MACOM Technology Solutions Holdings, Inc. (MTSI) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially and adversely from those referred to herein due to a number of factors, including but not limited to those described below and in “Item 1A - Risk Factors” and elsewhere in this Annual Report.

OVERVIEW

We design and manufacture semiconductor products for I&D, Data Center and Telecom industries. Headquartered in Lowell, Massachusetts, we have more than 70 years of application expertise, with silicon, GaAs, GaN and InP fabrication, manufacturing, assembly and test, and operational facilities throughout North America, Europe and Asia. We design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability. We offer a broad portfolio of thousands of standard and custom devices, which include ICs, MCMs, diodes, amplifiers, switches and switch limiters, passive and active components and RF and optical subsystems, which make up dozens of product lines that service over 6,000 end customers in our three primary markets. Our semiconductor products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless basestations, high-capacity optical networks, data center networks, radar, medical systems and test and measurement applications. Our primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; (2) Data Center, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and FTTx/PON, among others.

See “Item 1 - Business” for additional information.

Basis of Presentation

We have one reportable operating segment and all intercompany balances have been eliminated in consolidation.

We have a 52 or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 2023, 2022 and 2021 each consisted of 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we typically include the extra week in the first quarter of our fiscal year.

Description of Our Revenue

Revenue. Our revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical and photonic semiconductor products. We design, integrate, manufacture and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, our network of independent sales representatives and our distributors. We believe the primary drivers of our future revenue growth will include:

•continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets;

•introducing new products using advanced technologies, added features, higher levels of integration and improved performance;

•increasing content of our semiconductor solutions in customers’ systems through cross-selling our product lines;

•leveraging our core strength and leadership position in standard, catalog products that service all of our end applications; and

•engaging early with our lead customers to develop custom and standard products.

Our core strategy is to develop and innovate high-performance products that address our customers’ most difficult technical challenges in our primary markets: I&D, Data Center and Telecom.

We expect our revenue in the I&D market to be driven by the expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, industrial, automotive, scientific and medical applications, further supported by growth in applications for our multi-market catalog products.

We expect our revenue in the Data Center market to be driven by the adoption of cloud-based services and the upgrade of data center architectures, to 100G, 200G, 400G and 800G interconnects, which we expect will drive adoption of higher speed optical and photonic components.

We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements. The preparation of financial statements, in conformity with generally accepted accounting principles in the U.S., requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty and could be material if our actual or expected experience were to change unexpectedly. On an ongoing basis, we re-evaluate our estimates and judgments.

We base our estimates and judgments on our historical experience and on other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates and material effects on our operating results and financial position may result. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.

Inventory valuation

When we evaluate inventory for excess quantities and obsolescence, we utilize historical product usage experience and expected demand for establishing our reserve estimates. Our actual product usage may vary from the historical experience and estimating demand is inherently difficult, particularly given the cyclical nature of the semiconductor industry, both of these factors may result in us recording excess and obsolete inventory amounts that do not match the required amounts.

Revenue reserves

We establish revenue reserves, primarily for distributor price adjustments, which requires the use of judgment and estimates that impact the amount and timing of revenue recognition. We record reductions of revenue for such distributor pricing adjustments in the same period that the related revenue is recorded based on estimates of historical pricing adjustments granted to distributors. The actual pricing adjustments granted to distributors may significantly exceed or be less than the historical estimates resulting in adjustments to revenue in the incorrect period.

Business Combinations

We apply significant estimates and judgments in order to determine the fair value of the identified tangible and intangible assets acquired, liabilities assumed and goodwill recognized in business combinations. The value of all assets and liabilities are recognized at fair value as of the acquisition date using a market participant approach. In measuring the fair value, we utilize a number of valuation techniques. When determining the fair value of property and equipment acquired, generally we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, typically determined using a discounted cash flow valuation method, we use assumptions such as the timing and amount of future cash flows, discount rates, weighted average cost of capital and estimated useful lives. These assessments can be significantly affected by our judgments.

Goodwill and intangible asset valuation

Significant management judgment is required in our valuation of goodwill and intangible assets, many of which are based on the creation of forecasts of future operating results that are used in the valuation, including (i) estimation of future cash flows, (ii) estimation of the long-term rate of growth for our business, (iii) estimation of the useful life over which cash flows will occur, (iv) terminal values, if applicable, and (v) the determination of our weighted average cost of capital, which helps determine the discount rate. It is possible that these forecasts may change, and our performance projections included in our forecasts of future results may prove to be inaccurate. The value of our goodwill and purchased intangible assets could also be impacted by future adverse changes, such as a decline in the valuation of technology company stocks, including the valuation of our common stock, or a significant slowdown in the worldwide economy or in the optical communications equipment or semiconductor industry.

Share-based compensation expense

We account for share-based compensation arrangements using the fair value method as described in Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements in this Annual Report. There are a significant number of estimates and assumptions required for the initial valuation as well as for the ongoing valuation of certain share-based compensation items. These estimates may vary significantly and the assumptions may not be accurate resulting us to make adjustments to historically recorded balances.

Income taxes

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We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure together and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction. To the extent we believe that recovery is not likely, we must establish a valuation allowance. We provide valuation allowances for certain deferred tax assets where it is more likely than not that any portion will not be realized.

On a periodic basis, we reassess valuation allowances on our deferred tax assets, weighing positive and negative evidence, to assess recoverability. We determined that the valuation allowance on the majority of our domestic NOLs and R&D tax credit carryforwards and other deferred tax assets should be released as of September 30, 2022. In making this determination, we considered positive evidence, including significant cumulative consolidated and U.S. income over the three years ended September 30, 2022, continued revenue growth combined with profitability and expectations regarding financial forecasts. We also considered negative evidence, including the uncertainty relating to the economic and geopolitical environment and global supply chain.

Significant judgment is required in making these assessments to maintain or reverse the majority of our valuation allowances. To the extent our future expectations change, we would have to reassess the recoverability of our deferred tax assets at that time. This valuation allowance release resulted in a tax benefit of $202.8 million, or $2.91 per basic share in fiscal year 2022.

The application of tax laws and regulations to calculate our tax liabilities is subject to legal and factual interpretation, judgment and uncertainty in a multitude of jurisdictions. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings. We recognize potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and interest will be due. We record an amount as an estimate of probable additional income tax liability at the largest amount that we feel is more likely than not, based upon the technical merits of the position, to be sustained upon audit by the relevant tax authority.

Historically, we have not experienced material differences in our estimates and actual results.

For additional information related to these and other accounting policies refer to Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report which is incorporated by reference herein.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our Statements of Operations data (in thousands):

(1)Includes (a) amortization expense related to intangible assets arising from acquisitions and (b) share-based compensation expense included in our Consolidated Statements of Operations as set forth below (in thousands):

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(2)Fiscal year 2023 includes $7.7 million of acquisition-related professional fees expense.

(3)Represents changes in the fair value of common stock warrants recorded as liabilities and adjusted each reporting period to fair value. See Note 18 - Stockholders' Equity to the Consolidated Financial Statements included in this Annual Report for additional information regarding the common stock warrants.

(4)Fiscal year 2022 includes a gain on sale of our equity method investment of $118.2 million. Includes non-cash net losses of $3.3 million and $2.4 million for fiscal years 2022 and 2021, respectively, associated with our equity method investment based on our proportionate share of its losses and changes in equity. The net loss amount for fiscal year 2021 includes a non-cash gain of $9.8 million associated with changes in the investment’s equity. See Note 5 - Investments to the Consolidated Financial Statements included in this Annual Report for additional information. Fiscal year 2021 also includes losses on extinguishment of debt of $4.4 million. See Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report for additional information.

(5)Fiscal year 2023 and 2022 includes a non-cash benefit of $12.1 million and $202.8 million, respectively, related to the partial release of our valuation allowance. See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information.

The following table sets forth, for the periods indicated, our Statements of Operations data expressed as a percentage of our revenue:

Comparison of Fiscal Year Ended September 29, 2023 to Fiscal Year Ended September 30, 2022

Revenue. In fiscal year 2023, our revenue decreased by $26.8 million, or 4.0%, to $648.4 million from $675.2 million for fiscal year 2022. Fiscal years 2023 and 2022 each consisted of 52 weeks.

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Revenue from our primary markets, the percentage of change between the years and revenue by primary markets expressed as a percentage of total revenue were (in thousands, except percentages):

In fiscal year 2023, our I&D market revenue increased by $22.8 million, or 7.7%, compared to fiscal year 2022. The increase was primarily driven by defense program shipments, incremental revenue from recent acquisitions, sales of GaN products and expansion of high-performance analog product lines into the I&D market, partially offset by a decrease in sales of legacy products.

In fiscal year 2023, our Data Center market revenue increased by $8.9 million, or 6.4%, compared to fiscal year 2022. The increase was primarily driven by an increase in sales of our legacy connectivity products, which were supply constrained in prior periods, and an increase in sales of 400G and 800G high-performance analog Data Center products, partially offset by a decrease in sales of optical semiconductor products.

In fiscal year 2023, our Telecom market revenue decreased by $58.4 million, or 24.1%, compared to fiscal year 2022. The decrease was primarily driven by a decrease in sales of products targeted for 5G applications, a decrease in sales of carrier-based optical semiconductor products, a decrease in sales of RF and microwave products for broadband access and video infrastructure and a decrease in sales of legacy backhaul products, primarily in China, partially offset by higher sales to satellite communications customers and higher sales of legacy high-performance analog Telecom products.

Gross profit. In fiscal year 2023, our gross profit decreased by $20.4 million, or 5.0%, compared to fiscal year 2022. Gross margin of 59.5% in fiscal year 2023 decreased 70 basis points, compared to fiscal year 2022. The decrease in gross profit during 2023 was primarily due to lower sales, increases in production supplies, employee headcount primarily due to acquisitions, depreciation expense and variable costs, partially offset by lower intangible asset amortization.

Research and development. In fiscal year 2023, research and development expense increased by $0.3 million, or 0.2%, to $148.5 million, representing 22.9% of revenue, compared with $148.2 million, representing 22.0% of revenue, in fiscal year 2022. Research and development expense increased during fiscal year 2023 primarily as a result of an increase in employee headcount primarily due to acquisitions, employee-related costs and development foundry costs, offset by decreases in design software costs, supplies expense and lower variable compensation.

Selling, general and administrative. In fiscal year 2023, selling, general and administrative expenses increased by $4.6 million, or 3.7%, to $129.9 million, or 20.0% of revenue, compared with $125.3 million, or 18.6% of revenue, for fiscal year 2022. Selling, general and administrative expenses increased during fiscal year 2023 primarily due to an increase in acquisition-related professional fees, employee headcount, travel expense and software costs, partially offset by decreases in intangible amortization, share-based compensation expense and lower variable compensation.

Interest income. In fiscal year 2023, interest income was $20.8 million, or 3.2% of our revenue, compared to $4.3 million of interest income, or 0.6% of our revenue, for fiscal year 2022. The change in fiscal year 2023 is due to higher yields on short-term investments and cash equivalents.

Interest expense. In fiscal year 2023, interest expense was $12.4 million, or 1.9% of our revenue, compared to $8.6 million of interest expense, or 1.3% of our revenue, for fiscal year 2022. The increase in fiscal year 2023 is primarily due to an increase in our interest rate on the Term Loans (as defined in Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report) prior to our repayment of the total outstanding principal balance of the Term Loans in August 2023.

Income tax expense (benefit). In fiscal year 2023, income tax expense was $23.6 million, or 3.7% of revenue, compared to a benefit of $196.8 million, or 29.2% of revenue, for fiscal year 2022. The change in the provision is primarily due to the $202.8 million partial release of the valuation allowance on our domestic NOL and R&D tax credit carryforwards and other deferred taxes in our fiscal fourth quarter of 2022. See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information. Further information on the significant judgments related to its release can be found above in “Critical Accounting Policies and Estimates.”

For fiscal year 2023, our effective tax rate was 20.5% and was comparable to the U.S. federal income tax rate of 21%. Our effective tax rate for fiscal year 2023, as compared to the U.S. federal income tax rate, is impacted primarily by income earned outside the U.S. (i.e., global intangible low taxed income), resulting in a 15.7% increase, offset primarily by partial release of our valuation

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allowance, resulting in a 10.6% decrease and research and development credits, resulting in a 4.8% decrease. For fiscal year 2022, our effective income tax rate of (81.0)% was primarily driven by tax benefits arising from the partial release of the valuation allowance on U.S. deferred tax assets.

Comparison of Fiscal Year Ended September 30, 2022 to Fiscal Year Ended October 1, 2021

Revenue. In fiscal year 2022, our revenue increased by $68.3 million, or 11.2%, to $675.2 million from $606.9 million for fiscal year 2021. Fiscal years 2022 and 2021 each consisted of 52 weeks.

Revenue from our primary markets, the percentage of change between the years and revenue by primary markets expressed as a percentage of total revenue were (in thousands, except percentages):

In fiscal year 2022, our Telecom market revenue increased by $54.3 million, or 28.8%, compared to fiscal year 2021. The increase was primarily driven by an increase in RF and microwave products for metro long haul broadband access and video infrastructure, products targeted for 5G applications and carrier-based optical semiconductor products.

In fiscal year 2022, our I&D market revenue increased by $14.1 million, or 5.0%, compared to fiscal year 2021. The increase was primarily related to new program wins and expansion of our product lines, partially offset by lower sales of legacy products.

In fiscal year 2022, our Data Center market revenue decreased by $0.2 million, or 0.1%, compared to fiscal year 2021. The decrease was primarily due to a decrease in sales of legacy products partially offset by an increase in sales of our high performance analog Data Center products.

Gross profit. In fiscal year 2022, our gross profit increased by $64.3 million, or 18.8%, compared to fiscal year 2021. Gross margin of 60.2% in fiscal year 2022 increased 390 basis points, compared to fiscal year 2021. The increase in gross profit during 2022 was primarily as a result of higher sales, favorable revenue mix, production efficiencies, as well as decreases in intangible amortization expense, partially offset by increases in variable costs, production supplies, employee headcount and employee-related costs.

Research and development. In fiscal year 2022, research and development expense increased by $9.4 million, or 6.8%, to $148.2 million representing 22.0% of revenue, compared with $138.8 million, representing 22.9% of revenue in fiscal year 2021. Research and development expense increased during fiscal year 2022 primarily as a result of an increase in employee headcount, employee-related costs, share-based compensation expense, depreciation expense, development foundry costs and design software costs, partially offset by lower lease costs.

Selling, general and administrative. In fiscal year 2022, selling, general and administrative expenses increased by $3.3 million, or 2.7%, to $125.3 million, or 18.6% of revenue, compared with $122.0 million, or 20.1% of revenue, for fiscal year 2021. Selling, general and administrative expenses increased during fiscal year 2022 primarily due to an increase in employee-related costs, share-based compensation expense and variable selling costs, partially offset by a decrease in intangible amortization.

Warrant liability expense. In fiscal year 2022, there was no warrant expense, compared to an expense of $11.1 million, or 1.8% of revenue, for fiscal year 2021. In fiscal year 2021, all of the warrants were exercised and 857,631 shares of common stock were issued. See Note 18 - Stockholders' Equity in this Annual Report for additional information regarding the common stock warrants.

Interest expense, net. In fiscal year 2022, interest expense, net was $4.3 million, or 0.6% of our revenue, compared to $20.6 million, or 3.4% of our revenue, for fiscal year 2021. The decrease in fiscal year 2022 is primarily due to the issuance of our 2026 Convertible Notes in fiscal year 2021 with a lower fixed interest rate as compared to our Term Loans, the adoption of ASU 2020-06, as well as the reduction in our Term Loan balance in fiscal year 2021. See Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report for more information.

Other income (expense), net. In fiscal year 2022, other income, net was $114.7 million, or 17.0% of our revenue, compared to other expense, net of $6.3 million, or 1.0% of our revenue, for fiscal year 2021. The increase in fiscal year 2022 is primarily due to the gain on sale of our equity method investment of $118.2 million. See Note 5 - Investments to our Consolidated Financial Statements included in this Annual Report for more information.

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Provision for income taxes. In fiscal year 2022, income tax benefit was $196.8 million, or 29.2% of revenue, compared to an expense of $5.0 million, or 0.8% of revenue, for fiscal year 2021. The change in the provision is primarily due to the $202.8 million partial release of the valuation allowance on our domestic NOL and R&D tax credit carryforwards and other deferred taxes in our fiscal fourth quarter of 2022. See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information. Further information on the significant judgments related to its release can be found above in “Critical Accounting Policies and Estimates.”

The difference between the U.S. federal income tax rate of 21% and our effective income tax rate of (81.0)% for fiscal year 2022 was primarily driven by tax benefits arising from the release of the valuation allowance on domestic deferred tax assets and income taxed in foreign jurisdictions at generally lower tax rates. For fiscal year 2021, our effective income tax rate of 11.6% was primarily impacted by the continuation of a full valuation allowance against any tax expense associated with U.S. income and income taxed in foreign jurisdictions at generally lower tax rates.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flow activities for the fiscal years ended September 29, 2023 and September 30, 2022, respectively (in thousands):

Cash Flow from Operating Activities:

Our cash flow from operating activities for fiscal year 2023 was $166.9 million and consisted of a net income of $91.6 million, plus adjustments to reconcile our net income to cash provided by operating activities of $103.1 million, and cash used by operating assets and liabilities of $27.8 million. Adjustments to reconcile our net income to cash provided by operating activities of $103.1 million primarily included depreciation and intangible amortization expense of $52.2 million, share-based compensation expense of $38.1 million and deferred income tax expense of $19.8 million, partially offset by $11.8 million in amortization on marketable securities. In addition, cash used by operating assets and liabilities was $27.8 million for fiscal year 2023, primarily driven by a decrease in accrued and other liabilities of $21.3 million, an increase in inventory of $10.6 million, a decrease in accounts payable of $6.7 million, partially offset by a decrease in accounts receivable of $12.3 million.

Our cash flow from operating activities for fiscal year 2022 was $177.0 million and consisted of a net income of $440.0 million, plus adjustments to reconcile our net income to cash provided by operating activities of $216.3 million, and changes in operating assets and liabilities of $46.7 million. Adjustments to reconcile our net income to cash provided by operating activities of $216.3 million primarily included a gain of $200.4 million primarily related to the release of the valuation allowance, a net gain of $114.9 million related to the sale of our equity method investment offset by equity method investment losses, depreciation and intangible amortization expense of $57.2 million and share-based compensation expense of $41.2 million. In addition, cash used by operating assets and liabilities was $46.7 million for fiscal year 2022, primarily driven by an increase in accounts receivable of $17.0 million, an increase in inventory of $32.3 million, a decrease in accrued and other liabilities of $5.6 million, partially offset by a decrease in prepaid expenses and other assets of $5.6 million and an increase in accounts payable of $2.4 million.

Cash Flow from Investing Activities:

Our cash flow from investing activities for fiscal year 2023 of $36.3 million consisted primarily of proceeds of $515.8 million related to the sale and maturities of short-term investments and proceeds from the sale of equipment of $8.0 million, partially offset by $375.1 million in purchases of short-term investments, $87.7 million for acquisitions, net of cash acquired and capital expenditures of $24.7 million. For additional information on the cash paid for our acquisitions, net of cash acquired, see Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report.

Our cash flow used in investing activities for fiscal year 2022 of $182.9 million consisted primarily of $528.8 million in purchases of short-term investments and capital expenditures of $26.5 million, partially offset by proceeds from the sale of our equity method investment of $127.8 million and proceeds of $244.6 million related to the sale and maturities of short-term investments. For additional information on the sale of our equity method investment, see Note 5 - Investments to our Consolidated Financial Statements included in this Annual Report.

Cash Flow from Financing Activities:

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During fiscal year 2023, our cash used in financing activities of $149.0 million was primarily related to the $120.8 million payment of the total outstanding principal balance of our Term Loans (as defined in Note 15 - Debt), $32.6 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by $5.6 million of proceeds from employee stock purchases. For additional information on the payment of the total outstanding principal balance of our Term Loans, see Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report.

During fiscal year 2022, our cash used in financing activities of $28.9 million was primarily related to $36.0 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by $8.1 million of proceeds from stock option exercises and employee stock purchases.

Liquidity

As of September 29, 2023, we held $174.0 million of cash and cash equivalents, primarily deposited with financial institutions as well as $340.6 million of liquid short-term investments. The undistributed earnings of certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings. We believe the decision to reinvest these earnings will not have a significant impact on our liquidity. As of September 29, 2023, cash held by our indefinitely reinvested foreign subsidiaries was $16.5 million, which, along with cash generated from foreign operations, is expected to be used in the support of international growth and working capital requirements as well as the repayment of certain intercompany loans.

On August 2, 2023, we repaid the total outstanding principal balance on our Term Loans of $120.8 million and accrued interest of less than $0.1 million with cash-on-hand.

We plan to use our remaining available cash and cash equivalents as well as our short-term investments for general corporate purposes, including working capital, or for the acquisition of or investment in complementary technologies, design teams, products and businesses. On August 22, 2023, we announced the acquisition of Wolfspeed, Inc.’s RF business and in connection with the closing of the transaction we expect to pay $75.0 million, utilizing existing available cash, and also issue 711,528 shares during our fiscal first quarter of 2024. We believe that our cash and cash equivalents, short-term investments and cash generated from operations will be sufficient to meet our working capital requirements for at least the next twelve months. We may need to raise additional capital from time to time through the issuance and sale of equity or debt securities, and there is no assurance that we will be able do so on favorable terms or at all.

As of September 29, 2023, we had no off-balance sheet arrangements.

The following is a summary of our significant contractual payment obligations for consolidated debt, purchase agreements, leases, financing obligations, other commitments and long-term liabilities as of September 29, 2023, and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

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(1)Our 2026 Convertible Notes will mature in March 2026.

(2)Estimated future lease payments, see Note 17 - Leases to the Consolidated Financial Statements included in this Annual Report for additional information.

(3)We have purchase commitments of $69.6 million primarily related to services and inventory supply arrangements of which approximately $56.9 million that is non-cancelable. In addition, we have $25.5 million in fixed payments associated with a power purchase agreement that commenced in fiscal 2023 and has a remaining 14-year term. See Note 16- Financing Obligation for additional detail on the power purchase agreement. Remaining purchase commitment of $8.4 million relates to amounts payable for software over a two year period.

As of September 29, 2023, we estimated $1.9 million in asset retirement obligations primarily for the restoration of leased facilities upon the termination of the related leases. Although it is reasonably possible that our estimates could change materially in the next twelve months, we are presently unable to reliably estimate when any cash settlement of these obligations may occur.