Marvell Technology 10-Q 2023-04-29

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 29, 2023

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						The 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.

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 19, 2023 was 860.0 million.

TABLE OF CONTENTS

						Page
PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements:
			Unaudited Condensed Consolidated Balance Sheets as of April 29, 2023 and January 28, 2023			2
			Unaudited Condensed Consolidated Statements of Operations for the three months ended April 29, 2023 and April 30, 2022			3
			Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended April 29, 2023 and April 30, 2022			4
			Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended April 29, 2023 and April 30, 2022			5
			Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended April 29, 2023 and April 30, 2022			6
			Notes to Unaudited Condensed Consolidated Financial Statements			7
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			31
Item 4.			Controls and Procedures			32
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings			33
Item 1A.			Risk Factors			33
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 6.			Exhibits			60
			Signatures			64

PART I: FINANCIAL INFORMATION

MARVELL TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value per share)

			April 29, 2023						January 28, 2023
ASSETS
Current assets:
Cash and cash equivalents			$	1,028.3					$	911.0
Accounts receivable, net			1,000.9						1,192.2
Inventories			1,026.0						1,068.3
Prepaid expenses and other current assets			147.7						109.6
Total current assets			3,202.9						3,281.1
Property and equipment, net			636.2						577.4
Goodwill			11,586.9						11,586.9
Acquired intangible assets, net			4,832.0						5,102.0
Deferred tax assets			608.2						465.9
Other non-current assets			1,407.0						1,508.8
Total assets			$	22,273.2					$	22,522.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	388.4					$	465.8
Accrued liabilities			970.8						1,092.0
Accrued employee compensation			184.6						244.5
Short-term debt			1,517.6						584.4
Total current liabilities			3,061.4						2,386.7
Long-term debt			3,154.9						3,907.7
Other non-current liabilities			563.0						590.5
Total liabilities			6,779.3						6,884.9
Commitments and contingencies (Note 4)
Stockholders’ equity:
Common stock, $0.002 par value			1.7						1.7
Additional paid-in capital			14,589.9						14,512.0
Accumulated other comprehensive loss			(0.9)						—
Retained earnings			903.2						1,123.5
Total stockholders’ equity			15,493.9						15,637.2
Total liabilities and stockholders’ equity			$	22,273.2					$	22,522.1

See accompanying notes to unaudited condensed consolidated financial statements

MARVELL TECHNOLOGY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

			Three Months Ended
			April 29, 2023						April 30, 2022
Net revenue			$	1,321.7					$	1,446.9
Cost of goods sold			764.5						696.0
Gross profit			557.2						750.9
Operating expenses:
Research and development			480.7						444.1
Selling, general and administrative			199.0						235.7
Restructuring related charges			59.9						1.3
Total operating expenses			739.6						681.1
Operating income (loss)			(182.4)						69.8
Interest income			2.5						0.5
Interest expense			(52.7)						(36.3)
Other income, net			0.3						5.2
Interest and other loss, net			(49.9)						(30.6)
Income (loss) before income taxes			(232.3)						39.2
Provision (benefit) for income taxes			(63.4)						204.9
Net loss			$	(168.9)					$	(165.7)
Net loss per share - basic			$	(0.20)					$	(0.20)
Net loss per share - diluted			$	(0.20)					$	(0.20)
Weighted-average shares:
Basic			856.7						848.0
Diluted			856.7						848.0

See accompanying notes to unaudited condensed consolidated financial statements

MARVELL TECHNOLOGY, INC.

**UNAUDITED C

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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 changes in general macroeconomic conditions such as economic slowdowns, inflation, stagflation, rising interest rates, financial institution instability and recessions 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 and the U.S. National Science and Technology Council’s designation of semiconductors as a critical and emerging technology;

• 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 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 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 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 our ability to design, develop and introduce new and enhanced products, in particular in the 5G and Cloud markets, as well as for Artificial Intelligence (AI) solutions, in a timely and effective manner, as well as our ability to anticipate and adapt to changes in technology;

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

• 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 debt obligations;

• 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 including risks related to severe financial hardship or bankruptcy or other attrition of one or more of our major customers, particularly as our major customers comprise an increasing percentage 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, assembly, testing and packaging 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, regulatory investigations, or contractual disputes with customers 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, semiconductor and related industries and end markets;

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

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

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

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

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

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 data 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, enterprise networking, carrier infrastructure, consumer, and automotive/industrial end markets.

Net revenue in the first quarter of fiscal 2024 was $1.3 billion and was 9% lower than net revenue of $1.4 billion in the first quarter of fiscal 2023. This was due to a decrease in sales to the data center end market by 32% and a decrease in sales to the consumer end market by 20%. These decreases were partially offset by an increase in sales to the enterprise networking end market by 27% and an increase in sales to the carrier infrastructure end market by 15%. The sales to the automotive/industrial end market were relatively flat for the three months ended April 29, 2023 compared to the three months ended April 30, 2022.

During the second half of fiscal 2023, in response to a softening demand environment, customers started requesting to push out shipments and reschedule orders to manage their inventory. We have seen these inventory corrections continue to impact our storage customers, as well as enterprise networking and our wired carrier customers. In addition, we have continued to see low demand from our OEM customers in China. During the first quarter of fiscal 2024, we have seen a strong increase in demand for our optical products, driven by AI applications.

To secure capacity over the long term, we have entered into and expect to continue to enter into capacity reservation arrangements with certain foundries and partners for substrates. See “Note 4 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

We expect that the U.S. government’s export restrictions on certain Chinese customers to continue to impact our revenue. 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 cannot easily quantify such as the fact that some of our other customers’ products which use our solutions may also be impacted by export restrictions. See also Part II, Item IA, “Risk Factors,” including, but not limited to, the risk detailed under the caption “Adverse changes in the political and economic policies of the U.S. government in connection with trade with China and Chinese customers have reduced the demand for our products and damaged our business.”

Restructuring. During the quarter ended April 29, 2023, we initiated a restructuring plan and incurred $59.9 million restructuring related charges to streamline our organization and optimize resources. See “Note 7 - Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

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 our common 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. During the three months ended April 29, 2023, we did not repurchase shares of our common stock. As of April 29, 2023, $449.5 million remained available for future stock repurchases.

As of April 29, 2023, a total of 310.4 million shares have been repurchased since inception of our current and previous stock repurchase programs for an aggregate total of $4.4 billion in cash. We returned $51.4 million to stockholders in the three months ended April 29, 2023 in cash dividends.

Cash and Short-Term Investments. Our cash and cash equivalents were $1.0 billion at April 29, 2023, which were $117.3 million higher than our balance at our fiscal year ended January 28, 2023 of $911.0 million.

Sales and Customer Composition. Our accounts receivable was concentrated with four customers at April 29, 2023, who represented a total of 55% of gross accounts receivable, compared with four customers at April 30, 2022, who represented 52% of gross accounts receivable. During the three months ended April 29, 2023, there was one customer, in addition to two distributors, whose revenue as a percentage of net revenue was 10% or greater of total net revenue. During the three months ended April 30, 2022, there was no net revenue attributable to a 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 significant customers 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 29, 2023						April 30, 2022
Customer:
Customer A			15%						*
Distributor:
Distributor A			16%						19%
Distributor B			11%						*

*Less than 10% of net revenue.

We continue to 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 with operations 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 69% of our net revenue in the three months ended April 29, 2023, and approximately 75% of net revenue in the three months ended April 30, 2022. 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 many 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 or be unable to obtain the supplies or contract manufacturing capacity to meet that demand, 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 29, 2023 to our critical accounting policies and estimates from the information provided in the “Critical Accounting Policies and Estimates” section of Part II, Item 7, 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 28, 2023.

In the current macroeconomic environment, 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 29, 2023						April 30, 2022
Net revenue			100.0		%				100.0		%
Cost of goods sold			57.8						48.1
Gross profit			42.2						51.9
Operating expenses:
Research and development			36.4						30.7
Selling, general and administrative			15.1						16.3
Restructuring related charges			4.5						0.1
Total operating expenses			56.0						47.1
Operating income (loss)			(13.8)						4.8
Interest income			0.2						—
Interest expense			(4.0)						(2.5)
Other income (loss), net			—						0.4
Income (loss) before income taxes			(17.6)						2.7
Provision (benefit) for income taxes			(4.8)						14.2
Net loss			(12.8)		%				(11.5)		%

Three Months Ended April 29, 2023 and April 30, 2022

Net Revenue

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Net revenue			$	1,321.7					$	1,446.9					(8.7)%

Our net revenue for the three months ended April 29, 2023 decreased by $125.2 million compared to net revenue for the three months ended April 30, 2022. This was due to a decrease in sales to the data center end market by 32% and a decrease in sales to the consumer end market by 20%. The decreases were partially offset by an increase in sales to the enterprise networking end market by 27% and an increase in sales to the carrier infrastructure end market by 15%. The sales to the automotive/industrial end market were relatively flat for the three months ended April 29, 2023 compared to the three months ended April 30, 2022.

The overall decreases in net revenue of 8.7% for the three months ended April 29, 2023 compared to three months ended April 30, 2022, were primarily driven by lower unit shipments related to storage products.

Cost of Goods Sold and Gross Profit

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Cost of goods sold			$	764.5					$	696.0					9.8%
% of net revenue			57.8		%				48.1		%
Gross profit			$	557.2					$	750.9					(25.8)%
% of net revenue			42.2		%				51.9		%

Cost of goods sold as a percentage of net revenue increased for the three months ended April 29, 2023 compared to the three months ended April 30, 2022, which is primarily due to a shift in product mix and increased inventory reserves. As a result, gross margin for the three months ended April 29, 2023 decreased by 9.7 percentage points compared to the three months ended April 30, 2022.

Research and Development

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Research and development			$	480.7					$	444.1					8.2%
% of net revenue			36.4		%				30.7		%

Research and development expense increased by $36.6 million in the three months ended April 29, 2023 compared to the three months ended April 30, 2022. The increase was primarily due to $28.9 million of higher employee personnel-related costs.

Selling, General and Administrative

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Selling, general and administrative			$	199.0					$	235.7					(15.6)%
% of net revenue			15.1		%				16.3		%

Selling, general and administrative expense decreased by $36.7 million in the three months ended April 29, 2023 compared to the three months ended April 30, 2022. The decrease was primarily due to a $15.0 million charge in the three months ended April 30, 2022 related to a contractual dispute, which did not repeat in the three months ended April 29, 2023, $11.7 million of lower intangibles amortization expense related to intangibles that were fully amortized during the first quarter of fiscal 2023 and $9.5 million of lower integration costs associated with our prior acquisitions.

Restructuring Related Charges

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Restructuring related charges			$	59.9					$	1.3					4,507.7%
% of net revenue			4.5		%				0.1		%

We recognized $59.9 million of total restructuring related charges in the three months ended April 29, 2023 as a result of our restructuring plan to streamline our organization and optimize resources. See “Note 7 – Restructuring” in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Interest Income

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Interest income			$	2.5					$	0.5					400.0%
% of net revenue			0.2		%				—		%

Interest income increased by $2.0 million in the three months ended April 29, 2023 compared to the three months ended April 30, 2022 due to higher interest rates on our invested cash.

Interest Expense

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Interest expense			$	(52.7)					$	(36.3)					45.2%
% of net revenue			(4.0)		%				(2.5)		%

Interest expense increased by $16.4 million in the three months ended April 29, 2023 compared to the three months ended April 30, 2022. The increase was primarily due to higher interest expense associated with the 2024 and 2026 Term Loans.

Other Income, Net

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Other income, net			$	0.3					$	5.2					(94.2)%
% of net revenue			—		%				0.4		%

Other income, net, decreased by $4.9 million in the three months ended April 29, 2023 compared to the three months ended April 30, 2022. The higher income in the three months ended April 30, 2022 was primarily due to a gain recognized from an equity investment in a privately-held company.

Provision (Benefit) for Income Taxes

			Three Months Ended
			April 29, 2023						April 30, 2022						% Change
			(in millions, except percentage)
Provision (benefit) for income taxes			$	(63.4)					$	204.9					(130.9)%

Our income tax benefit for the three months ended April 29, 2023 was $63.4 million compared to a tax expense of $204.9 million for the three months ended April 30, 2022. Our income tax benefit of $63.4 million for the three months ended April 29, 2023 differed from the 21% federal income tax rate, primarily due to a substantial portion of earnings or losses being taxed or benefited at rates lower than the U.S. statutory rate, net of the impact of U.S. taxation of foreign operations, benefits from tax credits, valuation allowance releases, and discrete tax benefits and expenses for excess deductions and deficiencies on stock-based compensation, respectively. Our income tax expense for the three months ended April 30, 2022 differed from the U.S. federal tax rate of 21% 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.

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 continue to 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 Part II Item 1A – Risk Factors” under the caption “Changes in existing taxation benefits, tax rules or tax practices may adversely affect our financial results.”

Liquidity and Capital Resources

Our principal source of liquidity as of April 29, 2023 consisted of approximately $1.0 billion of cash and cash equivalents, of which approximately $592.3 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 8 – 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 the 2024 and 2026 Term Loan Agreement to obtain the 2024 and 2026 Term Loans. On April 14, 2023, we entered into an amendment to the 2024 and 2026 Term Loan Agreement. The amendment modifies the existing agreement to, among other things, adopt SOFR interest rates and conform the maximum leverage ratio financial covenant with the amended and restated revolving credit agreement.

For the quarter ended April 29, 2023, we repaid $21.9 million of the principal outstanding of the 2026 Term Loan. As of April 29, 2023, we had $735.0 million borrowings outstanding under the 2024 Term Loan and $765.6 million borrowings outstanding under the 2026 Term Loan.

In December 2020, we also executed a debt agreement to obtain a $750.0 million revolving credit facility. On April 14, 2023, we entered into an agreement to amend and restate the credit facility to increase the borrowing capacity to $1.0 billion (as so amended and restated, the “2023 Revolving Credit Facility”). The 2023 Revolving Credit Facility has a 5-year term and a stated floating interest rate which equates to an adjusted term SOFR plus an applicable margin. During the first quarter of fiscal 2024, we drew down $200.0 million on the 2023 Revolving Credit facility that remained outstanding as at April 29, 2023.

As of April 29, 2023, we had $2.0 billion aggregate principal amount of the Senior Notes outstanding and $1.0 billion aggregate principal amount of the MTG/MTI Senior Notes outstanding. The notes are registered under the Securities Act.

See “Note 3 – 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 2023 Revolving Credit Facility will be sufficient to cover our working capital needs, capital expenditures, investment requirements, any declared dividends, repurchases of our common stock and commitments (including those discussed in “Note 4 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements) 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 2023 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 provided by operating activities for the three months ended April 29, 2023 was $208.4 million. We had a net loss of $168.9 million adjusted for the following non-cash items: amortization of acquired intangible assets of $270.0 million, stock-based compensation expense of $143.2 million, deferred income tax benefit of $139.1 million, depreciation and amortization of $78.4 million, restructuring related impairment charges of $10.1 million, and $12.8 million of net loss from other non-cash items. Cash inflow from working capital of $1.9 million for the three months ended April 29, 2023 was primarily driven by decreases in accounts receivable, inventory, and prepaid expenses and other assets, partially offset by decreases in accounts payable, accrued liabilities and other non-current liabilities and accrued employee compensation. The decrease in accounts receivable was primarily due to timing of shipments and a reduction of revenue due to higher customer inventories. The decrease in inventory was primarily a result of managing the supply chain in a slower demand environment. The decrease in prepaid expenses and other assets was primarily driven by a decrease in prepaid ship and debits due to lower inventory balance at distributors resulting from lower shipments to and higher sales at distributors, partially offset by prepayments on supply capacity reservation agreements. The decrease in accounts payable was primarily due to the timing of payments. The decrease in accrued liabilities and other non-current liabilities was primarily driven by lower ship and debit claims accrual due to lower inventory balance at distributors resulting from lower shipments to and higher sales at distributors, partially offset by increases in restructuring accruals and income tax payable. The decrease in accrued employee compensation was due to bonus payout.

Net cash 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 acquisition of Innovium, Inc. of $9.3 million, restructuring related impairment charges of $0.9 million, and $5.8 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 was to support future customer demand. The increase in prepaid expenses and other assets was primarily due to prepayments on supply capacity reservation agreements. The decrease in accrued employee compensation was 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.

Cash Flows from Investing Activities

For the three months ended April 29, 2023, net cash used in investing activities of $102.7 million was primarily driven by purchases of property and equipment of $99.8 million, and purchases of technology licenses of $2.8 million.

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.

Cash Flows from Financing Activities

For the three months ended April 29, 2023, net cash provided by financing activities of $11.6 million was primarily attributable to $200.0 million drawdown from our 2023 Revolving Credit Facility and $7.5 million in proceeds from our employee stock plans, partially offset by $72.6 million for tax withholding payments on behalf of employees for net share settlements, $51.4 million for payment of our quarterly dividends, $50.0 million payments on technology license obligations, and $21.9 million repayment of debt.

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.

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 included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023. We also discuss updates of our significant commitments in “Note 4 – Commitments and Contingencies” in the Notes to the Unaudited Condensed Consolidated Financial Statements. Other than as described above, there were no material changes to our capital resources and material cash requirements during the three months ended April 29, 2023.

Indemnification Obligations

See “Note 4 – 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.