10-Q 1 mtsi-20231229.htm 10-Q mtsi-20231229
0001493594false9/27Q12024P3YP3Y45900014935942023-09-302023-12-2900014935942024-01-29xbrli:shares00014935942023-12-29iso4217:USD00014935942023-09-2900014935942022-10-012022-12-30iso4217:USDxbrli:shares0001493594us-gaap:CommonStockMember2023-09-290001493594us-gaap:TreasuryStockCommonMember2023-09-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-290001493594us-gaap:AdditionalPaidInCapitalMember2023-09-290001493594us-gaap:RetainedEarningsMember2023-09-290001493594us-gaap:CommonStockMember2023-09-302023-12-290001493594us-gaap:AdditionalPaidInCapitalMember2023-09-302023-12-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-302023-12-290001493594us-gaap:RetainedEarningsMember2023-09-302023-12-290001493594us-gaap:CommonStockMember2023-12-290001493594us-gaap:TreasuryStockCommonMember2023-12-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-290001493594us-gaap:AdditionalPaidInCapitalMember2023-12-290001493594us-gaap:RetainedEarningsMember2023-12-290001493594us-gaap:CommonStockMember2022-09-300001493594us-gaap:TreasuryStockCommonMember2022-09-300001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001493594us-gaap:AdditionalPaidInCapitalMember2022-09-300001493594us-gaap:RetainedEarningsMember2022-09-3000014935942022-09-300001493594us-gaap:CommonStockMember2022-10-012022-12-300001493594us-gaap:AdditionalPaidInCapitalMember2022-10-012022-12-300001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-012022-12-300001493594us-gaap:RetainedEarningsMember2022-10-012022-12-300001493594us-gaap:CommonStockMember2022-12-300001493594us-gaap:TreasuryStockCommonMember2022-12-300001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-300001493594us-gaap:AdditionalPaidInCapitalMember2022-12-300001493594us-gaap:RetainedEarningsMember2022-12-3000014935942022-12-300001493594mtsi:TelecomMember2023-09-302023-12-290001493594mtsi:TelecomMember2022-10-012022-12-300001493594mtsi:IndustrialDefenseMember2023-09-302023-12-290001493594mtsi:IndustrialDefenseMember2022-10-012022-12-300001493594mtsi:DataCenterMember2023-09-302023-12-290001493594mtsi:DataCenterMember2022-10-012022-12-300001493594country:US2023-09-302023-12-290001493594country:US2022-10-012022-12-300001493594mtsi:ChinaandHongKongMember2023-09-302023-12-290001493594mtsi:ChinaandHongKongMember2022-10-012022-12-300001493594mtsi:AsiaPacificexcludingChinaMember2023-09-302023-12-290001493594mtsi:AsiaPacificexcludingChinaMember2022-10-012022-12-300001493594country:KY2023-09-302023-12-290001493594country:KY2022-10-012022-12-300001493594mtsi:OtherCountriesMember2023-09-302023-12-290001493594mtsi:OtherCountriesMember2022-10-012022-12-30xbrli:pure0001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-022023-12-020001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-020001493594mtsi:RFBusinessOfWolfspeedIncMember2023-09-302023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-292023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMemberus-gaap:TechnologyBasedIntangibleAssetsMember2023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMemberus-gaap:CustomerRelationshipsMember2023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMembermtsi:FavorableContractsMember2023-12-290001493594us-gaap:OrderOrProductionBacklogMembermtsi:RFBusinessOfWolfspeedIncMember2023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMember2022-10-012022-12-300001493594mtsi:RFBusinessOfWolfspeedIncMemberus-gaap:AcquisitionRelatedCostsMember2023-09-302023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMemberus-gaap:AcquisitionRelatedCostsMember2022-10-012022-12-300001493594mtsi:OMMICSASMember2023-05-312023-05-310001493594mtsi:OMMICSASMember2023-09-302023-12-290001493594mtsi:OMMICSASMember2022-10-012022-12-300001493594mtsi:OMMICSASMember2023-12-290001493594mtsi:OMMICSASMemberus-gaap:TechnologyBasedIntangibleAssetsMember2023-12-290001493594mtsi:OMMICSASMemberus-gaap:CustomerRelationshipsMember2023-12-290001493594mtsi:LinearizerTechnologyIncMember2023-03-032023-03-030001493594mtsi:LinearizerTechnologyIncMember2023-09-302023-12-290001493594mtsi:LinearizerTechnologyIncMember2023-09-290001493594mtsi:LinearizerTechnologyIncMember2023-12-290001493594mtsi:EfgCompanyMember2023-09-302023-12-290001493594mtsi:LinearizerTechnologyIncMemberus-gaap:CustomerRelationshipsMember2023-12-290001493594mtsi:LinearizerTechnologyIncMemberus-gaap:TechnologyBasedIntangibleAssetsMember2023-12-290001493594us-gaap:TradeNamesMembermtsi:LinearizerTechnologyIncMember2023-12-290001493594us-gaap:CertificatesOfDepositMember2023-12-290001493594us-gaap:CorporateDebtSecuritiesMember2023-12-290001493594us-gaap:CommercialPaperMember2023-12-290001493594us-gaap:USTreasurySecuritiesMember2023-12-290001493594us-gaap:CorporateDebtSecuritiesMember2023-09-290001493594us-gaap:CommercialPaperMember2023-09-290001493594us-gaap:USTreasurySecuritiesMember2023-09-290001493594mtsi:PrivatelyHeldManufacturingCompanyMember2023-09-290001493594mtsi:PrivatelyHeldManufacturingCompanyMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMember2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:USTreasurySecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2023-09-290001493594us-gaap:ConstructionInProgressMember2023-12-290001493594us-gaap:ConstructionInProgressMember2023-09-290001493594us-gaap:MachineryAndEquipmentMember2023-12-290001493594us-gaap:MachineryAndEquipmentMember2023-09-290001493594us-gaap:LeaseholdImprovementsMember2023-12-290001493594us-gaap:LeaseholdImprovementsMember2023-09-290001493594us-gaap:FurnitureAndFixturesMember2023-12-290001493594us-gaap:FurnitureAndFixturesMember2023-09-290001493594mtsi:ComputerEquipmentAndSoftwareMember2023-12-290001493594mtsi:ComputerEquipmentAndSoftwareMember2023-09-290001493594mtsi:AssetsHeldUnderFinanceLeasesMember2023-12-290001493594mtsi:AssetsHeldUnderFinanceLeasesMember2023-09-290001493594us-gaap:CostOfSalesMember2023-09-302023-12-290001493594us-gaap:CostOfSalesMember2022-10-012022-12-300001493594us-gaap:ResearchAndDevelopmentExpenseMember2023-09-302023-12-290001493594us-gaap:ResearchAndDevelopmentExpenseMember2022-10-012022-12-300001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-09-302023-12-290001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-10-012022-12-300001493594us-gaap:DevelopedTechnologyRightsMember2023-12-290001493594us-gaap:OrderOrProductionBacklogMember2023-12-290001493594us-gaap:CustomerRelationshipsMember2023-12-290001493594mtsi:FavorableContractsMember2023-12-290001493594mtsi:InternalUseSoftwareMember2023-12-290001493594us-gaap:TradeNamesMember2023-12-290001493594us-gaap:DevelopedTechnologyRightsMember2023-09-290001493594us-gaap:CustomerRelationshipsMember2023-09-290001493594mtsi:InternalUseSoftwareMember2023-09-290001493594us-gaap:TradeNamesMember2023-09-290001493594mtsi:ConvertibleSeniorNotesDue2026Memberus-gaap:ConvertibleNotesPayableMember2021-03-252021-03-250001493594us-gaap:ConvertibleDebtMember2023-12-290001493594us-gaap:ConvertibleDebtMember2023-09-290001493594us-gaap:LongTermDebtMember2023-12-290001493594us-gaap:LongTermDebtMember2023-09-290001493594mtsi:ConvertibleSeniorNotesDue2026Member2021-03-250001493594mtsi:ConvertibleNotesGreenShoeMember2021-04-060001493594mtsi:ConvertibleSeniorNotesDue2026Member2023-12-290001493594mtsi:ConversionPeriodOneMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-25mtsi:renewal_option0001493594mtsi:ConversionPeriodOneMembermtsi:ConvertibleSeniorNotesDue2026Membermtsi:ConversionPriceMember2021-03-252021-03-250001493594mtsi:ConvertibleSeniorNotesDue2026Membermtsi:ConversionPeriodTwoMember2021-03-252021-03-25utr:D0001493594mtsi:ConvertibleSeniorNotesDue2026Membermtsi:PrincipalTradingPriceMembermtsi:ConversionPeriodTwoMember2021-03-252021-03-250001493594mtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-250001493594mtsi:ConvertibleSeniorNotesDue2026Member2023-09-302023-12-290001493594mtsi:ConvertibleSeniorNotesDue2026Member2022-10-012022-12-300001493594mtsi:ConvertibleSeniorNotesDue2026Memberus-gaap:ConvertibleNotesPayableMember2023-12-290001493594mtsi:ConvertibleSeniorNotesDue2026Memberus-gaap:ConvertibleNotesPayableMember2023-09-290001493594us-gaap:LongTermDebtMember2023-08-0200014935942023-08-020001493594mtsi:TermLoanMember2022-10-012022-12-300001493594us-gaap:PurchaseCommitmentMember2023-09-302023-12-290001493594us-gaap:PurchaseCommitmentMember2022-10-012023-09-290001493594mtsi:A2012OmnibusIncentivePlanMember2023-12-290001493594mtsi:EmployeeStockPurchasePlanMember2023-12-290001493594srt:MinimumMember2023-09-302023-12-290001493594srt:MaximumMember2023-09-302023-12-290001493594srt:MinimumMembermtsi:IncentiveStockUnitsMember2023-09-302023-12-290001493594srt:MaximumMembermtsi:IncentiveStockUnitsMember2023-09-302023-12-290001493594mtsi:IncentiveStockUnitsMember2023-12-290001493594mtsi:IncentiveStockUnitsMember2023-09-290001493594mtsi:IncentiveStockUnitsMember2023-09-302023-12-290001493594mtsi:IncentiveStockUnitsMember2022-10-012022-12-300001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2023-09-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2023-09-302023-12-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2023-12-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2022-10-012022-12-300001493594srt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2023-09-302023-12-290001493594srt:MaximumMemberus-gaap:RestrictedStockUnitsRSUMember2023-09-302023-12-290001493594mtsi:MarketBasedPerformanceRestrictedStockUnitsMember2023-09-302023-12-290001493594srt:MinimumMember2023-12-290001493594srt:MaximumMember2023-12-290001493594us-gaap:RestrictedStockUnitsRSUMember2023-09-302023-12-29mtsi:segment0001493594country:US2023-12-290001493594country:US2023-09-290001493594country:FR2023-12-290001493594country:FR2023-09-290001493594mtsi:OtherCountriesMember2023-12-290001493594mtsi:OtherCountriesMember2023-09-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembermtsi:CustomerAMember2023-09-302023-12-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembermtsi:CustomerAMember2022-10-012022-12-300001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermtsi:CustomerBMember2023-09-302023-12-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermtsi:CustomerBMember2022-10-012022-12-300001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermtsi:CustomerCMember2023-09-302023-12-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermtsi:CustomerCMember2022-10-012022-12-300001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2022-10-012022-12-30mtsi:customer0001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-09-302023-12-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembermtsi:TopTenCustomersMember2023-09-302023-12-290001493594us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembermtsi:TopTenCustomersMember2022-10-012022-12-300001493594mtsi:CharlesBlandMember2023-09-302023-12-290001493594mtsi:CharlesBlandMember2023-12-29

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35451
MACOM Technology Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter) 
Delaware 27-0306875
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
100 Chelmsford Street
Lowell, MA 01851
(Address of principal executive offices and zip code)
(978) 656-2500
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareMTSINasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of January 29, 2024, there were 72,067,141 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)
December 29,
2023
September 29,
2023
ASSETS
Current assets:
Cash and cash equivalents$163,586 $173,952 
Short-term investments299,705 340,574 
Accounts receivable, net 101,075 91,253 
Inventories159,501 136,300 
Prepaid and other current assets21,084 19,114 
Total current assets744,951 761,193 
Property and equipment, net184,278 149,496 
Goodwill322,489 323,398 
Intangible assets, net119,527 66,994 
Deferred income taxes217,463 218,107 
Other long-term assets62,094 34,056 
Total assets$1,650,802 $1,553,244 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of finance lease obligations$1,052 $1,162 
Accounts payable27,137 24,966 
Accrued liabilities74,680 57,397 
Total current liabilities102,869 83,525 
Finance lease obligations, less current portion31,624 31,776 
Financing obligation9,232 9,307 
Long-term debt447,421 447,134 
Other long-term liabilities35,565 33,902 
Total liabilities626,711 605,644 
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Common stock72 71 
Treasury stock, at cost(330)(330)
Accumulated other comprehensive loss(396)(3,635)
Additional paid-in capital1,274,928 1,214,203 
Accumulated deficit(250,183)(262,709)
Total stockholders’ equity1,024,091 947,600 
Total liabilities and stockholders' equity$1,650,802 $1,553,244 
See notes to condensed consolidated financial statements.
1



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

 
 Three Months Ended
 December 29,
2023
December 30,
2022
Revenue$157,148 $180,104 
Cost of revenue69,838 69,749 
Gross profit87,310 110,355 
Operating expenses:
Research and development39,413 38,832 
Selling, general and administrative36,887 32,940 
Total operating expenses76,300 71,772 
Income from operations11,010 38,583 
Other income (expense):
Interest income5,556 3,684 
Interest expense(1,290)(3,082)
Other expense, net (55)
Total other income4,266 547 
Income before income taxes15,276 39,130 
Income tax expense2,750 9,611 
Net income$12,526 $29,519 
Net income per share:
Income per share - Basic$0.18 $0.42 
Income per share - Diluted$0.17 $0.41 
 Weighted average shares used:
Basic71,425 70,481 
Diluted72,286 71,374 
See notes to condensed consolidated financial statements.

2


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


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

Three Months Ended December 29, 2023
   Accumulated
Other
Comprehensive (Loss) Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of September 29, 202371,013 $71 (23)$(330)$(3,635)$1,214,203 $(262,709)$947,600 
Stock option exercises5 — — — — 80 — 80 
Vesting of restricted common stock and units
459  — — — — —  
Issuance of common stock pursuant to employee stock purchase plan
59 — — — — 2,769 — 2,769 
Shares repurchased for tax withholdings on restricted stock awards(160)— — — — (11,552)— (11,552)
Share-based compensation
— — — — — 8,657 — 8,657 
Issuance of common stock as consideration for acquisition712 1 — — — 60,771 — 60,772 
Other comprehensive income, net of tax— — — — 3,239 — — 3,239 
Net income— — — — — — 12,526 12,526 
Balance as of December 29, 202372,088 $72 (23)$(330)$(396)$1,274,928 $(250,183)$1,024,091 
See notes to condensed consolidated financial statements.

Three Months Ended December 30, 2022
   Accumulated
Other
Comprehensive (Loss) Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of September 30, 202270,022 $70 (23)$(330)$(5,851)$1,203,145 $(354,286)$842,748 
Vesting of restricted common stock and units
1,126 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
52 — — — — 2,320 — 2,320 
Shares repurchased for tax withholdings on equity awards
(443)— — — — (26,375)— (26,375)
Share-based compensation
— — — — — 11,047 — 11,047 
Other comprehensive income, net of tax— — — — 3,284 — — 3,284 
Net income— — — — — — 29,519 29,519 
Balance as of December 30, 202270,757 $71 (23)$(330)$(2,567)$1,190,137 $(324,767)$862,544 
See notes to condensed consolidated financial statements.
4


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Three Months Ended
 December 29, 2023December 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$12,526 $29,519 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangibles amortization14,289 12,855 
Share-based compensation8,657 11,047 
Deferred income taxes294 9,067 
Other adjustments, net(1,755)(381)
Change in operating assets and liabilities:
Accounts receivable(12,180)(10,489)
Inventories1,555 (6,375)
Prepaid expenses and other assets(510)(556)
Accounts payable2,122 3,689 
Accrued and other liabilities6,612 (10,349)
Income taxes1,489 246 
Net cash provided by operating activities33,099 38,273 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of a business(75,000) 
Purchases of property and equipment(4,652)(9,616)
Proceeds from sales and maturities of short-term investments100,265 146,966 
Purchases of short-term investments(55,387)(145,300)
Net cash used in investing activities(34,774)(7,950)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on finance leases and other(349)(278)
Proceeds from stock option exercises and employee stock purchases2,848 2,320 
Repurchase of common stock - tax withholdings on equity awards(11,552)(26,375)
Net cash used in financing activities(9,053)(24,333)
Foreign currency effect on cash362 213 
NET CHANGE IN CASH AND CASH EQUIVALENTS(10,366)6,203 
CASH AND CASH EQUIVALENTS — Beginning of period173,952 119,952 
CASH AND CASH EQUIVALENTS — End of period$163,586 $126,155 
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the RF Business Acquisition (See Note 3 - Acquisitions)
$60,772 $ 
See notes to condensed consolidated financial statements.
5


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

1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, comprehensive income, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM,” 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 September 29, 2023 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our September 29, 2023 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended September 29, 2023 filed with the SEC on November 13, 2023 (the “2023 Annual Report on Form 10-K”). We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our 2023 Annual Report on Form 10-K.
Principles of Consolidation, Basis of Presentation and Reclassification—The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the condensed consolidated financial statements, Interest income has been reclassified to conform to the current year presentation.
We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 2024 and 2023 each include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in such fiscal years in the first fiscal quarter.
Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.
Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in our 2023 Annual Report on Form 10-K.
Pronouncements for Adoption in Subsequent Periods
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which improves disclosures about a public entity’s reportable segments and addresses requests from investors and other allocators of capital for additional, more detail information about a reportable segment’s expenses. The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. This ASU should be applied on a retrospective basis. The amendments in this update are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the future effect the adoption of this ASU will have on our consolidated financial statements and related disclosures.
6


In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which require greater disaggregation of income tax disclosures. The amendments in this update improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. Other amendments in this update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) and (2) removing disclosures that no longer are considered cost beneficial or relevant. This ASU should be applied on a prospective basis, with retrospective application permitted. The guidance in this update is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the potential effect of the adoption of this ASU will have on our consolidated financial statements and related disclosures.
2. REVENUE
Disaggregation of Revenue
We disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The following tables present our revenue disaggregated by markets and geography (in thousands):
Three Months Ended
December 29, 2023December 30, 2022
Revenue by Market:
Industrial & Defense
$76,998 $77,169 
Data Center
49,512 41,485 
Telecom30,638 61,450 
Total $157,148 $180,104 
Three Months Ended
December 29, 2023December 30, 2022
Revenue by Geographic Region:
United States
$69,645 $88,589 
China
36,348 41,156 
Asia Pacific, excluding China (1)
14,008 21,534 
Cayman Islands18,600 11,092 
Other Countries (2)
18,547 17,733 
Total$157,148 $180,104 
(1)Asia Pacific primarily represents Australia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand.
(2)No country or region represented greater than 10% of our total revenue as of the dates presented, other than the United States, China, Asia Pacific region and Cayman Islands as presented above.
Revenue by geographic region is aggregated by customer billing address.
Contract Balances
We record contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advanced consideration received from customers for contracts prior to the transfer of control to the customer, and, therefore, revenue is subsequently recognized upon delivery of products and services.
The following table presents the changes in contract liabilities during the three months ended December 29, 2023 (in thousands, except percentage):
December 29, 2023September 29, 2023$ Change% Change
 Contract liabilities$5,604 $2,762 $2,842 103 %
During the three months ended December 29, 2023, we recognized sales of $2.4 million that were included in the contract liabilities balance as of the beginning of the period. The increase in contract liabilities during the three months ended December 29, 2023 was primarily related to invoicing prior to when our customers obtain control of such products and or
7


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

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



Intangible assets consist of technology, customer relationships, a favorable contract and backlog with fair values of $22.0 million, $21.5 million, $15.0 million and $1.5 million, respectively, and useful lives of 4.8 years, 8.8 years, 2.0 years and 0.8 years, respectively. We used variations of income approaches with estimates and assumptions developed by us to determine the fair values of technology, customer relationships, the favorable contract and backlog. We valued technology by using the relief-from-royalty method, customer relationships and backlog by using the multi-period excess earnings method, and the favorable contract by using the discounted cash flow method. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including revenue growth rates, royalty rates, operating margin, and discount rates. We used the cost and market approaches to determine the fair value of our property and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets.
The prepayment of $19.5 million for the net assets associated with the RTP Fab Transfer, classified in Other long-term assets in our condensed consolidated balance sheet, relates to the estimated future fair value of property and equipment, inventory and liabilities that we will assume control of at the time of the RTP Fab Transfer. The cost and market approaches were used in determining the fair value of $14.1 million for property and equipment at the RTP Fab Transfer date.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of December 29, 2023, the purchase price allocation for the RF Business remains open as we gather additional information regarding the fair value of consideration transferred, the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, the prepayment for the assets and liabilities to be conveyed with the RTP Fab Transfer and contingencies.
The RF Business has been included in our consolidated financial statements since the date of acquisition. During the fiscal quarter ended December 29, 2023, the RF Business contributed approximately $6.2 million of our total revenue. The net income associated with the RF Business did not materially impact our consolidated net income for the quarter ended December 29, 2023.
Consolidated estimated pro forma unaudited revenue for the fiscal quarters ended December 29, 2023 and December 30, 2022, as if the RF Business Acquisition had occurred on October 1, 2022, is $184.0 million and $222.4 million, respectively. Consolidated pro forma net loss for the fiscal quarters ended December 29, 2023 and December 30, 2022, as if the RF Business Acquisition had occurred on October 1, 2022, is $13.9 million and $31.3 million, respectively. Pro forma revenue and net loss was prepared for comparative purposes only and is not indicative of what would have occurred had the acquisition actually occurred on October 1, 2022, or of the results that may occur in the future. Pro forma net loss includes business combination accounting effects from the RF Business Acquisition, primarily amortization expense from acquired intangible assets, acquisition transaction costs and tax-related effects. Pro forma earnings for the three months ended December 29, 2023 was adjusted to exclude transaction costs of $15.5 million incurred during the quarter and pro forma earnings for the three months ended December 30, 2022 was adjusted to include $41.8 million of transaction costs incurred associated with the RF Business Acquisition.
MESC— On May 31, 2023, we completed the acquisition of the key manufacturing facilities, capabilities, technologies and other assets and certain specified liabilities of OMMIC SAS, a semiconductor manufacturer based in Limeil-Brévannes, France with expertise in wafer fabrication, epitaxial growth and monolithic microwave integrated circuit (“MMIC”) processing and design. We are referring to this acquisition as the MACOM European Semiconductor Center Acquisition (the “MESC Acquisition”) and it was accounted for as a business combination. We completed the MESC Acquisition to expand our European footprint and to enable us to offer higher frequency gallium arsenide (“GaAs”) and GaN MMICs. Total cash consideration paid for the MESC Acquisition was approximately $36.9 million and was funded with cash-on-hand. During the three months ended December 29, 2023 and December 30, 2022, we incurred acquisition-related transaction costs of approximately $0.3 million and $0.8 million, respectively, which are included in selling, general and administrative expense.
The purchase price for the MESC Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
9


At Acquisition Date as Reported
December 29, 2023
Current assets$297 
Inventory3,790 
Property and equipment30,538 
Intangible assets5,966 
Total assets acquired40,591 
Current liabilities3,734 
Total liabilities assumed3,734 
Purchase Price$36,857 
As part of the acquisition, we assumed a lease agreement for the manufacturing facilities in France that provides us with the option to purchase the real property for an immaterial price at the end of the lease term, in October 2024. We expect to exercise this bargain purchase option and have recorded a right-of-use-asset of $24.7 million in Property and equipment. The real property was valued using a market approach.
Intangible assets consist of technology and customer relationships of $4.9 million and $1.1 million, respectively, and both having useful lives of 8.3 years. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of December 29, 2023, the purchase price allocation for the MESC Acquisition remains open as we gather additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of intangibles, inventory, property and equipment, leases, liabilities and contingencies. We did not recognize goodwill associated with this acquisition and there were no measurement period adjustments recognized during the quarter ended December 29, 2023.
Linearizer Technology, Inc.— On March 3, 2023, we completed the acquisition of Linearizer Technology, Inc. (“Linearizer”), a developer of modules and subsystems, including SSPAs, microwave predistortion linearizers and microwave photonics based in Hamilton, New Jersey (the “Linearizer Acquisition”), which was accounted for as a business combination. We acquired Linearizer to further strengthen our component and subsystem design expertise in our target markets. In connection with the Linearizer Acquisition, we acquired all of the outstanding shares of Linearizer for total cash consideration of approximately $51.6 million, subject to customary purchase price adjustments. We funded the Linearizer Acquisition with cash-on-hand. During the three months ended December 29, 2023, we incurred acquisition-related transaction costs of approximately less than $0.1 million which are included in selling, general and administrative expense. There were no transaction costs for the three months ended December 30, 2022. The Linearizer Acquisition was accounted for as a business combination and the operations of Linearizer have been included in our consolidated financial statements since the date of acquisition.
The purchase price for the Linearizer Acquisition has been allocated based on preliminary estimates of fair values of the acquired assets and assumed liabilities at the date of acquisition as follows (in thousands):
At Acquisition Date as Reported
September 29, 2023
Measurement Period AdjustmentsAt Acquisition Date as Reported
December 29, 2023
Current assets$2,819 $— $2,819 
Inventory8,907 1,407 10,314 
Property and equipment5,485 — 5,485 
Intangible assets29,600 — 29,600 
Goodwill12,332 (1,407)10,925 
Total assets acquired59,143 — 59,143 
Current liabilities7,544 — 7,544 
Total liabilities assumed7,544 — 7,544 
Purchase Price$51,599 $ $51,599 
10


Intangible assets consist of customer relationships, technology and trade name with fair values of $20.7 million, $7.1 million and $1.8 million, respectively, and useful lives of 8.6 years, 7.6 years and 7.6 years, respectively. We used the income approach to determine the fair value of the definite-lived intangible assets and the cost and market approaches to determine the fair value of our property, plant and equipment. We amortize definite-lived assets based on the pattern over which we expect to receive the economic benefit from these assets. The intangible assets and goodwill acquired will be amortizable for tax purposes due to the Internal Revenue Code of 1986 (IRC) Section 338 election filed.
The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). During the three months ended December 29, 2023, we increased the fair value of inventory by $1.4 million with an offsetting reduction to Goodwill. As of December 29, 2023, the purchase price allocation for Linearizer remains open as we gather additional information regarding the assets acquired and the liabilities assumed, primarily in relation to the valuation of contingencies.
4. INVESTMENTS
All investments are short-term in nature and are invested in corporate bonds, commercial paper, and U.S. Treasury securities and are classified as available-for-sale. These certificates of deposit, corporate bonds, commercial paper and U.S. Treasury securities are owned directly by the Company and are segregated in brokerage custody accounts. The amortized cost, gross unrealized holding gains or losses and fair value of our available-for-sale investments by major investment type are summarized in the tables below (in thousands):
 December 29, 2023
 Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Certificates of deposit$10,980 $3 $ $10,983 
Corporate bonds157,136 85 (1,392)155,829 
Commercial paper100,987 16 (19)100,984 
U.S. Treasury securities31,864 107 (62)31,909 
Total short-term investments$300,967 $211 $(1,473)$299,705 
September 29, 2023
 Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Corporate bonds$145,234 $ $(2,845)$142,389 
Commercial paper176,405  (129)176,276 
U.S. Treasury securities21,895 18 (4)21,909 
Total short-term investments$343,534 $18 $(2,978)$340,574 
    
The contractual maturities of available-for-sale investments were as follows (in thousands):
 December 29, 2023September 29, 2023
Less than one year$235,965 $265,591 
Over one year63,740 74,983 
Total available-for-sale investments$299,705 $340,574 

We have determined that the gross unrealized losses on available for sale securities as of December 29, 2023 and September 29, 2023 are temporary in nature and/or do not relate to credit loss, and therefore there is no expense for credit losses recorded in our condensed consolidated statements of operations. Unrealized gains and losses on available-for-sale investments are reported as a separate component of stockholders’ equity within accumulated other comprehensive income.
Other Investments—As of December 29, 2023, we held a non-marketable equity investment in Series B preferred stock of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. As the equity securities do not have a readily determinable fair value and do not qualify for the practical expedient under Accounting Standards Codification 820, Fair Value Measurement, we have elected to account for this investment at cost less any impairment. We
11


evaluate this investment for impairment at each balance sheet date. As of December 29, 2023 and September 29, 2023, the carrying value of this investment was $2.5 million and it was classified as a long-term investment.
5. FAIR VALUE
We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three months ended December 29, 2023.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
December 29, 2023
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$80,852 $80,852 $ $ 
U.S. Treasury securities31,909 31,909   
Certificates of deposit10,983 10,983   
Commercial paper100,984  100,984  
Corporate bonds155,829  155,829  
Total assets measured at fair value$380,557 $123,744 $256,813 $ 
September 29, 2023
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$111,388 $111,388 $ $ 
U.S. Treasury securities21,910 21,910   
Commercial paper176,276  176,276  
Corporate bonds142,388  142,388  
Total assets measured at fair value$451,962 $133,298 $318,664 $ 
6. INVENTORIES
Inventories consist of the following (in thousands):
December 29,
2023
September 29,
2023
Raw materials$100,294 $82,589 
Work-in-process14,250 14,280 
Finished goods44,957 39,431 
Total inventory, net$159,501 $136,300 

12


7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
December 29,
2023
September 29,
2023
Construction in process$12,908 $10,256 
Machinery and equipment272,513 238,037 
Leasehold improvements37,317 35,342 
Furniture and fixtures3,067 2,888 
Computer equipment and software19,617 18,824 
Finance lease assets65,522 64,126 
Total property and equipment410,944 369,473 
Less accumulated depreciation and amortization(226,666)(219,977)
Property and equipment, net$184,278 $149,496 
Depreciation and amortization expense related to property and equipment for the three months ended December 29, 2023 and December 30, 2022 was $6.5 million and $6.0 million, respectively. Accumulated amortization on finance lease assets as of December 29, 2023 and September 29, 2023 was $8.4 million and $7.8 million, respectively.
8. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 Three Months Ended
 December 29,
2023
December 30,
2022
Cost of revenue$1,942 $910 
Research and development1,044  
Selling, general and administrative4,798 5,903 
Total$7,784 $6,813 
A summary of the activity in gross intangible assets as of December 29, 2023 and September 29, 2023 is as follows (in thousands):

December 29,
2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$213,646 $(180,685)$32,961 
Backlog1,500 (129)1,371 
Customer relationships289,181 (230,435)58,746 
Favorable contract15,000 (831)14,169 
Internal-use software8,350 (1,044)7,306 
Trade name (1)
5,200 (226)4,974 
Balance as of December 29, 2023 (2)
$532,877 $(413,350)$119,527 
13


September 29,
2023
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$191,369 $(179,558)$11,811 
Customer relationships267,621 (225,827)41,794 
Internal-use software8,350  8,350 
Trade name (1)
5,200 (161)5,039 
Balance as of September 29, 2023 (2)
$472,540 $(405,546)$66,994 
(1)     Includes an indefinite-lived trade name of $3.4 million that is not amortized.
(2) Foreign intangible asset carrying amounts were affected by foreign currency translation.
As of December 29, 2023, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
2024 Remaining2025202620272028ThereafterTotal
Amortization expense$32,372 26,595 15,170 12,787 9,919 19,284 $116,127 
A summary of the changes in goodwill as of December 29, 2023 and September 29, 2023 is as follows (in thousands):
December 29,
2023
Balance as of September 29, 2023$323,398 
Acquired (1)
(1,407)
Foreign currency translation adjustment498 
Balance as of December 29, 2023$322,489 
(1)     The reduction of $1.4 million to goodwill is related to a measurement period adjustment for the Linearizer Acquisition. For additional information refer to Note 3 - Acquisitions.
9. DEBT
The following represents the outstanding balances and effective interest rates of our borrowings as of December 29, 2023 and September 29, 2023, (in thousands, except percentages):
December 29, 2023September 29, 2023
Principal BalanceEffective Interest RatePrincipal BalanceEffective Interest Rate
0.25% convertible notes due March 2026
450,000 0.54 %450,000 0.54 %
Unamortized discount on deferred financing costs(2,579)(2,866)
Total long-term debt, less current portion$447,421 $447,134 
2026 Convertible Notes
On March 25, 2021, we issued 0.25% convertible senior notes due in fiscal year 2026, pursuant to an indenture dated as of such date (the “Indenture”), between the Company and U.S. Bank National Association, as trustee, with an aggregate principal amount of $400.0 million (the “Initial Notes”), and on April 6, 2021, we issued an additional $50.0 million aggregate principal amount (the “Additional Notes”) (together, the “2026 Convertible Notes”). The aggregate principal balance of the 2026 Convertible Notes is $450.0 million. The 2026 Convertible Notes will mature on March 15, 2026, unless earlier converted, redeemed or repurchased.
The Additional Notes were issued and sold to the initial purchaser of the Initial Notes, pursuant to the option to purchase the Additional Notes granted by the Company to the initial purchaser and have the same terms as the Initial Notes.
Holders of the 2026 Convertible Notes may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2025 in multiples of $1,000 principal amount, only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on July 2, 2021 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive)
14


during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the notes on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the “trading price” (as defined in the Indenture) per $1,000 principal amount of the notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the notes on each such trading day; (iii) if we call such notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the applicable redemption date; or (iv) upon the occurrence of specified corporate events described in the Indenture. On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes in multiples of $1,000 principal amount, regardless of the foregoing circumstances.
The initial conversion rate for the 2026 Convertible Notes is 12.1767 shares of common stock per $1,000 principal amount of the notes, equivalent to an initial conversion price of approximately $82.12 per share of common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events in the Indenture.
In November 2021, we made an irrevocable election to pay cash for the aggregate principal amount of notes to be converted. Upon conversion of the 2026 Convertible Notes, we are required to pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted (subject to, and in accordance with, the settlement provisions of the Indenture). We may not redeem the notes prior to March 20, 2024. We may redeem for cash all or any portion of the notes, at our option, on or after March 20, 2024 if the last reported sale price per share of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, to, but not including, the redemption date.
The Indenture does not contain any financial or operating covenants or restrictions on the payments of dividends, the making of investments, the incurrence of indebtedness or the purchase or prepayment of securities by us or any of our subsidiaries.
For the three months ended December 29, 2023 and December 30, 2022, total interest expense for the 2026 Convertible Notes was $0.3 million and $0.3 million, respectively.
The fair value of our 2026 Convertible Notes was $556.2 million and $512.5 million as of December 29, 2023 and September 29, 2023, respectively, and was determined based on quoted prices in markets that are not active, which is considered a Level 2 valuation input.
There are no future minimum principal payments under the notes as of December 29, 2023; the full amount of $450.0 million is due in fiscal year 2026.
Term Loans
As of December 30, 2022, we were party to a credit agreement, dated as of May 8, 2014, with a syndicate of lenders and Goldman Sachs Bank USA, as administrative agent (as amended on February 13, 2015, August 31, 2016, March 10, 2017, May 19, 2017, May 2, 2018 and May 9, 2018, the “Credit Agreement”).
On August 2, 2023, the Credit Agreement was terminated when we paid the total outstanding principal balance on our Term Loans of $120.8 million and accrued interest of less than $0.1 million with cash-on-hand.
There was no interest expense for the Term Loans for the three months ended December 29, 2023. For the three months ended December 30, 2022, total interest expense for the Term Loans was $1.8 million.
15


10. FINANCING OBLIGATION
We are party to a power purchase agreement for the use of electric power and thermal energy producing systems at our fabrication facility in Lowell, Massachusetts. These systems are expected to reduce our consumption of energy while delivering sustainable, resilient energy for heating and cooling. We do not own these systems; however, we control the use of the assets during operation. As of December 29, 2023 and September 29, 2023, the net book value of the systems in Property and equipment, net was $8.7 million and $8.9 million, respectively, and the corresponding liability was $9.5 million and $9.6 million, respectively, primarily classified in Financing obligation on our condensed consolidated balance sheet. The initial financing obligation was calculated based on future fixed payments allocated to the power generator of $16.8 million over the 15-year term, discounted at an implied discount rate of 7.4%, and the remaining future minimum payments are for power purchases. As of December 29, 2023 and September 29, 2023, we have $25.3 million and $25.5 million, respectively, in remaining fixed payments over a 14-year term associated with the power purchase agreement, of which $15.7 million and $15.9 million, respectively, is included in our consolidated balance sheets on a discounted basis.
As of December 29, 2023, expected future minimum payments for the financing obligation were as follows (in thousands):
Fiscal year ending:Amount
2024$718 
2025982 
20261,007 
20271,031 
20281,057 
Thereafter10,857 
Total payments$15,652 
Less: interest6,152 
Present value of liabilities$9,500 
11. EARNINGS PER SHARE
The following table sets forth the computation for basic and diluted net income per share of common stock (in thousands, except per share data):
Three Months Ended
December 29, 2023December 30, 2022
Numerator:
Net income attributable to common stockholders$12,526 $29,519 
Denominator:
Weighted average common shares outstanding-basic71,425 70,481 
Dilutive effect of convertible debt, stock options, restricted stock and restricted stock units861 893 
Weighted average common shares outstanding-diluted72,286 71,374 
Net income to common stockholders per share-Basic:$0.18 $0.42 
Net income to common stockholders per share-Diluted:$0.17 $0.41 
The table above includes the dilutive effect of 7,404 potential common shares for the 2026 Convertible Notes for the three months ended December 29, 2023. The 2026 Convertible Notes did not have an impact on diluted net income per share for the three months ended December 30, 2022.
12. COMMITMENTS AND CONTINGENCIES
From time to time, we may be subject to commercial disputes, employment issues, claims by other companies in the industry that we have infringed their intellectual property rights and other similar claims and litigation. Any such claims may lead to future litigation and material damages and defense costs. We were not involved in any material pending legal proceedings during the three months ended December 29, 2023.
16


13. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION
We have authorized 10 million shares of $0.001 par value preferred stock and 300 million shares of $0.001 par value common stock as of December 29, 2023.
Stock Plans
As of December 29, 2023, we had 3.9 million shares available for issuance under our 2021 Omnibus Incentive Plan (the “2021 Plan”), which replaced our 2012 Omnibus Incentive Plan (as amended and restated) (the “2012 Plan”), and 1.2 million shares available for issuance under our 2021 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), which replaced our 2012 Employee Stock Purchase Plan. We have outstanding awards under the 2021 Plan and the 2012 Plan. Following the adoption of the 2021 Plan, no additional awards have been or will be made under the 2012 Plan. Under the 2021 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), unrestricted stock awards, stock units (including restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”)), performance awards, cash awards, and other share-based awards to employees, directors, consultants and advisors. The ISOs and NSOs must be granted at an exercise price, and the SARs must be granted at a base value, per share of not less than 100% of the closing price of a share of our common stock on the date of grant (or, if no closing price is reported on that date, the closing price on the immediately preceding date on which a closing price was reported) (110% in the case of certain ISOs). Options granted under the 2012 Plan primarily vested based on certain market-based and performance-based criteria and generally have a term of four years to seven years. Certain of the share-based awards granted and outstanding as of December 29, 2023 are subject to accelerated vesting upon a change in control of the Company.
Incentive Stock Units
Aside from the equity plans described above, we also grant incentive stock units (“ISUs”) to certain of our international employees which typically vest over three or four years and for which the fair value is determined by our underlying stock price, which are classified as liabilities and settled in cash upon vesting.
As of December 29, 2023 and September 29, 2023, the fair value of outstanding ISUs was $6.0 million and $5.0 million, respectively, and the associated accrued compensation liability was $2.3 million and $3.3 million, respectively. During the three months ended December 29, 2023 and December 30, 2022, we recorded expense for ISU awards of $0.5 million and $1.3 million, respectively. These expenses are not included in the share-based compensation expense totals below.
Share-Based Compensation
The following table shows a summary of share-based compensation expense included in the condensed consolidated statements of operations (in thousands):
 Three Months Ended
 December 29,
2023
December 30,
2022
Cost of revenue$1,270 $1,150 
Research and development2,765 4,232 
Selling, general and administrative4,622 5,665 
Total share-based compensation expense $8,657 $11,047 
As of December 29, 2023, the total unrecognized compensation costs related to RSUs and PRSUs was $93.2 million, which we expect to recognize over a weighted-average period of 2.3 years. As of December 29, 2023, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $0.9 million.

Restricted Stock Units and Performance-Based Restricted Stock Units
A summary of stock award activity for the three months ended December 29, 2023 is as follows:
17


Number of shares
(in thousands)
Weighted-
Average
Grant Date Fair Value
 Balance as of September 29, 20231,501 $60.90 
Granted692 78.22 
Performance-based adjustment (1)
62 35.43 
Vested and released(459)48.46 
Forfeited, canceled or expired(87)65.05 
Balance as of December 29, 20231,709 $70.12 
(1) The amount shown represents performance adjustments for performance-based awards. These were granted in prior fiscal years and vested during the three months ended December 29, 2023 based on the Company’s achievement of adjusted earnings per share performance conditions.
Stock awards that vested during the three months ended December 29, 2023 and December 30, 2022 had combined fair values of $33.3 million and $66.8 million, respectively, as of the vesting date. RSUs granted generally vest over a period of three or four years.
Market-based PRSUs
We granted 132,247 market-based PRSUs during the three months ended December 29, 2023, at a weighted average grant date fair value of $88.88 per share. Recipients may earn between 0% and 200% of the target number of shares based on the Company’s achievement of total stockholder return in comparison to a peer group of companies in the PHLX Semiconductor Sector Index (^SOX) over a period of approximately three years. The fair value of the awards was estimated using a Monte Carlo simulation and compensation expense is recognized ratably over the service period based on the grant date fair value of the awards subject to the market condition. The expected volatility of the Company’s common stock was estimated based on the historical average volatility rate over the three-year period. The dividend yield assumption was based on historical and anticipated dividend payouts. The risk-free rate assumption was based on observed interest rates consistent with the three-year measurement period. The assumptions used to value the awards are as follows:
Three Months Ended
December 29,
2023
Grant date stock price$73.01
Average stock price at the start of the performance period$79.43
Risk free interest rate4.6%
Years to maturity2.9
Expected volatility rate41.7%
Expected dividend yield
Stock Options
As of December 29, 2023 and September 29, 2023 there were 10,000 and 15,000 stock options outstanding, respectively, with a weighted-average exercise price per share of $16.06. As of December 29, 2023, the weighted-average remaining contractual term was 1.85 years and the aggregate intrinsic value was $0.8 million. Aggregate intrinsic value is calculated using the difference between our closing stock price on December 29, 2023 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised during the three months ended December 29, 2023 was $0.3 million. There were no options exercised during the three months ended December 30, 2022.
14. INCOME TAXES
We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax. For interim periods, we record a tax provision or benefit based upon the estimated effective tax rate expected for the full fiscal year, adjusted for material discrete taxation matters arising during the interim periods. Our quarterly tax provision or benefit, and its quarterly estimate of the annual effective tax rate, are subject to significant variation due to several factors. These factors include items such as: variability in accurately predicting pre-tax income/loss, the mix of jurisdictions in which we operate, intercompany transactions, changes in how we do business, tax law developments, the realizability of our deferred tax assets and related valuation allowance and relative changes in permanent tax benefits or expenses.
The provision for income taxes and effective income tax rate are as follows (in thousands, except percentages):
18


Three Months Ended
December 29,
2023
December 30,
2022
Income tax expense$2,750 $9,611 
Effective income tax rate18.0 %24.6 %
The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 29, 2023 was primarily driven by favorable stock based compensation and research and development (“R&D”) tax credits, partially offset by foreign withholding taxes and global intangible low taxed income (“GILTI”). The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 30, 2022 was primarily driven by tax on GILTI and non-deductible compensation, partially offset by R&D tax credits.
During the three months ended December 29, 2023, we changed our position on having earnings permanently reinvested for one of our entities in India to no longer having its earnings permanently reinvested. The result of this change in position required us to record a foreign withholding tax expense of $1.0 million associated with undistributed earnings during the three months ended December 29, 2023.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making this determination, we consider available positive and negative evidence. We look at factors that may impact the valuation of our deferred tax assets including results of recent operations, future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies.
There were no unrecognized tax benefits as of December 29, 2023 and September 29, 2023. It is our policy to recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the fiscal quarter ended December 29, 2023, we did not make any accrual or payment of interest or penalties.
15. SUPPLEMENTAL CASH FLOW INFORMATION
The following is a summary of supplemental cash flow information for the periods presented (in thousands):
Three Months Ended
December 29,
2023
December 30,
2022
Cash paid for interest$722 $2,258 
Cash paid for income taxes$923 $297 
Non-cash activities:
Operating lease right-of-use assets obtained in exchange for new lease liabilities$6,321 $1,305 
Additions to property and equipment, net included in liabilities$379 $1,364 
Operating lease right-of-use assets obtained in exchange for new lease liabilities includes $5.6 million operating lease right-of-use assets acquired as part of the RF Business Acquisition. For additional information on the RF Business Acquisition, see Note 3 - Acquisitions.
16. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
We have one reportable operating segment that designs, develops, manufactures and markets semiconductors and modules. The determination of the number of reportable operating segments is based on the chief operating decision maker’s (“CODM”) use of financial information provided for the purposes of assessing performance and making operating decisions. The Company's CODM is its President and Chief Executive Officer. In evaluating financial performance and making operating decisions, the CODM primarily uses consolidated metrics. The Company assesses its determination of operating segments at least annually. We continue to evaluate our internal reporting structure and the potential impact of any changes on our segment reporting.
For information about our revenue in different geographic regions, based upon customer locations, see Note 2 - Revenue.
Information about net property and equipment in different geographic regions is presented below (in thousands):
19


December 29,
2023
September 29,
2023
United States$131,486 $111,865 
France32,995 31,142 
Other Countries (1)
19,797 6,489 
Total$184,278 $149,496 
(1)Other than the United States and France, no country or region represented greater than 10% of the total net property and equipment as of the dates presented.
The following is a summary of customer concentrations as a percentage of revenue and accounts receivable as of and for the periods presented:
 Three Months Ended
RevenueDecember 29,
2023
December 30,
2022
Customer A13 % 
Accounts ReceivableDecember 29,
2023
September 29,
2023
Customer B 14 % 
Customer C12 % 

Customer Concentration
Customer A did not represent more than 10% of our revenue in the three months ended December 30, 2022. Customer B and Customer C did not represent more than 10% of our revenue in the three months ended December 29, 2023 and December 30, 2022, respectively. No other customer represented more than 10% of revenue or accounts receivable in the periods presented in the accompanying condensed consolidated financial statements. For the three months ended December 29, 2023 and December 30, 2022, our top ten customers represented 57% and 52%, respectively, of total revenue.

ITEM 2.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended September 29, 2023 filed with the United States Securities and Exchange Commission (“SEC”) on November 13, 2023 (the “2023 Annual Report on Form 10-K”).
In this document, the words “Company,” “we,” “our,” “us,” and similar terms refer only to MACOM Technology Solutions Holdings, Inc. and its consolidated subsidiaries, and not any other person or entity.

“MACOM,” “MACOM Technology Solutions,” and related logos are trademarks of MACOM Technology Solutions Holdings, Inc. All other brands and names listed are trademarks of their respective owners.
Cautionary Note Regarding Forward-Looking Statements
This Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10-Q contain “forward-looking statements.” In addition, we may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements regarding our business outlook, strategic plans and priorities, expectations, anticipated drivers of future revenue growth, our ability to develop new products, achieve market acceptance of those products and better address certain markets, expand our capabilities and extend our product offerings through the Linearizer Acquisition, the MESC Acquisition and the RF Business Acquisition, industry trends, the potential impacts of COVID-19 on our future operations and results, our estimated annual effective tax rate, our plans for use of our cash and cash equivalents and short-term investments, interest rate and foreign currency risks, our ability to meet working capital requirements, estimates and objectives for future operations, our future results of operations and our financial position, including liquidity, and other matters that do not relate strictly to historical facts. Forward-looking statements generally may be identified by terms such as “anticipates,” “believes,” “could,” “continue,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” or similar expressions or variations or the negatives of those terms. These statements are based on management's beliefs and assumptions as of the date of this Quarterly Report on Form 10-Q, based on information currently available to us. Such forward-looking
20


statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the 2023 Annual Report on Form 10-K. We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We design and manufacture semiconductor products for the Industrial and Defense (“I&D”), Data Center and Telecommunications (“Telecom”) industries. Headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia, we design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability. We have more than 70 years of application expertise, combined with expertise in analog and mixed signal circuit design, compound semiconductor fabrication (including GaAs, GaN, indium phosphide (“InP”) and specialized silicon), advanced packaging and back-end assembly and test. We offer a broad portfolio of thousands of standard and custom devices, which include integrated circuits (“IC”), multi-chip modules (“MCM”), diodes, amplifiers, switches and switch limiters, passive and active components and radio frequency (“RF”) and optical subsystems, which make up dozens of product lines that service over 6,000 end customers in our three primary markets. Our products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless basestations, high-capacity optical networks, data center networks, radar, medical systems and test and measurement applications. Our primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; (2) Data Center, which includes intra-Data Center, Data Center Interconnect (“DCI”) applications, at 100G, 200G, 400G, 800G and higher speeds, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G satellite communications and Fiber-to-the-X (“FTTx”)/passive optical network (“PON”), among others.
Description of Our Revenue
Revenue. Our revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical and photonic semiconductor products. We design, integrate, manufacture and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, our network of independent sales representatives and our distributors.
We believe the primary drivers of our future revenue growth will include:
continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets;
introducing new products using advanced technologies, added features, higher levels of integration and improved performance;
increasing content of our semiconductor solutions in customers’ systems through cross-selling our product lines;
leveraging our core strength and leadership position in standard, catalog products that service all of our end applications; and
engaging early with our lead customers to develop custom and standard products.
Our core strategy is to develop and innovate high-performance products that address our customers’ most difficult technical challenges in our primary markets: I&D, Data Center and Telecom.
We expect our revenue in the I&D market to be driven by the expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, industrial, automotive, scientific and medical applications, further supported by growth in applications for our multi-market catalog products.
We expect our revenue in the Data Center market to be driven by the adoption of cloud-based services and the upgrade of data center architectures to 100G, 200G, 400G and 800G interconnects, which we expect will drive adoption of higher speed optical and photonic components.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, satellite communications networks and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.
Critical Accounting Policies and Estimates
21


Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and could be material if our actual or expected experience were to change unexpectedly. On an ongoing basis, we re-evaluate our estimates and judgments.
We base our estimates and judgments on our historical experience and on other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates and material effects on our operating results and financial position may result. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.
Business combinations
We apply significant estimates and judgments in order to determine the fair value of the identified tangible and intangible assets acquired, liabilities assumed and goodwill recognized in business combinations. The value of all assets and liabilities are recognized at fair value as of the acquisition date using a market participant approach. In measuring the fair value, we utilize a number of valuation techniques. When determining the fair value of property and equipment acquired, generally we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, typically determined using a discounted cash flow valuation method, we use assumptions such as the timing and amount of future cash flows, discount rates, weighted average cost of capital and estimated useful lives. These assessments can be significantly affected by our judgments.
Goodwill and intangible asset valuation
Significant management judgment is required in our valuation of goodwill and intangible assets, many of which are based on the creation of forecasts of future operating results that are used in the valuation, including (i) estimation of future cash flows, (ii) estimation of the long-term rate of growth for our business, (iii) estimation of the useful life over which cash flows will occur, (iv) terminal values, if applicable, and (v) the determination of our weighted average cost of capital, which helps determine the discount rate. It is possible that these forecasts may change, and our performance projections included in our forecasts of future results may prove to be inaccurate. The value of our goodwill and purchased intangible assets could also be impacted by future adverse changes, such as a decline in the valuation of technology company stocks, including the valuation of our common stock, or a significant slowdown in the worldwide economy or in the optical communications equipment or semiconductor industry.
For additional information related to these and other accounting policies refer to Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements included in Item 8 of Part II, “Financial Statements and Supplementary Data,” of the 2023 Annual Report on Form 10-K and Note 1 - Basis of Presentation and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
22


Results of Operations
The following table sets forth, for the periods indicated, our statements of operations data (in thousands):
 Three Months Ended
 December 29,
2023
December 30,
2022
Revenue$157,148 $180,104 
Cost of revenue (1)
69,838 69,749 
Gross profit87,310 110,355 
Operating expenses:
Research and development (1)
39,413 38,832 
Selling, general and administrative (1) (2)
36,887 32,940 
Total operating expenses76,300 71,772 
Income from operations11,010 38,583 
Other income (expense):
Interest income5,556 3,684 
Interest expense(1,290)(3,082)
Other expense, net— (55)
Total other income4,266 547 
Income before income taxes15,276 39,130 
Income tax expense2,750 9,611 
Net income$12,526 $29,519 
(1)     Includes (a) Amortization expense related to intangible assets arising from acquisitions and (b) Share-based compensation expense included in our condensed consolidated statements of operations as set forth below (in thousands):
 Three Months Ended
 December 29,
2023
December 30,
2022
(a) Intangible amortization expense:
Cost of revenue$1,942 $910 
Research and development1,044 — 
Selling, general and administrative4,798 5,903 
(b) Share-based compensation expense:
Cost of revenue$1,270 $1,150 
Research and development2,765 4,232 
Selling, general and administrative4,622 5,665 
23



(2) The three months ended December 29, 2023 and December 30, 2022 include $8.4 million and $0.8 million, respectively, of acquisition-related professional fee and other expense.

The following table sets forth, for the periods indicated, our statements of operations data expressed as a percentage of our revenue: 
 Three Months Ended
 December 29,
2023
December 30,
2022
Revenue100.0 %100.0 %
Cost of revenue44.4 38.7 
Gross profit55.6 61.3 
Operating expenses:
Research and development25.1 21.6 
Selling, general and administrative23.5 18.3 
Total operating expenses48.6 39.9 
Income from operations7.0 21.4 
Other income (expense):
Interest income3.5 2.0 
Interest expense(0.8)(1.7)
Other expense, net— — 
Total other income2.7 0.3 
Income before income taxes9.7 21.7 
Income tax expense1.7 5.3 
Net income8.0 %16.4 %
Comparison of the Three Months Ended December 29, 2023 to the Three Months Ended December 30, 2022
Revenue. Our revenue decreased by $23.0 million, or 12.7%, to $157.1 million for the three months ended December 29, 2023, from $180.1 million for the three months ended December 30, 2022. The decrease in revenue in the three months ended December 29, 2023 is described by end market in the following paragraphs.
Revenue from our primary markets, the percentage of change between the periods presented, and revenue by primary markets expressed as a percentage of total revenue in the periods presented were (in thousands, except percentages):
 Three Months Ended 
 December 29,
2023
December 30,
2022
%
Change
Industrial & Defense$76,998$77,169(0.2)%
Data Center49,51241,48519.3 %
Telecom30,63861,450(50.1)%
Total$157,148$180,104(12.7)%
Industrial & Defense49.0 %42.9 %
Data Center31.5 %23.0 %
Telecom19.5 %34.1 %
Total100.0 %100.0 %

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


primarily driven by an increase in sales of 400G and 800G high-performance analog Data Center products, partially offset by a decrease in sales of our legacy connectivity products.
In the three months ended December 29, 2023, our Telecom market revenue decreased by $30.8 million, or 50.1%, compared to the three months ended December 30, 2022. The decrease for the three months ended December 29, 2023 was primarily driven by a decrease in sales of carrier-based optical semiconductor products, a decrease in sales of RF and microwave products for broadband access and a decrease in sales of legacy products, partially offset by incremental revenue from recent acquisitions.
We continue to be negatively impacted by the current macroeconomic conditions, which we expect may result in weaker near-term demand for our products across all three of our primary markets.
Gross profit. Gross margin was 55.6% and 61.3% for the three months ended December 29, 2023 and December 30, 2022, respectively. Gross profit was $87.3 million and $110.4 million for the three months ended December 29, 2023 and December 30, 2022, respectively. Gross profit decreased for the three months ended December 29, 2023 as compared to the three months ended December 30, 2022 primarily as a result of lower sales, increases in employee headcount associated with acquisitions, higher intangible asset amortization and depreciation expense, partially offset by decreases in production supplies.
Research and development. Research and development expense increased by $0.6 million, or 1.5%, to $39.4 million, or 25.1% of our revenue, for the three months ended December 29, 2023, compared to $38.8 million, or 21.6% of our revenue, for the three months ended December 30, 2022. Research and development expense increased in the three months ended December 29, 2023 primarily as a result of increases in employee headcount due to acquisitions, design software costs and supplies expense, partially offset primarily by decreases in development foundry costs and share-based compensation expense.
Selling, general and administrative. Selling, general and administrative expense increased by $3.9 million, or 12.0%, to $36.9 million, or 23.5% of our revenue, for the three months ended December 29, 2023, compared to $32.9 million, or 18.3% of our revenue, for the three months ended December 30, 2022. Selling, general and administrative expense increased in the three months ended December 29, 2023 primarily due to an increase in acquisition-related costs and employee headcount due to acquisitions, partially offset primarily by lower intangible amortization and share-based compensation expense.
Interest income. In the three months ended December 29, 2023, interest income was $5.6 million, compared to $3.7 million for the three months ended December 30, 2022. The increase for the three months ended December 29, 2023 is primarily due to the general increase in interest rates on both our short-term investments and our money market balances.
Interest expense. In the three months ended December 29, 2023, interest expense was $1.3 million, compared to $3.1 million for the three months ended December 30, 2022. The decrease for the three months ended December 29, 2023 is primarily due to the August 2023 payment of the total outstanding principal balance of the Term Loans.
Provision for income taxes. In the three months ended December 29, 2023, income tax expense was $2.8 million, compared to $9.6 million for the three months ended December 30, 2022. In the three months ended December 29, 2023, the effective income tax rate was 18.0%, compared to 24.6% for the three months ended December 30, 2022. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 29, 2023 was primarily driven by favorable stock based compensation and R&D tax credits, partially offset by foreign withholding taxes and GILTI. The difference between the U.S. federal statutory income tax rate of 21% and our effective income tax rate for the three months ended December 30, 2022, was primarily driven by tax on GILTI and non-deductible compensation, partially offset by R&D tax credits. Our estimated annual effective tax rate for the year ending September 27, 2024 is expected to be approximately 23%, adjusted for discrete taxation matters arising during the interim periods.
For additional information refer to Note 14 - Income Taxes to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
25


Liquidity and Capital Resources
The following table summarizes our cash flow activities (in thousands):
Three Months Ended
December 29, 2023December 30, 2022
Cash and cash equivalents, beginning of period$173,952 $119,952 
Net cash provided by operating activities33,099 38,273 
Net cash used in investing activities(34,774)(7,950)
Net cash used in financing activities(9,053)(24,333)
Foreign currency effect on cash362 213 
Cash and cash equivalents, end of period$163,586 $126,155 
Cash Flow from Operating Activities
Our cash flow from operating activities for the three months ended December 29, 2023 of $33.1 million consisted of a net income of $12.5 million plus adjustments of $21.5 million, to reconcile our net income to cash provided by operating activities, less cash used in operating assets and liabilities of $0.9 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included depreciation and intangible amortization expense of $14.3 million and share-based compensation expense of $8.7 million. In addition, cash used in operating assets and liabilities was $0.9 million for the three months ended December 29, 2023, primarily driven by an increase in accounts receivables of $12.2 million, partially offset by an increase of $6.6 million in accrued and other liabilities, an increase of $2.1 million in accounts payable and a decrease in inventories of $1.6 million.
Our cash flow from operating activities for the three months ended December 30, 2022 of $38.3 million consisted of a net income of $29.5 million plus adjustments of $32.6 million, to reconcile our net income to cash provided by operating activities less cash used in operating assets and liabilities of $23.8 million. Adjustments to reconcile our net income to cash provided by operating activities primarily included depreciation and intangible amortization expense of $12.9 million, share-based compensation expense of $11.0 million, and deferred income tax expense of $9.1 million. In addition, cash used in operating assets and liabilities was $23.8 million for the three months ended December 30, 2022, primarily driven by an increase in accounts receivable of $10.5 million, an increase in inventories of $6.4 million and a decrease of $10.3 million in accrued and other liabilities, partially offset by an increase in accounts payable of $3.7 million.
Cash Flow from Investing Activities
Our cash flow used in investing activities for the three months ended December 29, 2023 of $34.8 million consisted primarily of $75.0 million for acquisitions, capital expenditures of $4.7 million and purchases of $55.4 million of short-term investments, offset by proceeds of $100.3 million for the sale and maturity of short-term investments. For additional information on the cash paid for our acquisitions, see Note 3 - Acquisitions to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Our cash flow used in investing activities for the three months ended December 30, 2022 of $8.0 million consisted primarily of purchases of $145.3 million of short-term investments and capital expenditures of $9.6 million, offset by proceeds of $147.0 million for the sale and maturity of short-term investments.
Cash Flow from Financing Activities
During the three months ended December 29, 2023, our cash used in financing activities of $9.1 million was primarily related to $11.6 million of repurchases of common stock associated with employee tax withholdings on vested equity awards, partially offset by $2.8 million of proceeds from stock option exercises and employee stock purchases.
During the three months ended December 30, 2022, our cash used in financing activities of $24.3 million was primarily related to $26.4 million of repurchases of common stock associated with employee tax withholdings on vested equity awards, partially offset by $2.3 million of proceeds from employee stock purchases.
26


Liquidity
As of December 29, 2023, we held $163.6 million of cash and cash equivalents, primarily deposited with financial institutions, as well as $299.7 million of liquid short-term investments. The undistributed earnings of certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings. We believe the decision to reinvest these earnings will not have a significant impact on our liquidity. As of December 29, 2023, cash held by our indefinitely reinvested foreign subsidiaries was $7.3 million, which, along with cash generated from foreign operations, is expected to be used in the support of international growth and working capital requirements as well as the repayment of certain intercompany loans.
We plan to use our remaining available cash and cash equivalents and short-term investments for general corporate purposes, including working capital, or for the acquisition of or investment in complementary technologies, design teams, products and businesses. We believe that our cash and cash equivalents, short-term investments and cash generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We may need to raise additional capital from time to time through the issuance and sale of equity or debt securities, and there is no assurance that we will be able to do so on favorable terms or at all.
As of December 29, 2023, we had no off-balance sheet arrangements.
For additional information related to our Liquidity and Capital Resources, see Note 9 - Debt to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
See Note 1 - Basis of Presentation and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information about recent accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents, short-term investments and our variable rate debt, as well as foreign exchange rate risk.
Interest rate risk. The primary objectives of our investment activity are to preserve principal, provide liquidity and invest excess cash for an average rate of return. To minimize market risk, we maintain our portfolio in cash and diversified investments, which may consist of corporate bonds, bank deposits, money market funds, commercial paper and U.S. Treasury securities. The interest rates are variable and fluctuate with current market conditions. The risk associated with fluctuating interest rates is limited to this investment portfolio. We believe that a 10% change in interest rates would not have a material impact on our financial position or results of operations. We do not enter into financial instruments for trading or speculative purposes.
On August 2, 2023, we paid the total outstanding principal balance on our Term Loans. The interest rates on our 2026 Convertible Notes are fixed and therefore not subject to interest rate risk. For additional information regarding our Term Loans and Convertible Notes, refer to Note 9 - Debt.
Foreign currency risk. To date, our international customer agreements have been denominated primarily in U.S. dollars. Accordingly, we have limited exposure to foreign currency exchange rates. The functional currency of a majority of our foreign operations continues to be in U.S. dollars with the remaining operations being local currency. Changes in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact demand in certain regions, reduce or delay customer orders, or otherwise negatively affect how customers do business with us. The effects of exchange rate fluctuations on the net assets of the majority of our operations are accounted for as transaction gains or losses. We believe that a change of 10% in such foreign currency exchange rates would not have a material impact on our financial position or results of operations. In the future, we may enter into foreign currency exchange hedging contracts to reduce our exposure to changes in exchange rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of December 29, 2023.
27


Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
28


PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 12 - Commitments and Contingencies to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information about our legal proceedings.
ITEM 1A. RISK FACTORS
Our business involves a high degree of risk.  In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes in any of the risk factors described in our 2023 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table presents information with respect to purchases of common stock we made during the fiscal quarter ended December 29, 2023. 
Period
Total Number of Shares (or Units) Purchased (1)
Average Price Paid per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
September 30, 2023-October 27, 2023105,456 $72.04 — — 
October 28, 2023-November 24, 202352,590 73.44 — — 
November 25, 2023-December 29, 20231,006 92.89 — — 
Total159,052 $72.63 — — 
(1)    We employ “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees, pursuant to which, we withheld from employees the shares noted in the table above to cover tax withholding related to the vesting of their awards. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld.

ITEM 5. OTHER INFORMATION
Insider Trading Arrangements
The following table describes actions by our directors and Section 16 officers with respect to plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the three months ended December 29, 2023. None of our directors or Section 16 officers terminated a Rule 10b5-1 trading arrangement or took actions with respect to a “non-Rule 10b5-1 trading arrangement,” as such term is defined in Item 408(c) of Regulation S-K, during the three months ended December 29, 2023.
Name and TitleAction DateExpiration of Plan (1)Potential Number of Shares to be Sold
Charles Bland
Director
AdoptionNovember 13, 2023February 14, 2025
Sale of up to 10,000 shares