SEC Filing | Qorvo, Inc.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 1, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File Number 001-36801

https://cdn.kscope.io/1b76351e323f9e08fc392eb69c1cbd62-rfmd-20220101_g1.jpg

Qorvo, Inc.

(Exact name of registrant as specified in its charter)


Delaware		46-5288992
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

7628 Thorndike Road
Greensboro,	North Carolina	27409-9421
(Address of principal executive office)		(Zip code)

(336) 664-1233

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

QRVO

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of January 27, 2022, there were 108,431,627 shares of the registrant’s common stock outstanding.

Table of Contents

QORVO, INC. AND SUBSIDIARIES

INDEX


			Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Income			4
Condensed Consolidated Statements of Comprehensive Income			5
Condensed Consolidated Statements of Stockholders' Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			30
Item 4. Controls and Procedures.			30

PART II — OTHER INFORMATION			31

Item 1A. Risk Factors.			31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			32
Item 6. Exhibits.			33

SIGNATURES			34

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1.

QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	January 1, 2022		April 3, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	988,527	$	1,397,880
Accounts receivable, net of allowance of $470 and $331 as of January 1, 2022 and April 3, 2021, respectively	632,347		457,431
Inventories	710,228		507,787
Prepaid expenses	44,438		41,572
Other receivables	11,874		27,324
Other current assets	58,437		51,810
Total current assets	2,445,851		2,483,804
Property and equipment, net of accumulated depreciation of $1,697,976 and $1,561,613 as of January 1, 2022 and April 3, 2021, respectively	1,266,805		1,266,031
Goodwill	2,824,856		2,642,708
Intangible assets, net	718,095		611,155
Long-term investments	38,234		35,370
Other non-current assets	332,744		182,402
Total assets	$	7,626,585	$	7,221,470
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	357,879	$	313,868
Accrued liabilities	227,898		255,060
Other current liabilities	87,650		112,653
Total current liabilities	673,427		681,581
Long-term debt	2,046,951		1,742,550
Other long-term liabilities	239,008		167,914
Total liabilities	2,959,386		2,592,045
Commitments and contingent liabilities (Note 9)
Stockholders’ equity:
Preferred stock, $.0001 par value; 5,000 shares authorized; no shares issued and outstanding	—		—
Common stock and additional paid-in capital, $.0001 par value; 405,000 shares authorized; 108,668 and 112,557 shares issued and outstanding at January 1, 2022 and April 3, 2021, respectively	4,119,098		4,244,740
Accumulated other comprehensive income	14,613		29,649
Retained earnings	533,488		355,036
Total stockholders’ equity	4,667,199		4,629,425
Total liabilities and stockholders’ equity	$	7,626,585	$	7,221,470

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
Revenue	$	1,113,957	$	1,094,834	$	3,479,556	$	2,942,577
Cost of goods sold	565,864		557,082		1,763,727		1,587,486
Gross profit	548,093		537,752		1,715,829		1,355,091
Operating expenses:
Research and development	154,435		136,697		464,891		423,110
Selling, general and administrative	82,003		93,139		265,791		289,115
Other operating expense	15,645		8,713		29,675		29,307
Total operating expenses	252,083		238,549		760,357		741,532
Operating income	296,010		299,203		955,472		613,559
Interest expense	(15,328)		(17,453)		(45,934)		(59,788)
Other income (expense), net	2,532		(58,234)		24,077		(33,177)

Income before income taxes	283,214		223,516		933,615		520,594

Income tax expense	(66,951)		(22,481)		(112,537)		(85,720)
Net income	$	216,263	$	201,035	$	821,078	$	434,874

Net income per share:
Basic	$	1.97	$	1.77	$	7.40	$	3.80
Diluted	$	1.95	$	1.74	$	7.30	$	3.74

Weighted average shares of common stock outstanding:
Basic	109,687		113,811		110,966		114,292
Diluted	110,810		115,690		112,415		116,257

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
Net income	$	216,263	$	201,035	$	821,078	$	434,874
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term investment nature	(8,488)		20,837		(14,767)		45,125
Reclassification adjustments, net of tax:
Foreign currency (gain) loss realized upon liquidation of subsidiary	(359)		15		(359)		15
Amortization of pension actuarial loss	29		21		90		61
Other comprehensive (loss) income	(8,818)		20,873		(15,036)		45,201
Total comprehensive income	$	207,445	$	221,908	$	806,042	$	480,075

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)


				Accumulated Other Comprehensive Income		Retained Earnings
	Common Stock
Three Months Ended	Shares	Amount						Total
Balance, October 2, 2021	110,461	$	4,158,170	$	23,431	$	546,153	$	4,727,754
Net income	—	—		—		216,263		216,263
Other comprehensive loss	—	—		(8,818)		—		(8,818)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes	41	(527)		—		—		(527)
Issuance of common stock in connection with employee stock purchase plan	108	15,503		—		—		15,503
Repurchase of common stock, including transaction costs	(1,942)	(73,092)		—		(228,928)		(302,020)
Stock-based compensation	—	19,044		—		—		19,044
Balance, January 1, 2022	108,668	$	4,119,098	$	14,613	$	533,488	$	4,667,199

Balance, October 3, 2020	114,111	$	4,267,987	$	26,616	$	112,563	$	4,407,166
Net income	—	—		—		201,035		201,035
Other comprehensive income	—	—		20,873		—		20,873
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes	63	372		—		—		372
Issuance of common stock in connection with employee stock purchase plan	188	15,608		—		—		15,608
Repurchase of common stock, including transaction costs	(1,063)	(39,754)		—		(120,269)		(160,023)
Stock-based compensation	—	18,670		—		—		18,670
Balance, January 2, 2021	113,299	$	4,262,883	$	47,489	$	193,329	$	4,503,701

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)


				Accumulated Other Comprehensive Income		Retained Earnings
	Common Stock
Nine Months Ended	Shares	Amount						Total
Balance, April 3, 2021	112,557	$	4,244,740	$	29,649	$	355,036	$	4,629,425
Net income	—	—		—		821,078		821,078
Other comprehensive loss	—	—		(15,036)		—		(15,036)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes	683	(49,979)		—		—		(49,979)
Issuance of common stock in connection with employee stock purchase plan	273	33,297		—		—		33,297
Repurchase of common stock, including transaction costs	(4,845)	(182,767)		—		(642,626)		(825,393)
Stock-based compensation	—	73,807		—		—		73,807
Balance, January 1, 2022	108,668	$	4,119,098	$	14,613	$	533,488	$	4,667,199

Balance, March 28, 2020	114,625	$	4,290,377	$	2,288	$	—	$	4,292,665
Net income	—	—		—		434,874		434,874
Other comprehensive income	—	—		45,201		—		45,201
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes	889	(31,999)		—		—		(31,999)
Issuance of common stock in connection with employee stock purchase plan	417	31,366		—		—		31,366
Cumulative-effect adoption of ASU 2016-13	—	—		—		(38)		(38)
Repurchase of common stock, including transaction costs	(2,632)	(98,584)		—		(241,487)		(340,071)
Stock-based compensation	—	71,723		—		—		71,723
Other	—	—		—		(20)		(20)
Balance, January 2, 2021	113,299	$	4,262,883	$	47,489	$	193,329	$	4,503,701

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	January 1, 2022		January 2, 2021
Cash flows from operating activities:
Net income	$	821,078	$	434,874
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	159,038		152,337
Intangible assets amortization	112,523		217,781
Loss on debt extinguishment	744		61,991
Deferred income taxes	37,566		26,311
Stock-based compensation expense	73,236		71,154
Other, net	5,959		(128)
Changes in operating assets and liabilities:
Accounts receivable, net	(170,511)		(140,054)
Inventories	(190,247)		38,851
Prepaid expenses and other assets	(145,643)		(1,921)
Accounts payable and accrued liabilities	42,797		35,597
Income taxes payable and receivable	(16,303)		22,014
Other liabilities	(26,874)		(19,883)
Net cash provided by operating activities	703,363		898,924
Cash flows from investing activities:
Purchase of property and equipment	(162,993)		(109,505)
Purchase of businesses, net of cash acquired	(389,192)		(47,069)
Other investing activities	9		15,277
Net cash used in investing activities	(552,176)		(141,297)
Cash flows from financing activities:
Payment of debt	(197,500)		(1,086,744)
Proceeds from borrowings and debt issuances	499,070		1,206,750
Repurchase of common stock, including transaction costs	(825,393)		(340,071)
Proceeds from the issuance of common stock	26,653		28,659
Tax withholding paid on behalf of employees for restricted stock units	(52,265)		(37,069)
Other financing activities	(9,078)		(12,413)
Net cash used in financing activities	(558,513)		(240,888)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,063)		2,569
Net (decrease) increase in cash, cash equivalents and restricted cash	(409,389)		519,308
Cash, cash equivalents and restricted cash at the beginning of the period	1,398,309		715,612
Cash, cash equivalents and restricted cash at the end of the period	$	988,920	$	1,234,920

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	988,527	$	1,234,415
Restricted cash included in "Other current assets" and "Other non-current assets"	393		505
Total cash, cash equivalents and restricted cash	$	988,920	$	1,234,920

Supplemental disclosure of cash flow information:
Capital expenditures included in liabilities	$	42,055	$	45,592

See accompanying Notes to Condensed Consolidated Financial Statements.

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QORVO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements of Qorvo, Inc. and Subsidiaries (together, the “Company” or “Qorvo”) have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions, which could differ materially from actual results. In addition, certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial statements include all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in Qorvo’s Annual Report on Form 10-K for the fiscal year ended April 3, 2021.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain items in the fiscal 2021 financial statements have been reclassified to conform with the fiscal 2022 presentation.

The Company uses a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. Each fiscal year, the first quarter ends on the Saturday closest to June 30, the second quarter ends on the Saturday closest to September 30 and the third quarter ends on the Saturday closest to December 31. Fiscal 2022 is a 52-week year and fiscal 2021 was a 53-week year with the additional week included in the second fiscal quarter ended October 3, 2020.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, "Simplifying the Accounting for Income Taxes," which eliminates certain exceptions within Accounting Standards Codification Topic 740, "Income Taxes" and clarifies and simplifies other aspects of the current accounting guidance. The Company adopted this standard in the first quarter of fiscal 2022, and it did not have a material impact on the Company's consolidated financial statements.

3. INVENTORIES

The components of inventories, net of reserves, are as follows (in thousands):


	January 1, 2022		April 3, 2021
Raw materials	$	208,837	$	134,959
Work in process	327,234		283,067
Finished goods	174,157		89,761
Total inventories	$	710,228	$	507,787

4. BUSINESS ACQUISITIONS

United Silicon Carbide, Inc.

On October 19, 2021, the Company acquired all the outstanding equity interests of United Silicon Carbide, Inc. ("United SiC"), a leading manufacturer of silicon carbide ("SiC") power semiconductors, for a total purchase price of $234.2 million. The acquisition expands the Company's offerings to include SiC power products for a range of applications such as electric vehicles, battery charging, IT infrastructure, renewables and circuit protection.

The purchase price was comprised of cash consideration of $227.1 million and contingent consideration of up to $31.3 million which is payable to the sellers if certain revenue and gross margin targets are achieved over the period beginning on the acquisition date through December 31, 2022. The estimated fair value of the contingent consideration was $7.1 million at both the acquisition date and January 1, 2022 and is included in "Other long-term liabilities" in the Condensed Consolidated Balance

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QORVO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Sheet. In subsequent reporting periods, the contingent consideration liability will be remeasured at fair value with changes recognized in "Other operating expense." See Note 6 for further information related to the fair value measurement.

The purchase price was preliminarily allocated based on the estimated fair values of the assets acquired and liabilities assumed as follows (in thousands):


Intangible assets	$	145,780
Goodwill	94,467
Net tangible assets (1)	18,015
Deferred tax liability, net	(24,036)
Total purchase price	$	234,226

(1) Includes cash acquired of $5.5 million.

The more significant intangible assets acquired included developed technology of $126.1 million and customer relationships of $19.2 million.

The fair value of the developed technology acquired was determined based on an income approach using the "excess earnings method" which estimated the value of the intangible asset by discounting the future projected earnings of the asset to present value as of the valuation date. The acquired developed technology asset is being amortized on a straight-line basis over its estimated useful life of eleven years.

The fair value of the customer relationships acquired was determined based on an income approach using the "with and without method" in which the value of the intangible asset is determined by the difference in discounted cash flows of the profitability of the Company "with" the asset and the profitability of the Company "without" the asset. These customer relationships are being amortized on a straight-line basis over their estimated useful life of three years.

The Company will continue to evaluate certain assets, liabilities and tax estimates over the measurement period (up to one year from the acquisition date). The goodwill resulting from the acquisition of United SiC is attributed to synergies and other benefits that are expected to be generated from this transaction and is not deductible for income tax purposes.

The operating results of United SiC were not material and have been included in the Company's condensed consolidated financial statements as of the acquisition date. During the three and nine months ended January 1, 2022, the Company recorded acquisition and integration related costs associated with the acquisition of United SiC totaling $1.1 million and $3.9 million, respectively, in "Other operating expense" in the Condensed Consolidated Statements of Income.

NextInput, Inc.

On April 5, 2021, the Company acquired all the outstanding equity interests of NextInput, Inc. ("NextInput"), a leader in microelectromechanical system ("MEMS")-based sensing solutions, for a total cash purchase price of $173.4 million. The acquisition expands the Company's offerings of MEMS-based products for mobile applications and provides sensing solutions for a broad range of applications in other markets.

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QORVO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The purchase price was preliminarily allocated based on the estimated fair values of the assets acquired and liabilities assumed as follows (in thousands):


Intangible assets	$	81,000
Goodwill	94,292
Net tangible assets (1)	8,209
Deferred tax liability, net	(10,132)
Total purchase price	$	173,369

(1) Includes cash acquired of $5.8 million.

The more significant intangible assets acquired included developed technology of $73.0 million and customer relationships of $7.5 million.

The fair value of the developed technology acquired was determined based on an income approach using the "excess earnings method" described above. The acquired developed technology asset is being amortized on a straight-line basis over its estimated useful life of seven years.

The fair value of the customer relationships acquired was determined based on an income approach using the "with and without method" described above. These customer relationships are being amortized on a straight-line basis over their estimated useful life of one year.

The Company will continue to evaluate certain assets, liabilities and tax estimates over the measurement period (up to one year from the acquisition date). The goodwill resulting from the acquisition of NextInput is attributed to synergies and other benefits that are expected to be generated from this transaction and is not deductible for income tax purposes.

The operating results of NextInput were not material and have been included in the Company's condensed consolidated financial statements as of the acquisition date. During the three and nine months ended January 1, 2022, the Company recorded acquisition and integration related costs associated with the acquisition of NextInput totaling $0.5 million and $2.2 million, respectively, in "Other operating expense" in the Condensed Consolidated Statements of Income.

7Hugs Labs S.A.S.

On October 1, 2020, the Company acquired all the outstanding equity interests of 7Hugs Labs S.A.S. ("7Hugs"), a private developer of Ultra Wideband ("UWB") software and solutions, for a total cash purchase price of $48.7 million. The acquisition supports the development and adaption of the Company's UWB products and solutions.

During the nine months ended January 1, 2022, the Company recognized a decrease to goodwill of approximately $0.1 million upon finalizing the purchase price allocation. The measurement period ended one year from the acquisition date.

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine months ended January 1, 2022, are as follows (in thousands):


	Mobile Products		Infrastructure and Defense Products		Total
Balance as of April 3, 2021 (1)	$	2,034,383	$	608,325	$	2,642,708
Goodwill resulting from NextInput acquisition (Note 4)	94,292		—		94,292
Goodwill resulting from United SiC acquisition (Note 4)	—		94,467		94,467
7Hugs measurement period adjustments	(97)		—		(97)
Effect of changes in foreign currency exchange rates	(6,514)		—		(6,514)
Balance as of January 1, 2022 (1)	$	2,122,064	$	702,792	$	2,824,856

(1) The Company’s goodwill balance is presented net of accumulated impairment losses and write-offs totaling $621.6 million, which were recognized in fiscal years 2009, 2013 and 2014.

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QORVO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangible assets (in thousands):


	January 1, 2022				April 3, 2021
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Developed technology	$	1,033,980	$	391,598	$	1,295,113	$	750,044
Customer relationships	105,046		40,331		459,052		403,407
Technology licenses	2,645		2,114		2,368		2,076
Backlog	—		—		1,600		1,600
Trade names	1,960		1,227		1,090		636
In-process research and development	9,734		N/A		9,695		N/A
Total (1)	$	1,153,365	$	435,270	$	1,768,918	$	1,157,763

(1) Amounts include the impact of foreign currency translation.

At the beginning of each fiscal year, the Company removes the gross asset and accumulated amortization amounts of intangible assets that have reached the end of their useful lives and have been fully amortized. Useful lives are estimated based on the expected economic benefit to be derived from the intangible assets.

Total intangible assets amortization expense was $38.5 million and $112.5 million for the three and nine months ended January 1, 2022, respectively, and $73.3 million and $217.8 million for the three and nine months ended January 2, 2021, respectively.

6. INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Equity Method Investments

The Company invests in limited partnerships and accounts for these investments using the equity method. The carrying amounts of these investments as of January 1, 2022, and April 3, 2021, were $29.9 million and $29.8 million, respectively, and are classified as “Long-term investments” in the Condensed Consolidated Balance Sheets. During the three and nine months ended January 1, 2022, the Company recorded a loss of $2.4 million and income of $13.6 million, respectively, based on its share of the limited partnerships' earnings. During the three and nine months ended January 2, 2021, the Company recorded income of $1.8 million and $17.4 million, respectively, based on its share of the limited partnerships' earnings. These amounts are included in “Other income (expense), net” in the Condensed Consolidated Statements of Income. During the three months ended January 1, 2022, the Company received no cash distributions. During the nine months ended January 1, 2022, the Company received cash distributions of $13.5 million. During the three and nine months ended January 2, 2021, the Company received cash distributions of $5.9 million. The cash distributions were recognized as reductions to the carrying value of the investments and included in the cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows.

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QORVO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Fair Value of Financial Instruments

The fair value of the financial assets and liabilities measured on a recurring basis was determined using the following levels of inputs (in thousands):


		Total		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
January 1, 2022
	Marketable equity securities	$	4,633	$	4,633	$	—	$	—
	Invested funds in deferred compensation plan (1)	41,479		41,479		—		—
	Contingent earn-out liability (2)	(7,100)		—		—		(7,100)

April 3, 2021
	Marketable equity securities	$	3,802	$	3,802	$	—	$	—
	Invested funds in deferred compensation plan (1)	32,824		32,824		—		—
	Contingent earn-out liability (3)	(10,000)		—		—		(10,000)

(1) Invested funds under the Company's non-qualified deferred compensation plan are held in a rabbi trust and consist of mutual funds. The fair value of the mutual funds is calculated using the net asset value per share determined by quoted active market prices of the underlying investments.

(2) The Company recorded a contingent earn-out liability in conjunction with the acquisition of United SiC (see Note 4). The fair value of this liability is estimated using an option pricing model.

(3) The Company recorded a contingent earn-out liability in conjunction with the acquisition of Custom MMIC Design Services, Inc. As of April 3, 2021, the fair value of the contingent consideration liability was equal to the maximum amount payable which was paid during the first quarter of fiscal 2022.

7. LONG-TERM DEBT

Long-term debt is as follows (in thousands):


	January 1, 2022		April 3, 2021
Term loan	$	—	$	197,500
1.750% senior notes due 2024	500,000		—
4.375% senior notes due 2029	850,000		850,000
3.375% senior notes due 2031	700,000		700,000
Finance leases and other	2,757		1,617
Unamortized premium, discount and issuance costs, net	(5,035)		(1,475)
Less current portion of long-term debt	(771)		(5,092)
Total long-term debt	$	2,046,951	$	1,742,550

Credit Agreement

On September 29, 2020, the Company and certain of its U.S. subsidiaries (the “Guarantors”) entered into a five-year unsecured senior credit facility pursuant to a credit agreement (the “2020 Credit Agreement”) with Bank of America, N.A., acting as administrative agent, and a syndicate of lenders. The 2020 Credit Agreement amended and restated the previous credit agreement dated as of December 5, 2017 (the “2017 Credit Agreement”). The 2020 Credit Agreement includes a senior term loan (the “2020 Term Loan”) of up to $200.0 million and a senior revolving line of credit (the “Revolving Facility”) of up to $300.0 million. During the three and nine months ended January 1, 2022, there were no borrowings under the Revolving Facility.

On the closing date of the 2020 Credit Agreement, the Company repaid the remaining principal balance of $97.5 million on the term loan under the 2017 Credit Agreement and concurrently drew $200.0 million under the 2020 Term Loan.

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On December 14, 2021, the Company repaid the remaining principal balance of $195.0 million on the 2020 Term Loan, plus accrued and unpaid interest. Interest paid during the three and nine months ended January 1, 2022, was $0.5 million and $1.7 million, respectively. In connection with the repayment, the Company recorded a loss on debt extinguishment of $0.7 million in "Other income (expense), net" in the Condensed Consolidated Statements of Income.

Senior Notes due 2024

On December 14, 2021, the Company issued $500.0 million aggregate principal amount of its 1.750% senior notes due 2024 (the “2024 Notes”). Interest is payable on the 2024 Notes on June 15 and December 15 of each year, commencing June 15, 2022. The 2024 Notes will mature on December 15, 2024, unless earlier redeemed in accordance with their terms. The 2024 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by the Guarantors.

The Company used a portion of the net proceeds of the offering of the 2024 Notes to repay all of the outstanding 2020 Term Loan, as described above, and will use the remainder of the net proceeds for general corporate purposes.

The 2024 Notes were issued pursuant to an indenture, dated as of December 14, 2021 (the “2021 Indenture”), by and among the Company, the Guarantors and Computershare Trust Company, N.A., as trustee. The 2021 Indenture contains customary events of default, including payment default, exchange default, failure to provide certain notices thereunder and certain provisions related to bankruptcy events. The 2021 Indenture also contains customary negative covenants.

The 2024 Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and, unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws.

In connection with the offering of the 2024 Notes, the Company entered into a Registration Rights Agreement, dated as of December 14, 2021 (the “Registration Rights Agreement”), by and among the Company and the Guarantors, on the one hand, and BofA Securities, Inc., as representative of the initial purchasers of the 2024 Notes, on the other hand.

Under the Registration Rights Agreement, the Company and the Guarantors have agreed to use their commercially reasonable efforts to (i) file with the SEC a registration statement (the “Exchange Offer Registration Statement”) relating to the registered exchange offer (the “Exchange Offer”) to exchange the 2024 Notes for a new series of the Company’s exchange notes having terms substantially identical in all material respects to, and in the same aggregate principal amount as, the 2024 Notes; (ii) cause the Exchange Offer Registration Statement to be declared effective by the SEC; and (iii) cause the Exchange Offer to be consummated no later than the 720th day after December 14, 2021 (or if such 720th day is not a business day, the next succeeding business day).

Under certain circumstances, the Company and the Guarantors have agreed to use their commercially reasonable efforts to (i) file a shelf registration statement relating to the resale of the 2024 Notes as promptly as practicable, and (ii) cause the shelf registration statement to be declared effective by the SEC as promptly as practicable.

If the Company fails to meet any of these targets, the annual interest rate on the 2024 Notes will increase by 0.25% during the 90-day period following the default and will increase by an additional 0.25% for each subsequent 90-day period during which the default continues, up to a maximum additional interest rate of 1.00% per year. If the Company cures the default, the interest rate on the 2024 Notes will revert to the original level.

Senior Notes due 2029

On September 30, 2019, the Company issued $350.0 million aggregate principal amount of its 4.375% senior notes due 2029 (the “Initial 2029 Notes”). On December 20, 2019, and June 11, 2020, the Company issued an additional $200.0 million and $300.0 million, respectively, aggregate principal amount of such notes (together, the “Additional 2029 Notes” and together with the Initial 2029 Notes, the “2029 Notes”). The 2029 Notes will mature on October 15, 2029, unless earlier redeemed in accordance with their terms. The 2029 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by the Guarantors.

The Initial 2029 Notes were issued pursuant to an indenture, dated as of September 30, 2019, by and among the Company, the Guarantors and MUFG Union Bank, N.A., as trustee, and the Additional 2029 Notes were issued pursuant to supplemental indentures, dated as of December 20, 2019, and June 11, 2020 (such indenture and supplemental indentures, collectively, the

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“2019 Indenture”). The 2019 Indenture contains substantially the same customary events of default and negative covenants as the 2021 Indenture.

Interest is payable on the 2029 Notes on April 15 and October 15 of each year. Interest paid on the 2029 Notes during the three and nine months ended January 1, 2022 was $18.6 million and $37.2 million, respectively. Interest paid on the 2029 Notes during the three and nine months ended January 2, 2021 was $18.6 million and $31.6 million, respectively.

Senior Notes due 2031

On September 29, 2020, the Company issued $700.0 million aggregate principal amount of its 3.375% senior notes due 2031 (the “2031 Notes”). The 2031 Notes will mature on April 1, 2031, unless earlier redeemed in accordance with their terms. The 2031 Notes are senior unsecured obligations of the Company and are guaranteed, jointly and severally, by the Guarantors.

The 2031 Notes were issued pursuant to an indenture, dated as of September 29, 2020, by and among the Company, the Guarantors and MUFG Union Bank, N.A., as trustee (the “2020 Indenture”). The 2020 Indenture contains the same customary events of default and negative covenants as the 2021 Indenture.

Interest is payable on the 2031 Notes on April 1 and October 1 of each year. The Company paid no interest on the 2031 Notes during the three months ended January 1, 2022 and paid interest of $11.8 million on the 2031 Notes during the nine months ended January 1, 2022. The Company paid no interest on the 2031 Notes during the three and nine months ended January 2, 2021.

Fair Value of Debt

The Company's debt is carried at amortized cost and is measured at fair value quarterly for disclosure purposes. The estimated fair value of the 2024 Notes, the 2029 Notes and the 2031 Notes as of January 1, 2022, was $500.5 million, $909.1 million and $713.3 million, respectively (compared to the outstanding principal amount of $500.0 million, $850.0 million and $700.0 million, respectively). The estimated fair value of the 2029 Notes and the 2031 Notes as of April 3, 2021, was $905.3 million and $689.5 million, respectively (compared to the outstanding principal amount of $850.0 million and $700.0 million, respectively). The Company considers its debt to be Level 2 in the fair value hierarchy. Fair values are estimated based on quoted market prices for identical or similar instruments. The 2024 Notes, the 2029 Notes and the 2031 Notes currently trade over-the-counter, and the fair values were estimated based upon the value of the last trade at the end of the period.

Interest Expense

During the three and nine months ended January 1, 2022, the Company recognized total interest expense of $16.3 million and $48.7 million, respectively, primarily related to the 2029 Notes and the 2031 Notes, partially offset by interest capitalized to property and equipment of $0.9 million and $2.8 million, respectively. During the three and nine months ended January 2, 2021, the Company recognized total interest expense of $18.3 million and $62.9 million, respectively, primarily related to its 5.50% senior notes due 2026 (redeemed on October 16, 2020), the 2029 Notes and the 2031 Notes, which was partially offset by interest capitalized to property and equipment of $0.9 million and $3.1 million, respectively.

8. STOCK REPURCHASES

On May 5, 2021, the Company announced that its Board of Directors authorized a new share repurchase program to repurchase up to $2.0 billion of the Company's outstanding common stock, which included approximately $236.9 million authorized under the prior program terminated concurrent with the new authorization. Under this current program, share repurchases are made in accordance with applicable securities laws on the open market or in privately negotiated transactions. The extent to which the Company repurchases its shares, the number of shares and the timing of any repurchases depends on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The program does not require the Company to repurchase a minimum number of shares, does not have a fixed term, and may be modified, suspended or terminated at any time without prior notice.

During the three and nine months ended January 1, 2022, the Company repurchased approximately 1.9 million and 4.8 million shares, respectively, of its common stock for approximately $302.0 million and $825.4 million, respectively (including transaction costs). As of January 1, 2022, approximately $1,188.6 million remains available for repurchases under the current share repurchase program.

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During the three and nine months ended January 2, 2021, the Company repurchased approximately 1.1 million and 2.6 million shares, respectively, of its common stock for approximately $160.0 million and $340.1 million, respectively (including transaction costs) under the prior repurchase program.

9. COMMITMENTS AND CONTINGENT LIABILITIES

Purchase Obligations

As of January 1, 2022, the Company's purchase obligations totaled approximately $2.2 billion, of which approximately $500.0 million is expected to be paid during the last three months of fiscal 2022 and the remaining $1.7 billion is expected to be paid ratably over fiscal years 2023 through 2026. Noncancelable purchase obligations represent payments due related to the purchase of materials and manufacturing services, a majority of which are not recorded as liabilities in the Condensed Consolidated Balance Sheet because the Company has not received the related goods or services as of January 1, 2022.

Amidst ongoing industry-wide supply constraints, the Company entered into a long-term capacity reservation agreement with a foundry supplier during the second quarter ended October 2, 2021. The Company agreed to pay certain fees and deposits which are recorded in "Prepaid expenses" and "Other non-current assets" in the Condensed Consolidated Balance Sheet as of January 1, 2022. Under the agreement the Company is required to purchase, and the foundry supplier is required to supply, a certain number of wafers (at predetermined sales prices) for calendar years 2022 through 2025. The Company currently estimates that it is obligated to purchase a total of approximately $1.6 billion of wafers (included in the total purchase obligations above) under the capacity reservation agreement.

Legal Matters

The Company is involved in various legal proceedings and claims that have arisen in the ordinary course of business that have not been fully adjudicated. The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company regularly evaluates developments in its legal matters that could affect the amount of the previously accrued liability and records adjustments as appropriate. Although it is not possible to predict with certainty the outcome of the unresolved legal matters, it is the opinion of management that these matters will not, individually or in the aggregate, have a material adverse effect on the Company’s consolidated financial position or results of operations. The aggregate range of reasonably possible losses in excess of accrued liabilities, if any, associated with these unresolved legal matters is not material.

10. REVENUE

The following table presents the Company's revenue disaggregated by geography, based on the location of the customers' headquarters (in thousands):


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
United States	$	569,494	$	587,737	$	1,449,667	$	1,295,398
China	273,582		305,887		1,227,782		1,084,120
Other Asia	136,089		83,070		364,855		243,715
Taiwan	76,432		69,492		253,713		176,171
Europe	58,360		48,648		183,539		143,173
Total revenue	$	1,113,957	$	1,094,834	$	3,479,556	$	2,942,577

The Company also disaggregates revenue by operating segments (see Note 11).

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(Unaudited)

11. OPERATING SEGMENT INFORMATION

The Company's operating and reportable segments are Mobile Products ("MP") and Infrastructure and Defense Products ("IDP") based on the organizational structure and information reviewed by the Company's Chief Executive Officer, who is the Company's chief operating decision maker ("CODM"), and these segments are managed separately based on the end markets and applications they support. The CODM allocates resources and assesses the performance of each operating segment primarily based on operating income.

MP is a global supplier of cellular, UWB, Wi-Fi and other solutions for a variety of applications, including smartphones, wearables, laptops, tablets and Internet of Things ("IoT").

IDP is a global supplier of RF, system-on-a-chip and power management solutions for a wide range of applications including cellular and IT infrastructure, automotive, green energy, defense and IoT.

The "All other" category includes operating expenses such as stock-based compensation, amortization of intangible assets, acquisition and integration related costs, (loss) gain on assets, start-up costs, restructuring related charges and other miscellaneous corporate overhead expenses that the Company does not allocate to its reportable segments because these expenses are not included in the segment operating performance measures evaluated by the Company’s CODM. The CODM does not evaluate operating segments using discrete asset information. The Company’s operating segments do not record intercompany revenue. The Company does not allocate gains and losses from equity investments, interest and other income (expense), or taxes to operating segments. Except as discussed above regarding the "All other" category, the Company’s accounting policies for segment reporting are the same as for the Company as a whole.

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The following tables present details of the Company’s operating and reportable segments and a reconciliation of the “All other” category (in thousands):


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
Revenue:
MP	$	848,428	$	826,021	$	2,680,263	$	2,048,719
IDP	265,529		268,813		799,293		893,858
Total revenue	$	1,113,957	$	1,094,834	$	3,479,556	$	2,942,577
Operating income (loss):
MP	$	306,014	$	342,118	$	991,293	$	714,959
IDP	65,994		59,241		183,162		219,491
All other	(75,998)		(102,156)		(218,983)		(320,891)
Operating income	296,010		299,203		955,472		613,559
Interest expense	(15,328)		(17,453)		(45,934)		(59,788)
Other income (expense), net	2,532		(58,234)		24,077		(33,177)
Income before income taxes	$	283,214	$	223,516	$	933,615	$	520,594


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
Reconciliation of “All other” category:
Stock-based compensation expense	$	(19,307)	$	(19,247)	$	(73,236)	$	(71,154)
Amortization of intangible assets	(38,443)		(73,112)		(112,243)		(217,203)
Acquisition and integration related costs	(6,552)		(5,261)		(16,585)		(25,183)
Other (including (loss) gain on assets, start-up costs, restructuring related charges and other miscellaneous corporate overhead)	(11,696)		(4,536)		(16,919)		(7,351)
Loss from operations for “All other”	$	(75,998)	$	(102,156)	$	(218,983)	$	(320,891)

12. INCOME TAXES

The Company’s income tax expense was $67.0 million and $112.5 million for the three and nine months ended January 1, 2022, respectively, and $22.5 million and $85.7 million for the three and nine months ended January 2, 2021, respectively. The Company’s effective tax rate was 23.6% and 12.1% for the three and nine months ended January 1, 2022, respectively, and 10.1% and 16.5% for the three and nine months ended January 2, 2021, respectively.

The Company's effective tax rate for the three and nine months ended January 1, 2022 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, global intangible low tax income (“GILTI”), domestic tax credits and discrete tax items recorded during the period. A discrete charge of $42.5 million and $12.0 million was recorded during the three and nine months ended January 1, 2022, respectively. The discrete tax expense for the three and nine months ended January 1, 2022 primarily related to the revaluation of deferred tax assets due to the extension of the Company’s tax holiday in Singapore. The discrete tax expense for the nine months ended January 1, 2022 was partially offset by the recognition of previously unrecognized tax benefits due to the expiration of the statute of limitations, stock-based compensation deductions and net tax benefits associated with other non-recurring restructuring activities, including a discrete charge associated with the intercompany restructuring of the NextInput intellectual property.

The Company has operations in Singapore which are subject to a tax holiday agreement, previously set to expire December 31, 2021. During the three months ended January 1, 2022, the Company was granted an extension to its tax holiday agreement in Singapore. The current extension to the tax holiday in Singapore is effective through December 31, 2031. The tax holiday is

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conditional upon the Company meeting certain employment and investment thresholds within the region which the Company expects to meet as part of its ongoing business operations. The extension of the tax holiday resulted in a decrease to the annual effective tax rate during the period, offset by a discrete charge due to the revaluation of the Company’s deferred tax assets.

The Company's effective tax rate for the three and nine months ended January 2, 2021 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, GILTI, domestic tax credits and discrete tax items recorded during the period. A discrete benefit of $3.8 million and a discrete charge of $31.4 million was recorded during the three and nine months ended January 2, 2021, respectively. The discrete tax expense for the nine months ended January 2, 2021 primarily related to the intercompany restructuring of the intellectual property from the acquisition of Cavendish Kinetics Limited in fiscal 2020, partially offset by discrete tax benefits recognized for stock-based compensation deductions and a retroactive incentive allowing previously non-deductible payments to be amortized.

13. NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):


	Three Months Ended				Nine Months Ended
	January 1, 2022		January 2, 2021		January 1, 2022		January 2, 2021
Numerator:
Numerator for basic and diluted net income per share	$	216,263	$	201,035	$	821,078	$	434,874
Denominator:
Denominator for basic net income per share — weighted average shares	109,687		113,811