, 2024October 29, 2023
Net cash provided by (used in) operating activities$24,491 $(107,839)
Net cash used in investing activities(4,085)(26,266)
Net cash (used in) provided by financing activities(12,057)24,337 
Effect of foreign exchange rate changes on cash and cash equivalents(430)(1,922)
Net increase (decrease) in cash and cash equivalents$7,919 $(111,690)
Operating Activities
Net cash provided by or used in operating activities is driven by net income or loss adjusted for non-cash items and fluctuations in operating assets and liabilities.
Operating cash flows for the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024 were favorably impacted by a significant decrease in annual bonus payments, lower payroll costs related to reduced headcount, a decrease in income tax payments, and lower transaction and integration costs primarily related to the Sierra Wireless
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Acquisition, and were unfavorably impacted by an 2.6% decrease in net sales, higher restructuring payments related to employee termination benefits and an incremental increase in inventory spend.
Investing Activities
Net cash provided by or used in investing activities is primarily driven by capital expenditures, purchases and sales of investments, purchases of intangibles, and proceeds from corporate-owned life insurance.
Capital expenditures were $5.2 million for the first nine months of fiscal year 2025, which were lower due to cost-saving initiatives, compared to $27.5 million for the first nine months of fiscal year 2024 as we made investments to update and expand our production capabilities.
In the first nine months of fiscal year 2025, we sold investments for proceeds of $2.7 million. In the first nine months of fiscal year 2025, we paid $0.4 million for strategic investments, including investments in companies that are enabling the LoRa® and LoRaWAN® -based ecosystem, compared to $0.9 million for the first nine months of fiscal year 2024.
Purchases of intangibles were $5.9 million for the first nine months of fiscal year 2025, which included capitalized development costs and software licenses.
In the first nine months of fiscal year 2025 and 2024, we received $4.8 million and $2.5 million of proceeds, respectively, from corporate-owned life insurance, which were used to pay deferred compensation distributions.
Financing Activities
Net cash provided by or used in financing activities is primarily attributable to proceeds or payments on our Revolving Credit Facility, payments related to deferred financing costs, payments related to employee share-based compensation payroll taxes and proceeds from the exercise of stock options.
In the first nine months of fiscal year 2025, we made a payment of $5.0 million on our Revolving Credit Facility. In the first nine months of fiscal year 2024, we borrowed $70.0 million on our Revolving Credit Facility.
In the first nine months of fiscal year 2025, we paid $0.8 million for deferred financing costs, compared to $17.8 million for the first nine months of fiscal year 2024.
In the first nine months of fiscal year 2025, we paid $7.3 million for employee share-based compensation payroll taxes and received proceeds of $1.2 million from the exercise of stock options. In the first nine months of fiscal year 2024, we paid $5.5 million for employee share-based compensation payroll taxes. We do not directly control the timing of the exercise of stock options. Such exercises are independent decisions made by grantees and are influenced most directly by the stock price and the expiration dates of stock option awards. Such proceeds are difficult to forecast, resulting from several factors that are outside our control. We believe that such proceeds will remain a nominal source of cash in the future.
Critical Accounting Estimates
Our critical accounting estimates are disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024. There have been no significant changes to our policies during the nine months ended October 27, 2024.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 1, Organization and Basis of Presentation to our interim unaudited condensed consolidated financial statements.
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
We are subject to a variety of market risks, including commodity risk and the risks related to foreign currency, interest rates and market performance that are discussed in Item 7A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024. Many of the factors that can have an impact on our market risk are external to us, and so we are unable to fully predict them.
Commodity Risk
We are subject to risk from fluctuating market prices of certain commodity raw materials, particularly gold, that are incorporated into our end products or used by our suppliers to process our end products. Increased commodity prices are passed on to us in the form of higher prices from our suppliers, either in the form of general price increases or a commodity surcharge. Although we generally deal with our suppliers on a purchase order basis rather than on a long-term contract basis, we generally attempt to obtain firm pricing for volumes consistent with planned production. Our gross margins may decline if we are not able to increase selling prices of our products or obtain manufacturing efficiencies to offset the increased cost. We do not enter into formal hedging arrangements to mitigate against commodity risk.
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Foreign Currency Risk
Our foreign operations expose us to the risk of fluctuations in foreign currency exchange rates against our functional currencies and we may economically hedge this risk with foreign currency contracts (such as currency forward contracts). Gains or losses on these balances are generally offset by corresponding losses or gains on the related hedging instruments. As of October 27, 2024, our largest foreign currency exposures were from the Australian Dollar, Canadian Dollar, Euro, Swiss Franc, South Korean Won, and Great British Pound.
We considered the historical trends in foreign currency exchange rates and determined that it is reasonably possible that adverse changes in foreign exchange rates of 10% for all currencies could be experienced in the near-term. These reasonably possible adverse changes were applied to our total monetary assets and liabilities denominated in currencies other than our functional currency as of the end of our third quarter of fiscal year 2025. The adverse impact these changes would have had (after taking into account balance sheet hedges only) on our income before taxes is $4.7 million for the quarter ended October 27, 2024.
Interest rate and credit risk
We are subject to interest rate risk in connection with the portion of the outstanding debt under our Credit Agreement that bears interest at a variable rate as of October 27, 2024.
In the first quarter of fiscal year 2024, we entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.58%, plus a variable margin and spread based on our consolidated leverage ratio.
In the fourth quarter of fiscal year 2023, we entered into an interest rate swap agreement with a 5 year term to hedge the variability of interest payments on $450.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.44%, plus a variable margin and spread based on our consolidated leverage ratio.
Based upon our $232.6 million of unhedged floating-rate outstanding indebtedness as of October 27, 2024, the adverse impact a one percentage point increase in Term SOFR would have on our interest expense is $2.3 million.
Interest rates also affect our return on excess cash and investments. As of October 27, 2024, we had $136.5 million of cash and cash equivalents. A majority of our cash and cash equivalents generate interest income based on prevailing interest rates. Interest income, net of reserves, generated by our investments and cash and cash equivalents was $0.5 million in the third quarter of fiscal year 2025. A significant change in interest rates would impact the amount of interest income generated from our cash and investments. It would also impact the market value of our investments.
Our investments are primarily subject to credit risk. Our investment guidelines prescribe credit quality, permissible investments, diversification, and duration restrictions. These restrictions are intended to limit risk by restricting our investments to high quality debt instruments with relatively short-term durations. Our investment strategy limits investment of new funds and maturing securities to U.S. Treasury, Federal agency securities, high quality money market funds and time deposits with our principal commercial banks. Outside of these investment guidelines, we also invest in a limited amount of debt securities in privately held companies that we view as strategic to our business. For example, many of these investments are in companies that are enabling the LoRa®- and LoRaWAN® -based ecosystem.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. We maintain cash held in deposit at financial institutions in the U.S. These deposits are insured by the FDIC in an amount up to $250,000 for any depositor. To the extent we hold cash deposits in amounts that exceed the FDIC insurance limitation, we may incur a loss in the event of a failure of any of the financial institutions where we maintain deposits. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or any applicable foreign government in the future or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a future failure or liquidity crisis. In addition, if any of our partners or parties with whom we conduct business are unable to access funds due to the status of their financial institution, such parties' ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. Management believes we are not exposed to significant risk due to the financial position of the depository institution, but will continue to monitor regularly and adjust, if needed, to mitigate risk. We have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, we have not experienced any losses associated with this credit risk and continue to believe that this exposure is not significant.
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ITEM 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. As a result of the material weaknesses in our internal control over financial reporting described in Item 9A., Controls and Procedures, in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 filed with the SEC on March 28, 2024, and as outlined below, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of October 27, 2024.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
We have identified a deficiency in a principle associated with the risk assessment component of the COSO framework. Specifically, the control deficiency constitutes a material weakness relating to identifying and assessing changes in the business that could impact our system of internal control. Contributing factors relate to the integration of Sierra Wireless, Inc. ("Sierra Wireless"), which the Company acquired on January 12, 2023. The risk assessment material weakness contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level, all of which were associated with the Sierra Wireless business.
•We did not design and maintain effective controls to ensure that all manual journal entries were properly approved prior to being posted to the general ledger system, and certain individuals had the ability to both prepare, review and post manual journal entries to the general ledger.
•We did not design and maintain effective controls to ensure the timely collection and maintenance of documentation necessary to support claimed value added tax ("VAT") withholding exemptions in certain jurisdictions.
•We did not maintain adequate evidence of the review of information used to determine the inventory excess and obsolescence reserves.
In addition, we did not maintain adequate evidence of our review of the operating forecasts used in the preparation of the financial statements.
Remediation Measures
Management is committed to addressing and remediating the aforementioned material weaknesses and believes progress has been made in our remediation efforts.
•We are enhancing our risk assessment process to ensure it is sufficiently robust to identify and analyze significant changes in the business, including the impact of these changes on the identification of risks and the internal control structure.
•We have migrated the Sierra Wireless enterprise resource planning system to existing Semtech financial systems which we expect to remediate the material weakness around manual journal entries because this migration results in the use of existing policies, processes and internal controls for manual journal entry posting at Sierra Wireless going forward.
•We are enhancing our processes and internal controls to ensure the completeness and accuracy of the information used to estimate the excess and obsolete inventory reserve related to Sierra Wireless inventory.
•We have implemented enhanced processes and internal controls to ensure documentation is retained to support proof of delivery for all transactions with value added tax claims.
•We updated our policies and educated our personnel to properly document and maintain evidence of review of operating forecasts and information used in preparation of the financial statements.
As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine that additional measures are required to address the control deficiencies, or that we need to modify or otherwise adjust the remediation measures described above. We will continue to assess the effectiveness of our remediation efforts in
connection with our evaluation of our internal control over financial reporting. Further, while certain remediation measures are currently in place, the identified material weaknesses will not be considered remediated until the remediation measures have been fully designed and implemented, the applicable controls operate for a sufficient period of time, and we have concluded through testing that the newly implemented controls are operating effectively.
Changes in Internal Controls
Other than the remediation measures described above, there were no changes to our internal control over financial reporting that occurred during the fiscal quarter ended October 27, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
 
ITEM 1.Legal Proceedings
Information about our material legal proceedings is set forth in Note 12, Commitments and Contingencies to the interim unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report and incorporated by reference herein.
We have elected to disclose environmental proceedings described in Item 103(c)(3)(iii) of Regulation S-K unless we reasonably believe that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $1,000,000.
ITEM 1A.Risk Factors
Please carefully consider and evaluate all of the information in this Quarterly Report and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024. If any of these risks actually occur, our business could be materially harmed. If our business is harmed, the trading price of our common stock could decline.
The risk factors associated with our business have not materially changed as compared to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024.
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchase of Equity Securities
None.
ITEM 3.Defaults Upon Senior Securities
None.
ITEM 4.Mine Safety Disclosures
Not applicable.
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ITEM 5.Other Information
Insider Trading Arrangements
Securities Trading Arrangements of Directors and Executive Officers
The following table sets forth certain information regarding any "Rule 10b5-1 trading arrangements" (a "trading plan") or "non-Rule 10b5-1 trading arrangements," each as defined Item 408 of Regulation S-K, adopted or terminated by the Company's directors and executive officers during the third fiscal quarter ended October 27, 2024. All of these trading plans were adopted during the Company's quarterly open trading window in accordance with the Company's Stock Trading Guidelines for Semtech Stock.

Date of ActionTrading Arrangements
Name and TitleActionRule 10b5-1(a)Non-Rule 10b5-1(b)Total Shares to be Sold (c)Duration (d)
Mark Lin

Adopt09/17/2024X68,113 (e)December 17, 2024 through September 9, 2025
EVP and Chief Financial Officer
Imran Sherazi
Adopt
09/19/2024X14,488 (f)December 19, 2024 through December 25, 2025
SVP and General Manager, Signal Integrity Products Group
Asaf Silberstein
Adopt09/05/2024X15,500December 6, 2024 through September 30, 2025
EVP and Chief Operating Officer
Gregory Fischer
Adopt09/04/2024X1,888December 10, 2024 through December 31, 2025
Director
(a) Intended to satisfy the affirmative defense of Rule 10b5-1(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) Not intended to satisfy the affirmative defense of 10b5-1(c) promulgated under the Exchange Act.
(c) The numbers in this column represent the maximum number of shares of our common stock that may be sold pursuant to each trading plan.
(d) Transactions under the trading plan may occur during the specified plan duration period and will expire the earlier of the end of the specified plan duration period or the completion of all sales under such trading plan.
(e) This number includes shares of our common stock issuable pursuant to unvested restricted stock unit awards ("RSUs") and unvested performance stock units ("PSUs"). The PSUs are subject to the achievement of certain performance conditions as set forth in the applicable PSU agreement. The actual number of PSUs that vest following the end of an applicable performance period, if any, vary and therefore the resulting shares of our common stock available for sale under the plan will depend on the attainment of the performance metrics. The maximum number of shares to be sold will be reduced by net shares withheld to satisfy tax withholding obligations that arise in connection with the vesting and settlement.
(f) This number includes shares of our common stock issuable pursuant to unvested RSUs. The maximum number of shares to be sold will be reduced by net shares withheld to satisfy tax withholding obligations that arise in connection with the vesting and settlement.
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ITEM 6.Exhibits
Documents that are not physically filed with this report are incorporated herein by reference to the location indicated.
Exhibit No.DescriptionLocation
3.1Restated Certificate of Incorporation of Semtech Corporation
3.2Amended and Restated Bylaws of Semtech Corporation
31.1Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended
31.2Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended
32Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit 32 is being furnished and shall not be deemed "filed")
101
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended October 27, 2024, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income and Loss, (iii) Consolidated Balance Sheets (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flow and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended October 27, 2024, formatted in Inline XBRL (included as Exhibit 101).

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SIGNATURES
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.
 
SEMTECH CORPORATION
Registrant
Date: December 3, 2024/s/ Mark Lin
Mark Lin
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
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