10-Q 1 mtsi-20220401.htm 10-Q mtsi-20220401
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35451
MACOM Technology Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter) 
Delaware 27-0306875
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
100 Chelmsford Street
Lowell, MA 01851
(Address of principal executive offices and zip code)
(978) 656-2500
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareMTSINasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of April 25, 2022, there were 69,890,536 shares of the registrant’s common stock outstanding.



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
April 1,
2022
October 1,
2021
ASSETS
Current assets:
Cash and cash equivalents$127,575 $156,537 
Short-term investments375,449 188,365 
Accounts receivable, net 100,552 84,570 
Inventories93,352 82,699 
Prepaid and other current assets9,508 9,365 
Total current assets706,436 521,536 
Property and equipment, net122,426 120,526 
Goodwill313,185 314,240 
Intangible assets, net67,344 84,685 
Deferred income taxes38,261 39,516 
Other investments2,500 15,342 
Other long-term assets36,341 38,300 
Total assets$1,286,493 $1,134,145 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of finance lease obligations$949 $958 
Accounts payable30,999 28,712 
Accrued liabilities62,375 63,374 
Total current liabilities94,323 93,044 
Finance lease obligations, less current portion27,544 28,037 
Financing obligation, less current portion9,544 8,720 
Long-term debt565,097 492,097 
Other long-term liabilities35,702 40,511 
Total liabilities732,210 662,409 
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Common stock70 69 
Treasury stock, at cost(330)(330)
Accumulated other comprehensive income195 4,150 
Additional paid-in capital1,180,204 1,269,601 
Accumulated deficit(625,856)(801,754)
Total stockholders’ equity554,283 471,736 
Total liabilities and stockholders' equity$1,286,493 $1,134,145 
See notes to condensed consolidated financial statements.
1


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

 
 Three Months EndedSix Months Ended
 April 1,
2022
April 2,
2021
April 1,
2022
April 2,
2021
Revenue$165,147 $150,583 $324,767 $299,087 
Cost of revenue66,158 66,470 131,636 134,713 
Gross profit98,989 84,113 193,131 164,374 
Operating expenses:
Research and development35,455 34,619 70,925 71,555 
Selling, general and administrative30,963 30,522 62,566 61,774 
Total operating expenses66,418 65,141 133,491 133,329 
Income from operations32,571 18,972 59,640 31,045 
Other (expense) income:
Warrant liability expense   (11,130)
Interest expense, net(1,389)(4,851)(3,082)(9,585)
Other (expense) income, net(55)2,879 114,853 (1,624)
Total other (expense) income, net(1,444)(1,972)111,771 (22,339)
Income before income taxes31,127 17,000 171,411 8,706 
Income tax expense1,569 2,193 3,026 2,867 
Net income$29,558 $14,807 $168,385 $5,839 
Net income per share:
Income per share - Basic$0.42 $0.22 $2.42 $0.09 
Income per share - Diluted$0.42 $0.21 $2.37 $0.08 
 Weighted average shares used:
Basic69,788 68,504 69,594 68,130 
Diluted71,107 70,546 71,166 69,983 
See notes to condensed consolidated financial statements.

2


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
 Three Months EndedSix Months Ended
 April 1,
2022
April 2,
2021
April 1,
2022
April 2,
2021
Net income$29,558 $14,807 $168,385 $5,839 
Unrealized loss on short term investments, net of tax(2,335)(373)(2,952)(196)
Foreign currency translation loss, net of tax(679)(1,303)(1,003)(351)
Other comprehensive loss, net of tax(3,014)(1,676)(3,955)(547)
Total comprehensive income$26,544 $13,131 $164,430 $5,292 
See notes to condensed consolidated financial statements.
3


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)
Three Months Ended
   Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of December 31, 202169,709 $70 (23)$(330)$3,209 $1,177,239 $(655,414)$524,774 
Vesting of restricted common stock and units
315  — — — — —  
Shares repurchased for tax withholdings on restricted stock awards(114)— — — — (7,002)— (7,002)
Share-based compensation
— — — — — 9,967 — 9,967 
Other comprehensive loss, net of tax— — — — (3,014)— — (3,014)
Net income— — — — — — 29,558 29,558 
Balance as of April 1, 202269,910 $70 (23)$(330)$195 $1,180,204 $(625,856)$554,283 
Six Months Ended
   Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of October 1, 202168,877 $69 (23)$(330)$4,150 $1,269,601 $(801,754)$471,736 
Stock option exercises190 — — — — 2,688 — 2,688 
Vesting of restricted common stock and units
1,284 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
56 — — — — 2,447 — 2,447 
Shares repurchased for tax withholdings on equity awards
(497)— — — — (34,758)— (34,758)
Share-based compensation
— — — — — 19,916 — 19,916 
Other comprehensive loss, net of tax— — — — (3,955)— — (3,955)
Cumulative-effect adjustment from adoption of ASU 2020-06, net— — — — — (79,690)7,513 (72,177)
Net income— — — — — — 168,385 168,385 
Balance as of April 1, 202269,910 $70 (23)$(330)$195 $1,180,204 $(625,856)$554,283 
See notes to condensed consolidated financial statements.

4


Three Months Ended
   Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of January 1, 202168,367 $68 (23)$(330)$6,138 $1,172,269 $(848,695)$329,450 
Stock option exercises40 — — — — 642 — 642 
Vesting of restricted common stock and units
440 1 — — — — — 1 
Shares repurchased for tax withholdings on equity awards
(155)— — — — (10,494)— (10,494)
Share-based compensation
— — — — — 8,569 — 8,569 
Other comprehensive loss, net of tax— — — — (1,676)— — (1,676)
Equity component of convertible notes, net— — — — — 70,834 — 70,834 
Net income— — — — — — 14,807 14,807 
Balance as of April 2, 202168,692 $69 (23)$(330)$4,462 $1,241,820 $(833,888)$412,133 
Six Months Ended
   Accumulated
Other
Comprehensive Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of October 2, 202066,921 $67 (23)$(330)$5,009 $1,135,127 $(839,727)$300,146 
Stock option exercises
50 — — — — 817 — 817 
Vesting of restricted common stock and units
1,222 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
93 — — — — 2,239 — 2,239 
Shares repurchased for tax withholdings on equity awards
(452)— — — — (22,338)— (22,338)
Share-based compensation
— — — — — 18,700 — 18,700 
Other comprehensive loss, net of tax— — — — (547)— — (547)
Issuance of common stock for the cashless exercise of warrants858 1 — — — 36,441 — 36,442 
Equity component of convertible notes, net— — — — — 70,834 — 70,834 
Net income— — — — — — 5,839 5,839 
Balance as of April 2, 202168,692 $69 (23)$(330)$4,462 $1,241,820 $(833,888)$412,133 
See notes to condensed consolidated financial statements.
5


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months Ended
 April 1, 2022April 2, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$168,385 $5,839 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangibles amortization29,080 35,613 
Share-based compensation19,916 18,700 
Warrant liability expense 11,130 
Deferred financing cost and discount amortization and write-offs869 4,954 
Deferred income taxes1,284 1,629 
Gain on equity method investment, net(114,908)(1,738)
Other adjustments, net307 331 
Change in operating assets and liabilities:
Accounts receivable(15,983)(22,397)
Inventories(10,653)7,068 
Prepaid expenses and other assets597 (4,033)
Accounts payable1,632 3,841 
Accrued and other liabilities(4,930)1,324 
Income taxes1,001 460 
Net cash provided by operating activities76,597 62,721 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equity method investment127,750  
Purchases of property and equipment(12,184)(7,328)
Proceeds from sales and maturities of short-term investments91,841 179,426 
Purchases of short-term investments(282,642)(138,149)
Proceeds from sale of assets23 63 
Net cash (used in) provided by investing activities(75,212)34,012 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes, net of issuance costs 394,871 
Payments on long-term debt (496,021)
Payments on finance leases(500)(666)
Proceeds from stock option exercises and employee stock purchases5,135 3,056 
Repurchase of common stock - tax withholdings on equity awards(34,758)(22,338)
Net cash used in financing activities(30,123)(121,098)
Foreign currency effect on cash(224)464 
NET CHANGE IN CASH AND CASH EQUIVALENTS(28,962)(23,901)
CASH AND CASH EQUIVALENTS — Beginning of period156,537 129,441 
CASH AND CASH EQUIVALENTS — End of period$127,575 $105,540 
See notes to condensed consolidated financial statements.
6


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

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, comprehensive income, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The condensed consolidated balance sheet as of October 1, 2021 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our October 1, 2021 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended October 1, 2021 filed with the SEC on November 15, 2021 (the “2021 Annual Report on Form 10-K”). We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our 2021 Annual Report on Form 10-K.
Principles of Consolidation—The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 2022 and 2021 each include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in such fiscal years in the first fiscal quarter.
Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; goodwill and long-lived asset valuations and associated impairment assessments; revenue reserves; share-based compensation valuations and income taxes.
Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in our 2021 Annual Report on Form 10-K.
Pronouncements Adopted in Fiscal Year 2022
In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts on an entity’s own equity. The standard reduces the number of models used to account for convertible instruments, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and requires the if-converted method for calculation of diluted earnings per share for all convertible instruments. We early adopted this standard effective October 2, 2021 using the modified retrospective approach transition method. Therefore, the condensed consolidated financial statements for the three and six months ended April 1, 2022 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy. Refer to Note 8 - Debt for the impact of adoption on our 2026 Convertible Notes (as defined below).
7


Pronouncements for Adoption in Subsequent Periods
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this update was effective upon its issuance. If elected, the guidance is to be applied prospectively through December 31, 2022. We are currently evaluating the effect the potential adoption of this ASU will have on our consolidated financial statements, including, but not limited to, our Credit Agreement (defined below). For additional information regarding our Credit Agreement, refer to Note 8 - Debt.
2. REVENUE
Disaggregation of Revenue
We disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The following tables present our revenue disaggregated by markets and geography (in thousands):
Three Months EndedSix Months Ended
April 1, 2022April 2, 2021April 1, 2022April 2, 2021
Revenue by Market:
Telecommunications
$62,927 $42,273 $118,749 $93,805 
Industrial & Defense
67,139 72,090 140,285 133,708 
Data Center
35,081 36,220 65,733 71,574 
Total $165,147 $150,583 $324,767 $299,087 

Three Months EndedSix Months Ended
April 1, 2022April 2, 2021April 1, 2022April 2, 2021
Revenue by Geographic Region:
United States
$74,547 $72,255 $148,973 $136,237 
China
46,028 37,199 82,091 79,575 
Asia Pacific, excluding China (1)
25,881 25,515 56,531 47,288 
Other Countries (2)
18,691 15,614 37,172 35,987 
Total$165,147 $150,583 $324,767 $299,087 
(1)Asia Pacific primarily represents Taiwan, Japan, Singapore, Thailand, South Korea, Australia and Malaysia.
(2)No country or region represented greater than 10% of our total revenue as of the dates presented, other than the United States, China and Asia Pacific region as presented above.
Contract Balances
We record contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advanced consideration received from customers for contracts prior to the transfer of control to the customer, and therefore revenue is subsequently recognized upon delivery of products and services.
The following table presents the changes in contract liabilities during the six months ended April 1, 2022 (in thousands, except percentage):
April 1, 2022October 1, 2021$ Change% Change
 Contract liabilities$4,189 $2,793 $1,396 50 %
As of April 1, 2022 and October 1, 2021, $0.4 million and $0.9 million, respectively, of our contract liabilities, were recorded as other long-term liabilities on our balance sheet with the remainder recorded as accrued liabilities. During the three and six months ended April 1, 2022, we recognized net sales of $0.6 million and $1.0 million, respectively, that were included
8


in the contract liabilities balance as of the beginning of the period. The increase in contract liabilities during the six months ended April 1, 2022 was primarily related to deferral of revenue for invoiced products and services prior to when certain of our customers obtained control of the product and or services.
3. INVESTMENTS
All investments are short-term in nature and are invested in corporate bonds and commercial paper and are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses and fair value of our available-for-sale investments by major investment type are summarized in the tables below (in thousands):
 April 1, 2022
 Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Corporate bonds$133,697 $ $(2,311)$131,386 
Commercial paper244,710  (647)244,063 
Total short-term investments$378,407 $ $(2,958)$375,449 
October 1, 2021
 Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Corporate bonds$73,653 $151 $(171)$73,633 
Commercial paper114,718 21 (7)114,732 
Total short-term investments$188,371 $172 $(178)$188,365 
    
The contractual maturities of available-for-sale investments were as follows (in thousands):
 April 1, 2022October 1, 2021
Less than one year$281,096 $120,590 
Over one year94,353 67,775 
Total available-for-sale investments$375,449 $188,365 

We have determined that the gross unrealized losses on available for sale securities as of April 1, 2022 and October 1, 2021 are temporary in nature and/or do not relate to credit loss, and therefore there is no expense for credit losses recorded in our condensed consolidated statements of operations. Unrealized gains and losses on available-for-sale investments are reported as a separate component of stockholders’ equity within accumulated other comprehensive income.
Other Investments — As of April 1, 2022, we held a non-marketable equity investment in Series B preferred stock of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. As the equity securities do not have a readily determinable fair value and do not qualify for the practical expedient under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, we have elected to account for this investment at cost less any impairment. We evaluate this investment for impairment at each balance sheet date. As of April 1, 2022 and October 1, 2021, the carrying value of this investment was $2.5 million and is classified as a long-term investment.
As of October 1, 2021, also included in long-term investments was a non-controlling investment of less than 10% in the outstanding equity of a private company, Ampere Computing Holdings LLC (“Ampere”), that was acquired in conjunction with our divestiture of our compute business during our fiscal year 2018. This investment’s carrying value was updated quarterly based on our proportionate share of the gains or losses, as well as any changes in Ampere's equity, utilizing the equity method. As of October 1, 2021, the carrying value of this investment was $12.8 million.
On December 23, 2021, we sold our investment in Ampere to one of Ampere’s other limited liability company members, pursuant to the terms of a previously negotiated call option included in Ampere’s limited liability company agreement, as amended and restated (the “LLC Agreement”), in exchange for a predetermined fixed price as set forth in the LLC Agreement of approximately $127.8 million in cash consideration. As of December 23, 2021, the carrying value of this investment was approximately $9.5 million. As a result of this transaction, during the three months ended December 31, 2021, we recorded a gain of $118.2 million in Other (expense) income, net in our condensed consolidated statements of operations.
During the three months ended December 31, 2021, we also recorded our proportionate share of the losses on this investment of $3.3 million in Other (expense) income, net in our condensed consolidated statements of operations. We do not
9


anticipate any further Ampere income or losses to be recorded. During the three and six months ended April 2, 2021, we recorded income of $6.5 million and $1.7 million, respectively, associated with this investment. Amounts for the three and six months ended April 2, 2021 include a non-cash gain of $9.8 million associated with an increase in Ampere's equity.
4. FAIR VALUE
We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three and six months ended April 1, 2022.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
April 1, 2022
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$278 $278 $ $ 
Commercial paper244,063  244,063  
Corporate bonds131,386  131,386  
Total assets measured at fair value$375,727 $278 $375,449 $ 
October 1, 2021
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$26,363 $26,363 $ $ 
Commercial paper114,732  114,732  
Corporate bonds73,633  73,633  
Total assets measured at fair value$214,728 $26,363 $188,365 $ 
All common stock warrants were exercised during the six months ended April 2, 2021. During the six months ended April 2, 2021, the change in the fair value of the warrant liability, classified within Level 3 of the fair value hierarchy, consist of the following (in thousands):
October 2,
2020
Net Realized Losses Included in EarningsSales and
Settlements
April 2,
2021
Common stock warrant liability$25,312 $11,130 $(36,442)$ 
10


5. INVENTORIES
Inventories consist of the following (in thousands):
April 1,
2022
October 1,
2021
Raw materials$59,239 $50,950 
Work-in-process11,752 9,201 
Finished goods22,361 22,548 
Total inventory, net$93,352 $82,699 
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
April 1,
2022
October 1,
2021
Construction in process$17,888 $24,086 
Machinery and equipment220,155 200,843 
Leasehold improvements24,802 24,347 
Furniture and fixtures2,390 2,377 
Computer equipment and software17,815 17,749 
Finance lease assets34,417 35,589 
Total property and equipment317,467 304,991 
Less accumulated depreciation and amortization(195,041)(184,465)
Property and equipment, net$122,426 $120,526 
Depreciation and amortization expense related to property and equipment for the three and six months ended April 1, 2022 was $5.8 million and $11.7 million, respectively. Depreciation and amortization expense related to property and equipment for the three and six months ended April 2, 2021 was $6.0 million and $12.2 million, respectively.
7. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 Three Months EndedSix Months Ended
 April 1,
2022
April 2,
2021
April 1,
2022
April 2,
2021
Cost of revenue$1,778 $3,806 $4,283 $7,683 
Selling, general and administrative6,276 7,601 13,058 15,717 
Total$8,054 $11,407 $17,341 $23,400 
    
Intangible assets consist of the following (in thousands):
April 1,
2022
October 1,
2021
Acquired technology$179,434 $179,434 
Customer relationships245,870 245,870 
Trade name (indefinite-lived)3,400 3,400 
Total 428,704 428,704 
Less accumulated amortization(361,360)(344,019)
Intangible assets — net$67,344 $84,685 
11


A summary of the activity in gross intangible assets and goodwill is as follows (in thousands):
Intangible Assets
Total Intangible AssetsAcquired
Technology
Customer
Relationships
Trade NameGoodwill
Balance as of October 1, 2021$428,704 $179,434 $245,870 $3,400 $314,240 
Currency translation adjustment    (1,055)
Balance as of April 1, 2022$428,704 $179,434 $245,870 $3,400 $313,185 
As of April 1, 2022, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
2022 Remaining2023202420252026ThereafterTotal
Amortization expense$16,092 26,048 15,410 3,490 1,644 1,260 $63,944 
Accumulated amortization for acquired technology and customer relationships were $171.6 million and $189.7 million, respectively, as of April 1, 2022, and $167.3 million and $176.7 million, respectively, as of October 1, 2021.
8. DEBT
The following represents the outstanding balances and effective interest rates of our borrowings as of April 1, 2022 and October 1, 2021, (in thousands, except percentages):
April 1, 2022October 1, 2021
Principal BalanceEffective Interest RatePrincipal BalanceEffective Interest Rate
LIBOR plus 2.25% term loans due May 2024
$120,766 2.46 %$120,766 2.33 %
0.25% convertible notes due March 2026
450,000 0.54 %450,000 4.25 %
Total principal amount outstanding570,766 570,766 
Less: Unamortized discount on term loans and deferred financing costs(5,669)(