Marvell Technology 10-Q 2022-04-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 30, 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: 001-40357

MARVELL TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware						85-3971597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1000 N. West Street, Suite 1200 Wilmington, Delaware 19801

(302) 295-4840

(Address of principal executive offices, zip code and 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, par value $0.002 per share						MRVL						Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ 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 ☐ 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. (Check one):

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			¨			Smaller reporting company			☐
						Emerging growth company			☐

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

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

The number of shares of common stock of the registrant outstanding as of May 20, 2022 was 849.9 million.

TABLE OF CONTENTS

						Page
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements:
			Unaudited Condensed Consolidated Balance Sheets as of April 30, 2022 and January 29, 2022			2
			Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended April 30, 2022 and May 1, 2021			3
			Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended April 30, 2022 and May 1, 2021			4
			Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended April 30, 2022 and May 1, 2021			5
			Notes to Unaudited Condensed Consolidated Financial Statements			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			36
Item 4.			Controls and Procedures			37
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings			38
Item 1A.			Risk Factors			38
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			63
Item 6.			Exhibits			64
			Signatures			68

PART I: FINANCIAL INFORMATION

MARVELL TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value per share)

			April 30, 2022						January 29, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	465.0					$	613.5
Accounts receivable, net			1,191.1						1,048.6
Inventories			835.5						720.3
Prepaid expenses and other current assets			107.3						111.0
Total current assets			2,598.9						2,493.4
Property and equipment, net			502.2						462.8
Goodwill			11,539.0						11,511.1
Acquired intangible assets, net			5,888.1						6,153.4
Deferred tax assets			331.8						493.5
Other non-current assets			1,178.7						994.4
Total assets			$	22,038.7					$	22,108.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	553.1					$	461.5
Accrued liabilities			735.0						622.6
Accrued employee compensation			191.9						241.3
Short-term debt			74.1						63.2
Total current liabilities			1,554.1						1,388.6
Long-term debt			4,465.3						4,484.8
Other non-current liabilities			554.3						533.1
Total liabilities			6,573.7						6,406.5
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock, $0.002 par value			1.7						1.7
Additional paid-in capital			14,188.5						14,209.0
Retained earnings			1,274.8						1,491.4
Total stockholders’ equity			15,465.0						15,702.1
Total liabilities and stockholders’ equity			$	22,038.7					$	22,108.6

See accompanying notes to unaudited condensed consolidated financial statements

MARVELL TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In millions, except per share amounts)

			Three Months Ended
			April 30, 2022						May 1, 2021
Net revenue			$	1,446.9					$	832.3
Cost of goods sold			696.0						414.1
Gross profit			750.9						418.2
Operating expenses:
Research and development			444.1						286.1
Selling, general and administrative			235.7						201.5
Restructuring related charges			1.3						12.9
Total operating expenses			681.1						500.5
Operating income (loss)			69.8						(82.3)
Interest income			0.5						0.2
Interest expense			(36.3)						(35.1)
Other income, net			5.2						1.2
Interest and other income (loss), net			(30.6)						(33.7)
Income (loss) before income taxes			39.2						(116.0)
Provision (benefit) for income taxes			204.9						(27.8)
Net loss			$	(165.7)					$	(88.2)
Comprehensive loss, net of tax			$	(165.7)					$	(88.2)
Net loss per share - basic			$	(0.20)					$	(0.13)
Net loss per share - diluted			$	(0.20)					$	(0.13)
Weighted-average shares:
Basic			848.0						693.4
Diluted			848.0						693.4

See accompanying notes to unaudited condensed consolidated financial statements

MARVELL TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per share amounts)

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This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “seeks,” “estimates,” “forecasts,” “targets,” “may,” “can,” “will,” “would” and similar expressions identify such forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ materially from those predicted include, but are not limited to:

*•*risks related to the impact of the COVID-19 pandemic or other future pandemics, on the global economy and on our customers, suppliers, employees and business;

• risks related to our ability to scale our business;

• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products and our kitting process, and constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to changes in general economic conditions, such as economic slowdowns and recessions, inflation and stagflation, or political conditions, such as the tariffs and trade restrictions with China, Russia and other foreign nations, and specific conditions in the end markets we address, including the continuing volatility in the technology sector and semiconductor industry;

• risks related to the ability of our customers, particularly in jurisdictions such as China that may be subject to trade restrictions (including the need to obtain export licenses) to develop their own solutions or acquire fully developed solutions from third-parties;

• risks related to cancellations, rescheduling or deferrals of significant customer orders or shipments, as well as the ability of our customers to manage inventory;

• risks related to our ability to successfully integrate and to realize anticipated synergies, on a timely basis or at all, in connection with our acquisitions, divestitures, significant investments or strategic transactions;

• risks related to our debt obligations;

• risks related to the effects of any future acquisitions, divestitures or significant investments;

• risks related to the highly competitive nature of the end markets we serve, particularly within the semiconductor and infrastructure industries;

• risks related to our dependence on a few customers for a significant portion of our revenue;

• risks related to our ability to execute on changes in strategy and realize the expected benefits from restructuring activities;

• risks related to our ability to maintain a competitive cost structure for our manufacturing and assembly and test processes and our reliance on third parties to produce our products;

• risks related to our ability to attract, retain and motivate a highly skilled workforce, especially engineering, managerial, sales and marketing personnel;

• risks related to any current and future litigation and regulatory investigations that could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully maintain and grow our business;

• risks related to gain or loss of a design win or key customer;

• risks related to seasonality or volatility related to sales into the infrastructure market;

• risks related to failures to qualify our products or our suppliers’ manufacturing lines;

• risks related to our ability to develop and introduce new and enhanced products, in particular in the 5G and Cloud markets, in a timely and effective manner, as well as our ability to anticipate and adapt to changes in technology;

• risks related to failures to protect our intellectual property, particularly outside the United States;

• risks related to the potential impact of a significant natural disasters, or the effects of climate change (such as drought, flooding, wildfires, increased storm severity and sea level rise), particularly in certain regions in which we operate or own buildings, such as Santa Clara, California, and where our third party suppliers operate, such as Taiwan and elsewhere in the Pacific Rim;

• risks related to our Environmental, Social and Governance (ESG) programs;

• risks related to severe financial hardship or bankruptcy of one or more of our major customers; and

• risks related to failures of our customers to agree to pay for NRE (non-recurring engineering) costs or failure to pay enough to cover the costs we incur in connection with NREs.

Additional factors which could cause actual results to differ materially include those set forth in the following discussion, as well as the risks discussed in Part II, Item 1A, “Risk Factors,” and other sections of this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date hereof. We undertake no obligation to update any forward-looking statements.

Overview

We are a leading supplier of infrastructure semiconductor solutions, spanning the data center core to network edge. We are a fabless semiconductor supplier of high-performance standard and semi-custom products with core strengths in developing and scaling complex System-on-a-Chip architectures, integrating analog, mixed-signal and digital signal processing functionality. Leveraging leading intellectual property and deep system-level expertise, as well as highly innovative security firmware, our solutions are empowering the data economy and enabling the data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial end markets.

Net revenue in the first quarter of fiscal 2023 was $1,446.9 million and was 74% higher than net revenue of $832.3 million in the first quarter of fiscal 2022. This was due to an increase in sales from all our end markets. Revenue increased from the data center end market by 131%, from the carrier infrastructure end market by 50%, from the enterprise networking end market by 64%, from the consumer end market by 7%, and the automotive/industrial end market by 94% compared to the three months ended May 1, 2021. The overall increase in net revenue of 74% was primarily driven by an increase in demand for our products and the year-over-year impact of acquisitions in fiscal 2022, with both factors contributing to higher unit shipments. In addition, our average selling prices increased year-over-year driven by relatively higher sales of products which had higher content and more features.

In response to increased demand from customers for our products, our operations team is continuing to ramp production with our global supply chain partners. However, we are continuing to experience a number of industry-wide supply constraints affecting the type of high complexity products we provide for data infrastructure. These supply challenges are currently limiting our ability to fully satisfy the increase in demand for some of our products. To secure additional capacity, we entered into capacity reservation arrangements with certain foundries and test & assembly partners. See “Note 5 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

Securing capacity for growth remains a high priority for our operations team, even as this supply expansion comes with an increase in input costs. As we have done throughout this period of supply constraints, we are working with our customers to adjust prices to offset the impact of these cost increases, which lets us jointly benefit from sustained growth.

We continue to monitor the impact of COVID-19 on our business. While our offices around the world generally remain open to enable critical on-site business functions in accordance with local government guidelines, in response to the COVID-19 pandemic we modified our workplace practices globally, which resulted in many of our employees working remotely for extended periods of time. As a result, many of our employees have expressed a preference to continue to work from home two to three days a week post-pandemic. In response, we adopted a hybrid work policy where most employees split their time between home and the office. We expect COVID-19 to continue to impact our business, for a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part II, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “We face risks related to the COVID-19 pandemic which currently has, and may continue in the future to, significantly disrupt and adversely impact our manufacturing, research and development, operations, sales and financial results.”

We expect that the U.S. government’s export restrictions on certain Chinese customers will continue to impact our revenue in fiscal 2023. Moreover, concerns that U.S. companies may not be reliable suppliers as a result of these and other actions has caused, and may in the future cause, some of our customers in China to amass large inventories of our products well in advance of need or cause some of our customers to replace our products in favor of products from other suppliers. Customers in China may also choose to develop indigenous solutions, as replacements for products that are subject to U.S. export controls. In addition, there may be indirect impacts to our business that we can not easily quantify such as the fact that some of our other customers’ products which use our solutions may also be impacted by export restrictions.

Capital Return Program. We remain committed to delivering stockholder value through our stock repurchase and dividend programs. Under the program authorized by our Board of Directors, we may repurchase shares of stock in the open-market or through privately negotiated transactions. The extent to which we repurchase our stock and the timing of such repurchases will depend upon market conditions, legal rules and regulations, and other corporate considerations, as determined by our management team. We resumed our stock repurchase program in the first quarter of fiscal 2023, which had been temporarily suspended in fiscal 2021 to preserve cash during the COVID-19 pandemic. During the three months ended April 30, 2022, we repurchased 0.3 million shares of our common stock for $15.0 million. As of April 30, 2022, there was $549.5 million remaining available for future stock repurchases.

As of April 30, 2022, a total of 308.4 million shares have been repurchased to date under our share repurchase programs for a total $4.3 billion in cash. We returned $65.9 million to stockholders in the three months ended April 30, 2022, including our repurchases of common stock and $50.9 million in cash dividends.

Subsequent to quarter end through May 20, 2022, we repurchased an additional 0.9 million shares of our common stock for $50.0 million pursuant to a 10b5-1 trading plan.

Cash and Short-Term Investments. Our cash and cash equivalents were $465.0 million at April 30, 2022, which was $148.5 million lower than our balance at our fiscal year ended January 29, 2022 of $613.5 million.

Sales and Customer Composition. Our accounts receivable was concentrated with four customers at April 30, 2022, who comprise a total of 52% of gross accounts receivable, compared with five customers at May 1, 2021, who represented 54% of gross accounts receivable, respectively. This presentation is at the customer consolidated level. During the three months ended April 30, 2022 and May 1, 2021, there was no net revenue attributable to a single customer, other than one distributor, whose revenue as a percentage of net revenue was 10% or greater of total net revenue. Net revenue attributable to a distributor whose revenue as a percentage of net revenue was 10% or greater of total net revenue is presented in the following table:

			Three Months Ended
			April 30, 2022						May 1, 2021
Distributor:
Distributor A			19		%				19		%

We continuously monitor the creditworthiness of our customers and distributors and believe these distributors’ sales to diverse end customers and geographies further serve to mitigate our exposure to credit risk.

Most of our sales are made to customers located outside of the United States, primarily in Asia, and majority of our products are manufactured outside the United States. Sales shipped to customers with operations in Asia represented approximately 75% of our net revenue in the three months ended April 30, 2022, and approximately 80% of net revenue in the three months ended May 1, 2021. Because many manufacturers and manufacturing subcontractors of our customers are located in Asia, we expect that most of our net revenue will continue to be represented by sales to our customers in that region. For risks related to our global operations, see Part II, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “We face additional risks due to the extent of our global operations since a majority of our products, and those of our customers, are manufactured and sold outside of the United States. The occurrence of any or a combination of the additional risks described below would significantly and negatively impact our business and results of operations.”

The development process for our products is long, which may cause us to experience a delay between the time we incur expenses and the time revenue is generated from these expenditures. We anticipate that the rate of new orders may vary significantly from quarter to quarter. For risks related to our sales cycle, see Part II, Item 1A, “Risk Factors,” including but not limited to the risk detailed under the caption “We are subject to order and shipment uncertainties. If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our gross margin. Conversely, we may have insufficient inventory, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.”

Critical Accounting Policies and Estimates

There have been no material changes during the three months ended April 30, 2022 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In the current macroeconomic environment affected by COVID-19, our estimates could require increased judgment and carry a higher degree of variability and volatility. We continue to monitor and assess our estimates in light of developments, and as events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Results of Operations

The following table sets forth information derived from our Unaudited Condensed Consolidated Statements of Operations expressed as a percentage of net revenue:

			Three Months Ended
			April 30, 2022						May 1, 2021
Net revenue			100.0		%				100.0		%
Cost of goods sold			48.1						49.8
Gross profit			51.9						50.2
Operating expenses:
Research and development			30.7						34.4
Selling, general and administrative			16.3						24.2
Restructuring related charges			0.1						1.5
Total operating expenses			47.1						60.1
Operating income (loss)			4.8						(9.9)
Interest income			—						—
Interest expense			(2.5)						(4.2)
Other income, net			0.4						0.1
Income (loss) before income taxes			2.7						(14.0)
Provision (benefit) for income taxes			14.2						(3.3)
Net loss			(11.5)		%				(10.7)		%

Three months ended April 30, 2022 and May 1, 2021

Net Revenue

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Net revenue			$	1,446.9					$	832.3					73.8%

Our net revenue for the three months ended April 30, 2022 increased by $614.6 million compared to net revenue for the three months ended May 1, 2021. This was due to an increase in sales from all our end markets. Revenue increased from the data center end market by 131% from the carrier infrastructure end market by 50%, from the enterprise networking end market by 64%, from the consumer end market by 7%, and from the automotive/industrial end market by 94% compared to the three months ended May 1, 2021. The overall increase in net revenue of 74% was primarily driven by an increase in demand for our products and the year-over-year impact of acquisitions in fiscal 2022, with both factors contributing to higher unit shipments. In addition, our average selling prices increased year-over-year driven by relatively higher sales of products which had higher content and more features.

Cost of Goods Sold and Gross Profit

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Cost of goods sold			$	696.0					$	414.1					68.1%
% of net revenue			48.1		%				49.8		%
Gross profit			$	750.9					$	418.2					79.6%
% of net revenue			51.9		%				50.2		%

Cost of goods sold as a percentage of net revenue decreased for the three months ended April 30, 2022 compared to the three months ended May 1, 2021, which is primarily due to operational efficiencies with increased sales and lower amortization of inventory fair value adjustment. As a result, gross margin for the three months ended April 30, 2022 increased 1.7% percentage points compared to the three months ended May 1, 2021.

Research and Development

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Research and development			$	444.1					$	286.1					55.2%
% of net revenue			30.7		%				34.4		%

Research and development expense increased by $158.0 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021. The increase was primarily due to additional costs from our acquisitions of Inphi and Innovium in fiscal 2022, including $125.0 million of higher employee personnel-related costs and $32.9 million of higher product development and qualification costs recognized in the current period.

Selling, general and administrative

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Selling, general and administrative			$	235.7					$	201.5					17.0%
% of net revenue			16.3		%				24.2		%

Selling, general and administrative expense increased by $34.2 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021. The increase was primarily due to additional costs from our acquisitions of Inphi and Innovium in fiscal 2022, including $63.1 million of higher intangibles amortization expense, partially offset by $35.3 million of lower integration costs in the current period.

Restructuring Related Charges

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Restructuring related charges			$	1.3					$	12.9					(89.9)%
% of net revenue			0.1		%				1.5		%

We recognized $1.3 million of total restructuring related charges in the three months ended April 30, 2022 as we continue to evaluate our existing operations to increase operational efficiency, decrease costs, and increase profitability. See “Note 9 –Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Interest Income

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Interest income			$	0.5					$	0.2					150.0%
% of net revenue			—		%				—		%

Interest income increased by $0.3 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021 due to higher interest rates on our invested cash.

Interest Expense

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Interest expense			$	(36.3)					$	(35.1)					3.4%
% of net revenue			(2.5)		%				(4.2)		%

Interest expense increased by $1.2 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021. The increase was primarily due to higher interest expense and amortization of debt issuance costs associated with the 2020 Term Loans and 2026, 2028 and 2031 Senior Notes, partially offset by prior period costs associated with the bridge loan termination.

Other Income, Net

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Other income, net			$	5.2					$	1.2					333.3%
% of net revenue			0.4		%				0.1		%

Other income, net, increased by $4.0 million in the three months ended April 30, 2022 compared to the three months ended May 1, 2021. The increase was primarily due to a gain from an equity investment in a privately-held company.

Provision (benefit) for Income Taxes

			Three Months Ended
			April 30, 2022						May 1, 2021						% Change
			(in millions, except percentage)
Provision (benefit) for income taxes			$	204.9					$	(27.8)					(837.1)%

Our income tax expense for the three months ended April 30, 2022 was $204.9 million compared to a tax benefit of $27.8 million for the three months ended May 1, 2021. Our income tax expense for the three months ended April 30, 2022 differed from the 21% federal income tax rate, primarily because of the remeasurement of our deferred taxes in Singapore upon the five year extension of our DEI status until June 30, 2029 at the new incentive tax rates that are expected to apply during these future periods for existing deferred tax items, resulting in a net reduction to our Singapore deferred tax assets of $213.6 million and a corresponding income tax expense. In addition, our tax rate for the three months ended April 30, 2022 was affected by the recognition of benefits for tax credits, discrete tax benefits from stock-based compensation deductions and the tax rate differential on foreign income. The income tax benefit for the three months ended May 1, 2021 differed from the federal statutory tax rate of 21% primarily because of tax rate differentials on foreign income, tax benefits for stock based compensation and the recognition of tax benefits on the expiration of the statutes of limitations for the assessment of certain foreign taxes.

Our provision for incomes taxes may be affected by changes in the geographic mix of earnings with different applicable tax rates, acquisitions, changes in the realizability of deferred tax assets, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of income tax audits, the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities and changes in tax laws and regulations.

The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those assets become deductible or creditable. We evaluate the recoverability of these assets, weighing all positive and negative evidence, and provide or maintain a valuation allowance for these assets if it is more likely than not that some, or all, of the deferred tax assets will not be realized. If negative evidence exists, sufficient positive evidence is necessary to support a conclusion that a valuation allowance is not needed. We consider all available evidence such as our earnings history including the existence of cumulative income or losses, reversals of taxable temporary differences, projected future taxable income, and tax planning strategies. In future periods, it is possible that significant positive or negative evidence could arise that results in a change in our judgment with respect to the need for a valuation allowance, which could result in a tax benefit, or adversely affect our income tax provision, in the period of such change in judgment.

We also continuously evaluate potential changes to our legal structure in response to guidelines and requirements in various international tax jurisdictions where we conduct business. Additionally, please see the information in “Item 1A: Risk Factors” under the caption “Changes in existing taxation benefits, rules or practices may adversely affect our financial results.”

Liquidity and Capital Resources

Our principal source of liquidity as of April 30, 2022 consisted of approximately $465.0 million of cash and cash equivalents, of which approximately $415.6 million was held by subsidiaries outside of the United States. We manage our worldwide cash requirements by, among other things, reviewing available funds held by our foreign subsidiaries and the cost effectiveness by which those funds can be accessed in the United States. See “Note 10 – Income Taxes” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

In December 2020, to fund the Inphi acquisition, we executed a debt agreement to obtain a 3-year term loan of $875.0 million and a 5-year term loan of $875.0 million. For the quarter ended April 30, 2022, the Company repaid $10.9 million of the principal outstanding of the 5-year term loan.

In December 2020, we also executed a debt agreement to obtain a $750.0 million revolving credit facility (“2020 Revolving Credit Facility”). Subsequent to quarter end, on May 3, 2022, the Company drew down $150.0 million on the 2020 Revolving Credit Facility. The Company intends to repay the drawn amount during the second quarter of fiscal 2023.

In April 2021, we completed an offering and issued (i) 5-year $500.0 million senior notes due in 2026, (ii) 7-year $750.0 million senior notes due in 2028, and (iii) 10-year $750.0 million senior notes due in 2031 (collectively, the “Senior Notes”). On October 8, 2021, the Senior Notes issued in April 2021 were exchanged for new notes.

See “Note 4 – Debt” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

We believe that our existing cash, cash equivalents, together with cash generated from operations, and funds from our 2020 Revolving Credit Facility will be sufficient to cover our working capital needs, capital expenditures, investment requirements and any declared dividends, repurchase of our common stock and commitments for at least the next twelve months. Our capital requirements will depend on many factors, including our rate of sales growth, market acceptance of our products, costs of securing access to adequate manufacturing capacity, the timing and extent of research and development projects and increases in operating expenses, all of which are subject to uncertainty.

To the extent that our existing cash and cash equivalents, together with cash generated by operations, and funds available under our 2020 Revolving Credit Facility are insufficient to fund our future activities, we may need to raise additional funds through public or private debt or equity financing. We may also acquire additional businesses, purchase assets or enter into other strategic arrangements in the future, which could also require us to seek debt or equity financing. Additional equity financing or convertible debt financing may be dilutive to our current stockholders. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis or on acceptable terms, if at all. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to our common stock.

Future payment of a regular quarterly cash dividend on our common stock and our planned repurchases of common stock will be subject to, among other things, the best interests of the Company and our stockholders, our results of operations, cash balances and future cash requirements, financial condition, developments in ongoing litigation, statutory requirements under Delaware law, U.S. securities laws and regulations, market conditions and other factors that our Board of Directors may deem relevant. Our dividend payments and repurchases of common stock may change from time to time, and we cannot provide assurance that we will continue to declare dividends or repurchase stock at all or in any particular amounts.

Cash Flows from Operating Activities

Net cash flow provided by operating activities for the three months ended April 30, 2022 was $194.8 million. We had a net loss of $165.7 million adjusted for the following non-cash items: amortization of acquired intangible assets of $272.5 million, deferred income tax expense of $165.0 million, stock-based compensation expense of $131.1 million, depreciation and amortization of $75.7 million, amortization of inventory fair value adjustment associated with the Innovium acquisition of $9.3 million, and $6.7 million net loss from other non-cash items. Cash outflow from working capital of $299.8 million for the three months ended April 30, 2022 was primarily driven by increases in accounts receivable, inventory, and prepaid expenses and other assets and decrease in accrued employee compensation, partially offset by increases in accounts payable and accrued liabilities and other non-current liabilities. The increase in accounts receivable was driven primarily by higher revenue and uniform collections. The increase in inventory is to support future customer demand. The increase in prepaid expenses and other assets is primarily due to prepayments on supply capacity reservation agreements. The decrease in accrued employee compensation is due to bonus payout. The increase in accounts payable was mainly due to timing of payments. The increase in accrued liabilities and other non-current liabilities is mainly due to an increase in ship and debit claim reserve due to price increase and stock replenishment.

Net cash flow used in operating activities for the three months ended May 1, 2021 was $13.7 million. We had a net loss of $88.2 million adjusted for the following non-cash items: amortization of acquired intangible assets of $128.6 million, stock-based compensation expense of $92.7 million, depreciation and amortization of $51.8 million, deferred income tax benefit of $22.6 million, amortization of inventory fair value adjustment associated with the Inphi acquisition of $13.7 million and $31.4 million net loss from other non-cash items. Cash outflow from working capital of $221.1 million for the three months ended May 1, 2021 was primarily driven by a decrease in accrued employee compensation, decrease in accounts payable, a decrease in accrued liabilities and other non-current liabilities as well as an increase in accounts receivable. The decrease in accrued employee compensation is due to our annual bonus payment in the period. The decrease in accounts payable and accrued liabilities and other non-current liabilities is primarily due to payment of banker success fees. The increase in accounts receivable is due to revenue linearity and lower sales reserves.

Cash Flows from Investing Activities

For the three months ended April 30, 2022, net cash used in investing activities of $82.4 million was primarily driven by net cash paid for business acquisitions of $44.0 million, purchases of property and equipment of $36.9 million, and purchases of technology licenses of $1.6 million.

For the three months ended May 1, 2021, net cash used in investing activities of $3.6 billion was primarily driven by the net cash paid to acquire Inphi of $3.6 billion, purchases of property and equipment of $21.4 million and purchases of technology licenses of $3.4 million.

Cash Flows from Financing Activities

For the three months ended April 30, 2022, net cash used in financing activities of $260.9 million was primarily attributable to $137.6 million tax withholding payments on behalf of employees for net share settlements, $50.9 million for payment of our quarterly dividends, $49.0 million payments on technology license obligations, $15.0 million of repurchases of common stock and $10.9 million repayment of debt, partially offset by $2.5 million proceeds from employee stock plans.

For the three months ended May 1, 2021, net cash provided by financing activities of $3.4 billion was primarily attributable to proceeds from issuance of debt of $3.7 billion, proceeds from capped calls of $111.2 million, partially offset by $200.0 million repayment of debt principal, $73.2 million tax withholding payments on behalf of employees for net share settlements, $71.1 million of repurchase and settlement of convertible notes, $44.1 million payments for technology license obligations and $40.6 million for payment of our quarterly dividends.

Capital Resources and Material Cash Requirements

A summary of our capital resources and material cash requirements is presented in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022. Other than as described above, there were no material changes to our capital resources and material cash requirements during the three months ended April 30, 2022.

Indemnification Obligations

See “Note 5 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.