Financial Data and Key Metrics Changes - Revenue for Q4 2021 was $155.2 million, with adjusted EPS of $0.61 per diluted share, marking a 1.7% increase quarter-over-quarter [7][35] - For the full fiscal year 2021, revenue was $607 million, representing a 14.5% year-over-year growth, and adjusted EPS was $2.15, up from $0.98 in fiscal year 2020 [8][41] - Adjusted operating margin exceeded 30% for the first time since going public, with adjusted operating income for Q4 at $46.8 million, up from $43.9 million in Q3 [10][39] Business Line Data and Key Metrics Changes - Revenue by end market for Q4 included Industrial and Defense (I&D) at $75.1 million, Telecom at $46.6 million, and Data Center at $33.5 million [13] - For fiscal year 2021, I&D revenue increased by 44%, Data Center by 10%, while Telecom revenue decreased by 10% [13] - The company reported a book-to-bill ratio of 1.2:1 for Q4 and a diversified customer base with top 10 customers representing 26.5% of total revenue [10][13] Market Data and Key Metrics Changes - Domestic customers accounted for approximately 46% of revenue in both Q4 and fiscal year 2021, an increase from 36% and 41% in the previous year [36] - The company noted supply chain challenges affecting production capacity, particularly in semiconductor and packaging technologies [12][60] Company Strategy and Development Direction - The company aims to achieve at least 10% year-over-year revenue growth in FY 2022, supported by new product introductions and market share gains [51] - MACOM is focusing on diversifying its technology portfolio and customer base, with significant investments in R&D and production capabilities [28][30] - The company is also expanding its presence in the automotive sector, leveraging its technologies for applications like sensors and autonomous driving [30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged supply chain constraints but emphasized that these are viewed as short-term issues that will not hinder long-term growth [60] - The company is optimistic about its backlog and new product introductions, which are expected to drive future revenue growth [55][56] Other Important Information - The company achieved a net leverage ratio of around 1.7x and gross leverage of 3.1x, down from 3.4x and 5.5x in fiscal 2020 [45] - Standard & Poor's upgraded MACOM's credit rating from B to B+, reflecting operational and financial improvements [46] Q&A Session Summary Question: Growth trajectory towards $1 billion in sales by 2025 - Management remains confident in achieving long-term goals, starting the year with a near-record backlog and a strong product pipeline [54][55] Question: Supply chain bottlenecks - Constraints exist in semiconductor technology and assembly capacity, but these are considered tactical issues manageable by the operations team [60] Question: Data Center business outlook - The Data Center segment is expected to grow 8% to 10% in FY 2022, with strong growth anticipated in 100G and 400G applications despite some legacy business decline [66][70] Question: Telecom segment growth - Telecom is expected to see growth in cable infrastructure and PON, with steady demand for 5G front haul products [77] Question: Revenue left behind due to supply issues - Management does not quantify potential lost revenue but emphasizes that forecasts consider customer schedules and material availability [81][82] Question: Margin structure at $1 billion revenue run rate - While difficult to project, management aims to launch products with above-average margins to drive profitability [90][91] Question: New product introductions and gross margins - The company successfully met its new product introduction targets and expects to accelerate this in FY 2022, focusing on profitability improvements [96][97]

Financial Performance - Revenue for the three months ended July 2, 2021, was $152.622 million, a 11.2% increase from $137.267 million for the same period in 2020[119] - Gross profit for the three months ended July 2, 2021, was $87.269 million, compared to $70.876 million for the same period in 2020, reflecting a gross margin improvement[119] - Net income for the three months ended July 2, 2021, was $15.005 million, a significant recovery from a net loss of $24.982 million in the same period of 2020[119] - Operating expenses for the three months ended July 2, 2021, totaled $63.595 million, slightly down from $64.376 million in the same period of 2020[119] - Revenue increased by $15.4 million, or 11.2%, to $152.6 million for the three months ended July 2, 2021, and increased by $68.9 million, or 18.0%, to $451.7 million for the nine months ended July 2, 2021[124] - Gross profit was $87.3 million for the three months ended July 2, 2021, compared to $70.9 million for the same period in 2020, and $251.6 million for the nine months ended July 2, 2021, compared to $192.5 million for the same period in 2020[129] - Gross margin improved to 57.2% for the three months ended July 2, 2021, compared to 51.6% for the same period in 2020, and 55.7% for the nine months ended July 2, 2021, compared to 50.3% for the same period in 2020[129] - Net income was 9.8% for the three months ended July 2, 2021, compared to a net loss of (18.2)% for the same period in 2020, and net income was 4.6% for the nine months ended July 2, 2021, compared to a net loss of (16.6)% for the same period in 2020[123] Expenses and Costs - Research and development expenses for the three months ended July 2, 2021, were $33.610 million, compared to $34.948 million in the same period of 2020[119] - Research and development expenses decreased by $1.3 million, or 3.8%, to $33.6 million for the three months ended July 2, 2021, and decreased by $0.8 million, or 0.7%, to $105.2 million for the nine months ended July 2, 2021[130] - Selling, general and administrative expenses were $30.0 million for the three months ended July 2, 2021, unchanged from the same period in 2020, and decreased by $2.6 million, or 2.7%, to $91.8 million for the nine months ended July 2, 2021[131] - Interest expense decreased to $5.5 million, or 3.6% of revenue, for the three months ended July 2, 2021, compared to $5.8 million, or 4.3% of revenue, for the same period in 2020[134] Cash Flow and Liquidity - Cash and cash equivalents at the end of the period were $144.1 million as of July 2, 2021, compared to $131.9 million as of July 3, 2020[138] - Cash flow from operating activities for the nine months ended July 2, 2021, was $107.6 million, consisting of a net income of $20.8 million and adjustments totaling $104.4 million, offset by cash used in operating assets and liabilities of $17.6 million[139] - Cash flow from investing activities for the nine months ended July 2, 2021, included proceeds of $191.3 million from the sale and maturity of short-term investments, offset by purchases of $152.3 million of short-term investments and capital expenditures of $12.9 million[141] - Cash used in financing activities for the nine months ended July 2, 2021, was $119.7 million, primarily related to $545.3 million of payments on Term Loans, partially offset by proceeds from the 2026 Convertible Notes of $444.2 million[143] - As of July 2, 2021, the company held $144.1 million in cash and cash equivalents and $164.8 million in liquid short-term investments, with $160.0 million in borrowing capacity under its Revolving Facility[145] - The company plans to use available cash and short-term investments for general corporate purposes, including working capital and potential acquisitions of complementary technologies and businesses[146] - Cash flow from operating activities for the nine months ended July 3, 2020, was $97.0 million, consisting of a net loss of $63.6 million and adjustments totaling $123.1 million[140] Market Outlook - The company expects revenue growth in the Telecom market driven by 5G deployments and upgrades in communications equipment[110] - Revenue in the I&D market is anticipated to grow due to an expanding product portfolio servicing applications like satellite communications and radar[111] - The Data Center market revenue is expected to increase with the adoption of cloud-based services and upgrades to higher-speed interconnects[112] Risk Management - The impact of COVID-19 on operations has been managed without material effects on consolidated operating results for the periods presented[105] - The company experienced a decrease in Telecom market revenue by $8.8 million, or 15.5%, for the three months ended July 2, 2021, primarily due to a decrease in carrier-based optical semiconductor products[125] - The company has limited exposure to foreign currency exchange rates, as most international customer agreements are denominated in U.S. dollars[153] - The company believes that a 10% change in interest rates or foreign currency exchange rates would not have a material impact on its financial position or results of operations[151][153] - The company did not have any off-balance sheet arrangements as of July 2, 2021[149]

MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) Q3 2021 Earnings Conference Call July 29, 2021 8:30 AM ET Company Participants Steve Ferranti ??? Vice President-Strategic Initiatives and Investor Relations Steve Daly ??? President and Chief Executive Officer Jack Kober ??? Chief Financial Officer Conference Call Participants Tom O???Malley ??? Barclays Harsh Kumar ??? Piper Sandler Quinn Bolton ??? Needham & Company Harlan Sur ??? JPMorgan Chris Caso ??? Raymond James Vivek Arya ??? Bank of America ...

Financial Performance - Revenue for the three months ended April 2, 2021, was $150.583 million, a 19.1% increase from $126.424 million for the same period in 2020[123]. - Gross profit for the three months ended April 2, 2021, was $84.113 million, compared to $63.370 million for the same period in 2020, reflecting a gross margin improvement[123]. - Net income for the three months ended April 2, 2021, was $14.807 million, a significant recovery from a net loss of $10.226 million in the same period of 2020[123]. - Revenue increased by $24.2 million, or 19.1%, to $150.6 million for the three months ended April 2, 2021, and by $53.6 million, or 21.8%, to $299.1 million for the six months ended April 2, 2021[128]. - Gross profit was $84.1 million for the three months ended April 2, 2021, compared to $63.4 million for the same period in 2020, resulting in a gross margin of 55.9%[133]. - Net income for the three months ended April 2, 2021, was 9.8%, compared to a net loss of (8.1)% for the same period in 2020[127]. Expenses - Research and development expenses for the three months ended April 2, 2021, were $34.619 million, slightly down from $35.830 million in the same period of 2020[123]. - Total operating expenses for the three months ended April 2, 2021, were $65.141 million, a decrease from $68.639 million in the same period of 2020[123]. - Research and development expenses decreased by $1.2 million, or 3.4%, to $34.6 million for the three months ended April 2, 2021, representing 23.0% of revenue[134]. - Selling, general and administrative expenses decreased by $1.5 million, or 4.6%, to $30.5 million for the three months ended April 2, 2021, representing 20.3% of revenue[135]. Market Outlook - The company expects revenue growth in the Telecom market driven by 5G deployments and upgrades in communication equipment[114]. - Revenue in the I&D market is anticipated to grow due to an expanding product portfolio servicing applications like satellite communications and radar[115]. - The Data Center market revenue is projected to increase with the adoption of cloud-based services and upgrades to higher-speed interconnects[116]. - The Telecom market revenue decreased by $9.4 million, or 18.2%, for the three months ended April 2, 2021, primarily due to a decrease in carrier-based optical semiconductor products[129]. Cash Flow and Liquidity - Cash and cash equivalents at the end of the period were $105.5 million, down from $120.7 million at the end of the six months ended April 3, 2020[140]. - Cash flow from operating activities for the six months ended April 2, 2021 was $62.7 million, consisting of a net income of $5.8 million and adjustments totaling $70.6 million[141]. - Cash used in financing activities for the six months ended April 2, 2021, was $121.1 million, primarily due to $394.9 million from 2026 Convertible Notes and $496.0 million in Term Loan payments[145]. - As of April 2, 2021, the company held $105.5 million in cash and cash equivalents and $162.6 million in liquid short-term investments, with $23.4 million held by indefinitely reinvested foreign subsidiaries[147]. - The company has $160.0 million in borrowing capacity under its Revolving Facility, allowing up to $50.0 million to be borrowed without certain financial covenants[147]. - The company plans to utilize available cash, short-term investments, and borrowing capacity for general corporate purposes and potential acquisitions[148]. - As of April 2, 2021, the company had $170.1 million in outstanding borrowings under the Credit Agreement, with a 1% change in interest rates affecting annual interest expense by $1.7 million[154]. - The company believes its current liquidity will be sufficient to meet working capital requirements for at least the next twelve months[148]. Risk Factors - The impact of COVID-19 on operations has been managed without material effects on consolidated operating results for the periods presented[109]. - The company has limited exposure to foreign currency risk, as most international agreements are denominated in U.S. dollars[155]. - A 10% change in interest rates is not expected to materially impact the company's financial position or results of operations[153]. - The company did not have any off-balance sheet arrangements as of April 2, 2021[151]. - The company may need to raise additional capital through equity or debt securities, with no assurance of favorable terms[148]. - The effective income tax rate for the three months ended April 2, 2021 was 12.9%, compared to an effective tax rate of (18.3)% for the same period in 2020[138]. - The company reported a loss on extinguishment of debt of $3.8 million for the three months ended April 2, 2021[125].

MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) Q2 2021 Earnings Conference Call April 29, 2021 8:30 AM ET Company Participants Steve Ferranti ??? Vice President-Strategic Initiatives and Investor Relations Steve Daly ??? President and Chief Executive Officer Jack Kober ??? Chief Financial Officer Conference Call Participants Vivek Arya ??? Bank of America Tom O???Malley ??? Barclays Harsh Kumar ??? Sandler Quinn Bolton ??? Needham & Company C.J. Muse ??? Evercore Tore Svanberg ??? Stifel Karl Acker ...

MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) Q1 2021 Earnings Conference Call January 28, 2021 8:30 AM ET Company Participants Steve Ferranti - Vice President, Investor Relations Steve Daly - President & Chief Executive Officer Jack Kober - Chief Financial Officer Conference Call Participants Harsh Kumar - Piper Sandler Tom O'Malley - Barclays Karl Ackerman - Cowen Tore Svanberg - Stifel Quinn Bolton - Needham & Company Ruben Roy - Benchmark Kevin Feeney - Evercore ISI Harlan Sur - J.P. Morgan Ri ...

PART I—FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) MACOM reported a significant year-over-year revenue increase to $148.5 million, turning an operating loss into an income of $12.1 million, with net loss narrowing substantially to $9.0 million [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to $1.154 billion, driven by short-term investments and accounts receivable, while total liabilities decreased to $824.2 million due to warrant liability settlement Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Jan 1, 2021 | Oct 2, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $128,728 | $129,441 | | Short-term investments | $226,044 | $203,711 | | Total current assets | $509,215 | $481,519 | | Total Assets | $1,153,682 | $1,146,428 | | Total current liabilities | $98,156 | $94,950 | | Long-term debt, less current portion | $650,931 | $652,172 | | Total Liabilities | $824,232 | $846,282 | | Total Stockholders' Equity | $329,450 | $300,146 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue increased by 24.7% year-over-year to $148.5 million, resulting in an operating income of $12.1 million and a significantly narrowed net loss of $9.0 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 FY2021 (ended Jan 1, 2021) | Q1 FY2020 (ended Jan 3, 2020) | | :--- | :--- | :--- | | Revenue | $148,504 | $119,097 | | Gross Profit | $80,262 | $58,204 | | Income (loss) from operations | $12,074 | $(10,528) | | Net loss | $(8,968) | $(28,362) | | Loss per share - Diluted | $(0.13) | $(0.43) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $34.8 million, while investing activities used $24.8 million, primarily for short-term investments, and financing activities used $11.5 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 FY2021 (ended Jan 1, 2021) | Q1 FY2020 (ended Jan 3, 2020) | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,780 | $37,658 | | Net cash used in investing activities | $(24,769) | $(4,541) | | Net cash used in financing activities | $(11,479) | $(592) | | **Net Change in Cash and Cash Equivalents** | **$(713)** | **$32,665** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a 24.7% YoY revenue growth driven by all markets, $664.4 million in term loan debt, and the exercise of all outstanding common stock warrants Revenue by Market (in thousands) | Market | Q1 FY2021 | Q1 FY2020 | | :--- | :--- | :--- | | Telecommunications | $51,532 | $45,602 | | Industrial & Defense | $61,618 | $50,482 | | Data Center | $35,354 | $23,013 | | **Total** | **$148,504** | **$119,097** | - As of January 1, 2021, the company had **$664.4 million** in principal outstanding on its Term Loans, with an effective interest rate of **2.40%**[52](index=52&type=chunk) - During the quarter, all outstanding warrants to purchase **1,281,358 shares** of common stock were exercised on a cashless basis, resulting in the issuance of **857,631 shares**[59](index=59&type=chunk)[115](index=115&type=chunk) - One customer (Customer A) represented **14% of revenue** for the quarter and **24% of accounts receivable** at period end, with the top ten customers accounting for **55% of total revenue**[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 24.7% year-over-year revenue growth to strong performance across all key markets, improved gross margin, and robust operating cash flow [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Revenue increased by $29.4 million (24.7%) YoY, driven by strong demand in all three primary markets, and gross margin expanded to 54.0% due to higher sales and favorable product mix Revenue Growth by Market (YoY) | Market | % Change YoY | | :--- | :--- | | Data Center | +53.6% | | Industrial & Defense | +22.1% | | Telecom | +13.0% | | **Total** | **+24.7%** | - Gross margin improved to **54.0%** for the quarter, up from **48.9%** in the prior-year period, primarily due to increased sales, favorable product mix, production efficiencies, and the recognition of licensing revenue[111](index=111&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **3.4%** to **$31.3 million**, primarily due to lower payroll-related costs and professional fees, partially offset by higher share-based compensation[113](index=113&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended the quarter with a strong liquidity position, holding $128.7 million in cash and $226.0 million in short-term investments, and generated $34.8 million in cash from operations - As of January 1, 2021, the company held **$128.7 million** of cash and cash equivalents and **$226.0 million** of liquid short-term investments[126](index=126&type=chunk) - The company has **$160.0 million** in borrowing capacity under its Revolving Facility, of which up to **$50.0 million** can be borrowed without being subject to certain financial covenants[126](index=126&type=chunk) - Cash flow from operating activities was **$34.8 million** for the quarter, driven by non-cash charges like depreciation (**$18.2 million**), share-based compensation (**$10.1 million**), and warrant liability expense (**$11.1 million**), which offset the net loss[120](index=120&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations affecting its $664.4 million variable-rate debt and foreign currency exchange rates, though the latter is considered limited - The company is exposed to interest rate risk on its **$664.4 million** of outstanding variable-rate debt, where a **1% change** in the applicable annual interest rate would result in a **$6.6 million change** in annual interest expense[133](index=133&type=chunk) - Foreign currency risk is limited as most international customer agreements are denominated in U.S. dollars, with a **10% change** in foreign currency exchange rates not expected to have a material impact[134](index=134&type=chunk) - As of January 1, 2021, no common stock warrants remain outstanding, eliminating the market risk associated with the warrant liability's fair value fluctuations[131](index=131&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of January 1, 2021[135](index=135&type=chunk) - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[136](index=136&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company was not involved in any material pending legal proceedings during the fiscal quarter ended January 1, 2021 - The company was not involved in any material pending legal proceedings during the fiscal quarter ended January 1, 2021[62](index=62&type=chunk)[140](index=140&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended October 2, 2020 - As of the date of this Quarterly Report, there have been no material changes in any of the risk factors described in the company's 2020 Annual Report on Form 10-K[141](index=141&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter, the company withheld 297,447 shares for tax obligations and issued 857,631 shares from cashless warrant exercises, an unregistered sale exempt under Section 4(a)(2) - The company withheld **297,447 shares** of its common stock to cover tax withholding obligations related to the vesting of employee equity awards[143](index=143&type=chunk) - The company issued **857,631 shares** of common stock from the cashless exercise of warrants for **1,281,358 shares**, which was considered an unregistered sale of equity securities[144](index=144&type=chunk) [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications required under Sarbanes-Oxley Act and financial statements in Inline XBRL - Exhibits filed include CEO and CFO certifications (**31.1, 31.2, 32.1**) and financial data in Inline XBRL format (**101**)[146](index=146&type=chunk)

[PART I](index=4&type=section&id=PART%20I) This section details the company's business, associated risks, legal status, properties, and regulatory compliance [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS) MACOM Technology Solutions Holdings, Inc. designs and manufactures semiconductor products for Telecommunications, Industrial and Defense, and Data Center applications. The company leverages over 70 years of expertise, operating fabrication, manufacturing, assembly, and test facilities globally. Its strategy focuses on developing high-performance products, strengthening customer relationships, and increasing market share in its primary markets, supported by both internal and external manufacturing capabilities and continuous R&D investment - MACOM designs and manufactures semiconductor products for three primary markets: Telecommunications (Telecom), Industrial and Defense (I&D), and Data Center applications[16](index=16&type=chunk) - The company has over 70 years of application expertise with silicon, gallium arsenide (GaAs), and indium phosphide (InP) fabrication, manufacturing, assembly, and test facilities across North America, Europe, and Asia[16](index=16&type=chunk) - MACOM's growth strategy is centered on strengthening customer relationships, securing more design wins, and expanding market share by growing its product portfolio and technology base[17](index=17&type=chunk) [Overview](index=4&type=section&id=Overview) Provides a general introduction to the company's operations and strategic focus [Research and Development](index=5&type=section&id=Research%20and%20Development) Details the company's investment and activities in research and development [Our Markets and Products](index=5&type=section&id=Our%20Markets%20and%20Products) Describes the company's target markets and product offerings [Sales and Marketing](index=7&type=section&id=Sales%20and%20Marketing) Outlines the company's strategies for sales and marketing [Customers](index=7&type=section&id=Customers) Identifies key customer relationships and segments [Competition](index=8&type=section&id=Competition) Analyzes the competitive landscape and market positioning [Backlog and Inventory](index=8&type=section&id=Backlog%20and%20Inventory) Discusses the company's order backlog and inventory management [Intellectual Property](index=8&type=section&id=Intellectual%20Property) Covers the company's intellectual property assets and protection strategies [Manufacturing, Sources of Supply and Raw Materials](index=10&type=section&id=Manufacturing%2C%20Sources%20of%20Supply%20and%20Raw%20Materials) Describes manufacturing processes, supply chain, and raw material sourcing [Quality Assurance](index=10&type=section&id=Quality%20Assurance) Details the company's quality control and assurance processes [Environmental Regulation](index=10&type=section&id=Environmental%20Regulation) Addresses compliance with environmental laws and regulations [Export Regulations](index=11&type=section&id=Export%20Regulations) Explains adherence to export control regulations [Employees](index=11&type=section&id=Employees) Provides information on the company's workforce [History and Recent Developments](index=11&type=section&id=History%20and%20Recent%20Developments) Summarizes the company's historical background and recent operational changes [COVID-19 Impact](index=11&type=section&id=COVID-19%20Impact) Assesses the impact of the COVID-19 pandemic on business operations [Available Information](index=13&type=section&id=Available%20Information) Indicates where additional company information can be accessed [ITEM 1A. RISK FACTORS](index=13&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks across its operations, including dependence on new product development for revenue growth, potential gross margin reductions due to underutilization or price competition, and fluctuating operating results. Key risks also involve declining demand in primary markets, reliance on a limited number of customers, and uncertainties in order and shipment forecasting. The COVID-19 pandemic has introduced substantial economic uncertainty, impacting operations, supply chains, and customer demand. Production risks include manufacturing and supply chain disruptions, limited component sources, and potential catastrophic losses at facilities. Intellectual property and new technology risks involve unsuccessful R&D investments and infringement claims. International operations expose the company to regulatory, geopolitical, and currency risks, while government regulations, including export controls and environmental laws, pose compliance and financial challenges. Strategic and personnel risks include intense competition, loss of key personnel, and difficulties in managing growth or integrating acquisitions - Revenue growth and gross margin are highly dependent on the successful and timely development and release of new products that meet customer expectations and offset price erosion[73](index=73&type=chunk) - The company's operating results are subject to significant period-to-period fluctuations due to factors like economic conditions, customer order changes, manufacturing issues, and competitive pressures[76](index=76&type=chunk) - The COVID-19 pandemic has created significant economic uncertainty and volatility, impacting operations, supply chains, customer demand, and potentially leading to increased credit risks, asset impairments, and adverse effects on capital resources[69](index=69&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) [Risks Relating to General Business Conditions](index=13&type=section&id=Risks%20Relating%20to%20General%20Business%20Conditions) Discusses risks associated with economic conditions and operational fluctuations [Risks Relating to Production Operations](index=19&type=section&id=Risks%20Relating%20to%20Production%20Operations) Covers risks related to manufacturing, supply chain, and facility operations [Risks Relating to Research and Development, Intellectual Property and New Technologies](index=23&type=section&id=Risks%20Relating%20to%20Research%20and%20Development%2C%20Intellectual%20Property%20and%20New%20Technologies) Addresses risks in R&D, intellectual property, and new technology adoption [Risks Relating to International Operations](index=24&type=section&id=Risks%20Relating%20to%20International%20Operations) Examines risks from global operations, including regulatory and geopolitical factors [Risks Relating to Government Regulations](index=25&type=section&id=Risks%20Relating%20to%20Government%20Regulations) Details risks associated with compliance to government and environmental regulations [Risks Relating to Business Strategies and Personnel](index=28&type=section&id=Risks%20Relating%20to%20Business%20Strategies%20and%20Personnel) Covers risks related to competition, key personnel, and growth management [Risks Relating to Ownership of our Common Stock](index=32&type=section&id=Risks%20Relating%20to%20Ownership%20of%20our%20Common%20Stock) Discusses risks pertinent to the ownership and trading of common stock [ITEM 1B. UNRESOLVED STAFF COMMENTS.](index=33&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS.) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[150](index=150&type=chunk) [ITEM 2. PROPERTIES.](index=33&type=section&id=ITEM%202.%20PROPERTIES.) The company's principal executive offices are in a leased facility in Lowell, Massachusetts, which also serves as a major site for administration, production, fabrication, test, and assembly. Other significant leased facilities are located in Newport Beach, Santa Clara, Ann Arbor, Cork (Ireland), Ithaca, and Nashua, supporting R&D, production, sales, and engineering functions - The principal executive offices are in a leased facility in Lowell, Massachusetts, which is also a major site for Production and Fabrication (P&F), Test and Assembly (T&A), and Research and Development (R&D)[151](index=151&type=chunk)[152](index=152&type=chunk) Major Leased Facilities and Activities (as of October 2, 2020) | Site | Major Activity | Square Footage | Lease Expiration | | :-------------------- | :----------------------------- | :------------- | :--------------- | | Lowell, Massachusetts | A, P&F, T&A, AE, S&M and RT | 281,700 | October 2038 | | Newport Beach, California | R&D, AE and S&M | 68,435 | December 2029 | | Santa Clara, California | R&D, AE | 59,625 | October 2024 | | Ann Arbor, Michigan | P&F, R&D and T&A, RT | 50,335 | May 2021 | | Cork, Ireland | A, R&D, S&M, AE and RT | 21,422 | August 2026 | | Ithaca, New York | R&D | 20,600 | December 2025 | | Nashua, New Hampshire | R&D, T&A, P&F, RT | 17,000 | December 2021 | [ITEM 3. LEGAL PROCEEDINGS.](index=35&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS.) The company is subject to various commercial and employment disputes, as well as intellectual property infringement claims, which could lead to litigation and significant costs. As of the filing date, no pending legal proceedings were deemed to have a material adverse effect on the business, operating results, financial condition, or cash flows, beyond those discussed in the consolidated financial statements - The company is subject to commercial and employment disputes, and intellectual property infringement claims[154](index=154&type=chunk) - As of the filing date, no pending legal proceedings were believed to have a material adverse effect on the business, operating results, financial condition, or cash flows[154](index=154&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=35&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) This item is not applicable to the company - Mine Safety Disclosures are not applicable to MACOM Technology Solutions Holdings, Inc[156](index=156&type=chunk) [PART II](index=35&type=section&id=PART%20II) This section covers market information, selected financial data, management's discussion, and market risk disclosures [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.](index=35&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) The company's common stock is listed on the Nasdaq Global Select Market under the symbol "MTSI." As of November 12, 2020, there were approximately 11 stockholders of record. The stock price performance graph shows the cumulative return of MACOM's common stock compared to the NASDAQ Composite Index and the PHLX Semiconductor Index from October 2, 2015, to October 2, 2020. The company also reported limited issuer purchases of equity securities, primarily for tax withholdings on employee restricted stock awards - MACOM's common stock is listed on the Nasdaq Global Select Market under the symbol "MTSI" since March 15, 2012[157](index=157&type=chunk) - As of November 12, 2020, there were approximately **11 stockholders of record**[157](index=157&type=chunk) [Stock Price Performance Graph](index=35&type=section&id=Stock%20Price%20Performance%20Graph) Illustrates the company's stock performance against market indices [Issuer Purchases of Equity Securities](index=36&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Details the company's repurchases of its own equity securities Issuer Purchases of Equity Securities (Fiscal Year 2020) | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | | :--------------------------- | :----------------------------------- | :--------------------------- | :---------------------------------------------------------------------------------------- | :-------------------------------------------------------------------------------------------------------------------- | | July 4, 2020—July 31, 2020 | 662 | $36.75 | — | — | | August 1, 2020—August 28, 2020 | 3,313 | $38.39 | — | — | | August 29, 2020—October 2, 2020 | — | — | — | — | | Total | 3,975 | $38.12 | — | — | [ITEM 6. SELECTED FINANCIAL DATA.](index=36&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA.) This section provides a summary of selected financial data for MACOM Technology Solutions Holdings, Inc. for the fiscal years 2016 through 2020, including statements of operations data and consolidated balance sheet data. The fiscal year 2020 included 53 weeks, while other presented fiscal years had 52 weeks. The historical results are not necessarily indicative of future performance Statements of Operations Data (in thousands, except per share data) | Fiscal Years | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Revenue | $ 530,037 | $ 499,708 | $ 570,398 | $ 698,772 | $ 544,338 | | Gross profit | 270,166 | 220,708 | 245,706 | 326,884 | 281,609 | | Income (loss) from operations | 3,388 | (380,376) | (106,520) | (16,084) | 13,248 | | Loss before income taxes | (41,562) | (423,153) | (155,235) | (49,505) | (21,571) | | Income tax expense (benefit) | 4,516 | (39,355) | (21,473) | 100,911 | (17,983) | | Loss from continuing operations | (46,078) | (383,798) | (133,762) | (150,416) | (3,588) | | Net (loss) income attributable to common stockholders | $ (46,078) | $ (383,798) | $ (139,977) | $ (169,493) | $ 1,434 | | Basic (loss) income per common share: Net (loss) income - basic | $ (0.69) | $ (5.84) | $ (2.16) | $ (2.79) | $ 0.03 | | Diluted (loss) income per common share: Net (loss) income - diluted | $ (0.69) | $ (5.84) | $ (2.57) | $ (2.79) | $ 0.03 | Consolidated Balance Sheet Data (in thousands) | As of | October 2, 2020 | September 27, 2019 | September 28, 2018 | September 29, 2017 | September 30, 2016 | | :-------------------------------- | :-------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Cash and cash equivalents | $ 129,441 | $ 75,519 | $ 94,676 | $ 130,104 | $ 332,977 | | Short-term investments | 203,711 | 101,226 | 98,221 | 84,121 | 23,776 | | Working capital | 386,569 | 323,746 | 351,856 | 445,778 | 520,794 | | Total assets | 1,146,428 | 1,105,574 | 1,482,495 | 1,637,123 | 1,188,551 | | Long-term debt and finance lease obligations and other, less current portion | 681,166 | 684,778 | 687,395 | 678,746 | 576,345 | | Stockholders' equity | $ 300,146 | $ 313,896 | $ 668,675 | $ 777,374 | $ 462,784 | - Fiscal year 2020 included **53 weeks**, while all other fiscal years presented included **52 weeks**[164](index=164&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=37&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) This section provides a detailed analysis of MACOM's financial condition and results of operations, highlighting revenue trends across its primary markets (Telecom, I&D, Data Center), changes in gross profit and operating expenses, and the impact of restructuring activities. It also covers critical accounting policies, liquidity, capital resources, and contractual obligations. The company experienced revenue growth in fiscal year 2020, driven by Telecom and Data Center, while I&D revenue decreased. Significant restructuring efforts in 2019 led to reduced operating expenses in 2020. The company maintains a strong liquidity position with cash, short-term investments, and available credit - MACOM designs and manufactures semiconductor products for Telecommunications, Industrial and Defense, and Data Center applications[167](index=167&type=chunk)[168](index=168&type=chunk) - The company's core strategy is to develop and innovate high-performance products addressing technical challenges in its primary markets[173](index=173&type=chunk) - Future revenue growth is expected to be driven by **5G deployments** in Telecom, expanding product portfolio in I&D, and adoption of cloud-based services and data center architecture upgrades (**100G, 200G, 400G, 800G interconnects**) in Data Center[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) [OVERVIEW](index=37&type=section&id=OVERVIEW) Provides a high-level summary of the company's financial performance and strategic direction [Basis of Presentation](index=38&type=section&id=Basis%20of%20Presentation) Explains the accounting principles and methods used in financial reporting [Description of Our Revenue](index=38&type=section&id=Description%20of%20Our%20Revenue) Details the sources and recognition policies for the company's revenue [COVID-19 Impact](index=38&type=section&id=COVID-19%20Impact) Assesses the impact of the COVID-19 pandemic on financial condition and operations [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=38&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Outlines key accounting policies and significant management estimates [RESULTS OF OPERATIONS](index=42&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes the company's financial performance over the reporting period [LIQUIDITY AND CAPITAL RESOURCES](index=46&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Discusses the company's cash flow, funding, and financial flexibility [OFF-BALANCE SHEET ARRANGEMENTS](index=47&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) Describes financial arrangements not recorded on the balance sheet [CONTRACTUAL OBLIGATIONS](index=47&type=section&id=CONTRACTUAL%20OBLIGATIONS) Details the company's future payment commitments under various contracts [OTHER MATTERS](index=48&type=section&id=OTHER%20MATTERS) Covers additional relevant financial and operational information [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=48&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) The company is exposed to market risks primarily from interest rate fluctuations on its cash, short-term investments, and variable-rate debt, as well as foreign exchange rate risk. A 1% change in interest rates would impact annual interest expense by $6.7 million. While most international customer agreements are in U.S. dollars, currency fluctuations can affect product competitiveness and manufacturing costs. The warrant liability's value is also subject to common stock price changes, though most warrants were exercised post-fiscal year end - The company is exposed to interest rate risk on its cash, short-term investments, and variable-rate debt, and foreign exchange rate risk[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - A **1% increase or decrease** in the annual interest rate on outstanding debt would change annual interest expense by **$6.7 million**[236](index=236&type=chunk) - The value of the warrant liability is based on the underlying common stock price, and changes could significantly impact warrant liability expense. Most warrants were exercised on November 11, 2020[234](index=234&type=chunk) [Interest rate risk](index=48&type=section&id=Interest%20rate%20risk) Analyzes the company's exposure to fluctuations in interest rates [Foreign currency risk](index=48&type=section&id=Foreign%20currency%20risk) Assesses the impact of foreign exchange rate movements on financial results [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.](index=49&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA.) This section presents the audited consolidated financial statements for MACOM Technology Solutions Holdings, Inc., including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows for the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018. It also includes the Report of Independent Registered Public Accounting Firm, critical audit matters, and detailed notes to the financial statements covering significant accounting policies, revenue disaggregation, investments, fair value measurements, inventories, property and equipment, debt, leases, employee benefits, accrued liabilities, commitments, restructurings, product warranties, impairments, intangible assets, income taxes, share-based compensation, stockholders' equity, related-party transactions, divested businesses, earnings per share, supplemental cash flow information, and geographic/customer information - The financial statements include Consolidated Balance Sheets, Statements of Operations, Comprehensive Loss, Stockholders' Equity, and Cash Flows for the fiscal years ended October 2, 2020, September 27, 2019, and September 28, 2018[239](index=239&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of October 2, 2020[243](index=243&type=chunk)[244](index=244&type=chunk) - A critical audit matter identified was the reserve for excess quantities and obsolete inventory due to significant estimates and assumptions regarding expected demand, especially given the cyclical nature of the semiconductor industry[249](index=249&type=chunk)[250](index=250&type=chunk) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Presents the auditor's opinion on the financial statements and internal controls [MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS](index=53&type=section&id=MACOM%20TECHNOLOGY%20SOLUTIONS%20HOLDINGS%2C%20INC.%20CONSOLIDATED%20BALANCE%20SHEETS) Provides a snapshot of the company's assets, liabilities, and equity at specific dates [MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS](index=54&type=section&id=MACOM%20TECHNOLOGY%20SOLUTIONS%20HOLDINGS%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, expenses, and net income or loss over a period [MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS](index=55&type=section&id=MACOM%20TECHNOLOGY%20SOLUTIONS%20HOLDINGS%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) Reports all changes in equity during a period, except those from transactions with owners [MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=56&type=section&id=MACOM%20TECHNOLOGY%20SOLUTIONS%20HOLDINGS%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY) Shows changes in the equity section of the balance sheet over a period [MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS](index=57&type=section&id=MACOM%20TECHNOLOGY%20SOLUTIONS%20HOLDINGS%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash inflows and outflows from operating, investing, and financing activities [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=58&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations and additional information for items in the financial statements [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.](index=88&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE.) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[433](index=433&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES.](index=89&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES.) Management concluded that the company's disclosure controls and procedures were effective as of October 2, 2020. The internal control over financial reporting was also assessed as effective based on the COSO framework. Deloitte & Touche LLP audited and provided an unqualified opinion on the effectiveness of internal control over financial reporting. No material changes in internal control over financial reporting occurred during the fiscal quarter - Management concluded that disclosure controls and procedures were effective as of October 2, 2020[435](index=435&type=chunk) - Internal control over financial reporting was assessed as effective based on the COSO 2013 Framework[438](index=438&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[439](index=439&type=chunk)[444](index=444&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=89&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Assesses the effectiveness of controls ensuring timely and accurate public disclosures [Management's Annual Report on Internal Control over Financial Reporting](index=89&type=section&id=Management%27s%20Annual%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management's assessment of the effectiveness of internal controls over financial reporting [Changes in Internal Control over Financial Reporting](index=89&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports any material changes in the company's internal control over financial reporting [Report of Independent Registered Public Accounting Firm](index=90&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Presents the auditor's opinion on the effectiveness of internal control over financial reporting [ITEM 9B. OTHER INFORMATION.](index=92&type=section&id=ITEM%209B.%20OTHER%20INFORMATION.) The company reported no other information required by this item - No other information was reported[451](index=451&type=chunk) [PART III](index=92&type=section&id=PART%20III) This section covers corporate governance, executive compensation, security ownership, and accounting fees [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.](index=92&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE.) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. The company maintains a written code of business conduct and ethics applicable to all directors, officers, and employees, available on its website - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[453](index=453&type=chunk) - The company has a written code of business conduct and ethics for directors, officers, and employees, available on its website[454](index=454&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION.](index=92&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION.) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Executive compensation information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[455](index=455&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.](index=92&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS.) Information on security ownership of beneficial owners and management, along with related stockholder matters, is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. The company's equity compensation plans (2012 Omnibus Incentive Plan and 2012 Employee Stock Purchase Plan) have shares authorized for future issuance, with evergreen provisions allowing for annual increases - Security ownership information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[456](index=456&type=chunk) [Equity Compensation Plan Information](index=92&type=section&id=Equity%20Compensation%20Plan%20Information) Details the company's equity-based compensation plans and share availability Equity Compensation Plan Information (as of October 2, 2020) | Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | (b) Weighted-average exercise price of outstanding options, warrants and rights(1) | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(2)(3) | | :------------------------------------------------ | :----------------------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity Compensation Plans Approved by Security Holders | 1,606,356 | $14.27 | 20,677,326 | | Equity Compensation Plans Not Approved by Security Holders | — | — | — | | Total | 1,606,356 | $14.27 | 20,677,326 | - The 2012 Plan and ESPP include 'evergreen' provisions, allowing for annual increases in available shares for issuance[459](index=459&type=chunk)[460](index=460&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.](index=92&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE.) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information on related party transactions and director independence is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[461](index=461&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.](index=93&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES.) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders - Information on principal accounting fees and services is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[462](index=462&type=chunk) [PART IV](index=94&type=section&id=PART%20IV) This section includes exhibits, financial statement schedules, and signatures [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.](index=94&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES.) This section lists the financial statements included in Item 8 and provides a comprehensive list of exhibits filed with the Annual Report on Form 10-K. These exhibits include various agreements, corporate documents, and certifications, many of which are incorporated by reference from previous SEC filings - Financial statements are included in Item 8 of this Annual Report[464](index=464&type=chunk) - A comprehensive list of exhibits, including various agreements, corporate documents, and certifications, is filed herewith and incorporated by reference[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) [ITEM 16. FORM 10-K SUMMARY.](index=97&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY.) The company reported no Form 10-K summary - No Form 10-K summary was provided[469](index=469&type=chunk) [SIGNATURES](index=98&type=section&id=SIGNATURES) The Annual Report was duly signed on behalf of MACOM Technology Solutions Holdings, Inc. by its President and Chief Executive Officer, Stephen G. Daly, and other authorized persons, including the Chief Financial Officer and members of the Board of Directors, on November 18, 2020 - The Annual Report was signed by Stephen G. Daly, President and Chief Executive Officer, and other authorized persons on November 18, 2020[472](index=472&type=chunk)[473](index=473&type=chunk)

MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) Q4 2020 Earnings Conference Call November 5, 2020 5:00 PM ET Company Participants Steve Ferranti - Vice President, Investor Relations Steve Daly - President & Chief Executive Officer Jack Kober - Chief Financial Officer Conference Call Participants Harsh Kumar - Piper Sandler Tore Svanberg - Stifel Tom O'Malley - Barclays Karl Ackerman - Cowen C.J. Muse - Evercore Ruben Roy - Benchmark Quinn Bolton - Needham & Company Operator Good afternoon and welcom ...

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) Part I of the 10-Q report provides the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for MACOM Technology Solutions Holdings, Inc., covering the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with comprehensive notes detailing accounting policies, revenue disaggregation, investments, fair value measurements, debt, leases, impairments, intangible assets, stockholders' equity, earnings per share, commitments, restructurings, share-based compensation, income taxes, supplemental cash flow information, geographic and significant customer data, and related-party transactions [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (Unaudited, in thousands) | ASSETS | July 3, 2020 | September 27, 2019 | | :--------------------------------------- | :----------- | :--------------- | | Cash and cash equivalents | $131,870 | $75,519 | | Short-term investments | 133,248 | 101,226 | | Accounts receivable, net | 60,504 | 69,790 | | Inventories | 95,576 | 107,880 | | Total current assets | 450,268 | 398,582 | | Property and equipment, net | 122,000 | 132,647 | | Goodwill | 314,779 | 314,727 | | Intangible assets, net | 143,317 | 181,228 | | TOTAL ASSETS | $1,121,127 | $1,105,574 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | 95,017 | 74,836 | | Long-term debt, less current portion | 652,947 | 655,272 | | Warrant liability | 27,315 | 12,364 | | Total liabilities | 847,823 | 791,678 | | Total stockholders' equity | 273,304 | 313,896 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $1,121,127 | $1,105,574 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, costs, and net income or loss over specified reporting periods Condensed Consolidated Statements of Operations (Unaudited, in thousands, except per share data) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :--------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $137,267 | $108,306 | $382,788 | $387,460 | | Cost of revenue | 66,391 | 74,478 | 190,338 | 219,678 | | Gross profit | 70,876 | 33,828 | 192,450 | 167,782 | | Total operating expenses | 64,376 | 357,601 | 201,747 | 536,163 | | Income (loss) from operations | 6,500 | (323,773) | (9,297) | (368,381) | | Total other expense, net | (29,732) | (2,263) | (49,557) | (25,587) | | Loss before income taxes | (23,232) | (326,036) | (58,854) | (393,968) | | Income tax expense (benefit) | 1,750 | (1,322) | 4,716 | 346 | | Net loss | $(24,982) | $(324,714) | $(63,570) | $(394,314) | | Loss per share - Basic | $(0.37) | $(4.93) | $(0.96) | $(6.01) | | Loss per share - Diluted | $(0.37) | $(4.95) | $(0.96) | $(6.09) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) Reports the company's net loss and other comprehensive income or loss components for the reporting periods Condensed Consolidated Statements of Comprehensive Loss (Unaudited, in thousands) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :------------------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(24,982) | $(324,714) | $(63,570) | $(394,314) | | Unrealized gain on short term investments, net of tax | 1,697 | 105 | 400 | 455 | | Foreign currency translation gain (loss), net of tax | 458 | 996 | (477) | 2,256 | | Other comprehensive income (loss), net of tax | 2,155 | 1,101 | (77) | 2,711 | | Total comprehensive loss | $(22,827) | $(323,613) | $(63,647) | $(391,603) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Outlines changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (Unaudited, in thousands) - Nine Months Ended July 3, 2020 | Metric | Common Stock (Shares) | Common Stock (Amount) | Treasury Stock (Shares) | Treasury Stock (Amount) | Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | | :------------------------------------------ | :-------------------- | :-------------------- | :---------------------- | :---------------------- | :------------------------------------- | :------------------------- | :------------------ | :------------------------- | | Balance at September 27, 2019 | 66,177 | $66 | (23) | $(330) | $4,358 | $1,101,576 | $(791,774) | $313,896 | | Cumulative effect of ASU 2016-02 | — | — | — | — | — | — | (1,875) | (1,875) | | Stock options exercises | 41 | — | — | — | — | 168 | — | 168 | | Vesting of restricted common stock and units | 636 | 1 | — | — | — | — | — | 1 | | Issuance of common stock pursuant to employee stock purchase plan | 272 | — | — | — | — | 4,397 | — | 4,397 | | Shares repurchased for tax withholdings on equity awards | (223) | — | — | — | — | (6,557) | — | (6,557) | | Share-based compensation | — | — | — | — | — | 26,921 | — | 26,921 | | Other comprehensive loss, net of tax | — | — | — | — | (77) | — | — | (77) | | Net loss | — | — | — | — | — | — | (63,570) | (63,570) | | Balance at July 3, 2020 | 66,903 | $67 | (23) | $(330) | $4,281 | $1,126,505 | $(857,219) | $273,304 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes the cash inflows and outflows from operating, investing, and financing activities over specified periods Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) - Nine Months Ended | Cash Flow Activity | July 3, 2020 | June 28, 2019 | | :------------------------------------------ | :----------- | :------------ | | Net cash provided by operating activities | $96,994 | $28,277 | | Net cash used in investing activities | $(31,970) | $(33,060) | | Net cash used in financing activities | $(8,462) | $(4,792) | | Foreign currency effect on cash | $(211) | $164 | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $56,351 | $(9,411) | | CASH AND CASH EQUIVALENTS — Beginning of period | $75,519 | $94,676 | | CASH AND CASH EQUIVALENTS — End of period | $131,870 | $85,265 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, revenue disaggregation, investment details, fair value measurements, inventory composition, property and equipment, debt obligations, lease accounting, impairment charges, intangible assets, stockholders' equity, earnings per share calculations, commitments and contingencies, restructuring activities, share-based compensation, income tax details, supplemental cash flow information, geographic and significant customer data, and related-party transactions [1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the basis of financial statement preparation and key accounting policies, including the adoption of new lease standards - The financial statements are unaudited and prepared in accordance with SEC rules, reflecting all necessary adjustments for fair presentation. The company's fiscal year is 52 or 53 weeks, ending on the Friday closest to the last day of September. Fiscal year 2020 includes 53 weeks, with the extra week in the first quarter[24](index=24&type=chunk)[27](index=27&type=chunk) - The company adopted ASU 2016-02, Leases (Topic 842) on the first day of fiscal year 2020, using a modified retrospective approach. This resulted in an increase of approximately **$37.1 million** in total assets, **$39.0 million** in total liabilities, and a **$1.9 million** decrease in retained earnings due to the recognition of ROU assets and lease liabilities[30](index=30&type=chunk)[31](index=31&type=chunk) - The adoption of the new lease guidance did not materially impact the condensed consolidated statement of operations, cash flows, or earnings per share for the three and nine months ended July 3, 2020[34](index=34&type=chunk) [2. Revenue](index=11&type=section&id=2.%20REVENUE) Provides disaggregated revenue data by market and geographic region, along with contract liabilities Revenue by Market (in thousands) | Market | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Telecommunications | $56,800 | $43,883 | $154,049 | $141,379 | | Industrial & Defense | $48,035 | $46,809 | $146,586 | $154,563 | | Data Center | $32,432 | $17,614 | $82,153 | $91,518 | | Total | $137,267 | $108,306 | $382,788 | $387,460 | Revenue by Geographic Region (in thousands) | Geographic Region | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | United States | $53,633 | $52,340 | $163,964 | $185,172 | | China | $55,886 | $27,451 | $133,659 | $104,491 | | Asia Pacific, excluding China | $19,688 | $16,371 | $58,552 | $60,384 | | Other Countries | $8,060 | $12,144 | $26,613 | $37,413 | | Total | $137,267 | $108,306 | $382,788 | $387,460 | Contract Liabilities (in thousands) | Metric | July 3, 2020 | September 27, 2019 | $ Change | % Change | | :----------------- | :----------- | :----------------- | :------- | :------- | | Contract liabilities | $10,653 | $11,003 | $350 | 3% | [3. Investments](index=12&type=section&id=3.%20INVESTMENTS) Details the company's short-term and non-marketable equity investments, including fair value and associated losses Short-term Investments (in thousands) - July 3, 2020 | Investment Type | Amortized Cost | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Aggregate Fair Value | | :---------------------- | :------------- | :----------------------------- | :------------------------------ | :------------------- | | Corporate bonds | $30,097 | $354 | $(179) | $30,272 | | Commercial paper | $102,749 | $247 | $(20) | $102,976 | | Total short-term investments | $132,846 | $601 | $(199) | $133,248 | - The company holds two non-marketable equity investments classified as other long-term investments. One is a Series B preferred stock in a privately held manufacturing corporation, accounted for at cost less impairment, with a cost of **$5.0 million** as of July 3, 2020. The other is a minority investment in a private company ('Compute'), valued using the equity method, with a carrying value of **$5.0 million** as of July 3, 2020, down from **$18.6 million** on September 27, 2019, due to recorded losses[41](index=41&type=chunk)[42](index=42&type=chunk) Losses Associated with Minority Equity Investment (in thousands) | Period | Loss (Income) | | :-------------------------------- | :------------ | | Three Months Ended July 3, 2020 | $(4,600) | | Nine Months Ended July 3, 2020 | $(13,600) | | Three Months Ended June 28, 2019 | $5,000 | | Nine Months Ended June 28, 2019 | $(3,900) | [4. Fair Value](index=13&type=section&id=4.%20FAIR%20VALUE) Explains the fair value hierarchy and presents assets and liabilities measured at fair value on a recurring basis - The company classifies financial assets and liabilities measured at fair value into three levels based on input observability: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) Assets and Liabilities Measured at Fair Value on a Recurring Basis (in thousands) - July 3, 2020 | Item | Fair Value | Level 1 | Level 2 | Level 3 | | :-------------------------- | :--------- | :------ | :------ | :------ | | **Assets:** | | | | | | Money market funds | $10,375 | $10,375 | $— | $— | | Commercial paper | $102,976 | $— | $102,976 | $— | | Corporate bonds | $30,272 | $— | $30,272 | $— | | Total assets | $143,623 | $10,375 | $133,248 | $— | | **Liabilities:** | | | | | | Common stock warrant liability | $27,315 | $— | $— | $27,315 | | Total liabilities | $27,315 | $— | $— | $27,315 | Quantitative Information for Level 3 Liabilities (Warrant liability) | Input | July 3, 2020 | September 27, 2019 | | :-------------- | :----------- | :--------------- | | Volatility | 79.8% | 61.4% | | Discount rate | 0.14% | 1.71% | | Expected life | 0.5 years | 1.2 years | | Exercise price | $14.05 | $14.05 | | Stock price | $35.13 | $21.68 | | Dividend rate | —% | —% | [5. Inventories](index=14&type=section&id=5.%20INVENTORIES) Breaks down inventory components, including raw materials, work-in-process, and finished goods Inventories (in thousands) | Category | July 3, 2020 | September 27, 2019 | | :--------------- | :----------- | :--------------- | | Raw materials | $53,936 | $59,184 | | Work-in-process | $11,427 | $13,799 | | Finished goods | $30,213 | $34,897 | | Total inventory, net | $95,576 | $107,880 | [6. Property and Equipment](index=15&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT) Details the composition of property and equipment, net of accumulated depreciation, and related expenses Property and Equipment (in thousands) | Category | July 3, 2020 | September 27, 2019 | | :-------------------------- | :----------- | :--------------- | | Construction in process | $14,643 | $24,848 | | Machinery and equipment | $192,835 | $175,696 | | Leasehold improvements | $18,715 | $12,962 | | Furniture and fixtures | $3,199 | $3,716 | | Computer equipment and software | $18,421 | $18,116 | | Capital lease and financed assets | $— | $46,496 | | Finance lease assets | $36,112 | $— | | Total property and equipment | $283,925 | $281,834 | | Less accumulated depreciation and amortization | $(161,925) | $(149,187) | | Property and equipment, net | $122,000 | $132,647 | Depreciation and Amortization Expense (in thousands) | Period | Property and Equipment | | :-------------------------------- | :--------------------- | | Three Months Ended July 3, 2020 | $7,100 | | Nine Months Ended July 3, 2020 | $21,800 | | Three Months Ended June 28, 2019 | $7,300 | | Nine Months Ended June 28, 2019 | $22,400 | [7. Debt](index=15&type=section&id=7.%20DEBT) Describes the company's credit agreement, term loans, and scheduled principal payments - As of July 3, 2020, the company's Credit Agreement included **$700.0 million** in Term Loans and a **$160.0 million** Revolving Facility. The Term Loans mature in May 2024 and bear interest at LIBOR plus 2.25% or base rate plus 1.25%[52](index=52&type=chunk) Term Loans Outstanding (in thousands, except rate data) - July 3, 2020 | Metric | Amount | | :-------------------------- | :------- | | Principal Outstanding | $667,808 | | LIBOR Rate | 0.18% | | Margin | 2.25% | | Effective Interest Rate | 2.43% | Term Loans Outstanding (in thousands) - July 3, 2020 | Metric | Amount | | :-------------------------- | :------- | | Principal balance | $667,808 | | Unamortized discount | $(2,507) | | Unamortized deferred financing costs | $(5,469) | | Total term loans | $659,832 | | Current portion | $6,885 | | Long-term, less current portion | $652,947 | Minimum Principal Payments Under Term Loans (in thousands) | Fiscal Year | Amount | | :------------------------ | :------- | | 2020 (remainder) | $1,721 | | 2021 | $6,885 | | 2022 | $6,885 | | 2023 | $6,885 | | 2024 | $645,432 | | Total | $667,808 | [8. Leases](index=16&type=section&id=8.%20LEASES) Outlines the company's operating and finance lease arrangements, including ROU assets, lease liabilities, and lease expenses - The company has operating leases for facilities and equipment, and finance leases for its corporate headquarters and manufacturing equipment, expiring through 2038 with some renewal options. Leases with terms over one year are recognized on the balance sheet as ROU assets and lease liabilities[57](index=57&type=chunk)[58](index=58&type=chunk) Lease Assets and Liabilities (in thousands) - July 3, 2020 | Category | Amount | | :-------------------------- | :------- | | **Assets:** | | | | Operating lease ROU assets | $32,157 | | Finance lease assets | $33,919 | | Total lease assets | $66,076 | | **Liabilities:** | | | | Current operating lease liabilities | $7,498 | | Current finance lease liabilities | $1,506 | | Long-term operating lease liabilities | $30,438 | | Long-term finance lease liabilities | $29,351 | | Total lease liabilities | $68,793 | Weighted-Average Lease Terms and Discount Rates (July 3, 2020) | Metric | Operating Leases | Finance Leases | | :-------------------------------- | :--------------- | :------------- | | Weighted-average remaining lease term (in years) | 6.57 | 17.07 | | Weighted-average discount rate | 6.36 % | 6.71 % | Components of Lease Expense (in thousands) - Nine Months Ended July 3, 2020 | Expense Type | Amount | | :---------------------- | :------- | | Total finance lease cost | $3,834 | | Operating lease cost | $7,393 | | Variable lease cost | $1,937 | | Short-term lease cost | $339 | | Sublease income | $(442) | [9. Impairments](index=19&type=section&id=9.%20IMPAIRMENTS) Details impairment charges recorded for intangible assets and construction in process in prior periods - During the fiscal quarter ended June 28, 2019, the company recorded impairment charges of **$217.5 million** for customer relationship intangible assets and **$33.2 million** for acquired technology intangible assets, totaling **$250.7 million**, due to a reassessment of future revenue growth following the 2019 Plan[63](index=63&type=chunk) - Additional impairment charges of **$2.4 million** for customer relationship intangible assets and **$3.9 million** for acquired technology intangible assets were recorded for abandoned assets. A **$7.1 million** impairment charge was also recorded for construction in process that could not be placed in service[64](index=64&type=chunk)[65](index=65&type=chunk) [10. Intangible Assets](index=19&type=section&id=10.%20INTANGIBLE%20ASSETS) Presents the carrying value and amortization schedule for acquired technology, customer relationships, and trade name intangible assets Amortization Expense Related to Intangible Assets (in thousands) | Category | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :-------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $4,348 | $8,139 | $13,115 | $24,074 | | Selling, general and administrative | $8,071 | $13,723 | $24,797 | $38,115 | | Total | $12,419 | $21,862 | $37,912 | $62,189 | Intangible Assets (in thousands) | Category | July 3, 2020 | September 27, 2019 | | :-------------------- | :----------- | :--------------- | | Acquired technology | $179,434 | $179,682 | | Customer relationships | $245,870 | $245,870 | | Trade name (indefinite-lived) | $3,400 | $3,400 | | Total | $428,704 | $428,952 | | Less accumulated amortization | $(285,387) | $(247,724) | | Intangible assets — net | $143,317 | $181,228 | Estimated Amortization of Intangible Assets (in thousands) - As of July 3, 2020 | Fiscal Year | Amortization Expense | | :---------------- | :------------------- | | 2020 Remaining | $12,418 | | 2021 | $46,213 | | 2022 | $33,433 | | 2023 | $26,048 | | 2024 | $15,410 | | Thereafter | $6,395 | | Total | $139,917 | [11. Stockholders' Equity](index=20&type=section&id=11.%20STOCKHOLDERS'%20EQUITY) Details authorized shares, common stock warrants, and their impact on the financial statements - The company has authorized **10 million** shares of preferred stock and **300 million** shares of common stock, both with a **$0.001** par value, as of July 3, 2020[68](index=68&type=chunk) - Warrants to purchase **1,281,358** shares of common stock at **$14.05** per share were issued in March 2012 and expire on December 21, 2020. These warrants are recorded as a long-term liability at estimated fair value, with changes impacting the statements of operations[69](index=69&type=chunk)[70](index=70&type=chunk) [12. Earnings (Loss) Per Share](index=20&type=section&id=12.%20EARNINGS%20(LOSS)%20PER%20SHARE) Provides basic and diluted net loss per share calculations and the impact of antidilutive shares Net Loss Per Share (in thousands, except per share data) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :------------------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(24,982) | $(326,641) | $(63,570) | $(400,102) | | Weighted average common shares outstanding-basic | 66,796 | 65,858 | 66,512 | 65,555 | | Weighted average common shares outstanding-diluted | 66,796 | 65,945 | 66,512 | 65,722 | | Net loss to common stockholders per share-Basic | $(0.37) | $(4.93) | $(0.96) | $(6.01) | | Net loss to common stockholders per share-Diluted | $(0.37) | $(4.95) | $(0.96) | $(6.09) | - The calculation of diluted loss per share excludes the effects of **1,766,561** and **1,543,686** potential shares for the three and nine months ended July 3, 2020, respectively, as their inclusion would be antidilutive[71](index=71&type=chunk) [13. Commitments and Contingencies](index=21&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) Addresses potential legal proceedings and other commitments the company may face - The company may face commercial disputes, employment issues, and intellectual property infringement claims. As of July 3, 2020, there were no material pending legal proceedings[72](index=72&type=chunk) [14. Restructurings](index=21&type=section&id=14.%20RESTRUCTURINGS) Details the company's restructuring activities, including employee and facility-related charges and expected savings - The company has implemented restructuring actions to reduce staffing, manufacturing footprint, and operating costs, primarily involving headcount reductions and facility closures[73](index=73&type=chunk) Restructuring (Benefit) Charges (in thousands) | Category | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :------------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Employee related expenses and adjustments | $(761) | $5,135 | $787 | $6,742 | | Facility related expenses | $207 | $3,752 | $707 | $10,305 | | Total restructuring (benefit) charges | $(554) | $8,887 | $1,494 | $17,047 | Accrued Restructuring Liabilities Rollforward (in thousands) - Nine Months Ended July 3, 2020 | Category | Employee-Related Expense | Facility-Related Expense | Total | | :-------------------------- | :----------------------- | :----------------------- | :------ | | Balance at September 27, 2019 | $1,549 | $978 | $2,527 | | Charges and adjustments | $787 | $707 | $1,494 | | Charges paid/settled/other | $(1,460) | $(1,492) | $(2,952) | | Balance at July 3, 2020 | $876 | $193 | $1,069 | - The 2019 Plan, initiated in the fiscal quarter ended June 28, 2019, involved reducing the workforce by approximately **250** employees, exiting six development facilities, and ceasing investment in optical modules for Data Center applications. This plan is expected to result in annual expense savings of approximately **$50 million** once fully implemented[80](index=80&type=chunk)[134](index=134&type=chunk) [15. Share-Based Compensation](index=23&type=section&id=15.%20SHARE-BASED%20COMPENSATION) Outlines share-based compensation plans, expense recognition, and unrecognized compensation costs - As of July 3, 2020, **17.0 million** shares were available under the 2012 Omnibus Incentive Plan and **3.6 million** shares under the Employee Stock Purchase Plan. Awards include ISOs, NSOs, RSAs, RSUs, and PRSUs, with vesting based on market and performance criteria[82](index=82&type=chunk) Share-Based Compensation Expense (in thousands) | Category | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :-------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $814 | $651 | $2,771 | $2,165 | | Research and development | $2,921 | $2,517 | $9,939 | $6,540 | | Selling, general and administrative | $4,760 | $(353) | $14,211 | $11,458 | | Total share-based compensation expense | $8,495 | $2,815 | $26,921 | $20,163 | - Total unrecognized compensation costs for ISOs, RSAs, and RSUs were **$53.2 million** as of July 3, 2020, expected to be recognized over a weighted-average period of **2.2 years**. Unrecognized compensation cost for the Employee Stock Purchase Plan was **$0.8 million**[83](index=83&type=chunk)[84](index=84&type=chunk) [16. Income Taxes](index=24&type=section&id=16.%20INCOME%20TAXES) Presents income tax expense, effective tax rates, and factors influencing tax rate differences Income Tax Expense (Benefit) and Effective Income Tax Rate (in thousands, except percentages) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :-------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Income tax expense (benefit) | $1,750 | $(1,322) | $4,716 | $346 | | Effective income tax rate | (7.5)% | 0.4% | (8.0)% | (0.1)% | - The difference from the U.S. federal statutory income tax rate of **21%** is primarily due to a full valuation allowance against U.S. losses and income taxed at lower rates in foreign jurisdictions where a valuation allowance is not needed[89](index=89&type=chunk) - The CARES Act, enacted on March 27, 2020, technically corrected the Tax Act, limiting the net operating loss carryforward for fiscal year 2018 to **20 years**. This resulted in a **$1.4 million** increase in the indefinite-lived deferred tax liability and an offsetting adjustment to tax expense during the fiscal quarter ended April 3, 2020[94](index=94&type=chunk) [17. Supplemental Cash Flow Information](index=25&type=section&id=17.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Provides additional details on non-cash investing activities and cash payments for interest and income taxes - As of July 3, 2020, **$0.5 million** in unpaid property and equipment purchases were included in accounts payable and accrued liabilities, excluded from cash flow statements until paid[95](index=95&type=chunk) Supplemental Cash Flow Information (in thousands) - Nine Months Ended | Metric | July 3, 2020 | June 28, 2019 | | :-------------------------------- | :----------- | :------------ | | Cash paid for interest | $20,035 | $25,675 | | Cash paid (refunded) for income taxes | $309 | $(1,713) | [18. Geographic and Significant Customer Information](index=25&type=section&id=18.%20GEOGRAPHIC%20AND%20SIGNIFICANT%20CUSTOMER%20INFORMATION) Details the company's operating segment, geographic property and equipment, and customer revenue concentrations - The company operates as one reportable operating segment, designing, developing, manufacturing, and marketing semiconductors and modules, with consolidated metrics used for performance assessment[97](index=97&type=chunk) Net Property and Equipment by Geographic Region (in thousands) | Region | July 3, 2020 | September 27, 2019 | | :---------------- | :----------- | :--------------- | | United States | $103,389 | $116,037 | | Other Countries | $18,611 | $16,610 | | Total | $122,000 | $132,647 | Customer Concentrations as a Percentage of Revenue | Customer | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :--------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Customer A | 13% | 17% | 14% | 15% | | Customer B | 14% | — | 11% | — | | Customer C | 14% | — | 10% | — | | Top Ten Customers | 66% | 54% | 61% | 54% | [19. Related-Party Transactions](index=26&type=section&id=19.%20RELATED-PARTY%20TRANSACTIONS) Discloses sales of commercial products to an affiliate of significant stockholders and a CEO's equity interest - During the nine months ended July 3, 2020, the company sold **$0.2 million** of commercial products to Mission Microwave Technologies, LLC, an affiliate of directors John and Susan Ocampo (MACOM's largest stockholders). Stephen G. Daly, MACOM's CEO, holds a less than **1%** equity interest in Mission[100](index=100&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition, including an overview of its business, the impact of COVID-19, key revenue drivers, critical accounting policies, and a detailed comparison of operating results for the three and nine months ended July 3, 2020, versus the prior year. It also discusses liquidity, capital resources, recent accounting pronouncements, and off-balance sheet arrangements [Overview](index=28&type=section&id=Overview) Provides an overview of MACOM's business, product offerings, and target markets across Telecommunications, Industrial & Defense, and Data Center segments - MACOM designs and manufactures semiconductor products for Telecommunications, Industrial and Defense, and Data Center applications, leveraging over **65 years** of expertise in various fabrication technologies. The company offers a broad portfolio of thousands of standard and custom devices to over **6,000** end-customers[106](index=106&type=chunk) - Primary markets include Telecom (carrier infrastructure, 5G, FTTx/PON), Industrial & Defense (military/commercial radar, RF jammers, satellite communications, multi-market applications), and Data Center (analog ICs and photonic components for high-speed optical modules)[106](index=106&type=chunk) [COVID-19 Impact](index=28&type=section&id=COVID-19%20Impact) Discusses the operational adjustments and potential future financial risks posed by the COVID-19 pandemic - COVID-19 has led to modified business practices and disruptions in operations, but as of the nine months ended July 3, 2020, it did not have a material impact on consolidated operating results[107](index=107&type=chunk) - Significant economic uncertainty and volatility from the pandemic make it difficult to predict future impacts on product demand. Potential adverse effects include increased credit risks, supplier impacts, asset impairments, declines in financial instrument values, and adverse impacts on capital resources[108](index=108&type=chunk) [Description of Our Revenue](index=29&type=section&id=Description%20of%20Our%20Revenue) Explains the sources of revenue and anticipated growth drivers across key market segments, including 5G and high-speed interconnects - Revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical, and photonic semiconductor products. Future revenue growth is expected to be driven by: continued demand for high-performance analog, digital, and optical semiconductors; new product introductions with advanced technologies; increased semiconductor content in customer systems; leveraging leadership in standard catalog products; and early engagement with lead customers for custom and standard products[111](index=111&type=chunk)[118](index=118&type=chunk) - Telecom market revenue is expected to be driven by 5G deployments and upgrades. I&D market revenue will be driven by an expanding product portfolio for test and measurement, satellite communications, radar, industrial, scientific, and medical applications. Data Center market revenue is anticipated from cloud-based services adoption and upgrades to higher-speed interconnects (100G, 200G, 400G, 800G)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights key accounting policies and estimates requiring significant management judgment, such as inventory and asset impairment valuations - The preparation of financial statements requires management to make estimates and judgments, which are inherently uncertain and could materially differ from actual results. Key areas requiring significant judgment include inventories and associated reserves, goodwill and long-lived asset valuations and impairment assessments, revenue reserves, and share-based compensation valuations[115](index=115&type=chunk)[117](index=117&type=chunk) - Valuation of long-lived asset groups for impairment involves significant management judgment, relying on forecasts of future operating results, growth rates, useful lives, terminal values, and weighted average cost of capital. Inaccurate forecasts or adverse changes in market conditions could lead to impairment charges[118](index=118&type=chunk)[119](index=119&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, comparing operating results for the current and prior year periods Statements of Operations Data (in thousands) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :--------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | $137,267 | $108,306 | $382,788 | $387,460 | | Gross profit | $70,876 | $33,828 | $192,450 | $167,782 | | Research and development | $34,948 | $42,708 | $105,936 | $128,593 | | Selling, general and administrative | $29,982 | $41,920 | $94,317 | $126,437 | | Impairment charges | $— | $264,086 | $— | $264,086 | | Restructuring (benefit) charges | $(554) | $8,887 | $1,494 | $17,047 | | Income (loss) from operations | $6,500 | $(323,773) | $(9,297) | $(368,381) | | Warrant liability (expense) gain | $(19,511) | $1,927 | $(14,951) | $5,788 | | Net loss | $(24,982) | $(324,714) | $(63,570) | $(394,314) | Statements of Operations Data as a Percentage of Revenue | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :--------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue | 100.0% | 100.0% | 100.0% | 100.0% | | Gross profit | 51.6% | 31.2% | 50.3% | 43.3% | | Research and development | 25.5% | 39.4% | 27.7% | 33.2% | | Selling, general and administrative | 21.8% | 38.7% | 24.6% | 32.6% | | Impairment charges | — | 243.8% | — | 68.2% | | Restructuring (benefit) charges | (0.4)% | 8.2% | 0.4% | 4.4% | | Income (loss) from operations | 4.7% | (298.9)% | (2.4)% | (95.1)% | | Warrant liability (expense) gain | (14.2)% | 1.8% | (3.9)% | 1.5% | | Net loss | (18.2)% | (299.8)% | (16.6)% | (101.8)% | [Comparison of the Three and Nine Months Ended July 3, 2020 to the Three and Nine Months Ended June 28, 2019](index=31&type=section&id=Comparison%20of%20the%20Three%20and%20Nine%20Months%20Ended%20July%203%2C%202020%20to%20the%20Three%20and%20Nine%20Months%20Ended%20June%2028%2C%202019) Compares the financial performance metrics for the three and nine months ended July 3, 2020, against the corresponding periods in the prior fiscal year [Revenue](index=31&type=section&id=Revenue) Analyzes revenue changes by market segment, highlighting growth drivers and declines for the reported periods Revenue by Market (in thousands, except percentages) | Market | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | % Change (3M) | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | % Change (9M) | | :------------------- | :------------------------------ | :----------------------------- | :------------ | :----------------------------- | :----------------------------- | :------------ | | Telecom | $56,800 | $43,883 | 29.4% | $154,049 | $141,379 | 9.0% | | Industrial & Defense | $48,035 | $46,809 | 2.6% | $146,586 | $154,563 | (5.2)% | | Data Center | $32,432 | $17,614 | 84.1% | $82,153 | $91,518 | (10.2)% | | Total | $137,267 | $108,306 | 26.7% | $382,788 | $387,460 | (1.2)% | - Telecom revenue increased due to higher sales of carrier-based optical semiconductor products, including 5G applications, offset by lower sales of legacy products. Data Center revenue surged in the three-month period due to increased sales of high-performance analog products, but decreased over nine months primarily due to **$7.0 million** in licensing revenue recognized in the prior year[126](index=126&type=chunk)[128](index=128&type=chunk) - I&D market revenue saw a slight increase in the three-month period but decreased over nine months, mainly due to a decline in certain defense-related programs and lower sales of legacy product lines[127](index=127&type=chunk) [Gross profit](index=32&type=section&id=Gross%20profit) Examines the changes in gross profit and margin, attributing improvements to strategic realignments and cost reductions - Gross margin increased significantly to **51.6%** (from 31.2%) for the three months ended July 3, 2020, and to **50.3%** (from 43.3%) for the nine months ended July 3, 2020. This improvement was primarily driven by the strategic realignment under the 2019 Plan, lower compensation-related costs, and reduced intangible amortization and inventory reserve expenses[129](index=129&type=chunk) [Research and development](index=32&type=section&id=Research%20and%20development) Discusses the decrease in R&D expenses due to strategic realignment and reduced activities - Research and development expense decreased by **18.2%** to **$34.9 million** for the three months and by **17.6%** to **$105.9 million** for the nine months ended July 3, 2020. This reduction is mainly attributed to the strategic realignment of business and operations under the 2019 Plan, leading to lower compensation costs and reduced R&D activities[130](index=130&type=chunk) [Selling, general and administrative](index=32&type=section&id=Selling%20general%20and%20administrative) Analyzes the reduction in SG&A expenses, driven by lower amortization, compensation, and external service costs - Selling, general and administrative expense decreased by **28.5%** to **$30.0 million** for the three months and by **25.4%** to **$94.3 million** for the nine months ended July 3, 2020. The decrease was primarily due to lower intangible amortization, reduced compensation-related costs from the 2019 Plan, and decreased spending on external services, partially offset by an increase in employee-related share-based compensation[131](index=131&type=chunk) [Impairment charges](index=32&type=section&id=Impairment%20charges) Details the significant impairment charges recorded in the prior year for intangible assets and construction in process - Impairment charges totaled **$264.1 million** for the three and nine months ended June 28, 2019, comprising **$257.0 million** for intangible assets and **$7.1 million** for equipment from construction in process that was not placed in service. No impairment charges were recorded in the current periods[132](index=132&type=chunk) [Restructuring (benefit) charges](index=32&type=section&id=Restructuring%20(benefit)%20charges) Explains the restructuring benefit in the current quarter and charges in prior periods, stemming from workforce and facility adjustments - The company recorded a restructuring benefit of **$0.6 million** for the three months ended July 3, 2020, primarily due to an adjustment to accrued employee-related costs from retaining certain employees. For the nine months, charges were **$1.5 million**. In contrast, the prior year periods saw charges of **$8.9 million** and **$17.0 million**, respectively, mainly from the 2019 Plan[133](index=133&type=chunk)[134](index=134&type=chunk) - The 2019 Plan involved reducing the workforce by approximately **250** employees and exiting six development facilities. The company expects to incur up to **$0.2 million** in additional restructuring costs through fiscal year 2020, with anticipated annual expense savings of approximately **$50 million** upon full implementation[134](index=134&type=chunk) [Warrant liability](index=33&type=section&id=Warrant%20liability) Discusses the expense or gain related to the warrant liability, primarily influenced by changes in the underlying stock price - The warrant liability resulted in an expense of **$19.5 million** and **$15.0 million** for the three and nine months ended July 3, 2020, respectively, compared to a gain of **$1.9 million** and **$5.8 million** in the prior year periods. This change was driven by fluctuations in the estimated fair value of common stock warrants, primarily due to changes in the underlying stock price[137](index=137&type=chunk) [Provision for income taxes](index=33&type=section&id=Provision%20for%20income%20taxes) Analyzes income tax expense and effective tax rates, noting the impact of valuation allowances and foreign jurisdictions Income Tax Expense (Benefit) and Effective Income Tax Rate (in thousands, except percentages) | Metric | Three Months Ended July 3, 2020 | Three Months Ended June 28, 2019 | Nine Months Ended July 3, 2020 | Nine Months Ended June 28, 2019 | | :-------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | | Income tax expense (benefit) | $1,750 | $(1,322) | $4,716 | $346 | | Effective income tax rate | (7.5)% | 0.4% | (8.0)% | (0.1)% | - The effective income tax rate differs from the U.S. federal statutory rate of **21%** primarily due to a full valuation allowance against U.S. losses and income taxed at lower rates in foreign jurisdictions where a valuation allowance is not applied[139](index=139&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash flow, investment holdings, and borrowing capacity to meet future financial obligations Cash Flow Activities (in thousands) - Nine Months Ended | Cash Flow Activity | July 3, 2020 | June 28, 2019 | | :------------------------------------------ | :----------- | :------------ | | Cash and cash equivalents, beginning of period | $75,519 | $94,676 | | Net cash provided by operating activities | $96,994 | $28,277 | | Net cash used in investing activities | $(31,970) | $(33,060) | | Net cash used in financing activities | $(8,462) | $(4,792) | | Foreign currency effect on cash | $(211) | $164 | | Cash and cash equivalents, end of period | $131,870 | $85,265 | - Net cash provided by operating activities significantly increased to **$97.0 million** for the nine months ended July 3, 2020, from **$28.3 million** in the prior year. This was driven by a lower net loss and positive changes in operating assets and liabilities, including decreases in prepaid expenses, inventories, and accounts receivable[141](index=141&type=chunk)[142](index=142&type=chunk) - Cash used in investing activities was **$32.0 million** for the nine months ended July 3, 2020, primarily due to purchases of short-term investments and capital expenditures, partially offset by proceeds from sales/maturities of short-term investments and a divested business. Cash used in financing activities was **$8.5 million**, mainly for stock repurchases for tax withholdings, long-term debt payments, and finance lease payments[144](index=144&type=chunk)[146](index=146&type=chunk) - As of July 3, 2020, the company held **$131.9 million** in cash and cash equivalents, **$133.2 million** in liquid short-term investments, and had **$160.0 million** in borrowing capacity under its Revolving Facility. Undistributed earnings of certain foreign subsidiaries (**$36.5 million**) are indefinitely reinvested[148](index=148&type=chunk) - Management believes current cash, investments, operating cash flow, and revolving credit facility will be sufficient to meet working capital requirements for at least the next **12 months**. Additional capital may be raised through equity or debt if needed[149](index=149&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) Refers to detailed information on recently adopted and issued accounting standards - Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies for information on recent accounting pronouncements[151](index=151&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of any off-balance sheet arrangements as of the reporting date - As of July 3, 2020, the company did not have any off-balance sheet arrangements[152](index=152&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=34&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section outlines the company's exposure to market risks, primarily focusing on interest rate risk associated with its cash, investments, and variable-rate debt, as well as foreign exchange rate risk. It also notes the impact of common stock price fluctuations on the warrant liability [Interest rate risk](index=35&type=section&id=Interest%20rate%20risk) Evaluates the company's exposure to interest rate fluctuations on its investment portfolio and variable-rate debt - The company's investment portfolio, consisting of cash and diversified investments, is exposed to fluctuating interest rates, but a **10%** change is not expected to materially impact financial position or results. The company does not engage in trading or speculative financial instruments[154](index=154&type=chunk) - Exposure to interest rate risk also stems from variable-rate debt under the Credit Agreement. As of July 3, 2020, with **$667.8 million** outstanding, a **1%** change in the annual interest rate would increase or decrease annual interest expense by **$6.7 million**[155](index=155&type=chunk) [Foreign currency risk](index=35&type=section&id=Foreign%20currency%20risk) Assesses the company's limited exposure to foreign currency exchange rate fluctuations and their potential impact on product demand - The company has limited exposure to foreign currency exchange rates as international customer agreements are primarily denominated in U.S. dollars. Increases in the U.S. dollar's value could make products more expensive, potentially impacting demand. A **10%** change in foreign currency exchange rates is not expected to materially impact financial position or results[156](index=156&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=35&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the company's disclosure controls and procedures, confirming their effectiveness as of July 3, 2020. It also states that there were no material changes in internal control over financial reporting during the fiscal quarter and acknowledges the inherent limitations of any control system [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - As of July 3, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[157](index=157&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) States that no material changes occurred in internal control over financial reporting during the fiscal quarter - There were no changes to internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[158](index=158&type=chunk) [Limitations on Controls](index=35&type=section&id=Limitations%20on%20Controls) Acknowledges the inherent limitations of any control system in providing absolute assurance against misstatements or fraud - The company acknowledges that control systems, regardless of design, are based on judgments and assumptions and cannot provide absolute assurance that all objectives will be met or that all misstatements or fraud will be detected[159](index=159&type=chunk) [PART II—OTHER INFORMATION](index=36&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) Part II of the 10-Q report covers other information not included in the financial statements, such as legal proceedings, risk factors, unregistered sales of equity securities and use of proceeds, and a list of exhibits. It also includes the required signatures for the report [ITEM 1. LEGAL PROCEEDINGS](index=36&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Refers to the detailed disclosures on legal proceedings and commitments within the financial statement notes - Information regarding legal proceedings is cross-referenced to Note 13 - Commitments and Contingencies in the Condensed Consolidated Financial Statements[162](index=162&type=chunk) [ITEM 1A. RISK FACTORS](index=36&type=section&id=ITEM%201A.%20RISK%20FACTORS) Highlights the inherent risks in the company's business and references prior disclosures on risk factors - The company's business involves a high degree of risk. No material changes to the risk factors described in the 2019 Annual Report on Form 10-K have occurred as of the date of this report, except as discussed in previous quarterly reports[163](index=163&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=36&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section provides details on the company's unregistered sales of equity securities and the use of proceeds, specifically focusing on issuer purchases of equity securities related to tax withholdings on employee restricted stock awards [Issuer Purchases of Equity Securities](index=36&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Details the company's purchases of equity securities, primarily for tax withholdings on employee restricted stock awards Issuer Purchases of Equity Securities - Fiscal Quarter Ended July 3, 2020 | Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | | :------------------------ | :------------------------------------------ | :------------------------------------- | | April 4, 2020-May 1, 2020 | — | $— | | May 2, 2020-May 29, 2020 | 21,566 | $28.18 | | May 30, 2020-July 3, 2020 | — | $— | | Total | 21,566 | $28.18 | - The purchases represent shares withheld from employees to cover tax withholdings on vested restricted stock awards, using a 'withhold to cover' method. The average prices are based on the fair market prices used for valuing withheld shares[165](index=165&type=chunk) [ITEM 6. EXHIBITS](index=37&type=section&id=ITEM%206.%20EXHIBITS) Provides a comprehensive list of exhibits filed with the report, including corporate documents and certifications Exhibits List | Exhibit Number | Description | | :------------- | :---------- | | 3.1 | Fifth Amended and Restated Certificate of Incorporation | | 3.2 | Third Amended and Restated Bylaws | | 31.1 | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | | 31.2 | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | | 32.1 | Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a 14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | | 101 | Inline XBRL financial statements and notes | | 104 | Inline XBRL cover page | [SIGNATURES](index=38&type=section&id=SIGNATURES) Lists the principal executive and financial officers who signed the Quarterly Report on Form 10-Q - The Quarterly Report on Form 10-Q was signed on July 30, 2020, by Stephen G. Daly, President and Chief Executive Officer, and John F. Kober, Senior Vice President and Chief Financial Officer[171](index=171&type=chunk)