MACOM Technology Solutions Holdings, Inc. (MTSI) FY 2021 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 Telecom, I&D and Data Center applications. Headquartered in Lowell, Massachusetts, we have more than 70 years of application expertise, with silicon, GaAs and InP fabrication, manufacturing, assembly and test, and operational facilities throughout North America, Europe and Asia. We design, develop and manufacture differentiated, high-value 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 complete subsystems, across dozens of product lines serving over 6,000 end customers in 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, radar, medical systems and test and measurement. Our primary markets are: (1) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and FTTx/PON, among others; (2) 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; and (3) Data Center, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers.

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 2021 and 2019 each consisted of 52 weeks, and fiscal year 2020 included 53 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. Our first quarter of fiscal year 2020, ended January 3,

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2020, included 14 weeks.

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: Telecom, I&D and Data Center.

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.

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, 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.

COVID-19 Impact

See “Item 1 - Business.” For additional information on risk factors that could impact our future results, please refer to “Item 1A - Risk Factors” in this Annual Report.

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.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of the date of filing of this Annual Report on Form 10-K with the SEC. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

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; goodwill and long-lived asset valuations and associated impairment assessments; revenue reserves; share-based compensation valuations and income taxes.

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.

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Our goodwill impairment assessment requires management to make assumptions and to apply judgment to items such as the determination of the reporting unit.

Significant management judgment is required in our valuation of long-lived asset groups when assessing for potential impairment. These analyses are based on the creation of forecasts of future operating results that are used in the valuation, including estimation of (i) future cash flows, (ii) the long-term rate of growth for our business, (iii) 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 is used to determine the discount rate. It is possible that these forecasts may change and our projections included in our forecasts of future results may prove to be inaccurate. If our actual results, or the forecasts and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur impairment charges. Our forecasts and the value of our long-lived asset groups could be adversely affected by, but not limited to, a change in strategy, the outcome of development activities, a significant slowdown in our primary markets, the semiconductor industry or worldwide economy, or a decline in the valuation of technology company stocks, including the valuation of our common stock.

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.

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.

We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with 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 and to the extent we believe that recovery is not likely, we must establish a valuation allowance. We provide valuation allowances for certain of our deferred tax assets, where it is more likely than not that some portion, or all of such assets, will not be realized.

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.

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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):

(2)Impairment charges in fiscal year 2019 include $264.8 million for impairment of customer relationship and acquired technology intangible assets as well as equipment. See Note 10 - Impairments to the Consolidated Financial Statements included in this Annual Report for additional information.

(3)See Note 12 - Restructurings, to the Consolidated Financial Statements included in this Annual Report for additional information.

(4)Represents changes in the fair value of common stock warrants recorded as liabilities and adjusted each reporting period to fair value. See Note 19 - Stockholders' Equity to the Consolidated Financial Statements included in this Annual Report for additional information regarding the common stock warrants.

(5)Includes $2.4 million, $3.4 million and $7.5 million of non-cash net losses for fiscal years 2021, 2020 and 2019, respectively, associated with our equity method investment in Ampere based on our proportionate share of the losses and changes in equity of Ampere. The net loss amounts for fiscal years 2021, 2020 and 2019 include non-cash gains of $9.8 million and $16.6 million and $10.8 million, respectively, associated with changes in Ampere’s equity. See Note 4 - 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 16 - Debt to the Consolidated Financial Statements included in this Annual Report for additional information.

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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 October 1, 2021 to Fiscal Year Ended October 2, 2020

Revenue. In fiscal year 2021, our revenue increased by $76.9 million, or 14.5%, to $606.9 million from $530.0 million for fiscal year 2020. Fiscal year 2021 consisted of 52 weeks, and fiscal year 2020 included 53 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 2021, our Telecom market revenue decreased by $21.1 million, or 10.1%, compared to fiscal year 2020. The decrease was primarily driven by a decrease in carrier-based optical semiconductor products, including those targeted for 5G applications, offset by increased sales of legacy products, including products targeting fiber to the home, CATV infrastructure and licensing revenue.

In fiscal year 2021, our I&D market revenue increased by $85.7 million, or 44.1%, compared to fiscal year 2020. The increase was primarily related to new program wins and expansion of our RF and microwave product lines.

In fiscal year 2021, our Data Center market revenue increased by $12.3 million, or 9.8%, compared to fiscal year 2020. The increase was primarily due to increased sales of our high-performance analog and optoelectronics Data Center products.

Gross profit. In fiscal year 2021, our gross profit increased by $71.7 million, or 26.5%, compared to fiscal year 2020. Gross margin of 56.3% in fiscal year 2021 increased 530 basis points, compared to fiscal year 2020. The increase in gross profit during 2021 was primarily the result of higher sales, favorable revenue mix, production efficiencies, as well as decreases in depreciation and amortization.

Research and development. In fiscal year 2021, research and development expense decreased by $2.5 million, or 1.8%, to $138.8 million representing 22.9% of revenue, compared with $141.3 million, representing 26.7% of revenue in fiscal year 2020. Research and development expense decreased during fiscal year 2021 primarily as a result of decreased spending on software and lower depreciation, partially offset by higher supplies expense, foundry costs and outside service costs.

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Selling, general and administrative. In fiscal year 2021, selling, general and administrative expenses decreased by $2.3 million, or 1.8%, to $122.0 million, or 20.1% of revenue, compared with $124.3 million, or 23.5% of revenue, for fiscal year 2020. Selling, general and administrative expenses decreased during fiscal year 2021 primarily due to lower depreciation, amortization and other outside service costs, offset by an increase in variable selling costs.

Restructuring charges. There were no restructuring charges incurred during fiscal year 2021, compared with $1.1 million, or 0.2% of our revenue, for fiscal year 2020. All restructuring actions were completed as of October 2, 2020. Refer to Note 12 - Restructurings in this Annual Report on Form 10-K for additional information.

Warrant liability gain. In fiscal year 2021, we recorded warrant expense of $11.1 million, or 1.8% of revenue, compared to an expense of $12.9 million, or 2.4% of revenue, for fiscal year 2020. The difference between periods was driven by a change in the estimated fair value of common stock warrants, primarily driven by the increase in the underlying price of our common stock, which was recorded as a liability at fair value. During November 2020, all of the warrants were exercised and 857,631 shares of common stock were issued. As of October 1, 2021, there are no remaining common stock warrants outstanding. See Note 19 - Stockholders' Equity in this Annual Report for additional information regarding the common stock warrants.

Interest expense, net. In fiscal year 2021, interest expense, net was $20.6 million, or 3.4% of our revenue, compared to $27.4 million, or 5.2% of our revenue, for fiscal year 2020. The decrease in fiscal year 2021 is primarily due to a lower effective interest rate on our Term Loans and the decrease in our long-term debt balance.

Provision for income taxes. In fiscal year 2021, income tax expense was $5.0 million, or 0.8% of revenue, compared to an expense of $4.5 million, or 0.9% of revenue, for fiscal year 2020. The change in the provision is primarily due to a change in the valuation allowance.

The difference between the U.S. federal income tax rate of 21% and our effective income tax rate of 11.6% for fiscal year 2021 was primarily driven 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. For fiscal year 2020, our effective income tax rate of (10.9)% was primarily impacted by the continuation of a full valuation allowance against any benefit associated with U.S. losses and income taxed in foreign jurisdictions at generally lower tax rates.

Comparison of Fiscal Year Ended October 2, 2020 to Fiscal Year Ended September 27, 2019

Revenue. In fiscal year 2020, our revenue increased by $30.3 million, or 6.1%, to $530.0 million from $499.7 million for fiscal year 2019. Fiscal year 2020 included 53 weeks and fiscal year 2019 consisted of 52 weeks. Our first quarter of fiscal year 2020, ended January 3, 2020, included 14 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 2020, our Telecom market revenue increased by $28.5 million, or 15.8%, compared to fiscal year 2019. The increase was primarily driven by increased sales of carrier-based optical semiconductor products, including those targeted for 5G applications, primarily to our Asia customer base, partially offset by lower sales of legacy products.

In fiscal year 2020, our I&D market revenue decreased by $10.1 million, or 5.0%, compared to fiscal year 2019. The decrease was primarily related to the decline in certain defense-related programs and lower sales of certain legacy product lines.

In fiscal year 2020, our Data Center market revenue increased by $11.9 million, or 10.4%, compared to fiscal year 2019. The increase was primarily due to increased sales of our high-performance analog Data Center products.

Gross profit. In fiscal year 2020, our gross profit increased by $49.5 million, or 22.4%, compared to fiscal year 2019. Gross margin of 51.0% in fiscal year 2020 increased 680 basis points, compared to fiscal year 2019. The increase in gross profit during 2020 was primarily the result of lower inventory reserve expenses and the strategic realignment of our business under the 2019 Plan (as defined below), resulting in lower compensation-related costs and intangible amortization.

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Research and development. In fiscal year 2020, research and development expense decreased by $22.1 million, or 13.5%, to $141.3 million representing 26.7% of revenue, compared with $163.5 million, representing 32.7% of revenue in fiscal year 2019. Research and development expense decreased during fiscal year 2020 primarily as a result of the strategic realignment of our business and operations under the 2019 Plan, resulting in lower compensation and research and development related costs, partially offset by higher share-based compensation expense.

Selling, general and administrative. In fiscal year 2020, selling, general and administrative expenses decreased by $29.0 million, or 18.9%, to $124.3 million, or 23.5% of revenue, compared with $153.3 million, or 30.7% of revenue, for fiscal year 2019. Selling, general and administrative expenses decreased during fiscal year 2020 primarily due to lower intangible amortization expense, decreased discretionary spending, such as external services and travel, offset by an increase in share-based compensation expense.

Impairment charges. In fiscal year 2019, impairment charges were $264.8 million, or 53.0% of revenue, primarily related to the $257.0 million impairment of intangible assets, as well as the impairment of $7.1 million of equipment from construction in process that was not placed in service. See Note 10 - Impairments to the Consolidated Financial Statements included in this Annual Report for additional information.

Restructuring charges. In fiscal year 2020, restructuring charges were $1.1 million, or 0.2% of our revenue, compared with $19.5 million, or 3.9% of our revenue, for fiscal year 2019. In fiscal year 2019, restructuring charges primarily related to the 2019 Plan and the Ithaca Plan, each as defined below.

During the third quarter of fiscal 2019, we committed to a plan to strategically realign, streamline and improve certain of our business and operations, including reducing our workforce by approximately 250 employees, and exiting multiple development facilities, reducing certain development activities for one of our product lines and no longer investing in the design and development of optical modules and subsystems for Data Center applications (the “2019 Plan”). During the fiscal year ended October 2, 2020, we incurred restructuring expenses of $1.2 million under the 2019 Plan, including $0.8 million of facility-related costs and $0.4 million of employee-related costs. We incurred restructuring charges of $11.6 million in fiscal year 2019, including $6.3 million of employee-related costs, $4.0 million of impairment expense for fixed assets and $1.3 million of other facility-related costs. This action was completed during fiscal 2020 and the remaining charges were paid during fiscal year 2021.

During the fiscal quarter ended September 28, 2018, we committed to a plan to exit certain production and product lines, primarily related to certain production facilities located in Ithaca, New York (the “Ithaca Plan”). For these facilities, we incurred $5.5 million of restructuring charges in the fiscal year ended September 27, 2019, including $1.5 million of employee-related costs and $4.0 million of facility-related costs. This action was completed in fiscal year 2019 and no further costs were incurred.

Refer to Note 12 - Restructurings in this Annual Report on Form 10-K for additional information.

Warrant liability gain. In fiscal year 2020, we recorded warrant expense of $12.9 million, or 2.4% of revenue, compared to a gain of $0.8 million, or 0.2% of revenue, for fiscal year 2019. The difference between periods was driven by an increase in the estimated fair value of common stock warrants we issued in December 2010, which we carry as a liability at fair value. Substantially all of the warrants were exercised and common stock was issued on November 11, 2020. See Note 19 - Stockholders' Equity in this Annual Report for additional information regarding the common stock warrants.

Provision for income taxes. In fiscal year 2020, income tax expense was $4.5 million, or 0.9% of revenue, compared to a benefit of $39.4 million, or 7.9% of revenue, for fiscal year 2019. The change in the provision is primarily due to recognition of current and deferred income tax effects totaling $39.8 million during fiscal year 2019, from an intra-entity transfer of a license for intellectual property between foreign tax jurisdictions that received a tax basis step-up, with no similar benefit during fiscal year 2020.

The difference between the U.S. federal income tax rate of 21% and our effective income tax rate of (10.9)% for fiscal year 2020 was primarily driven by the continuation of a full valuation allowance against any benefit associated with U.S. losses and income taxed in foreign jurisdictions at generally lower tax rates. For fiscal year 2019, our effective income tax rate of 9.3% was primarily impacted by the reduction of our NOLs from Section 382 limitations, the immediate recognition of the current and deferred income tax effects of an intra-entity transfer of a license for intellectual property and the valuation allowance against our U.S. deferred tax assets.

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LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flow activities for the fiscal years ended October 1, 2021 and October 2, 2020, respectively (in thousands):

Cash Flow from Operating Activities:

Our cash flow from operating activities for fiscal year 2021 was $148.4 million and consisted of a net income of $38.0 million, plus adjustments to reconcile our net income to cash provided by operating activities of $136.4 million, partially offset by changes in operating assets and liabilities of $25.9 million. Adjustments to reconcile our net income to cash provided by operating activities of $136.4 million primarily included depreciation and intangible amortization expense of $70.0 million, share-based compensation expense of $35.0 million, warrant liability expense of $11.1 million, accretion of the discount on convertible debt of $7.6 million and deferred financing cost amortization and write offs of $6.5 million. In addition, cash used by operating assets and liabilities was $25.9 million for fiscal year 2021, primarily driven by an increase in accounts receivable of $38.7 million due to timing of sales, partially offset by a decrease in inventory of $8.9 million and an increase in accounts payable of $5.8 million.

Our cash flow from operating activities for fiscal year 2020 was $171.4 million and consisted of a net loss of $46.1 million, plus adjustments to reconcile our net loss to cash provided by operating activities of $142.1 million plus changes in operating assets and liabilities of $75.5 million. Adjustments to reconcile our net loss to cash provided by operating activities of $142.1 million primarily included depreciation and intangible amortization expense of $78.8 million, share-based compensation expense of $35.7 million, warrant liability expense of $12.9 million, impairment and net loss on minority equity investments of $5.9 million, amortization of deferred financing costs of $4.1 million and a decrease in deferred tax assets of $3.3 million. In addition, cash from operating assets and liabilities was $75.5 million for fiscal year 2020, primarily driven by a decrease in accounts receivable of $23.9 million due to improved revenue linearity, a decrease in inventory of $16.3 million, a decrease in income tax receivable of $14.9 million and a decrease in prepaid expenses and other assets of $18.1 million.

Cash Flow from Investing Activities:

Our cash flow used in investing activities for fiscal year 2021 consisted primarily of $194.2 million in purchases of short-term investments and capital expenditures of $18.0 million, partially offset by proceeds of $209.3 million related to the sale and maturities of short-term investments.

Our cash flow used in investing activities for fiscal year 2020 consisted primarily of $284.9 million in purchases of short-term investments, proceeds of $183.9 million related to the sale and maturities of short-term investments, capital expenditures of $17.6 million and proceeds of $11.0 million associated with our divestment in May 2018 of certain capital equipment, inventory and other assets in Japan associated with the LR4 business.

Cash Flow from Financing Activities:

During fiscal year 2021, our cash used in financing activities of $119.1 million was primarily related to $545.3 million of prepayments on our Term Loans (as defined in Note 16 - Debt to our Consolidated Financial Statements included in this Annual Report) and $23.4 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by proceeds of $450.0 million from the 2026 Convertible Notes (as defined in Note 16 - Debt to our Consolidated Financial Statements included in this Annual Report) and $6.8 million of proceeds from stock option exercises and employee stock purchases. The early prepayment on the Term Loans of $543.6 million was made using $443.6 million of net proceeds from our 2026 Convertible Notes and cash of $100.0 million. See Note 16 - Debt to our Consolidated Financial Statements included in this Annual Report for additional information.

During fiscal year 2020, our cash used in financing activities of $10.7 million was primarily related to $6.9 million of principal payments associated with our Term Loans (as defined in Note 16 - Debt to our Consolidated Financial Statements included in this Annual Report) and $6.7 million in purchases of stock associated with employee tax withholdings, partially offset by $4.6 million of proceeds from stock option exercises and employee stock purchases.

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Liquidity

As of October 1, 2021, we held $156.5 million of cash and cash equivalents, primarily deposited with financial institutions as well as $188.4 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 October 1, 2021, cash held by our indefinitely reinvested foreign subsidiaries was $27.1 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. As of October 1, 2021, we had $160.0 million in borrowing capacity under our Revolving Facility (as defined in Note 16 - Debt to our Consolidated Financial Statements included in this Annual Report) that expired undrawn on November 8, 2021.

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. 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 October 1, 2021, we had no off-balance sheet arrangements.

CONTRACTUAL OBLIGATIONS

The following is a summary of our contractual payment obligations for consolidated debt, purchase agreements, leases, financing obligations, other commitments and long-term liabilities as of October 1, 2021 (in thousands):

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(1)Our Term Loans will mature in May 2024 and our 2026 Convertible Notes will mature in March 2026. The interest rate on the Term Loans is variable, which may result in changes to our interest obligations. See Note 16 - Debt to the Consolidated Financial Statements included in this Annual Report for additional information.

(2)Estimated future lease payments, see Note 18 - Leases to the Consolidated Financial Statements included in this Annual Report for additional information.

(3)We have purchase commitments of $108.0 million primarily related to services and inventory supply arrangements of which approximately $82.7 million that is non-cancelable. In addition, we have $27.2 million in fixed payments associated with a power purchase agreement that is expected to commence in fiscal 2022 and has a 15-year term. See Note 17- Financing Obligation for additional detail on the power purchase agreement.

As of October 1, 2021, 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.