10-Q 1 mtsi-20240329.htm 10-Q mtsi-20240329
0001493594false9/27Q220242.52.5P3YP3Y00014935942023-09-302024-03-2900014935942024-04-29xbrli:shares00014935942024-03-29iso4217:USD00014935942023-09-2900014935942023-12-302024-03-2900014935942022-12-312023-03-3100014935942022-10-012023-03-31iso4217:USDxbrli:shares0001493594us-gaap:CommonStockMember2023-12-290001493594us-gaap:TreasuryStockCommonMember2023-12-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-290001493594us-gaap:AdditionalPaidInCapitalMember2023-12-290001493594us-gaap:RetainedEarningsMember2023-12-2900014935942023-12-290001493594us-gaap:CommonStockMember2023-12-302024-03-290001493594us-gaap:AdditionalPaidInCapitalMember2023-12-302024-03-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-302024-03-290001493594us-gaap:RetainedEarningsMember2023-12-302024-03-290001493594us-gaap:CommonStockMember2024-03-290001493594us-gaap:TreasuryStockCommonMember2024-03-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-290001493594us-gaap:AdditionalPaidInCapitalMember2024-03-290001493594us-gaap:RetainedEarningsMember2024-03-290001493594us-gaap:CommonStockMember2023-09-290001493594us-gaap:TreasuryStockCommonMember2023-09-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-290001493594us-gaap:AdditionalPaidInCapitalMember2023-09-290001493594us-gaap:RetainedEarningsMember2023-09-290001493594us-gaap:CommonStockMember2023-09-302024-03-290001493594us-gaap:AdditionalPaidInCapitalMember2023-09-302024-03-290001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-302024-03-290001493594us-gaap:RetainedEarningsMember2023-09-302024-03-290001493594us-gaap:CommonStockMember2022-12-300001493594us-gaap:TreasuryStockCommonMember2022-12-300001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-300001493594us-gaap:AdditionalPaidInCapitalMember2022-12-300001493594us-gaap:RetainedEarningsMember2022-12-3000014935942022-12-300001493594us-gaap:CommonStockMember2022-12-312023-03-310001493594us-gaap:AdditionalPaidInCapitalMember2022-12-312023-03-310001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-312023-03-310001493594us-gaap:RetainedEarningsMember2022-12-312023-03-310001493594us-gaap:CommonStockMember2023-03-310001493594us-gaap:TreasuryStockCommonMember2023-03-310001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001493594us-gaap:AdditionalPaidInCapitalMember2023-03-310001493594us-gaap:RetainedEarningsMember2023-03-3100014935942023-03-310001493594us-gaap:CommonStockMember2022-09-300001493594us-gaap:TreasuryStockCommonMember2022-09-300001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001493594us-gaap:AdditionalPaidInCapitalMember2022-09-300001493594us-gaap:RetainedEarningsMember2022-09-3000014935942022-09-300001493594us-gaap:CommonStockMember2022-10-012023-03-310001493594us-gaap:AdditionalPaidInCapitalMember2022-10-012023-03-310001493594us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-012023-03-310001493594us-gaap:RetainedEarningsMember2022-10-012023-03-310001493594mtsi:TelecomMember2023-12-302024-03-290001493594mtsi:TelecomMember2022-12-312023-03-310001493594mtsi:TelecomMember2023-09-302024-03-290001493594mtsi:TelecomMember2022-10-012023-03-310001493594mtsi:IndustrialDefenseMember2023-12-302024-03-290001493594mtsi:IndustrialDefenseMember2022-12-312023-03-310001493594mtsi:IndustrialDefenseMember2023-09-302024-03-290001493594mtsi:IndustrialDefenseMember2022-10-012023-03-310001493594mtsi:DataCenterMember2023-12-302024-03-290001493594mtsi:DataCenterMember2022-12-312023-03-310001493594mtsi:DataCenterMember2023-09-302024-03-290001493594mtsi:DataCenterMember2022-10-012023-03-310001493594country:US2023-12-302024-03-290001493594country:US2022-12-312023-03-310001493594country:US2023-09-302024-03-290001493594country:US2022-10-012023-03-310001493594mtsi:ChinaandHongKongMember2023-12-302024-03-290001493594mtsi:ChinaandHongKongMember2022-12-312023-03-310001493594mtsi:ChinaandHongKongMember2023-09-302024-03-290001493594mtsi:ChinaandHongKongMember2022-10-012023-03-310001493594mtsi:AsiaPacificexcludingChinaMember2023-12-302024-03-290001493594mtsi:AsiaPacificexcludingChinaMember2022-12-312023-03-310001493594mtsi:AsiaPacificexcludingChinaMember2023-09-302024-03-290001493594mtsi:AsiaPacificexcludingChinaMember2022-10-012023-03-310001493594mtsi:OtherCountriesMember2023-12-302024-03-290001493594mtsi:OtherCountriesMember2022-12-312023-03-310001493594mtsi:OtherCountriesMember2023-09-302024-03-290001493594mtsi:OtherCountriesMember2022-10-012023-03-31xbrli:pure0001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-022023-12-020001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-020001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-302024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMember2023-09-302024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMember2022-10-012023-03-310001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-292023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMember2024-03-292024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMember2023-09-292024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMember2023-12-290001493594mtsi:RFBusinessOfWolfspeedIncMember2024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMemberus-gaap:TechnologyBasedIntangibleAssetsMember2024-03-290001493594mtsi:FavorableContractsMembermtsi:RFBusinessOfWolfspeedIncMember2024-03-290001493594us-gaap:CustomerRelationshipsMembermtsi:RFBusinessOfWolfspeedIncMember2024-03-290001493594mtsi:RFBusinessOfWolfspeedIncMember2022-12-312023-03-310001493594us-gaap:AcquisitionRelatedCostsMembermtsi:RFBusinessOfWolfspeedIncMember2023-12-302024-03-290001493594us-gaap:AcquisitionRelatedCostsMembermtsi:RFBusinessOfWolfspeedIncMember2023-09-302024-03-290001493594us-gaap:AcquisitionRelatedCostsMembermtsi:RFBusinessOfWolfspeedIncMember2022-12-312023-03-310001493594us-gaap:AcquisitionRelatedCostsMembermtsi:RFBusinessOfWolfspeedIncMember2022-10-012023-03-310001493594mtsi:OMMICSASMember2023-05-312023-05-310001493594mtsi:OMMICSASMember2023-09-302024-03-290001493594mtsi:OMMICSASMember2022-12-312023-03-310001493594mtsi:OMMICSASMember2022-10-012023-03-310001493594mtsi:OMMICSASMember2024-03-290001493594mtsi:OMMICSASMemberus-gaap:TechnologyBasedIntangibleAssetsMember2024-03-290001493594us-gaap:CustomerRelationshipsMembermtsi:OMMICSASMember2024-03-290001493594mtsi:LinearizerTechnologyIncMember2023-03-032023-03-030001493594mtsi:LinearizerTechnologyIncMember2022-10-012023-03-310001493594mtsi:LinearizerTechnologyIncMember2023-09-290001493594mtsi:LinearizerTechnologyIncMember2023-09-292024-03-290001493594mtsi:LinearizerTechnologyIncMember2024-03-290001493594us-gaap:CustomerRelationshipsMembermtsi:LinearizerTechnologyIncMember2024-03-290001493594us-gaap:TechnologyBasedIntangibleAssetsMembermtsi:LinearizerTechnologyIncMember2024-03-290001493594us-gaap:TradeNamesMembermtsi:LinearizerTechnologyIncMember2024-03-290001493594us-gaap:CertificatesOfDepositMember2024-03-290001493594us-gaap:CorporateDebtSecuritiesMember2024-03-290001493594us-gaap:CommercialPaperMember2024-03-290001493594us-gaap:USTreasurySecuritiesMember2024-03-290001493594us-gaap:CorporateDebtSecuritiesMember2023-09-290001493594us-gaap:CommercialPaperMember2023-09-290001493594us-gaap:USTreasurySecuritiesMember2023-09-290001493594mtsi:PrivatelyHeldManufacturingCompanyMember2023-09-290001493594mtsi:PrivatelyHeldManufacturingCompanyMember2024-03-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:CashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:CashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:CashEquivalentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:CashEquivalentsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2024-03-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-290001493594us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-09-290001493594us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-09-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2023-09-290001493594us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-09-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-09-290001493594us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-09-290001493594us-gaap:ConstructionInProgressMember2024-03-290001493594us-gaap:ConstructionInProgressMember2023-09-290001493594us-gaap:MachineryAndEquipmentMember2024-03-290001493594us-gaap:MachineryAndEquipmentMember2023-09-290001493594us-gaap:LeaseholdImprovementsMember2024-03-290001493594us-gaap:LeaseholdImprovementsMember2023-09-290001493594us-gaap:FurnitureAndFixturesMember2024-03-290001493594us-gaap:FurnitureAndFixturesMember2023-09-290001493594mtsi:ComputerEquipmentAndSoftwareMember2024-03-290001493594mtsi:ComputerEquipmentAndSoftwareMember2023-09-290001493594mtsi:AssetsHeldUnderFinanceLeasesMember2024-03-290001493594mtsi:AssetsHeldUnderFinanceLeasesMember2023-09-290001493594us-gaap:CostOfSalesMember2023-12-302024-03-290001493594us-gaap:CostOfSalesMember2022-12-312023-03-310001493594us-gaap:CostOfSalesMember2023-09-302024-03-290001493594us-gaap:CostOfSalesMember2022-10-012023-03-310001493594us-gaap:ResearchAndDevelopmentExpenseMember2023-12-302024-03-290001493594us-gaap:ResearchAndDevelopmentExpenseMember2022-12-312023-03-310001493594us-gaap:ResearchAndDevelopmentExpenseMember2023-09-302024-03-290001493594us-gaap:ResearchAndDevelopmentExpenseMember2022-10-012023-03-310001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-302024-03-290001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-12-312023-03-310001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-09-302024-03-290001493594us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-10-012023-03-310001493594us-gaap:DevelopedTechnologyRightsMember2024-03-290001493594us-gaap:CustomerRelationshipsMember2024-03-290001493594mtsi:FavorableContractsMember2024-03-290001493594mtsi:InternalUseSoftwareMember2024-03-290001493594us-gaap:TradeNamesMember2024-03-290001493594us-gaap:DevelopedTechnologyRightsMember2023-09-290001493594us-gaap:CustomerRelationshipsMember2023-09-290001493594mtsi:InternalUseSoftwareMember2023-09-290001493594us-gaap:TradeNamesMember2023-09-290001493594mtsi:RFBusinessAcquisitionMember2023-09-302024-03-290001493594mtsi:LinearizerAcquisitionMember2023-09-302024-03-290001493594us-gaap:ConvertibleNotesPayableMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-250001493594us-gaap:ConvertibleDebtMember2024-03-290001493594us-gaap:ConvertibleDebtMember2023-09-290001493594us-gaap:LongTermDebtMember2024-03-290001493594us-gaap:LongTermDebtMember2023-09-290001493594mtsi:ConvertibleSeniorNotesDue2026Member2021-03-250001493594mtsi:ConvertibleNotesGreenShoeMember2021-04-060001493594mtsi:ConvertibleSeniorNotesDue2026Member2024-03-290001493594mtsi:ConversionPeriodOneMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-25mtsi:renewal_option0001493594mtsi:ConversionPriceMembermtsi:ConversionPeriodOneMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-250001493594mtsi:ConversionPeriodTwoMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-25utr:D0001493594mtsi:PrincipalTradingPriceMembermtsi:ConversionPeriodTwoMembermtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-250001493594mtsi:ConvertibleSeniorNotesDue2026Member2021-03-252021-03-250001493594mtsi:ConvertibleSeniorNotesDue2026Member2023-12-302024-03-290001493594mtsi:ConvertibleSeniorNotesDue2026Member2023-09-302024-03-290001493594mtsi:ConvertibleSeniorNotesDue2026Member2022-12-312023-03-310001493594mtsi:ConvertibleSeniorNotesDue2026Member2022-10-012023-03-310001493594us-gaap:ConvertibleNotesPayableMembermtsi:ConvertibleSeniorNotesDue2026Member2024-03-290001493594us-gaap:ConvertibleNotesPayableMembermtsi:ConvertibleSeniorNotesDue2026Member2023-09-290001493594us-gaap:LongTermDebtMember2023-08-0200014935942023-08-020001493594mtsi:TermLoanMember2022-12-312023-03-310001493594mtsi:TermLoanMember2022-10-012023-03-310001493594us-gaap:PurchaseCommitmentMember2024-03-290001493594us-gaap:PurchaseCommitmentMember2023-09-290001493594mtsi:A2012OmnibusIncentivePlanMember2024-03-290001493594mtsi:EmployeeStockPurchasePlanMember2024-03-290001493594srt:MinimumMember2023-09-302024-03-290001493594srt:MaximumMember2023-09-302024-03-290001493594srt:MinimumMembermtsi:IncentiveStockUnitsMember2023-09-302024-03-290001493594mtsi:IncentiveStockUnitsMembersrt:MaximumMember2023-09-302024-03-290001493594mtsi:IncentiveStockUnitsMember2024-03-290001493594mtsi:IncentiveStockUnitsMember2023-09-290001493594mtsi:IncentiveStockUnitsMember2023-12-302024-03-290001493594mtsi:IncentiveStockUnitsMember2023-09-302024-03-290001493594mtsi:IncentiveStockUnitsMember2022-12-312023-03-310001493594mtsi:IncentiveStockUnitsMember2022-10-012023-03-310001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2023-09-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2023-09-302024-03-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2024-03-290001493594mtsi:RestrictedStockRestrictedStockUnitsAndPerformanceBasedRestrictedStockUnitsMember2022-10-012023-03-310001493594us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2023-09-302024-03-290001493594us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2023-09-302024-03-290001493594mtsi:MarketBasedPerformanceRestrictedStockUnitsMember2023-09-302024-03-290001493594srt:MinimumMember2024-03-290001493594srt:MaximumMember2024-03-290001493594us-gaap:RestrictedStockUnitsRSUMember2023-09-302024-03-29mtsi:segment0001493594country:US2024-03-290001493594country:US2023-09-290001493594country:FR2024-03-290001493594country:FR2023-09-290001493594srt:AsiaPacificMember2024-03-290001493594srt:AsiaPacificMember2023-09-290001493594mtsi:OtherCountriesMember2024-03-290001493594mtsi:OtherCountriesMember2023-09-290001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:SalesRevenueNetMember2023-12-302024-03-290001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:SalesRevenueNetMember2022-12-312023-03-310001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:SalesRevenueNetMember2023-09-302024-03-290001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:SalesRevenueNetMember2022-10-012023-03-310001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:AccountsReceivableMember2023-09-302024-03-290001493594us-gaap:CustomerConcentrationRiskMembermtsi:CustomerAMemberus-gaap:AccountsReceivableMember2022-10-012023-03-310001493594mtsi:TopTenCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-12-302024-03-290001493594mtsi:TopTenCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2023-09-302024-03-290001493594mtsi:TopTenCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2022-12-312023-03-310001493594mtsi:TopTenCustomersMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMember2022-10-012023-03-31

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 March 29, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35451
MACOM Technology Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter) 
Delaware 27-0306875
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
100 Chelmsford Street
Lowell, MA 01851
(Address of principal executive offices and zip code)
(978) 656-2500
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareMTSINasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
Non-accelerated filer  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of April 29, 2024, there were 72,106,577 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)
March 29,
2024
September 29,
2023
ASSETS
Current assets:
Cash and cash equivalents$114,990 $173,952 
Short-term investments361,423 340,574 
Accounts receivable, net 120,222 91,253 
Inventories177,806 136,300 
Prepaid and other current assets23,997 19,114 
Total current assets798,438 761,193 
Property and equipment, net180,229 149,496 
Goodwill330,373 323,398 
Intangible assets, net93,013 66,994 
Deferred income taxes214,061 218,107 
Other long-term assets60,274 34,056 
Total assets$1,676,388 $1,553,244 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of finance lease obligations$948 $1,162 
Accounts payable44,341 24,966 
Accrued liabilities63,564 57,397 
Total current liabilities108,853 83,525 
Finance lease obligations, less current portion31,427 31,776 
Financing obligation9,156 9,307 
Long-term debt447,707 447,134 
Other long-term liabilities33,632 33,902 
Total liabilities630,775 605,644 
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Common stock72 71 
Treasury stock, at cost(330)(330)
Accumulated other comprehensive loss(1,935)(3,635)
Additional paid-in capital1,283,009 1,214,203 
Accumulated deficit(235,203)(262,709)
Total stockholders’ equity1,045,613 947,600 
Total liabilities and stockholders' equity$1,676,388 $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 EndedSix Months Ended
 March 29,
2024
March 31,
2023
March 29,
2024
March 31,
2023
Revenue$181,234 $169,406 $338,382 $349,510 
Cost of revenue86,022 66,716 155,860 136,465 
Gross profit95,212 102,690 182,522 213,045 
Operating expenses:
Research and development45,621 35,537 85,034 74,369 
Selling, general and administrative34,184 31,249 71,071 64,189 
Total operating expenses79,805 66,786 156,105 138,558 
Income from operations15,407 35,904 26,417 74,487 
Other income (expense):
Interest income5,366 5,064 10,921 8,749 
Interest expense(1,285)(3,430)(2,574)(6,513)
Other expense, net (123) (178)
Total other income4,081 1,511 8,347 2,058 
Income before income taxes19,488 37,415 34,764 76,545 
Income tax expense4,508 11,660 7,258 21,271 
Net income$14,980 $25,755 $27,506 $55,274 
Net income per share:
Income per share - Basic$0.21 $0.36 $0.38 $0.78 
Income per share - Diluted$0.20 $0.36 $0.38 $0.77 
 Weighted average shares used:
Basic72,076 70,799 71,750 70,640 
Diluted73,272 71,402 72,779 71,388 
See notes to condensed consolidated financial statements.

2


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
 Three Months EndedSix Months Ended
 March 29,
2024
March 31,
2023
March 29,
2024
March 31,
2023
Net income$14,980 $25,755 $27,506 $55,274 
Unrealized (loss) gain on short term investments, net of tax(291)833 1,004 3,380 
Foreign currency translation (loss) gain, net of tax(1,248)301 696 1,038 
Other comprehensive (loss) income, net of tax(1,539)1,134 1,700 4,418 
Total comprehensive income$13,441 $26,889 $29,206 $59,692 
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 March 29, 2024
   Accumulated
Other
Comprehensive Loss
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of December 29, 202372,088 $72 (23)$(330)$(396)$1,274,928 $(250,183)$1,024,091 
Vesting of restricted common stock and units
43 — — — — — — — 
Shares withheld for taxes on equity awards(11)— — — — (970)— (970)
Share-based compensation
— — — — — 12,090 — 12,090 
Issuance of common stock as consideration for acquisition— — — — — (3,039)— (3,039)
Other comprehensive loss, net of tax— — — — (1,539)— — (1,539)
Net income— — — — — — 14,980 14,980 
Balance as of March 29, 202472,120 $72 (23)$(330)$(1,935)$1,283,009 $(235,203)$1,045,613 
Six Months Ended March 29, 2024
   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
502 — — — — — — — 
Issuance of common stock pursuant to employee stock purchase plan
59 — — — — 2,769 — 2,769 
Shares withheld for taxes on equity awards(171)— — — — (12,522)— (12,522)
Share-based compensation
— — — — — 20,747 — 20,747 
Issuance of common stock as consideration for acquisition712 1 — — — 57,732 — 57,733 
Other comprehensive income, net of tax— — — — 1,700 — — 1,700 
Net income— — — — — — 27,506 27,506 
Balance as of March 29, 202472,120 $72 (23)$(330)$(1,935)$1,283,009 $(235,203)$1,045,613 
See notes to condensed consolidated financial statements.

4


Three Months Ended March 31, 2023
   Accumulated
Other
Comprehensive (Loss) Income
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of December 31, 202270,757 $71 (23)$(330)$(2,567)$1,190,137 $(324,767)$862,544 
Vesting of restricted common stock and units
212 — — — — — — — 
Shares withheld for taxes on equity awards(72)— — — — (4,878)— (4,878)
Share-based compensation
— — — — — 9,460 — 9,460 
Other comprehensive income, net of tax— — — — 1,134 — — 1,134 
Net income— — — — — — 25,755 25,755 
Balance as of March 31, 202370,897 $71 (23)$(330)$(1,433)$1,194,719 $(299,012)$894,015 
Six Months Ended March 31, 2023
   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
1,338 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
52 — — — — 2,320 — 2,320 
Shares withheld for taxes on equity awards(515)— — — — (31,253)— (31,253)
Share-based compensation
— — — — — 20,507 — 20,507 
Other comprehensive income, net of tax— — — — 4,418 — — 4,418 
Net income— — — — — — 55,274 55,274 
Balance as of March 31, 202370,897 $71 (23)$(330)$(1,433)$1,194,719 $(299,012)$894,015 
See notes to condensed consolidated financial statements.
5


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months Ended
 March 29, 2024March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$27,506 $55,274 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangibles amortization31,486 25,365 
Share-based compensation20,747 20,507 
Deferred income taxes3,706 20,233 
Other adjustments, net(1,497)(2,784)
Change in operating assets and liabilities:
Accounts receivable(31,327)(18,316)
Inventories(12,325)(8,236)
Prepaid expenses and other assets(3,955)(2,857)
Accounts payable19,240 (253)
Accrued and other liabilities(2,301)(17,471)
Income taxes22 (715)
Net cash provided by operating activities51,302 70,747 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired(74,813)(50,835)
Purchases of property and equipment(9,782)(15,614)
Proceeds from sale of property and equipment 8,000 
Proceeds from sales and maturities of short-term investments215,112 261,634 
Purchases of short-term investments(230,590)(228,157)
Net cash used in investing activities(100,073)(24,972)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on finance leases and other(703)(591)
Proceeds from stock option exercises and employee stock purchases2,849 2,320 
Common stock withheld for taxes on employee equity awards(12,522)(31,253)
Net cash used in financing activities(10,376)(29,524)
Foreign currency effect on cash185 370 
NET CHANGE IN CASH AND CASH EQUIVALENTS(58,962)16,621 
CASH AND CASH EQUIVALENTS — Beginning of period173,952 119,952 
CASH AND CASH EQUIVALENTS — End of period$114,990 $136,573 
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the RF Business Acquisition (See Note 3 - Acquisitions)
$57,733 $ 
See notes to condensed consolidated financial statements.
6


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

1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, comprehensive income, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM,” the “Company,” “us,” “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The condensed consolidated balance sheet as of 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.
In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which amends Account Standards Codification Topic 820, Fair Value Measurement (“ASU 2022-03”). ASU 2022-03 clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. We elected to early adopt ASU 2022-03 on September 30, 2023, and applied the amendment in measuring consideration transferred in the RF Business Acquisition (as defined in Note 3 - Acquisitions). As a result, we have not applied a discount for lack of marketability related to the RF Business Acquisition stockholder restrictions set forth in the asset purchase agreement (discussed in Note 3 - Acquisitions). However, the fair value of the shares was discounted for lack of marketability due to the unregistered shares being transferred and legally restricted from being sold. See Note 3 - Acquisitions for additional information.
7


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 detailed 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.
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 EndedSix Months Ended
March 29, 2024March 31, 2023March 29, 2024March 31, 2023
Revenue by Market:
Industrial & Defense
$90,887 $77,194 $167,885 $154,363 
Data Center
43,147 38,324 92,659 79,810 
Telecom47,200 53,888 77,838 115,337 
Total $181,234 $169,406 $338,382 $349,510 
Three Months EndedSix Months Ended
March 29, 2024March 31, 2023March 29, 2024March 31, 2023
Revenue by Geographic Region:
United States
$80,161 $82,835 $149,806 $171,423 
China
46,190 33,325 82,538 74,481 
Asia Pacific, excluding China (1)
26,663 28,008 40,671 49,542 
Other Countries (2)
28,220 25,238 65,367 54,064 
Total$181,234 $169,406 $338,382 $349,510 
(1)Asia Pacific primarily represents Australia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand.
(2)No country or region represented greater than 10% of our total revenue as of the dates presented, other than the United States, China and Asia Pacific region 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.
8


The following table presents the changes in contract liabilities during the six months ended March 29, 2024 (in thousands, except percentage):
March 29, 2024September 29, 2023$ Change% Change
 Contract liabilities$5,214 $2,762 $2,452 89 %
During the three and six months ended March 29, 2024, we recognized sales of $0.1 million and $2.5 million, respectively, that were included in the contract liabilities balance as of the beginning of the period. The increase in contract liabilities during the six months ended March 29, 2024 was primarily related to invoicing prior to when our customers obtain control of such products and or 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 $57.7 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 and six months ended March 29, 2024, we incurred acquisition-related transaction costs of approximately $0.3 million and $7.4 million, respectively, which are included in selling, general and administrative expense. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately less than $0.1 million, which are included in selling, general and administrative expense.
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
Measurement Period AdjustmentsAt Acquisition Date as Reported March 29, 2024
Cash purchase consideration$75,000 $— $75,000 
Number of shares of MACOM common stock issued at closing711,528 
Fair value of shares issued$81.14 
Equity purchase consideration60,772 (3,039)57,733 
Total purchase consideration$135,772 $(3,039)$132,733 

During the six months ended March 29, 2024, we reduced the fair value of our common stock issued at the closing of the RF Business Acquisition by $3.0 million, representing the discount for lack of marketability as the shares were unregistered.
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):
9


At Acquisition Date as Reported
December 29, 2023
Measurement Period AdjustmentsAt Acquisition Date as Reported March 29, 2024
Current assets$160 $(121)$39 
Inventory23,574 6,358 29,932 
Property and equipment35,415 — 35,415 
Intangible assets60,000 (17,000)43,000 
Prepayment for net assets associated with the RTP Fab Transfer19,450 500 19,950 
Other non-current assets6,735 (1,101)5,634 
Goodwill 8,584 8,584 
Total assets acquired145,334 (2,780)142,554 
Current liabilities6,474 159 6,633 
Long-term liabilities3,088 100 3,188 
Total liabilities assumed9,562 259 9,821 
Purchase Price$135,772 $(3,039)$132,733 

Intangible assets consist of technology, a favorable contract and customer relationships with fair values of $21.5 million, $14.5 million and $7.0 million, respectively, and useful lives of 4.8 years, 2.0 years and 8.8 years, respectively. We used variations of income approaches with estimates and assumptions developed by us to determine the fair values of technology, customer relationships and the favorable contract. We valued technology by using the relief-from-royalty method, customer relationships by using the multi-period excess earnings method and the favorable contract by using the discounted cash flow method. We valued backlog using the multi-period excess earnings method and determined that the value for backlog is zero. 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. During the three months ended March 29, 2024, based on additional information, we updated inputs and assumptions used to calculate the fair value of certain assets and liabilities, primarily resulting in a decrease to the fair value of intangible assets of $17.0 million, an increase to the fair value of inventory of $6.4 million, with an offsetting increase to Goodwill. Due to these adjustments, the statement of operations for the three months ended March 29, 2024 includes a net benefit of $0.1 million for intangible asset and inventory step-up amortization related to the quarter ended December 29, 2023.
The prepayment of $20.0 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 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 expected to transfer at the RTP Fab Transfer date. The remaining prepayment relates to inventory and liabilities, net, that we will assume control of at the time of the RTP Fab Transfer.
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 March 29, 2024, 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 three and six months ended March 29, 2024, the RF Business contributed approximately $35.7 million and $41.9 million of our total revenue, respectively. The RF Business did not materially impact our consolidated net income for the three and six months ended March 29, 2024.
Consolidated estimated pro forma unaudited revenue and net income as if the RF Business Acquisition had occurred on October 1, 2022, is as follows (in thousands):
10


Three Months EndedSix Months Ended
March 29, 2024March 31, 2023March 29, 2024March 31, 2023
Consolidated estimated pro forma unaudited revenue$181,234 $205,610 $365,219 $428,060 
Consolidated estimated pro forma unaudited net income (loss)$15,222 $(1,566)$1,297 $(32,842)
Pro forma revenue and net income (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 income (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 and six months ended March 29, 2024 were adjusted to exclude transaction costs incurred of $0.3 million and $15.8 million, respectively, and pro forma earnings for the three and six months ended March 31, 2023 were adjusted and include $3.1 million and $42.0 million, respectively, of transaction costs 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 March 29, 2024, we did not incur any acquisition-related transaction costs. During the six months ended March 29, 2024, we incurred acquisition-related transaction costs of approximately $0.3 million, which are included in selling, general and administrative expense. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately $0.9 million and $1.6 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):
At Acquisition Date as Reported
March 29, 2024
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 
11


As part of the acquisition, we assumed a lease agreement for 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 March 29, 2024, 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 March 29, 2024.
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 $51.4 million. We funded the Linearizer Acquisition with cash-on-hand. During the three and six months ended March 29, 2024, we did not incur any acquisition-related transaction costs. During the three and six months ended March 31, 2023, we incurred acquisition-related transaction costs of approximately $1.9 million, which are included in selling, general and administrative expense. 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.
We finalized the Linearizer Acquisition purchase accounting during the fiscal quarter ended March 29, 2024. The final purchase price has been allocated as follows (in thousands):
At Acquisition Date as Reported
September 29, 2023
Measurement Period AdjustmentsAt Acquisition Date as Reported
March 29, 2024
Current assets$2,819 $(100)$2,719 
Inventory8,907 1,407 10,314 
Property and equipment5,485 — 5,485 
Intangible assets29,600 — 29,600 
Goodwill12,332 (1,494)10,838 
Total assets acquired59,143 (187)58,956 
Current liabilities7,544 — 7,544 
Total liabilities assumed7,544 — 7,544 
Purchase Price$51,599 $(187)$51,412 
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.
12


4. INVESTMENTS
All investments are short-term in nature and are invested in certificates of deposit, corporate bonds, commercial paper, and U.S. Treasuries and agency bonds and are classified as available-for-sale. These certificates of deposit, corporate bonds, commercial paper and U.S. Treasuries and agency bonds 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):
 March 29, 2024
 Amortized
Cost
Gross
Unrealized
Holding Gains
Gross
Unrealized
Holding Losses
Aggregate Fair
Value
Certificates of deposit$10,980 $1 $ $10,981 
Corporate bonds243,039 36 (1,615)241,460 
Commercial paper48,589  (60)48,529 
U.S. Treasuries and agency bonds60,460 75 (82)60,453 
Total short-term investments$363,068 $112 $(1,757)$361,423 
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. Treasuries and agency bonds21,895 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):
 March 29, 2024September 29, 2023
Less than one year$219,861 $265,591 
Over one year141,562 74,983 
Total available-for-sale investments$361,423 $340,574 

We have determined that the gross unrealized losses on available for sale securities as of March 29, 2024 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 loss.
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 and six months ended March 29, 2024.
13


Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
March 29, 2024
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$54,614 $54,614 $ $ 
U.S. Treasuries and agency bonds60,453 60,453   
Certificates of deposit10,981 10,981   
Cash equivalents (1)
7,177  7,177  
Commercial paper48,529  48,529  
Corporate bonds241,460  241,460  
Total assets measured at fair value$423,214 $126,048 $297,166 $ 
(1) Cash equivalents represent highly liquid investments with original maturities of 90 days or less, primarily in corporate bonds and U.S. Treasuries.
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):
March 29,
2024
September 29,
2023
Raw materials$110,005 $82,589 
Work-in-process13,973 14,280 
Finished goods53,828 39,431 
Total inventory, net$177,806 $136,300 

7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
March 29,
2024
September 29,
2023
Construction in process$9,658 $10,256 
Machinery and equipment278,937 238,037 
Leasehold improvements38,292 35,342 
Furniture and fixtures2,967 2,888 
Computer equipment and software19,812 18,824 
Finance lease assets64,845 64,126 
Total property and equipment414,511 369,473 
Less accumulated depreciation and amortization(234,282)(219,977)
Property and equipment, net$180,229 $149,496 
14


In August 2022, the U.S. government enacted the CHIPS and Science Act of 2022 (CHIPS Act), which provides funding for manufacturing grants and research investments and establishes a 25% investment tax credit for certain qualifying investments in U.S. semiconductor manufacturing equipment. As of March 29, 2024, we recognized $3.6 million in Prepaid and other current assets with a corresponding reduction to the carrying amounts of the qualifying manufacturing assets in the condensed consolidated balance sheet.
Depreciation and amortization expense related to property and equipment for the three and six months ended March 29, 2024 was $7.8 million and $14.3 million, respectively. Depreciation and amortization expense related to property and equipment for the three and six months ended March 31, 2023 was $5.8 million and $11.8 million, respectively. Accumulated amortization on finance lease assets as of March 29, 2024 and September 29, 2023 was $9.0 million and $7.8 million, respectively.
8. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 Three Months EndedSix Months Ended
 March 29,
2024
March 31,
2023
March 29,
2024
March 31,
2023
Cost of revenue$4,200 $988 $6,142 $1,898 
Research and development1,043  2,087  
Selling, general and administrative4,121 5,764 8,919 11,667 
Total$9,364 $6,752 $17,148 $13,565 
A summary of the activity in gross intangible assets as of March 29, 2024 and September 29, 2023 is as follows (in thousands):

March 29,
2024
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$213,012 $(182,670)$30,342 
Customer relationships274,652 (234,626)40,026 
Favorable contract14,500 (3,026)11,474 
Internal-use software8,350 (2,087)6,263 
Trade name (1)
5,200 (292)4,908 
Balance as of March 29, 2024 (2)
$515,714 $(422,701)$93,013 
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 March 29, 2024, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
2024 Remaining2025202620272028ThereafterTotal
Amortization expense$19,419 24,716 13,530 11,045 8,172 12,731 $89,613 
15


A summary of the changes in goodwill as of March 29, 2024 is as follows (in thousands):
March 29,
2024
Balance as of September 29, 2023$323,398 
Acquired (1)
7,089 
Foreign currency translation adjustment(114)
Balance as of March 29, 2024$330,373 
(1)     The balance consists of an increase of $8.6 million to goodwill related to measurement period adjustments for the RF Business Acquisition and a reduction of $1.5 million to goodwill related to measurement period adjustments 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 March 29, 2024 and September 29, 2023, (in thousands, except percentages):
March 29, 2024September 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(2,293)(2,866)
Total long-term debt, less current portion$447,707 $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) 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
16


Indenture). 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 and six months ended March 29, 2024, total interest expense for the 2026 Convertible Notes was $0.3 million and $0.6 million, respectively. For the three and six months ended March 31, 2023, total interest expense for the 2026 Convertible Notes was $0.3 million and $0.6 million, respectively.
The fair value of our 2026 Convertible Notes was $566.5 million and $512.5 million as of March 29, 2024 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 March 29, 2024; the full amount of $450.0 million is due on March 15, 2026.
Term Loans
As of March 31, 2023, 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 and six months ended March 29, 2024. For the three and six months ended March 31, 2023, total interest expense for the Term Loans was $2.1 million and $3.9 million, respectively.
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 March 29, 2024 and September 29, 2023, the net book value of the systems in Property and equipment, net was $8.5 million and $8.9 million, respectively, and the corresponding liability was $9.4 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 March 29, 2024 and September 29, 2023, we have $24.8 million and $25.5 million, respectively, in remaining fixed payments over a 14-year term associated with the power purchase agreement, of which $15.4 million and $15.9 million, respectively, is included in our consolidated balance sheets on a discounted basis.
As of March 29, 2024, expected future minimum payments for the financing obligation were as follows (in thousands):
Fiscal year ending:Amount
2024$481 
2025982 
20261,007 
20271,031 
20281,057 
Thereafter10,858 
Total payments$15,416 
Less: interest5,980 
Present value of liabilities$9,436 
17


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 EndedSix Months Ended
March 29, 2024March 31, 2023March 29, 2024March 31, 2023
Numerator:
Net income attributable to common stockholders$14,980 $25,755 $27,506 $55,274 
Denominator:
Weighted average common shares outstanding-basic72,076 70,799 71,750 70,640 
Dilutive effect of stock options, restricted stock and restricted stock units807 603 831 748 
Dilutive effect of convertible debt389  198  
Weighted average common shares outstanding-diluted73,272 71,402 72,779 71,388 
Net income to common stockholders per share-Basic:$0.21 $0.36 $0.38 $0.78 
Net income to common stockholders per share-Diluted:$0.20 $0.36 $0.38 $0.77 
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 and six months ended March 29, 2024.
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 March 29, 2024.
Stock Plans
As of March 29, 2024, 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 March 29, 2024 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 March 29, 2024 and September 29, 2023, the fair value of outstanding ISUs was $6.1 million and $5.0 million, respectively, and the associated accrued compensation liability was $3.0 million and $3.3 million, respectively. During the three and six months ended March 29, 2024, we recorded an expense for ISU awards of $0.9 million and $1.4 million, respectively.
18


During the three and six months ended March 31, 2023, we recorded an expense for ISU awards of $0.5 million and $1.8 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 EndedSix Months Ended
 March 29,
2024
March 31,
2023
March 29,
2024
March 31,
2023
Cost of revenue$1,600 $1,011 $2,870 $2,161 
Research and development4,962 3,742 7,727 7,974 
Selling, general and administrative5,528 4,707 10,150 10,372 
Total share-based compensation expense $12,090 $9,460 $20,747 $20,507 
As of March 29, 2024, the total unrecognized compensation costs related to RSUs and PRSUs was $80.9 million, which we expect to recognize over a weighted-average period of 2.1 years. As of March 29, 2024, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $0.3 million.

Restricted Stock Units and Performance-Based Restricted Stock Units
A summary of stock award activity for the six months ended March 29, 2024 is as follows:
Number of shares
(in thousands)
Weighted-
Average
Grant Date Fair Value
 Balance as of September 29, 20231,501 $60.90 
Granted715 78.62 
Performance-based adjustment (1)
62 35.43 
Vested and released(502)50.11 
Forfeited, canceled or expired(100)65.07 
Balance as of March 29, 20241,676 $70.51 
(1) The amount shown represents performance adjustments for performance-based awards. These were granted in prior fiscal years and vested during the six months ended March 29, 2024 based on the Company’s achievement of adjusted earnings per share performance conditions.
Stock awards that vested during the six months ended March 29, 2024 and March 31, 2023 had combined fair values of $37.2 million and $81.3 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 six months ended March 29, 2024, 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:
19


Six Months Ended
March 29,
2024
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 March 29, 2024 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 March 29, 2024, the weighted-average remaining contractual term was 1.61 years and the aggregate intrinsic value was $0.8 million. Aggregate intrinsic value is calculated using the difference between our closing stock price on March 29, 2024 and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised during the six months ended March 29, 2024 was $0.3 million. There were no options exercised during the three and six months ended March 31, 2023.
14. INCOME TAXES
We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax. For interim periods, we record a tax provision or benefit based upon the estimated effective tax rate expected for the full fiscal year, adjusted for material discrete taxation matters arising during the interim periods. Our quarterly tax provision or benefit, and its quarterly estimate of the annual effective tax rate, are subject to significant variation due to several factors. These factors include items such as: variability in accurately predicting pre-tax income/loss, the mix of jurisdictions in which we operate, intercompany transactions, changes in how we do business, tax law developments, the realizability of our deferred tax assets and related valuation allowance and relative changes in permanent tax benefits or expenses.
The provision for income taxes and effective income tax rate are as follows (in thousands, except percentages):
Three Months EndedSix Months Ended
March 29,
2024
March 31,
2023
March 29,
2024
March 31,
2023
Income tax expense$4,508 $11,660 $7,258