QORVO, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-K)

0
The following discussion should be read in conjunction with, and is qualified in
its entirety by reference to, our audited consolidated financial statements,
including the notes thereto, set forth in Part II, Item 8 of this report.

PREVIEW

Company

Qorvo® is a world leader in the development and commercialization of technologies and products for the wireless, wireline and energy markets.

We design, develop, manufacture and market our products to U.S. and
international OEMs and ODMs in two operating segments, MP and IDP, which are
also our reportable segments. MP is a global supplier of cellular, UWB, Wi-Fi
and other wireless solutions for a variety of applications, including
smartphones, wearables, laptops, tablets and IoT. IDP is a global supplier of
RF, SoC and power management solutions for a wide range of markets, including
cellular and IT infrastructure, automotive, renewable energy, defense and IoT.

In fiscal 2022, the semiconductor industry continued to experience supply
constraints, and we have taken actions to address short and long-term supply
requirements. During the second quarter ended October 2, 2021, we entered into a
long-term capacity agreement with a foundry supplier to reserve manufacturing
supply capacity. Under the agreement we are required to purchase, and the
foundry supplier is required to supply, a certain number of wafers for calendar
years 2022 through 2025. See Note 11 of the Notes to Consolidated Financial
Statements for additional information regarding this agreement.

The COVID-19 pandemic (including the recent COVID-19 lockdowns in China) has
been a contributing factor of the semiconductor industry supply constraints and
may continue to cause volatility and uncertainty in customer demand, worldwide
economies and financial markets for an extended period of time. To date, any
negative impact of COVID-19 on the overall demand for our products, cash flows
from operations, need for capital expenditures and our liquidity position has
been limited, although we are addressing capacity constraints in our supply
chain as described above. However, the recent COVID-19 lockdowns in China could
negatively impact the overall demand for our products, cash flows from
operations, need for capital expenditures and our liquidity position in future
periods.
                                       33

————————————————– ——————————

Contents

Fiscal 2022 Financial Highlights

•Revenue increased 15.7% in fiscal 2022 to $4,645.7 million, compared to
$4,015.3 million in fiscal 2021, driven primarily by higher demand for our 5G
mobile solutions and our power management, automotive and broadband products,
partially offset by lower demand for our base station and defense and aerospace
products.

•Gross margin for fiscal 2022 was 49.2%, compared to 46.9% in fiscal 2021,
primarily due to lower intangible amortization expense as well as lower unit
costs on higher volume and productivity. The increase in gross margin was
partially offset by average selling price erosion.

•Operating income was $1,226.1 million in fiscal 2022, compared to $906.6
million in fiscal 2021. This increase was primarily due to higher revenue and
favorable gross margin, partially offset by higher operating expenses. Operating
expenses increased primarily due to higher personnel costs, a goodwill
impairment charge and increased product development spend, partially offset by
lower intangible amortization expense and lower incentive-based compensation.

• Diluted net earnings per share were $9.26 for the 2022 financial year, compared to the net earnings per diluted share of $6.32 for fiscal year 2021.

•Cash flows from operations was $1,049.2 million for fiscal 2022, compared to
$1,301.9 million for fiscal 2021. This year-over-year decrease was primarily due
to increased inventory as well as prepayments of certain fees and deposits
associated with a long-term capacity reservation agreement. The increased
inventory related to the lower demand for 5G handsets from China-based OEMs and
the build of inventory in anticipation of certain customers' product ramps.

• Capital expenditures have been $213.5 million in fiscal 2022, compared to $187.0 million in fiscal year 2021. Our capital expenditures in fiscal year 2022 included investments in premium screening capacity.

•We finalized the acquisitions of Next entry and United SiC for a total of $389.1 millionnet of cash acquired.

•We recorded a $48.0 million impairment of goodwill related to the
Next entry acquisition.

• We issued $500.0 million aggregate principal amount of the 1.750% Senior Notes due 2024 (the “2024 Notes”).

•Have been paid $197.5 million on the 2020 Term Loan (as defined below), plus accrued and unpaid interest.

• We repurchased approximately 7.3 million common shares for approximately $1,152.3 million.

                                       34
--------------------------------------------------------------------------------
  Table of     Contents
RESULTS OF OPERATIONS

Consolidated

The table below presents a summary of our results of operations for fiscal years
2022 and 2021 along with a year-over-year comparison. See Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on Form 10-K for the fiscal year ended April 3,
2021, filed with the SEC on May 24, 2021, which is incorporated by reference
herein, for a summary of our results of operations for the fiscal year ended
March 28, 2020 along with a year-over-year comparison between fiscal years 2021
and 2020.

                                               Fiscal 2022                                    Fiscal 2021                               Increase (Decrease)
(In thousands, except
percentages)                        Dollars              % of Revenue              Dollars              % of Revenue              Dollars          Percentage Change
Revenue                          $ 4,645,714                     100.0  %       $ 4,015,307                     100.0  %       $  630,407                    15.7  %
Cost of goods sold                 2,359,546                      50.8            2,131,741                      53.1             227,805                    10.7
Gross profit                       2,286,168                      49.2            1,883,566                      46.9             402,602                    21.4
Research and development             623,636                      13.4              570,395                      14.2              53,241                     9.3
Selling, general and
administrative                       349,718                       7.5              367,238                       9.1             (17,520)                   (4.8)
Other operating expense               86,745                       1.9               39,306                       1.0              47,439                   120.7
Operating income                 $ 1,226,069                      26.4  %       $   906,627                      22.6  %       $  319,442                    35.2  %



Revenue

Revenue increased primarily due to higher demand for our 5G mobile solutions and
our power management, automotive and broadband products, partially offset by
lower demand for our base station and defense and aerospace products. The higher
demand for our mobile solutions was driven by 5G content increases with our
largest customers, and the increased demand for our power management products
was driven by the migration to smaller and more efficient power solutions. The
increased demand for our automotive and broadband products was driven by the
proliferation of connected devices and the increasing requirements for higher
efficiency, greater throughput and smaller size. The lower demand for our base
station products was attributed to fewer 5G massive
Multiple-Input/Multiple-Output ("mMIMO") deployments in China, and the lower
demand for our defense and aerospace products was due to the timing of programs.

We provided our products to our largest end customer (Apple) through sales to
multiple contract manufacturers, which in the aggregate accounted for
approximately 33% and 30% of total revenue in fiscal years 2022 and 2021,
respectively. Samsung accounted for approximately 11% and 7% of total revenue in
fiscal years 2022 and 2021, respectively. These customers primarily purchase RF
solutions for a variety of mobile devices.

International shipments amounted to $2,717.3 million in fiscal year 2022 (approximately 58% of revenue) compared to $2,384.2 million in fiscal year 2021 (approximately 59% of revenue). Shipments to Asia totaled $2,465.7 million in fiscal year 2022 (approximately 53% of revenue) compared to $2,191.2 million in fiscal year 2021 (around 55% of revenue).

Gross margin

Gross margin increased primarily due to lower intangible asset amortization expense as well as lower unit costs related to increased volume and productivity. The increase in gross margin was partially offset by the erosion of the average selling price.

Functionnary costs

Research and development

R&D spending increased primarily due to additional headcount and higher design
and development costs associated with our UWB solutions, biotechnology testing
solutions and 5G mobile solutions as well as the acquisition of United SiC.
These increases were partially offset by lower incentive-based compensation.
                                       35

————————————————– ——————————

Contents

Selling, general and administrative expenses

Selling, general and administrative expense decreased primarily due to lower
intangible amortization expense and lower incentive-based compensation. These
decreases were partially offset by higher personnel and commission expenses.

Other operating expenses

Other operating expenses increased in fiscal year 2022 mainly due to a goodwill impairment charge of $48.0 million. See note 6 of the notes to the consolidated financial statements for more information.

Operating Segments

Mobile Products

                                                     Fiscal Year                                   Increase
(In thousands, except percentages)            2022                 2021               Dollars            Percentage Change
Revenue                                  $ 3,545,253          $ 2,856,813          $  688,440                        24.1  %
Operating income                           1,290,132            1,008,171             281,961                        28.0
Operating income as a % of revenue              36.4  %              35.3  %



MP revenue increased primarily due to increased demand for our mobile solutions, driven by increased 5G content with our largest customers.

MP operating income increased primarily due to the effects of increased revenue
and lower unit costs on higher volume and productivity. These increases were
partially offset by average selling price erosion and higher operating expenses.
Operating expenses increased primarily due to additional headcount and higher
design and development costs associated with our UWB solutions and 5G mobile
solutions as well as the acquisition of NextInput. These increases were
partially offset by lower incentive-based compensation.

Infrastructure and defense products

                                                     Fiscal Year                                    Decrease
(In thousands, except percentages)            2022                 2021               Dollars            Percentage Change
Revenue                                  $ 1,100,461          $ 1,158,494          $  (58,033)                        (5.0) %
Operating income                             261,511              283,507             (21,996)                        (7.8)
Operating income as a % of revenue              23.8  %              24.5  %



IDP revenue decreased primarily due to lower demand for our base station and
defense and aerospace products, partially offset by increased demand for our
power management, automotive and broadband products. The lower demand for our
base station products was attributed to fewer 5G mMIMO deployments in China, and
the lower demand for our defense and aerospace products was due to the timing of
programs. The increased demand for our power management products was driven by
the migration to smaller and more efficient power solutions. The increased
demand for our automotive and broadband products was driven by the proliferation
of connected devices and the increasing requirements for higher efficiency,
greater throughput and smaller size.

IDP operating income decreased primarily due to decreased revenue and higher
operating expenses, partially offset by favorable changes in gross margin.
Operating expenses increased primarily due to increased expenses associated with
the design and development of our biotechnology testing solutions as well as the
acquisition of United SiC, partially offset by lower incentive-based
compensation. Gross margin was favorable primarily due to improved product mix,
average selling price expansion and lower costs from improved factory
utilization.

See note 17 of the notes to the consolidated financial statements for a reconciliation of segment operating profit with consolidated operating profit for fiscal years 2022, 2021 and 2020.

                                       36
--------------------------------------------------------------------------------
  Table of     Contents
INTEREST, OTHER INCOME (EXPENSE) AND INCOME TAXES

                                                          Fiscal Year
                (In thousands)                        2022           2021
                Interest expense                   $ (63,326)     $ (75,198)
                Other income (expense), net           18,341        (24,049)
                Income tax expense                  (147,731)       (73,769)



Interest expense

During fiscal 2022, we recorded interest expense primarily related to our 4.375%
senior notes due 2029 (the "2029 Notes") and our 3.375% senior notes due 2031
(the "2031 Notes"). During fiscal 2021, we recorded interest expense primarily
related to our 5.50% senior notes due July 15, 2026 (the "2026 Notes"), the 2029
Notes and the 2031 Notes. Interest expense in the preceding table for fiscal
years 2022 and 2021 is net of capitalized interest of $3.7 million and $4.1
million, respectively.

Other income (expenses), net

Other income (expenses) includes realized or unrealized gains and losses on investments, interest income, exchange rate fluctuations and losses on extinguishment of debts.

During fiscal 2022, we recorded $12.0 million of income based on our share of
the earnings from our limited partnership investments, and we recorded net gains
of $2.7 million from other investments.

During fiscal 2021, we recorded $21.5 million of income based on our share of
the earnings from our limited partnership investments, and we recorded net gains
of $9.1 million from other investments. In addition, we recognized a loss on
debt extinguishment of $62.0 million primarily related to the redemption of our
2026 Notes on October 16, 2020.

income tax expense

Income tax expense for fiscal 2022 was $147.7 million. This was primarily
comprised of tax expense related to domestic and international operations
generating pre-tax book income (exclusive of nondeductible expenses associated
with acquisition related adjustments), the impact of the Tax Act's GILTI
provisions and an increase in gross unrecognized tax benefits, offset by a tax
benefit related to international operations generating pre-tax book losses and
domestic tax credits. For fiscal 2022, this resulted in an annual effective tax
rate of 12.5%.

Income tax expense for fiscal 2021 was $73.8 million. This was primarily
comprised of tax expense related to international operations generating pre-tax
book income, the impact of the Tax Act's GILTI provisions, the reversal of the
permanent reinvestment assertion with regards to certain unrepatriated foreign
earnings and an increase in gross unrecognized tax benefits, offset by a tax
benefit related to international operations generating pre-tax book losses and
domestic tax credits. For fiscal 2021, this resulted in an annual effective tax
rate of 9.1%.

A valuation allowance has been established against deferred tax assets in the
taxing jurisdictions where, based upon the positive and negative evidence
available, it is more likely than not that the related deferred tax assets will
not be realized. Realization is dependent upon generating future income in the
taxing jurisdictions in which the operating loss carryovers, credit carryovers,
depreciable tax basis and other deferred tax assets exist. Management
reevaluates the ability to realize the benefit of these deferred tax assets on a
quarterly basis. As of the end of fiscal years 2022 and 2021, the valuation
allowance against domestic and foreign deferred tax assets was $36.3 million and
$36.5 million, respectively.

See Note 13 of the Notes to the Consolidated Financial Statements for additional information regarding income taxes.

                                       37
--------------------------------------------------------------------------------
  Table of     Contents
STOCK-BASED COMPENSATION

Under Accounting Standards Codification ("ASC") 718, "Compensation - Stock
Compensation," stock-based compensation cost is measured at the grant date,
based on the estimated fair value of the award using an option pricing model for
stock options (Black-Scholes) and market price for restricted stock units, and
is recognized as expense over the employee's requisite service period.

From April 2, 2022the total remaining unearned compensation cost related to unvested restricted stock units was $121.0 millionwhich will be amortized over the weighted average remaining service life of approximately 1.2 years.

CASH AND CAPITAL RESOURCES

Cash generated by operations is our primary source of liquidity. As of April 2,
2022, we had working capital of approximately $1,774.7 million, including $972.6
million in cash and cash equivalents, compared to working capital of
approximately $1,802.2 million, including $1,397.9 million in cash and cash
equivalents, as of April 3, 2021.

Our $972.6 million of total cash and cash equivalents as of April 2, 2022,
includes $831.8 million held by our foreign subsidiaries, of which $709.5
million is held by Qorvo International Pte. Ltd. in Singapore. If the
undistributed earnings of our foreign subsidiaries are needed in the U.S., we
may be required to pay state income and/or foreign local withholding taxes to
repatriate these earnings.

Credit Agreement

On September 29, 2020, we and certain of our U.S. subsidiaries (the
"Guarantors") entered into a five-year unsecured senior credit facility pursuant
to a credit agreement (as amended, restated, modified or otherwise supplemented
from time to time, the "2020 Credit Agreement") with Bank of America, N.A.,
acting as administrative agent, and a syndicate of lenders. The 2020 Credit
Agreement amended and restated the previous credit agreement dated as of
December 5, 2017 (the "2017 Credit Agreement"). The 2020 Credit Agreement
included a senior term loan (the "2020 Term Loan") of $200.0 million and a
senior revolving line of credit (the "Revolving Facility") of up to $300.0
million (collectively the "Credit Facility"). The Revolving Facility includes a
$25.0 million sublimit for the issuance of standby letters of credit and a $10.0
million sublimit for swing line loans. The Credit Facility is available to
finance working capital, capital expenditures and other general corporate
purposes.

Pursuant to the 2020 Credit Agreement, we may request one or more additional tranches of Term Loans or increases to the Revolving Credit Facility, up to an aggregate of $500.0 million and subject to, among other things, obtaining additional financing commitments from existing or new lenders.

During fiscal 2022, there was no borrowing under the revolving credit facility.

During fiscal 2021, we made principal payments totaling $2.5 million on the term
loan under the 2017 Credit Agreement (the "2017 Term Loan"). On the closing date
of the 2020 Credit Agreement, we repaid the remaining principal balance of $97.5
million on the 2017 Term Loan and concurrently drew $200.0 million under the
2020 Term Loan.

During fiscal 2021, we made principal payments totaling $2.5 million on the 2020
Term Loan, and during fiscal 2022, we repaid the remaining principal balance of
$197.5 million on the 2020 Term Loan.

The 2020 Credit Agreement contains various conditions, covenants and
representations with which we must be in compliance in order to borrow funds and
to avoid an event of default. As of April 2, 2022, we were in compliance with
these covenants. See Note 9 of the Notes to Consolidated Financial Statements
for further information about the Credit Agreement, including applicable
interest rates.

                                       38
--------------------------------------------------------------------------------
  Table of     Contents
Stock Repurchases

On October 31, 2019, we announced that our Board of Directors authorized a share
repurchase program to repurchase up to $1.0 billion of our outstanding common
stock, which included approximately $117.0 million authorized under a prior
program which was terminated concurrent with this authorization.

On May 5, 2021, we announced that our Board of Directors authorized a new share
repurchase program to repurchase up to $2.0 billion of our outstanding common
stock, which included approximately $236.9 million authorized under the program
announced on October 31, 2019, which was terminated concurrent with the new
authorization. As of April 2, 2022, there was $861.7 million of availability
under the share repurchase program.

Under our share repurchase programs, repurchases are made in accordance with
applicable securities laws on the open market or in privately negotiated
transactions. The extent to which we repurchase our shares, the number of shares
and the timing of any repurchases depends on general market conditions,
regulatory requirements, alternative investment opportunities and other
considerations. The current program does not require us to repurchase a minimum
number of shares, does not have a fixed term, and may be modified, suspended or
terminated at any time without prior notice.

We repurchased 7.3 million shares, 3.6 million shares and 6.4 million shares of
our common stock during fiscal years 2022, 2021 and 2020, respectively, at an
aggregate cost of $1,152.3 million, $515.1 million and $515.1 million,
respectively.

Cash flow from operating activities

Operating activities in fiscal 2022 generated cash of $1,049.2 million, compared
to $1,301.9 million in fiscal 2021. This decrease in cash provided by operating
activities was primarily due to increased inventory as well as prepayments of
certain fees and deposits associated with a long-term capacity reservation
agreement. The increased inventory related to the lower demand for 5G handsets
from China-based OEMs and the build of inventory in anticipation of certain
customers' product ramps. These decreases to cash provided by operating
activities were partially offset by increased profitability as a result of
demand and revenue growth.

Cash flow from investing activities

Net cash used in investing activities in fiscal 2022 was $596.0 million,
compared to $218.7 million in fiscal 2021. This increase in cash used in
investing activities was primarily due to the acquisitions of NextInput and
United SiC in fiscal 2022, which resulted in net cash outflows of $389.1
million, as compared to the acquisition of 7Hugs Labs S.A.S. in fiscal 2021,
which resulted in net cash outflows of $47.7 million. See Note 5 of the Notes to
Consolidated Financial Statements for additional information regarding our
business acquisitions.

Cash flow from financing activities

Net cash used in financing activities in fiscal 2022 was $875.5 million,
compared to $401.9 million in fiscal 2021. This increase in cash used in
financing activities was primarily due to stock repurchases. See Note 16 of the
Notes to Consolidated Financial Statements for additional information regarding
our stock repurchases.

Our future capital requirements may differ materially from those currently
anticipated and will depend on many factors, including market acceptance of and
demand for our products, acquisition opportunities, technological advances and
our relationships with suppliers and customers. Based on current and projected
levels of cash flows from operations, coupled with our existing cash and cash
equivalents and our Credit Facility, we believe that we have sufficient
liquidity to meet both our short-term and long-term cash requirements. However,
if there is a significant decrease in demand for our products, or if our revenue
grows faster than we anticipate, operating cash flows may be insufficient to
meet our needs. If existing resources and cash from operations are not
sufficient to meet our future requirements or if we perceive conditions to be
favorable, we may seek additional debt or equity financing. Additional debt or
equity financing could be dilutive to holders of our common stock. Further, we
cannot be sure that additional debt or equity financing, if required, will be
available on favorable terms, if at all.

                                       39
--------------------------------------------------------------------------------
  Table of     Contents
CONTRACTUAL OBLIGATIONS

The following table summarizes our main contractual obligations and commitments (in thousands) as of April 2, 2022and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Payments Due by Fiscal Period

                                  Total Payments              2023              2024-2025           2026-2027            2028 and
                                                                                                                        thereafter
Capital commitments (1)         $       137,176          $   116,482          $    20,694          $       -          $          -
Purchase obligations (2)              2,019,516              902,162              880,450            236,904                     -
Leases                                  104,886               20,839               30,581             22,062                31,404
Long-term debt obligations (3)        2,586,399               69,587              627,313            133,437             1,756,062
Total                           $     4,847,977          $ 1,109,070          $ 1,559,038          $ 392,403          $  1,787,466


(1) Capital commitments represent obligations for the purchase of property and
equipment, a majority of which are not recorded as liabilities on our
Consolidated Balance Sheet because we had not received the related goods or
services as of April 2, 2022.
(2) Purchase obligations represent payments due related to the purchase of
materials and manufacturing services, a majority of which are not recorded as
liabilities on our Consolidated Balance Sheet because we had not received the
related goods or services as of April 2, 2022. See Note 11 of the Notes to
Consolidated Financial Statements for further information.
(3) Long-term debt obligations represent future cash payments of principal and
interest over the life of the 2024 Notes, the 2029 Notes and the 2031 Notes,
including anticipated interest payments not recorded as liabilities on our
Consolidated Balance Sheet as of April 2, 2022. Debt obligations are classified
based on their stated maturity date, and any future redemptions would impact our
cash payments. See Note 9 of the Notes to Consolidated Financial Statements for
further information.

Other Contractual Obligations

As of April 2, 2022, in addition to the amounts shown in the contractual
obligations table above, we have $13.8 million of unrecognized income tax
benefits and accrued interest and penalties which has been recorded as a
liability. We are uncertain as to if, or when, such amounts may be settled. We
also have an obligation related to the Transitional Repatriation Tax that we
elected to pay over eight years which has been recorded as a liability. The
remaining obligation of $5.4 million is to be paid over the next four years.

As discussed in Note 10 of the Notes to Consolidated Financial Statements, we
have two pension plans in Germany with a combined benefit obligation of
approximately $12.1 million as of April 2, 2022. Pension benefit payments are
not included in the schedule above due to the uncertainty regarding the amount
and timing of any future cash outflows. Pension benefit payments were
approximately $0.3 million in fiscal 2022 and are expected to be approximately
$0.3 million in fiscal 2023.

We also offer a non-qualified deferred compensation plan to eligible
participants to defer and invest a specified percentage of their cash
compensation. We record an obligation under the plan for the distributions to be
made to participants upon certain triggering events. Although participants are
required to make distribution elections at the time of enrollment, the amount
and timing of any future cash outflows is uncertain until such triggering events
occur. The total deferred compensation obligation as of April 2, 2022 was $39.4
million, of which $1.5 million is estimated to be paid in fiscal 2023. See Note
10 of the Notes to Consolidated Financial Statements for further information.
                                       40
--------------------------------------------------------------------------------
  Table of     Contents
SUPPLEMENTAL PARENT AND GUARANTOR FINANCIAL INFORMATION

In accordance with the indentures governing the 2024 Notes, the 2029 Notes and
the 2031 Notes (together, the "Notes"), our obligations under the Notes are
fully and unconditionally guaranteed on a joint and several unsecured basis by
the Guarantors, which are listed on Exhibit 22 to this Annual Report on Form
10-K. Each Guarantor is 100% owned, directly or indirectly, by Qorvo, Inc.
("Parent"). A Guarantor can be released in certain customary circumstances. Our
other U.S. subsidiaries and our non-U.S. subsidiaries do not guarantee the Notes
(such subsidiaries are referred to as the "Non-Guarantors").

The following presents summarized financial information for the Parent and the
Guarantors on a combined basis as of and for the periods indicated, after
eliminating (i) intercompany transactions and balances among the Parent and
Guarantors, and (ii) equity earnings from, and investments in, any
Non-Guarantor. The summarized financial information may not necessarily be
indicative of the financial position and results of operations had the combined
Parent and Guarantors operated independently from the Non-Guarantors.

            Summarized Balance Sheets
            (in thousands)                 April 2, 2022       April 3, 2021
            ASSETS
            Current assets (1)            $      771,528      $   

1,143,086

            Non-current assets            $    2,624,454      $    

2,450,960

            LIABILITIES
            Current liabilities           $      241,674      $     

240,943

            Long-term liabilities (2)     $    2,634,501      $    

2,250,666

(1) Includes the net amounts owed by subsidiaries that do not guarantee $286.8 million
and $532.4 million from April 2, 2022 and April 3, 2021respectively.

(2) Includes the net amounts due to non-guaranteeing subsidiaries of $433.5 million and
$395.3 million from April 2, 2022 and April 3, 2021respectively.

                   Summarized Statement of Income       Fiscal Year
                   (in thousands)                          2022
                   Revenue                             $ 1,126,193
                   Gross profit                        $   268,025
                   Net loss                            $   (93,405)


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires management to use
judgment and estimates. The level of uncertainty in estimates and assumptions
increases with the length of time until the underlying transactions are
completed. Actual results could materially differ from those estimates. The
accounting policies that are most critical in the preparation of our
consolidated financial statements are those that are both important to the
presentation of our financial condition and results of operations and require
significant judgment and estimates on the part of management. Our critical
accounting policies are reviewed periodically with the Audit Committee of the
Board of Directors. We also have other policies that we consider key accounting
policies; however, these policies typically do not require us to make estimates
or judgments that are difficult or subjective. See Note 1 of the Notes to
Consolidated Financial Statements.

Inventory Reserves. The valuation of inventory requires us to estimate obsolete
or excess inventory. The determination of obsolete or excess inventory requires
us to estimate the future demand for our products within specific time horizons,
generally 12 to 24 months. The estimates of future demand that we use in the
valuation of inventory reserves are the same as those used in our revenue
forecasts and are also consistent with the estimates used in our manufacturing
plans to enable consistency between inventory valuations and build decisions.
Product-specific facts and circumstances reviewed in the inventory
                                       41
--------------------------------------------------------------------------------
  Table of     Contents
valuation process include a review of the customer base, market conditions and
customer acceptance of our products and technologies, as well as an assessment
of the selling price in relation to the product cost.

Historically, inventory reserves have fluctuated as new technologies have been
introduced and customers' demand has shifted. Inventory reserves had an impact
on margins of less than 2% in fiscal years 2022 and 2021.

Property and Equipment. Periodically, we evaluate the period over which we
expect to recover the economic value of our property and equipment, considering
factors such as changes in machinery and equipment technology, our ability to
re-use equipment across generations of process technology and historical usage
trends. When we determine that the useful lives of assets are shorter or longer
than we had originally estimated, we adjust the rate of depreciation to reflect
the revised useful lives of the assets.

We assess property and equipment for impairment when events or changes in
circumstances indicate that the carrying value of the assets or the asset group
may not be recoverable. Factors that we consider in deciding when to perform an
impairment review include an adverse change in our use of the assets or an
expectation that the assets will be sold or otherwise disposed. We assess the
recoverability of the assets held and used by comparing the projected
undiscounted net cash flows associated with the related asset or group of assets
over their remaining estimated useful lives against their respective carrying
amounts.  Assets identified as "held for sale" are recorded at the lesser of
their carrying value or their fair market value less costs to sell.  Impairment,
if any, is based on the excess of the carrying amount over the fair value of
those assets.  The process of evaluating property and equipment for impairment
is highly subjective and requires significant judgment as we are required to
make assumptions about items such as future demand for our products and industry
trends.

Business Acquisitions. We allocate the fair value of the purchase price to the
assets acquired and liabilities assumed based on their estimated fair value. The
excess of the purchase price over the fair values of the identifiable assets and
liabilities is recorded to goodwill. Goodwill is assigned to the reporting unit
that is expected to benefit from the synergies of the business combination.

A number of assumptions, estimates and judgments are used in determining the
fair value of acquired assets and liabilities, particularly with respect to the
intangible assets acquired. The valuation of intangible assets requires the use
of valuation techniques such as the income approach. The income approach
includes management's estimation of future cash flows (including expected
revenue growth rates and profitability), the underlying product or technology
life cycles and the discount rates applied to future cash flows.

Judgment is also required in estimating the fair values of deferred tax assets
and liabilities, uncertain tax positions and tax-related valuation allowances,
which are initially estimated as of the acquisition date, as well as inventory,
property and equipment, pre-existing liabilities or legal claims, deferred
revenue and contingent consideration, each as may be applicable.

While we use our best estimates and assumptions to accurately value assets
acquired and liabilities assumed at the acquisition date as well as contingent
consideration, where applicable, our estimates are inherently uncertain and
subject to refinement. As a result, during the measurement period, which may be
up to one year from the acquisition date, we may record adjustments to the
assets acquired and liabilities assumed with the corresponding offset to
goodwill. After the measurement period, any purchase price adjustments are
recognized in our Consolidated Statements of Income.

Goodwill Impairment Testing. In accordance with ASC 350, "Intangibles - Goodwill
and Other" ("ASC 350"), goodwill is not amortized, but rather is reviewed for
impairment at the reporting unit level on the first day of our fourth quarter of
each fiscal year, or when there is evidence that events or changes in
circumstances indicate that the carrying amount of the goodwill may not be
recovered.

Under ASC 350, we have the option to first assess qualitatively whether it is
more likely than not that the fair value of a reporting unit is less than its
carrying amount, including goodwill.

                                       42
--------------------------------------------------------------------------------
  Table of     Contents
We establish our reporting units based on our current organizational structure,
product and technology characteristics and segment management's view of the
business. As of January 2, 2022, we identified three reporting units within the
MP operating segment and two reporting units within the IDP operating segment,
and we performed the optional qualitative assessment to determine whether the
existence of events or circumstances indicated that it was more likely than not
that the fair value of each reporting unit was less than its respective carrying
value.

In performing qualitative assessments, we consider (i) our overall historical
and projected future operating results, (ii) if there was a significant decline
in our stock price for a sustained period, (iii) if there was a significant
change in our market capitalization relative to our net book value, and (iv) if
there was a prolonged or more significant slowdown in the worldwide economy of
the semiconductor industry, as well as other relevant events and factors
affecting the reporting unit.

In fiscal 2022, we completed our annual qualitative assessments and concluded
that based on the relevant events and circumstances, it was more likely than not
that four of our five reporting units' fair values exceeded their related
carrying values. However, for one of our MP reporting units (the acquired
NextInput business), it was determined that the market adoption of the acquired
technology into mobile handsets is expected to be delayed compared to the
previous assumptions. Therefore, we determined that it was more likely than not
that the fair value of the reporting unit was less than its carrying amount, and
we performed a quantitative assessment to calculate the fair value of the
reporting unit.

Our quantitative assessment considered both the income and market approaches to
estimate the fair value of the reporting unit. The income approach is based on
the discounted cash flow method that uses estimates of the reporting unit's
forecasted future financial performance including revenues, operating expenses,
taxes and capital expenditures. These estimates are developed as part of our
long-term planning process based on assumed market segment growth rates and our
assumed market segment share, estimated costs based on historical data and
various internal estimates. Projected cash flows are then discounted to a
present value employing a discount rate that properly accounts for the estimated
market weighted-average cost of capital, as well as any risk unique to the cash
flows. The market approach is based on financial multiples (i.e., multiples of
revenue or earnings before income taxes, depreciation and amortization) of
comparable companies.

Based on the quantitative assessment performed, we determined that the carrying
amount of the reporting unit exceeded its fair value, which resulted in a
goodwill impairment charge of approximately $48.0 million. The goodwill
impairment charge is recorded in "Other operating expense" in the Statement of
Income for the fiscal year ended April 2, 2022.

Inherent in the fair value determination are significant judgments and
estimates, including assumptions about our future revenue, profitability and
cash flows, our operational plans and our interpretation of current economic
indicators and market valuations. To the extent these assumptions are incorrect
or there are further declines in our business outlook, additional goodwill
impairment charges may be recorded in future periods.

In fiscal 2021, we completed qualitative assessments and concluded that based on
the relevant events and circumstances, it was more likely than not that each of
the reporting unit's fair value exceeded its related carrying value, and no
further impairment testing was required.

Identified Intangible Assets. We amortize definite-lived intangible assets
(including developed technology, customer relationships, technology licenses,
backlog and trade names) over their estimated useful lives. In-process research
and development ("IPRD") assets represent the fair value of incomplete R&D
projects that had not reached technological feasibility as of the date of the
acquisition; initially, these are classified as IPRD and are not subject to
amortization. Upon completion of development, IPRD assets are transferred to
developed technology and are amortized over their useful lives. The asset
balances relating to abandoned projects are impaired and expensed to R&D.

                                       43
--------------------------------------------------------------------------------
  Table of     Contents
We evaluate definite-lived intangible assets for impairment in accordance with
ASC 360-10-35, "Impairment or Disposal of Long-Lived Assets" to determine
whether facts and circumstances (including external factors such as industry and
economic trends and internal factors such as changes in our business strategy
and forecasts) indicate that the carrying amount of the assets may not be
recoverable. If such facts and circumstances exist, we assess the recoverability
of identified intangible assets by comparing the projected undiscounted net cash
flows associated with the related asset or group of assets over their remaining
lives against their respective carrying amounts. Impairments, if any, are based
on the excess of the carrying amounts over the fair value of those assets and
occur in the period in which the impairment determination was made.

In connection with completing our fiscal 2022 annual goodwill impairment
assessment, we also evaluated our long-lived intangible assets and determined
that the forecasted undiscounted net cash flows related to these assets were in
excess of their carrying values. No definite-lived intangible asset impairment
charges were recorded for fiscal years 2022 or 2021.

Revenue Recognition. We generate revenue primarily from the sale of
semiconductor products, either directly to a customer or to a distributor, or at
completion of a consignment process. Revenue is recognized when control of the
promised goods or services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled in exchange for those goods
or services. A majority of our revenue is recognized at a point in time, either
on shipment or delivery of the product, depending on individual customer terms
and conditions. Revenue from sales to our distributors is recognized upon
shipment of the product to the distributors (sell-in). Revenue is recognized
from our consignment programs at a point in time when the products are pulled
from consignment inventory by the customer. Revenue recognized for products and
services over-time is immaterial (less than 3% of overall revenue). We apply a
five-step approach as defined in ASC 606, "Revenue from Contracts with
Customers," in determining the amount and timing of revenue to be recognized:
(1) identifying the contract with a customer; (2) identifying the performance
obligations in the contract; (3) determining the transaction price; (4)
allocating the transaction price to the performance obligations in the contract;
and (5) recognizing revenue when the corresponding performance obligation is
satisfied.

Sales agreements are in place with certain customers and contain terms and
conditions with respect to payment, delivery, warranty and supply, but typically
do not require minimum purchase commitments. In the absence of a sales
agreement, our standard terms and conditions apply. We consider a customer's
purchase order, which is governed by a sales agreement or our standard terms and
conditions, to be the contract with the customer.

Our pricing terms are negotiated independently, on a stand-alone basis. In
determining the transaction price, we evaluate whether the price is subject to a
refund or adjustment to determine the net consideration to which we expect to be
entitled. Variable consideration in the form of rebate programs is offered to
certain customers, including distributors, and represents less than 7% of net
revenue. We determine variable consideration by estimating the most likely
amount of consideration we expect to receive from the customer. Our terms and
conditions do not give our customers a right of return associated with the
original sale of our products. However, we may authorize sales returns under
certain circumstances, which include courtesy returns and like-kind exchanges.
We reduce revenue and record reserves for product returns and allowances, rebate
programs and scrap allowance based on historical experience or specific
identification depending on the contractual terms of the arrangement.

Our accounts receivable balance is from contracts with customers and represents
our unconditional right to receive consideration from our customers. Payments
are due upon completion of the performance obligation and subsequent invoicing.
Substantially all payments are collected within our standard terms, which do not
include any financing components. To date, there have been no material
impairment losses on accounts receivable. Contract assets and contract
liabilities recorded on the Consolidated Balance Sheets were immaterial as of
April 2, 2022 and April 3, 2021.

We invoice customers upon shipment and recognize revenue in accordance with delivery terms. From April 2, 2022we have had $424.7 million remaining unfulfilled performance obligations with an original

                                       44

————————————————– ——————————

Duration greater than one year, the majority of which is expected to be recognized as revenue over the next 12 months.

We include shipping charges billed to customers in "Revenue" and include the
related shipping costs in "Cost of goods sold" in the Consolidated Statements of
Income. Taxes assessed by government authorities on revenue-producing
transactions, including tariffs, value-added and excise taxes, are excluded from
revenue in the Consolidated Statements of Income.

We incur commission expense that is incremental to obtaining contracts with
customers. Sales commissions (which are recorded in the "Selling, general and
administrative" expense line item in the Consolidated Statements of Income) are
expensed when incurred because such commissions are not owed until the
performance obligation is satisfied, which coincides with the end of the
contract term; therefore, no remaining period exists over which to amortize the
commissions.

Income Taxes. In determining income for financial statement purposes, we must
make certain estimates and judgments in the calculation of tax expense, the
resultant tax liabilities and the recoverability of deferred tax assets that
arise from temporary differences between the tax and financial statement
recognition of revenue and expense.

As part of our financial process, we assess on a tax jurisdictional basis the
likelihood that our deferred tax assets can be recovered. If recovery is not
more likely than not (a likelihood of less than 50 percent), the provision for
taxes must be increased by recording a reserve in the form of a valuation
allowance for the deferred tax assets that are estimated not to ultimately be
recoverable. In this process, certain relevant criteria are evaluated including:
the amount of income or loss in prior years, the existence of deferred tax
liabilities that can be used to absorb deferred tax assets, the taxable income
in prior carryback years that can be used to absorb net operating losses and
credit carrybacks, future expected taxable income and prudent and feasible tax
planning strategies. Changes in taxable income, market conditions, U.S. or
international tax laws and other factors may change our judgment regarding
whether we will be able to realize the deferred tax assets. These changes, if
any, may require material adjustments to the net deferred tax assets and an
accompanying reduction or increase in income tax expense which will result in a
corresponding increase or decrease in net income in the period when such
determinations are made. See Note 13 of the Notes to Consolidated Financial
Statements for additional information regarding changes in the valuation
allowance and net deferred tax assets.

As part of our financial process, we also assess the likelihood that our tax
reporting positions will ultimately be sustained. To the extent it is determined
it is more likely than not (a likelihood of more than 50 percent) that some
portion, or all, of a tax reporting position will ultimately not be recognized
and sustained, a provision for unrecognized tax benefit is provided by either
reducing the applicable deferred tax asset or accruing an income tax liability.
Our judgment regarding the sustainability of our tax reporting positions may
change in the future due to changes in U.S. or international tax laws and other
factors. These changes, if any, may require material adjustments to the related
deferred tax assets or accrued income tax liabilities and an accompanying
reduction or increase in income tax expense which will result in a corresponding
increase or decrease in net income in the period when such determinations are
made. See Note 13 of the Notes to Consolidated Financial Statements for
additional information regarding our uncertain tax positions and the amount of
unrecognized tax benefits.

© Edgar Online, source Previews


Source link

Share.

Comments are closed.