SYNAPTICS Inc (SYNA) FY 2022 MD&A

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

Forward-Looking Statements and Factors That May Affect Results

You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth elsewhere in this report and under Item 1A. Risk Factors.

Impact of COVID-19

Although many of these restrictions and other containment measures implemented by governmental authorities in response to the COVID-19 pandemic have since been lifted or scaled back, ongoing surges of COVID-19 and its variants have resulted in a variety of responses in the many geographic locations in which we do business, from no actions taken to and up to and including the re-imposition of lockdowns and containment measures designed to mitigate or reduce the rapid spread of COVID-19 and its variants.

The health and wellbeing of our workforce is our highest priority, and a large number of our workforce has been vaccinated. Many of our employees that worked from home at the onset of COVID-19, or during subsequent lockdowns, have returned full-time or on a hybrid basis to our office environment. For those employees that have returned to the office, we continue to adhere to return to work protocols, based on guidance from local and global health organizations and applicable laws and regulations.

To date, we have not incurred significant disruptions to our business or a materially negative impact on our consolidated results of operations and financial condition from the COVID-19 outbreak and continue to believe our business will not be severely impacted as steps continue to be taken globally to mitigate the spread and vaccinate large portions of the population. However, if more infectious COVID-19 variants become resistant to the existing vaccines, we, our customer, and our suppliers could experience renewed and sustained business disruption.

We will continue to evaluate the impact to our business, consolidated results of operations, and financial condition and may take actions that we deem necessary or appropriate to respond to the ongoing pandemic.

Overview

We are a leading worldwide developer and fabless supplier of premium mixed signal semiconductor solutions changing the way humans engage with connected devices and data, engineering exceptional experiences throughout the home, at work, in the car and on the go. We believe our results to date reflect the combination of our customer focus and the strength of our intellectual property and our engineering know-how, which allow us to develop or engineer products that meet the demanding design specifications of our OEMs.

We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. For fiscal 2022, revenue from the IoT product applications market accounted for 63.3% of our net revenue, revenue from the PC product applications market accounted for 19.7% of our net revenue, and revenue from the mobile product applications market accounted for 17.0% of our net revenue.

Many of our customers have manufacturing operations in China, and many of our OEM customers have established design centers in Asia. With our expanding global presence, including offices in China, France, Germany, Hong Kong, India, Israel, Japan, Korea, Poland, Switzerland, Taiwan, the U.K., and the U.S., we are well positioned to provide local sales, operational, and engineering support services to our existing customers, as well as potential new customers, on a global basis.

Our manufacturing operations are based on a variable cost model in which we outsource all of our production requirements and generally drop ship our products directly to our customers from our contract manufacturers’ facilities, eliminating the need for significant capital expenditures and allowing us to minimize our investment in inventories. This approach requires us to work closely with our contract manufacturers and semiconductor fabricators to ensure adequate production capacity to meet our forecasted volume requirements. As a result of recent supply constraints and capacity shortages affecting the global semiconductor industry, we have entered into long-term capacity and pricing agreements with some suppliers. We use third-party wafer manufacturers to supply wafers and third-party packaging manufacturers to package our proprietary ASICs. In certain cases, we rely on a single source or a limited number of suppliers to provide other key components

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of our products. Our cost of revenue includes all costs associated with the production of our products, including materials; logistics; amortization of intangibles related to acquired developed technology; backlog; supplier arrangements; manufacturing, assembly, royalties paid to third-party intellectual property providers and test costs paid to third-party manufacturers; and related overhead costs associated with our indirect manufacturing operations personnel. Additionally, we charge all warranty costs, losses on inventory purchase obligations, and write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net realizable value, to cost of revenue.

Our gross margin generally reflects the combination of the added value we bring to our OEM customers’ products by meeting their custom design requirements and the impact of our ongoing cost-improvement programs. These cost-improvement programs include reducing materials and component costs and implementing design and process improvements. Our newly introduced products may have lower margins than our more mature products, which have realized greater benefits associated with our ongoing cost-improvement programs. As a result, new product introductions may initially negatively impact our gross margin.

Our research and development expenses include costs for supplies and materials related to product development, as well as the engineering costs incurred to design ASICs and human experience solutions for OEM customers prior to and after our OEMs’ commitment to incorporate those solutions into their products. In addition, we expense in-process research and development projects acquired as part of a business acquisition, which have not yet reached technological feasibility, and which have no foreseeable alternative future use. We continue to commit to the technological and design innovation required to maintain our position in our existing markets, and to adapt our existing technologies or develop new technologies for new markets.

Selling, general, and administrative expenses include expenses related to sales, marketing, and administrative personnel; internal sales and outside sales representatives’ commissions; market and usability research; outside legal, accounting, and consulting costs; and other marketing and sales activities.

Acquired intangibles amortization, included in operating expenses, consists primarily of amortization of customer relationship and tradenames intangible assets recognized under the purchase method for business combinations.

Restructuring costs primarily reflect severance costs related to the restructuring of our operations to reduce operating expenses and gain efficiencies from our recent acquisitions. These headcount related costs were in cost of revenue, research and development, and selling, general and administrative expenses. See Note 15 Restructuring Activities to the consolidated financial statements contained elsewhere in this report.

Gain on sale of audio technology assets includes the sale of limited audio technology intangible assets. See below under “Divestiture”.

Interest and other expense, net, primarily reflects interest expense on our Senior Notes, Term Loan Facility and revolving line of credit as well as the amortization of debt issuance costs and discount on our debt, partially offset by interest income earned on our cash, cash equivalents and short-term investments.

Gain from sale of equity investment relates to our sale of our equity method investment in OXi Technology Ltd. See Note 1 Organization and Summary of Significant Accounting Policies to the consolidated financial statements contained elsewhere in this report.

Acquisitions

DSP Group, Inc.

On August 30, 2021, we entered into an agreement and plan of merger with DSPG to acquire all of the equity of DSPG for $22.00 per share of common stock. The transaction closed on December 2, 2021, for an aggregate purchase consideration of $543.3 million. We financed the transaction through a combination of cash on hand and the Term Loan Facility. The results of DSPG are included in our consolidated financial statements for the period from December 3, 2021 through June 25, 2022. For further discussion of the DSPG acquisition, see Note 4 Acquisitions, Divestiture and Investment included in the consolidated financial statements contained elsewhere in this report.

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DisplayLink

On July 17, 2020, we entered into a definitive agreement to acquire all of the equity interests in DisplayLink Corporation, or DisplayLink, a leader in high-performance video compression technology. The acquisition closed on July 31, 2020 for an aggregate purchase consideration of $444.0 million. For further discussion of the DisplayLink acquisition, see Note 4 Acquisitions, Divestiture and Investment included in the consolidated financial statements contained elsewhere in this report.

Broadcom

On July 2, 2020, we entered into definitive agreements with Broadcom to acquire certain assets and assume certain liabilities of, and obtain non-exclusive licenses relating to, Broadcom’s existing Wi-Fi, Bluetooth and GPS/global navigation satellite system, or GNSS, products and business in the IoT market, or the Broadcom Business Acquisition, for an aggregate purchase consideration of $250.0 million in cash that closed on July 23, 2020. We also entered into certain transition agreements with Broadcom for a period of three years. For further discussion of the Broadcom Business Acquisition, see Note 4 Acquisitions, Divestiture and Investment included in the consolidated financial statements contained elsewhere in this report.

Divestitures

In December 2020, we completed the sale of limited audio technology intangible assets, received a fully-paid up perpetual license back from the buyer and, as an element of the transaction, licensed other audio technology intangible assets to the buyer under a fully-paid up perpetual license arrangement. Under the asset purchase agreement and the intellectual property license agreement, we received $35.0 million in cash. The gain on the sale of the audio technology assets was $34.2 million.

In December 2019, we entered into an asset purchase agreement with a third-party to sell the assets of our LCD, Touch Controller and Display Driver Integration, or TDDI, product line for LCD mobile displays. We retained our automotive TDDI product line and our discrete touch and discrete display driver product lines supporting LCD and organic light-emitting diode, or OLED, for the mobile market. The assets sold under the asset purchase agreement for cash consideration of $138.7 million and had a carrying value of approximately $33.6 million as of the closing date of the transaction in April 2020. The gain on sale of this portion of a product line was $105.1 million.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, cost of revenue, inventories, product warranty, share-based compensation costs, provision for income taxes, deferred income tax asset, valuation allowances, uncertain tax positions, tax contingencies, goodwill, intangible assets, investments, and contingencies. We base our estimates on historical experience, applicable laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The methods, estimates, interpretations, and judgments we use in applying our most critical accounting policies can have a significant impact on the results that we report in our consolidated financial statements. The SEC considers an entity’s most critical accounting policies to be those policies that are both most important to the portrayal of the entity’s financial condition and results of operations and those that require the entity’s most difficult, subjective, or complex judgments, often as a result of the need to make assumptions and estimates about matters that are inherently uncertain. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our revenue is primarily generated from the sale of ASIC chips, either directly to a customer or to a distributor. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. We generally warrant our products for a period of 12 months from the date of sale and estimate probable product warranty costs at the time we recognize revenue as the warranty is considered an assurance warranty and not a performance

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obligation. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We then select an appropriate method for measuring satisfaction of the performance obligations.

Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect to payment, delivery, warranty, and supply. In the absence of a master sales agreement, we consider a customer's purchase order or our standard terms and conditions to be the contract with the customer.

Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation rights, price protection and price allowances; variable consideration associated with these rights is expected to be inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current liabilities under the new revenue standard and are shown as customer obligations within Other Accrued Liabilities as disclosed in Note 1 Organization and Summary of Significant Accounting Policies to the consolidated financial statements contained elsewhere in this report. We estimate the amount of variable consideration for such arrangements based on the expected value to be provided to customers, and we do not believe that there will be significant changes to our estimates of variable consideration. When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable, they are estimated and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical return rates applied to distributor inventory subject to stock rotation rights and recorded as a reduction to revenue with a corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded as prepaid expenses and other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements and we estimate total unit volumes under such arrangement to determine the expected transaction price for the units expected to be transferred. Such arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns liabilities are recorded as refund liabilities within other accrued liabilities.

Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. Payments are generally due within three months of completion of the performance obligation and subsequent invoicing and, therefore, do not include significant financing components. To date, there have been no material impairment losses on accounts receivable.

We invoice customers and recognize all of our revenue, except an inconsequential amount, at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. We account for shipping and handling costs as fulfillment costs before the customer obtains control of the goods. We continue to account for collection of all taxes on a net basis.

We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are recorded in the selling, general and administrative expense line item in the consolidated statements of operations) are expensed when the product is shipped because such commissions are owed after shipment.

Inventory

We state our inventories at the lower of cost or net realizable value. We base our assessment of the ultimate realization of inventories on our projections of future demand and market conditions. Sudden declines in demand, rapid product improvements, or technological changes, or any combination of these factors can cause us to have excess or obsolete inventories. On an ongoing basis, we review for estimated excess, obsolete, or unmarketable inventories and write down our inventories to their net realizable value based on our forecasts of future demand and market conditions. If actual market conditions are less favorable than our forecasts, additional inventory write-downs may be required. The following factors influence our estimates: changes to or cancellations of customer orders, unexpected or sudden decline in demand, rapid product improvements, technological advances, and termination or changes by our OEM customers of any product offerings incorporating our product solutions.

Periodically, we purchase inventory from our contract manufacturers when a customer delays its delivery schedule or cancels its order. In those circumstances, we record a write-down, if necessary, to reduce the carrying value of the inventory purchased to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which we do not subsequently write up. We also record a liability and charge to cost of revenue for estimated losses on inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer delays, order cancellations, or other factors.

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Business Combinations

We allocate the fair value of the purchase consideration of a business acquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (“IPR&D”), based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. IPR&D is initially recorded at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, IPR&D is reclassified as an amortizable intangible asset and amortized over the asset’s estimated useful life. Our valuation of acquired assets and assumed liabilities requires significant estimates, especially with respect to intangible assets. The valuation of intangible assets requires that we use valuation techniques such as the income approach that includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires the following significant estimates: future expected revenue, expenses, capital expenditures and other costs, and discount rates. We estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Acquisition-related expenses and related restructuring costs are recognized separately from the business combination and are expensed as incurred.

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Results of Operations

The following sets forth certain of our consolidated statements of income data for fiscal 2022 and 2021 along with comparative information regarding the absolute and percentage changes in these amounts (in millions, except percentages):

The following sets forth certain of our consolidated statements of operations data as a percentage of net revenues for fiscal 2022 and 2021:

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Fiscal 2022 Compared with Fiscal 2021

Net Revenue.

Net revenue was $1,739.7 million for fiscal 2022 compared with $1,339.6 million for fiscal 2021, an increase of $400.1 million, or 29.9%. Of our fiscal 2022 net revenue, $1,100.9 million, or 63.3% of net revenue was from the IoT product applications market, $343.0 million, or 19.7%, of net revenue was from the PC product applications market, and $295.8 million, or 17.0%, of net revenue was from the mobile product applications market. The overall increase in net revenue for fiscal 2022 was attributable to an increase of $488.0 million, or 79.6%, in net revenue from IoT product applications partially offset by a decrease of $11.7 million, or 3.3%, in net revenue from PC product applications and a decrease of $76.2 million, or 20.5%, in net revenue from mobile product applications. The increase in net revenue from IoT product applications was primarily driven by a 45% increase in the units sold as well as a 23.9% increase in average selling prices. The decrease in net revenue from PC product applications was driven by a 17.0% decrease in the units sold, partially offset by a 16.4% increase in average selling prices. The decrease in mobile product applications was driven by a 21.4% decrease in the units sold, partially offset by a 1.2% increase in average selling prices.

Gross Margin.

Gross margin as a percentage of net revenue was 54.2%, or $943.1 million, for fiscal 2022 compared with 45.6%, or $611.2 million, for fiscal 2021. The 860 basis point increase in gross margin was primarily due to a favorable product mix, product cost reductions, and a decrease in inventory fair value adjustments of $13.8 million, partially offset by a $7.5 million increase in acquired intangibles amortization charged to cost of revenue largely related to the acquisition of DSPG.

Because we sell our technology solutions in designs that are generally unique or specific to an OEM customer’s application, gross margin varies on a product-by-product basis, making our cumulative gross margin a blend of our product specific designs. As a fabless manufacturer, our gross margin percentage is generally not materially impacted by our shipment volume. We charge losses on inventory purchase obligations and write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net realizable value (including warranty costs) to cost of revenue.

Operating Expenses.

Research and Development Expenses. Research and development expenses increased $53.9 million, to $367.3 million, for fiscal 2022 compared with fiscal 2021. The increase in research and development expenses primarily reflected a $24.3 million increase in share-based compensation primarily due to a substantial increase in our stock price during the first three quarters of fiscal 2022, which also increased the share-based compensation associated with our phantom stock plan. Payroll and variable compensation costs increased by $22.6 million, which includes costs associated with research and development headcount from our DSPG acquisition, which closed on December 2, 2021.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $23.5 million, to $168.4 million, for fiscal 2022 compared with fiscal 2021. The increase in selling, general and administrative expenses primarily reflected a $14.7 million increase in share-based compensation primarily due to a substantial increase in our stock price during the first three quarters of fiscal 2022, which also increased the share-based compensation associated with our phantom stock plan. Payroll and variable compensation costs increased by $11.1 million, which includes costs associated with selling, general and administrative headcount from our DSPG acquisition, which closed on December 2, 2021.

Acquired Intangibles Amortization. Acquired intangibles amortization reflects the amortization of intangibles acquired through recent acquisitions. See Note 7 Goodwill and Acquired Intangible Assets to the consolidated financial statements contained elsewhere in this report.

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Restructuring Costs. Restructuring costs primarily reflect employee severance costs and facilities consolidation costs related to the restructuring of operations, improve efficiencies in our operational activities and gain synergies from acquisitions. These headcount-related costs included personnel in operations, research and development, and selling, general and administrative functions. Restructuring costs incurred in fiscal 2022 and 2021 were $18.3 million and $7.4 million, respectively. See Note 15 Restructuring Activities to the consolidated financial statements contained elsewhere in this report.

Gain on Sale of Audio Technology Assets. Gain on sale of audio technology assets includes the sale of certain intangible assets related to our audio products. See Note 1 Organization and Summary of Significant Accounting Policies to the consolidated financial statements contained elsewhere in this report.

Non-Operating Income.

Interest and Other Income, Net. Interest and other income, net was $3.0 million for fiscal 2022 compared with $2.9 million for fiscal 2021.

Interest Expense. Interest expense was $30.2 million and $29.5 million, in fiscal 2022 and 2021, respectively, which represents interest and amortization of debt issuance costs and discount on the $600 million Term Loan Facility issued in December 2021, interest and amortization of debt issuance costs on the $400.0 million principal amount of the Senior Notes issued in March 2021, as well as interest and amortization of debt issuance costs and discount on our $525 million principal amount convertible notes issued in June 2017 and settled in August 2021. See Note 8 Debt to the consolidated financial statements contained elsewhere in this report.

Loss on redemption of convertible notes. Loss on redemption of convertible notes represents the difference between fair value and the carrying value as of the redemption date of the convertible notes. The loss on redemption of convertible notes for fiscal years 2022 and 2021 was $8.1 million and $0.3 million, respectively.

Gain from sale and leaseback transaction. Gain from sale and leaseback transaction represents the gain from the sale of our headquarters buildings and properties located at 1109-1251 McKay Drive and 1140-1150 Ringwood Court, San Jose, California in the third quarter of fiscal 2022. The gain from the sale and leaseback transaction for fiscal 2022 was $5.4 million.

Provision for Income Taxes.

Our income tax provision was $64.6 million in fiscal 2022 and $31.4 million in fiscal 2021. The increase in our income tax provision in fiscal 2022 was primarily due to an increase in foreign profits and associated taxes, offset by the increase in tax benefits associated with stock-based compensation deductions and research and development credits. See “Note 13 Income Taxes” to the consolidated financial statements contained elsewhere in this report for the table reconciling the provision for income taxes from the federal statutory rate for fiscal 2022, 2021, and 2020.

It is reasonably possible that the amount of liability for unrecognized tax benefits may change within the next 12 months; an estimate of the range of possible changes could result in a decrease of $0.9 million to an increase of $6.9 million.

Fiscal 2021 Compared with Fiscal 2020.

For discussion related to the results of operations and changes in financial condition for fiscal 2021 compared to fiscal 2020, please refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our fiscal 2021 Form 10-K, which was filed with the SEC on August 23, 2021.

Liquidity and Capital Resources

Our cash and cash equivalents were $824.0 million as of the end of fiscal 2022 compared with $836.3 million as of the end of fiscal 2021, a decrease of $12.3 million. This decrease reflected cash flows provided by operating activities of $462.7 million and $14.3 million of cash provided by financing activities, offset by $482.7 million of cash used in investing activities.

We consider almost all earnings of our foreign subsidiaries as not indefinitely reinvested overseas and have made appropriate provisions for income or withholding taxes, that may result from a future repatriation of those earnings. As of the end of fiscal 2022, $624.0 million of cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we will be able to repatriate these funds without any further impact on our tax provision.

Cash Flows from Operating Activities. For fiscal 2022, the $462.7 million in net cash provided by operating activities was primarily attributable to net income of $257.5 million plus adjustments for non-cash charges, including acquired intangibles

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amortization of $123.5 million, share-based compensation costs of $100.8 million, depreciation and amortization of $24.0 million, as well as other non-cash adjustments of $24.1 million, and a net change in operating assets and liabilities of $19.0 million. The net change in operating assets and liabilities related primarily to an $81.1 million increase in accounts receivable, an increase of $65.1 million in inventories, an increase of $23.2 million in accounts payable, an increase of $48.6 million in income taxes payable and an increase of $17.4 million in other accrued liabilities. Our days sales outstanding was 61 days in fiscal 2022 as compared to 63 days in fiscal 2021. Our inventory turns decreased to four times in fiscal 2022 from seven times from fiscal 2021.

For fiscal 2021, the $319.2 million in net cash provided by operating activities was primarily attributable to net income of $79.6 million plus adjustments for non-cash charges, including acquired intangibles amortization of $110.1 million, share-based compensation costs of $66.1 million, depreciation and amortization of $21.6 million, and a reduction of $34.2 million for gain on sale of audio technology assets, as well as other non-cash adjustments of $30.4 million, and a net change in operating assets and liabilities of $45.6 million. The net change in operating assets and liabilities related primarily to a $53.1 million decrease in inventories, a $32.2 million increase in accounts payable, and a $14.9 million increase in accrued compensation; partially offset by a $25.9 million increase in accounts receivable, a $17.2 million decrease in other accrued liabilities, and a $9.4 million increase in prepaid expenses and other current assets.

Cash Flows from Investing Activities. Net cash used in investing activities for fiscal 2022 was $482.7 million and net cash provided by investing activities in 2021 was $522.6 million. Net cash used in investing activities for fiscal 2022 consisted primarily of $501.1 million used for the acquisition of businesses, net of cash and cash equivalents acquired, and $31.1 million used for the purchases of property and equipment; partially offset by proceeds from sale and leaseback transaction of $55.9 million and $24.4 million in proceeds from sales of investments.

Net cash used in investing activities for fiscal 2021 consisted primarily of $626.5 million used for the acquisition of businesses, net of cash and cash equivalents acquired, and $21.1 million used for the purchases of capital assets; partially offset by $95.8 million in proceeds from sales of investments and $34.2 million in proceeds from sale of audio technology assets. Net cash provided by investing activities for fiscal 2020 consisted primarily of $138.7 million of proceeds from the sale of assets, partially offset by $16.3 million used for the purchases of capital assets.

Cash Flows from Financing Activities. Net cash provided by financing activities for fiscal 2022 was $14.3 million and for fiscal 2021 was $274.1 million. Our net cash provided by financing activities for fiscal 2022 was primarily attributable to $600.0 million in proceeds from issuance of debt and $15.2 million in proceeds from issuance of shares, partially offset by $3.0 million of payment on debt, $67.3 million used for payroll taxes for restricted stock units, or RSUs, market stock units, or MSUs, and performance stock units, or PSUs, and $505.6 million used for payment for redemption of convertible notes.

Our net cash provided by financing activities for fiscal 2021 was primarily attributable to $400.0 million in proceeds from issuance of debt and $27.8 million in proceeds from issuance of shares, partially offset by $100.0 million of payment on the line-of-credit borrowings, $28.2 million used for payroll taxes for restricted stock units, or RSUs, market stock units, or MSUs, and performance stock units, or PSUs, and $19.4 million used for payment for redemption of convertible notes. Our net cash provided by financing activities for fiscal 2020 was primarily attributable to $100.0 million proceeds from borrowing under the line-of-credit and $34.5 million of proceeds from issuance of shares, partially offset by $30.2 million used to repurchase shares of our common stock in the open market and $9.7 million used for payroll taxes for RSUs, MSUs and PSUs.

For discussion related to the statement of cash flows for fiscal 2020, please refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our fiscal 2020 Form 10-K, which was filed with the SEC on August 21, 2020.

Common Stock Repurchase Program. As of the end of fiscal 2022, our Board of Directors had cumulatively authorized the purchase of up to an aggregate of $1.8 billion of our common stock pursuant to our common stock repurchase program through July 2025. The program authorizes us to purchase our common stock in the open market or in privately negotiated transactions, depending upon market conditions and other factors. The number of shares purchased, and the timing of purchases is based on the level of our cash balances, general business and market conditions, and other factors, including alternative investment opportunities. Common stock purchased under this program is held as treasury stock. From April 2005 through the end of fiscal 2022, we purchased 31,749,195 shares of our common stock in the open market for an aggregate cost of $1.2 billion. As of the end of fiscal 2022, we had $577.4 million, respectively, remaining under our common stock repurchase program.

Senior Debt. On March 11, 2021, we completed an offering of $400.0 million aggregate principal amount of 4.0% senior notes due 2029, or the Senior Notes, in a private offering. The Senior Notes were issued pursuant to an Indenture, dated as of March 11, 2021, or the Indenture, by and among our company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee.

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The Indenture provides that the Senior Notes will bear interest at a rate of 4.000% per annum, payable in cash semi-annually in arrears on December 15 and June 15 of each year, commencing on June 15, 2021. The Senior Notes will mature on June 15, 2029 and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of our current and future domestic restricted subsidiaries that guarantee our obligations under our senior secured credit facilities.

Prior to June 15, 2024, we may redeem the Senior Notes, in whole or in part, at a redemption price of 100% of the principal amount thereof, plus a make-whole premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

We may redeem some or all of the Senior Notes on or after June 15, 2024 at the redemption prices specified below, plus accrued and unpaid interest, if any, to, but excluding, the redemption date:

In addition, at any time prior to June 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Senior Notes at a redemption price equal to 104% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date with the net cash proceeds from one or more equity offerings by us.

The Senior Notes are the general unsecured obligations of our company. The Senior Note guarantees are the senior unsecured obligations of each guarantor. Under certain circumstances, the guarantors may be released from their Senior Note guarantees without consent of the holders of Senior Notes. Under the terms of the Indenture, the Senior Notes rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness, and rank contractually senior in right of payment to our and the guarantors’ future indebtedness and other obligations that are, by their terms, expressly subordinated in right of payment to the Senior Notes. The Senior Notes are effectively subordinated to our and the guarantors’ existing and future secured indebtedness, including secured indebtedness under our senior secured credit facilities, to the extent of the value of the assets securing such indebtedness. The Senior Notes and guarantees are structurally subordinated to all existing and future indebtedness and liabilities (including trade payables) of our subsidiaries that do not guarantee the Senior Notes.

The Indenture contains covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our Restricted Subsidiaries (as defined in the Indenture) to (i) incur additional indebtedness and guarantee indebtedness; (ii) pay dividends or make other distributions or repurchase or redeem our company’s or any parent’s capital stock; (iii) prepay, redeem or repurchase certain indebtedness; (iv) issue certain preferred stock or similar equity securities; (v) make loans and investments; (vi) dispose of assets; (vii) incur liens; (viii) enter into transactions with affiliates; (ix) enter into agreements restricting its subsidiaries’ ability to pay dividends; and (x) consolidate, merge or sell all or substantially all of its assets.

The Indenture contains customary events of default including, without limitation, failure to make required payments, failure to comply with certain agreements or covenants, cross-acceleration to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Indenture will allow either the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Senior Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the maturity of the principal, and accrued and unpaid interest, if any, on all outstanding Senior Notes.

Revolving Credit Facility. On March 11, 2021, we entered into a Second Amended and Restated Credit Agreement, or the Credit Agreement, with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent to, among other changes, extend the maturity date of our senior secured revolving credit facility, to five years from the closing date of the amendment, increase the facility size from $200.0 million to $250.0 million, and replace the requirement to maintain a total debt to Consolidated EBITDA ratio (as defined in the Credit Agreement) of not more than 4.75 to 1.00 with a requirement to maintain a net total debt to Consolidated EBITDA ratio of not more than 3.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 4.25 to 1.00, and thereafter 3.75 to 1.00, provided further, that such deemed increase pursuant to the foregoing shall not apply to more than two material acquisitions consummated during the term of the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in a principal amount of up to $250 million, which includes a $20 million sublimit for letters of credit and a $25 million sublimit for swingline loans. Under the terms of the Credit Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $150 million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. Future proceeds under the revolving credit facility are available for

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working capital and general corporate purposes. In March 2021 we used a portion of the proceeds from the Senior Notes described above to repay the $100.0 million outstanding borrowings on this revolving credit facility. As of the end of fiscal 2022, there was no balance outstanding under the revolving credit facility.

Borrowings under the revolving credit facility are required to be repaid in full by March 11, 2026. Debt issuance costs relating to the revolving credit facility of $1.6 million, included in non-current other assets on our consolidated balance sheet, are being amortized over 60 months.

Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of our company, subject to certain exceptions, who collectively with our company are referred to as the Credit Parties. The obligations of the Credit Parties under the Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65% of the voting capital stock and 100% of the non-voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions.

The revolving credit facility bears interest at our election of a Base Rate plus an Applicable Margin or LIBOR plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis points, or LIBOR plus 100 basis points. The Applicable Margin is based on a sliding scale that ranges from 0.25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for LIBOR loans. We are required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-based sliding scale ranging from 0.175% to 0.25% per annum. Interest and fees are payable on a quarterly basis. The LIBOR index is expected to be discontinued at the end of June 2023. Under our credit facility, when the LIBOR index is discontinued, we will switch to a comparable or successor rate as selected by us and the administrative agent, which may include the Secured Overnight Financing Rate, or SOFR.

Under the Credit Agreement, there are various restrictive covenants, including two financial covenants that limit the consolidated total leverage ratio, or leverage ratio, the consolidated interest coverage ratio, or interest coverage ratio, a restriction that permits accounts receivable financings provided that the aggregate unpaid amount of permitted accounts receivable financings are no more than the greater of $100 million and 50% of the amount of all accounts receivable of the company and specified subsidiaries, and other specific items. The leverage ratio is the ratio of debt as of the measurement date to Consolidated EBITDA, for the four consecutive quarters ending with the quarter of measurement. The current leverage ratio shall not exceed 3.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 4.25 to 1.00, and thereafter 3.75 to 1.0. The interest coverage ratio is Consolidated EBITDA to interest expense for the four consecutive quarters ending with the quarter of measurement. The interest coverage ratio must not be less than 3.50 to 1.0 during the term of the Credit Agreement. As of the end of fiscal 2022, we remain in compliance with the restrictive covenants.

Term Loan Facility. In December 2021, we entered into that certain First Amendment and Lender Joinder Agreement to the Credit Agreement, to, among other things, establish a new $600.0 million incremental term loan facility, or the Term Loan Facility. The Term Loan Facility was advanced by certain existing and new lenders under the Credit Agreement to finance our DSPG acquisition and general corporate purposes. The Term Loan Facility matures on December 2, 2028. Principal on the Term Loan Facility is payable in equal quarterly installments on the last day of each March, June, September and December of each year, beginning December 31, 2021, at a rate of 1.00% per annum.

Borrowings under the Term Loan Facility will accrue interest at the London Interbank Offered Rate, or LIBOR, plus 2.25% or at the base rate plus 1.50%, subject to a 25 basis point step-down based on total gross leverage, and subject to a LIBOR floor of 50 basis points. The base rate is the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the Wells Fargo Bank, National Association prime rate and (iii) the one-month LIBOR plus 1.00%. The Term Loan Facility contains customary representations and warranties, affirmative and negative covenants and events of default, in each case consistent with the Credit Agreement. The Term Loan Facility does not contain any financial covenant.

The Term Loan Facility is subject to a 1.00% prepayment premium in the event all or any portion of the Term Loan Facility is prepaid within the first 6 months in connection with a repricing transaction only. The Term Loan Facility is subject to customary mandatory prepayments, including, commencing June 30, 2023, an excess cash flow sweep, subject to customary step-downs and thresholds.

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$100 Million Shelf Registration. We have registered an aggregate of $100.0 million of common stock and preferred stock for issuance in connection with acquisitions, which shares generally will be freely tradeable after their issuance under Rule 145 of the Securities Act unless held by an affiliate of the acquired company, in which case such shares will be subject to the volume and manner of sale restrictions of Rule 144 of the Securities Act.

Working Capital Needs. We believe our existing cash and cash equivalents, anticipated cash flows from operating activities, and available credit under our revolving credit facility will be sufficient to meet our working capital and other cash requirements and our debt service obligations, for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue, the effectiveness of vaccines on COVID-19 variants, including the deployment of those vaccines to help reduce the length, duration and severity of the COVID-19 pandemic, the timing and extent of spending to support product development efforts, costs associated with restructuring activities net of projected savings from those activities, costs related to protecting our intellectual property, the expansion of sales and marketing activities, timing of introduction of new products and enhancements to existing products, costs to ensure access to adequate manufacturing, costs of maintaining sufficient space for our workforce, the continuing market acceptance of our product solutions, our common stock repurchase program, and the amount and timing of our investments in, or acquisitions of, other technologies or companies. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to fund our future long-term working capital needs, take advantage of business opportunities or to respond to competitive pressures could be limited or severely constrained.

Based on our ability to access our cash and cash equivalents, our expected operating cash flows, and our other sources of cash, we do not currently anticipate the need to remit undistributed earnings of our foreign subsidiaries to meet our working capital and other cash requirements. While we have accrued taxes on almost all of our undistributed earnings of our foreign subsidiaries, if we did remit such earnings, we may be required to pay certain state and foreign taxes to repatriate these funds, which would impact our operating cash flows.

Contractual Obligations and Commercial Commitments. The following table sets forth a summary of our material contractual obligations and commercial commitments as of the end of fiscal 2022 (in millions):

(1)
Represents the principal and interest payable through the maturity date of the underlying contractual obligation.

(2)
Purchase obligations and other commitments include payments due for inventory purchase obligations with contract manufacturers, long-term software tool licenses, and other licenses.

The amounts in the table above exclude gross unrecognized tax benefits related to uncertain tax positions of $29.8 million. As of the end of fiscal 2022, we were unable to make a reasonably reliable estimate of when cash settlement with a taxing authority may occur in connection with our gross unrecognized tax benefit.

Off-Balance Sheet Arrangements

We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to materially affect our financial condition, revenues or expenses, results of operations, liquidity, or capital resources. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support; engage in leasing, hedging, or research and development services; or have other relationships that expose us to liability that is not reflected in our financial statements.

Recently Issued Accounting Pronouncements Not Yet Effective

In October 2021, the FASB issued ASU No. 2021-08 “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. ASU No. 2021-08 is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022, with early

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application permitted. This ASU is applicable to the Company's fiscal year beginning June 25, 2023, and the impact of its adoption on the Company’s consolidated financial statements will depend on the contract assets and liabilities acquired in business combinations after that date.

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