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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
____________________________________
FORM 10-Q
____________________________________
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended July 30, 2023
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to             
Commission File Number 001-06395
____________________________________ 
SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
 ____________________________________
Delaware 95-2119684
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

200 Flynn Road, Camarillo, California, 93012-8790
(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (805498-2111
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common Stock par value $0.01 per shareSMTC The Nasdaq Global Select Market
____________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x   No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x  Accelerated filer  
Non-accelerated filer 
  Smaller reporting company  
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  x 
Number of shares of common stock, $0.01 par value per share, outstanding at September 8, 2023: 64,174,406



SEMTECH CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JULY 30, 2023
 
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Unless the context otherwise requires, the use of the terms "Semtech," "the Company," "we," "us" and "our" in this Quarterly Report on Form 10-Q refers to Semtech Corporation and, as applicable, its consolidated subsidiaries. This Quarterly Report on Form 10-Q may contain references to the Company’s trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
Special Note Regarding Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our plans, objectives and expectations. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "estimate," "should," "will," "designed to," "projections," or "business outlook," or other similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the Company's ability to comply with the covenants under the agreements governing its indebtedness; the Company's ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty; the inherent risks, costs and uncertainties associated with integrating Sierra Wireless, Inc. successfully and risks of not achieving all or any of the anticipated benefits or the risk that the anticipated benefits may not be fully realized or take longer to realize than expected; the uncertainty surrounding the impact and duration of supply chain constraints and any associated disruptions; export restrictions and laws affecting the Company's trade and investments and tariffs or the occurrence of trade wars; worldwide economic and political disruptions, including as a result of inflation and the current conflict between Russia and Ukraine; tightening credit conditions related to the United States banking system concerns; competitive changes in the marketplace including, but not limited to, the pace of growth or adoption rates of applicable products or technologies; downturns in the business cycle; decreased average selling prices of the Company’s products; the Company’s reliance on a limited number of suppliers and subcontractors for components and materials; changes in projected or anticipated end-user markets; future responses to and effects of public health crises; and those factors set forth under "Risk Factors" in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023, and under “Risk Factors” in this Quarterly Report on Form 10-Q, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved, or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.
In addition to regarding forward-looking statements with caution, you should consider that the preparation of the consolidated financial statements requires us to draw conclusions and make interpretations, judgments, assumptions and estimates with respect to certain factual, legal, and accounting matters. Our consolidated financial statements might have been materially impacted if we had reached different conclusions or made different interpretations, judgments, assumptions or estimates.
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PART I - FINANCIAL INFORMATION
 
ITEM 1.Financial Statements

SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 Three Months EndedSix Months Ended
 July 30, 2023July 31, 2022July 30, 2023July 31, 2022
Net sales$238,372 $209,254 $474,911 $411,403 
Cost of sales127,071 73,435 249,809 145,331 
Amortization of acquired technology10,573 1,048 21,428 2,096 
Total cost of sales137,644 74,483 271,237 147,427 
Gross profit100,728 134,771 203,674 263,976 
Operating costs and expenses, net:
Selling, general and administrative65,024 48,119 123,141 91,483 
Product development and engineering51,387 40,601 103,214 79,390 
Intangible amortization4,871  9,753  
Gain on sale of business (17,986) (17,986)
Goodwill impairment279,555  279,555  
Total operating costs and expenses, net400,837 70,734 515,663 152,887 
Operating (loss) income(300,109)64,037 (311,989)111,089 
Interest expense(24,171)(1,259)(44,681)(2,456)
Interest income674 555 1,743 919 
Non-operating expense, net(1,566)(430)(2,039)(532)
Investment impairments and credit loss reserves, net(227)429 (260)405 
(Loss) income before taxes and equity method (loss) income(325,399)63,332 (357,226)109,425 
Provision for income taxes56,592 12,019 54,175 20,088 
Net (loss) income before equity method (loss) income(381,991)51,313 (411,401)89,337 
Equity method (loss) income(12)283 (19)307 
Net (loss) income(382,003)51,596 (411,420)89,644 
Net loss attributable to noncontrolling interest(1)(2)(3)(3)
Net (loss) income attributable to common stockholders$(382,002)$51,598 $(411,417)$89,647 
(Loss) earnings per share:
Basic$(5.97)$0.81 $(6.43)$1.41 
Diluted$(5.97)$0.81 $(6.43)$1.39 
Weighted-average number of shares used in computing (loss) earnings per share:
Basic64,005 63,500 63,964 63,725 
Diluted64,005 63,977 63,964 64,270 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
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SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS
(in thousands)
(unaudited)
 
  Three Months EndedSix Months Ended
 July 30, 2023July 31, 2022July 30, 2023July 31, 2022
Net (loss) income$(382,003)$51,596 $(411,420)$89,644 
Other comprehensive income, net:
Unrealized gain (loss) on foreign currency cash flow hedges, net96 546 (27)546 
Reclassifications of realized gain on foreign currency cash flow hedges, net, to net (loss) income(164)(142)(276)(142)
Unrealized gain on interest rate cash flow hedges, net13,769 307 14,187 1,564 
Reclassifications of realized gain on interest rate cash flow hedges, net, to net (loss) income(1,836)(174)(3,592)(54)
Cumulative translation adjustment(6,697)(48)(7,698)(48)
Change in defined benefit plans, net(52)23 (102)46 
Other comprehensive income, net5,116 512 2,492 1,912 
Comprehensive (loss) income(376,887)52,108 (408,928)91,556 
Comprehensive loss attributable to noncontrolling interest(1)(2)(3)(3)
Comprehensive (loss) income attributable to common stockholders$(376,886)$52,110 $(408,925)$91,559 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.









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SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
July 30, 2023January 29, 2023
Assets
Current assets:
Cash and cash equivalents$147,912 $235,510 
Accounts receivable, less allowances of $4,418 and $3,881, respectively
159,097 161,695 
Inventories180,231 207,704 
Prepaid taxes7,669 6,243 
Other current assets135,029 111,634 
Total current assets629,938 722,786 
Non-current assets:
Property, plant and equipment, net of accumulated depreciation of $272,632 and $257,978, respectively
161,329 169,293 
Deferred tax assets14,075 63,783 
Goodwill1,017,444 1,281,703 
Other intangible assets, net183,401 215,102 
Other assets112,413 116,961 
TOTAL ASSETS$2,118,600 $2,569,628 
Liabilities and Equity
Current liabilities:
Accounts payable$52,473 $100,676 
Accrued liabilities215,694 253,075 
Current portion of long-term debt52,890 43,104 
Total current liabilities321,057 396,855 
Non-current liabilities:
Deferred tax liabilities4,755 5,065 
Long-term debt1,330,614 1,296,966 
Other long-term liabilities95,159 114,707 
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized, 78,136,144 issued and 64,030,212 outstanding and 78,136,144 issued and 63,870,581 outstanding, respectively
785 785 
Treasury stock, at cost, 14,105,932 shares and 14,265,563 shares, respectively
(572,990)(577,907)
Additional paid-in capital486,365 471,374 
Retained earnings446,823 858,240 
Accumulated other comprehensive income5,852 3,360 
Total stockholders’ equity366,835 755,852 
Noncontrolling interest180 183 
Total equity367,015 756,035 
TOTAL LIABILITIES AND EQUITY$2,118,600 $2,569,628 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Three Months Ended July 30, 2023
Common StockAccumulated Other Comprehensive Income
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at April 30, 202363,957,748 $785 $(575,317)$477,999 $828,825 $736 $733,028 $181 $733,209 
Net loss— — — — (382,002)— (382,002)(1)(382,003)
Other comprehensive income— — — — — 5,116 5,116 — 5,116 
Share-based compensation— — — 11,503 — — 11,503 — 11,503 
Treasury stock reissued to settle share-based awards72,464 — 2,327 (3,137)— — (810)— (810)
Balance at July 30, 202364,030,212 $785 $(572,990)$486,365 $446,823 $5,852 $366,835 $180 $367,015 
Six Months Ended July 30, 2023
Common StockAccumulated Other Comprehensive Income
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at January 29, 202363,870,581 $785 $(577,907)$471,374 $858,240 $3,360 $755,852 $183 $756,035 
Net loss— — — — (411,417)— (411,417)(3)(411,420)
Other comprehensive income— — — — — 2,492 2,492 — 2,492 
Share-based compensation— — — 22,323 — — 22,323 — 22,323 
Treasury stock reissued to settle share-based awards159,631 — 4,917 (7,332)— — (2,415)— (2,415)
Balance at July 30, 202364,030,212 $785 $(572,990)$486,365 $446,823 $5,852 $366,835 $180 $367,015 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.


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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(in thousands, except share data)
(unaudited)
Three Months Ended July 31, 2022
Common StockAccumulated Other Comprehensive Loss
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at May 1, 202263,466,933 $785 $(596,187)$496,151 $834,909 $(675)$734,983 $190 $735,173 
Net income— — — — 51,598 — 51,598 (2)51,596 
Other comprehensive income— — — — — 512 512 — 512 
Share-based compensation— — — 12,608 — — 12,608 — 12,608 
Treasury stock reissued to settle share-based awards49,408 — 1,738 (2,581)— — (843)— (843)
Balance at July 31, 202263,516,341 $785 $(594,449)$506,178 $886,507 $(163)$798,858 $188 $799,046 
Six Months Ended July 31, 2022
Common StockAccumulated Other Comprehensive Loss
Number of Shares OutstandingAmountTreasury Stock, at CostAdditional Paid-in CapitalRetained EarningsStockholders’ EquityNoncontrolling InterestTotal Equity
Balance at January 30, 202264,098,565 $785 $(549,942)$491,956 $796,860 $(2,075)$737,584 $191 $737,775 
Net income— — — — 89,647 — 89,647 (3)89,644 
Other comprehensive income— — — — — 1,912 1,912 — 1,912 
Share-based compensation— — — 24,711 — — 24,711 — 24,711 
Repurchase of common stock(762,093)— (50,000)— — — (50,000)— (50,000)
Treasury stock reissued to settle share-based awards179,869 — 5,493 (10,489)— — (4,996)— (4,996)
Balance at July 31, 202263,516,341 $785 $(594,449)$506,178 $886,507 $(163)$798,858 $188 $799,046 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.

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SEMTECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
 July 30, 2023July 31, 2022
Cash flows from operating activities:
Net (loss) income$(411,420)$89,644 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization46,565 14,998 
Amortization of right-of-use assets3,282 2,302 
Investment impairments and credit loss reserves, net260 (405)
Accretion of deferred financing costs and debt discount3,103 241 
Write-off of deferred financing costs and debt discount771  
Deferred income taxes50,542 261 
Share-based compensation21,803 24,143 
Gain on disposition of business operations and assets(17)(17,978)
Equity method loss (income)19 (307)
Corporate-owned life insurance, net3,212 831 
Goodwill impairment279,555  
Amortization of inventory step-up3,314  
Changes in assets and liabilities:
Accounts receivable, net2,725 402 
Inventories22,094 (15)
Other assets(11,179)2,836 
Accounts payable(37,730)5,676 
Accrued liabilities(71,211)7,230 
Other liabilities(7,680)(2,530)
Net cash (used in) provided by operating activities(101,992)127,329 
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment42  
Purchase of property, plant and equipment(20,897)(15,583)
Proceeds from sale of investments 2,275 
Purchase of investments(930)(3,288)
Purchase of intangibles(292) 
Proceeds from sale of business, net of cash disposed 26,812 
Proceeds from corporate-owned life insurance2,500 2,676 
Premiums paid for corporate-owned life insurance (2,676)
Net cash (used in) provided by investing activities(19,577)10,216 
Cash flows from financing activities:
Proceeds from revolving line of credit60,000 10,000 
Payments of revolving line of credit (10,000)
Payments of term loans(11,187) 
Deferred financing costs(11,671) 
Payments for employee share-based compensation payroll taxes(2,415)(5,616)
Proceeds from exercise of stock options 620 
Repurchase of common stock (50,000)
Net cash provided by (used in) financing activities34,727 (54,996)
Effect of foreign exchange rate changes on cash and cash equivalents(756) 
Net (decrease) increase in cash and cash equivalents(87,598)82,549 
Cash and cash equivalents at beginning of period235,510 279,601 
Cash and cash equivalents at end of period$147,912 $362,150 
Supplemental disclosure of cash flow information:
Interest paid$40,912 $1,931 
Income taxes paid$15,612 $5,375 
Non-cash investing and financing activities:
Accounts payable related to capital expenditures$1,640 $3,384 
The accompanying notes are an integral part of these interim unaudited condensed consolidated financial statements.
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SEMTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Organization and Basis of Presentation
Nature of Business
Semtech Corporation (together with its consolidated subsidiaries, the "Company" or "Semtech") is a high-performance semiconductor, IoT systems and cloud connectivity service provider. The end customers for the Company’s silicon solutions are primarily original equipment manufacturers that produce and sell technology solutions. The Company’s IoT module, router, gateway and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices.
The Company designs, develops and markets a wide range of products for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets.
Basis of Presentation
The Company reports results on the basis of 52 and 53-week periods and ends its fiscal year on the last Sunday in January. The other quarters generally end on the last Sunday of April, July and October. All quarters consist of 13 weeks except for one 14-week period in the fourth quarter of 53-week years. The second quarters of fiscal years 2024 and 2023 each consisted of 13 weeks.
Principles of Consolidation
The accompanying interim unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2023 ("Annual Report"). The Company’s interim unaudited condensed consolidated statements of operations are referred to herein as the "Statements of Operations," the Company’s interim unaudited condensed consolidated balance sheets are referred to herein as the "Balance Sheets," and the Company's interim unaudited condensed consolidated statements of cash flows are referred to herein as the "Statements of Cash Flows." In the opinion of the Company, these interim unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the financial position and results of operations of the Company for the interim periods presented. All intercompany balances have been eliminated. Because the interim unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report. The results reported in these interim unaudited condensed consolidated financial statements should not be regarded as indicative of results that may be expected for any subsequent period or for the entire year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification
In fiscal year 2023, the Company reclassified amounts recorded for amortization of acquired technology intangible assets as a component of cost of sales. This was applied retrospectively and resulted in the reclassification of $1.0 million and $2.1 million of amortization of acquired technology intangible assets for the three and six months ended July 31, 2022, respectively, from "Intangible amortization" within "Total operating costs and expenses, net" to "Amortization of acquired technology" within "Total cost of sales" in the Statements of Operations, which also had the impact of reducing gross profit by the same amount. This reclassification did not impact the Company's operating income, net income or earnings per share for any historical periods and also did not impact the Company's Balance Sheets or Statements of Cash Flows.
Liquidity
The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements. Compliance with the Company’s
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leverage and interest expense coverage financial covenants is measured quarterly based upon the Company’s performance over the most recent four quarters, and compliance with the liquidity covenant is measured as of the last day of each monthly accounting period.
As of July 30, 2023, the Company was in compliance with the financial covenants in the Credit Agreement (as defined in Note 9, Long-Term Debt). In response to adverse market demand conditions, the Company has taken actions to reduce expenses to preserve cash and maintain compliance with its financial covenants. In the absence of additional actions, the Company may not maintain compliance with the financial covenants over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements, which noncompliance would raise substantial doubt about the Company’s ability to continue as a going concern. Failure to meet the covenant requirements in the Credit Agreement would constitute an event of default under the Credit Agreement and there is no certainty the Company would be able to obtain waivers or amendments with the requisite lenders party thereto in order to maintain compliance.
If an event of default occurs and the Company is unable to obtain necessary waivers or amendments, the requisite lenders may elect to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. Further, if an event of default occurs, the lenders will have the right to proceed against the collateral granted to them to secure that debt. If the debt under the Credit Agreement were to be accelerated, the Company’s assets may not be sufficient to repay in full the debt that may become due as a result of that acceleration. The Company could seek replacement financing at prevailing market rates or raise additional capital by issuing equity or debt securities; however, this may not be on terms favorable to the Company, or available at all.
Based on the Company’s current projections and management’s plan to further manage controllable expenditures through cost-saving initiatives that are planned and probable to be implemented, management believes the Company is expected to maintain compliance with its financial covenants and the Company’s existing cash, projected operating cash flows and available borrowing capacity under its Revolving Credit Facility (as defined in Note 9, Long-Term Debt) are adequate to meet its operating needs, liabilities and commitments over the next twelve months from the issuance of the accompanying interim unaudited condensed consolidated financial statements.


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Note 2: Acquisition and Divestiture
Acquisition of Sierra Wireless, Inc.
On January 12, 2023 (the "Acquisition Date"), the Company completed the acquisition of all of the issued and outstanding common shares of Sierra Wireless, Inc. ("Sierra Wireless") in an all-cash transaction representing a total purchase consideration of approximately $1.3 billion (the "Sierra Wireless Acquisition"). The results of operations of Sierra Wireless have been included in the Statements of Operations since the Acquisition Date.
The transaction was accounted for as a business combination in accordance with Accounting Standards Codification ("ASC") 805, "Business Combinations." The purchase price allocation for the Sierra Wireless Acquisition is preliminary. The Company made an initial allocation of the purchase price at the Acquisition Date based upon its understanding of the fair value of the acquired assets and assumed liabilities based on the information that was currently available. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. In the fourth quarter of fiscal year 2023, a preliminary goodwill balance of $931.4 million was recognized for the excess of the consideration transferred over the net assets acquired and represented the expected revenue and cost synergies of the combined company and assembled workforce. In the six months ended July 30, 2023, the Company finalized measurement period adjustments related to identifiable intangible assets, inventories, property, plant, and equipment and other assets and liabilities, which have been recorded to reflect facts and circumstances that existed as of the Acquisition Date. These adjustments increased the preliminary goodwill balance by $21.7 million to $953.1 million. The amounts assigned to certain legal matters and income and non-income based taxes remain preliminary, are subject to adjustment and will be finalized within the measurement period (not to exceed one year from the Acquisition Date). In the six months ended July 30, 2023, the Company also finalized its determination of the reporting units related to the Sierra Wireless Acquisition and completed a preliminary allocation of the goodwill balance to these reporting units. See Note 8, Goodwill and Intangible Assets, for additional information.
The following table presents the preliminary estimated fair values of assets and liabilities assumed on the Acquisition Date based on valuations and management's estimates:
(in thousands)Amounts recognized as of Acquisition Date (as initially reported)Measurement period adjustmentAmounts recognized as of Acquisition Date (as adjusted)
Total purchase price consideration, net of cash acquired $68,794
$1,240,757 $1,240,757 
Assets:— 
Accounts receivable, net92,633 — 92,633 
Inventories96,339 (1,899)94,440 
Other current assets72,724 5,003 77,727 
Property, plant and equipment29,086 (2,628)26,458 
Intangible assets214,780 — 214,780 
Prepaid taxes3,001 — 3,001 
Deferred tax assets22,595 677 23,272 
Other assets14,878 — 14,878 
Liabilities:— 
Accounts payable50,413 210 50,623 
Accrued liabilities148,654 24,644 173,298 
Deferred tax liabilities4,824 64 4,888 
Other long-term liabilities32,785 (2,106)30,679 
Net assets acquired, excluding goodwill$309,360 $(21,659)$287,701 
Goodwill$931,397 $21,659 $953,056 
See Note 8, Goodwill and Intangible Assets, for additional information about goodwill impairments recorded in the three and six months ended July 30, 2023 related to the Sierra Wireless Acquisition.
The following table provides a summary of the pro forma unaudited consolidated results of operations as if the Sierra Wireless Acquisition had been completed on February 1, 2021 (the first day of fiscal year 2022):
Three Months EndedSix Months Ended
July 31, 2022July 31, 2022
(in thousands)(unaudited)(unaudited)
Total revenues$397,205 $772,311 
Net loss$38,444 39,404 
The unaudited pro forma information presented does not purport to be indicative of the results that would have been achieved had the acquisition been consummated at the beginning of the period presented nor of the results which may occur in the future.
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The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. The unaudited pro forma information does not include any adjustments for any restructuring activities, operating efficiencies or cost savings. The Company ends its fiscal year on the last Sunday in January. Prior to the transaction, Sierra Wireless's fiscal year ended on December 31. To comply with SEC rules and regulations for companies with different fiscal year ends, the pro forma combined financial information has been prepared utilizing periods that differ by up to a month.
Divestiture
On May 3, 2022, the Company completed the divestiture of its high reliability discrete diodes and assemblies business (the “Disposal Group”) to Micross Components, Inc. for $26.8 million, net of cash disposed, in an all-cash transaction. The divestiture resulted in a gain of $18.0 million for both the three and six months ended July 31, 2022, which was recorded in "Gain on sale of business" in the Statements of Operations. As a result of the transaction, the Company disposed of $0.8 million of goodwill based on the relative fair value of the Disposal Group and the portion of the applicable reporting unit that was retained. The estimated fair value of the Disposal Group less estimated costs to sell exceeded its carrying amount as of the transaction date. As the sale of the Disposal Group was not considered a strategic shift that would have a major effect on the Company’s operations or financial results, it was not reported as discontinued operations.
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Note 3: (Loss) Earnings per Share
The computation of basic and diluted (loss) earnings per share was as follows:
 Three Months EndedSix Months Ended
(in thousands, except per share data)July 30, 2023July 31, 2022July 30, 2023July 31, 2022
Net (loss) income attributable to common stockholders$(382,002)$51,598 $(411,417)$89,647 
Weighted-average shares outstanding–basic64,005 63,500 63,964 63,725 
Dilutive effect of share-based compensation 477  545 
Weighted-average shares outstanding–diluted64,005 63,977 63,964 64,270 
(Loss) earnings per share:
Basic$(5.97)$0.81 $(6.43)$1.41 
Diluted$(5.97)$0.81 $(6.43)$1.39 
Anti-dilutive shares not included in the above calculations:
Share-based compensation2,593 210 2,462 83 
Warrants8,573  8,573  
Total anti-dilutive shares11,166 210 11,035 83 
Basic earnings or loss per share is computed by dividing income or loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period. Diluted earnings or loss per share incorporates the incremental shares issuable, calculated using the treasury stock method, upon the assumed exercise of non-qualified stock options and the vesting of restricted stock units, market-condition restricted stock units and financial metric-based restricted stock units if certain conditions have been met, but excludes such incremental shares that would have an anti-dilutive effect. Due to the Company's net loss for the three and six months ended July 30, 2023, all shares underlying stock options and restricted stock units are considered anti-dilutive.
Any dilutive effect of the Warrants (see Note 9, Long-Term Debt) is calculated using the treasury-stock method. During the three and six months ended July 30, 2023, the Warrants were excluded from diluted shares outstanding because the exercise price exceeded the average market price of the Company's common stock for the reporting period and due to net loss.
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Note 4: Share-Based Compensation
Financial Statement Effects and Presentation
Pre-tax share-based compensation was included in the Statements of Operations as follows:
Three Months EndedSix Months Ended
(in thousands)July 30, 2023July 31, 2022July 30, 2023July 31, 2022
Cost of sales$525 $610 $888 $1,385 
Selling, general and administrative9,409 8,588 13,911 14,720 
Product development and engineering3,465 4,052 7,004 8,038 
Total share-based compensation$13,399 $13,250 $21,803 $24,143 
Restricted Stock Units, Employees
The Company grants restricted stock units to certain employees of which a portion are expected to be settled with shares of the Company's common stock and a portion are expected to be settled in cash. The restricted stock units that are to be settled with shares are accounted for as equity. The grant date for these awards is equal to the measurement date and they are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically 3 or 4 years). The restricted stock units that are to be settled in cash are accounted for as liabilities and the value of the awards is re-measured at the end of each reporting period until settlement at the end of the requisite vesting period (typically 3 years). In the six months ended July 30, 2023, the Company granted to certain employees 904,752 restricted stock units that settle in shares with a weighted-average grant date fair value of $27.45, including 123,652 restricted stock units granted to the current Chief Executive Officer ("CEO") that vest quarterly over a 3-year period and 232,635 restricted stock units granted to the former CEO ("Former CEO") prior to his retirement that vest quarterly over an 18-month period. In the six months ended July 30, 2023, the Company granted to certain employees 9,432 restricted stock units that settle in cash.
Restricted Stock Units, Non-Employee Directors
The Company maintains a compensation program pursuant to which restricted stock units are granted to the Company’s directors that are not employed by the Company or any of its subsidiaries. Under the Company's director compensation program, a portion of the restricted stock units granted under the program would be settled in cash and a portion would be settled in shares of the Company's common stock. Restricted stock units awarded under the program are generally scheduled to vest on the earlier of (i) one year after the grant date or (ii) the day immediately preceding the first annual meeting of the Company's stockholders following the grant. The portion of a restricted stock unit award under the program that is to be settled in cash will, subject to vesting, be settled when the director who received the award separates from service. The portion of a restricted stock unit award under the program that is to be settled in shares of stock will, subject to vesting, be settled promptly following vesting. In the six months ended July 30, 2023, the Company granted to certain non-employee directors 37,116 restricted stock units that settle in cash and 37,116 restricted stock units that settle in shares with a weighted-average grant date fair value of $25.28.
The restricted stock units that are to be settled in cash are accounted for as liabilities. These awards are not typically settled until a non-employee director’s separation from service. The value of both the unvested and vested but unsettled awards are re-measured at the end of each reporting period until settlement. As of July 30, 2023, the total number of vested, but unsettled awards was 227,109 units and the liability associated with these awards was $5.5 million, of which $2.5 million was included in "Accrued liabilities" in the Balance Sheets relating to two previous non-employee directors currently serving short-term non-employee consultancies for the Company. The remaining $3.0 million was included in "Other long-term liabilities" in the Balance Sheets.
Total Stockholder Return ("TSR") Market-Condition Restricted Stock Units
The Company grants TSR market-condition restricted stock units (the "TSR Awards") to certain executives of the Company, which are settled in shares and accounted for as equity awards. The TSR Awards have a pre-defined market-condition, which determines the number of shares that ultimately vest, as well as a service condition. The TSR Awards are valued as of the grant date using a Monte Carlo simulation, which takes into consideration the possible outcomes pertaining to the TSR market condition and expense is recognized on a straight-line basis over the requisite service periods and is adjusted for any actual forfeitures.
In the six months ended July 30, 2023, the Company granted 170,934 TSR Awards, including 61,827 TSR Awards granted to the CEO and 109,107 TSR Awards granted to certain other executives. The market condition is determined based upon the Company’s TSR benchmarked against the TSR of the Russell 3000 Index over one, two and three year performance periods (one-third of the awards vesting each performance period). Generally, the award recipients must be employed for the entire
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performance period and be an active employee at the time of vesting of the awards. The grant-date fair values per unit of the TSR Awards granted to the CEO in the six months ended July 30, 2023 for each one, two and three year performance period were $23.65, $32.78 and $38.65, respectively. The grant-date fair values per unit of the TSR Awards granted to certain other executives in the six months ended July 30, 2023 for each one, two and three year performance period were $39.47, $45.36 and $49.79, respectively. Under the terms of these awards, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2024, 2025 and 2026 performance periods would be 341,868 shares.
Financial Metric-Based Restricted Stock Units
The Company grants financial metric-based restricted stock units to certain executives of the Company, which are settled in shares and accounted for as equity awards. These awards have a performance condition in addition to a service condition. The number of vested shares for each performance period is determined based on the Company’s attainment of pre-established revenue and non-GAAP operating income targets for the respective performance period. The vesting for tranches after the initial performance period is dependent on revenue and non-GAAP operating income for the preceding performance period. The financial metric-based restricted stock units are valued as of the measurement date and compensation cost is recognized using the accelerated attribution method over the requisite service period based on the number of shares that are probable of attainment for each fiscal year.
In the six months ended July 30, 2023, the Company granted 109,107 financial metric-based restricted stock units with a weighted-average grant date fair value of $30.21 that vest over one, two and three year performance periods (one-third of the awards vesting each performance period). Generally, the award recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. Under the terms of these awards, assuming the highest performance level of 200% with no cancellations due to forfeitures, the maximum potential number of shares that can be earned in aggregate for the cumulative fiscal years 2024, 2025 and 2026 performance periods would be 218,214 shares.
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Note 5: Available-for-sale securities
The following table summarizes the values of the Company’s available-for-sale securities:
 July 30, 2023January 29, 2023
(in thousands)Fair ValueAmortized
Cost
Gross
Unrealized Gain/(Loss)
Fair ValueAmortized
Cost
Gross
Unrealized Gain/(Loss)
Convertible debt investments$14,249 $16,149 $(1,900)$13,995 $15,635 $(1,640)
Total available-for-sale securities$14,249 $16,149 $(1,900)$13,995 $15,635 $(1,640)
The following table summarizes the maturities of the Company’s available-for-sale securities:
July 30, 2023
(in thousands)Fair ValueAmortized Cost
Within 1 year$12,870 $14,055 
After 1 year through 5 years1,379 2,094 
Total available-for-sale securities$14,249 $16,149 
The Company's available-for-sale securities consist of investments in convertible debt instruments issued by privately-held companies. The available-for-sale securities with maturities within one year were included in "Other current assets" and with maturities greater than one year were included in "Other assets" in the Balance Sheets.






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Note 6: Fair Value Measurements
The following fair value hierarchy is applied for disclosure of the inputs used to measure fair value and prioritizes the inputs into three levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the assets or liabilities, either directly or indirectly.
Level 3—Unobservable inputs based on the Company’s own assumptions, requiring significant management judgment or estimation.
Instruments Measured at Fair Value on a Recurring Basis
The fair values of financial assets and liabilities measured and recorded at fair value on a recurring basis were presented in the Balance Sheets as follows:
 July 30, 2023January 29, 2023
(in thousands)Total(Level 1)(Level 2)(Level 3)Total(Level 1)(Level 2)(Level 3)
Financial assets:
Interest rate swap agreement$13,396 $ $13,396 $ $6,067 $ $6,067 $ 
Total return swap contracts43  43  91  91  
Convertible debt investments14,249   14,249 13,995   13,995 
Foreign currency forward contracts309  309  717  717  
Total financial assets$27,997 $ $13,748 $14,249 $20,870 $ $6,875 $13,995 
Financial liabilities:
Interest rate swap agreement    6,432  6,432  
Total financial liabilities$ $ $ $ $6,432 $ $6,432 $ 
During the six months ended July 30, 2023, the Company had no transfers of financial assets or liabilities between Level 1, Level 2 or Level 3. As of July 30, 2023 and January 29, 2023, the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.
The convertible debt investments are valued utilizing a combination of estimates that are based on the estimated discounted cash flows associated with the debt and the fair value of the equity into which the debt may be converted, all of which are Level 3 inputs.
The following table presents a reconciliation of the changes in convertible debt investments in the six months ended July 30, 2023:
(in thousands)
Balance at January 29, 2023$13,995 
Increase in credit loss reserve(260)
Interest accrued514 
Balance at July 30, 2023$14,249 
The interest rate swap agreements are measured at fair value using readily available interest rate curves (Level 2 inputs). The fair value of each agreement is determined by comparing, for each settlement, the contract rate to the forward rate and discounting to the present value. Contracts in a gain position are recorded in "Other current assets" and "Other assets" in the Balance Sheets and the value of contracts in a loss position are recorded in "Accrued liabilities" and "Other long-term liabilities" in the Balance Sheets. See Note 17, Derivatives and Hedging Activities, for further discussion of the Company’s derivative instruments.
The foreign currency forward contracts are measured at fair value using readily available foreign currency forward and interest rate curves (Level 2 inputs). The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to the present value. Contracts in a gain position are recorded in "Other current assets" in the Balance Sheets and the value of contracts in a loss position are recorded in "Accrued liabilities" in the Balance Sheets. See Note 17, Derivatives and Hedging Activities, for further discussion of the Company’s derivative instruments.
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The total return swap contracts are measured at fair value using quoted prices of the underlying investments (Level 2 inputs). The fair values of the total return swap contracts are recognized in the Balance Sheets in "Other Current Assets" if the instruments are in a gain position and in "Accrued Liabilities" if the instruments are in a loss position. See Note 17, Derivatives and Hedging Activities, for further discussion of the Company's derivative instruments.
Instruments Not Recorded at Fair Value
Some of the Company’s financial instruments are not measured at fair value, but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include: cash and cash equivalents including money market deposits, net receivables, certain other assets, accounts payable, accrued expenses, accrued personnel costs, and other current liabilities. The Company’s revolving loans and Term Loans (as defined in Note 9, Long-Term Debt) are recorded at cost, which approximates fair value as the debt instruments bear interest at a floating rate. The Notes (as defined in Note 9, Long-Term Debt) are carried at face value less unamortized debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the capitalized issuance costs. The estimated fair values are determined based on the actual bid price of the Notes as of the last business day of the period.
The following table displays the carrying values and fair values of the Notes:
 July 30, 2023January 29, 2023
(in thousands)Fair Value HierarchyCarrying ValueFair ValueCarrying ValueFair Value
1.625% convertible senior notes due 2027, net (1)
Level 2309,358 304,371 308,150 345,075 
(1) The 1.625% convertible senior notes due 2027, net are reflected net of $10.1 million and $11.4 million of unamortized debt issuance costs as of July 30, 2023 and January 29, 2023, respectively.
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
The Company reduces the carrying amounts of its goodwill, intangible assets, long-lived assets and non-marketable equity securities to fair value when it determines they are impaired.
Investment Impairments and Credit Loss Reserves
The total credit loss reserve for the Company's held-to-maturity debt securities and available-for-sale debt securities was $4.4 million and $4.2 million as of July 30, 2023 and January 29, 2023, respectively. During each of the three and six months ended July 30, 2023, the Company increased its expected credit loss reserves by $0.2 million primarily due to its available-for-sale debt securities. During each of the three and six months ended July 31, 2022, the Company decreased its expected credit loss reserves by $0.4 million primarily due to a recovery on one of its held-to-maturity debt securities. Credit loss reserves related to the Company’s available-for-sale debt securities and held-to-maturity debt securities with maturities within one year were included in “Other current assets” and with maturities greater than one year were included in “Other assets” in the Balance Sheets.





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Note 7: Inventories
Inventories, consisting of material, material overhead, labor, and manufacturing overhead, are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
(in thousands)July 30, 2023January 29, 2023
Raw materials and electronic components$63,536 $76,919 
Work in progress78,642 88,764 
Finished goods38,053 42,021 
Total inventories$180,231 $207,704 
In the six months ended July 30, 2023, the Company recorded $3.3 million of amortization of inventory step-up related to the Sierra Wireless Acquisition in Cost of Sales in the Statements of Operations.
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Note 8: Goodwill and Intangible Assets
Goodwill
The carrying amounts of goodwill by applicable operating segment were as follows:
(in thousands)Signal IntegrityAdvanced Protection and Sensing IoT SystemIoT Connected ServicesUnallocatedTotal
Balance at January 29, 2023$274,085 $14,639 $61,582 $ $931,397 $1,281,703 
Measurement period adjustment    21,659 $21,659 
Reallocation  654,831 298,225 (953,056) 
Cumulative translation adjustment  (1,757)(4,606) (6,363)
Impairment  (210,516)(69,039) (279,555)
Balance at July 30, 2023$274,085 $14,639 $504,140 $224,580 $ $1,017,444 
On January 12, 2023, in connection with the Sierra Wireless Acquisition, the Company acquired all of the outstanding equity interests in Sierra Wireless and a preliminary goodwill balance of $931.4 million was recorded for the excess of the consideration transferred over the net assets acquired and represented the expected revenue and cost synergies of the combined company and assembled workforce. In the six months ended July 30, 2023, the Company recorded measurement period adjustments that increased goodwill by $21.7 million. See Note 2, Acquisition and Divestiture, for further discussion of the Sierra Wireless Acquisition and impact of the measurement period adjustments. In the fourth quarter of fiscal year 2023, in conjunction with the Sierra Wireless Acquisition, the Company formed two additional operating segments: the IoT System operating segment, which also absorbed portions of the Company's previous Wireless and Sensing operating segment, and the IoT Connected Services operating segment. In the six months ended July 30, 2023, the Company finalized the determination of the reporting units related to the previously-identified operating segments. IoT System-Modules and IoT System-Routers were identified as reporting units, which together with IoT System-Wireless (f.k.a. Wireless and Sensing) reporting unit, aggregate into the IoT System operating segment. IoT Connected Services comprises one reporting unit and, accordingly, is both a reporting unit and an operating segment. During the six months ended July 30, 2023, the Company also completed a preliminary allocation of the goodwill balance resulting from the Sierra Wireless Acquisition to each of these reporting units.
Goodwill is not amortized, but is tested for impairment at the reporting unit level using either a qualitative or quantitative assessment on an annual basis during the fourth quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair market value of the reporting unit.
During the second quarter of fiscal year 2024, as a result of reduced earnings forecasts associated with the business acquired from Sierra Wireless and current macroeconomic conditions, including a rising interest rate environment, the Company performed an interim impairment test using a quantitative assessment of the reporting units related to the Sierra Wireless Acquisition (specifically, the IoT Connected Services, IoT System–Modules and IoT System–Routers reporting units). The interim impairment test resulted in $279.6 million of total pre-tax non-cash goodwill impairment charges recorded in the Statements of Operations, consisting of $69.0 million of goodwill impairment for the IoT Connected Services reporting unit, $109.9 million of goodwill impairment for the IoT System–Modules reporting unit and $100.7 million goodwill impairment for the IoT System–Routers reporting unit. The fair values of these reporting units were determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach). Significant inputs to the reporting unit fair value measurements included forecasted cash flows, discount rates, terminal growth rates and earnings multiples, which were determined by management estimates and assumptions. The reporting unit fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.
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Purchased and Other Intangibles
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions, which are amortized over their estimated useful lives:
 July 30, 2023January 29, 2023
(in thousands, except estimated useful life)Estimated
Useful Life
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Core technologies
1-8 years
$154,926 $(22,576)$132,350 $175,080 $(21,156)$153,924 
Customer relationships
1-10 years
52,330 (8,856)