The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with our interim unaudited
condensed consolidated financial statements and the accompanying notes included
in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Quarterly
Report"), and the "Special Note Regarding Forward-Looking and Cautionary
Statements" in this Quarterly Report.

Overview

Semtech Corporation (together with its consolidated subsidiaries, the "Company",
"we", "our", or "us") designs, develops, manufactures and markets
high-performance analog and mixed signal semiconductors and advanced algorithms.
We account for results in two reportable segments-the High-Performance Analog
Group and the System Protection Group. The High-Performance Analog Group is
comprised of our Signal Integrity and Wireless and Sensing product lines, which
represent two operating segments. The System Protection Group is comprised of
our Protection product line, which represents a separate operating segment.

Signal Integrity. We design, develop, manufacture and market a portfolio of
optical data communications and video transport products used in a wide variety
of infrastructure and industrial applications. Our comprehensive portfolio of
integrated circuits ("ICs") for data centers, enterprise networks, passive
optical networks ("PON"), and wireless base station optical transceivers and
high-speed interfaces ranges from 100Mbps to 400Gbps and supports key industry
standards such as Fibre Channel, Infiniband, Ethernet, PON and synchronous
optical networks. Our video products offer advanced solutions for next
generation high-definition broadcast applications, as well as highly
differentiated video-over-IP technology for professional audio video
applications.

Wireless and Sensing. We design, develop, manufacture and market a portfolio of
specialized radio frequency products used in a wide variety of industrial,
medical and communications applications, and specialized sensing products used
in industrial and consumer applications. Our wireless products, which include
our LoRa® devices and wireless radio frequency technology, feature industry
leading and longest range industrial, scientific and medical radio, enabling a
lower total cost of ownership and increased reliability in all environments.
These features make these products particularly suitable for machine to machine
and Internet-of-Things ("IoT") applications. Our unique sensing technology
enables proximity sensing and advanced user interface solutions for our mobile
and consumer products. Our wireless and sensing products can be found in a broad
range of applications in the industrial, medical, and consumer markets. We also
design, develop, and market power product devices that control, alter, regulate,
and condition the power within electronic systems focused on the LoRa and IoT
infrastructure segment. The highest volume product types within this category
are switching voltage regulators, combination switching and linear regulators,
smart regulators, isolated switches, and wireless charging.

Protection. We design, develop, manufacture and market high-performance
protection devices, which are often referred to as transient voltage suppressors
("TVS"). TVS devices provide protection for electronic systems where voltage
spikes (called transients), such as electrostatic discharge, electrical over
stress or secondary lightning surge energy, can permanently damage sensitive
ICs. Our portfolio of protection solutions include filter and termination
devices that are integrated with the TVS device. Our products provide robust
protection while preserving signal integrity in high-speed communications,
networking and video interfaces. These products also operate at very low
voltage. Our protection products can be found in a broad range of applications
including smart phones, LCD and organic light-emitting diode TVs and displays,
set-top boxes, monitors and displays, tablets, computers, notebooks, base
stations, routers, automobile and industrial systems.

Our interim unaudited condensed consolidated balance sheets are referred to herein as the "Balance Sheets" and interim unaudited condensed consolidated statements of income are referred to herein as the "Statements of Income."

Our net sales by product line were as follows:



                           Three Months Ended
(in thousands)             May 1, 2022                May 2, 2021
Signal Integrity       $           79,302            $     66,695
Wireless and Sensing               67,299                  58,507
Protection                         55,548                  45,170
Total                  $          202,149            $    170,372

We design, develop and market a wide range of products for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets.

Infrastructure: data centers, PON, base stations, optical networks, servers, carrier networks, switches and routers, cable modems, wireless local area network ("LAN") and other communication infrastructure equipment.



High-End Consumer: smartphones, tablets, wearables, desktops, notebooks, and
other handheld products, wireless charging, set-top boxes, digital televisions,
monitors and displays, digital video recorders and other consumer equipment.

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Industrial: IoT applications, analog and digital video broadcast equipment,
video-over-IP solutions, automated meter reading, smart grid, wireless charging,
medical, security systems, automotive, industrial and home automation and other
industrial equipment.

Our end customers are primarily original equipment manufacturers that produce and sell electronics.



Recent Developments

On May 3, 2022, we completed the divestiture of our high reliability discrete
diodes and assemblies business (the "Disposal Group") to Micross Components,
Inc. for approximately $30 million in an all-cash transaction. See Note 2,
Divestitures, for additional information.

Impact of COVID-19 and Macroeconomic Conditions



The COVID-19 pandemic has significantly affected health and economic conditions
throughout the United States ("U.S.") and the rest of the world including Asia,
where a significant percentage of our customers, suppliers, third party
foundries and subcontractors are located. As a result of the pandemic, certain
of our facilities and the third-party foundries and assembly and test
contractors to which we outsource our manufacturing functions, have had to
periodically reduce or suspend operations. The disruption experienced during
such closures has resulted in reduced production of our products, delays for
delivery of our products to our customers, and reduced ability to receive
supplies, which have had and may continue to have, individually and in the
aggregate, an adverse effect on our results.

Currently, customer demand remains strong and supply tight, with many of our
suppliers running at or near capacity and our customers competing for limited
inventory. While we have increased our inventory levels to prepare for our
strong backlog of orders, higher demand and to minimize the impact of potential
supply shortages, we cannot provide assurance that we will have sufficient
inventory if this high level of demand is sustained over the longer term. In
addition, the prices to obtain raw materials and convert them into the necessary
inventory have increased in certain cases, and may continue to increase,
including due to current inflationary pressures. While we have been largely
successful with passing on selective price increases to our customers, we cannot
provide assurance that all future potential price increases can be absorbed
through increased pricing to our customers.

We believe we have good visibility going into the second quarter of fiscal year
2023; however, it is unknown how much of the increased demand reflects real end
market strength. We believe the general supply chain constraints in the industry
may be motivating certain customers to increase their orders and inventory
levels to protect against supply risk. To the extent that this cautionary
purchasing is occurring, we could experience a decrease in future demand as
potential excess inventory is worked down.

Factors Affecting Our Performance



Most of our sales to customers are made on the basis of individual customer
purchase orders. Many customers include cancellation provisions in their
purchase orders. As a result of current macro conditions where demand is
exceeding supply and we are seeing global shortages, lead times may continue to
expand, resulting in fewer orders being shipped and received in the same
quarter. Orders received and shipped in the first quarters of fiscal years 2023
and 2022 represented 1% and 18% of net sales, respectively. Sales made directly
to customers during the first quarters of fiscal years 2023 and 2022 were 11%
and 14% of net sales, respectively. The remaining sales were made through
independent distributors. The decline in direct sales is due to customers
electing to leverage the value of distribution to better manage their supply
chain.

Our business relies on foreign-based entities. Many of our third-party
subcontractors and suppliers, including third-party foundries that supply
silicon wafers, are located in foreign countries or territories including Taiwan
and China. Foreign sales constituted approximately 88% and 89% of our net sales
during the first quarters of fiscal years 2023 and 2022, respectively.
Approximately 76% and 78% of our sales during the first quarters of fiscal years
2023 and 2022, respectively, were to customers located in the Asia-Pacific
region. The remaining foreign sales were primarily to customers in Europe,
Canada and Mexico. Doing business in foreign locations also subjects us to
export restrictions and trade laws, which may limit our ability to sell to
certain customers.

We use several metrics as indicators of future potential growth. The indicators
that we believe best correlate to potential future sales growth are design wins
and new product releases. There are many factors that may cause a design win or
new product release not to result in sales, including a customer's decision not
to go to system production, a change in a customer's perspective regarding a
product's value or a customer's product failing in the end market. As a result,
although a design win or new product introduction is an important step towards
generating future sales, it does not inevitably result in us being awarded
business or receiving a purchase commitment.

Inflationary factors have not had a significant effect on our performance over
the past several years. A significant increase in inflation would affect our
future performance if we were unable to pass these higher costs on to our
customers.

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Results of Operations



The following table sets forth, for the periods indicated, our interim unaudited
condensed consolidated statements of income expressed as a percentage of net
sales.

                                                                                            Three Months Ended
                                                                                 May 1, 2022                     May 2, 2021
Net sales                                                                                    100.0  %                     100.0  %
Cost of sales                                                                                 35.6  %                      38.5  %
Gross profit                                                                                  64.4  %                      61.5  %
Operating costs and expenses:
Selling, general and administrative                                                           21.5  %                      22.8  %
Product development and engineering                                                           19.2  %                      21.6  %
Intangible amortization                                                                        0.5  %                       0.8  %

Total operating costs and expenses                                                            41.2  %                      45.1  %
Operating income                                                                              23.3  %                      16.4  %
Interest expense                                                                              (0.6) %                      (0.7) %
Non-operating income, net                                                                      0.1  %                       0.1  %
Investment impairments and credit loss reserves                                                  -  %                      (0.1) %

Income before taxes and equity in net gains of equity method investments

                   22.8  %                      15.6  %
Provision for income taxes                                                                     4.0  %                       1.9  %

Net income before equity in net gains of equity method investments

                   18.8  %                      13.7  %
Equity in net gains of equity method investments                                                 -  %                         -  %
Net income                                                                                    18.8  %                      13.8  %
Net loss attributable to noncontrolling interest                                                 -  %                         -  %
Net income attributable to common stockholders                                                18.8  %                      13.8  %

Percentages may not add precisely due to rounding.

Our regional mix of income (loss) before taxes and equity in net gains (losses) of equity method investments was as follows:



                       Three Months Ended
(in thousands)    May 1, 2022      May 2, 2021
Domestic         $    (4,782)     $     (5,484)
Foreign               50,875            32,102
Total            $    46,093      $     26,618

Domestic performance includes higher levels of share-based compensation compared to foreign operations.

Comparison of the Three Months Ended May 1, 2022 and May 2, 2021

Net Sales

The following table summarizes our net sales by major end market:



                                                       Three Months Ended
(in thousands, except percentages)           May 1, 2022                May 2, 2021
Infrastructure                         $   76,194        37  %    $   61,350        36  %
High-End Consumer                          47,826        24  %        53,816        32  %
Industrial                                 78,129        39  %        55,206        32  %
Total                                  $  202,149       100  %    $  170,372       100  %


Net sales for the first quarter of fiscal year 2023 were $202.1 million, an
increase of 18.7% compared to $170.4 million for the first quarter of fiscal
year 2022. Net sales from our industrial end market increased $22.9 million
versus the prior year primarily due to an approximately $19 million increase in
LoRa-enabled product sales led by an increase in pico gateways. We experienced
an increase of $14.8 million in net sales from our infrastructure end market,
primarily driven by an approximately $14 million increase in PON sales. Net
sales from our high-end consumer end market decreased $6.0 million primarily
driven

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by an approximately $11 million decrease in our proximity sensing products, partially offset by an approximately $3 million increase in TVS consumer product sales including wearables, mobile computers and smartphones.



Based on booking trends and our backlog entering the quarter, we estimate net
sales for the second quarter of fiscal year 2023 to be between $203.0 million
and $213.0 million. The range of guidance reflects continued uncertainty
regarding macro-related events and those associated with the COVID-19 pandemic
discussed above.

The following table summarizes our net sales by reportable segment:



                                                                        Three Months Ended
(in thousands, except percentages)                      May 1, 2022                            May 2, 2021
                                                Net Sales         % Net Sales          Net Sales         % Net Sales           Change
High-Performance Analog Group                 $  146,601                 73  %       $  125,202                 73  %               17  %
System Protection Group                           55,548                 27  %           45,170                 27  %               23  %
Total                                         $  202,149                100  %       $  170,372                100  %               19  %


Net sales from our High-Performance Analog Group increased $21.4 million in the
first quarter of fiscal year 2023 compared to the first quarter of fiscal year
2022 primarily driven by an approximately $19 million increase in LoRa-enabled
product sales led by an increase in pico gateways and an approximately $14
million increase in PON sales, partially offset by an approximately $11 million
decline in proximity sensing products. Net sales from our System Protection
Group increased $10.4 million in the first quarter of fiscal year 2023 compared
to the first quarter of fiscal year 2022 primarily driven by an approximately $7
million increase in industrial automation and automotive sales and an
approximately $3 million increase in TVS consumer product sales, including
wearables, mobile computers and smartphones.

Gross Profit



The following table summarizes our gross profit and gross margin by reportable
segment:

                                                                                    Three Months Ended
(in thousands, except percentages)                                May 1, 2022                                May 2, 2021
                                                        Gross Profit        

Gross Margin Gross Profit Gross Margin High-Performance Analog Group

$     102,061                69.6  %       $      83,080                66.4  %
System Protection Group                                      29,187                52.5  %              22,741                50.3  %

Unallocated costs, including share-based compensation (995)


                              (960)
Total                                                 $     130,253                64.4  %       $     104,861                61.5  %


In the first quarter of fiscal year 2023, gross profit increased to $130.3
million from $104.9 million in the first quarter of fiscal year 2022 as a result
of higher sales. This increase included a $19.0 million increase from our
High-Performance Analog Group and a $6.4 million increase from our System
Protection Group, both of which experienced higher demand and implemented price
increases to offset higher manufacturing costs during the first quarter of
fiscal year 2023.

Our gross margin was 64.4% in the first quarter of fiscal year 2023, compared to
61.5% in the first quarter of fiscal year 2022. Gross margin in our
High-Performance Analog Group was 69.6% in the first quarter of fiscal year
2023, compared to 66.4% in the first quarter of fiscal year 2022, reflecting
higher margins in 10G PON and 2.5G PON, as well as a favorable product mix
related to LoRa-enabled products. Gross margin in our System Protection Group
was 52.5% in the first quarter of fiscal year 2023, compared to 50.3% in the
first quarter of fiscal year 2022, reflecting a more favorable industrial
automation and automotive product mix.

The majority of our manufacturing is outsourced, resulting in relatively low
fixed manufacturing costs and variable costs that highly correlate with volume.
For the second quarter of fiscal year 2023, we expect our gross margins to be in
the range of 64.1% to 65.5%.

Despite the capacity constraints within the industry, we expect overall gross
profit for the second quarter of fiscal year 2023 to benefit from continued
revenue growth. We have increased our inventory levels to try to meet the strong
backlog of orders and higher demand, as well as to minimize the impact of
potential supply shortages.

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Operating Costs and Expenses



                                                        Three Months Ended
(in thousands, except percentages)           May 1, 2022                 May 2, 2021            Change
Selling, general and administrative    $    43,364        52  %    $    38,804        50  %       12  %
Product development and engineering         38,789        47  %         36,790        48  %        5  %
Intangible amortization                      1,048         1  %          

1,298 2 % (19) %

Total operating costs and expenses $ 83,201 100 % $ 76,892 100 % 8 %

Selling, General and Administrative Expenses



Selling, general and administrative ("SG&A") expenses increased $4.6 million in
the first quarter of fiscal year 2023 compared to the first quarter of fiscal
year 2022 primarily as a result of a $1.8 million increase in performance-based
compensation, which is comprised of bonus and share-based compensation, a $0.7
million increase in transaction costs including costs related to the divestiture
of our high reliability discrete diodes and assemblies business in May 2022, a
$0.5 million increase in depreciation expense and a $0.5 million increase in our
environmental reserve.

Product Development and Engineering Expenses



Product development and engineering expenses increased $2.0 million in the first
quarter of fiscal year 2023 compared to the first quarter of fiscal year 2022
primarily as a result of a $3.1 million increase in staffing-related costs,
including performance-based compensation, partially offset by a $1.6 million
decrease in operating supplies and contracted research, as well as fluctuations
in the timing of development activities. 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 non-recurring engineering
services, which are typically recorded as a reduction to product development and
engineering expense.

Intangible Amortization

Intangible amortization was $1.0 million and $1.3 million for the first quarters
of fiscal years 2023 and 2022, respectively. This decrease was primarily due to
certain finite-lived intangible assets associated with the acquisition of
Trackio International AG, which became fully amortized during fiscal year 2022.

Interest Expense



Interest expense, including amortization of debt discounts and issuance costs,
remained flat at $1.2 million for the first quarters of fiscal years 2023 and
2022.

Investment Impairments and Credit Loss Reserves



During the first quarter of fiscal year 2023, investment impairments and credit
loss reserves totaled a loss of $0.02 million due to adjustments to our credit
loss reserve for our available-for-sale debt securities, and we did not record
any impairments on our non-marketable equity investments. During the first
quarter of fiscal year 2022, investment impairments and credit loss reserves
totaled a loss of $0.2 million due to adjustments to our credit loss reserve for
our available-for-sale debt securities, and we did not record any impairments on
our non-marketable equity investments.

Provision for Income Taxes



The effective tax rates for the first quarters of fiscal years 2023 and 2022
were provision rates of 17.5% and 12.0%, respectively. In the first quarter of
fiscal year 2023, we recorded income tax expense of $8.1 million, compared to
$3.2 million in the first quarter of fiscal year 2022. The increase to our
effective tax rate for the first quarter of fiscal year 2023 compared to the
first quarter of fiscal year 2022 was mainly due to an increase in global
intangible low-taxed income ("GILTI"), driven by the capitalization of research
and development ("R&D") costs as mandated by The Tax Cuts and Jobs Act. The
effective tax rates in the first quarters of fiscal years 2023 and 2022 differ
from the statutory federal income tax rate of 21% primarily due to a regional
mix of income, impact of GILTI and R&D tax credits. 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.

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.

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; the general economic
environment in which we operate; and our ability to generate cash flow from
operations, which are more uncertain as a result of the COVID-19 pandemic and
its impact on the general economy. Our

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liquidity needs during this uncertain time will depend on multiple factors,
including our ability to continue operations and production of our products,
given the global supply constraints, the COVID-19 pandemic's effect on our
customers, the availability of sufficient amounts of financing and our operating
performance.

We believe that our cash on hand, cash available from future operations and
available borrowing capacity under our Credit Facility (as defined below) are
sufficient to meet liquidity requirements for at least the next 12 months,
including funds needed for our material cash requirements. As of May 1, 2022, we
had $275.2 million in cash and cash equivalents and $417.0 million of undrawn
capacity on our Credit Facility (as defined below). In addition, on May 3, 2022,
we sold our high reliability discrete diodes and assemblies business for
approximately $30 million in an all-cash transaction. Over the longer-term, we
believe our strong cash-generating business model will continue to provide
adequate liquidity to fund our normal operations, which have minimal capital
intensity. To the extent that we enter into acquisitions or strategic
partnerships, we may be required to raise additional capital through debt
issuances or equity offerings. In addition, we expect to refinance our Credit
Facility ahead of its maturity in November 2024. While we have not had issues
securing favorable financing historically, there is no assurance that we will be
able to refinance or secure additional capital at favorable terms, or at all in
the future.

A meaningful portion of our capital resources, and the liquidity they represent,
are held by our foreign subsidiaries. As of May 1, 2022, our foreign
subsidiaries held approximately $256.5 million of cash and cash equivalents,
compared to $221.9 million at January 30, 2022.

We expect our future cash uses will be for capital expenditures, repurchases of
our common stock, debt repayment and potentially, acquisitions and other
investments that support achievement of our business strategies. We expect to
fund those cash requirements through our cash from operations and borrowings
against our Credit Facility.

Credit Facility



On November 7, 2019, we, with certain of our domestic subsidiaries as
guarantors, entered into an amended and restated credit agreement (the "Credit
Agreement") with the lenders party thereto and HSBC Bank USA, National
Association, as administrative agent, swing line lender and letter of credit
issuer. The Credit Agreement provides $600.0 million in borrowing capacity of
revolving loans under the senior secured first lien credit facility (the "Credit
Facility"). The Credit Facility matures on November 7, 2024.

In the first three months of fiscal year 2023, we borrowed $10.0 million against
our Credit Facility. In the first three months of fiscal year 2022, we made
payments on our Credit Facility that totaled $4.0 million. As of May 1, 2022, we
had $183.0 million of outstanding borrowings against our Credit Facility, which
had $417.0 million of undrawn capacity.

The Credit Agreement provides that, subject to certain customary conditions,
including obtaining commitments with respect thereto, we may request the
establishment of one or more term loan facilities and/or increases to the
revolving loans in a principal amount not to exceed (a) $300.0 million, plus (b)
an unlimited amount, so long as our consolidated leverage ratio, determined on a
pro forma basis, does not exceed 3.00 to 1.00. However, the lenders are not
required to provide such increase upon our request.

Interest on loans made under the Credit Facility in U.S. Dollars accrues, at our
option, at a rate per annum equal to (1) the Base Rate (as defined below) plus a
margin ranging from 0.25% to 1.25% depending upon our consolidated leverage
ratio or (2) LIBOR (determined with respect to deposits in U.S. Dollars) for an
interest period to be selected by us plus a margin ranging from 1.25% to 2.25%
depending upon our consolidated leverage ratio (such margin, the "Applicable
Margin"). The "Base Rate" is equal to a fluctuating rate equal to the highest of
(a) the prime rate of the Administrative Agent, (b) 0.50% above the federal
funds effective rate published by the Federal Reserve Bank of New York and (c)
one-month LIBOR (determined with respect to deposits in U.S. Dollars), plus
1.00%. Interest on loans made under the Credit Facility in Alternative
Currencies (as defined in the Credit Agreement) accrues at a rate per annum
equal to LIBOR (determined with respect to deposits in the applicable
Alternative Currency) (other than loans made in Canadian Dollars, for which a
special reference rate for Canadian Dollars applies) for an interest period to
be selected by us plus the Applicable Margin.

In the first quarter of fiscal year 2021, we entered into an interest rate swap
agreement with a three-year term to hedge the variability of interest payments
on the first $150.0 million of debt outstanding under our Credit Facility. Based
on our current leverage ratio as of May 1, 2022, interest payments on the first
$150.0 million of debt outstanding under our Credit Facility are fixed at
1.9775%.

All of our obligations under the Credit Agreement are unconditionally guaranteed
by all of our direct and indirect domestic subsidiaries, other than certain
excluded subsidiaries, including, but not limited to, any domestic subsidiary
the primary assets of which consist of equity or debt of non-U.S. subsidiaries,
certain immaterial non-wholly-owned domestic subsidiaries and subsidiaries that
are prohibited from providing a guarantee under applicable law or that would
require governmental approval to provide such guarantee. The Company and the
guarantors have also pledged substantially all of their assets to secure their
obligations under the Credit Agreement.

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No amortization is required with respect to the revolving loans and we may voluntarily prepay borrowings at any time and from time to time, without premium or penalty, other than customary "breakage costs" and fees for LIBOR-based loans.



The Credit Agreement contains customary covenants, including limitations on our
ability to, among other things, incur indebtedness, create liens on assets,
engage in certain fundamental corporate changes, make investments, repurchase
stock, pay dividends or make similar distributions, engage in certain affiliate
transactions, or enter into agreements that restrict our ability to create
liens, pay dividends or make loan repayments. In addition, we must comply with
financial covenants, including maintaining a maximum consolidated leverage
ratio, determined as of the last day of each fiscal quarter, of 3.50 to 1.00 or
less, provided that, such maximum consolidated leverage ratio may be increased
to 4.00 to 1.00 for the four consecutive fiscal quarters ending on or after the
date of consummation of a permitted acquisition that constitutes a "Material
Acquisition" under the Credit Agreement, subject to the satisfaction of certain
conditions. As of May 1, 2022, we were in compliance with the 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.

On August 11, 2021, we entered into an amendment to the Credit Agreement in
order to, among other things, (i) provide for contractual fallback language for
LIBOR replacement to reflect the Alternative Reference Rates Committee hardwired
approach and (ii) incorporate certain provisions that clarify the rights of the
administrative agent to recover from lenders or other secured parties erroneous
payments made to such lenders or secured parties.

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 operations and our existing cash balances.

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. This program represents one of
our principal efforts to return value to our stockholders. We repurchased
762,093 shares of our common stock under this program in the first three months
of fiscal year 2023 for $50.0 million. In the first three months of fiscal year
2022, we repurchased 360,942 shares under this program for $25.0 million. As of
May 1, 2022, the remaining authorization under this program was $209.4 million.
We intend to fund repurchases under the program from cash on hand and borrowings
on our 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,
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. Our working capital, excluding cash
and cash equivalents, was $109.8 million and $94.3 million as of May 1, 2022 and
January 30, 2022, respectively. Our working capital, including cash and cash
equivalents, was $385.0 million and $373.9 million as of May 1, 2022 and
January 30, 2022, respectively.

Cash Flows



One of our primary goals is to continually improve the cash flows from our
existing operating activities. Additionally, we will continue to seek to
maintain and improve our existing business performance with capital expenditures
and, potentially, acquisitions and other investments that support achievement of
our business strategies. Acquisitions may be made for either cash or stock
consideration, or a combination of both.

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In summary, our cash flows for each period were as follows:



                                                    Three Months Ended
(in thousands)                                May 1, 2022       May 2, 2021

Net cash provided by operating activities $ 50,051 $ 32,585 Net cash used in investing activities

             (10,315)           

(8,655)


Net cash used in financing activities             (44,153)          

(34,602)

Net decrease in cash and cash equivalents $ (4,417) $ (10,672)




Operating Activities

Net cash provided by operating activities is driven by net income adjusted for non-cash items and fluctuations in operating assets and liabilities.



Operating cash flows for the first three months of fiscal year 2023 compared to
the first three months of fiscal year 2022 were favorably impacted by an 18.7%
increase in net sales and unfavorably impacted by a $7.1 million incremental
increase in inventory spend.

Investing Activities

Net cash used in investing activities was primarily attributable to capital expenditures, premiums paid for corporate-owned life insurance and purchases of investments, offset by proceeds from corporate-owned life insurance.



Capital expenditures were $8.3 million for the first three months of fiscal year
2023, compared to $5.8 million for the first three months of fiscal year 2022.
In the first three months of fiscal years 2023 and 2022, we made significant
investments to update and expand our production capabilities.

In the first three months of fiscal year 2023, we paid $2.0 million for
strategic investments, including investments in companies that are enabling the
LoRa and LoRaWAN®-based ecosystem, compared to $2.9 million of investments in
the first three months of fiscal year 2022.

In the first three months of fiscal year 2023, we received $2.7 million of
proceeds from a corporate-owned life insurance death benefit, which included a
$1.6 million gain. All $2.7 million of the proceeds were re-invested into our
corporate-owned life insurance policy in order to provide substantive coverage
for our deferred compensation liability.

Financing Activities

Net cash used in financing activities is primarily attributable to repurchases of outstanding common stock, payments related to employee share-based compensation payroll taxes and payments on our Credit Facility, offset by proceeds from stock option exercises.



In the first three months of fiscal year 2023, we paid $4.6 million for employee
share-based compensation payroll taxes and received $0.4 million in proceeds
from the exercise of stock options, compared to payments of $6.2 million for
employee share-based compensation payroll taxes and proceeds of $0.6 million
from the exercise of stock options in the first three months of fiscal year
2022. We do not directly control the timing of the exercise of stock options.
Such exercises are independent decisions made by grantees and are influenced
most directly by the stock price and the expiration dates of stock option
awards. Such proceeds are difficult to forecast, resulting from several factors
that are outside our control. We believe that such proceeds will remain a
nominal source of cash in the future.

Critical Accounting Estimates



Our critical accounting 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. There have been no significant changes to our
policies during the three months ended May 1, 2022. For a discussion of recent
accounting pronouncements, see Note 1 to our interim unaudited condensed
consolidated financial statements.

Available Information



General information about us can be found on our website at www.semtech.com. The
information on our website is for informational purposes only and should not be
relied on for investment purposes. The information on our website is not
incorporated by reference into this Quarterly Report and should not be
considered part of this or any other report filed with the SEC.

We make available free of charge, either by direct access on our website or by a
link to the SEC website, our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or as soon as

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reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our reports filed with, or furnished to, the SEC are also available directly at the SEC's website at www.sec.gov.

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