# Qorvo, Inc. (QRVO) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Qorvo, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1604778/000160477824000036/rfmd-20240330.htm
Accession: 0001604778-24-000036
Filing date: 2024-05-20
Report date: 2024-03-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/QRVO/
All MD&A years: /company/QRVO/mda/
Previous year: /company/QRVO/mda/fy2023/ (FY 2023)
Next year: /company/QRVO/mda/fy2025/ (FY 2025)

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

The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto, set forth in Part II, Item 8 of this report.

Qorvo® is a global leader in the development and commercialization of technologies and products for wireless, wired and power markets.

We design, develop, manufacture and market our products to U.S. and international OEMs and ODMs in three reportable operating segments: HPA, CSG and ACG. HPA is a leading global supplier of RF, analog mixed signal and power management solutions. CSG is a leading global supplier of connectivity and sensor solutions, with broad expertise spanning UWB, Matter, Bluetooth Low Energy, Zigbee, Thread, Wi-Fi, cellular IoT and MEMS-based sensors. ACG is a leading global supplier of cellular RF solutions for smartphones, wearables, laptops, tablets and other devices.

Fiscal 2024 Overview

•Revenue increased 5.6% in fiscal 2024 to $3,769.5 million, compared to $3,569.4 million in fiscal 2023, driven by content gains at our largest end customer and higher demand for our defense and aerospace products.

•Gross margin for fiscal 2024 was 39.5%, compared to 36.3% in fiscal 2023, driven by lower charges associated with a long-term capacity reservation agreement and improved factory utilization.

•Operating income was $91.7 million in fiscal 2024, compared to $183.2 million in fiscal 2023. This decrease was driven by goodwill impairment charges.

•Net loss per share was $0.72 for fiscal 2024, compared to net income per diluted share of $1.00 for fiscal 2023.

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•Operating activities in fiscal 2024 generated cash of $833.2 million, compared to $843.2 million in fiscal 2023.

•Capital expenditures were $127.2 million in fiscal 2024, compared to $159.0 million in fiscal 2023.

•We recorded $221.4 million in goodwill impairment charges due to revisions in long-term forecasts for a reporting unit within the CSG operating segment.

•We completed the acquisition of Anokiwave for a purchase price of $83.0 million, net of cash acquired.

•We repurchased approximately 4.0 million shares of our common stock for approximately $403.0 million.

•We repurchased $60.3 million of the principal amount of our 1.750% senior notes due 2024 (the "2024 Notes"), plus accrued and unpaid interest, on the open market.

•We entered into a definitive agreement with Luxshare to divest our assembly and test operations in China.

RESULTS OF OPERATIONS

Consolidated

The table below presents a summary of our results of operations for fiscal years 2024 and 2023 along with a year-over-year comparison. Refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended April 1, 2023, filed with the SEC on May 19, 2023, which is incorporated by reference herein, for a summary of our results of operations for the fiscal year ended April 2, 2022 along with a year-over-year comparison between fiscal years 2023 and 2022.

[[GREPCENT_TABLE]]
[["(In thousands, except percentages)","Fiscal 2024","","% of Revenue","","Fiscal 2023","","% of Revenue","","Increase (Decrease)","","Percentage Change"],["Revenue","$","3,769,506","","","100.0","%","","$","3,569,399","","","100.0","%","","$","200,107","","","5.6","%"],["Cost of goods sold","2,281,011","","","60.5","","","2,272,457","","","63.7","","","8,554","","","0.4"],["Gross profit","1,488,495","","","39.5","","","1,296,942","","","36.3","","","191,553","","","14.8"],["Research and development","682,249","","","18.1","","","649,841","","","18.2","","","32,408","","","5.0"],["Selling, general and administrative","389,140","","","10.3","","","358,790","","","10.1","","","30,350","","","8.5"],["Other operating expense (1)","325,405","","","8.7","","","105,143","","","2.9","","","220,262","","","209.5"],["Operating income","$","91,701","","","2.4","%","","$","183,168","","","5.1","%","","$","(91,467)","","","(49.9)","%"]]
[[/GREPCENT_TABLE]]

(1) Other operating expense includes goodwill impairment charges of $221.4 million and $12.4 million for fiscal years 2024 and 2023, respectively.

Revenue

The increase in consolidated revenue resulted from a $394.2 million increase in ACG revenue and decreases in revenue of $154.2 million and $39.8 million, in HPA and CSG, respectively, which are further discussed in our Operating Segments results below.

We provide products to our largest end customer (Apple) through sales to multiple contract manufacturers, which in the aggregate accounted for approximately 46% and 37% of total revenue in fiscal years 2024 and 2023, respectively. Samsung accounted for approximately 12% of total revenue in both fiscal years 2024 and 2023. These customers primarily purchase RF solutions for a variety of mobile devices.

International shipments amounted to $1,593.6 million in fiscal 2024 (approximately 42% of revenue) compared to $1,751.4 million in fiscal 2023 (approximately 49% of revenue). Shipments to Asia totaled $1,505.3 million in fiscal 2024 (approximately 40% of revenue) compared to $1,549.0 million in fiscal 2023 (approximately 43% of revenue).

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Gross Margin

The increase in gross margin in fiscal 2024 was driven by lower charges associated with a long-term capacity reservation agreement and improved factory utilization.

In fiscal 2022, we entered into a long-term capacity reservation agreement with a foundry supplier to purchase a certain number of wafers through calendar year 2025. During fiscal 2023, the agreement was amended to extend the term through calendar year 2026, and we recorded charges of $181.0 million to "Cost of goods sold" based on the actual and estimated purchase shortfalls. During fiscal 2024, the agreement was terminated effective December 31, 2023, and we are no longer obligated to order silicon wafers from the foundry supplier. Total charges of $38.4 million were recorded to "Cost of goods sold" in the fiscal 2024 Consolidated Statement of Operations, primarily due to a contract termination fee.

Operating Expenses

Research and Development

R&D expense increased in fiscal 2024 as compared to fiscal 2023 driven by $33.5 million of higher employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense).

Selling, General and Administrative

Selling, general and administrative expense increased in fiscal 2024 as compared to fiscal 2023 due to $16.7 million of higher employee-related costs (including salaries and benefits, incentive-based cash compensation and stock-based compensation expense) and $11.8 million of higher professional fees.

Other Operating Expense

In fiscal 2024, we recorded goodwill impairment charges of $221.4 million, restructuring-related charges of $92.8 million and $12.0 million of consulting expenses associated with a multiyear project to upgrade the core systems we use to run our business. In fiscal 2023, we recorded goodwill impairment charges of $12.4 million and $114.1 million in other restructuring-related charges. Refer to Note 7 of the Notes to Consolidated Financial Statements for additional information on goodwill impairment charges and Note 13 of the Notes to Consolidated Financial Statements for additional information on restructuring-related charges.

Operating Segments

High Performance Analog

[[GREPCENT_TABLE]]
[["(In thousands, except percentages)","","Fiscal 2024","","Fiscal 2023","","Dollar Change","","Percentage Change"],["Revenue","","$","572,953","","","$","727,187","","","$","(154,234)","","","(21.2)","%"],["Operating income","","82,501","","","198,820","","","(116,319)","","","(58.5)"],["Operating income as a % of revenue","","14.4","%","","27.3","%"]]
[[/GREPCENT_TABLE]]

The $154.2 million decrease in HPA revenue was attributable to $135.5 million and $67.6 million decreases in infrastructure and power management revenue, respectively, driven by challenges in the global macroeconomic environment which negatively impacted demand for products in these markets in the first half of fiscal 2024. Over the course of fiscal 2024, demand for these products was also negatively impacted by higher channel inventory. The decrease in revenue was partially offset by a $44.5 million increase in defense and aerospace revenue.

The decrease in HPA operating income was driven by lower revenue, the sale of products that were manufactured during periods of lower factory utilization and higher inventory-related charges.

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Connectivity and Sensors Group

[[GREPCENT_TABLE]]
[["(In thousands, except percentages)","","Fiscal 2024","","Fiscal 2023","","Dollar Change","","Percentage Change"],["Revenue","","$","434,537","","","$","474,364","","","$","(39,827)","","","(8.4)","%"],["Operating loss","","(88,649)","","","(72,080)","","","(16,569)","","","(23.0)"],["Operating loss as a % of revenue","","(20.4)","%","","(15.2)","%"]]
[[/GREPCENT_TABLE]]

The $39.8 million decrease in CSG revenue was attributable to a $43.0 million decrease in our connectivity components revenue. Challenges in the global macroeconomic environment negatively impacted demand for our connectivity components in the first half of fiscal 2024. In the second half of fiscal 2024, channel inventory levels improved and shipments of our connectivity components increased.

The increase in CSG operating loss was due to lower revenue and an increase in operating expenses of $6.2 million. The increase in operating expenses was driven by employee-related costs (including salaries and benefits, as well as incentive-based cash compensation).

Advanced Cellular Group

[[GREPCENT_TABLE]]
[["(In thousands, except percentages)","","Fiscal 2024","","Fiscal 2023","","Dollar Change","","Percentage Change"],["Revenue","","$","2,762,016","","","$","2,367,848","","","$","394,168","","","16.6","%"],["Operating income","","727,906","","","627,708","","","100,198","","","16.0"],["Operating income as a % of revenue","","26.4","%","","26.5","%"]]
[[/GREPCENT_TABLE]]

The $394.2 million increase in ACG revenue was driven by content gains at our largest end customer. Challenges in the global macroeconomic environment negatively impacted demand for our advanced cellular products for mass market smartphones in the first half of fiscal 2024. Over the course of fiscal 2024, channel inventory levels improved, and in the second half of fiscal 2024 shipments of our advanced cellular products for mass market smartphones increased to more closely align with end market demand.

The increase in ACG operating income was driven by higher revenue as described above. In fiscal 2024, ACG incurred additional product development costs and employee-related costs as a result of increased investment in developing new technologies and products; however, operating expenses as a percentage of revenue decreased by 1.5%.

Refer to Note 18 of the Notes to Consolidated Financial Statements for a reconciliation of segment operating income to the consolidated operating income for fiscal years 2024, 2023 and 2022.

INTEREST, OTHER INCOME AND INCOME TAXES

[[GREPCENT_TABLE]]
[["","","Fiscal Year"],["(In thousands)","","2024","","2023"],["Interest expense","","$","(69,245)","","","$","(68,463)"],["Other income, net","","51,104","","","9,924"],["Income tax expense","","(143,882)","","","(21,477)"]]
[[/GREPCENT_TABLE]]

Interest expense

During fiscal years 2024 and 2023, we recorded interest expense primarily related to the 4.375% senior notes due 2029 (the "2029 Notes"), the 3.375% senior notes due 2031 (the "2031 Notes") and the 2024 Notes. Interest expense in the preceding table for fiscal years 2024 and 2023 is net of capitalized interest of $2.9 million and $3.9 million, respectively.

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Other income, net

During fiscal 2024, we recorded interest income of $38.3 million, losses of $1.2 million based on our share of the earnings from our limited partnership investments and a net gain on debt extinguishment of $1.8 million. Interest income increased by $17.2 million in fiscal 2024 compared to fiscal 2023 primarily due to higher interest rates on our cash balances. In addition, the fair value of invested funds under our non-qualified deferred compensation plan increased by $9.9 million (excluding participant contributions and withdrawals). Refer to Note 11 of the Notes to Consolidated Financial Statements for additional information regarding our non-qualified deferred compensation plan.

During fiscal 2023, we recorded interest income of $21.1 million, losses of $4.2 million based on our share of the earnings from our limited partnership investments and impairments and losses of $7.8 million from other investments.

Income tax expense

Income tax expense for fiscal 2024 was $143.9 million, which was primarily comprised of tax expense related to international operations generating pre-tax book income and the impact of GILTI, offset by a tax benefit related to domestic and international operations generating pre-tax book losses and domestic tax credits. During fiscal 2024, we also incurred incremental tax expense associated with the reversal of our permanent reinvestment assertion related to a fiscal 2024 restructuring initiative. This resulted in an annual effective tax rate of 195.6% for fiscal 2024.

Income tax expense for fiscal 2023 was $21.5 million, which was primarily comprised of tax expense related to international operations generating pre-tax book income and the impact of GILTI (including the effects of the capitalization and amortization of research and development expenses which were previously expensed for U.S. tax purposes), offset by a tax benefit related to domestic and international operations generating pre-tax book losses and domestic tax credits. This resulted in an annual effective tax rate of 17.2% for fiscal 2023.

A valuation allowance has been established against deferred tax assets in the taxing jurisdictions where, based upon the positive and negative evidence available, it is more likely than not that the related deferred tax assets will not be realized. Realization is dependent upon generating future income in the taxing jurisdictions in which the operating loss carryovers, credit carryovers, depreciable tax basis and other deferred tax assets exist. Management reevaluates the ability to realize the benefit of these deferred tax assets on a quarterly basis. As of the end of fiscal years 2024 and 2023, the valuation allowance against domestic and foreign deferred tax assets was $43.6 million and $35.9 million, respectively.

Refer to Note 14 of the Notes to Consolidated Financial Statements for additional information regarding income taxes.

STOCK-BASED COMPENSATION

Under Accounting Standards Codification ("ASC") 718, "Compensation – Stock Compensation," stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award using an option pricing model for stock options (Black-Scholes) and market price for restricted stock units and is recognized as expense over the employee's requisite service period.

As of March 30, 2024, total remaining unearned compensation cost related to unvested restricted stock units was $159.4 million, which will be amortized over the weighted-average remaining service period of approximately 1.4 years.

Refer to Note 16 of the Notes to Consolidated Financial Statements for additional information regarding stock-based compensation.

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LIQUIDITY AND CAPITAL RESOURCES

Cash generated by operations is our primary source of liquidity. As of March 30, 2024, we had working capital of approximately $1,215.9 million, including $1,029.3 million in cash and cash equivalents, compared to working capital of approximately $1,474.0 million, including $808.8 million in cash and cash equivalents, as of April 1, 2023.

Our $1,029.3 million of total cash and cash equivalents as of March 30, 2024, includes $752.0 million held by our foreign subsidiaries, of which $507.5 million is held by Qorvo International Pte. Ltd. in Singapore. If the undistributed earnings of our foreign subsidiaries are needed in the U.S., we may be required to pay state income and/or foreign local withholding taxes to repatriate these earnings.

We may from time to time in the future seek to retire or make additional optional payments on our outstanding debt obligations through repurchases or exchanges of our outstanding notes, which may be effected through privately negotiated transactions, market transactions, tender offers, redemptions or otherwise. Such tenders, exchanges, purchases, or other transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. During fiscal 2024, we repurchased $60.3 million of the principal amount of our 2024 Notes, plus accrued and unpaid interest, on the open market. The remaining principal amount of the 2024 Notes of $439.7 million is included in "Current portion of long-term debt" in the Consolidated Balance Sheet as of March 30, 2024.

Credit Agreement

On September 29, 2020, we and certain of our U.S. subsidiaries (the "Guarantors") entered into a five-year unsecured senior credit facility pursuant to a credit agreement (as amended, restated, modified or otherwise supplemented from time to time, the "2020 Credit Agreement") with Bank of America, N.A., acting as administrative agent, and a syndicate of lenders. The 2020 Credit Agreement amended and restated the previous credit agreement dated as of December 5, 2017. The 2020 Credit Agreement included a senior revolving line of credit (the "2020 Revolving Facility") of up to $300.0 million and a senior term loan that was fully repaid in fiscal 2022. The 2020 Revolving Facility was available to finance working capital, capital expenditures and other general corporate purposes.

During fiscal years 2024 and 2023, there were no borrowings under the 2020 Revolving Facility.

The 2020 Credit Agreement contained various conditions, covenants and representations with which we had to be in compliance in order to borrow funds and to avoid an event of default. As of March 30, 2024, we were in compliance with these covenants. Refer to Note 10 of the Notes to Consolidated Financial Statements for further information about the 2020 Credit Agreement.

On April 23, 2024, we entered into a five-year unsecured senior credit facility pursuant to a credit agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and a syndicate of lenders (the “2024 Credit Agreement”), which replaced the 2020 Credit Agreement. The 2024 Credit Agreement provides for a $325.0 million senior revolving line of credit (the “2024 Revolving Facility”). Up to $25.0 million of the 2024 Revolving Facility may be used for the issuance of standby letters of credit and up to $10.0 million of the 2024 Revolving Facility may be used for swing line advances (i.e., short-term borrowings made available from the lead lender). We may request at any time that the 2024 Revolving Facility be increased by up to $325.0 million, subject to securing additional funding commitments from existing or new lenders. The 2024 Revolving Facility is available to finance working capital, capital expenditures and other lawful corporate purposes. The initial maturity date of the 2024 Revolving Facility is April 23, 2029, which may be extended by up to two years by exercising extension options provided in the 2024 Credit Agreement.

At our option, loans under the 2024 Credit Agreement will bear interest at (i) the Applicable Rate (as defined in the 2024 Credit Agreement) plus Term SOFR (as defined in the 2024 Credit Agreement) or (ii) the Applicable Rate plus a rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A., or (c) Term SOFR plus 1.0% (the “Base Rate”). All swing line loans will bear interest at a rate equal to the Applicable Rate plus the Base Rate. Term SOFR is the rate per annum equal to the forward-looking SOFR term rate for interest

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periods of one, three or six months, as selected by us, plus an adjustment of 0.10%. The Applicable Rate will be determined by reference to a pricing grid based on the Consolidated Leverage Ratio (as defined in the 2024 Credit Agreement) or, at our option, the Debt Rating (as defined in the 2024 Credit Agreement). The Applicable Rate for Term SOFR loans ranges from 1.000% per annum to 1.750% per annum and will initially be set at 1.250% per annum until the delivery of our first compliance certificate to the lenders. The Applicable Rate for Base Rate loans ranges from 0.000% per annum to 0.750% per annum and will initially be set at 0.250% per annum until the delivery of our first compliance certificate to the lenders. Undrawn amounts under the 2024 Revolving Facility are subject to a commitment fee ranging from 0.125% to 0.275%. Interest for Term SOFR loans will be payable at the end of each applicable interest period or at three-month intervals, if such interest period exceeds three months. Interest for Base Rate loans will be payable quarterly in arrears. We will pay a letter of credit fee equal to the Applicable Rate multiplied by the daily amount available to be drawn under any letter of credit, a fronting fee and any customary documentary and processing charges for any letter of credit issued under the 2024 Credit Agreement.

The 2024 Credit Agreement contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds and avoid an event of default, including a financial covenant that we must maintain a Consolidated Leverage Ratio not to exceed 3.50 to 1.00 as of the end of any of our fiscal quarters, provided that in connection with an acquisition in excess of $300.0 million, our maximum Consolidated Leverage Ratio may increase on two occasions during the term of the 2024 Revolving Facility to 4.00 to 1.00, in each case for four consecutive fiscal quarters, beginning with the fiscal quarter in which such acquisition occurs.

Stock Repurchases

On November 2, 2022, we announced that our Board of Directors authorized a new share repurchase program to repurchase up to $2.0 billion of our outstanding common stock, which included the remaining authorized dollar amount under a prior program terminated concurrent with the new authorization. Under the current program, share repurchases are made in accordance with applicable securities laws on the open market or in privately negotiated transactions. The extent to which we repurchase our shares, the number of shares and the timing of any repurchases depends on general market conditions, regulatory requirements, alternative investment opportunities and other considerations. The program does not require us to repurchase a minimum number of shares, does not have a fixed term, and may be modified, suspended or terminated at any time without prior notice.

During fiscal years 2024, 2023 and 2022, we repurchased approximately 4.0 million shares, 8.7 million shares and 7.3 million shares of our common stock for approximately $403.0 million, $862.2 million and $1,152.3 million, respectively (including transaction costs and excise tax, as applicable) under the prior and current share repurchase programs. As of March 30, 2024, approximately $1,305.0 million remains authorized for repurchases under the current share repurchase program. Refer to Note 17 of the Notes to Consolidated Financial Statements for further discussion of our share repurchase program.

Cash Flows from Operating Activities

Operating activities in fiscal 2024 generated cash of $833.2 million, compared to $843.2 million in fiscal 2023. This decrease in cash provided by operating activities was primarily due to decreased profitability.

Cash Flows from Investing Activities

Net cash used in investing activities in fiscal 2024 was $136.5 million, compared to $153.4 million in fiscal 2023. During fiscal 2024, we received proceeds of $49.5 million, primarily from the sale of our BAW manufacturing facility in Farmers Branch, Texas, and our capital expenditures decreased by $31.7 million as compared to fiscal 2023. Additionally, we acquired Anokiwave in fiscal 2024, resulting in net cash outflows of $83.0 million.

Cash Flows from Financing Activities

Net cash used in financing activities in fiscal 2024 was $459.6 million, compared to $853.4 million in fiscal 2023. The decrease in cash used in financing activities was primarily due to lower stock repurchases in fiscal 2024, partially offset by repurchases of our 2024 Notes.

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Our future capital requirements may differ materially from those currently anticipated and will depend on many factors, including market acceptance of and demand for our products, acquisition opportunities, technological advances and our relationships with suppliers and customers. Based on current and projected levels of cash flows from operations, coupled with our existing cash and cash equivalents and availability from the 2024 Revolving Facility, we believe that we have sufficient liquidity to meet both our short-term and long-term cash requirements. However, if there is a significant decrease in demand for our products, or if investments in our business outpace revenue growth, operating cash flows may be insufficient to meet our needs. If existing resources and cash from operations are not sufficient to meet our future requirements or if we perceive conditions to be favorable, we may seek additional debt or equity financing. Additional debt or equity financing could be dilutive to holders of our common stock. Further, we cannot be sure that additional debt or equity financing, if required, will be available on favorable terms, if at all.

CONTRACTUAL OBLIGATIONS

The following table summarizes our significant contractual obligations and commitments (in thousands) as of March 30, 2024, and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

[[GREPCENT_TABLE]]
[["","Payments Due By Fiscal Period"],["","Total Payments","","2025","","2026-2027","","2028-2029","","2030 and thereafter"],["Capital commitments (1)","$","64,720","","","$","62,460","","","$","2,260","","","$","\u2014","","","$","\u2014"],["Purchase obligations (2)","462,703","","","424,668","","","33,656","","","4,379","","","\u2014"],["Leases","74,449","","","17,185","","","27,511","","","16,418","","","13,335"],["Long-term debt obligations (3)","2,397,747","","","508,246","","","133,438","","","109,813","","","1,646,250"],["Total","$","2,999,619","","","$","1,012,559","","","$","196,865","","","$","130,610","","","$","1,659,585"]]
[[/GREPCENT_TABLE]]

(1) Capital commitments represent obligations for the purchase of property and equipment, a majority of which are not recorded as liabilities on our Consolidated Balance Sheet because we had not received the related goods or services as of March 30, 2024.

(2) Purchase obligations represent payments due related to the purchase of materials and manufacturing services, a majority of which are not recorded as liabilities on our Consolidated Balance Sheet because we had not received the related goods or services as of March 30, 2024.

(3) Long-term debt obligations represent future cash payments of principal and interest over the life of the 2024 Notes, the 2029 Notes and the 2031 Notes, including anticipated interest payments not recorded as liabilities on our Consolidated Balance Sheet as of March 30, 2024. Debt obligations are classified based on their stated maturity date, and any future redemptions would impact our cash payments. Refer to Note 10 of the Notes to Consolidated Financial Statements for further information.

Other Contractual Obligations

As of March 30, 2024, in addition to the amounts shown in the contractual obligations table above, we have $43.9 million of unrecognized income tax benefits and accrued interest and penalties which have been recorded as a liability. We are uncertain as to if, or when, such amounts may be settled. We also have an obligation related to the Transitional Repatriation Tax that we elected to pay over eight years. The remaining obligation of $3.6 million is recorded as a liability and is expected to be paid over the next two years.

As discussed in Note 11 of the Notes to Consolidated Financial Statements, we have two pension plans in Germany with a combined benefit obligation of approximately $9.6 million as of March 30, 2024. Pension benefit payments are not included in the schedule above due to the uncertainty regarding the amount and timing of any future cash outflows. Pension benefit payments were approximately $0.3 million in fiscal 2024 and are expected to be approximately $0.4 million in fiscal 2025.

We also offer a non-qualified deferred compensation plan to eligible participants to defer and invest a specified percentage of their cash compensation. We record an obligation under the plan for the distributions to be made to participants upon certain triggering events. Although participants are required to make distribution elections at the time of enrollment, the amount and timing of any future cash outflows is uncertain until such triggering events occur. The total deferred compensation obligation as of March 30, 2024 was $52.3 million, of which $2.3 million is estimated to be paid in fiscal 2025. Refer to Note 11 of the Notes to Consolidated Financial Statements for further information.

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SUPPLEMENTAL PARENT AND GUARANTOR FINANCIAL INFORMATION

In accordance with the indentures governing the 2024 Notes, the 2029 Notes and the 2031 Notes (together, the "Notes"), our obligations under the Notes are fully and unconditionally guaranteed on a joint and several unsecured basis by the Guarantors, which are listed on Exhibit 22 to this Annual Report on Form 10-K. Each Guarantor is 100% owned, directly or indirectly, by Qorvo, Inc. ("Parent"). A Guarantor can be released in certain customary circumstances. Our other U.S. subsidiaries and our non-U.S. subsidiaries do not guarantee the Notes (such subsidiaries are referred to as the "Non-Guarantors").

The following presents summarized financial information for the Parent and the Guarantors on a combined basis as of and for the periods indicated, after eliminating (i) intercompany transactions and balances among the Parent and Guarantors, and (ii) equity earnings from, and investments in, any Non-Guarantor. The summarized financial information may not necessarily be indicative of the financial position and results of operations had the combined Parent and Guarantors operated independently from the Non-Guarantors.

[[GREPCENT_TABLE]]
[["Summarized Balance Sheets(in thousands)","March 30, 2024","","April 1, 2023"],["ASSETS"],["Current assets (1)","$","803,900","","","$","972,989"],["Non-current assets","2,311,618","","","2,398,287"],["LIABILITIES"],["Current liabilities","$","727,138","","","$","296,049"],["Long-term liabilities (2)","2,306,883","","","2,689,824"]]
[[/GREPCENT_TABLE]]

(1) Includes net amounts due from Non-Guarantor subsidiaries of $129.8 million and $379.5 million as of March 30, 2024 and April 1, 2023, respectively.

(2) Includes net amounts due to Non-Guarantor subsidiaries of $597.3 million and $509.1 million as of March 30, 2024 and April 1, 2023, respectively.

[[GREPCENT_TABLE]]
[["Summarized Statement of Operations(in thousands)","","Fiscal 2024"],["Revenue","","$","1,073,492"],["Gross profit","","162,178"],["Net loss","","(370,438)"]]
[[/GREPCENT_TABLE]]

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements requires management to use judgment and estimates. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could materially differ from those estimates. The accounting policies that are most critical in the preparation of our consolidated financial statements are those that are both important to the presentation of our financial condition and results of operations and require significant judgment and estimates on the part of management. Our critical accounting policies are reviewed periodically with the Audit Committee of the Board of Directors. We also have other policies that we consider key accounting policies; however, these policies typically do not require us to make estimates or judgments that are difficult or subjective. Refer to Note 1 of the Notes to Consolidated Financial Statements.

Inventory Reserves. The valuation of inventory requires us to estimate obsolete or excess inventory. The determination of obsolete or excess inventory requires us to estimate the future demand for our products within specific time horizons, generally 12 to 24 months. The estimates of future demand that we use in the valuation of inventory reserves are the same as those used in our revenue forecasts and are also consistent with the estimates used in our manufacturing plans to enable consistency between inventory valuations and build decisions. Product-specific facts and circumstances reviewed in the inventory valuation process include a review of the customer base,

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market conditions and customer acceptance of our products and technologies, as well as an assessment of the selling price in relation to the product cost.

These valuations and estimates require significant judgment. If actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could materially adversely impact our consolidated financial position and results of operations.

Historically, inventory reserves have fluctuated as new technologies have been introduced and customers’ demand has shifted.

Refer to Note 3 of the Notes to Consolidated Financial Statements for additional information regarding our inventories.

Property and Equipment. Periodically, we evaluate the period over which we expect to recover the economic value of our property and equipment, considering factors such as changes in machinery and equipment technology, our ability to re-use equipment across generations of process technology and historical usage trends. When we determine that the useful lives of assets are shorter or longer than we had originally estimated, we adjust the rate of depreciation to reflect the revised useful lives of the assets.

We assess property and equipment for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset group may not be recoverable. Factors that we consider in deciding when to perform an impairment review include an adverse change in our use of the assets or an expectation that the assets will be sold or otherwise disposed. We assess the recoverability of the assets held and used by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining estimated useful lives against their respective carrying amounts.  Assets identified as "held for sale" are recorded at the lesser of their carrying value or their fair market value less costs to sell.  Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. 

The process of evaluating property and equipment for impairment is highly subjective and requires significant judgment as we are required to make assumptions about items such as future demand for our products and industry trends. If actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could materially adversely impact our consolidated financial position and results of operations.

Refer to Notes 4 and 5 of the Notes to Consolidated Financial Statements for additional information regarding our business held for sale and property and equipment, respectively.

Business Acquisitions. We allocate the fair value of the purchase price to the assets acquired and liabilities assumed based on their estimated fair value. The excess of the purchase price over the fair values of the identifiable assets and liabilities is recorded to goodwill. Goodwill is assigned to the reporting unit that is expected to benefit from the synergies of the business combination.

A number of significant assumptions, estimates and judgments are used in determining the fair value of acquired assets and liabilities, particularly with respect to the intangible assets acquired. The valuation of intangible assets requires the use of valuation techniques such as the income approach. The income approach includes management’s estimation of future cash flows (including expected revenue growth rates and profitability), the underlying product or technology life cycles and the discount rates applied to future cash flows.

Judgment is also required in estimating the fair values of deferred tax assets and liabilities, uncertain tax positions and tax-related valuation allowances, which are initially estimated as of the acquisition date, as well as inventory, property and equipment, pre-existing liabilities or legal claims, deferred revenue and contingent consideration, each as may be applicable.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition

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date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, any purchase price adjustments are recorded to the income statement.

Refer to Note 6 of the Notes to Consolidated Financial Statements for additional information regarding our business acquisitions.

Goodwill Impairment Testing. In accordance with ASC 350, “Intangibles – Goodwill and Other,” goodwill is not amortized but is subject to impairment testing at least annually or when an event occurs or circumstances change that indicate it is more likely than not an impairment exists. Management tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment as defined in ASC 280, “Segment Reporting,” or one level below an operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels of an operating segment having similar economic characteristics. If the carrying value of a reporting unit (including the value of goodwill) is greater than its estimated fair value, an impairment charge would be recorded for the amount that the carrying amount of the reporting unit exceeded its fair value, up to the total amount of goodwill allocated to that reporting unit.

As required by the Company’s policy, goodwill is tested for impairment on the first day of our fourth quarter of each fiscal year, or when there is evidence that events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

During fiscal 2024, we completed interim assessments for goodwill impairment as management determined, based on revisions to long-term forecasts, it was more likely than not that the fair values of two of our reporting units (one within the HPA operating segment and one within the CSG operating segment) were below the carrying amounts.

Our quantitative assessments considered both the income and market approaches to estimate the fair value of each reporting unit. Inherent in the fair value determinations are significant judgments and estimates, including assumptions about future revenue, profitability and cash flows, our operational plans and our interpretation of current economic indicators and market valuations. The income approach was based on the discounted cash flow method that used estimates of the reporting units' revenue growth rates and operating margins as part of our long-term planning process, taking into consideration, historical data and industry and market conditions. The discount rate used to determine the present value of future cash flows was based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the ability to execute on the projected cash flows. The market approach estimated fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics.

Based on an interim assessment, the resulting fair value of the reporting unit within the HPA operating segment was then compared to the carrying value and it was determined that the fair value exceeded its carrying value by approximately 20%. This reporting unit has $96.5 million of goodwill allocated to it, which represents less than 5% of our total goodwill. As the forecasted revenue for this reporting unit includes products with early-stage technologies, there is commercial risk of market adoption as well as the timing of the market adoption, and we may be at risk for impairment loss in the future if forecasts assumed in the fair value calculation are not realized. Additionally, there are certain risks inherent to our operations as described in Item 1A. “Risk Factors.”

Based on an interim assessment, it was determined that the reporting unit within the CSG operating segment was below its carrying value, resulting in a goodwill impairment charge of approximately $48.0 million (based on the income approach) in the second quarter of fiscal 2024. In the third quarter of fiscal 2024, we concluded that an impairment triggering event occurred for this same reporting unit within the CSG segment as new information was received regarding slower than expected market adoption for one of CSG's new technologies and lower attach rates for a second CSG technology (resulting in further revisions to the long-term forecasts of this reporting unit). We concluded that it was more likely than not that the fair value of this reporting unit was below its carrying amount, and a quantitative analysis was performed. The quantitative analysis (based on the income approach) resulted in a $173.4 million write-off of the remaining goodwill of this reporting unit.

Our fiscal 2024 annual assessment was performed using a qualitative approach as of the first day of our fourth quarter (December 31, 2023) on our six reporting units with a remaining goodwill balance. In performing

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qualitative assessments, we consider the following factors which could trigger a goodwill impairment review: (i) significant underperformance relative to historical or projected future operating results; (ii) significant changes in the manner or our use of the acquired assets or the strategy for our overall business; (iii) significant negative industry or economic trends; (iv) a significant decline in our stock price for a sustained period; and (v) a significant change in our market capitalization relative to our net book value. Based on our fiscal 2024 qualitative assessment, we concluded there were no events or circumstances that indicated it was more likely than not that the fair value of each reporting unit was less than its respective carrying value.

Refer to Note 7 of the Notes to Consolidated Financial Statements for additional information regarding our goodwill and intangible assets.

Identified Intangible Assets. We amortize definite-lived intangible assets (including developed technology, customer relationships, technology licenses and trade names) on a straight-line basis over their estimated useful lives. Upon completion of development, in-process research and development assets are transferred to developed technology and are amortized over their useful lives. The asset balances relating to abandoned projects are impaired and expensed to research and development.

We evaluate definite-lived intangible assets for impairment to determine whether facts and circumstances indicate that the carrying amount of the assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amounts over the fair value of those assets and occur in the period in which the impairment determination was made. When measuring impairment, we make significant assumptions and apply judgment in estimating future cash flows and asset fair values, including annual revenue growth rates and a terminal year growth rate that reflects the inherent risk in future cash flows. If actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could materially adversely impact our consolidated financial position and results of operations.

No definite-lived intangible asset impairment charges were recorded in fiscal years 2024, 2023 or 2022.

Refer to Note 7 of the Notes to Consolidated Financial Statements for additional information regarding our identified intangible assets.

Revenue Recognition. 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 be entitled in exchange for those goods or services. A majority of our revenue is recognized at a point in time, either on shipment or delivery of the product, depending on individual customer terms and conditions.

We apply a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied.

Our revenue recognition accounting methodology contains uncertainties because it requires us to make significant estimates and assumptions and to apply judgment. For example, for arrangements that have multiple performance obligations, we must exercise judgment and use estimates in order to (1) determine whether performance obligations are distinct and should be accounted for separately; (2) determine the stand-alone selling price of each performance obligation; (3) allocate the transaction price among the various performance obligations on a relative stand-alone selling-price basis; and (4) determine whether revenue for each performance obligation should be recognized at a point in time or over time.

If we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of revenue or deferred revenue that we report in a particular period.

Refer to Note 1 of the Notes to Consolidated Financial Statements for a complete discussion of our revenue recognition policies.

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Income Taxes. In determining income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax expense, the resultant tax liabilities and the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense.

We assess the likelihood that our deferred tax assets can be recovered, recording a reserve in the form of a valuation allowance if the deferred tax assets are ultimately estimated to not be recoverable. In this process, certain relevant criteria are evaluated including: the amount of income or loss in prior years, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, the taxable income in prior carryback years that can be used to absorb net operating losses and credit carrybacks, future expected taxable income and prudent and feasible tax planning strategies. Changes in taxable income, market conditions, U.S. or international tax laws and other factors may change our judgment regarding whether we will be able to realize the deferred tax assets. These changes, if any, may require material adjustments to the net deferred tax assets and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made. Refer to Note 14 of the Notes to Consolidated Financial Statements for additional information regarding changes in the valuation allowance and net deferred tax assets.

We also assess the likelihood that our tax reporting positions will ultimately be sustained. To the extent it is determined it is more likely than not (a likelihood of more than 50 percent) that some portion, or all, of a tax reporting position will ultimately not be recognized and sustained, a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability. Our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made. Refer to Note 14 of the Notes to Consolidated Financial Statements for additional information regarding our uncertain tax positions and the amount of unrecognized tax benefits.