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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
____________________________________
FORM 10-Q
____________________________________
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended May 1, 2022
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to             
Commission File Number 001-06395
____________________________________ 
SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
 ____________________________________
Delaware 95-2119684
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

200 Flynn Road, Camarillo, California, 93012-8790
(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (805498-2111
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common Stock par value $0.01 per shareSMTC The Nasdaq 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  x    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   x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x  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  x 
Number of shares of common stock, $0.01 par value per share, outstanding at May 27, 2022: 63,477,783



SEMTECH CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MAY 1, 2022
 
2


Unless the context otherwise requires, the use of the terms "Semtech," "the Company," "we," "us" and "our" in this Quarterly Report on Form 10-Q refers to Semtech Corporation and, as applicable, its consolidated subsidiaries. This Quarterly Report on Form 10-Q may contain references to the Company’s trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
Special Note Regarding Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our plans, objectives and expectations. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "estimate," "should," "will," "designed to," "projections," or "business outlook," or other similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the uncertainty surrounding the impact and duration of supply chain constraints and any associated disruptions; the uncertainty surrounding the impact and duration of the COVID-19 pandemic; export restrictions and laws affecting the Company's trade and investments and tariffs or the occurrence of trade wars; worldwide economic and political disruptions as a result of the current conflict between Russia and Ukraine; competitive changes in the marketplace including, but not limited to, the pace of growth or adoption rates of applicable products or technologies; downturns in the business cycle; decreased average selling prices of the Company’s products; the Company’s reliance on a limited number of suppliers and subcontractors for components and materials; changes in projected or anticipated end-user markets; and the Company's ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty, including impacts arising from Asian, European and global economic dynamic; and those factors set forth under "Risk Factors" in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved, or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.
In addition to regarding forward-looking statements with caution, you should consider that the preparation of the consolidated financial statements requires us to draw conclusions and make interpretations, judgments, assumptions and estimates with respect to certain factual, legal, and accounting matters. Our consolidated financial statements might have been materially impacted if we had reached different conclusions or made different interpretations, judgments, assumptions or estimates.
3


PART I - FINANCIAL INFORMATION
 
ITEM 1.Financial Statements

SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
 
 Three Months Ended
 May 1, 2022May 2, 2021
Net sales$202,149 $170,372 
Cost of sales71,896 65,511 
Gross profit130,253 104,861 
Operating costs and expenses:
Selling, general and administrative43,364 38,804 
Product development and engineering38,789 36,790 
Intangible amortization1,048 1,298 
Total operating costs and expenses83,201 76,892 
Operating income47,052 27,969 
Interest expense(1,197)(1,199)
Non-operating income, net262 94 
Investment impairments and credit loss reserves(24)(246)
Income before taxes and equity in net gains of equity method investments46,093 26,618 
Provision for income taxes8,069 3,198 
Net income before equity in net gains of equity method investments38,024 23,420 
Equity in net gains of equity method investments24 78 
Net income38,048 23,498 
Net loss attributable to noncontrolling interest(1)(2)
Net income attributable to common stockholders$38,049 $23,500 
Earnings per share:
Basic$0.59 $0.36 
Diluted$0.59 $0.36 
Weighted-average number of shares used in computing earnings per share:
Basic63,950 65,089 
Diluted64,553 66,110 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
4


SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
  Three Months Ended
 May 1, 2022May 2, 2021
Net income $38,048 $23,498 
Other comprehensive income, net:
Unrealized gain on interest rate cash flow hedges, net1,258 464 
Reclassifications of realized loss (gain) on interest rate cash flow hedges, net to net income119 (179)
Change in defined benefit plans, net23 155 
Other comprehensive income, net1,400 440 
Comprehensive income$39,448 $23,938 
Comprehensive loss attributable to noncontrolling interest(1)(2)
Comprehensive income attributable to common stockholders$39,449 $23,940 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.









5


SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
May 1, 2022January 30, 2022
Assets
Current assets:
Cash and cash equivalents$275,184 $279,601 
Accounts receivable, less allowances of $692 and $747, respectively
66,360 71,507 
Inventories106,901 114,003 
Prepaid taxes2,442 5,983 
Assets held for sale9,065  
Other current assets35,471 31,201 
Total current assets495,423 502,295 
Non-current assets:
Property, plant and equipment, net of accumulated depreciation of $247,403 and $254,764, respectively
133,590 134,940 
Deferred tax assets25,643 27,803 
Goodwill350,306 351,141 
Other intangible assets, net5,756 6,804 
Other assets105,198 107,928 
TOTAL ASSETS$1,115,916 $1,130,911 
Liabilities and Equity
Current liabilities:
Accounts payable$48,381 $50,695 
Accrued liabilities60,793 77,704 
Liabilities held for sale1,242  
Total current liabilities110,416 128,399 
Non-current liabilities:
Deferred tax liabilities1,066 1,132 
Long term debt181,797 171,676 
Other long-term liabilities87,464 91,929 
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized, 78,136,144 issued and 63,466,933 outstanding and 78,136,144 issued and 64,098,565 outstanding, respectively
785 785 
Treasury stock, at cost, 14,669,211 shares and 14,037,579 shares, respectively
(596,187)(549,942)
Additional paid-in capital496,151 491,956 
Retained earnings834,909 796,860 
Accumulated other comprehensive loss(675)(2,075)
Total stockholders’ equity734,983 737,584 
Noncontrolling interest190 191 
Total equity735,173 737,775 
TOTAL LIABILITIES AND EQUITY$1,115,916 $1,130,911 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
6


SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Three Months Ended May 1, 2022
Common StockAccumulated Other Comprehensive Loss
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at January 30, 202264,098,565 $785 $(549,942)$491,956 $796,860 $(2,075)$737,584 $191 $737,775 
Net income— — — — 38,049 — 38,049 (1)38,048 
Other comprehensive income— — — — — 1,400 1,400 — 1,400 
Share-based compensation— — — 12,103 — — 12,103 — 12,103 
Repurchase of common stock(762,093)— (50,000)— — — (50,000)— (50,000)
Treasury stock reissued130,461 — 3,755 (7,908)— — (4,153)— (4,153)
Balance at May 1, 202263,466,933 $785 $(596,187)$496,151 $834,909 $(675)$734,983 $190 $735,173 

Three Months Ended May 2, 2021
Common StockAccumulated Other Comprehensive Loss
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at January 31, 202165,098,379 $785 $(438,798)$473,728 $671,196 $(8,168)$698,743 $210 $698,953 
Net income— — — — 23,500 — 23,500 (2)23,498 
Other comprehensive income— — — — — 440 440 — 440 
Share-based compensation— — — 12,196 — — 12,196 — 12,196 
Repurchase of common stock(360,942)— (25,000)— — — (25,000)— (25,000)
Treasury stock reissued160,483 — 3,549 (9,151)— — (5,602)— (5,602)
Balance at May 2, 202164,897,920 $785 $(460,249)$476,773 $694,696 $(7,728)$704,277 $208 $704,485 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
7


SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
 May 1, 2022May 2, 2021
Cash flows from operating activities:
Net income$38,048 $23,498 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization7,668 7,420 
Amortization of right-of-use assets1,140 1,055 
Investment impairments and credit loss reserves24 246 
Accretion of deferred financing costs and debt discount121 121 
Deferred income taxes1,747 (29)
Share-based compensation10,893 11,839 
Loss (gain) on disposition of assets8 (20)
Equity in net gains of equity method investments(24)(78)
Corporate-owned life insurance, net(47)2,562 
Changes in assets and liabilities:
Accounts receivable, net5,147 3,915 
Inventories712 (6,425)
Other assets3,017 5,815 
Accounts payable(126)1,513 
Accrued liabilities(16,808)(14,659)
Other liabilities(1,469)(4,188)
Net cash provided by operating activities50,051 32,585 
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment 32 
Purchase of property, plant and equipment(8,315)(5,760)
Purchase of investments(2,000)(2,927)
Proceeds from corporate-owned life insurance2,676  
Premiums paid for corporate-owned life insurance(2,676) 
Net cash used in investing activities(10,315)(8,655)
Cash flows from financing activities:
Proceeds from revolving line of credit10,000  
Payments of revolving line of credit (4,000)
Payment for employee share-based compensation payroll taxes(4,570)(6,230)
Proceeds from exercise of stock options417 628 
Repurchase of common stock(50,000)(25,000)
Net cash used in financing activities(44,153)(34,602)
Net decrease in cash and cash equivalents(4,417)(10,672)
Cash and cash equivalents at beginning of period279,601 268,891 
Cash and cash equivalents at end of period$275,184 $258,219 
Supplemental disclosure of cash flow information:
Interest paid$987 $1,065 
Income taxes paid$3,347 $2,917 
Non-cash investing and financing activities:
Accounts payable related to capital expenditures$3,808 $2,355 
Conversion of notes into equity$ $626 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
8


SEMTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Organization and Basis of Presentation
Nature of Business
Semtech Corporation (together with its consolidated subsidiaries, the "Company" or "Semtech") is a leading global supplier of high performance analog and mixed-signal semiconductors and advanced algorithms. The end customers for the Company’s products are primarily original equipment manufacturers that produce and sell electronics.
Fiscal Year
The Company reports results on the basis of 52 and 53-week periods and ends its fiscal year on the last Sunday in January. The other quarters generally end on the last Sunday of April, July and October, although the first quarter of fiscal year 2023 ends on the first Sunday of May. All quarters consist of 13 weeks except for one 14-week period in the fourth quarter of 53-week years. The first quarters of fiscal years 2023 and 2022 each consisted of 13 weeks.
Principles of Consolidation
The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company, in accordance with accounting principles generally accepted in the United States ("GAAP") and on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2022 ("Annual Report"). The Company’s interim unaudited condensed consolidated statements of income are referred to herein as the "Statements of Income." The Company’s interim unaudited condensed consolidated balance sheets are referred to herein as the "Balance Sheets" and interim unaudited condensed consolidated statements of cash flows as the "Statements of Cash Flows." In the opinion of the Company, these interim unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the financial position of the Company for the interim periods presented. All intercompany balances have been eliminated. Because the interim unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report. The results reported in these interim unaudited condensed consolidated financial statements should not be regarded as indicative of results that may be expected for any subsequent period or for the entire year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Held for Sale
As of May 1, 2022, the Company classified certain assets and liabilities as held for sale in the Balance Sheets. See Note 2, Divestiture, and Note 17, Subsequent Event, for additional information.
Accounting Guidance Issued, but not yet Adopted as of May 1, 2022
In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-08, “Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistencies related to recognition of an acquired contract liability, and to payment terms and their effect on subsequent revenue recognized by the acquirer. Among other changes, this ASU requires that an acquirer account for acquired revenue contracts in accordance with Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers," as if it had originated the contracts. If the acquirer is unable to assess or rely on how the acquiree applied ASC 606, the acquirer should consider the terms of the acquired contracts as of the contract inception or contract modification date in applying ASC 606 to determine what should be recorded at the acquisition date. The amendments also provide certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
9


Note 2: Divestiture
The Company determined that its high reliability discrete diodes and assemblies business (the “Disposal Group”) met the held for sale criteria as of May 1, 2022 and, as a result, related assets for this business were classified as "Assets held for sale" and related liabilities for this business were classified as "Liabilities held for sale" in the Balance Sheets as of May 1, 2022. The Company reclassified $0.8 million of goodwill to assets held for sale based on the relative fair value of the Disposal Group and the portion of the Wireless and Sensing reporting unit that will be retained. The estimated fair value of the Disposal Group less estimated costs to sell exceeded its carrying amount as of May 1, 2022. As the sale of the Disposal Group is not considered a strategic shift that will have a major effect on the Company’s operations or financial results, it is not reported as discontinued operations.
The following table summarizes the Company's assets and liabilities held for sale by major class:
May 1, 2022
(in thousands)
Assets:
Inventories$6,390 
Property, plant and equipment, net1,182 
Goodwill835 
Other658 
Total assets held for sale$9,065 
Liabilities:
Accounts payable$483 
Accrued liabilities759 
Total liabilities held for sale$1,242 
On May 3, 2022, the Company completed the divestiture of the Disposal Group. See Note 17, Subsequent Event, for additional information.

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Note 3: Earnings per Share
The computation of basic and diluted earnings per share was as follows:
 Three Months Ended
(in thousands, except per share data)May 1, 2022May 2, 2021
Net income attributable to common stockholders$38,049 $23,500 
Weighted-average shares outstanding–basic63,950 65,089 
Dilutive effect of share-based compensation603 1,021 
Weighted-average shares outstanding–diluted64,553 66,110 
Earnings per share:
Basic$0.59 $0.36 
Diluted$0.59 $0.36 
Anti-dilutive shares not included in the above calculations64  
Diluted earnings per share incorporates the incremental shares issuable, calculated using the treasury stock method, upon the assumed exercise of non-qualified stock options and the vesting of restricted stock units and market-condition restricted stock unit awards if certain conditions have been met, but excludes such incremental shares that would have an anti-dilutive effect.
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Note 4: Share-Based Compensation
Financial Statement Effects and Presentation
Pre-tax share-based compensation was included in the Statements of Income as follows:
Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Cost of sales$775 $718 
Selling, general and administrative6,132 7,359 
Product development and engineering3,986 3,762 
Total share-based compensation$10,893 $11,839 
Restricted Stock Units, Employees
The Company grants restricted stock units to certain employees, which are expected to be settled with shares of the Company's common stock. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically 4 years). In the three months ended May 1, 2022, the Company granted 166,023 restricted stock units to employees.
Total Stockholder Return ("TSR") Market-Condition Restricted Stock Units
The Company grants TSR market-condition restricted stock units (the "TSR Awards") to certain executives of the Company. The TSR Awards have a pre-defined market-condition, which determines the number of shares that ultimately vest, as well as a service condition. The TSR Awards are valued as of the grant date using a Monte Carlo simulation, which takes into consideration the possible outcomes pertaining to the TSR market condition and expense is recognized on a straight-line basis over the requisite service periods and is adjusted for any actual forfeitures.
In the three months ended May 1, 2022, the Company granted 125,399 TSR Awards, which are accounted for as equity awards. The market condition is determined based upon the Company’s TSR benchmarked against the TSR of the S&P SPDR Semiconductor ETF (NYSE:XSD) over one, two and three year periods (one-third of the awards vesting each performance period). Generally, the fiscal year 2023 TSR Award recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. The grant-date fair value per unit of the TSR Awards granted in the three months ended May 1, 2022 for each one, two and three year performance period was $57.92, $68.94 and $75.69, respectively.

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Note 5: Available-for-sale securities
The following table summarizes the values of the Company’s available-for-sale securities:
 May 1, 2022January 30, 2022
(in thousands)Fair ValueAmortized
Cost
Gross
Unrealized Gain/(Loss)
Fair ValueAmortized
Cost
Gross
Unrealized Gain/(Loss)
Convertible debt$13,130 $14,683 $(1,553)$12,872 $14,401 $(1,529)
Total available-for-sale securities$13,130 $14,683 $(1,553)$12,872 $14,401 $(1,529)
The following table summarizes the maturities of the Company’s available-for-sale securities:
May 1, 2022
(in thousands)Fair ValueAmortized Cost
Within 1 year$11,544 $12,366 
After 1 year through 5 years1,586 2,317 
Total available-for-sale securities$13,130 $14,683 
The Company's available-for-sale securities consist of investments in convertible debt instruments issued by privately-held companies. The available-for-sale securities with maturities within one year were included in "Other current assets" and maturities greater than one year were included in "Other assets" in the Balance Sheets.






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Note 6: Fair Value Measurements
The following fair value hierarchy is applied for disclosure of the inputs used to measure fair value and prioritizes the inputs into three levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the assets or liabilities, either directly or indirectly.
Level 3—Unobservable inputs based on the Company’s own assumptions, requiring significant management judgment or estimation.
Instruments Measured at Fair Value on a Recurring Basis
The fair values of financial assets and liabilities measured and recorded at fair value on a recurring basis were presented in the Balance Sheets as follows:
 May 1, 2022January 30, 2022
(in thousands)Total(Level 1)(Level 2)(Level 3)Total(Level 1)(Level 2)(Level 3)
Financial assets:
Interest rate swap agreement$1,983 $ $1,983 $ $229 $ $229 $ 
Convertible debt13,130   13,130 12,872   12,872 
Total financial assets$15,113 $ $1,983 $13,130 $13,101 $ $229 $12,872 
Financial liabilities:
Total return swap contracts$317 $ $317 $ $257 $ $257 $ 
Total financial liabilities$317 $ $317 $ $257 $ $257 $ 
During the three months ended May 1, 2022, the Company had no transfers of financial assets or liabilities between Level 1, Level 2 or Level 3. As of May 1, 2022 and January 30, 2022, the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.
The convertible debt investments are valued utilizing a combination of estimates that are based on the estimated discounted cash flows associated with the debt and the fair value of the equity into which the debt may be converted, all of which are Level 3 inputs.
The following table presents a reconciliation of the changes in the convertible debt investments in the three months ended May 1, 2022:
(in thousands)
Balance at January 30, 2022$12,872 
Increase in credit loss reserve(24)
Interest accrued282 
Balance at May 1, 2022$13,130 
The interest rate swap agreement is measured at fair value using readily available interest rate curves (Level 2 inputs). The fair value of the agreement is determined by comparing, for each settlement, the contract rate to the forward rate and discounting to the present value. Contracts in a gain position are recorded in "Other current assets" and "Other assets" in the Balance Sheets and the value of contracts in a loss position are recorded in "Accrued liabilities" and "Other long term liabilities" in the Balance Sheets. See Note 16, Derivatives and Hedging Activities, for further discussion of the Company’s derivative instruments.
The total return swap contracts are measured at fair value using quoted prices of the underlying investments (Level 2 inputs). The fair values of the total return swap contracts are recognized in the Balance Sheets in "Accrued Liabilities" if the instruments are in a loss position and in "Other Current Assets" if the instruments are in a gain position. See Note 16, Derivatives and Hedging Activities, for further discussion of the Company's derivative instruments.
Instruments Not Recorded at Fair Value on a Recurring Basis
Some of the Company’s financial instruments are not measured at fair value on a recurring basis, but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include: cash and cash equivalents including money market deposits, net receivables, certain other assets, accounts payable, accrued
14


expenses, accrued personnel costs, and other current liabilities. The Company’s long-term debt is recorded at cost, which approximates fair value as the long-term debt bears interest at a floating rate.
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
The Company reduces the carrying amounts of its goodwill, intangible assets, long-lived assets and non-marketable equity securities to fair value when held for sale or determined to be impaired.
Investment Impairments and Credit Loss Reserves
The total credit loss reserve for the Company's held-to-maturity debt securities and available-for-sale debt securities was $4.5 million as of May 1, 2022 and January 30, 2022. During the three months ended May 2, 2021, the Company increased its expected credit loss reserves by $0.2 million for its available-for-sale debt securities. Credit loss reserves related to the Company’s available-for-sale debt securities and held-to-maturity debt securities with maturities within one year were included in “Other current assets” and with maturities greater than one year were included in “Other assets” in the Balance Sheets.





15


Note 7: Inventories
Inventories, consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
(in thousands)May 1, 2022January 30, 2022
Raw materials$2,616 $4,304 
Work in progress77,021 85,445 
Finished goods27,264 24,254 
Total inventories$106,901 $114,003 
As of May 1, 2022, inventories excluded amounts classified as held for sale. See Note 2, Divestiture, for additional information.

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Note 8: Goodwill and Intangible Assets
Goodwill
The carrying amounts of goodwill by applicable reporting unit were as follows:
(in thousands)Signal IntegrityWireless and SensingProtectionTotal
Balance at January 30, 2022$274,085 $72,128 $4,928 $351,141 
Reclassifications to assets held for sale (835) (835)
Balance at May 1, 2022$274,085 $71,293 $4,928 $350,306 
Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during the fourth quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit. As of May 1, 2022, there was no indication of impairment of the Company's goodwill balances and goodwill excluded amounts reclassified to assets held for sale. See Note 2, Divestiture, for additional information.
Purchased Intangibles
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and technology licenses purchased, which are amortized over their estimated useful lives:
 May 1, 2022January 30, 2022
(in thousands, except estimated useful life)Estimated
Useful Life
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Core technologies
6-8 years
$26,300 $(20,544)$5,756 $26,300 $(19,496)$6,804 
Total finite-lived intangible assets$26,300 $(20,544)$5,756 $26,300 $(19,496)$6,804 
Amortization expense of finite-lived intangible assets recorded in the Statements of Income for each period was as follows:
Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Core technologies$1,048 $1,298 
Total amortization expense$1,048 $1,298 
Future amortization expense of finite-lived intangible assets is expected as follows:
(in thousands)
Fiscal Year Ending:
2023 (remaining nine months)$2,954 
20241,676 
2025288 
2026288 
2027288 
Thereafter262 
Total expected amortization expense$5,756 

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Note 9: Long-Term Debt
Long-term debt and the current period interest rates were as follows:
(in thousands, except percentages)May 1, 2022January 30, 2022
Revolving loans$183,000 $173,000 
Debt issuance costs(1,203)(1,324)
Total long-term debt, net of debt issuance costs$181,797 $171,676 
Effective interest rate (1)
1.93 %1.90 %
(1) The revolving loans bear interest at a variable rate based on LIBOR or a Base Rate, at the Company’s option, plus an applicable margin that varies based on the Company’s consolidated leverage ratio. In the first quarter of fiscal year 2021, the Company entered into a three-year interest rate swap agreement that fixed the interest on the first $150.0 million of debt outstanding under the revolving loans at 1.9775%. As of May 1, 2022, the effective interest rate was a weighted-average rate that represented (a) interest on the first $150.0 million of the debt outstanding at a fixed LIBOR rate of 0.7275% plus a margin of 1.25% (total fixed rate of 1.9775%), and (b) interest on the remainder of the debt outstanding at a variable rate based on the one-month LIBOR rate, which was 0.49% as of May 1, 2022, plus a margin of 1.25% (total variable rate of 1.74%). As of January 30, 2022, the effective interest rate was a weighted-average rate that represented (a) interest on the first $150.0 million of the debt outstanding at a fixed LIBOR rate of 0.7275% plus a margin of 1.25% (total fixed rate of 1.9775%), and (b) interest on the remainder of the debt outstanding at a variable rate based on the one-month LIBOR rate, which was 0.11% as of January 30, 2022, plus a margin of 1.25% (total variable rate of 1.36%).
On November 7, 2019, the Company, with certain of its domestic subsidiaries as guarantors, entered into an amended and restated credit agreement with the lenders party thereto and HSBC Bank USA, National Association, as administrative agent, swing line lender and letter of credit issuer. The borrowing capacity of the revolving loans under the senior secured first lien credit facility (the "Credit Facility") is $600.0 million and matures on November 7, 2024. As of May 1, 2022, the Company had $183.0 million outstanding under its Credit Facility and $417.0 million of undrawn borrowing capacity, and the Company was in compliance with the covenants required under the Credit Facility.
On August 11, 2021, the Company entered into an amendment to the Credit Agreement in order to, among other things, (i) provide for contractual fallback language for LIBOR replacement to reflect the Alternative Reference Rates Committee hardwired approach and (ii) incorporate certain provisions that clarify the rights of the administrative agent to recover from lenders or other secured parties erroneous payments made to such lenders or secured parties.
Interest expense was comprised of the following components for the periods presented:
 Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Contractual interest (1)
$1,076 $1,078 
Amortization of debt discount and issuance costs121 121 
Total interest expense$1,197 $1,199 
(1) Contractual interest represents the interest on the Company's outstanding debt after giving effect to the interest rate swap agreement.
As of May 1, 2022, there were no amounts outstanding under the letters of credit, swing line loans and alternative currency sub-facilities.
18


Note 10: Income Taxes
The Company’s effective tax rate differs from the statutory federal income tax rate of 21% primarily due to the regional mix of income, impact of global intangible low-taxed income ("GILTI") and research and development ("R&D") tax credits. The Tax Cuts and Jobs Act requires R&D costs incurred for tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted. The Company has elected to treat GILTI as a period cost and the additional capitalization of R&D costs within GILTI increases the Company's provision for income taxes.
The Company uses a two-step approach to recognize and measure uncertain tax positions ("UTP"). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (before the federal impact of state items) is as follows:
(in thousands)
Balance at January 30, 2022$27,051 
Additions/(decreases) based on tax positions related to the current fiscal year 181 
Additions/(decreases) based on tax positions related to the prior fiscal years(34)
Balance at May 1, 2022$27,198 
Included in the balance of gross unrecognized tax benefits at May 1, 2022 and January 30, 2022 are $9.4 million and $9.3 million, respectively, of net tax benefits (after the federal impact of state items), that, if recognized, would impact the effective tax rate, prior to consideration of any required valuation allowance.
The liability for UTP is reflected in the Balance Sheets as follows:        
(in thousands)May 1, 2022January 30, 2022
Deferred tax assets - non-current$16,440 $16,346 
Other long-term liabilities9,384 9,335 
Total accrued taxes$25,824 $25,681 
The Company’s policy is to include net interest and penalties related to unrecognized tax benefits in the "Provision for income taxes" in the Statements of Income.
Tax years prior to 2013 (the Company’s fiscal year 2014) are generally not subject to examination by the United States ("U.S.") Internal Revenue Service except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. For state returns in the U.S., the Company is generally not subject to income tax examinations for calendar years prior to 2012 (the Company’s fiscal year 2013). The Company has a significant tax presence in Switzerland for which Swiss tax filings have been examined through fiscal year 2020. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
The Company’s regional income (loss) from continuing operations before taxes and equity in net gains of equity method investments was as follows:
 Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Domestic$(4,782)$(5,484)
Foreign50,875 32,102 
Total$46,093 $26,618 
19


Note 11: Leases
The Company has operating leases for real estate, vehicles, and office equipment, which are accounted for in accordance with ASC 842, "Leases." Real estate leases are used to secure office space for the Company's administrative, engineering, production support and manufacturing activities. The Company's leases have remaining lease terms of up to approximately ten years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.
The components of lease expense were as follows:
Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Operating lease cost$1,446 $1,337 
Short-term lease cost271 244 
Sublease income(35)(20)
Total lease cost$1,682 $1,561 
Supplemental cash flow information related to leases was as follows:
Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Cash paid for amounts included in the measurement of lease liabilities$1,709 $1,731 
Right-of-use assets obtained in exchange for new operating lease liabilities$465 $33 
May 1, 2022
Weighted-average remaining lease term–operating leases (in years)5.41
Weighted-average discount rate on remaining lease payments–operating leases6.3 %
Supplemental balance sheet information related to leases was as follows:
(in thousands)May 1, 2022January 30, 2022
Operating lease right-of-use assets in "Other assets"$19,102 $19,777 
Operating lease liabilities in "Accrued liabilities"$3,790 $3,977 
Operating lease liabilities in "Other long-term liabilities"15,446 16,577 
Total operating lease liabilities$19,236 $20,554 
Maturities of lease liabilities as of May 1, 2022 are as follows:
(in thousands)
Fiscal Year Ending:
2023 (remaining nine months)$3,644 
20244,567 
20254,414 
20263,391 
20272,206 
Thereafter4,544 
Total lease payments22,766 
Less: imputed interest(3,530)
Total$19,236 

20


Note 12: Commitments and Contingencies
In accordance with ASC 450-20, "Loss Contingencies," the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. The Company also discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if material. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of liability that has been previously accrued, and makes adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. The Company may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are indeterminate, (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements, (iv) if there are significant factual issues to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.
Because the outcomes of litigation and other legal matters are inherently unpredictable, the Company’s evaluation of legal matters or proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. While the consequences of certain unresolved matters and proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material adverse effect on the Company’s earnings in any given reporting period. However, in the opinion of management, after consulting with legal counsel, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the Company’s consolidated financial statements, as a whole. However, legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control.
As such, even though the Company intends to vigorously defend itself with respect to its legal matters, there can be no assurance that the final outcome of these matters will not materially and adversely affect the Company’s business, financial condition, operating results, or cash flows.
From time to time, the Company is involved in various claims, litigation, and other legal actions that are normal to the nature of its business, including with respect to intellectual property, contract, product liability, employment, and environmental matters. In the opinion of management, after consulting with legal counsel, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the Company’s consolidated financial statements, as a whole.
Environmental Matters
The Company vacated a former facility in Newbury Park, California in 2002, but continues to address groundwater and soil contamination at the site. The Company’s efforts to address site conditions have been at the direction of the Los Angeles Regional Water Quality Control Board (“RWQCB”). In October 2013, an order was issued including a scope of proposed additional site work, monitoring, and remediation activities. The Company has been complying with RWQCB orders and direction, and continues to implement an approved remedial action plan addressing the soil, groundwater, and soil vapor at the site. 
The Company has accrued liabilities where it is probable that a loss will be incurred and the cost or amount of loss can be reasonably estimated. Based on the latest determinations by the RWQCB and the most recent actions taken pursuant to the remedial action plan, the Company estimates the range of probable loss between $7.9 million and $9.4 million. To date, the Company has made $5.8 million in payments towards the remedial action plan and, as of May 1, 2022, has a remaining accrual of $2.1 million related to this matter. Given the uncertainties associated with environmental assessment and the remediation activities, the Company is unable to determine a best estimate within the range of loss. Therefore, the Company has recorded the minimum amount of probable loss. These estimates could change as a result of changes in planned remedial actions, further actions from the regulatory agency, remediation technology, and other factors.
Indemnification
The Company has entered into agreements with its current and former executives and directors indemnifying them against certain liabilities incurred in connection with the performance of their duties. The Company’s Certificate of Incorporation and Bylaws also contain indemnification obligations with respect to the Company’s current directors and employees.
Product Warranties
The Company’s general warranty policy provides for repair or replacement of defective parts. In some cases, a refund of the purchase price is offered. In certain instances, the Company has agreed to other or additional warranty terms, including indemnification provisions.
The product warranty accrual reflects the Company’s best estimate of probable liability under its product warranties. The Company accrues for known warranty issues if a loss is probable and can be reasonably estimated, and accrues for estimated incurred but unidentified issues based on historical experience. Historically, warranty expense and the related accrual has been immaterial to the Company’s consolidated financial statements.
Deferred Compensation
The Company maintains a deferred compensation plan for certain officers and key executives that allows participants to defer a portion of their compensation for future distribution at various times permitted by the plan. This plan provides for a discretionary Company match up to a defined portion of the employee's deferral, with any match subject to a defined vesting schedule.
The Company's liability for the deferred compensation plan is presented below:
(in thousands)May 1, 2022January 30, 2022
Accrued liabilities$1,821 $1,966 
Other long-term liabilities41,305 43,197 
Total deferred compensation liabilities under this plan$43,126 $45,163 
The Company has purchased whole life insurance on the lives of certain current deferred compensation plan participants. This corporate-owned life insurance is held in a grantor trust and is intended to cover a majority of the Company's costs of the deferred compensation plan. The cash surrender value of the corporate-owned life insurance was $33.7 million and $35.2 million as of May 1, 2022 and January 30, 2022, respectively, and is included in "Other assets" in the Balance Sheets. The decrease in the cash surrender value of the corporate-owned life insurance as of May 1, 2022 compared to January 30, 2022 was primarily related to a $2.6 million decrease in market value and a $1.6 million reduction in cash surrender value related to a death benefit, partially offset by the re-investment of $2.7 million of proceeds from the death benefit into the corporate-owned life insurance policy in order to provide substantive coverage for the Company's deferred compensation liability.
21


Note 13: Concentration of Risk
The following significant customers accounted for at least 10% of the Company's net sales in one or more of the periods indicated:
Three Months Ended
(percentage of net sales)May 1, 2022May 2, 2021
Trend-tek Technology Ltd. (and affiliates)18 %16 %
Frontek Technology Corporation (and affiliates)15 %19 %
CEAC International Limited13 %10 %
The following table shows the customers that had an outstanding receivable balance that represented at least 10% of the Company's total net receivables as of one or more of the dates indicated:
(percentage of net receivables)May 1, 2022January 30, 2022
Frontek Technology Corporation (and affiliates)15 %17 %
Trend-tek Technology Ltd (and affiliates)11 %7 %
CEAC International Limited11 %10 %
Outside Subcontractors and Suppliers
The Company relies on a limited number of third-party subcontractors and suppliers for the production of silicon wafers, packaging and certain other tasks. Disruption or termination of supply sources or subcontractors, including due to the COVID-19 pandemic or natural disasters such as an earthquake or other causes, have delayed and could in the future delay shipments and could have a material adverse effect on the Company. Although there are generally alternate sources for these materials and services, qualification of the alternate sources could cause delays sufficient to have a material adverse effect on the Company. A significant amount of the Company’s third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in the U.S., Taiwan and China. A significant amount of the Company’s assembly and test operations are conducted by third-party contractors in China, Taiwan and Malaysia.

22


Note 14: Segment Information
The Company’s Chief Executive Officer functions as the chief operating decision maker ("CODM"). The CODM makes operating decisions and assesses performance based on the Company's major product lines, which represent its operating segments. The Company has three operating segments—Signal Integrity, Wireless and Sensing and Protection—that historically have been aggregated into one reportable segment identified as the "Semiconductor Products Group." In the fourth quarter of fiscal year 2022, the Company updated its forecasts and assessed the economic performance of the three operating segments and concluded that Protection is no longer expected to be economically similar to the other operating segments. This is primarily because the Company's projections indicate that the gross margin of products within Protection will not be economically similar to products within the other operating segments. Accordingly, the Company concluded that Protection should be separately reported as its own reportable segment. This decision resulted in the formation of two reportable segments, including the High-Performance Analog Group, which is comprised of the Signal Integrity and Wireless and Sensing operating segments, and the System Protection Group, which is comprised of the Protection operating segment. All prior year information in the tables below has been revised retrospectively to reflect the change to the Company's reportable segments.
The Company’s assets are commingled among the three operating segments and the CODM does not use asset information in making operating decisions or assessing performance. Therefore, the Company has not included asset information by reportable segment in the segment disclosures below.
Net sales and gross profit by segment were as follows:
Three Months Ended
(in thousands)May 1, 2022May 2, 2021
Net sales:
High-Performance Analog Group$146,601 $125,202 
System Protection Group55,548