10-Q – 2025-08-26 – smtc-20250727.htm

Product Development and Engineering Expenses
Product development and engineering expenses increased $8.1 million in the second quarter of fiscal year 2026 compared to the second quarter of fiscal year 2025 primarily as a result of a $6.7 million net increase in staffing-related costs, including higher supplemental compensation, and a $2.3 million increase from new product introduction expenses, partially offset by a $0.9 million decrease in depreciation.
Product development and engineering expenses increased $14.0 million in the first six months of fiscal year 2026 compared to the first six months of fiscal year 2025 primarily as a result of a $11.2 million net increase in staffing-related costs, including higher supplemental compensation, and an increase of $2.1 million from new product introduction expenses.
The levels of product development and engineering expenses reported in a fiscal period can be significantly impacted, and therefore experience period over period volatility, by the number of new product tape-outs and by the timing of recoveries from engineering services, which are typically recorded as a reduction to product development and engineering expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $2.7 million in the second quarter of fiscal year 2026 compared to the second quarter of fiscal year 2025 primarily as a result of a $2.5 million net increase in staffing-related costs from higher supplemental compensation and a $0.7 million increase in consulting expenses, partially offset by a $0.6 million decrease in depreciation.
Selling, general and administrative expenses decreased $3.1 million in the first six months of fiscal year 2026 compared to the first six months of fiscal year 2025 primarily as a result of a $5.5 million net decrease in staffing-related costs driven by lower share-based compensation caused by remeasurement of the cash-settled awards liability, a $1.0 million decrease in transaction and integration expenses, partially offset by a $2.8 million increase in consulting expenses.
Intangible Amortization
Intangible amortization was $0.1 million and $0.3 million for the second quarters of fiscal years 2026 and 2025, respectively, and $0.3 million and $0.6 million for the first six months of fiscal years 2026 and 2025, respectively. The amortization of acquired technology intangible assets is reflected in cost of sales.
Restructuring
Restructuring expenses decreased by $0.1 million in the second quarter of fiscal year 2026 compared to the second quarter of fiscal year 2025, and by $1.1 million for the first six months of fiscal year 2026 compared to the same period in fiscal year 2025 primarily due to structural reorganization actions in the prior year periods to reduce our workforce as a result of cost-saving measures and internal resource alignment including from the realization of synergies of the Sierra Wireless Acquisition.
Goodwill Impairment
Goodwill impairment was $42.0 million for the second quarter and first six months of fiscal year 2026 primarily due to reduced earnings forecasts associated with the IoT Connected Services reporting unit, included in the IoT Systems and Connectivity operating segment. There was no goodwill impairment at any of the Company's other reporting units. There was no goodwill impairment recorded in the same periods of fiscal year 2025.
See Note 7, Goodwill and Intangible Assets, to our interim unaudited condensed consolidated financial statements for additional information.
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Interest Expense
Interest expense, including amortization and a write-off of deferred financing costs, decreased by $23.3 million to $5.2 million from $28.6 million for the second quarter of fiscal year 2026 compared to the same period in fiscal year 2025, and decreased by $40.0 million to $11.8 million from $51.8 million for the first six months of fiscal year 2026 compared to the same period in fiscal year 2025. The decreases in both periods were primarily due to interest savings as a result of approximately $188.1 million of 2028 Notes extinguished in exchange for common stock in the second quarter of fiscal year 2025, and debt repayment of $215.0 million on the Revolving Credit Facility (as defined below) and $476.4 million on the Term Loans (as defined below) from the fourth quarter of fiscal year 2025 through the second quarter of fiscal year 2026.
Investment Impairments and Credit Loss Reserves, Net
During the second quarter and first six months of fiscal year 2026 and second quarter of fiscal year 2025, we did not record any investment impairments and credit loss reserves. During the first six months of 2025, investment impairments and credit loss reserves, net totaled a loss of $1.1 million primarily due to an other-than-temporary impairment on one of our non-marketable equity investments.
Provision for Income Taxes
We recorded income tax expense of $4.8 million in the second quarter of fiscal year 2026, compared to income tax expense of $4.2 million in the second quarter of fiscal year 2025. The change in our tax provision for the three months ended July 27, 2025, compared to the three months ended July 28, 2024 was primarily due to a regional mix of income and changes in valuation allowance. The effective tax rates in the second quarters of fiscal years 2026 and 2025 differ from the statutory federal income tax rate of 21% primarily due to regional mix of income, changes in valuation allowance, impact of global intangible low-taxed income ("GILTI") and research and development ("R&D") credits. The Tax Cuts and Jobs Act ("TCJA") requires R&D costs incurred for tax years beginning after December 31, 2021 to be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted. We have elected to treat GILTI as a period cost and the additional capitalization of R&D costs within GILTI increases our provision for income taxes. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the TCJA. The OBBBA permanently changes the limitation on the deduction of business interest expense, as well as makes permanent the immediate deduction for domestic R&D expenses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. This legislation may be subject to further clarification and the issuance of interpretive guidance; however, we do not expect a material impact to the financial statements at this time.
In the first six months of fiscal year 2026, we recorded income tax expense of $13.4 million, compared to income tax expense of $7.2 million in the first six months of fiscal year 2025. The change in our tax provision for the six months ended July 27, 2025, compared to the six months ended July 28, 2024 was primarily due to a regional mix of income, changes in valuation allowance, non-deductibility of goodwill impairment, impact of GILTI and R&D credits. The effective tax rates in the first six months of fiscal years 2026 and 2025 differ from the statutory federal income tax rate of 21% primarily due to a regional mix of income, changes in valuation allowance, non-deductibility of goodwill impairment, impact of GILTI and R&D credits.
As a global organization, we are subject to audit by taxing authorities in various jurisdictions. To the extent that an audit, or the closure of a statute of limitations, results in adjusting our reserves for uncertain tax positions, our effective tax rate could experience extreme volatility since any adjustment would be recorded as a discrete item in the period of adjustment.
For further information on the effective tax rate and the TCJA's and OBBBA's impacts, see Note 9, Income Taxes, to our interim unaudited condensed consolidated financial statements.

Liquidity and Capital Resources
Our capital requirements depend on a variety of factors including, but not limited to, the rate of increase or decrease in our existing business base; the success, timing and amount of investment required to bring new products to market; sales growth or decline; potential acquisitions or divestitures; the general economic environment in which we operate; and our ability to generate cash flows from operating activities.
We believe that our cash on hand, expected cash generation from future operations and available borrowing capacity under the Revolving Credit Facility are sufficient to meet liquidity requirements for at least the next 12 months, including funds needed for our material cash requirements. As of July 27, 2025, we had $168.6 million in cash and cash equivalents and $451.6 million of available undrawn borrowing capacity on our Revolving Credit Facility, subject to net leverage limitations and customary conditions precedent, including the accuracy of representations and warranties and the absence of defaults. Over the longer-term, we expect to fund our business using cash flows from operating activities.
As of July 27, 2025 and January 26, 2025, there was $3.4 million and $2.9 million, respectively, outstanding under the letters of credit under the Revolving Credit Facility.
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A meaningful portion of our capital resources, and the liquidity they represent, are held by our subsidiaries outside of the U.S. As of July 27, 2025, our foreign subsidiaries held $151.0 million of cash and cash equivalents, compared to $139.1 million at January 26, 2025. Our liquidity may be impacted by fluctuating exchange rates. For additional information on exchange rates, see Item 3–Quantitative and Qualitative Disclosures About Market Risk.
In connection with the enactment of the TCJA, all historic and current foreign earnings are taxed in the U.S. Depending on the jurisdiction, these foreign earnings are potentially subject to a withholding tax, if repatriated. As of July 27, 2025, our historical undistributed earnings prior to fiscal year 2023 of our foreign subsidiaries are intended to be permanently reinvested outside of the U.S. With the enactment of the TCJA, which amended the Internal Revenue Code of 1986, all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax. As a result of the U.S. taxation of these amounts, we have determined that none of the foreign earnings from fiscal year 2023 onward will be permanently reinvested outside of the U.S. If we needed to remit all or a portion of our historical undistributed earnings to the U.S. for investment in our domestic operations, any such remittance could result in increased tax liabilities and a higher effective tax rate. Determination of the amount of the unrecognized potential deferred tax liability on these unremitted earnings is not practicable.
We expect our future non-operating uses of cash will be for capital expenditures and debt repayment . We expect to fund these cash requirements through cash flows from operating activities.
Credit Agreement
On September 26, 2022 (the "Third Restatement Effective Date"), we entered into a third amended and restated credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, swing line lender and letter of credit issuer.
On April 24, 2025, we entered into the fourth amendment (the "Fourth Amendment") to the Credit Agreement, in order to, among other things, increase the total available borrowing capacity under the revolving credit facility under the Credit Agreement (the "Revolving Credit Facility") by $117.5 million, increasing the total facility size to $455.0 million. The increase partially replaces borrowing capacity that matured on November 7, 2024. Other than the foregoing, the material terms of the Credit Agreement remain unchanged.
After effectiveness of the Fourth Amendment, the borrowing capacity on the Revolving Credit Facility is $455.0 million, which is scheduled to mature on January 12, 2028 (subject to, in certain circumstances, an earlier springing maturity), and the term loans thereunder (the "Term Loans") are scheduled to mature on January 12, 2028 (subject to, in certain circumstances, an earlier springing maturity).
As of July 27, 2025, the Company had $146.2 million outstanding under the Term Loans and no revolving loans outstanding under the Revolving Credit Facility, which had available undrawn borrowing capacity of $451.6 million, subject to net leverage limitations and customary conditions precedent, including the accuracy of representations and warranties and the absence of defaults.
Up to $40.0 million of the Revolving Credit Facility may be used to obtain letters of credit, up to $25.0 million of the Revolving Credit Facility may be used to obtain swing line loans, and up to $75.0 million of the Revolving Credit Facility may be used to obtain revolving loans and letters of credit in certain currencies other than U.S. Dollars. The proceeds of the Revolving Credit Facility may be used by us for capital expenditures, permitted acquisitions, permitted dividends, working capital and general corporate purposes.
As of July 27, 2025, we were in compliance with the financial covenants in our Credit Agreement. The Credit Agreement also contains customary provisions pertaining to events of default. If any event of default occurs, the obligations under the Credit Agreement may be declared due and payable, terminated upon written notice to us and existing letters of credit may be required to be cash collateralized.
See Note 8, Long-Term Debt to our interim unaudited condensed consolidated financial statements for additional information regarding the terms of the Credit Agreement.
We have entered into interest rate swap agreements to hedge the variability of interest payments on debt outstanding under the Term Loans. See Note 16, Derivatives and Hedging Activities, to our interim unaudited condensed consolidated financial statements for additional information.
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Convertible Senior Notes Due 2027
On October 12, 2022 and October 21, 2022, we issued and sold $300.0 million and $19.5 million, respectively, in aggregate principal amount of 1.625% Convertible Senior Notes due 2027 (the "2027 Notes") in a private placement. The 2027 Notes were issued pursuant to an indenture dated October 12, 2022, by and among us, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. The 2027 Notes bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The 2027 Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased. The 2027 Notes are not currently redeemable and, as of July 27, 2025, none of the conditions allowing holders of the 2027 Notes to convert had been met. The 2027 Notes were initially issued pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
We used approximately $72.6 million of the net proceeds from the 2027 Notes to pay for the cost of the Convertible Note Hedge Transactions, after such cost was partially offset by approximately $42.9 million of proceeds to us from the sale of Warrants in connection with the issuance of the 2027 Notes, all as defined and described in Note 8, Long-Term Debt to our interim unaudited condensed consolidated financial statements. The Convertible Note Hedge Transactions and Warrants transactions are indexed to, and potentially settled in, our common stock and the net cost of $29.7 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of stockholders' equity (deficit). We used the remaining net proceeds to fund a portion of the consideration in the Sierra Wireless Acquisition and to pay related fees and expenses. For additional information on the 2027 Notes, Convertible Note Hedge Transactions and the Warrants, see Note 8, Long-Term Debt to our interim unaudited condensed consolidated financial statements.
Convertible Senior Notes Due 2028
On October 26, 2023, we issued and sold $250.0 million in aggregate principal amount of 2028 Notes in a private placement. The 2028 Notes were issued pursuant to an indenture, dated October 26, 2023, by and among the Company, the subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. The 2028 Notes bear interest at a rate of 4.00% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2024. The 2028 Notes will mature on November 1, 2028, unless earlier converted, redeemed or repurchased. As of July 27, 2025, approximately $62.0 million of the 2028 Notes remained outstanding. The 2028 Notes were offered and sold only to eligible purchasers who are both "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act and "accredited investors" within the meaning of Rule 501(a) under the Securities Act, in reliance on Section 4(a)(2) under the Securities Act.
The 2028 Notes are not currently redeemable by the Company. The 2028 Notes may be converted at the option of the holders at the times and under the circumstances and at the conversion rate described in Note 8, Long-Term Debt, to our interim unaudited condensed consolidated financial statements. As of July 27, 2025, one of the conditions allowing holders of the 2028 Notes to convert had been met. The trading price of our common stock remained above 130% of the applicable $20.37 conversion price for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, July 25, 2025 (the last trading day of the quarter ended July 27, 2025), resulting in the right of the holders of the 2028 Notes to convert the 2028 Notes beginning July 28, 2025 through October 24, 2025 (the last trading day of the fiscal quarter ending October 26, 2025). Should the holders of the 2028 Notes elect to convert some or all of the outstanding 2028 Notes, the Company intends to draw on its Revolving Credit Facility to settle the obligation.
On July 11, 2024 and July 15, 2024, we entered into separate, privately negotiated exchange agreements (the "Exchange Agreements") with certain holders of the 2028 Notes. Pursuant to the Exchange Agreements, certain holders of the 2028 Notes exchanged with us approximately $188.1 million in aggregate principal amount of 2028 Notes held by them for an aggregate of 10,378,431 shares of our common stock, which number of shares was determined over an averaging period that commenced on July 12, 2024.
For additional information on the 2028 Notes, see Note 8, Long-Term Debt to our interim unaudited condensed consolidated financial statements.
Capital Expenditures and Research and Development
We incur significant expenditures in order to fund the development, design and manufacture of new products. We intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities, which may require additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products. Certain of these expenditures, particularly the addition of design engineers, do not generate significant payback in the short-term. We plan to finance these expenditures with cash generated by our operating activities, our existing cash balances and additional draws on our Revolving Credit Facility, as needed. Borrowings under our Revolving Credit Facility are subject to customary conditions precedent, including the accuracy of representations and warranties and the absence of any defaults under the facility.
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Portfolio Rationalization
We are continuing to conduct a portfolio rationalization review, which has included identifying non-core assets in an effort to align our portfolio with our strategic vision and preferred margin profile. As part of the portfolio rationalization review, we are reviewing potential strategic alternatives for certain of our non-core assets. No decision has been made regarding any strategic alternative or any particular asset, and there is no assurance that the exploration of strategic alternatives will result in any transactions, nor any specified timeline.
Purchases under our Stock Repurchase Program
We currently have in effect a stock repurchase program that was initially approved by our Board of Directors in March 2008. On March 11, 2021, the Board of Directors approved the expansion of the stock repurchase program by an additional $350.0 million. Under the program, subject to the terms of the Credit Agreement, we may repurchase our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. Our repurchases may be made through Rule 10b5-1 and/or Rule 10b-18 or other trading plans, open market purchases, privately negotiated transactions, block purchases or other transactions.
We did not repurchase any shares of our common stock under the program in the first six months of fiscal year 2026 or in the first six months of fiscal year 2025. As of July 27, 2025, the remaining authorization under the program was $209.4 million. To the extent we repurchase any shares of our common stock under the program in the future, we expect to fund such repurchases from cash on hand and borrowings on our Revolving Credit Facility. We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
Working Capital
Working capital, defined as total current assets less total current liabilities including the current portion of long-term debt, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. In times of escalating demand, our working capital requirements may increase as we purchase additional manufacturing materials and increase production. In addition, our working capital may be affected by potential acquisitions and transactions involving our debt instruments. Although investments made to fund working capital will reduce our cash balances, these investments are necessary to support business and operating initiatives.
Material Cash Requirements
Except as disclosed above, there have been no material changes to our cash requirements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 26, 2025.
Cash Flows
In summary, our cash flows for each period were as follows:

Six Months Ended
(in thousands) July 27, 2025 July 28, 2024
Net cash provided by (used in) operating activities $ 72,219  $ (5,084)
Net cash used in investing activities (10,202) (2,672)
Net cash used in financing activities (47,018) (4,550)
Effect of foreign exchange rate changes on cash and cash equivalents 1,818  (351)
Net increase (decrease) in cash and cash equivalents $ 16,817  $ (12,657)

Operating Activities
Net cash provided by or used in operating activities is driven by net income or loss adjusted for non-cash items and fluctuations in operating assets and liabilities.
Operating cash flows for the first six months of fiscal year 2026 compared to the first six months of fiscal year 2025 were favorably impacted by a 20.7% increase in net sales, significantly lower interest payments on debt, lower restructuring payments related to employee termination benefits, and a decrease in income tax payments, and were unfavorably impacted by an increase in annual bonus payments and an incremental increase in inventory spend.
Investing Activities
Net cash provided by or used in investing activities is primarily driven by capital expenditures, purchases and sales of investments, purchases of intangibles, and proceeds from or premiums paid for corporate-owned life insurance.
Capital expenditures were $4.5 million for the first six months of fiscal year 2026 compared to $4.7 million for the first six months of fiscal year 2025.
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In the first six months of fiscal year 2026, we sold investments for proceeds of $0.5 million compared to $2.7 million for the first six months of fiscal year 2025. In the first six months of fiscal year 2025, we paid $0.4 million for strategic investments in companies that are enabling the LoRa and LoRaWAN®-based ecosystem. No similar investments were made in the first six months of fiscal year 2026.
Purchases of intangibles were $2.8 million for the first six months of fiscal year 2026, compared to $5.0 million for the first six months of fiscal year 2025, which included capitalized development costs and software licenses.
In the first six months of fiscal year 2026, we paid $3.4 million in premiums into our corporate-owned life insurance policy in order to provide substantive coverage for our deferred compensation liability. In the first six months of fiscal year 2025, we received $4.8 million of proceeds from corporate-owned life insurance, which were used to pay deferred compensation distributions.
Financing Activities
Net cash provided by or used in financing activities is primarily attributable to payments on our Term Loans, payments related to deferred financing costs, payments related to employee share-based compensation payroll taxes and proceeds from the exercise of stock options.
In the first six months of fiscal year 2026, we made prepayments of $35.0 million on our Term Loans. No such prepayments were made in the first six months of fiscal year 2025.
In the first six months of fiscal year 2026, we paid $0.6 million for deferred financing costs, compared to $0.8 million for the first six months of fiscal year 2025.
In the first six months of fiscal year 2026, we paid $12.2 million for employee share-based compensation payroll taxes and received $0.5 million in proceeds from the exercise of stock options. In the first six months of fiscal year 2025, we paid $4.2 million for employee share-based compensation payroll taxes and received $0.6 million in proceeds from the exercise of stock options.
Critical Accounting Estimates
Our critical accounting policies and estimates are disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 26, 2025. While, there have been no significant changes to our policies during the three and six months ended July 27, 2025, we revised certain assumptions within one of our critical accounting estimates to reflect developments during the second quarter of fiscal year 2026.
Goodwill
During the second quarter of fiscal year 2026, the Company determined that the fair value of its IoT Connectivity Services reporting unit, which is part of the IoT Systems and Connectivity segment, exceeded its carrying amount due to reduced earnings forecasts. As a result, the Company recorded $42.0 million of total pre-tax non-cash goodwill impairment charges for the second quarter and first six months of fiscal year 2026 to write down the carrying value of the IoT Connected Services reporting unit to its fair value. The Fair value of the reporting unit was 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. While we believe the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, additional impairments could be required.
For further discussion of goodwill and intangible assets, see Note 7, Goodwill and Intangible Assets to our interim unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 1, Organization and Basis of Presentation to our interim unaudited condensed consolidated financial statements.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to a variety of market risks, including commodity risk and the risks related to foreign currency, interest rates and market performance that are discussed in Item 7A of our Annual Report on Form 10-K for the fiscal year ended January 26, 2025. Many of the factors that can have an impact on our market risk are external to us, and so we are unable to fully predict them.
Commodity Risk
We are subject to risk from fluctuating market prices of certain commodity raw materials, particularly gold, that are incorporated into our end products or used by our suppliers to process our end products. Increased commodity prices are passed on to us in the form of higher prices from our suppliers, either in the form of general price increases or a commodity surcharge. Although we generally deal with our suppliers on a purchase order basis rather than on a long-term contract basis, we generally attempt to obtain firm pricing for volumes consistent with planned production. Our gross margins may decline if we are not able to increase selling prices of our products or obtain manufacturing efficiencies to offset the increased cost. We do not enter into formal hedging arrangements to mitigate against commodity risk.
Foreign Currency Risk
Our foreign operations expose us to the risk of fluctuations in foreign currency exchange rates against our functional currencies and we may economically hedge this risk with foreign currency contracts (such as currency forward contracts). Gains or losses on these balances are generally offset by corresponding losses or gains on the related hedging instruments. As of July 27, 2025, our largest foreign currency exposures were from the Australian Dollar, Canadian Dollar, Euro, Great British Pound, Swiss Franc and Mexican Peso.
We considered the historical trends in foreign currency exchange rates and determined that it is reasonably possible that adverse changes in foreign exchange rates of 10% for all currencies could be experienced in the near-term. These reasonably possible adverse changes were applied to our total monetary assets and liabilities denominated in currencies other than our functional currency as of the end of our second quarter of fiscal year 2026. The adverse impact these changes would have had (after taking into account balance sheet hedges only) on our income before taxes is $2.2 million for the quarter ended July 27, 2025.
Interest rate and credit risk
We are subject to interest rate risk in connection with the portion of the outstanding debt under our Credit Agreement that bears interest at a variable rate as of July 27, 2025.
In the first quarter of fiscal year 2024, we entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.58%, plus a variable margin and spread based on our consolidated leverage ratio. This interest rate swap agreement was partially terminated in the second quarter of fiscal year 2026 and, as of July 27, 2025, hedges the variability of interest payments on $75.0 million of debt outstanding on the Term Loans.
Based upon our $71.2 million of unhedged floating-rate outstanding indebtedness as of July 27, 2025, the adverse impact a one percentage point increase in Term SOFR would have on our interest expense is $0.7 million.
Interest rates also affect our return on excess cash and investments. As of July 27, 2025, we had $168.6 million of cash and cash equivalents. A majority of our cash and cash equivalents generate interest income based on prevailing interest rates. Interest income, net of reserves, generated by our investments and cash and cash equivalents was not material in the second quarter of fiscal year 2026. A significant change in interest rates would impact the amount of interest income generated from our cash and investments. It would also impact the market value of our investments.
Our investments are primarily subject to credit risk. Our investment guidelines prescribe credit quality, permissible investments, diversification, and duration restrictions. These restrictions are intended to limit risk by restricting our investments to high quality debt instruments with relatively short-term durations. Our investment strategy limits investment of new funds and maturing securities to U.S. Treasury, Federal agency securities, high quality money market funds and time deposits with our principal commercial banks. Outside of these investment guidelines, we also invest in a limited amount of debt securities in privately held companies that we view as strategic to our business. For example, many of these investments are in companies that are enabling the LoRa®- and LoRaWAN® -based ecosystem.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. We maintain cash held in deposit at financial institutions in the U.S. These deposits are insured by the FDIC in an amount up to $250,000 for any depositor. To the extent we hold cash deposits in amounts that exceed the FDIC insurance limitation, we may incur a loss in the event of a failure of any of the financial institutions where we maintain
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deposits. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or any applicable foreign government in the future or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a future failure or liquidity crisis. In addition, if any of our partners or parties with whom we conduct business are unable to access funds due to the status of their financial institution, such parties' ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. Management believes we are not exposed to significant risk due to the financial position of the depository institution, but will continue to monitor regularly and adjust, if needed, to mitigate risk. We have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, we have not experienced any losses associated with this credit risk and continue to believe that this exposure is not significant.

ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of July 27, 2025.
Changes in Internal Controls
As of July 27, 2025, there were no changes to our internal control over financial reporting that occurred during the fiscal quarter then ended that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
 

ITEM 1. Legal Proceedings
Information about our material legal proceedings is set forth in Note 11, Commitments and Contingencies to the interim unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report and incorporated by reference herein.
We have elected to disclose environmental proceedings described in Item 103(c)(3)(iii) of Regulation S-K unless we reasonably believe that such proceeding will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, of less than $1,000,000.

ITEM 1A. Risk Factors
Please carefully consider and evaluate all of the information in this Quarterly Report and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 26, 2025. If any of these risks actually occur, our business could be materially harmed. If our business is harmed, the trading price of our common stock could decline.
The risk factors associated with our business have not materially changed as compared to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended January 26, 2025.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchase of Equity Securities
None.

ITEM 3. Defaults Upon Senior Securities
None.

ITEM 4. Mine Safety Disclosures
Not applicable.

ITEM 5. Other Information
Insider Trading Arrangements
Securities Trading Arrangements of Directors and Executive Officers
The following table sets forth certain information regarding any "Rule 10b5-1 trading arrangements" (a "trading plan") or "non-Rule 10b5-1 trading arrangements," each as defined in Item 408 of Regulation S-K, adopted or terminated by the Company's directors and executive officers during the fiscal quarter ended July 27, 2025. All of these trading plans were adopted during the Company's quarterly open trading window in accordance with the Company's Stock Trading Guidelines for Semtech Stock for All Directors, Officers and Employees.

Date of Action Trading Arrangements
Name and Title Action Rule 10b5-1(a) Non-Rule 10b5-1(b) Total Shares to be Sold (c) Duration (d)
Gregory Fischer Adopt 5/30/2025 X 1,500 August 29, 2025 through May 30, 2026
Director
Mark Lin Adopt 6/23/2025 X 302,045 (e) September 21, 2025 through October 16, 2026
EVP and Chief Financial Officer
Paul V. Walsh Jr. Adopt 7/9/2025 X 10,500 October 22, 2025 through June 23, 2027

Director

(a) Intended to satisfy the affirmative defense of Rule 10b5-1(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) Not intended to satisfy the affirmative defense of 10b5-1(c) promulgated under the Exchange Act.
(c) The numbers in this column represent the maximum number of shares of our common stock that may be sold pursuant to each trading plan.
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(d) Transactions under the trading plan may occur during the specified plan duration period and will expire the earlier of the end of the specified plan duration period or the completion of all sales under such trading plan.
(e) This number includes shares of our common stock issuable pursuant to unvested restricted stock unit awards ("RSUs") and unvested performance stock units ("PSUs"). The PSUs are subject to the achievement of certain performance conditions as set forth in the applicable PSU agreement. The actual number of PSUs that vest following the end of an applicable performance period, if any, vary and therefore the resulting shares of our common stock available for sale under the plan will depend on the attainment of the performance metrics. The maximum number of shares to be sold will be reduced by net shares withheld to satisfy tax withholding obligations that arise in connection with the vesting and settlement.

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ITEM 6. Exhibits
Documents that are not physically filed with this report are incorporated herein by reference to the location indicated.

Exhibit No. Description Location

3.1 Restated Certificate of Incorporation of Semtech Corporation Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 26, 2003

3.2 Amended and Restated Bylaws of Semtech Corporation, adopted on June 3, 2025 Exhibit 3 .1 to the Company's Current Report on Form 8-K filed on J une 9, 2025

10.1 * Amended and Restated Semtech Corporation 2017 Long-Term Equity Incentive Plan Exhibit 10.1 to the Company's Current Report on Form 8-K filed on J une 9, 2025

10.2 * Semtech Corporation Policy Regarding Director Compensation (as amended June 5, 2025) Filed herewith

31.1 Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended Filed herewith

31.2 Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended Filed herewith

32 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit 32 is being furnished and shall not be deemed "filed") Furnished herewith

101 The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended July 27, 2025, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income and Loss, (iii) Consolidated Balance Sheets (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flow and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104 The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended July 27, 2025, formatted in Inline XBRL (included as Exhibit 101).

* Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 

SEMTECH CORPORATION
Registrant

Date: August 26, 2025 /s/ Mark Lin
Mark Lin
Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)

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