MONOLITHIC POWER SYSTEMS INC

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by Monolithic Power Systems, Inc. (the “Company” or “MPS”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted in accordance with these accounting principles, rules and regulations. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form10-K for the year ended* December 31, 2023*, filed with the SEC on* February**29,* 2024.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Quarterly Report on Form10-Q arenot necessarily indicative of the results that* maybe expected for the year ending December 31,*2024 or for any other future periods.

Summary of Significant Accounting Policies

There have beenno changes to the Company’s significant accounting policies during thethree months ended* March 31, 2024.In addition to those described in the Company’s audited consolidated financial statements included in the Annual Report on Form10*-K for the year ended* December 31, 2023,*the Company is subject to the following significant accounting policy due to the recent acquisition.

Goodwill and Acquisition-Related Intangible Assets

Goodwill represents the excess of fair value of purchase consideration over fair value of net tangible and identifiable intangible assets acquired as of the date of an acquisition. In-process research and development (“IPR&D”) assets represent the fair value of incomplete research and development (“R&D”) projects that hadnot reached technological feasibility as of the date of acquisition. IPR&D assets are initially capitalized at fair value as intangible assets with indefinite lives. When IPR&D projects are completed, they are reclassified as amortizable intangible assets and are amortized over their estimated useful lives. Alternatively, if IPR&D projects are abandoned, they are impaired and expensed as R&D costs. Acquisition-related intangible assets with finite lives consist of developed technologies, which are amortized on a straight-line basis over their estimated remaining useful lives. The amortization expense is recorded in cost of revenue in the Condensed Consolidated Statements of Operations.

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 reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these condensed consolidated financial statements primarily include those related to revenue recognition, inventory valuation, valuation of share-based awards, contingencies and income tax valuation allowances. Actual results could differ from these estimates and assumptions, and any such differences* may*be material to the Company’s condensed consolidated financial statements.

New Accounting PronouncementsNot Yet Adopted as of March 31, 2024****

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)*2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures*, which aims to improve disclosures regarding a public entity’s reportable segments, primarily through more comprehensive disclosures around significant segment expenses. The standard is effective for annual periods beginning* January 1,2024 and for interim periods beginning January 1, 2025,*and should be applied retroactively to all prior periods presented. The Company is evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In* December 2023,the FASB issued ASU**2023-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures*, which aims to improve an entity’s income tax disclosures around its effective rate reconciliation, income taxes paid, disaggregation of income before income taxes and income tax expense. The guidance will be effective for annual periods beginning* January 1,*2025. The standard should be applied prospectively but retrospective application is permitted. The Company doesnot expect the adoption of this standard to have a material impact on its consolidated financial statements.

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2. REVENUE RECOGNITION

Revenue from Product Sales

The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits (“ICs”), power modules as well as dies in wafer form. These product sales accounted for 99% of the Company’s total revenue for both thethree months ended* March 31, 2024* and2023. The remaining revenue primarily includes royalty revenue from licensing arrangements and revenue from wafer testing services performed forthird parties. See Note8 for the disaggregation of the Company’s revenue by geographic region and by product family.

The Company sells its products primarily throughthird-party distributors, value-added resellers, original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”) and electronic manufacturing service (“EMS”) providers. For thethree months ended* March 31, 2024and2023*,85% and 81% of the Company’s product sales were made through distribution arrangements, respectively. These distribution arrangements contain enforceable rights and obligations specific to those distributors andnot the end customers. Purchase orders, which are generally governed by sales agreements or the Company’s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed between the Company and the customer. The Company considers purchase orders to be the contracts with customers. The unit price as stated on the purchase orders is considered the observable, stand-alone selling price for the arrangements.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue.

Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company’s facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term).

Under certain consignment agreements, the Company recognizes revenue when the customers consume the products from the consigned inventory locations, at which time control transfers to the customers and the Company issues invoices.

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Variable Consideration

The Company accounts for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Certain U.S.-based distributors have price adjustment rights when they sell the Company’s products to their end customers at a price that is lower than the distribution price invoiced by the Company. When the Company receives claims from the distributors that products have been sold to the end customers at the lower price, the Company issues the distributors credit memos for the price adjustments. The Company estimates the price adjustments using the expected value method based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix. Other U.S. distributors and non-U.S. distributors donot have price adjustment rights. The Company records a credit against accounts receivable for the estimated price adjustments, with a corresponding reduction to revenue.

Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previoussix months’ purchases in accordance with the contract terms. The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue.

Contract Balances

Accounts Receivable:

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. The Company’s accounts receivables are short-term, with standard payment terms generally ranging from30 to90 days. The Company doesnot require its customers to provide collateral to support accounts receivable. The Company assesses collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers’ financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that* mayaffect collectability of the outstanding receivables. For certain customers, the Company requires standby letters of credit or advance payments prior to shipments of goods. The Company didnot* recognize any write-offs of accounts receivable or record any allowance for credit losses for the periods presented.

Contract Liabilities:

For customers without credit terms, the Company requires cash paymentstwo weeks before the products are scheduled to be shipped to the customers. The Company records these payments received in advance of performance as customer prepayments within current accrued liabilities. As of* March 31, 2024* and* December 31, 2023**,* customer prepayments totaled $2.7 million and $2.8 million, respectively. For thethree months ended* March 31, 2024*, the Company recognized all revenue that was included in the customer prepayment balance as of* December 31, 2023**.*

Practical Expedients

The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have beenone year or less.

The Company’s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For those customers who are required to pay in advance, the Company satisfies the performance obligations generally within a quarter. For these reasons, the Company has electednot to determine whether contracts with customers contain significant financing components.

The Company’s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company hasnot yet shipped. Because the Company expects to fulfill these performance obligations withinone year, the Company has electednot to disclose the amount of these remaining performance obligations.

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3. STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

In* April 2013,the Board of Directors adopted the Company’s2014* Equity Incentive Plan (the*“2014* Plan”), which the Company’s stockholders approved in* June 2013.In October 2014,the Board of Directors approved certain amendments to the2014* Plan. The amended2014 Plan became effective on* November 13, 2014,and provided for the issuance of up to 5.5 million shares. In April 2020,the Board of Directors further amended and restated the amended2014* Plan (the “Amended and Restated2014 Plan”), which the Company’s stockholders approved in* June 2020.The Amended and Restated2014* Plan became effective on* June 11, 2020,and provides for the issuance of up to 10.5 million shares. The Amended and Restated2014* Plan will cease being available for new awards on* June 11, 2030.As of March 31, 2024*,3.9 million shares remained available for future issuance under the Amended and Restated2014 Plan.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

Restricted Stock Units (“RSUs”)

The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance or market goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with or services to the Company.

A summary of RSU activity is presented in the table below (in thousands, except per-share amounts):

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The intrinsic value related to vested RSUs was $403.0 million and $141.6 million for thethree months ended* March 31, 2024and2023*, respectively. As of* March 31, 2024*, the total intrinsic value of all outstanding RSUs was $1.1 billion, based on the closing stock price of $677.42. As of* March 31, 2024*, unamortized compensation expense related to all outstanding RSUs was $339.5 million with a weighted-average remaining recognition period of approximatelytwo years.

Time-Based RSUs:

For thethree months ended* March 31, 2024*, the Compensation Committee granted 21,000 RSUs with service conditions to non-executive employees and non-employee directors. The RSUs generally vest over four years for employees andone year for directors, subject to continued service with the Company.

2024 PSUs:

In* February 2024,the Compensation Committee granted 50,000 PSUs to the executive officers, which represent a target number of shares that can be earned based on the degree of achievement ofthree* sets of performance goals (“2024 Executive PSUs”). For thefirst goal, the executive officers can earn up to 300% of the target number of the2024 Executive PSUs based on the achievement of the Company’s averagethree-year (2024 through2026) revenue growth rate in excess of the analog industry’s averagethree-year revenue growth rate as published by the Semiconductor Industry Association (the “SIA”). For thesecond goal, the executive officers can earn an additional 100% of the target number of the2024 Executive PSUs if the Company achieves a reduction in2026 of25% global combined Scope1 and Scope2 greenhouse gas emissions against the2022 baseline. For thethird goal, the executive officers can earn 50% of the target number of the2024 Executive PSUs if more thanone-third of the Company’s total2026 revenue in the automotive market is generated from Electronic Vehicle (“EV”) automakers. In addition, for thethird goal, the executive officers can earn 50% of the target number of the2024 Executive PSUs if total2026 revenue from products enabling EV powertrains and EV48V systems grows to200% of the2023 baseline. For thefirst goal, a percentage of the2024 Executive PSUs will fully vest on* December 31, 2026,depending on the degree to which the pre-determined goal is met during the performance period. The2024* Executive PSUs related to thesecond and thethird goal will fully vest on* December 31, 2026if the pre-determined goals are met during the performance period. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the2024* Executive PSUs will be $154.3 million.

In* February 2024,the Compensation Committee granted 11,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned based on the degree of achievement of the Company’s2025* revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s averagetwo-year (2024 and2025) revenue growth rate compared against the analog industry’s averagetwo-year revenue growth rate as published by the SIA (“2024 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200% or 300% of the target number of the2024 Non-Executive PSUs, depending on the job classification of the employee.50% of the2024 Non-Executive PSUs will vest in thefirst quarter of2026 depending on the degree to which the pre-determined goals are met during the performance period. The remaining2024 Non-Executive PSUs will vest over the followingtwo years on a quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the2024 Non-Executive PSUs will be $17.7 million.

The2024 Executive PSUs and the2024 Non-Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $30 per share upon vesting of the shares. The*$30* purchase price requirement is deemed satisfied and waived if the Company’s stock price on the last trading day of the performance period is*$30* higher than the grant date stock price of $632.98. The Company determined the grant date fair value of the2024 Executive PSUs and the2024 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $632.98, simulation term ofthree years, expected volatility of 49.4%, risk-free interest rate of 4.1%, and expected dividend yield of 0.8%. There isno illiquidity discount because the awards donot contain any post-vesting sales restrictions.

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2004 Employee Stock Purchase Plan (as amended and restated, the“2004 ESPP”)

On* August 16, 2023,the2004* ESPP was amended and restated to, among other changes, provide for the issuance of up to 4.4 million shares of the Company’s common stock. The2004 ESPP will expire on* August 16, 2038.*

For thethree months ended* March 31, 2024and2023*,11,000 and 9,000 shares were issued under the2004 ESPP, respectively. As of* March 31, 2024*,4.4 million shares were available for future issuance under the2004 ESPP.

The intrinsic value of the shares issued was $3.5 million and $0.7 million for thethree months ended* March 31, 2024and2023*, respectively. As of* March 31, 2024*, the unamortized expense was $1.1 million, which will be recognized through thethird quarter of2024. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

Cash proceeds from the shares issued under the2004 ESPP were $4.6 million and $3.7 million for thethree months ended* March 31, 2024and2023*, respectively.

4. ACQUISITION

On* January 3, 2024 (*the “Acquisition Date”), the Company acquired 100% of the outstanding capital stock of Axign B.V. (“Axign”), a Dutch company that designs and develops class-D audio ICs, targeting applications ranging from portable consumer speakers to automotive and professional-grade multi-speaker systems. Commencing on the Acquisition Date, Axign became a wholly-owned subsidiary of the Company and its results of operations have been included in the Company’s consolidated financial statements.

Purchase Consideration

The preliminary purchase consideration was approximately $33.7 million in cash and includes an estimated working capital adjustment and other adjustments.

Cash paid at the Acquisition Date included $3.8 million that is being held in an escrow account for aone-year period until Axign’s satisfaction of certain representations and warranties.

In connection with the acquisition, the Company incurred $0.4 million in transaction costs that were expensed as incurred and included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

Preliminary Purchase Price Allocation

The preliminary purchase price allocation for Axign is as follows (in thousands):

The intangible asset acquired with a finite life includes the core developed technology with an estimated remaining useful life ofeight years. The acquired intangible asset with an indefinite life includes an incomplete R&D project that hadnot reached technological feasibility as of the Acquisition Date. The fair values of the developed technology and the IPR&D were determined using the income approach.

The goodwill arising from the acquisition was primarily attributed to the assembled workforce and synergies that are anticipated to enable the Company to develop solutions with lower power consumption in the consumer and automotive markets using Axign’s digital feedback technology. The goodwill isnot expected to be deductible for tax purposes.

The Company is still in the process of determining the final fair values of the assets acquired and liabilities assumed. As a result, the purchase price allocation for Axign isnot complete as of* March 31, 2024.The Company expects to finalize the allocation by the quarter ending June 30, 2024.*Final determination of the fair values could result in an adjustment to the preliminary purchase price allocation with a corresponding adjustment to goodwill.

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5. BALANCE SHEET COMPONENTS

Inventories

Inventories consist of the following (in thousands):

Other Current Assets

Other current assets consist of the following (in thousands):

As of* March 31, 2024* and* December 31, 2023,the Company held $60 million in prepaid wafer expenses and $50 million in other receivables, respectively, related to deposits made to a supplier under a long-term wafer supply agreement. See Note9* for further details. The restricted cash included in other current assets as of* December 31, 2023was related to preliminary purchase consideration held in a trust account in connection with the Company’s acquisition of Axign and was paid in January 2024.See Note4* for further details.

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Other Long-Term Assets

Other long-term assets consist of the following (in thousands):

Prepaid wafer purchases relate to a deposit made to a supplier under a long-term wafer supply agreement. See Note9 for further details.

Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

As of* March 31, 2024*, stock rotation and sales returns included a $24.7 million stock rotation reserve, compared with a $16.7 million reserve as of* December 31, 2023*. The change in the reserve is affected by the timing of customer returns and the level of inventory in the distribution channel.

Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

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6. LEASES

Lessee

The Company has operating leases primarily for administrative, sales and marketing offices, manufacturing operations and R&D facilities, employee housing units and certain equipment. These leases have remaining lease terms from less thanone year toseven years. Some of these leases include options to renew the lease term for up tofive years or on a month-to-month basis. The Company doesnot have finance lease arrangements.

The following table summarizes the balances of operating lease right-of-use (“ROU”) assets and liabilities (in thousands):

The following tables summarize certain information related to the leases (in thousands, except percentages and years):

As of* March 31, 2024*, the maturities of the lease liabilities were as follows (in thousands):

As of* March 31, 2024**,* operating leases that havenot yet commenced arenot material.

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Lessor

The Company owns certain office buildings and leases a portion of these properties tothird parties under arrangements that are classified as operating leases. These leases have remaining lease terms ranging from less thanone year totwo years. One of these leases includes a tenant option to renew the lease term for up tofive years.

For thethree months ended* March 31, 2024and2023*, income related to lease payments was $0.2 million and $0.5 million, respectively. As of* March 31, 2024*, future income related to lease payments was as follows (in thousands):

7. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if outstanding securities or other contracts to issue common stock were exercised or converted into shares of common stock, and calculated using the treasury stock method. Contingently issuable shares, including equity awards with performance conditions or market conditions, are considered outstanding shares of common stock and included in the basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in the diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period.

The Company’s RSUs contain forfeitable rights to receive cash dividend equivalents, which are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees donot fulfill the requisite service requirement and, as a result, the awards donot vest. Accordingly, these awards arenot treated as participating securities in the net income per share calculation.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts):

Anti-dilutive common stock equivalents werenot material in any of the periods presented.

Stock Repurchase Program

In* October 2023,the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $640.0 million in the aggregate of its common stock through October 29, 2026.Shares are retired upon repurchase. The Company repurchased 6,100 shares of its common stock for an aggregate purchase price of $4.1 million during thethree* months ended* March 31, 2024*.

Stock repurchased under the program* maybe made through open market repurchases, privately negotiated transactions or other structures in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate. The timing and the number of any repurchased common stock will be determined by the Company’s management based on its evaluation of market conditions, legal requirements, share price, and other factors. The repurchase program doesnot* obligate the Company to purchase any particular number of shares, and* may*be suspended, modified, or discontinued at any time without prior notice.

The U.S. Inflation Reduction Act of2022 requires a1% excise tax based on the value of certain stock repurchases in excess of stock issued for employee compensation made after* December 31, 2022.This provision didnot* have an impact on the Company’s condensed consolidated financial statements for thethree months ended* March 31, 2024*.

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8. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company operates inone reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the enterprise data, storage and computing, automotive, communications, consumer and industrial markets. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations.

The Company sells its products primarily tothird-party distributors and value-added resellers, and directly to OEMs, ODMs and EMS providers. The following table summarizes those customers with sales equal to10% or more of the Company’s total revenue:

The Company’s agreements with thesethird-party customers were made in the ordinary course of business and* maybe terminated with or without cause by these customers with advance notice. Although the Company mayexperience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors were terminated, the Company believes that such termination wouldnot* have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a short period following any termination of the agreement with a distributor.

The following table summarizes those customers with accounts receivable equal to10% or more of the Company’s total accounts receivable:

• Represents less than10%

The following is a summary of revenue by geographic region (in thousands):

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The following is a summary of revenue by product family (in thousands):

The following is a summary of long-lived assets by geographic region (in thousands):

9. COMMITMENTS AND CONTINGENCIES

Product Warranties

The Company generally provides either aone- ortwo-year warranty against defects in materials and workmanship and will repair the products, provide replacements atno charge to customers or issue a refund. As they are considered assurance-type warranties, the Company doesnot account for them as separate performance obligations. Warranty reserve requirements are generally based on a specific assessment of the products sold with warranties when a customer asserts a claim for warranty or for a product defect.

The changes in warranty reserves are as follows (in thousands):

Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods.

Purchase Commitments

The Company has outstanding purchase obligations with its suppliers and other parties that require the purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements.

In* May 2022,the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over afour*-year period. As of* March 31, 2024*, the Company had remaining prepayments under this agreement of $120.0 million, of which $60.0 million was classified as short-term.

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Total estimated future unconditional purchase commitments to all suppliers and other parties, net of the*$120.0* million prepayment, as of* March 31, 2024* were as follows (in thousands):

Litigation

The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. The Company* mayalso be subject to litigation initiated by its stockholders. These proceedings often involve complex questions of fact and law and mayrequire the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. As of March 31, 2024**,* there wereno material pending legal proceedings to which the Company was a party.

10. CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands):

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of* March 31, 2024* (in thousands):

Gross realized gains and losses recognized on the sales of available-for-sale investments werenot material for the periods presented.

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The following tables summarize the unrealized gain and loss positions related to the available-for-sale investments (in thousands):

The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than12 months and for greater than12 months (in thousands):

An impairment exists when the fair value of an investment is less than its amortized cost basis. As of* March 31, 2024* and* December 31, 2023*, the Company didnot consider the impairment of its investments to be a result of credit losses. The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to anyone issuer. When evaluating a debt security for impairment, management reviews factors such as the Company’s intent to sell, or whether it will more likely thannot be required to sell, the security before recovery of its amortized cost basis, the extent to which the fair value of the security is less than its cost, the financial condition of the issuer and the credit quality of the investment.

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Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the amounts reported on the Condensed Consolidated Statements of Cash Flows (in thousands):

The restricted cash included in other current assets as of* December 31, 2023was related to preliminary purchase consideration held in a trust account in connection with the Company’s acquisition of Axign and was paid in January 2024.See Note4* for additional information. As of* March 31, 2024* and* December 31, 2023*, restricted cash included in other long-term assets was related to a security deposit that is set aside in a bank account and cannot be withdrawn by the Company under the terms of a lease agreement. The restriction will end upon the expiration of the lease.

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11. FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

The Company has estimated the fair value of its financial assets by applying the following hierarchy, which prioritizes the inputs used to measure fair value intothree levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Financial Assets Measured at Fair Value on a Recurring Basis

The following tables summarize the fair value of the Company’s financial assets measured on a recurring basis (in thousands):

Redemptions and changes in the fair value of the auction-rate securities classified as Level3 assets werenot material for the periods presented.

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12. DEFERRED COMPENSATION PLAN

The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands):

13. OTHER INCOME, NET

The components of other income, net, are as follows (in thousands):

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14. INCOME TAXES

The income tax provision or benefit for interim periods is generally determined using an estimate of the Company’s annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for thethree months ended* March 31, 2024* was $12.5 million, or 11.9% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate relative to the federal statutory rate was partially offset bythe inclusion of the global intangible low-taxed income (“GILTI”) tax.

The income tax expense for thethree months ended* March 31, 2023* was $19.8 million, or 15.3% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

On* December 27, 2023,the Bermuda Corporate Income Tax Act of2023* (the “Bermuda CIT Act”) was enacted and signed into law. It includes a15% CIT applicable to Bermuda businesses that are multinational enterprises (“MNE”) with annual revenue of*€750M* or more beginning in2025. The Bermuda CIT Act also includes an Economic Transition Adjustment (“ETA”) that requires MNEs to revalue their assets and liabilities, excluding goodwill, at their fair value as of* September 30, 2023.There is an election to opt out of the ETA. As the Bermuda CIT Act isnot* effective until* January 1, 2025,the Company is evaluating whether ornot* to adopt this ETA. Based on the information available, the Company hasnot recorded any changes to income tax expense related to the Bermuda CIT Act as of* March 31, 2024*.

15. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in accumulated other comprehensive loss (in thousands):

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16. DIVIDENDS AND DIVIDEND EQUIVALENTS

Cash Dividend Program

The Company has a dividend program approved by the Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. Based on the Company’s historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. The Board of Directors declared the following cash dividends (in thousands, except per-share amounts):

As of* March 31, 2024* and* December 31, 2023*, accrued dividends totaled $60.8 million and $47.9 million, respectively.

The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors* may*deem relevant, as well as a determination that cash dividends are in the best interests of the Company’s stockholders.

The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from its Bermuda subsidiary. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Cash Dividend Equivalent Rights

The Company’s RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees donot fulfill the requisite service requirement and, as a result, the awards donot vest. As of* March 31, 2024* and* December 31, 2023**,* accrued dividend equivalents totaled $11.4 million and $11.9 million, respectively.

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