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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 October 1, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from _____to _____
Commission File Number 001-36801
https://cdn.kscope.io/718a5a44d448bd2da30b47ce44d0c90b-rfmd-20221001_g1.jpg
Qorvo, Inc.
(Exact name of registrant as specified in its charter) 
Delaware46-5288992
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
7628 Thorndike Road
Greensboro,North Carolina27409-9421
      (Address of principal executive offices)(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueQRVOThe 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 filerþAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company


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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 October 27, 2022, there were 101,389,473 shares of the registrant’s common stock outstanding.


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QORVO, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 
 Page    
Condensed Consolidated Statements of Comprehensive Income

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PART I — FINANCIAL INFORMATION
ITEM 1.
QORVO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
 
October 1, 2022April 2, 2022
ASSETS
Current assets:
Cash and cash equivalents $911,570 $972,592 
Accounts receivable, net of allowance of $437 and $402 as of October 1, 2022 and April 2, 2022, respectively645,125 568,850 
Inventories840,850 755,748 
Prepaid expenses47,901 49,839 
Other receivables23,784 32,151 
Other current assets52,054 70,685 
Total current assets2,521,284 2,449,865 
Property and equipment, net of accumulated depreciation of $1,820,091 and $1,734,608 as of October 1, 2022 and April 2, 2022, respectively1,222,924 1,253,591 
Goodwill2,757,124 2,775,634 
Intangible assets, net585,860 674,786 
Long-term investments29,452 31,086 
Other non-current assets258,088 324,110 
Total assets$7,374,732 $7,509,072 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$322,247 $327,915 
Accrued liabilities298,882 240,186 
Other current liabilities142,998 107,026 
Total current liabilities764,127 675,127 
Long-term debt2,047,398 2,047,098 
Other long-term liabilities241,067 233,629 
Total liabilities3,052,592 2,955,854 
Commitments and contingent liabilities (Note 8)
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; 102,061 and 106,303 shares issued and outstanding at October 1, 2022 and April 2, 2022, respectively3,915,969 4,035,849 
Accumulated other comprehensive (loss) income(41,776)5,232 
Retained earnings447,947 512,137 
Total stockholders’ equity4,322,140 4,553,218 
Total liabilities and stockholders’ equity$7,374,732 $7,509,072 
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 EndedSix Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Revenue$1,158,057 $1,255,248 $2,193,415 $2,365,599 
Cost of goods sold619,130 633,695 1,279,238 1,197,863 
Gross profit538,927 621,553 914,177 1,167,736 
Operating expenses:
Research and development168,164 158,377 336,732 310,456 
Selling, general and administrative97,752 93,489 199,567 183,788 
Other operating expense11,449 7,327 14,457 14,030 
Total operating expenses277,365 259,193 550,756 508,274 
Operating income261,562 362,360 363,421 659,462 
Interest expense(16,904)(15,327)(34,156)(30,606)
Other income (expense), net2,214 4,754 (2,848)21,545 
Income before income taxes246,872 351,787 326,417 650,401 
Income tax expense(58,257)(32,598)(68,918)(45,586)
Net income$188,615 $319,189 $257,499 $604,815 
Net income per share:
Basic $1.83 $2.87 $2.48 $5.43 
Diluted $1.82 $2.84 $2.46 $5.35 
Weighted average shares of common stock outstanding:
Basic 102,927 111,035 103,991 111,476 
Diluted 103,674 112,411 104,817 113,088 

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 EndedSix Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Net income$188,615 $319,189 $257,499 $604,815 
Other comprehensive loss, net of tax:
Foreign currency translation adjustment, including intra-entity foreign currency transactions that are of a long-term investment nature(23,811)(9,517)(47,026)(6,279)
Reclassification adjustments, net of tax:
Amortization of pension actuarial loss 9 30 18 61 
Other comprehensive loss(23,802)(9,487)(47,008)(6,218)
Total comprehensive income$164,813 $309,702 $210,491 $598,597 
                
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 (Loss) IncomeRetained Earnings
Common Stock
Three Months EndedSharesAmountTotal
Balance, July 2, 2022103,340 $3,962,499 $(17,974)$356,080 $4,300,605 
Net income
—   188,615 188,615 
Other comprehensive loss—  (23,802) (23,802)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
372 (16,993)  (16,993)
Repurchase of common stock, including transaction costs
(1,651)(63,309) (96,748)(160,057)
Stock-based compensation
— 33,772   33,772 
Balance, October 1, 2022102,061 $3,915,969 $(41,776)$447,947 $4,322,140 
Balance, July 3, 2021111,210 $4,210,914 $32,918 $404,562 $4,648,394 
Net income
—   319,189 319,189 
Other comprehensive loss—  (9,487) (9,487)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
459 (36,104)  (36,104)
Repurchase of common stock, including transaction costs
(1,208)(45,758) (177,598)(223,356)
Stock-based compensation
— 29,118   29,118 
Balance, October 2, 2021110,461 $4,158,170 $23,431 $546,153 $4,727,754 

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 (Loss) IncomeRetained Earnings
Common Stock
Six Months EndedSharesAmountTotal
Balance, April 2, 2022106,303 $4,035,849 $5,232 $512,137 $4,553,218 
Net income
   257,499 257,499 
Other comprehensive loss  (47,008) (47,008)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
509 (21,181)  (21,181)
Issuance of common stock in connection with employee stock purchase plan
195 18,893   18,893 
Repurchase of common stock, including transaction costs
(4,946)(188,410) (321,689)(510,099)
Stock-based compensation
— 70,818  — 70,818 
Balance, October 1, 2022102,061 $3,915,969 $(41,776)$447,947 $4,322,140 
Balance, April 3, 2021112,557 $4,244,740 $29,649 $355,036 $4,629,425 
Net income
— — — 604,815 604,815 
Other comprehensive loss— — (6,218)— (6,218)
Exercise of stock options and vesting of restricted stock units, net of shares withheld for employee taxes
642 (49,452)— — (49,452)
Issuance of common stock in connection with employee stock purchase plan
165 17,794 — — 17,794 
Repurchase of common stock, including transaction costs
(2,903)(109,675)— (413,698)(523,373)
Stock-based compensation
— 54,763 —  54,763 
Balance, October 2, 2021110,461 $4,158,170 $23,431 $546,153 $4,727,754 

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)
Six Months Ended
October 1, 2022October 2, 2021
Cash flows from operating activities:
Net income$257,499 $604,815 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation103,882 105,205 
Intangible assets amortization66,539 74,022 
Deferred income taxes(16,693)(2,230)
Stock-based compensation expense67,203 53,929 
Other, net58,804 (6,867)
Changes in operating assets and liabilities:
Accounts receivable, net(75,728)(203,321)
Inventories(81,716)(87,137)
Prepaid expenses and other assets30,503 (157,063)
Accounts payable and accrued liabilities65,012 242,632 
Income taxes payable and receivable3,518 (16,455)
Other liabilities61,601 (21,132)
Net cash provided by operating activities540,424 586,398 
Cash flows from investing activities:
Purchase of property and equipment(90,454)(112,560)
Purchase of businesses, net of cash acquired(95)(166,818)
Other investing activities6,267 11,781 
Net cash used in investing activities(84,282)(267,597)
Cash flows from financing activities:
Repurchase of common stock, including transaction costs(510,099)(523,373)
Proceeds from the issuance of common stock19,541 20,435 
Tax withholding paid on behalf of employees for restricted stock units(22,020)(51,334)
Other financing activities(379)(8,490)
Net cash used in financing activities(512,957)(562,762)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(4,237)(1,087)
Net decrease in cash, cash equivalents and restricted cash(61,052)(245,048)
Cash, cash equivalents and restricted cash at the beginning of the period972,805 1,398,309 
Cash, cash equivalents and restricted cash at the end of the period$911,753 $1,153,261 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$911,570 $1,153,172 
Restricted cash included in "Other current assets" and "Other non-current assets"183 89 
Total cash, cash equivalents and restricted cash$911,753 $1,153,261 
Supplemental disclosure of cash flow information:
Capital expenditures included in liabilities$26,658 $54,507 

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 2, 2022.

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. During the second quarter of fiscal 2023, the Company updated its organizational structure to more closely align similar technologies and applications with customers and end markets. The Company is now managing its business and reporting its financial results in three reportable segments: High Performance Analog ("HPA"), Connectivity and Sensors Group ("CSG") and Advanced Cellular Group ("ACG").

Certain items in the fiscal 2022 financial statements (including prior period segment results) have been reclassified to conform with the fiscal 2023 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 years 2023 and 2022 are 52-week years.

2. INVENTORIES
The components of inventories, net of reserves, are as follows (in thousands):
October 1, 2022April 2, 2022
Raw materials$273,074 $236,095 
Work in process396,015 357,332 
Finished goods171,761 162,321 
Total inventories$840,850 $755,748 

3. 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 $236.7 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 $227.2 million and contingent consideration of up to $31.3 million which is expected to be paid to the sellers (in the first quarter of fiscal 2024) 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 liability was $9.5 million as of the acquisition date. At April 2, 2022, the contingent consideration liability was remeasured to a fair value of $17.6 million and is included in "Other long-term liabilities" in the Condensed Consolidated Balance Sheet. At October 1, 2022, the contingent consideration liability was remeasured to a fair value of $28.3 million and is included in "Other current liabilities" in the Condensed Consolidated Balance Sheet with the increase in fair
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value recognized in "Other operating expense" in the Condensed Consolidated Statement of Income. Refer to Note 5 for further information related to the fair value measurement.

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 $173.3 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.

4. GOODWILL AND INTANGIBLE ASSETS

During the second quarter of fiscal 2023, the Company updated its organizational structure (see Note 1).
The changes in the carrying amount of goodwill are as follows (in thousands):
HPA
CSG
ACG
Total
Balance as of April 2, 2022 (1)
$501,899 $539,875 $1,733,860 $2,775,634 
NextInput measurement period adjustments 572  572 
United SiC measurement period adjustments95   95 
Effect of changes in foreign currency exchange rates (19,177) (19,177)
Balance as of October 1, 2022 (1)
$501,994 $521,270 $1,733,860 $2,757,124 
(1) The Company’s goodwill balance is presented net of accumulated impairment losses and write-offs totaling $669.6 million, which were recognized in fiscal years 2009, 2013, 2014 and 2022.

The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangible assets (in thousands):
 October 1, 2022April 2, 2022
 Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Developed technology $844,432 $315,968 $1,026,690 $420,255 
Customer relationships 103,616 56,835 104,778 47,208 
Technology licenses 968 304 2,641 2,169 
Trade names 818 469 1,933 1,358 
In-process research and development9,602 N/A9,734 N/A
Total (1)
$959,436 $373,576 $1,145,776 $470,990 
(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.

5. 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 October 1, 2022 and April 2, 2022, were $25.5 million and $27.1 million, respectively, and are classified as "Long-term investments" in the Condensed Consolidated Balance Sheets. During the three and six months ended October 1, 2022, the Company recorded a gain of $1.2 million and $0.4 million, respectively, based on its share of the limited partnerships' earnings. During the three and six months ended October 2, 2021, the Company recorded income of $1.5
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million and $16.0 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. No cash distributions were received during the three months ended October 1, 2022 and $2.0 million of cash distributions were received during the six months ended October 1, 2022. During the three and six months ended October 2, 2021, the Company received cash distributions of $9.6 million and $13.5 million, respectively, from these equity method investments. 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.

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):
TotalQuoted Prices In
Active Markets For
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
October 1, 2022
Marketable equity securities$2,116 $2,116 $ $ 
Invested funds in deferred compensation plan (1)
34,068 34,068   
Contingent earn-out liability (2)
(28,325)  (28,325)
April 2, 2022
Marketable equity securities$2,906 $2,906 $ $ 
Invested funds in deferred compensation plan (1)
39,356 39,356   
Contingent earn-out liability (2)
(17,600)  (17,600)
(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 (refer to Note 3). The fair value of this liability is estimated using an option pricing model.

6. LONG-TERM DEBT

Long-term debt is as follows (in thousands):
October 1, 2022April 2, 2022
1.750% senior notes due 2024$500,000 $500,000 
4.375% senior notes due 2029850,000 850,000 
3.375% senior notes due 2031700,000 700,000 
Finance leases and other1,975 2,581 
Unamortized premium, discount and issuance costs, net(4,006)(4,692)
Less current portion of long-term debt(571)(791)
Total long-term debt$2,047,398 $2,047,098 

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 (as amended, restated, modified or otherwise supplemented from time to time, the "Credit Agreement") with Bank of America, N.A., acting as administrative agent, and a syndicate of lenders. The Credit Agreement amended and restated the previous credit agreement dated as of December 5, 2017. The Credit Agreement
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includes a senior revolving line of credit (the "Revolving Facility") of up to $300.0 million and included a senior term loan of $200.0 million (collectively the "Credit Facility") which was fully repaid in fiscal 2022.

On April 6, 2022, the Company and the administrative agent entered into an amendment to the Credit Agreement (the "LIBOR Transition Amendment") to replace the London Interbank Offered Rate as a reference rate available for use in the computation of interest under the Credit Agreement. As a result of the LIBOR Transition Amendment, at the Company’s option, loans under the Credit Agreement will bear interest at (i) the Applicable Rate (as defined in the Credit Agreement) plus the Term SOFR (as defined in the Credit Agreement) or (ii) the Applicable Rate plus a rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate as set by the administrative agent, and (c) the Term SOFR plus 1.0% (the "Base Rate"). All swing line loans will bear interest at a rate equal to the Applicable Rate plus the Base Rate. The Term SOFR is the rate per annum equal to the forward-looking Secured Overnight Financing Rate term rate for interest periods of one, three or six months (as selected by the Company) plus an adjustment (as defined in the Credit Agreement). The Applicable Rate for Term SOFR loans ranges from 1.000% per annum to 1.250% per annum, and the Applicable Rate for Base Rate loans ranges from 0.000% per annum to 0.250% per annum. Undrawn amounts under the Credit Facility are subject to a commitment fee ranging from 0.150% to 0.200%.

During the three and six months ended October 1, 2022, there were no borrowings under the Revolving Facility.

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"). 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 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.

Interest is payable on the 2024 Notes on June 15 and December 15 of each year. The Company paid no interest on the 2024 Notes during the three months ended October 1, 2022, and paid interest of $4.4 million during the six months ended October 1, 2022.

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 "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. The Company paid no interest on the 2029 Notes during the three months ended October 1, 2022 and October 2, 2021, and paid interest of $18.6 million during both the six months ended October 1, 2022 and October 2, 2021.

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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 interest of $11.8 million on the 2031 Notes during the three and six months ended October 1, 2022 and October 2, 2021.

Fair Value of Long-Term 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 October 1, 2022 was $458.1 million, $738.8 million and $524.6 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 2024 Notes, the 2029 Notes and the 2031 Notes as of April 2, 2022 was $476.9 million, $852.6 million and $638.6 million, respectively (compared to the outstanding principal amount of $500.0 million, $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 six months ended October 1, 2022, the Company recognized total interest expense of $17.9 million and $36.1 million, respectively, primarily related to the 2024 Notes, the 2029 Notes and the 2031 Notes, partially offset by interest capitalized to property and equipment of $1.0 million and $2.0 million, respectively. During the three and six months ended October 2, 2021, the Company recognized total interest expense of $16.2 million and $32.5 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 $1.9 million, respectively.

7. 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 a prior program terminated concurrent with the new authorization. Under this 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 six months ended October 1, 2022, the Company repurchased approximately 1.7 million and 4.9 million shares of its common stock for approximately $160.1 million and $510.1 million, respectively (including transaction costs) under the share repurchase program. As of October 1, 2022, approximately $351.6 million remains available for repurchases under the share repurchase program.

During the three and six months ended October 2, 2021, the Company repurchased approximately 1.2 million and 2.9 million shares, respectively, of its common stock for approximately $223.4 million and $523.4 million, respectively (including transaction costs).

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8. COMMITMENTS AND CONTINGENT LIABILITIES

Purchase Obligations

Amidst ongoing industry-wide supply constraints, the Company entered into a long-term capacity reservation agreement with a foundry supplier during the second quarter of fiscal 2022. Under this agreement, the Company was required to purchase, and the foundry supplier was required to supply, a certain number of wafers (at predetermined sales prices) for calendar years 2022 through 2025. In connection with this agreement, the Company paid a refundable deposit (which was recorded in "Other non-current assets" in the Condensed Consolidated Balance Sheets), and if the purchase commitments per the agreement were not met, under certain circumstances the supplier could deduct the amount of the purchase shortfall from the prepaid refundable deposit at the end of each calendar year.

During fiscal 2023, the Company has experienced unexpectedly weakened demand for 5G handsets in China and EMEA due to unprecedented disruption resulting from measures taken in China to control the COVID-19 pandemic and the conflict in Ukraine. As a result, the Company did not meet the minimum purchase commitments under this long-term capacity reservation agreement.

In the first quarter of fiscal 2023, the purchase shortfall resulted in an impairment to the prepaid refundable deposit of approximately $13.0 million and additional reserves of approximately $11.0 million for inventory in excess of demand forecasts were recorded. Additionally, the Company assessed the future minimum purchase commitments over the remaining term of the agreement and recorded an estimated shortfall of $86.0 million, of which $8.0 million was recorded in "Other current liabilities" and $78.0 million was recorded in "Other long-term liabilities" in accordance with Accounting Standards Codification ("ASC") 330, "Inventory." These transactions resulted in a total increase to cost of goods sold of $110.0 million in the first quarter of fiscal 2023.

In October 2022, the Company renegotiated the terms of the agreement with the foundry supplier, which included extending the duration of the agreement through calendar year 2026. The Company believes that the amended agreement more closely aligns the contractual purchase commitments with forecasted demand. As a result of the amended agreement, in the second quarter of fiscal 2023, the Company recorded an impairment to the prepaid refundable deposit of approximately $38.0 million and additional reserves of approximately $5.0 million for inventory in excess of demand forecasts, which reduced the estimated shortfall liability that was previously recorded, by $43.0 million. Therefore, the amended agreement did not impact the income statement in the second quarter of fiscal 2023.

In performing this assessment, the Company considered Company-specific forecasts, legal obligations, macroeconomic and geopolitical factors as well as market and industry trends. These factors include significant management judgment and estimates and, to the extent that these assumptions are incorrect or there are further declines in management's demand forecasts, additional charges may be recorded in future periods.

As of October 1, 2022, the Company estimates that, under the current terms of the capacity reservation agreement, it is obligated to purchase a total of approximately $800.0 million of wafers through calendar year 2026.

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.

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9. REVENUE

The following table presents the Company's revenue disaggregated by geography, based on the location of the customers' headquarters (in thousands):
Three Months EndedSix Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
United States$615,007 $560,992 $1,011,038 $880,173 
China221,737 418,263 505,213 954,200 
Other Asia126,360 119,488 318,688 228,766 
Taiwan130,463 92,067 221,635 177,281 
Europe64,490 64,438 136,841 125,179 
Total revenue
$1,158,057 $1,255,248 $2,193,415 $2,365,599 

The Company also disaggregates revenue by operating segments (refer to Note 10).

10. OPERATING SEGMENT INFORMATION

In the second quarter of fiscal 2023, the Company updated its organizational structure from two operating segments (Mobile Products and Infrastructure and Defense Products) to three operating segments (High Performance Analog ("HPA"), Connectivity and Sensors Group ("CSG") and Advanced Cellular Group ("ACG")), in order to more closely align similar technologies and applications with customers and end markets. The Company manages its three operating segments, which are also its reportable segments, based on the end markets and applications they support. The Company's Chief Executive Officer, who is also the Company's chief operating decision maker ("CODM"), allocates resources and evaluates the performance of each of the three operating segments primarily based on operating income. All prior-period segment data has been retrospectively adjusted to reflect these three operating segments.

HPA is a leading global supplier of RF and power management solutions for infrastructure, defense and aerospace, automotive power and other markets. HPA leverages a diverse portfolio of differentiated technologies and products to support multiyear drivers, including electrification, renewable energy, the increasing semiconductor spend in defense and 5G deployments outside of China.

CSG is a leading global supplier of connectivity and sensor components and systems featuring multiple technologies including UWB, Matter®, Bluetooth® Low Energy, Zigbee®, Thread®, Wi-Fi®, cellular IoT and MEMS-/BAW-based sensors. CSG combines the connectivity and sensors businesses formerly split between Mobile Products and Infrastructure and Defense Products. CSG’s markets include smart home, automotive connectivity, industrial automation, smartphones, wearables, gaming and other high-growth IoT connectivity and healthcare markets.

ACG is a leading global supplier of cellular RF solutions for a variety of devices, primarily smartphones, wearables, laptops and tablets. ACG leverages world-class technology, systems-level expertise and product portfolio breadth to deliver high performance cellular products to the world's leading smartphone and consumer electronics companies. It is a highly diversified supplier of custom and open market cellular solutions, with broad reach across iOS and Android original equipment manufacturers.

The "All other" category includes operating expenses such as stock-based compensation expense, amortization of intangible assets, acquisition and integration related costs, charges associated with a long-term capacity reservation agreement, restructuring related charges, gain (loss) on sale of fixed assets, start-up costs 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 expense, other (expense) income, 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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(Unaudited)

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 EndedSix Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Revenue:
HPA$228,132 $155,206 $439,083 $314,966 
CSG143,329 177,529 295,644 367,612 
ACG786,596 922,513 1,458,688 1,683,021 
Total revenue$1,158,057 $1,255,248 $2,193,415 $2,365,599 
Operating income (loss):
HPA$80,512 $36,681 $151,266 $84,002 
CSG(10,019)22,950 1,219 56,178 
ACG267,204 375,787 469,577 662,267 
All other(76,135)(73,058)(258,641)(142,985)
Operating income261,562 362,360 363,421 659,462 
Interest expense(16,904)(15,327)(34,156)(30,606)
Other income (expense), net2,214 4,754 (2,848)21,545 
Income before income taxes$246,872 $351,787 $326,417 $650,401 
 
 Three Months EndedSix Months Ended
October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Reconciliation of "All other" category:
Stock-based compensation expense$(31,789)$(28,691)$(67,203)$(53,929)
Amortization of intangible assets(32,787)(36,577)(66,439)(73,800)
Acquisition and integration related costs
(8,642)(6,040)(14,950)(10,033)
Charges associated with a long-term capacity reservation agreement (1)
 — (110,000)— 
Other (2,917)(1,750)(49)(5,223)
Loss from operations for "All other"$(76,135)$(73,058)$(258,641)$(142,985)
(1) Refer to Note 8 for additional information.

11. INCOME TAXES

The Company’s income tax expense was $58.3 million and $68.9 million for the three and six months ended October 1, 2022, respectively, and $32.6 million and $45.6 million, for the three and six months ended October 2, 2021, respectively. The Company’s effective tax rate was 23.6% and 21.1% for the three and six months ended October 1, 2022, respectively, and 9.3% and 7.0% for the three and six months ended October 2, 2021, respectively.

The Company's effective tax rate for the three and six months ended October 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 generated and discrete tax items recorded during the period. A discrete tax expense of $6.7 million and a discrete tax benefit of $12.6 million was recorded for the three and six months ended October 1, 2022. The discrete tax expense for the three months ended October 1, 2022 primarily resulted from foreign currency gains recognized for tax purposes. The discrete tax benefit for the six months ended October 1, 2022 primarily resulted from certain charges associated with a long-term capacity reservation agreement (refer to Note 8 for further information).

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(Unaudited)
The Company's effective tax rate for the three and six months ended October 2, 2021 differed from the statutory rate primarily due to tax rate differences in foreign jurisdictions, GILTI, domestic tax credits generated and discrete tax items recorded during the period. A discrete tax benefit of $10.3 million and $30.5 million was recorded during the three and six months ended October 2, 2021, respectively. The discrete tax benefits for the three and six months ended October 2, 2021 primarily related to stock-based compensation deductions and net tax benefits associated with other non-recurring restructuring activities, including a discrete tax charge associated with the intercompany restructuring of the NextInput intellectual property. The discrete tax benefit for the six months ended October 2, 2021, was also due in part to the recognition of previously unrecognized tax benefits due to the expiration of the statute of limitations.

12. 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 EndedSix Months Ended
 October 1, 2022October 2, 2021October 1, 2022October 2, 2021
Numerator:
Numerator for basic and diluted net income per share — net income available to common stockholders$188,615 $319,189 $257,499 $604,815 
Denominator:
Denominator for basic net income per share — weighted average shares
102,927 111,035 103,991 111,476 
Effect of dilutive securities:
Stock-based awards
747 1,376 826 1,612 
Denominator for diluted net income per share — adjusted weighted average shares and assumed conversions
103,674 112,411 104,817 113,088 
Basic net income per share$1.83 $2.87 $2.48 $5.43 
Diluted net income per share$1.82 $2.84 $2.46 $5.35 

In the computation of diluted net income per share for the three and six months ended October 1, 2022, approximately 1.0 million and 0.7 million shares of outstanding stock-based awards were excluded because the effect of their inclusion would have been anti-dilutive. An immaterial number of the Company's outstanding stock-based awards was excluded from the computation of diluted net income per share for the three and six months ended October 2, 2021.

13. SUBSEQUENT EVENT

On November 2, 2022, 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 includes the remaining authorized dollar amount under the prior program which was terminated concurrent with the new authorization. Under this new program, share repurchases will be 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 will depend 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions, and are not historical facts and typically are identified by use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under U.S. federal securities laws. Our business is subject to numerous risks and uncertainties, including those relating to fluctuations in our operating results; our substantial dependence on developing new products and achieving design wins; our dependence on several large customers for a substantial portion of our revenue; continued volatility and uncertainty in customer demand, worldwide economies and financial markets resulting from the impact of the COVID-19 pandemic, conflict in Ukraine or other macroeconomic factors; a loss of revenue if defense and aerospace contracts are canceled or delayed; our dependence on third parties; risks related to sales through distributors; risks associated with the operation of our manufacturing facilities; business disruptions; poor manufacturing yields; increased inventory risks and costs, including under long-term supply agreements, due to timing of customers' forecasts; our inability to effectively manage or maintain evolving relationships with chipset suppliers; our ability to continue to innovate in a very competitive industry; underutilization of manufacturing facilities; unfavorable changes in interest rates, pricing of certain precious metals, utility rates and foreign currency exchange rates; our acquisitions and other strategic investments failing to achieve financial or strategic objectives; our ability to attract, retain and motivate key employees; warranty claims, product recalls and product liability; changes in our effective tax rate; changes in the favorable tax status of certain of our subsidiaries; enactment of international or domestic tax legislation, or changes in regulatory guidance; risks associated with environmental, health and safety regulations, and climate change; risks from international sales and operations; economic regulation in China; changes in government trade policies, including imposition of tariffs and export restrictions; we may not be able to generate sufficient cash to service all of our debt; restrictions imposed by the agreements governing our debt; our reliance on our intellectual property portfolio; claims of infringement of third-party intellectual property rights; security breaches and other similar disruptions compromising our information; theft, loss or misuse of personal data by or about our employees, customers or third parties; provisions in our governing documents and Delaware law may discourage takeovers and business combinations that our stockholders might consider to be in their best interests; and volatility in the price of our common stock. These and other risks and uncertainties, which are described in more detail under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 2, 2022 and Qorvo's subsequent reports and statements that we file with the SEC, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.

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OVERVIEW

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the consolidated results of operations and financial condition of Qorvo. MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and accompanying Notes to Condensed Consolidated Financial Statements.

Qorvo is a global leader in the development and commercialization of technologies and products for wireless, wired and power markets.

During the second quarter of fiscal 2023, we updated our organizational structure to more closely align similar technologies and applications with customers and end markets. We now manage our business and report our financial results in three reportable segments: High Performance Analog ("HPA"), Connectivity and Sensors Group ("CSG") and Advanced Cellular Group ("ACG").

HPA is a leading global supplier of RF and power management solutions for infrastructure, defense and aerospace, automotive power and other markets. HPA leverages a diverse portfolio of differentiated technologies and products to support multiyear drivers, including electrification, renewable energy, the increasing semiconductor spend in defense and 5G deployments outside of China.

CSG is a leading global supplier of connectivity and sensor components and systems featuring multiple technologies including UWB, Matter®, Bluetooth® Low Energy, Zigbee®, Thread®, Wi-Fi®, cellular IoT and MEMS-/BAW-based sensors. CSG combines the connectivity and sensors businesses formerly split between Mobile Products and Infrastructure and Defense Products. CSG’s markets include smart home, automotive connectivity, industrial automation, smartphones, wearables, gaming and other high-growth IoT connectivity and healthcare markets.

ACG is a leading global supplier of cellular RF solutions for a variety of devices, including smartphones, wearables, laptops and tablets. ACG leverages world-class technology, systems-level expertise and product portfolio breadth to deliver high performance cellular products to the world's leading smartphone and consumer electronics companies. It is a highly diversified supplier of custom and open market cellular solutions, with broad reach across iOS and Android original equipment manufacturers.

These business segments are based on the organizational structure and information reviewed by our Chief Executive Officer, who is our chief operating decision maker ("CODM"), and are managed separately based on the end markets and applications they support. The CODM allocates resources and evaluates the performance of each operating and reportable segment primarily based on operating income. Refer to Note 10 of the Notes to Condensed Consolidated Financial Statements for additional information regarding our reportable operating segments as of October 1, 2022.

As previously disclosed in our Annual Report on Form 10-K, filed on May 20, 2022, the COVID-19 pandemic has impacted the semiconductor industry supply chain causing uncertainty in customer demand, worldwide economies and financial markets. During fiscal 2023, we have experienced unexpectedly weakened demand for 5G handsets in China and EMEA due to unprecedented disruption resulting from measures taken in China to control the COVID-19 pandemic and the conflict in Ukraine. As a result, we did not meet the minimum purchase commitments under a long-term capacity reservation agreement with a foundry supplier. In the first quarter of fiscal 2023, the purchase shortfall resulted in an impairment to the prepaid refundable deposit of approximately $13.0 million and additional reserves of approximately $11.0 million for inventory in excess of demand forecasts were recorded. Additionally, we assessed the future minimum purchase commitments over the remaining term of the agreement and recorded an estimated shortfall of $86.0 million in accordance with Accounting Standards Codification 330, "Inventory." These transactions resulted in a total increase to cost of goods sold of $110.0 million in the first quarter of fiscal 2023. In October 2022, we renegotiated the terms of the agreement with the foundry supplier, which included extending the duration of the agreement through calendar year 2026. We believe that the amended agreement more closely aligns the contractual purchase commitments with our forecasted demand. As a result of the amended agreement, in the second quarter of fiscal 2023, we recorded an impairment to the prepaid refundable deposit of approximately $38.0 million and additional reserves of approximately $5.0 million for inventory in excess of demand forecasts, which reduced the estimated shortfall liability that was previously recorded, by $43.0 million. Therefore, the amended agreement did not impact the income statement in the second quarter of fiscal 2023. In performing this assessment, we considered Company-specific forecasts, legal obligations, macroeconomic and geopolitical factors as well as market and industry trends. These factors include significant
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management judgment and estimates and, to the extent that these assumptions are incorrect or there are further declines in management's demand forecasts, additional charges may be recorded in future periods.

SECOND QUARTER FISCAL 2023 FINANCIAL HIGHLIGHTS

Revenue for the second quarter of fiscal 2023 decreased 7.7% as compared to the second quarter of fiscal 2022, driven primarily by lower demand for 5G handsets in China and EMEA and a decrease in end market demand for Wi-Fi and cellular IoT components. These decreases were partially offset by content gains in mass-tier handsets as well as higher demand for our defense, base station and silicon carbide based power management products.

Gross margin for the second quarter of fiscal 2023 decreased to 46.5% as compared to 49.5% for the second quarter of fiscal 2022, primarily due to lower factory utilization and unfavorable inventory charges resulting from demand fluctuations and a quality defect from a third-party supplier. These decreases to gross margin were partially offset by favorable changes in product mix.

Operating income was $261.6 million for the second quarter of fiscal 2023 as compared to $362.4 million for the second quarter of fiscal 2022. This decrease was primarily due to lower revenue, lower gross margin, and higher operating expenses.

Net income per diluted share was $1.82 for the second quarter of fiscal 2023 as compared to $2.84 for the second quarter of fiscal 2022.

Capital expenditures were $47.0 million for the second quarter of fiscal 2023 as compared to $47.3 million for the second quarter of fiscal 2022.

During the second quarter of fiscal 2023, we repurchased approximately 1.7 million shares of our common stock for approximately $160.1 million.
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RESULTS OF OPERATIONS

Consolidated

The following table presents a summary of our results of operations (in thousands, except percentages): 
 Three Months Ended
                      October 1, 2022% of
Revenue
October 2, 2021% of
Revenue
Increase (Decrease)Percentage
Change
Revenue$1,158,057 100.0 %$1,255,248 100.0 %$(97,191)(7.7)%
Cost of goods sold619,130 53.5 633,695 50.5 (14,565)(2.3)
Gross profit538,927 46.5 621,553 49.5 (82,626)(13.3)
Research and development168,164 14.5 158,377 12.6 9,787 6.2 
Selling, general and administrative97,752 8.4 93,489 7.4 4,263 4.6 
Other operating expense11,449 1.0 7,327 0.6 4,122 56.3 
Operating income$261,562 22.6 %$362,360 28.9 %$(100,798)(27.8)%
Six Months Ended
October 1, 2022