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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 1, 2022
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: 001-35451
MACOM Technology Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter) 
Delaware 27-0306875
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
100 Chelmsford Street
Lowell, MA 01851
(Address of principal executive offices and zip code)
(978) 656-2500
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareMTSINasdaq 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  ☒    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  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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☒  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  ☒
As of July 25, 2022, there were 69,997,229 shares of the registrant’s common stock outstanding.


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS
 Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.


PART I—FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
July 1,
2022		October 1,
2021
ASSETS
Current assets:
Cash and cash equivalents$132,170 $156,537 
Short-term investments404,169 188,365 
Accounts receivable, net 106,594 84,570 
Inventories110,228 82,699 
Prepaid and other current assets12,344 9,365 
Total current assets765,505 521,536 
Property and equipment, net122,498 120,526 
Goodwill311,958 314,240 
Intangible assets, net59,289 84,685 
Deferred income taxes37,519 39,516 
Other investments2,500 15,342 
Other long-term assets33,801 38,300 
Total assets$1,333,070 $1,134,145 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of finance lease obligations$977 $958 
Accounts payable42,725 28,712 
Accrued liabilities57,731 63,374 
Total current liabilities101,433 93,044 
Finance lease obligations, less current portion27,292 28,037 
Financing obligation9,544 8,720 
Long-term debt565,509 492,097 
Other long-term liabilities33,652 40,511 
Total liabilities737,430 662,409 
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Common stock70 69 
Treasury stock, at cost(330)(330)
Accumulated other comprehensive income(2,766)4,150 
Additional paid-in capital1,192,288 1,269,601 
Accumulated deficit(593,622)(801,754)
Total stockholders’ equity595,640 471,736 
Total liabilities and stockholders' equity$1,333,070 $1,134,145 
See notes to condensed consolidated financial statements.
1

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

 
 Three Months EndedNine Months Ended
 July 1,
2022		July 2,
2021		July 1,
2022		July 2,
2021
Revenue$172,259 $152,622 $497,027 $451,709 
Cost of revenue67,717 65,353 199,353 200,065 
Gross profit104,542 87,269 297,674 251,644 
Operating expenses:
Research and development37,625 33,610 108,550 105,165 
Selling, general and administrative30,914 29,985 93,481 91,758 
Total operating expenses68,539 63,595 202,031 196,923 
Income from operations36,003 23,674 95,643 54,721 
Other (expense) income:
Warrant liability expense— — — (11,130)
Interest expense, net(845)(5,526)(3,928)(15,111)
Other income (expense), net13 (2,661)114,866 (4,287)
Total other (expense) income, net(832)(8,187)110,938 (30,528)
Income before income taxes35,171 15,487 206,581 24,193 
Income tax expense2,937 482 5,962 3,349 
Net income$32,234 $15,005 $200,619 $20,844 
Net income per share:
Income per share - Basic$0.46 $0.22 $2.88 $0.31 
Income per share - Diluted$0.45 $0.21 $2.82 $0.30 
 Weighted average shares used:
Basic69,946 68,732 69,712 68,331 
Diluted71,060 70,880 71,130 70,282 
See notes to condensed consolidated financial statements.

2

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
 Three Months EndedNine Months Ended
 July 1,
2022		July 2,
2021		July 1,
2022		July 2,
2021
Net income$32,234 $15,005 $200,619 $20,844 
Unrealized (loss) gain on short term investments(1,219)75 (4,171)(121)
Foreign currency translation loss, net of tax(1,742)(69)(2,745)(420)
Other comprehensive (loss) income, net of tax(2,961)6 (6,916)(541)
Total comprehensive income$29,273 $15,011 $193,703 $20,303 
See notes to condensed consolidated financial statements.
3

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)

Three Months Ended
   Accumulated
Other
Comprehensive Income		Additional
Paid-in
Capital		Accumulated
Deficit		Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of April 1, 202269,910 $70 (23)$(330)$195 $1,180,204 $(625,856)$554,283 
Vesting of restricted common stock and units
67 — — — — — — — 
Issuance of common stock pursuant to employee stock purchase plan
66 — — — — 2,917 — 2,917 
Shares repurchased for tax withholdings on restricted stock awards(23)— — — — (1,178)— (1,178)
Share-based compensation
— — — — — 10,345 — 10,345 
Other comprehensive loss, net of tax— — — — (2,961)— — (2,961)
Net income— — — — — — 32,234 32,234 
Balance as of July 1, 202270,020 $70 (23)$(330)$(2,766)$1,192,288 $(593,622)$595,640 

Nine Months Ended
   Accumulated
Other
Comprehensive Income		Additional
Paid-in
Capital		Accumulated
Deficit		Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of October 1, 202168,877 $69 (23)$(330)$4,150 $1,269,601 $(801,754)$471,736 
Stock option exercises190 — — — — 2,688 — 2,688 
Vesting of restricted common stock and units
1,351 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
122 — — — — 5,364 — 5,364 
Shares repurchased for tax withholdings on equity awards
(520)— — — — (35,935)— (35,935)
Share-based compensation
— — — — — 30,260 — 30,260 
Other comprehensive loss, net of tax— — — — (6,916)— — (6,916)
Cumulative-effect adjustment from adoption of ASU 2020-06, net— — — — — (79,690)7,513 (72,177)
Net income— — — — — — 200,619 200,619 
Balance as of July 1, 202270,020 $70 (23)$(330)$(2,766)$1,192,288 $(593,622)$595,640 
See notes to condensed consolidated financial statements.








4


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)
Three Months Ended
   Accumulated
Other
Comprehensive Income		Additional
Paid-in
Capital		Accumulated
Deficit		Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of April 2, 202168,692 $69 (23)$(330)$4,462 $1,241,820 $(833,888)$412,133 
Stock option exercises10 — — — — 161 — 161 
Vesting of restricted common stock and units
62 — — — — — — — 
Issuance of common stock pursuant to employee stock purchase plan
73 — — — — 2,557 — 2,557 
Shares repurchased for tax withholdings on equity awards
(21)— — — — (1,066)— (1,066)
Share-based compensation
— — — — — 8,141 — 8,141 
Other comprehensive income, net of tax— — — — 6 — — 6 
Equity component of convertible notes, net— — — — — 8,856 — 8,856 
Net income— — — — — — 15,005 15,005 
Balance as of July 2, 202168,816 $69 (23)$(330)$4,468 $1,260,469 $(818,883)$445,793 

Nine Months Ended
   Accumulated
Other
Comprehensive Income		Additional
Paid-in
Capital		Accumulated
Deficit		Total
Stockholders’
Equity
 Common StockTreasury Stock
 SharesAmountSharesAmount
Balance as of October 2, 202066,921 $67 (23)$(330)$5,009 $1,135,127 $(839,727)$300,146 
Stock option exercises
60 — — — — 978 — 978 
Vesting of restricted common stock and units
1,284 1 — — — — — 1 
Issuance of common stock pursuant to employee stock purchase plan
166 — — — — 4,796 — 4,796 
Shares repurchased for tax withholdings on equity awards
(473)— — — — (23,404)— (23,404)
Share-based compensation
— — — — — 26,841 — 26,841 
Other comprehensive loss, net of tax— — — — (541)— — (541)
Issuance of common stock for the cashless exercise of warrants858 1 — — — 36,441 — 36,442 
Equity component of convertible notes, net— — — — — 79,690 — 79,690 
Net income— — — — — — 20,844 20,844 
Balance as of July 2, 202168,816 $69 (23)$(330)$4,468 $1,260,469 $(818,883)$445,793 
See notes to condensed consolidated financial statements.
5

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Nine Months Ended
 July 1, 2022July 2, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$200,619 $20,844 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangibles amortization43,052 52,854 
Share-based compensation30,260 26,841 
Warrant liability expense— 11,130 
Deferred financing cost and discount amortization and write-offs1,281 6,029 
Accretion of discount on convertible note— 3,925 
Deferred income taxes2,110 2,200 
(Gain) loss on equity method investment, net(114,908)287 
Other adjustments, net(85)1,053 
Change in operating assets and liabilities:
Accounts receivable(22,024)(25,735)
Inventories(27,529)8,089 
Prepaid expenses and other assets897 (1,025)
Accounts payable14,128 3,100 
Accrued and other liabilities(12,657)(1,606)
Income taxes1,845 (384)
Net cash provided by operating activities116,989 107,602 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equity method investment127,750 — 
Purchases of property and equipment(18,818)(12,926)
Proceeds from sales and maturities of short-term investments165,998 191,306 
Purchases of short-term investments(386,762)(152,336)
Proceeds from sale of property and equipment23 280 
Net cash (used in) provided by investing activities(111,809)26,324 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes, net of issuance costs— 444,249 
Payments on long-term debt— (545,321)
Payments on finance leases(726)(1,012)
Proceeds from stock option exercises and employee stock purchases8,052 5,774 
Repurchase of common stock - tax withholdings on equity awards(35,935)(23,404)
Net cash used in financing activities(28,609)(119,714)
Foreign currency effect on cash(938)481 
NET CHANGE IN CASH AND CASH EQUIVALENTS(24,367)14,693 
CASH AND CASH EQUIVALENTS — Beginning of period156,537 129,441 
CASH AND CASH EQUIVALENTS — End of period$132,170 $144,134 
See notes to condensed consolidated financial statements.
6

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, comprehensive income, stockholders' equity and cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The condensed consolidated balance sheet as of October 1, 2021 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our October 1, 2021 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended October 1, 2021 filed with the SEC on November 15, 2021 (the “2021 Annual Report on Form 10-K”). We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our 2021 Annual Report on Form 10-K.
Principles of Consolidation—The accompanying condensed consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 2022 and 2021 each include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in such fiscal years in the first fiscal quarter.
Use of Estimates—The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we determine estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; goodwill and long-lived asset valuations and associated impairment assessments; revenue reserves; share-based compensation valuations and income taxes.
Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in our 2021 Annual Report on Form 10-K.
Pronouncements Adopted in Fiscal Year 2022
In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts on an entity’s own equity. The standard reduces the number of models used to account for convertible instruments, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and requires the if-converted method for calculation of diluted earnings per share for all convertible instruments. We early adopted this standard effective October 2, 2021 using the modified retrospective approach transition method. Therefore, the condensed consolidated financial statements for the three and nine months ended July 1, 2022 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy. Refer to Note 8 - Debt for the impact of adoption on our 2026 Convertible Notes (as defined below).
7

Pronouncements for Adoption in Subsequent Periods
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this update was effective upon its issuance. If elected, the guidance is to be applied prospectively through December 31, 2022. We are currently evaluating the effect the potential adoption of this ASU will have on our consolidated financial statements, including, but not limited to, our Credit Agreement (defined below). For additional information regarding our Credit Agreement, refer to Note 8 - Debt.
2. REVENUE
Disaggregation of Revenue
We disaggregate revenue from contracts with customers by markets and geography, as we believe it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The following tables present our revenue disaggregated by markets and geography (in thousands):
Three Months EndedNine Months Ended
July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Revenue by Market:
Telecommunications
$61,988 $47,995 $180,738 $141,799 
Industrial & Defense
75,509 71,370 215,794 205,078 
Data Center
34,762 33,257 100,495 104,832 
Total $172,259 $152,622 $497,027 $451,709 

Three Months EndedNine Months Ended
July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Revenue by Geographic Region:
United States
$77,434 $70,329 $226,407 $206,566 
China
47,613 44,521 129,705 124,097 
Asia Pacific, excluding China (1)
27,225 22,023 83,756 69,310 
Other Countries (2)
19,987 15,749 57,159 51,736 
Total$172,259 $152,622 $497,027 $451,709 
(1)Asia Pacific primarily represents Australia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand.
(2)No country or region represented greater than 10% of our total revenue as of the dates presented, other than the United States, China and Asia Pacific region as presented above.
Contract Balances
We record contract assets or contract liabilities depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Our contract liabilities primarily relate to deferred revenue, including advanced consideration received from customers for contracts prior to the transfer of control to the customer, and therefore revenue is subsequently recognized upon delivery of products and services.
The following table presents the changes in contract liabilities during the nine months ended July 1, 2022 (in thousands, except percentage):
July 1, 2022October 1, 2021$ Change% Change
 Contract liabilities$2,633 $2,793 $(160)(6)%
As of July 1, 2022 and October 1, 2021, $0.2 million and $0.9 million, respectively, of our contract liabilities, were recorded as other long-term liabilities on our balance sheet with the remainder recorded as accrued liabilities. During the three and nine months ended July 1, 2022, we recognized net sales of $0.3 million and $1.3 million, respectively, that were included in the contract liabilities balance as of the beginning of the period. The decrease in contract liabilities during the nine months
8

ended July 1, 2022 was primarily related to recognition of revenue that was previously deferred for products and services invoiced prior to when certain of our customers obtained control of such products and/or services.
3. INVESTMENTS
All investments are short-term in nature and are invested in corporate bonds and commercial paper and are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses and fair value of our available-for-sale investments by major investment type are summarized in the tables below (in thousands):
 July 1, 2022
 Amortized
Cost		Gross
Unrealized
Holding Gains 		Gross
Unrealized
Holding Losses		Aggregate Fair
Value
Corporate bonds$130,741 $8 $(2,821)$127,928 
Commercial paper277,605 50 (1,414)276,241 
Total short-term investments$408,346 $58 $(4,235)$404,169 
October 1, 2021
 Amortized
Cost		Gross
Unrealized
Holding Gains 		Gross
Unrealized
Holding Losses		Aggregate Fair
Value
Corporate bonds$73,653 $151 $(171)$73,633 
Commercial paper114,718 21 (7)114,732 
Total short-term investments$188,371 $172 $(178)$188,365 
    
The contractual maturities of available-for-sale investments were as follows (in thousands):
 July 1, 2022October 1, 2021
Less than one year$316,363 $120,590 
Over one year87,806 67,775 
Total available-for-sale investments$404,169 $188,365 

We have determined that the gross unrealized losses on available for sale securities as of July 1, 2022 and October 1, 2021 are temporary in nature and/or do not relate to credit loss, and therefore there is no expense for credit losses recorded in our condensed consolidated statements of operations. Unrealized gains and losses on available-for-sale investments are reported as a separate component of stockholders’ equity within accumulated other comprehensive income.
Other Investments — As of July 1, 2022, we held a non-marketable equity investment in Series B preferred stock of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. As the equity securities do not have a readily determinable fair value and do not qualify for the practical expedient under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, we have elected to account for this investment at cost less any impairment. We evaluate this investment for impairment at each balance sheet date. As of July 1, 2022 and October 1, 2021, the carrying value of this investment was $2.5 million and is classified as a long-term investment.
As of October 1, 2021, also included in long-term investments was a non-controlling investment of less than 10% in the outstanding equity of a private company, Ampere Computing Holdings LLC (“Ampere”), that was acquired in conjunction with our divestiture of our compute business during our fiscal year 2018. This investment’s carrying value was updated quarterly based on our proportionate share of the gains or losses, as well as any changes in Ampere's equity, utilizing the equity method. As of October 1, 2021, the carrying value of this investment was $12.8 million.
On December 23, 2021, we sold our investment in Ampere to one of Ampere’s other limited liability company members, pursuant to the terms of a previously negotiated call option included in Ampere’s limited liability company agreement, as amended and restated (the “LLC Agreement”), in exchange for a predetermined fixed price as set forth in the LLC Agreement of approximately $127.8 million in cash consideration. As of December 23, 2021, the carrying value of this investment was approximately $9.5 million. As a result of this transaction, during the three months ended December 31, 2021, we recorded a gain of $118.2 million in Other income (expense), net in our condensed consolidated statements of operations.
During the three months ended December 31, 2021, we also recorded our proportionate share of the losses on this investment of $3.3 million in Other income (expense), net in our condensed consolidated statements of operations. We do not anticipate any further Ampere income or losses to be recorded. During the three and nine months ended July 2, 2021, we
9

recorded net losses of $2.0 million and $0.3 million, respectively, associated with this investment. The nine months ended July 2, 2021 include a non-cash gain of $9.8 million associated with an increase in Ampere's equity.
4. FAIR VALUE
We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:
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 or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three and nine months ended July 1, 2022.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
July 1, 2022
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$14,310 $14,310 $— $— 
Commercial paper276,241 — 276,241 — 
Corporate bonds127,928 — 127,928 — 
Total assets measured at fair value$418,479 $14,310 $404,169 $— 
October 1, 2021
Fair ValueActive Markets for Identical Assets (Level 1)Observable Inputs (Level 2)Unobservable Inputs (Level 3)
Assets
Money market funds$26,363 $26,363 $— $— 
Commercial paper114,732 — 114,732 — 
Corporate bonds73,633 — 73,633 — 
Total assets measured at fair value$214,728 $26,363 $188,365 $— 
All common stock warrants were exercised during the fiscal quarter ended January 1, 2021. During the nine months ended July 2, 2021, the change in the fair value of the warrant liability, classified within Level 3 of the fair value hierarchy, consist of the following (in thousands):
October 2,
2020		Net Realized Losses Included in EarningsSales and
Settlements		July 2,
2021
Common stock warrant liability$25,312 $11,130 $(36,442)$— 
10

5. INVENTORIES
Inventories consist of the following (in thousands):
July 1,
2022		October 1,
2021
Raw materials$70,519 $50,950 
Work-in-process13,290 9,201 
Finished goods26,419 22,548 
Total inventory, net$110,228 $82,699 
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
July 1,
2022		October 1,
2021
Construction in process$19,058 $24,086 
Machinery and equipment222,362 200,843 
Leasehold improvements26,480 24,347 
Furniture and fixtures2,664 2,377 
Computer equipment and software17,983 17,749 
Finance lease assets34,417 35,589 
Total property and equipment322,964 304,991 
Less accumulated depreciation and amortization(200,466)(184,465)
Property and equipment, net$122,498 $120,526 
Depreciation and amortization expense related to property and equipment for the three and nine months ended July 1, 2022 was $5.9 million and $17.7 million, respectively. Depreciation and amortization expense related to property and equipment for the three and nine months ended July 2, 2021 was $5.8 million and $18.1 million, respectively.
7. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 Three Months EndedNine Months Ended
 July 1,
2022		July 2,
2021		July 1,
2022		July 2,
2021
Cost of revenue$1,779 $3,806 $6,062 $11,489 
Selling, general and administrative6,276 7,602 19,334 23,318 
Total$8,055 $11,408 $25,396 $34,807 
    
Intangible assets consist of the following (in thousands):
July 1,
2022		October 1,
2021
Acquired technology$179,434 $179,434 
Customer relationships245,870 245,870 
Trade name (indefinite-lived)3,400 3,400 
Total 428,704 428,704 
Less accumulated amortization(369,415)(344,019)
Intangible assets — net$59,289 $84,685 
11

A summary of the activity in gross intangible assets and goodwill is as follows (in thousands):
Intangible Assets
Total Intangible AssetsAcquired
Technology		Customer
Relationships		Trade NameGoodwill
Balance as of October 1, 2021$428,704 $179,434 $245,870 $3,400 $314,240 
Currency translation adjustment— — — — (2,282)
Balance as of July 1, 2022$428,704 $179,434 $245,870 $3,400 $311,958 
As of July 1, 2022, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
2022 Remaining20232024