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What changed in MACOM Technology Solutions Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MACOM Technology Solutions Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+259 added−240 removedSource: 10-K (2023-11-13) vs 10-K (2022-11-14)

Top changes in MACOM Technology Solutions Holdings, Inc.'s 2023 10-K

259 paragraphs added · 240 removed · 200 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

49 edited+7 added−11 removed74 unchanged
Biggest changeMAJOR PRODUCT FAMILIES Amplifiers HDcctv Devices Optical Receivers Bulk Acoustic Wave Filters Integrated IC & Modules Passives Capacitors Laser & Modulator Drivers Photodiodes Clock and Data Recovery Lasers Photonic Devices Control Products Limiters RF Power Products Crosspoint Switches Linear Equalizers SDI Products Diodes Network Connectivity Solutions Switch LNAs Frequency Conversion Optical Post Amplifiers Transimpedance Amplifiers Frequency Generation 5 Sales and Marketing We employ a global multi-channel sales strategy and support model intended to facilitate customers’ evaluations and selections of our products.
Biggest changeMAJOR PRODUCT FAMILIES Amplifiers Integrated IC & Modules Photodiodes & Photoreceivers Attenuators Laser & Modulator Drivers Photonic Devices Bias Networks Lasers Predistortion Linearizer Capacitors Limiters & Detectors RF over Fiber Products Clock and Data Recovery Linear Equalizers RF Power Amplifiers Crosspoint Switches Low Noise Amplifiers SDI Cable Products Diodes Network Connectivity Solutions Space Qualified Modules Filters Passives SSPA Modules Frequency Conversion Phase Shifters & Time Delay Switches Frequency Generation Phase Detectors Transimpedance Amplifiers Sales and Marketing We employ a global multi-channel sales strategy and support model intended to facilitate customers’ evaluations and selections of our products.
We believe that the principal competitive factors in our markets include: ▪ the ability of engineering talent to drive innovation and new product development; ▪ the ability to timely design and deliver products and solutions that meet or exceed customers’ performance, reliability and price requirements; ▪ the breadth and diversity of product offerings; ▪ the ability to provide a reliable supply of products in sufficient quantities and in a timely manner; ▪ the quality of customer service and technical support; and ▪ the financial reliability, operational stability and reputation of the supplier.
We believe that the principal competitive factors in our markets include: ▪ the ability of engineering talent to drive innovation and new product development; ▪ the ability to timely design and deliver products and solutions that meet or exceed customers’ performance, reliability and price requirements; ▪ the breadth and diversity of product offerings; ▪ the ability to provide a reliable supply of products in sufficient quantities and in a timely manner; 6 ▪ the quality of customer service and technical support; and ▪ the financial reliability, operational stability and reputation of the supplier.
ITEM 1. BUSINESS Overview We design and manufacture semiconductor products for Telecommunications (“Telecom”), Industrial and Defense (“I&D”) and Data Center industries. Headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia, we design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability.
ITEM 1. BUSINESS Overview We design and manufacture semiconductor products for the Industrial and Defense (“I&D”), Data Center and Telecommunications (“Telecom”) industries. Headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia, we design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability.
We match our opto-electronic components to our laser and photodetector products enabling our customers to buy more complete solutions for their opto-electronic systems. For optical communications applications, we utilize a proprietary combination of GaAs, InP and Silicon Germanium (“SiGe”) technologies to obtain advantages in performance and 4 size.
We match our opto-electronic components to our laser and photodetector products enabling our customers to buy more complete solutions for their opto-electronic systems. For optical communications applications, we utilize a proprietary combination of GaAs, InP and Silicon Germanium (“SiGe”) technologies to obtain advantages in performance and size.
These laws are becoming more stringent and may in the future cause us to incur material expenditures or otherwise cause financial harm. Export Regulations We market and sell our products both inside and outside the U.S. Certain products are subject to the Export Administration Regulations, administered by the U.S.
These laws are becoming more stringent and may in the future cause us to incur material expenditures or otherwise cause financial harm. 8 Export Regulations We market and sell our products both inside and outside the U.S. Certain products are subject to the Export Administration Regulations, administered by the U.S.
We expect revenue growth in the Data Center market to be driven by the adoption of cloud-based services and the upgrade of data center architectures to 100G, 200G, 400G and 800G interconnects, which we expect will drive adoption of higher speed optical and photonic wireless links. Telecom.
We expect revenue growth in the Data Center market to be driven by the adoption of cloud-based services and the upgrade of data center architectures to 100G, 200G, 400G and 800G interconnects, which we expect will drive adoption of higher speed optical and photonic wireless links.
The interaction of semiconductor process technology, circuit design and packaging technology defines the performance parameters and the competitive differentiation of our products. We believe some of our core competencies are the ability to model, design, test, integrate, package and manufacture differentiated solutions for our customers.
The interaction of semiconductor process technology, circuit design and packaging technology defines the performance parameters and differentiation of our products. We believe some of our core competencies are the ability to model, design, test, integrate, package and manufacture differentiated solutions for our customers.
We have been accredited by the United States Department of Defense with “Trusted Foundry” status, a designation conferred on microelectronics vendors exhibiting the highest levels of process integrity and protection.
We have been accredited by the United States Department of Defense with “Trusted Foundry” status, a designation conferred on microelectronics vendors exhibiting the highest levels of process 3 integrity and protection.
Some of our competitors are also our customers, and in certain product categories we compete with semiconductor manufacturers from which we also obtain foundry services. We compete with Analog Devices, Inc. (“ADI”), Broadcom Inc. (“Broadcom”), Credo Technology Group Holding Ltd. (“Credo”), Marvell Technology Inc. (“Marvell”), MaxLinear Inc. (“MaxLinear”), Microchip Technology Incorporated (“Microchip”), 6 NXP Semiconductors N.V. (“NXP”), Qorvo, Inc.
Some of our competitors are also our customers, and in certain product categories we compete with semiconductor manufacturers from which we also obtain foundry services. We primarily compete with Analog Devices, Inc. (“ADI”), Broadcom Inc. (“Broadcom”), Credo Technology Group Holding Ltd. (“Credo”), Marvell Technology Inc. (“Marvell”), MaxLinear Inc. (“MaxLinear”), Microchip Technology Incorporated (“Microchip”), NXP Semiconductors N.V. (“NXP”), Qorvo, Inc.
In October 2017, following the acquisition of AppliedMicro, we divested AppliedMicro's Compute business (the “Compute business”) and received an equity interest in Ampere Computing Holdings LLC which we sold on December 23, 2021. See Note 4 - Investments to our Consolidated Financial Statements included in this Annual Report for more information.
In October 2017, following the acquisition of AppliedMicro, we divested AppliedMicro's Compute business (the “Compute business”) and received an equity interest in Ampere Computing Holdings LLC, which we sold on December 23, 2021. See Note 5 - Investments to our Consolidated Financial Statements included in this Annual Report for more information.
Our primary end markets are: (1) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and Fiber-to-the-X (“FTTx”)/passive optical network (“PON”), among others; (2) I&D, which includes military and commercial radar, radio frequency (“RF”) jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; and (3) Data Center, which includes intra-Data Center, Data Center Interconnect (“DCI”) applications, at 100G, 200G, 400G, 800G and higher speeds, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers.
Our primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; (2) Data Center, which includes intra-Data Center, Data Center Interconnect (“DCI”) applications, at 100G, 200G, 400G, 800G and higher speeds, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and Fiber-to-the-X (“FTTx”)/passive optical network (“PON”), among others.
For wired broadband applications, we offer OEM customers the opportunity to streamline their supply chain through our broad catalog of active components such as active splitters, amplifiers, multi-function ICs and switches, as well as passive components such as transformers, diplexers, filters, power dividers and combiners. Industrial & Defense.
For wired broadband applications, we offer OEM customers the opportunity to streamline their supply chain through our broad catalog of active components such as active splitters, amplifiers, multi-function ICs and switches, as well as passive components such as transformers, diplexers, filters, power dividers and combiners.
The following facilities have also achieved certification to the AS9100D aerospace standard: Lowell, Massachusetts; Morrisville, North Carolina; Ann Arbor, Michigan; and Nashua, New Hampshire. In addition, our Lowell, Massachusetts facility has received IATF16949 automotive quality management system certification and the ISO 14001:2015 environmental management system certification.
The following facilities have also achieved certification to the AS9100D aerospace standard: Lowell, Massachusetts; Morrisville, North Carolina; Ann Arbor, Michigan; Nashua, New Hampshire; and Hamilton, New Jersey. In addition, our Lowell, Massachusetts facility has received IATF16949 automotive quality management system certification and the ISO 14001:2015 environmental management system certification.
Growth in next-generation Internet and Internet of Things applications drives global demand for communications infrastructure equipment requiring amplifiers, filters, receivers, switches, synthesizers, transformers, upconverters and other components to expand and upgrade cellular backhaul, cellular infrastructure, wired broadband and fiber optic networks.
Growth in next generation Internet and Internet of Things, or IoT, applications drives global demand for communications infrastructure equipment requiring amplifiers, filters, receivers, switches, synthesizers, transformers, upconverters and other components to expand and upgrade cellular backhaul, cellular infrastructure, wired broadband and fiber optic networks.
Our acquisition strategy is intended to accelerate our growth, expand our technology portfolio, grow our addressable market and create stockholder value.
Our acquisition strategy is intended to accelerate our growth, expand our technology portfolio, grow our addressable market and further create stockholder value.
We encourage investors to monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts, as well as our social media channels (MACOM’s LinkedIn, Facebook and YouTube pages and Twitter account (@MACOMtweets)).
We encourage investors to monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts, as well as our social media channels (MACOM’s LinkedIn, Facebook and YouTube pages and X account (@MACOMtweets)).
We expect our revenue in the Telecom market to be driven, in part, by 5G deployments and expansion of optical networks, with continued upgrades and expansion of communications equipment and increasing adoption of bandwidth-rich services.
We expect our revenue in the Telecom market to be driven, in part, by 5G deployments and expansion of optical networks, with continued upgrades and expansion of communications equipment and increasing adoption of bandwidth-rich services. Industrial & Defense.
In the I&D market, military applications require advanced electronic systems, such as radar warning receivers, communications data links and tactical radios, unmanned aerial vehicles, RF jammers, electronic countermeasures and smart munitions.
In the I&D market, military applications require advanced electronic systems, such as radar warning receivers, communications data links and tactical radios, unmanned aerial vehicles, RF jammers, electronic countermeasures, smart munitions and satellite communications (“SATCOM”).
We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. The expiration dates of our patents range from 2022 to 2041.
We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. The expiration dates of our patents range from 2023 to 2041.
Those transactions include: In January 2017, we acquired Applied Micro Circuits Corporation (“AppliedMicro”), a global provider of silicon solutions for next-generation cloud infrastructure and Cloud Data Centers, as well as connectivity products for edge, metro and long-haul communications equipment (the “AppliedMicro Acquisition”) in order to expand our business in enterprise and Cloud Data Center applications.
Those transactions include: In January 2017, we acquired Applied Micro Circuits Corporation (“AppliedMicro”), a global provider of silicon solutions for next-generation cloud infrastructure and Cloud Data Centers, as well as connectivity products for edge, metro and long-haul communications equipment in order to expand our business in enterprise and Cloud Data Center applications.
The ESD Association provides standards for safe and proper handling of electrostatic discharge (“ESD”) in electronic manufacturing environments. Our following locations have each received ANSI/ESD S20.20:2014 certification: Lowell, Massachusetts; Ann Arbor, Michigan; Allentown, Pennsylvania; Morrisville, North Carolina; Nashua, New Hampshire; and Hsinchu, Taiwan.
The ESD Association provides standards for safe and proper handling of electrostatic discharge (“ESD”) in electronic manufacturing environments. Our following locations have each received ANSI/ESD S20.20:2014 certification: Lowell, Massachusetts; Ann Arbor, Michigan; Allentown, Pennsylvania; Newport Beach, California; Morrisville, North Carolina; Nashua, New Hampshire; and Hsinchu, Taiwan.
We have also maintained an internship program that supports the professional development of interns and serves as a recruitment tool for full-time employees. We monitor voluntary attrition as an indicator of employee engagement. During fiscal year 2022, our voluntary attrition rate was approximately 11%. Compensation. Our compensation policies recognize and reward individual and collective contributions to our growth and success.
We have also maintained an internship program that supports the professional development of interns and serves as a recruitment tool for full-time employees. We monitor voluntary attrition as an indicator of employee engagement. During fiscal year 2023, our voluntary attrition rate was approximately 10%. Compensation. Our compensation policies recognize and reward individual and collective contributions to our growth and success.
We expect our revenue in the I&D market to be driven by the expansion of our product portfolio which services test and measurement, satellite communications, civil and military radar, scientific, medical and other industrial applications.
We expect our revenue in the I&D market to be driven by the expansion of our product portfolio that services satellite and space communications, civil and military radar, test and measurement, scientific, medical and other industrial applications.
Our semiconductor products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless communication systems including basestations, high-capacity optical networks, data center applications, radar, medical systems and test and measurement applications.
Our products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless basestations, high-capacity optical networks, data center networks, radar, medical systems and test and measurement applications.
In the I&D 3 markets, a domestic fabrication facility may be a requirement to be a strategic supplier, and we believe our status as a Trusted Foundry offers us further competitive differentiation. We also utilize external semiconductor foundries to access additional process technologies and provide additional capacity.
In the I&D markets, a domestic fabrication facility may be a requirement to be a strategic supplier, and we believe our status as a Trusted Foundry offers us a further competitive advantage. We also utilize external semiconductor foundries to access additional process technologies and capacity.
We maintain an export compliance program staffed by dedicated personnel under which we screen export transactions against current lists of restricted exports, destinations and end users with the objective of managing export-related decisions, transactions and shipping logistics to ensure compliance with these requirements. 8 Human Capital Employees.
We maintain an export compliance program staffed by dedicated personnel under which we screen export transactions against current lists of restricted exports, destinations and end users with the objective of managing export-related decisions, transactions and shipping logistics to ensure compliance with these requirements. Workforce Employees.
In the medical industry, our custom designed non-magnetic diode product line is a critical component for certain MRI applications. For sensing and test and measurement applications, we believe our HMIC process is ideal for high-performance, integrated bias networks and switches.
In the medical industry, our custom designed non-magnetic diode product line is a critical component for certain MRI applications. For sensing and test and measurement applications, we believe our heterolithic microwave integrated circuit, or HMIC, process is ideal for high-performance, integrated bias networks and switches.
The following locations have each received ISO 9001:2015 certifications in one or more of their principal functional areas: Lowell, Massachusetts; Cork, Ireland; Ithaca, New York; Santa Clara and Newport Beach, California; Morrisville, North Carolina; Ann Arbor, Michigan; Nashua, New Hampshire; and Hsinchu, Taiwan.
The following locations have each received ISO 9001:2015 certifications in one or more of their principal functional areas: Lowell, Massachusetts; Cork, Ireland; Ithaca, New York; Santa Clara and Newport Beach, California; Morrisville, North Carolina; Ann Arbor, Michigan; Nashua, New Hampshire; Hsinchu, Taiwan; Hamilton, New Jersey; and Limeil-Brévannes , France.
None of our domestic employees are represented by a collective bargaining agreement; however, as of September 30, 2022, approximately 20 of our employees working in certain European locations were covered by collective bargaining agreements. We consider our relations with employees to generally be good and we have not experienced a work stoppage due to labor issues.
None of our domestic employees are represented by a collective bargaining agreement; however, as of September 29, 2023, approximately 108 of our employees working in certain European locations were covered by collective bargaining agreements. We consider our relations with employees to generally be good and we have not experienced a work stoppage due to labor issues.
Our manufacturing model consists of domestic semiconductor wafer fabrication assembly and test capabilities coupled with domestic and international external foundry and assembly and test partners. We operate semiconductor fabrication facilities at our Lowell, Massachusetts headquarters and in Ann Arbor, Michigan.
Our manufacturing model consists of domestic semiconductor wafer fabrication assembly and test capabilities coupled with domestic and international external foundry and assembly and test partners. We operate semiconductor fabrication facilities at our Lowell, Massachusetts headquarters, and in our Ann Arbor, Michigan, and Limeil-Brévannes, France locations.
We perform internal assembly and test functions at our Lowell, Massachusetts, Nashua, New Hampshire, Ann Arbor, Michigan and Hsinchu, Taiwan locations. We complement our internal manufacturing with outsourced foundry partners and other suppliers. Our operations team has extensive expertise in the management of outsourced manufacturing service providers and other supply chain participants.
We perform internal assembly 7 and test functions at our Lowell, Massachusetts, Nashua, New Hampshire, Ann Arbor, Michigan, Hamilton, New Jersey, Limeil-Brévannes, France, and Hsinchu, Taiwan locations. We complement our internal manufacturing with outsourced foundry partners and other suppliers. Our operations team has extensive expertise in the management of outsourced manufacturing service providers and other supply chain participants.
For example, our application expertise in power amplifier technology is leveraged across both scientific laboratory equipment applications and commercial and defense radar system applications. Our diode technology is used in switch filter banks of military tactical radios as well as medical imaging MRI systems. The table below presents the major product families.
For example, our application expertise in power amplifier technology is leveraged across both scientific laboratory equipment applications and commercial and defense radar system applications. Our diode technology is used in switch filter banks of military tactical radios as well as medical imaging MRI systems. Telecom.
We believe that our ability to utilize a broad array of internal proprietary process technologies and commercially available foundry technologies allows us to select the most appropriate technology to solve our customers’ needs. We believe that this strategy provides us with dependable supply, control over quality, reduced capital investment requirements, faster time to market and additional outsourced capacity when needed.
In aggregate, we utilize a broad array of internal, proprietary process technologies and commercially available foundry technologies, which allows us to select the most appropriate technology to solve our customers’ needs. This strategy is intended to provide us with dependable supply, control over quality, reduced capital investment requirements, faster time to market and additional outsourced capacity when needed.
Approximately 70% and 30% of our workforce is male and female, respectively. Females represented approximately 11% of our senior management and approximately 15% of our engineering roles. Corporate Culture and Employee Engagement. We are committed to fostering a corporate culture that encourages and seeks the betterment of the Company and the communities in which we conduct business.
Approximately 69% of our workforce is male and 31% of our workforce is female. Females represented approximately 17% of our senior management and approximately 17% of our engineering roles. Corporate Culture and Employee Engagement. We are committed to fostering a corporate culture that encourages and seeks the betterment of the Company and the communities in which we conduct business.
For fiscal years 2022, 2021 and 2020, no direct customer individually accounted for 10% or more of our revenue and sales to our top 25 direct customers accounted for an aggregate of 47.1%, 43.7% and 40.0% of our revenue, respectively.
For fiscal years 2023, 2022 and 2021 , no dire ct customer individually accounted for 10% or more of our revenue and sales to our top 25 direct customers accounted for an aggregate of 51.5%, 47.1% and 43.7% of our revenue, respectively.
We offer a broad portfolio of thousands of standard and custom devices, which include integrated circuits (“IC”), multi-chip modules (“MCM”), diodes, amplifiers, switches and switch limiters, passive and active components and complete subsystems, across dozens of product lines serving over 6,000 end customers in three primary markets.
We offer a broad portfolio of thousands of standard and custom devices, which include integrated circuits (“IC”), multi-chip modules (“MCM”), diodes, amplifiers, switches and switch limiters, passive and active components and radio frequency (“RF”) and optical subsystems, which make up dozens of product lines that service over 6,000 end customers in our three primary markets.
Our DEI&B efforts are guided by the following principles: • Diversity is the representation of different people in an organization. • Equity is ensuring that everyone has fair, just and equal opportunities at work. • Inclusion is ensuring that everyone has an equal opportunity to contribute to and influence every part and level of a workplace. • Belonging is ensuring that everyone feels safe and welcome at work.
Our DEI&B efforts are guided by the following principles: • Diversity is the representation of different people in an organization. • Equity is ensuring that everyone has fair, just and equal opportunities at work. • Inclusion is ensuring that everyone has an equal opportunity to contribute to and influence every part and level of a workplace. • Belonging is ensuring that everyone feels safe and welcome at work. 9 We regularly use our employee newsletter and communications meetings to share information, opportunities and updates with our workforce on our DEI&B and other initiatives.
One of our distributors, Richardson RFPD, Inc., (“Richardson”), accounted for 10.7% and 13.5% of our revenue in fiscal years 2021 and 2020, respectively, but did not exceed 10% in fiscal year 2022.
One of our distributors, Richardson RFPD, Inc., accounted for 10.7% of our revenue in fiscal year 2021, but did not exceed 10% in fiscal years 2022 or 2023.
In addition, the experience base cultivated through the continued operation of our internal fabrication lines provides us with the expertise to better manage our external foundry suppliers. Research and Development Our research and development efforts are directed toward the rapid development of new and innovative products, process technologies and packaging techniques.
In addition, the know-how developed through the continued operation of our internal fabrication lines provides us with the expertise to better manage our external foundry suppliers. Research and Development Our research and development efforts aim to rapidly develop new and innovative products, process technologies and packaging techniques.
We enable the market with a complete product portfolio of PAM-4 PHYs, TIAs, Modulator Drivers, Lasers, Photodetectors and Silicon Photonics, and, in some cases, individual component designs are optimized for use together as a chipset. To address our primary markets, we offer a broad range of standard and custom ICs and components.
We enable the market with a complete product portfolio of Pulse Amplitude Modulation (“PAM-4”) Physical Layers (“PHYs”), Transimpedance Amplifier (“TIAs”), Modulator Drivers, Lasers and Photodetectors, and, in some cases, individual component designs are optimized for use together as a chipset. To address our primary markets, we offer a broad range of standard and custom ICs and components.
Sales to our distributors accounted f or 30.9% , 35.0% and 45.3% of our revenue in fiscal years 2022, 2021 and 2020, respectively.
Sales to our distributors accounted for 24.0%, 30.9% and 35.0% of our revenue in fiscal years 2023, 2022 and 2021, respectively.
The use of external suppliers involves a number of risks, including the possibility of material disruptions in the supply of key raw materials and components, and the lack of control over delivery schedules, capacity, quality and costs. 7 While we attempt to maintain alternative sources for our principal raw materials to reduce the risk of supply interruptions or price increases, some of the raw materials and components are not readily available from alternate suppliers due to their unique nature, design or the length of time necessary for re-design or qualification.
While we attempt to maintain alternative sources for our principal raw materials to reduce the risk of supply interruptions or price increases, some of the raw materials and components are not readily available from alternate suppliers due to their unique nature, design or the length of time necessary for re-design or qualification.
As of September 30, 2022, we had 574 U.S. and 187 foreign issued patents and 103 U.S. and 148 foreign pending patent applications covering elements of semiconductor devices, circuit design, manufacturing and wafer fabrication.
As of September 29, 2023, we had 553 U.S. and 210 foreign issued patents and 113 U.S. and 185 foreign pending patent applications covering elements of semiconductor devices, circuit design, manufacturing and wafer fabrication.
As of September 30, 2022, we employed approximately 1,200 individuals worldwide, including approximately 430 in research and development. We have employees across 17 countries, with 71% in North America, 20% in Asia Pacific and 9% in Europe.
As of September 29, 2023, we employed approximately 1,500 individuals worldwide, including approximately 500 in research and development (“R&D”). We have employees across 15 countries, with 71% in North America, 16% in Asia Pacific and 14% in Europe.
For military communications data link and tactical radio applications, we offer a family of active, passive and discrete products, such as Monolithic Microwave Integrated Circuits (“MMICs”), control components, voltage-controlled oscillators (“VCOs”), transformers, power pallets, amplifiers and diodes.
For military communications data link and tactical radio applications, we offer a family of active, passive and discrete products, such as Monolithic Microwave Integrated Circuits (“MMICs”), control components, voltage-controlled oscillators, transformers, power pallets, amplifiers and diodes. 4 We believe manufacturing products in our Lowell, Massachusetts Trusted Foundry offers us a competitive advantage in the I&D market because of certain customers’ requirements for a domestic supply chain.
Our goal is to reduce the potential for injury or illness by maintaining safe working conditions, such as providing proper tools and training to all employees. Additionally, we offer resources to our employees to encourage healthy habits, such as health coaches, wellness incentives and a diabetes prevention program.
We have health and safety team members to support compliance requirements and also promote and encourage employees to maintain healthy and safe lifestyles. Our goal is to reduce the potential for injury or illness by maintaining safe working conditions, such as providing proper tools and training to all employees.
While sales in any or all of our primary markets may slow or decline from period to period, over the long term we generally expect to benefit from growth in these markets.
Our Markets and Products Our core strategy is to develop and innovate high-performance products that address our customers’ technical challenges in our primary markets: I&D, Data Center and Telecom. While sales in any or all of our primary markets may slow or decline from period to period, over the long term we expect to benefit from growth in these markets.
We maintain a policy against unlawful discrimination, harassment and retaliation which sets forth our position on the prohibition of all forms of discrimination and harassment in the workplace. Safety, Health and Well-being. We have health and safety team members to support compliance requirements and also promote and encourage employees to maintain healthy and safe lifestyles.
We are committed to providing equal opportunity in all aspects of employment and do not tolerate discrimination or harassment of any kind. We maintain a policy against unlawful discrimination, harassment and retaliation which sets forth our position on the prohibition of all forms of discrimination and harassment in the workplace. Safety, Health and Well-being.
We will continue to prioritize the health and safety of our employees during the remainder of the COVID-19 pandemic and thereafter. History and Recent Developments We were incorporated under the laws of the State of Delaware in March 2009.
Additionally, we offer resources to our employees to encourage healthy habits, such as health coaches, wellness incentives and a diabetes prevention program. History and Recent Developments We were incorporated under the laws of the State of Delaware in March 2009.
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Our Markets and Products Our core strategy is to develop and innovate high-performance products that address our customers’ technical challenges in our primary markets: Telecom, I&D and Data Center.
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Wireless applications include terrestrial and space-based radio frequency, microwave and millimeter wave communication systems, also known as satellite communications, or SATCOM. SATCOM systems can support commercial and defense applications and, in some cases, include deployment of large satellite constellations to support connectivity. 5 The table below presents our major product families.
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We believe manufacturing products in our Lowell, Massachusetts Trusted Foundry offers us a competitive advantage in the I&D market because of certain customers’ requirements for a domestic supply chain.
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The use of external suppliers involves a number of risks, including the possibility of material disruptions in the supply of key raw materials and components, and the lack of control over delivery schedules, capacity, quality and costs.
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Sales to two other resellers, Gateway Tech Company Limited (“Gateway”) and Pangaea (H.K.) Limited (“Pangaea”), both individually accounted for 11.5% of our revenue in fiscal year 2020, but did not individually exceed 10% in fiscal years 2022 or 2021.
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In March 2023, we completed the acquisition of Linearizer Technology, Inc. (“Linearizer”), a developer of modules and subsystems, including solid state amplifiers (SSPAs), microwave predistortion linearizers and microwave photonics based in Hamilton, New Jersey (the “Linearizer Acquisition”). We acquired Linearizer to further strengthen our component and subsystem design expertise in our target markets.
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We regularly use our employee newsletter and communications meetings to share information, opportunities and updates with our workforce on our DEI&B and other initiatives. We are committed to providing equal opportunity in all aspects of employment and do not tolerate discrimination or harassment of any kind.
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See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
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As a global organization, we followed and continue to follow local government guidance related to COVID-19 in every jurisdiction where we operate. In particular, we continue to follow government-issued orders, we have directed social distancing, we have minimized our in-person workforce and we continue to adhere to requirements for temporary site closures.
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In May 2023, we completed the acquisition of the key manufacturing facilities, capabilities, technologies and other assets and certain specified liabilities of OMMIC SAS, a semiconductor manufacturer based in Limeil-Brévannes, France with expertise in wafer fabrication, epitaxial growth and MMIC processing and design. We are referring to this acquisition as the MACOM European Semiconductor Center Acquisition (the “MESC Acquisition”).
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We have 9 implemented extensive onsite health and safety protocols to protect our employees, including onsite health screening, free private COVID-19 testing, and onsite COVID-19 vaccination clinics in our Lowell, Massachusetts headquarters. We also supported our workforce with advice and guidance on protecting their own health and the health of their families.
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We completed the MESC Acquisition to expand our European footprint and to enable us to offer higher frequency GaAs and GaN MMICs. See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
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During the fiscal quarter ended June 28, 2019, we committed to a plan designed to strategically realign, streamline and improve certain of our business and operations, including reducing our workforce by approximately 250 employees, exiting six development facilities in France, Japan, the Netherlands, Florida, Massachusetts and Rhode Island, reducing certain development activities for one of our product lines and no longer investing in the design and development of optical modules and subsystems for Data Center applications (the “2019 Plan”).
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In August 2023, we entered into a definitive Asset Purchase Agreement with Wolfspeed to acquire certain assets and specified liabilities of their RF business and the proposed transaction is expected to close in our fiscal first quarter of 2024. See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
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These restructuring actions were completed in fiscal year 2020. COVID-19 Impact COVID-19 has spread throughout areas of the world where we operate and resulted in authorities implementing numerous measures to try to contain the virus.
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As a result of these measures and the spread of COVID-19, we have modified our business practices and may further modify our practices as required, or as we determine appropriate.
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While these measures, as well as other disruptions, have impacted our operations, the operations of our customers and those of our respective vendors and suppliers, such impacts did not, through the fiscal year ended September 30, 2022, have a material impact on our consolidated operating results.
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For additional information on risk factors that could impact our future results, please refer to “ Item 1A - Risk Factors ” in this Annual Report.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

83 edited+22 added−15 removed189 unchanged
Biggest changeWe believe our continued ability to recruit, hire, retain and motivate highly skilled engineering, operations, sales, administrative and managerial personnel is key to our future success. Competition for these employees is intense. Our failure to retain our present employees and hire additional qualified personnel in a timely manner and on reasonable terms could harm our competitiveness and results of operations.
Biggest changeIf we lose key personnel or fail to attract and retain key personnel, we may be unable to pursue business opportunities or develop our products. We believe our continued ability to recruit, hire, retain and motivate highly skilled engineering, operations, sales, administrative and managerial personnel is key to our future success. Competition for these employees is intense.
Our successful product development depends on a number of factors, including the accurate prediction of market requirements, changes in technology and evolving standards; the availability of qualified product designers and process technologies needed to solve design challenges in a cost-effective, reliable manner; our ability to design products that meet customers’ requirements; our ability to successfully design and manufacture products at competitive prices and volumes; our customers’ acceptance of our product designs; the acceptance of our customers’ products by the market and the lifecycle of such products; the strength of and ability to protect our intellectual property rights; our ability to obtain, on commercially reasonable terms, licenses to necessary third party intellectual property rights; and our ability to maintain and increase our level of product content in our customers’ systems.
Our successful product development depends on a number of factors, including accurate prediction of market requirements, changes in technology and evolving standards; the availability of qualified product designers and process technologies needed to solve design challenges in a cost-effective, reliable manner; our ability to design products that meet customers’ requirements; our ability to successfully design and manufacture products at competitive prices and volumes; our customers’ acceptance of our product designs; the acceptance of our customers’ products by the market and the lifecycle of such products; the strength of and ability to protect our intellectual property rights; our ability to obtain, on commercially reasonable terms, licenses to necessary third party intellectual property rights; and our ability to maintain and increase our level of product content in our customers’ systems.
To a significant extent, this growth depends on the continued growth in usage of advanced electronic systems in our primary markets: Telecom, Data Center and I&D. The rate and extent to which these markets will grow, if at all, is uncertain.
To a significant extent, this growth depends on the continued growth in usage of advanced electronic systems in our primary markets: I&D, Data Center and Telecom. The rate and extent to which these markets will grow, if at all, is uncertain.
Our business may be adversely affected if we experience product returns, product liability and defects claims. Our products are complex and frequently operate in high-performance, challenging environments. We may not be able to anticipate all of the possible performance or reliability problems that could arise with our products after they are released to the market.
Our business may be adversely affected if we experience product returns and product liability and defects claims. Our products are complex and frequently operate in high-performance, challenging environments. We may not be able to anticipate all of the possible performance or reliability problems that could arise with our products after they are released to the market.
If we are unable to comply, or are unable to cause our suppliers or contract manufacturers to comply, with such policies or provisions or meet the requirements of our customers and our investors, a customer may stop purchasing products from us or an investor may sell their shares, and may take legal action against us, which could harm our reputation, revenue and results of operations.
If we are unable to comply, or are unable to cause our suppliers or contract manufacturers to comply, with such policies or provisions or meet the requirements of our customers or our investors, a customer may stop purchasing products from us or an investor may sell their shares and/or take legal action against us, which could harm our reputation, revenue and results of operations.
A number of factors will affect the future success of these internal manufacturing facilities and outsourced supply and service arrangements, including the level of demand for our products; our ability to expand and contract our facilities and purchase commitments in a timely and cost-effective manner; our ability to generate revenue in amounts that cover the significant fixed costs of operating our facilities; our ability to qualify our facilities for new products and process technologies in a timely manner and avoid complications; the availability of raw materials; the availability and continued operation of key equipment; our manufacturing cycle times and yields; political and economic risks; the occurrence of natural disasters, pandemics, acts of terrorism, armed conflicts or unrest impacting our facilities and those of our outsourced suppliers; our ability to hire, train, 16 manage and retain qualified production personnel; our compliance with applicable environmental and other laws and regulations; our ability to avoid prolonged periods of downtime or high levels of scrap in our and our suppliers’ facilities for any reason; and our ability to negotiate renewals to our existing lease agreements on favorable terms and without disruption to our wafer processing and manufacturing and internal assembly and test operations at our sites where such activities take place.
A number of factors will affect 18 the future success of these internal manufacturing facilities and outsourced supply and service arrangements, including the level of demand for our products; our ability to expand and contract our facilities and purchase commitments in a timely and cost-effective manner; our ability to generate revenue in amounts that cover the significant fixed costs of operating our facilities; our ability to qualify our facilities for new products and process technologies in a timely manner and avoid complications; the availability of raw materials; the availability and continued operation of key equipment; our manufacturing cycle times and yields; political and economic risks; the occurrence of natural disasters, pandemics, acts of terrorism, armed conflicts or unrest impacting our facilities and those of our outsourced suppliers; our ability to hire, train, manage and retain qualified production personnel; our compliance with applicable environmental and other laws and regulations; our ability to avoid prolonged periods of downtime or high levels of scrap in our and our suppliers’ facilities for any reason; and our ability to negotiate renewals to our existing lease agreements on favorable terms and without disruption to our wafer processing and manufacturing and internal assembly and test operations at our sites where such activities take place.
Our profitability will decline if we fail to accurately forecast customer demand when managing inventory. We generally sell our products on the basis of purchase orders rather than long-term purchase commitments from our customers. Our customers can typically cancel purchase orders or defer product shipments for some period without incurring a liability to us.
Our profitability will decline if we fail to accurately forecast customer demand when managing inventory. We generally sell our products on the basis of purchase orders rather than long-term purchase commitments from our customers. Our customers can typically cancel purchase orders or defer product shipments for some period without incurring liability to us.
In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Any unfavorable government policies on international trade, such as export and import controls, capital controls or tariffs, may affect the demand for our products and services, increase the cost of components, delay production, impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Any unfavorable government policies on international trade, such as export and import controls, capital controls or tariffs, may affect the demand for our products and services, increase the cost of components, 21 delay production, impact the competitive position of our products or prevent us from being able to sell products in certain countries.
In addition, new investors may demand rights, preferences or privileges that differ from or are senior to, those of our existing stockholders. Our incurrence of indebtedness could limit our operating flexibility and be detrimental to our results of operations. 23 The market price of our common stock may be volatile, which could result in substantial losses for investors.
In addition, new investors may demand rights, preferences or privileges that differ from or are senior to, those of our existing stockholders. Our incurrence of indebtedness could limit our operating flexibility and be detrimental to our results of operations. The market price of our common stock may be volatile, which could result in substantial losses for investors.
We expect to increase our use of outsourced manufacturing in the future as a strategy. The use of external suppliers involves a number of risks, including the possibility of material 18 disruptions in the supply of key components, the lack of control over delivery schedules, capacity constraints, manufacturing yields, quality and fabrication costs and misappropriation of our intellectual property.
We expect to increase our use of outsourced manufacturing in the future as a strategy. The use of external suppliers involves a number of risks, including the possibility of material disruptions in the supply of key components, the lack of control over delivery schedules, capacity constraints, manufacturing yields, quality and fabrication costs and misappropriation of our intellectual property.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, price erosion, product obsolescence, evolving standards, short product lifecycles and significant fluctuations in supply and demand. The industry has historically experienced significant fluctuations in demand and product obsolescence, resulting in product overcapacity, high inventory levels and accelerated erosion of average selling prices.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, price erosion, product obsolescence, evolving standards, short product lifecycles and significant fluctuations in supply and demand. The industry has historically experienced significant fluctuations in demand and product obsolescence, resulting in product overcapacity, high inventory levels and accelerated erosion of average selling prices (“ASPs”).
We purchase numerous raw materials, such as ceramic packages, precious metals, semiconductor wafers and ICs, from a limited number of external suppliers. We also currently use several external manufacturing suppliers for assembly and testing of our products, and in some cases for fully outsourced turnkey manufacturing of our products.
We purchase numerous raw materials, such as ceramic packages, precious metals, semiconductor wafers and ICs, from a limited number of external suppliers. We also currently use several external manufacturing suppliers for assembly and testing of our products, 20 and in some cases for fully outsourced turnkey manufacturing of our products.
For example, the General Data Protection Regulation (“GDPR”) requires compliance with rules regarding the handling of personal data belonging to individuals in the European Economic Area, and the California 21 Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”) provide enhanced privacy rights and consumer protection for residents of California.
For example, the General Data Protection Regulation (“GDPR”) requires compliance with rules regarding the handling of personal data belonging to individuals in the European Economic Area, and the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”) provide enhanced privacy rights and consumer protection for residents of California.
If any new export or import controls, tariffs, legislation or regulations are implemented or if existing trade agreements are renegotiated 19 such changes could have an adverse effect on our business, financial condition and results of operations.
If any new export or import controls, tariffs, legislation or regulations are implemented or if existing trade agreements are renegotiated such changes could have an adverse effect on our business, financial condition and results of operations.
We are subject to many privacy and data protection laws and regulations in the United States and around the world, some of which place restrictions on processing personal data across our business.
We are subject to many privacy and data protection laws and regulations in the United States and around the world, some of which place restrictions on 23 processing personal data across our business.
A default under the indenture governing the 2026 Convertible Notes or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
A default under the indenture governing the 2026 Convertible Notes or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. 25
Our quarterly and annual operating results and related expectations may vary significantly in the future based upon a number of factors, many of which are beyond our control, including: general economic growth or decline in the U.S. or foreign markets; reduction or cancellation of orders by customers; the amount of new customer orders we book and ship in any particular fiscal quarter; relative linearity of our shipments within any particular fiscal quarter; the gain or loss of a key customer or significant changes in demand and/or fluctuations in the markets we serve; fluctuations in the levels of component inventories held by our customers and accurate forecasting by customers; fluctuations in manufacturing output, yields, capacity levels, quality control or other potential problems or delays we or our subcontractors may experience in the fabrication, assembly, testing or delivery of our products; success of our investments in research and development; availability, quality and cost of semiconductor wafers and other raw materials, equipment, components and internal or outsourced manufacturing, packaging and test capacity, particularly where we have only one qualified source of supply; effects of seasonal and other changes in customer demand; effects of competitive pricing pressures, including decreases in average selling prices of our products; loss of key personnel or the shortage of available skilled workers; our failure to remain abreast of new and improved semiconductor process technologies; failure of our partners in strategic alliances, which may prevent us from achieving commercial success in such alliance; the exposure of our operations to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes; changes in laws and regulations in the U.S. and other countries, or the interpretations thereof; and the effects of war, natural disasters, global pandemics, acts of terrorism, macroeconomic uncertainty or decline including increased levels of inflation, or geopolitical unrest. 12 The foregoing factors are difficult to forecast.
Our quarterly and annual operating results and related expectations may vary significantly in the future based upon a number of factors, many of which are beyond our control, including: general economic growth or decline in the U.S. or foreign markets; reduction or cancellation of orders by customers; the amount of new customer orders we book and ship in any particular fiscal quarter; relative linearity of our shipments within any particular fiscal quarter; the gain or loss of a key customer or significant changes in demand and/or fluctuations in the markets we serve; fluctuations in the levels of component inventories held by our customers and accurate forecasting by customers; fluctuations in manufacturing output, yields, capacity levels, quality control or other potential problems or delays we or our subcontractors may experience in the fabrication, assembly, testing or delivery of our products; success of our investments in R&D; availability, quality and cost of semiconductor wafers and other raw materials, equipment, components and internal or outsourced manufacturing, packaging and test capacity, particularly where we have only one qualified source of supply; effects of seasonal and other changes in customer demand; effects of competitive pricing pressures, including decreases in ASPs of our products; loss of key personnel or the shortage of available skilled workers; our failure to remain abreast of new and improved semiconductor process technologies; failure of our partners in strategic alliances, which may prevent us from achieving commercial success in such alliance; the exposure of our operations to possible capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, as well as political unrest, unstable governments and legal systems and inter-governmental disputes; changes in laws and regulations in the U.S. and other countries, or the interpretations thereof; and the effects of war, natural disasters, global pandemics, acts of terrorism, macroeconomic uncertainty or decline including increased levels of inflation or geopolitical unrest. 12 The foregoing factors are difficult to forecast.
The legal system in many of the regions where we conduct business or where we may potentially make future investments through expansion, which may include acquisitions, can lack transparency in certain respects relative to that of the U.S. and can accord local government authorities a higher degree of control and discretion over business than is customary in the U.S.
The legal systems in many of the regions where we conduct business or where we may potentially make future investments through expansion, which may include acquisitions, can lack transparency in certain respects relative to that of the U.S. and can accord local government authorities a higher degree of control and discretion over business than is customary in the U.S.
The existence of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.
The existence 24 of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.
The cost of doing business in European jurisdictions can also be higher than in the U.S. due to exchange rates, local collective bargaining regimes and local legal requirements 15 and norms regarding employee benefits and employer-employee relations, in particular. We are also subject to U.S. legal requirements related to our foreign operations, including the Foreign Corrupt Practices Act.
The cost of doing business in European jurisdictions can also be higher than in the U.S. due to exchange rates, local collective bargaining regimes and local legal requirements regarding employee benefits and employer-employee relations, in particular. We are also subject to U.S. legal requirements related to our foreign operations, including the Foreign Corrupt Practices Act.
For example, since 1993, one of our legal entities has been named as a potentially responsible party (“PRP”) along with more than 100 other companies that used the Omega Chemical Corporation waste treatment facility in Whittier, California (the “Omega Site”). The 20 U.S.
For 22 example, since 1993, one of our legal entities has been named as a potentially responsible party (“PRP”) along with more than 100 other companies that used the Omega Chemical Corporation waste treatment facility in Whittier, California (the “Omega Site”). The U.S.
If we are not able to introduce, in successive years, products that ship in volume, our revenue will likely not grow and may decline significantly and rapidly. The development of products is a highly complex process, and we have in the past and may in the future experience delays and failures in completing the development and introduction of new products.
If we are not able to introduce products that ship in volume, our revenue will likely not grow and may decline significantly and rapidly. The development of products is a highly complex process, and we have in the past and may in the future experience delays and failures in completing the development and introduction of new products.
We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices to pass through some of these higher costs to our customers; however, our ability to raise our selling prices depends on market conditions and competitive dynamics.
We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices to pass through some of these higher costs to our customers; however, our ability to raise or maintain our selling prices depends on market conditions and competitive dynamics.
Based on currently available information with respect to the total anticipated level of investigatory, remedial and monitoring costs to be incurred by the group of PRP’s and our allocable share of those costs, we have a loss accrual for the Omega Site that is not material.
Based on currently available information with respect to the total anticipated level of investigatory, remedial and monitoring costs to be incurred by the group of PRPs and our allocable share of those costs, we have a loss accrual for the Omega Site that is not material.
Additionally, in October 2022, the BIS introduced novel restrictions related to semiconductor manufacturing, supercomputer and advanced computing items and end-uses, which restrict or prohibit the ability to sell, ship and support certain equipment and services to China.
Additionally, in October 2022 and 2023, the BIS introduced restrictions related to semiconductor manufacturing, supercomputer and advanced computing items and end-uses, which restrict or prohibit the ability to sell, ship and support certain equipment and services to China.
In addition, we may not realize the competitive advantage we anticipate from related investments and may not realize customer demand for this technology that meets our expectations, any of which could lead to higher than expected operating expense, lower than expected revenue and gross margin, associated charges or otherwise reduce the price of our common stock.
In addition, we may not realize the competitive advantage we anticipate from related investments and may not realize customer demand that meets our expectations, any of which could lead to higher than expected operating expense, lower than expected revenue and gross margin, associated charges or otherwise reduce the price of our common stock.
Any catastrophic loss or significant damage to any of these facilities, particularly our Lowell, Massachusetts, Nashua, New Hampshire and Hsinchu, Taiwan locations, could materially disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility and, in some instances, could significantly curtail our research and development efforts, and adversely affect our business and financial results, revenue and profitability. 11 We are subject to supply, order and shipment uncertainties.
Any catastrophic loss or significant damage to any of these facilities, particularly our Lowell, Massachusetts, Nashua, New Hampshire and Hsinchu, Taiwan locations, could materially disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility and, in some instances, could significantly curtail our R&D efforts, and adversely affect our business and financial results, revenue and profitability. 11 We are subject to supply, order and shipment uncertainties.
In August 2022, the U.S. enacted the CHIPS and Science Act of 2022 (the “CHIPS Act”), which provides certain financial incentives to the semiconductor industry, primarily for manufacturing activities within the U.S., which may potentially be available to us and our competitors; however, there can be no assurance as to which companies will receive such incentives and whether the CHIPS Act will have a positive or negative impact on our competitive position.
In August 2022, the U.S. enacted the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (the “CHIPS Act”), which provides certain financial incentives to the semiconductor industry, primarily for manufacturing activities within the U.S., which may potentially be available to us and our competitors; however, there can be no assurance as to which companies will receive such incentives and whether the CHIPS Act will have a positive or negative impact on our competitive position.
In the semiconductor industry, these minerals are most commonly found in metals used in the manufacture of semiconductor devices and related assemblies. These requirements may adversely affect our ability to source related minerals and metals and increase our related cost.
In the semiconductor industry, these minerals are most commonly found in metals used in the manufacture of semiconductor devices and related assemblies. These requirements may adversely affect our ability to source related minerals and metals and increase our related costs.
In the event we pursue a potential transaction, we will face numerous risks, including diverting management’s attention from normal daily operations of our business; difficulties in integrating the financial reporting capabilities and operating systems of any acquired operations to maintain effective internal control over financial reporting and disclosure controls and procedures; potential loss of key personnel of the acquired company as well as their know-how, relationships and expertise; challenges successfully integrating acquired personnel, operations and businesses; failing to realize the anticipated synergies and benefits of an acquisition; maintaining favorable business relationships of acquired operations; generating insufficient revenue from completed transactions to offset expenses associated with our efforts; acquiring material or unknown liabilities associated with any acquired operations; litigation associated with merger and acquisition transactions; and increasing expense associated with amortization or depreciation of intangible and tangible assets we acquire.
In pursuing transactions, we have and will continue to face numerous risks, including diverting management’s attention from normal daily operations of our business; difficulties in integrating the financial reporting capabilities and operating systems of any acquired operations to maintain effective internal control over financial reporting and disclosure controls and procedures; potential loss of key personnel of the acquired company as well as their know-how, relationships and expertise; challenges successfully integrating acquired personnel, operations and businesses; failing to realize the anticipated synergies and benefits of an acquisition; maintaining favorable business relationships of acquired operations; generating insufficient revenue from completed transactions to offset expenses associated with our efforts; acquiring material or unknown liabilities associated with any acquired operations; litigation associated with merger and acquisition transactions; and increasing expense associated with amortization or depreciation of intangible and tangible assets we acquire.
Our ability to make payments of the principal of, to pay interest on, or to refinance, the 2026 Convertible Notes, or to make cash payments in connection with any conversion of the 2026 Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our ability to make payments of the principal of, to pay interest on, or to refinance, our 2026 Convertible Notes (as defined below), or to make cash payments in connection with any conversion of the 2026 Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
We may not be successful in our research and development efforts or may not realize the competitive advantages, revenues or profits we anticipate from new products, any of which may lead to higher research and development expense, lower than expected revenues and gross margin and reduced profitability, or may otherwise harm our business or reduce the price of our common stock.
We may not be successful in our R&D efforts or may not realize the competitive advantages, revenues or profits we anticipate from new products, any of which may lead to higher R&D expense, lower than expected revenues and gross margin and reduced profitability, or may otherwise harm our business or reduce the price of our common stock.
Similarly, when we compete for business on the basis of our products’ unit price, the average selling price of our products is reduced, negatively affecting our gross margins.
Similarly, when we compete for business on the basis of our products’ unit price, the ASP of our products is reduced, negatively affecting our gross margins.
In addition, the average selling prices of our products may decrease over time and we must introduce new products that can be manufactured at lower costs or that command higher prices based on superior performance to offset this expected price erosion.
In addition, the ASPs of our products may decrease over time and we must introduce new products that can be manufactured at lower costs or that command higher prices based on superior performance to offset price erosion.
For example, in June 2019, we committed to a restructuring plan designed to streamline and improve our operations that included the refocusing of certain research and development activities and a reduction in workforce.
For example, in June 2019, we committed to a restructuring plan designed to streamline and improve our operations that included the refocusing of certain R&D activities and a reduction in workforce.
In particular, the ongoing COVID-19 pandemic has caused shortages of certain semiconductor components and delays in shipments, and these issues may be further exacerbated by supply chain disruptions caused by geopolitical unrest, including the conflict between Russia and Ukraine. If key components, materials or services are unavailable, our costs could increase and our revenue could decline.
In particular, the COVID-19 pandemic caused shortages of certain semiconductor components and delays in shipments, and these issues may be further exacerbated by supply chain disruptions caused by geopolitical unrest, including the conflicts in Ukraine and Israel. If key components, materials or services are unavailable, our costs could increase and our revenue could decline.
For example, we have in the past and may continue to experience additional and new unexpected difficulties, expenses or delays in qualifying and completing certain of our development projects including our GaN-on-Silicon, Silicon Photonics, certain Laser products and our AFRL related process technology transfer.
For example, we have in the past and may continue to experience additional and new unexpected difficulties, expenses or delays in qualifying and completing certain of our development projects including our GaN-on-Silicon, certain Laser products and our Air Force Research Laboratory related process technology transfer.
For example, as of September 30, 2022, we had $645.8 million of gross federal net operating loss (“NOL”) carryforwards, which, for those generated prior to the effective date of the 2017 Tax Cuts and Jobs Act (“Tax Act”), will expire at various dates through 2038, while those generated subsequent to the Tax Act have an indefinite carryforward with no expiration.
For example, as of September 29, 2023, we had $388.6 million of gross federal net operating loss (“NOL”) carryforwards, which, for those generated prior to the effective date of the 2017 Tax Cuts and Jobs Act (“Tax Act”), will expire at various dates through 2038, while those generated subsequent to the Tax Act have an indefinite carryforward with no expiration.
To obtain new business, we often need to win a competitive selection process to develop semiconductors for use in our customers’ systems, known in the industry as a “design win.” Failure to obtain a design win can result in lost or foregone revenue and could weaken our position in future competitive selection processes or cause us to fail to meet revenue projections or expectations. 13 Even when we achieve a design win, success is not guaranteed.
To obtain new business, we often need to win a competitive selection process to develop semiconductors for use in our customers’ systems, known in the industry as a “design win.” Failure to obtain a design win can result in lost or foregone revenue and could weaken our position in future competitive selection processes or cause us to fail to meet revenue projections or expectations.
For example, fiscal year 2022 sales to customers in China and the Asia Pacific region accounted for 26% and 16% of total fiscal year 2022 sales, respectively. We expect that revenue from international sales generally, and sales to China and the Asia Pacific region specifically, will continue to be a material part of our total revenue.
For example, fiscal year 2023 sales to customers in China and the Asia Pacific region accounted for 20% and 14% of total fiscal year 2023 sales, respectively. We expect that revenue from international sales generally, and sales to China and the Asia Pacific region specifically, will continue to be a material part of our total revenue.
Our relationships with our representatives and distributors typically may be terminated by either party at any time, and do not require them to buy any of our products. Sales to distributors accounted for approximately 30.9% of our revenue for the fiscal year ended September 30, 2022.
Our relationships with our representatives and distributors typically may be terminated by either party at any time, and do not require them to buy any of our products. Sales to distributors accounted for approximately 24.0% of our revenue for the fiscal year ended September 29, 2023.
While we compete with a wide variety of companies, our significant competitors include, among others , ADI, Broadcom, Credo, Marvell, MaxLinear, Microchip, NXP, Qorvo, Semtech, Skyworks and Wolfspeed .
While we compete with a wide variety of companies, our significant competitors include, among others , ADI, Broadcom, Credo, Marvell, MaxLinear, Microchip, NXP, Qorvo, Semtech, Skyworks and Wolfspeed, as well as increased competition from Chinese companies.
Some of our stockholders can exert control over us and they may not make decisions that reflect our interests or those of other stockholders. Our largest stockholders control a significant amount of our outstanding common stock. As of September 30, 2022, John and Susan Ocampo beneficially owned 25.2% of our common stock.
Some of our stockholders can exert control over us and they may not make decisions that reflect our interests or those of other stockholders. Our largest stockholders control a significant amount of our outstanding common stock. As of September 29, 2023, John and Susan Ocampo beneficially owned 23.0% of our common stock.
From time to time we may be a party to certain litigation matters. Any such disputes, litigations, investigations, administrative proceedings or enforcement actions may divert financial and management resources that would otherwise be used to benefit our operations, result in negative publicity and harm our customer or supplier relationships.
Any such disputes, litigations, investigations, administrative proceedings or enforcement actions may divert financial and management resources that would otherwise be used to benefit our operations, result in negative publicity and harm our customer or supplier relationships.
The accounting treatment may also result in significant goodwill, which, if impaired, will negatively affect our consolidated results of operations. Furthermore, we may incur debt or issue equity securities to pay for transactions.
The accounting treatment for any future transaction may result in significant amortizable intangible assets which, when amortized, will negatively affect our consolidated results of operations. The accounting treatment may also result in significant goodwill, which, if impaired, will negatively affect our consolidated results of operations. Furthermore, we may incur debt or issue equity securities to pay for transactions.
It is costly to comply with the GDPR, CCPA, CPRA and other similar laws and regulations. Further, the GDPR provides for significant penalties in the case of non-compliance of up to €20 million or 4% of worldwide annual revenues, whichever is greater. We have invested, and continue to invest, human and technology resources into our data privacy compliance efforts.
It is costly to comply with the GDPR, CCPA, CPRA and other similar laws and regulations. Further, the GDPR provides for significant penalties in the case of non-compliance. We have invested, and continue to invest, human and technology resources into our data privacy compliance efforts.
Customer qualification and design cycles can be lengthy, and it may take a year or more following a successful design win and product qualification for one of our products to be purchased in volume by the customer.
Even when we achieve a design win, success is not guaranteed. Customer qualification and design cycles can be lengthy, and it may take a year or more following a successful design win and product qualification for one of our products to be purchased in volume by the customer.
U.S. regulators have announced “export control reform” that has changed and is expected to change many of the rules applicable to us in this area in the future in ways we do not yet fully understand and we have experienced and will continue to experience challenges in complying with the new rules as they become effective, resulting in difficulties or an inability to ship products to certain countries and customers.
Ongoing export control reform that has changed and is expected to continue to change rules applicable to us in the future in ways we do not yet fully understand and we have experienced and will continue to experience challenges in complying with the new rules as they become effective, resulting in difficulties or an inability to ship products to certain countries and customers.
In the fiscal year ended September 30, 2022, no direct customer individually accounted for 10% or more of our revenue and sales to our top 10 direct and distribution customers accounted for an aggregate of 48.2% of our revenue.
In the fiscal year ended September 29, 2023, no direct customer individually accounted for 10% or more of our revenue and sales to our top 10 direct and distribution customers accounted for an aggregate of 47.6% of our revenue.
If demand for electronic systems that incorporate our products declines, fails to grow or grows more slowly than we anticipate, purchases of our products may be reduced, which will adversely affect our business, financial condition and results of operations.
If demand for electronic systems that incorporate our products declines, fails to grow or grows more slowly than we anticipate, purchases of our products may be reduced, which will adversely affect our business, financial condition and results of operations. We depend on orders from a limited number of customers for a significant percentage of our revenue.
In addition, there are ongoing global impacts resulting from the pandemic, including shortages of semiconductor components and delays in shipments, which has impacted product production and delivery to customers.
In addition, we have experienced global impacts resulting from the COVID-19 pandemic, including shortages of semiconductor components and delays in shipments, which has impacted product production and delivery to customers.
Our aggregate exposure varies from year to year based upon the number of participants in our insurance plans. We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience. Our accruals for insurance reserves reflect these estimates and other management judgments, which are subject to a high degree of variability.
We estimate our self-insurance liabilities using an analysis provided by our claims administrator and our historical claims experience. Our accruals for insurance reserves reflect these estimates and other management judgments, which are subject to a high degree of variability.
If they do not, our reported revenue and earnings will become more directly subject to foreign exchange fluctuations. Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from U.S. laws.
Also, we cannot be sure that our international customers will continue to accept orders denominated in U.S. dollars. If they do not, our reported revenue and earnings will become more directly subject to foreign exchange fluctuations. Some of our customer purchase orders and agreements are governed by foreign laws, which may differ significantly from U.S. laws.
In addition, any product recall or product liability claim brought against us, particularly in high-volume consumer markets, could have a material negative impact on our reputation, business, financial condition or results of operations. Our business and operations could suffer in the event of a security breach, cybersecurity incident or disruption of our information technology systems.
In addition, any product recall or product liability claim brought against us, particularly in high-volume consumer markets, could have a material negative impact on our reputation, business, financial condition or results of operations.
Our failure to successfully compete could result in lower revenue, decreased profitability and a lower stock price. We may make future acquisitions and investments, which involve numerous risks. We routinely evaluate potential acquisitions, investments, joint ventures and strategic alliances involving complementary technologies, design teams, products and companies. We may pursue such transactions if appropriate opportunities arise.
Our failure to successfully compete could result in lower revenue, decreased profitability and a lower stock price. 16 We have made and may, in the future, make acquisitions and investments, which involve numerous risks. We have made certain acquisitions and continue to routinely evaluate potential acquisitions, investments and strategic alliances involving complementary technologies, design teams, products and companies.
Divestitures have inherent risks, including the inability to find potential buyers with favorable terms, the expense of selling the product line, the possibility that any anticipated sale will be delayed or will not occur and the potential delay or failure to realize the perceived strategic or financial merits of the divestment. 22 If we lose key personnel or fail to attract and retain key personnel, we may be unable to pursue business opportunities or develop our products.
Divestitures have inherent risks, including the inability to find potential buyers with favorable terms, the expense of selling the product line, the possibility that any anticipated sale will be delayed or will not occur and the potential delay or failure to realize the perceived strategic or financial merits of the divestment.
Sales to customers located outside the U.S. accounted for 53.3% of our revenue for the fiscal year ended September 30, 2022. Sales to customers located in China and the Asia Pacific region typically account for a substantial majority of our overall sales to customers located outside the U.S.
Sales to customers located outside the U.S. accounted for 51.7% of our revenue for the fiscal year ended September 29, 2023. Sales to customers located in China and the Asia Pacific region typically account for a large portion of our overall sales to customers located outside the U.S.
Risks Relating to Business Strategies and Personnel We face intense competition in our industry, and our inability to compete successfully could negatively affect our operating results. The semiconductor industry is highly competitive.
Any or all of these factors could negatively affect demand for our products and our business, financial condition and results of operations. Risks Relating to Business Strategies and Personnel We face intense competition in our industry, and our inability to compete successfully could negatively affect our operating results. The semiconductor industry is highly competitive.
Moreover, the COVID-19 pandemic or any worsening of the global economic environment as a result thereof, including increased inflationary pressures, may have the effect of exacerbating other risks described elsewhere in this Part I, “ Item 1A - Risk Factors. ” The degree to which the COVID-19 pandemic may impact our business, financial condition, results of operations, liquidity and cash flows will continue to depend on future developments, which remain highly uncertain and cannot be predicted.
Moreover, developments regarding a pandemic or epidemic or any worsening of the global economic environment as a result thereof, including increased inflationary pressures, may have the effect of exacerbating other risks described elsewhere in this Part I, “ Item 1A - Risk Factors. ” The ultimate impact of an outbreak on our business, financial condition and results of operations remains highly uncertain and subject to change.
The ongoing impact of the COVID-19 pandemic remains fluid and uncertain, and it could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, negatively impact our supply chain, restrict our ability to provide certain products or delay the introduction of new product offerings.
The impacts of a pandemic or epidemic related to an outbreak of communicable disease, including, but not limited to COVID-19, could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, negatively impact our supply chain, restrict our ability to provide certain products or delay the introduction of new product offerings.
Additionally, other factors affecting the Chinese economy, such as government-imposed lockdowns in response to the COVID-19 pandemic, inflation, geopolitical conflict, or otherwise, could limit the demand in China for electronic devices containing our products, which could have a material adverse effect on our business and results of operations .
Additionally, other factors affecting the Chinese economy, such as government-imposed lockdowns in response to a pandemic, inflation, geopolitical conflict, or otherwise, could limit the demand in China for electronic devices containing our products, which could have a material adverse effect on our business and results of operations . 15 Because the majority of our foreign sales are denominated in U.S. dollars, our products become less price-competitive in countries with currencies that are low or are declining in value against the U.S. dollar.
Similarly, attackers could implant malicious code into software that we may purchase, and this supply chain vulnerability could disrupt our operations, compromise our data or lead to other cyber harms.
Similarly, attackers could implant malicious code into software that we may purchase, and this supply chain vulnerability could disrupt our operations, compromise our data or lead to other cyber harms. Recent global developments have created an environment in which malicious actors may have increased opportunity and motivation for breaching or compromising our systems .
We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business.
Our business and operations could suffer in the event of a security breach, cybersecurity incident or disruption of our information technology systems. 13 We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business.
However, we may not be able to identify suitable transactions in the future or, if we do, we may face intense competition for such opportunities.
We expect to continue to pursue such transactions if appropriate opportunities arise. However, we may not be able to identify suitable transactions in the future or if we do identify such transactions, we may not be able to complete them on commercially acceptable terms or at all and may face intense competition for such opportunities.
In particular, the loss of any member of our senior management team could strengthen a competitor, weaken customer relationships or harm our ability to implement our business strategy.
Our failure to retain our present employees and hire additional qualified personnel in a timely manner and on reasonable terms could harm our competitiveness and results of operations. In particular, the loss of any member of our senior management team could strengthen a competitor, weaken customer relationships or harm our ability to implement our business strategy.
Any failure of one or more of our vendors to provide these services could have a material adverse effect on our business. We rely on third-party vendors to provide critical corporate infrastructure services, including, among other things, certain services related to information technology and network development and monitoring.
We rely on third-party vendors to provide critical corporate infrastructure services, including, among other things, certain services related to information technology and network development and monitoring. We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements.
We may sell, wind down or exit one or more of our businesses or product lines, from time to time, as a result of our evaluation of our businesses, products and markets, and any such divestiture could adversely affect our continuing business.
If any of the above risks occur, our business, financial condition, results of operations and cash flows may be materially and adversely impacted, we may fail to meet the expectations of investors or analysts, and our stock price may decline as a result. 17 We may sell, wind down or exit one or more of our businesses or product lines, from time to time, as a result of our evaluation of our businesses, products and markets, and any such divestiture could adversely affect our continuing business.
In addition, we may not have sufficient resources to maintain the level of investment in research and development required to remain competitive or succeed in our strategy.
We cannot assure you if, or when, the products and solutions where we have focused our R&D expenditures will become commercially successful. In addition, we may not have sufficient resources to maintain the level of investment in R&D required to remain competitive or succeed in our strategy.
We also use multiple external foundries for outsourced semiconductor wafer supply, as well as multiple domestic and Asian assembly and test suppliers to assemble and test our products.
We maintain other internal assembly and test operation facilities as well, including leased sites in Hamilton, New Jersey, Limeil-Brévannes, France, Nashua, New Hampshire, and Hsinchu, Taiwan. We also use multiple external foundries for outsourced semiconductor wafer supply, as well as multiple domestic and Asian assembly and test suppliers to assemble and test our products.
We operate a leased semiconductor wafer processing and manufacturing facility at our headquarters in Lowell, Massachusetts, and at our Ann Arbor, Michigan site. These facilities are also important internal design, assembly and test facilities. We maintain other internal assembly and test operation facilities as well, including leased sites in Nashua, New Hampshire, and Hsinchu, Taiwan.
Risks Relating to Production Operations Our internal and external manufacturing, assembly and test model subjects us to various manufacturing and supply risks. We operate leased semiconductor wafer processing and manufacturing facilities at our headquarters in Lowell, Massachusetts, and at our Ann Arbor, Michigan site. These facilities are also important internal design, assembly and test facilities.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 24 Risks Relating to our 2026 Convertible Notes Servicing our debt, including the 2026 Convertible Notes, requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements. The ability of these third-party vendors to successfully provide reliable, high quality services is subject to technical and operational uncertainties that are beyond our control.
The ability of these third-party vendors to successfully provide reliable, high quality services is subject to technical and operational uncertainties that are beyond our control. Any failure of our corporate infrastructure could have a material adverse effect on our business, financial condition and results of operations. Variability in self-insurance liability estimates could adversely impact our results of operations.
Past transactions, whether completed or abandoned by us, have resulted, and in the future may result, in significant time and attention, costs, expenses, liabilities and charges to earnings. The accounting treatment for any future transaction may result in significant amortizable intangible assets which, when amortized, will negatively affect our consolidated results of operations.
Our past and recent acquisitions have required and continue to require significant management time and attention relating to the transactions. Past transactions, whether completed or abandoned by us, have resulted, and in the future may result, in significant time and attention, costs, expenses, liabilities and charges to earnings.
In addition, if we are unable to comply with security clearance requirements, we might be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue. 17 Risks Relating to Research and Development, Intellectual Property and New Technologies Our investment in technology as well as research and development may not be successful, which may impact our profitability.
Any such suspension or debarment or other sanction could have an adverse effect on 19 our business. In addition, if we are unable to comply with security clearance requirements, we might be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue.
In the event we make future investments, the investments may decline in value, we may lose all or part of our investment.
In the event we make future investments, the investments may decline in value, we may lose all or part of our investment. We may be unable to successfully integrate the businesses and personnel of acquired companies and businesses, and may not realize the anticipated synergies and benefits of such acquisitions.
In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our business, operations and financial results. 14 The outcome of any litigation in which we are involved in is unpredictable and an adverse decision in any such matter could subject us to damage awards and lower the market price of our stock.
The outcome of any litigation in which we are involved in is unpredictable and an adverse decision in any such matter could subject us to damage awards and lower the market price of our stock. From time to time, we may be a party to certain litigation matters.
Any failure of our corporate infrastructure could have a material adverse effect on our business, financial condition and results of operations. Variability in self-insurance liability estimates could adversely impact our results of operations. We self-insure for employee health insurance and workers’ compensation insurance coverage up to a predetermined level, beyond which we maintain stop-loss insurance from a third-party insurer.
We self-insure for employee health insurance and workers’ compensation insurance coverage up to a predetermined level, beyond which we maintain stop-loss insurance from a third-party insurer. Our aggregate exposure varies from year to year based upon the number of participants in our insurance plans.
If the number or severity of claims for which we self-insure increases, it could cause a material and adverse change to our reserves for self-insurance liabilities, as well as to our earnings. Risks Relating to International Operations We are subject to risks from our international sales and operations. We have operations in Europe and Asia, and customers around the world.
If the number or severity of claims for which we self-insure increases, it could cause a material and adverse change to our reserves for self-insurance liabilities, as well as to our earnings. Our short-term investment portfolio and certain cash balances could experience a decline in market value or otherwise become illiquid, which could materially and adversely affect our financial results.
In each of the last three fiscal years, we invested in research and development as part of our strategy toward the development of innovative products and solutions to help support our growth and profitability. We cannot assure you if, or when, the products and solutions where we have focused our research and development expenditures will become commercially successful.
Our R&D expenses were $148.5 million for the fiscal year ended September 29, 2023. In each of the last three fiscal years, we invested in R&D as part of our strategy toward the development of innovative products and solutions to help support our growth and profitability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSite Major Activity (1) Square Footage Lease Expiration Lowell, Massachusetts A, P&F, T&A, AE, S&M and RT 281,700 October 2038 Newport Beach, California R&D, AE and S&M 57,412 December 2029 Ann Arbor, Michigan P&F, R&D and T&A, RT 50,335 May 2026 Nashua, New Hampshire R&D, T&A, P&F and RT 33,750 December 2024 Santa Clara, California R&D, AE and S&M 26,909 October 2024 Hsinchu, Taiwan P&F, T&A and RT 24,282 December 2022 Cork, Ireland A, R&D, S&M, AE and RT 21,422 August 2026 (1) Major activities include Administration (A), Research and Development (R&D), Production and Fabrication (P&F), Sales and Marketing (S&M), Application Engineering (AE), Test and Assembly (T&A) and Reliability Testing (RT). 25 For additional information regarding property and equipment by geographic region for each of the last two fiscal years and additional information on all of our lease obligations, see the Notes to Consolidated Financial Statements in “ Item 8 - Financial Statements and Supplementary Data ” below.
Biggest changeSite Major Activity (1) Square Footage Lease Expiration Lowell, Massachusetts A, P&F, T&A, AE, S&M and RT 281,700 October 2043 Limeil-Brévannes, France A, P&F, T&A, S&M and RT 164,752 October 2024 Newport Beach, California R&D, AE and S&M 57,412 December 2029 Ann Arbor, Michigan P&F, R&D and T&A, RT 50,335 May 2026 Nashua, New Hampshire R&D, T&A, P&F and RT 33,750 December 2024 Santa Clara, California R&D, AE and S&M 26,909 October 2024 Hamilton, New Jersey A, T&A, AE, R&D, S&M and RT 25,750 March 2030 Hsinchu, Taiwan P&F, T&A and RT 24,282 December 2027 Cork, Ireland A, R&D, S&M, AE and RT 21,422 August 2026 (1) Major activities include Administration (A), Research and Development (R&D), Production and Fabrication (P&F), Sales and Marketing (S&M), Application Engineering (AE), Test and Assembly (T&A) and Reliability Testing (RT).
Added
For additional information regarding property and equipment by geographic region for each of the last two fiscal years and additional information on all of our lease obligations, see the Notes to Consolidated Financial Statements in “ Item 8 - Financial Statements and Supplementary Data ” below.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther than as set forth below, we were not involved in any pending legal proceedings as of the filing date of this Annual Report that we believe would have a material adverse effect on our business, operating results, financial condition or cash flows.
Biggest changeWe were not involved in any pending legal proceedings as of the filing date of this Annual Report that we believe would have a material adverse effect on our business, operating results, financial condition or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons in the graph are historical and are not intended to forecast or be indicative of possible future performance of our common stock. 26 September 29, 2017 September 28, 2018 September 27, 2019 October 2, 2020 October 1, 2021 September 30, 2022 MACOM Technology Solutions Holdings, Inc. $100.00 $46.18 $48.60 $75.77 $146.47 $116.10 Nasdaq Composite Index $100.00 $125.17 $124.88 $175.91 $232.92 $170.38 PHLX Semiconductor Index $100.00 $118.69 $136.71 $200.32 $297.82 $213.55 Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock we made during the fiscal quarter ended September 30, 2022.
Biggest changeThe comparisons in the graph are historical and are not intended to forecast or be indicative of possible future performance of our common stock. 26 September 28, 2018 September 27, 2019 October 2, 2020 October 1, 2021 September 30, 2022 September 29, 2023 MACOM Technology Solutions Holdings, Inc. $100.00 $105.24 $164.08 $317.18 $251.41 $396.02 Nasdaq Composite Index $100.00 $99.77 $140.54 $186.08 $136.12 $171.65 PHLX Semiconductor Index $100.00 $112.89 $162.51 $238.61 $168.77 $251.68 Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock we made during the fiscal quarter ended September 29, 2023.
The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld. ITEM 6. [RESERVED]
The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld. ITEM 6. [RESERVED] 27
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock has been listed on the Nasdaq Global Select Market under the symbol “MTSI” since March 15, 2012. The number of stockholders of record of our common stock as of November 10, 2022 was approximately 73.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock has been listed on the Nasdaq Global Select Market under the symbol “MTSI” since March 15, 2012. The number of stockholders of record of our common stock as of November 8, 2023 was approximately 74.
Stock Price Performance Graph The following graph shows a comparison from September 29, 2017 through September 30, 2022 of the total cumulative return of our common stock with the total cumulative return of the NASDAQ Composite Index and the PHLX Semiconductor Index.
Stock Price Performance Graph The following graph shows a comparison from September 28, 2018 through September 29, 2023 of the total cumulative return of our common stock with the total cumulative return of the NASDAQ Composite Index and the PHLX Semiconductor Index.
The amounts represented below assume an investment of $100.00 in our common stock at the closing price of $44.61 on September 29, 2017 and in the Nasdaq Composite Index and the PHLX Semiconductor Index on the closest month end date of September 29, 2017, and assume reinvestment of dividends.
The amounts represented below assume an investment of $100.00 in our common stock at the closing price of $20.60 on September 28, 2018 and in the Nasdaq Composite Index and the PHLX Semiconductor Index on the closest month end date of September 28, 2018, and assume reinvestment of dividends.
Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs July 2, 2022—July 29, 2022 318 $ 48.45 — — July 30, 2022—August 26, 2022 368 64.73 — — August 27, 2022—September 30, 2022 529 55.41 — — Total 1,215 $ 56.41 — — (1) Our board of directors has approved “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees.
Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs July 1, 2023—July 28, 2023 408 $ 65.47 — — July 29, 2023—August 25, 2023 573 76.50 — — August 26, 2023—September 29, 2023 883 77.96 — — Total 1,864 $ 74.78 — — (1) Our board of directors has approved “withhold to cover” as a tax payment method for vesting of restricted stock awards for our employees.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6: [RESERVED] 27 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 27 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 35 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 36 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 66 ITEM 9A: CONTROLS AND PROCEDURES. 67
Biggest changeITEM 6: [RESERVED] 27 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 28 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 35 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 37 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 69 ITEM 9A: CONTROLS AND PROCEDURES. 70 ITEM 9B: OTHER INFORMATION. 72

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor additional information related to these and other accounting policies refer to Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report which is incorporated by reference herein. 29 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our Statements of Operations data (in thousands): Fiscal Years 2022 2021 2020 Revenue $ 675,170 $ 606,920 $ 530,037 Cost of revenue (1) 268,989 265,065 259,871 Gross profit 406,181 341,855 270,166 Operating expenses: Research and development (1) 148,228 138,844 141,333 Selling, general and administrative (1) 125,279 122,009 124,306 Restructuring charges (2) — — 1,139 Total operating expenses 273,507 260,853 266,778 Income from operations 132,674 81,002 3,388 Other income (expense): Warrant liability expense (3) — (11,130) (12,948) Interest expense, net (4,300) (20,593) (27,380) Other income (expense), net (4) 114,746 (6,334) (4,622) Other income (expense), net 110,446 (38,057) (44,950) Income (loss) before income taxes 243,120 42,945 (41,562) Income tax (benefit) expense (5) (196,835) 4,972 4,516 Net income (loss) $ 439,955 $ 37,973 $ (46,078) (1) Includes (a) amortization expense related to intangible assets arising from acquisitions and (b) share-based compensation expense included in our Consolidated Statements of Operations as set forth below (in thousands): Fiscal Years 2022 2021 2020 (a) Intangible amortization expense: Cost of revenue $ 7,839 $ 15,296 $ 17,462 Selling, general and administrative 25,592 30,917 32,868 Total intangible amortization expense $ 33,431 $ 46,213 $ 50,330 (b) Share-based compensation expense: Cost of revenue $ 4,038 $ 3,298 $ 3,609 Research and development 14,940 13,332 12,794 Selling, general and administrative 22,207 18,368 19,271 Total share-based compensation expense $ 41,185 $ 34,998 $ 35,674 (2) See Note 11 - Restructurings , to the Consolidated Financial Statements included in this Annual Report for additional information.
Biggest changeRESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our Statements of Operations data (in thousands): Fiscal Years 2023 2022 2021 Revenue $ 648,407 $ 675,170 $ 606,920 Cost of revenue (1) 262,610 268,989 265,065 Gross profit 385,797 406,181 341,855 Operating expenses: Research and development (1) 148,545 148,228 138,844 Selling, general and administrative (1) (2) 129,852 125,279 122,009 Total operating expenses 278,397 273,507 260,853 Income from operations 107,400 132,674 81,002 Other income (expense): Warrant liability expense (3) — — (11,130) Interest income 20,807 4,251 1,470 Interest expense (12,384) (8,551) (22,063) Other (expense) income, net (4) (665) 114,746 (6,334) Other income (expense), net 7,758 110,446 (38,057) Income before income taxes 115,158 243,120 42,945 Income tax expense (benefit) (5) 23,581 (196,835) 4,972 Net income $ 91,577 $ 439,955 $ 37,973 (1) Includes (a) amortization expense related to intangible assets arising from acquisitions and (b) share-based compensation expense included in our Consolidated Statements of Operations as set forth below (in thousands): 30 Fiscal Years 2023 2022 2021 (a) Intangible amortization expense: Cost of revenue $ 4,369 $ 7,839 $ 15,296 Selling, general and administrative 23,735 25,592 30,917 Total intangible amortization expense $ 28,104 $ 33,431 $ 46,213 (b) Share-based compensation expense: Cost of revenue $ 4,325 $ 4,038 $ 3,298 Research and development 14,808 14,940 13,332 Selling, general and administrative 18,970 22,207 18,368 Total share-based compensation expense $ 38,103 $ 41,185 $ 34,998 (2) Fiscal year 2023 includes $7.7 million of acquisition-related professional fees expense.
OVERVIEW We design and manufacture semiconductor products for Telecom, I&D and Data Center industries. Headquartered in Lowell, Massachusetts, we have more than 70 years of application expertise, with silicon, GaAs, GaN and InP fabrication, manufacturing, assembly and test, and operational facilities throughout North America, Europe and Asia.
OVERVIEW We design and manufacture semiconductor products for I&D, Data Center and Telecom industries. Headquartered in Lowell, Massachusetts, we have more than 70 years of application expertise, with silicon, GaAs, GaN and InP fabrication, manufacturing, assembly and test, and operational facilities throughout North America, Europe and Asia.
Our primary end markets are: (1) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and FTTx/PON, among others; (2) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; and (3) Data Center, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers.
Our primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and multi-market applications, which include industrial, medical, test and measurement and scientific applications; (2) Data Center, enabled by our broad portfolio of analog ICs and photonic components for high speed optical module customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and FTTx/PON, among others.
Our core strategy is to develop and innovate high-performance products that address our customers’ most difficult technical challenges in our primary markets: Telecom, I&D and Data Center.
Our core strategy is to develop and innovate high-performance products that address our customers’ most difficult technical challenges in our primary markets: I&D, Data Center and Telecom.
Our actual product usage may vary from the historical experience and estimating 28 demand is inherently difficult, particularly given the cyclical nature of the semiconductor industry, both of these factors may result in us recording excess and obsolete inventory amounts that do not match the required amounts.
Our actual product usage may vary from the historical experience and estimating demand is inherently difficult, particularly given the cyclical nature of the semiconductor industry, both of these factors may result in us recording excess and obsolete inventory amounts that do not match the required amounts.
Research and development expense increased during fiscal year 2022 primarily as a result of an increase in employee headcount, employee-related costs, share-based compensation expense, depreciation expense, development foundry costs and design software costs, partially offset by lower lease costs. 31 Selling, general and administrative.
Research and development expense increased during fiscal year 2022 primarily as a result of an increase in employee headcount, employee-related costs, share-based compensation expense, depreciation expense, development foundry costs and design software costs, partially offset by lower lease costs. Selling, general and administrative.
(4) Fiscal year 2022 includes a gain on sale of our equity method investment of $118.2 million. Includes non-cash net losses of $3.3 million, $2.4 million and $3.4 million for fiscal years 2022, 2021 and 2020, respectively, associated with our equity method investment based on our proportionate share of its losses and changes in equity.
(4) Fiscal year 2022 includes a gain on sale of our equity method investment of $118.2 million. Includes non-cash net losses of $3.3 million and $2.4 million for fiscal years 2022 and 2021, respectively, associated with our equity method investment based on our proportionate share of its losses and changes in equity.
Cash Flow from Investing Activities: Our cash flow used in investing activities for fiscal year 2022 of $182.9 million consisted primarily of $528.8 million in purchases of short-term investments and capital expenditures of $26.5 million, partially offset by proceeds from the sale of our equity method investment of $127.8 million and proceeds of $244.6 million related to the sale and maturities of short-term investments.
Our cash flow used in in vesting activities for fiscal year 2022 of $182.9 million consisted primarily of $528.8 million in purchases of short-term investments and capital expenditures of $26.5 million, partially offset by proceeds from the sale of our equity method investment of $127.8 million and proceeds of $244.6 million related to the sale and maturities of short-term investments.
Our semiconductor products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless basestations, high-capacity optical networks, radar, medical systems and test and measurement applications.
Our semiconductor products are electronic components that our customers generally incorporate into larger electronic systems, such as wireless basestations, high-capacity optical networks, data center networks, radar, medical systems and test and measurement applications.
In fiscal year 2022, our revenue increased by $68.3 million, or 11.2%, to $675.2 million from $606.9 million for fiscal year 2021. Fiscal year 2022 and fiscal year 2021 consisted of 52 weeks.
In fiscal year 2022, our revenue increased by $68.3 million, or 11.2%, to $675.2 million from $606.9 million for fiscal year 2021. Fiscal years 2022 and 2021 each consisted of 52 weeks.
For additional information on the sale of our equity method investment, see Note 4 - Investments to our Consolidated Financial Statements included in this Annual Report.
For additional information on the sale of our equity method investment, see Note 5 - Investments to our Consolidated Financial Statements included in this Annual Report.
Cash Flow from Financing Activities: During fiscal y ear 2022, our cash used in financing activities of $28.9 million was primarily related to $36.0 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by $8.1 million of proceeds from stock option exercises and employee stock purchases.
During fiscal year 2022, our cash used in financing activities of $28.9 million was primarily related to $36.0 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by $8.1 million of proceeds from stock option exercises and employee stock purchases.
See Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report for additional information. (5) Fiscal year 2022 includes a non-cash benefit of $202.8 million related to the partial release of our valuation allowance.
See Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report for additional information. (5) Fiscal year 2023 and 2022 includes a non-cash benefit of $12.1 million and $202.8 million, respectively, related to the partial release of our valuation allowance.
Actual results could differ from those estimates and material effects on our operating results and financial position may result. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; revenue reserves; share-based compensation valuations and income taxes.
Actual results could differ from those estimates and material effects on our operating results and financial position may result. The accounting policies which our management believes involve the most significant application of judgment or involve complex estimation, are inventories and associated reserves; revenue reserves; business combinations; goodwill and intangible asset valuation; share-based compensation valuations and income taxes.
The difference between the U.S. federal income tax rate of 21% and our effective income tax rate of 11.6% for fiscal year 2021 was primarily driven by the continuation of a full valuation allowance against any tax expense associated with U.S. income and income taxed in foreign jurisdictions at generally lower tax rates.
For fiscal year 2021, our effective income tax rate of 11.6% was primarily impacted by the continuation of a full valuation allowance against any tax expense associated with U.S. income and income taxed in foreign jurisdictions at generally lower tax rates.
See “ Item 1 - Business ” for additional information. 27 Basis of Presentation We have one reportable operating segment and all intercompany balances have been eliminated in consolidation. We have a 52 or 53-week fiscal year ending on the Friday closest to the last day of September.
See “ Item 1 - Business ” for additional information. Basis of Presentation We have one reportable operating segment and all intercompany balances have been eliminated in consolidation. We have a 52 or 53-week fiscal year ending on the Friday closest to the last day of September. Fiscal years 2023, 2022 and 2021 each consisted of 52 weeks.
Liquidity As of September 30, 2022, we held $120.0 million of cash and cash equivalents, primarily deposited with financial institutions as well as $466.6 million of liquid short-term investments. The undistributed earnings of certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings.
Liquidity As of September 29, 2023, we held $174.0 million of cash and cash equivalents, primarily deposited with financial institutions as well as $340.6 million of liquid short-term investments. The undistributed earnings of certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings.
As of September 30, 2022, cash held by our indefinitely reinvested foreign subsidiaries was $15.2 million, which, along with cash generated from foreign operations, is expected to be used in the support of international growth and working capital requirements as well as the repayment of certain intercompany loans.
As of September 29, 2023, cash held by our indefinitely reinvested foreign subsidiaries was $16.5 million, which, along with cash generated from foreign operations, is expected to be used in the support of international growth and working capital requirements as well as the repayment of certain intercompany loans.
The increase in fiscal year 2022 is primarily due to the gain on sale of our equity method investment of $118.2 million. See Note 4 - Investments to our Consolidated Financial Statements included in this Annual Report for more information. Provision f or income tax (benefit) expense .
The increase in fiscal year 2022 is primarily due to the gain on sale of our equity method investment of $118.2 million. See Note 5 - Investments to our Consolidated Financial Statements included in this Annual Report for more information. 33 Provision for income taxes .
We may need to raise additional capital from time to time through the issuance and sale of equity or debt securities, and there is no assurance that we will be able do so on favorable terms or at all.
We may need to raise additional capital from time to time through the issuance and sale of equity or debt securities, and there is no assurance that we will be able do so on favorable terms or at all. As of September 29, 2023, we had no off-balance sheet arrangements.
See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information. 30 The following table sets forth, for the periods indicated, our Statements of Operations data expressed as a percentage of our revenue: Fiscal Years 2022 2021 2020 Revenue 100.0 % 100.0 % 100.0 % Cost of revenue 39.8 43.7 49.0 Gross profit 60.2 56.3 51.0 Operating expenses: Research and development 22.0 22.9 26.7 Selling, general and administrative 18.6 20.1 23.5 Restructuring charges — — 0.2 Total operating expenses 40.5 43.0 50.3 Income from operations 19.7 13.3 0.6 Other income (expense): Warrant liability expense — (1.8) (2.4) Interest expense, net (0.6) (3.4) (5.2) Other income (expense), net 17.0 (1.0) (0.9) Total other income (expense), net 16.4 (6.3) (8.5) Income (loss) before income taxes 36.0 7.1 (7.8) Income tax (benefit) expense (29.2) 0.8 0.9 Net income (loss) 65.2 % 6.3 % (8.7) % Comparison of Fiscal Year Ended September 30, 2022 to Fiscal Year Ended October 1, 2021 Revenue.
The following table sets forth, for the periods indicated, our Statements of Operations data expressed as a percentage of our revenue: Fiscal Years 2023 2022 2021 Revenue 100.0 % 100.0 % 100.0 % Cost of revenue 40.5 39.8 43.7 Gross profit 59.5 60.2 56.3 Operating expenses: Research and development 22.9 22.0 22.9 Selling, general and administrative 20.0 18.6 20.1 Total operating expenses 42.9 40.5 43.0 Income from operations 16.6 19.7 13.3 Other income (expense): Warrant liability expense — — (1.8) Interest income 3.2 0.6 0.2 Interest expense (1.9) (1.2) (3.6) Other (expense) income, net (0.1) 17.0 (1.0) Total other income (expense), net 1.2 16.4 (6.3) Income before income taxes 17.8 36.0 7.1 Income tax expense (benefit) 3.7 (29.2) 0.8 Net income 14.1 % 65.2 % 6.3 % Comparison of Fiscal Year Ended September 29, 2023 to Fiscal Year Ended September 30, 2022 Revenue.
The net loss amounts for fiscal years 2021 and 2020 include non-cash gains of $9.8 million and $16.6 million, respectively, associated with changes in the investment’s equity. See Note 4 - Investments to the Consolidated Financial Statements included in this Annual Report for additional information. Fiscal year 2021 also includes losses on extinguishment of debt of $4.4 million.
The net loss amount for fiscal year 2021 includes a non-cash gain of $9.8 million associated with changes in the investment’s equity. See Note 5 - Investments to the Consolidated Financial Statements included in this Annual Report for additional information. Fiscal year 2021 also includes losses on extinguishment of debt of $4.4 million.
In addition, cash used by operating assets and liabilities was $46.7 million for fiscal year 2022, primarily driven by an increase in accounts receivable of $17.0 million, an increase in inventory of $32.3 million, a decrease in accrued and other liabilities of $5.6 million, partially offset by a decrease in prepaid expenses and other assets of $5.6 million and an increase in accounts payable of $2.4 million. 33 Our cash flow from operating activities for fiscal year 2021 was $148.4 million and consisted of a net income of $38.0 million, plus adjustments to reconcile our net income to cash provided by operating activities of $136.4 million, partially offset by changes in operating assets and liabilities of $25.9 million.
In addition, cash used by operating assets and liabilities was $46.7 million for fiscal year 2022, primarily driven by an increase in accounts receivable of $17.0 million, an increase in inventory of $32.3 million, a decrease in accrued and other liabilities of $5.6 million, partially offset by a decrease in prepaid expenses and other assets of $5.6 million and an increase in accounts payable of $2.4 million.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components. 28 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our cash flow activities for the fiscal years ended September 30, 2022 and October 1, 2021, respectively (in thousands): Fiscal Year Ended September 30, 2022 October 1, 2021 Cash and cash equivalents, beginning of period $ 156,537 $ 129,441 Net cash provided by operating activities 176,982 148,412 Net cash used in investing activities (182,861) (2,583) Net cash used in financing activities (28,908) (119,095) Effect of exchange rates on cash balances (1,798) 362 Cash and cash equivalents, end of period $ 119,952 $ 156,537 Cash Flow from Operating Activities: Our cash flow from operating activities for fiscal year 2022 was $177.0 million and consisted of a net income of $440.0 million, plus adjustments to reconcile our net income to cash provided by operating activities of $216.3 million, and changes in operating assets and liabilities of $46.7 million.
LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our cash flow activities for the fiscal years ended September 29, 2023 and September 30, 2022, respectively (in thousands): Fiscal Year Ended September 29, 2023 September 30, 2022 Cash and cash equivalents, beginning of period $ 119,952 $ 156,537 Net cash provided by operating activities 166,917 176,982 Net cash used in investing activities 36,341 (182,861) Net cash used in financing activities (149,020) (28,908) Effect of exchange rates on cash balances (238) (1,798) Cash and cash equivalents, end of period $ 173,952 $ 119,952 Cash Flow from Operating Activities: Our cash flow from operating activities for fiscal year 2023 was $166.9 million and consisted of a net income of $91.6 million, plus adjustments to reconcile our net income to cash provided by operating activities of $103.1 million, and cash used by operating assets and liabilities of $27.8 million.
Description of Our Revenue Revenue. Our revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical and photonic semiconductor products. We design, integrate, manufacture and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, our network of independent sales representatives and our distributors.
We design, integrate, manufacture and package differentiated, semiconductor-based products that we sell to customers through our direct sales organization, our network of independent sales representatives and our distributors.
The application of tax laws and regulations to calculate our tax liabilities is subject to legal and factual interpretation, judgment, and uncertainty in a multitude of jurisdictions. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings.
Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations, and court rulings.
Significant judgment is required in making these assessments to maintain or reverse the majority of our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time. This resulted in a tax benefit of $202.8 million, or $2.91 per basic share in fiscal year 2022.
Significant judgment is required in making these assessments to maintain or reverse the majority of our valuation allowances. To the extent our future expectations change, we would have to reassess the recoverability of our deferred tax assets at that time.
Although it is reasonably possible that our estimates could change materially in the next twelve months, we are presently unable to reliably estimate when any cash settlement of these obligations may occur.
As of September 29, 2023, we estimated $1.9 million in asset retirement obligations primarily for the restoration of leased facilities upon the termination of the related leases. Although it is reasonably possible that our estimates could change materially in the next twelve months, we are presently unable to reliably estimate when any cash settlement of these obligations may occur.
In addition, cash used by operating assets and liabilities was $25.9 million for fiscal year 2021, primarily driven by an increase in accounts receivable of $38.7 million due to timing of sales, partially offset by a decrease in inventory of $8.9 million and an increase in accounts payable of $5.8 million.
In addition, cash used by operating assets and liabilities was $27.8 million for fiscal year 2023, primarily driven by a decrease in accrued and other liabilities of $21.3 million, an increase in inventory of $10.6 million, a decrease in accounts payable of $6.7 million, partially offset by a decrease in accounts receivable of $12.3 million.
We design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability. We offer a broad portfolio of thousands of standard and custom devices, which include ICs, MCMs, diodes, amplifiers, switches and switch limiters, passive and active components and complete subsystems, across dozens of product lines serving over 6,000 end customers in three primary markets.
We offer a broad portfolio of thousands of standard and custom devices, which include ICs, MCMs, diodes, amplifiers, switches and switch limiters, passive and active components and RF and optical subsystems, which make up dozens of product lines that service over 6,000 end customers in our three primary markets.
Our cash flow used in investing activities for fiscal year 2021 consisted primarily of $194.2 million in purchases of short-term investments and capital expenditures of $18.0 million, partially offset by proceeds of $209.3 million related to the sale and maturities of short-term investments.
Cash Flow from Investing Activities: Our cash flow from investing activities for fiscal year 2023 of $36.3 million consisted primarily of proceeds of $515.8 million related to the sale and maturities of short-term investments and proceeds from the sale of equipment of $8.0 million, partially offset by $375.1 million in purchases of short-term investments, $87.7 million for acquisitions, net of cash acquired and capital expenditures of $24.7 million.
In fiscal year 2021, research and development expense decreased by $2.5 million, or 1.8%, to $138.8 million representing 22.9% of revenue, compared with $141.3 million, representing 26.7% of revenue in fiscal year 2020.
In fiscal year 2023, research and development expense increased by $0.3 million, or 0.2%, to $148.5 million, representing 22.9% of revenue, compared with $148.2 million, representing 22.0% of revenue, in fiscal year 2022.
These differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and to the extent we believe that recovery is not likely, we must establish a valuation allowance.
We then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction. To the extent we believe that recovery is not likely, we must establish a valuation allowance. We provide valuation allowances for certain deferred tax assets where it is more likely than not that any portion will not be realized.
During fiscal year 2021, our cash used in financing activities of $119.1 million was primarily related to $545.3 million of prepayments on our Term Loans (as defined in Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report) and $23.4 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by proceeds of $450.0 million from the 2026 Convertible Notes (as defined in Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report) and $6.8 million of proceeds from stock option exercises and employee stock purchases.
Cash Flow from Financing Activities: 34 During fiscal year 2023, our cash used in financing activities of $149.0 million was primarily related to the $120.8 million payment of the total outstanding principal balance of our Term Loans (as defined in Note 15 - Debt ), $32.6 million of repurchases of stock associated with employee tax withholdings on vested equity awards, partially offset by $5.6 million of proceeds from employee stock purchases.
Income taxes We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
This process involves estimating our current tax exposure together and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets.
In the fiscal fourth quarter of 2022, we reassessed our valuation allowances and considered positive evidence including significant cumulative consolidated and U.S. income over the three years ended September 30, 2022, continued revenue growth combined with profitability and expectations regarding financial forecasts, and negative evidence, including the uncertainty posed by the current economic and geopolitical environment and global supply chain and determined that the valuation allowance on the majority of our domestic NOLs and R&D tax credit carryforwards and other deferred tax assets should be released as of September 30, 2022.
In making this determination, we considered positive evidence, including significant cumulative consolidated and U.S. income over the three years ended September 30, 2022, continued revenue growth combined with profitability and expectations regarding financial forecasts. We also considered negative evidence, including the uncertainty relating to the economic and geopolitical environment and global supply chain.
The actual pricing adjustments granted to distributors may significantly exceed or be less than the historical estimates resulting in adjustments to revenue in the incorrect period. Share-based compensation expense We account for share-based compensation arrangements using the fair value method as described in Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements in this Annual Report.
Share-based compensation expense We account for share-based compensation arrangements using the fair value method as described in Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements in this Annual Report. There are a significant number of estimates and assumptions required for the initial valuation as well as for the ongoing valuation of certain share-based compensation items.
In fiscal year 2021, selling, general and administrative expenses decreased by $2.3 million, or 1.8%, to $122.0 million, or 20.1% of revenue, compared with $124.3 million, or 23.5% of revenue, for fiscal year 2020.
In fiscal year 2023, selling, general and administrative expenses increased by $4.6 million, or 3.7%, to $129.9 million, or 20.0% of revenue, compared with $125.3 million, or 18.6% of revenue, for fiscal year 2022.
In fiscal year 2021, our gross profit increased by $71.7 million, or 26.5%, compared to fiscal year 2020. Gross margin of 56.3% in fiscal year 2021 increased 530 basis points, compared to fiscal year 2020.
Gross profit. In fiscal year 2023, our gross profit decreased by $20.4 million, or 5.0%, compared to fiscal year 2022. Gross margin of 59.5% in fiscal year 2023 decreased 70 basis points, compared to fiscal year 2022.
The increase was primarily related to new program wins and expansion of our RF and microwave product lines. In fiscal year 2021, our Data Center market revenue increased by $12.3 million, or 9.8%, compared to fiscal year 2020. The increase was primarily due to increased sales of our high-performance analog and optoelectronics Data Center products. Gross profit .
The increase was primarily driven by defense program shipments, incremental revenue from recent acquisitions, sales of GaN products and expansion of high-performance analog product lines into the I&D market, partially offset by a decrease in sales of legacy products. In fiscal year 2023, our Data Center market revenue increased by $8.9 million, or 6.4%, compared to fiscal year 2022.
Fiscal years 2022 and 2021 each consisted of 52 weeks, and fiscal year 2020 included 53 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we typically include the extra week in the first quarter of our fiscal year. Our first quarter of fiscal year 2020, ended January 3, 2020, included 14 weeks.
To offset the effect of holidays, for fiscal years in which there are 53 weeks, we typically include the extra week in the first quarter of our fiscal year. Description of Our Revenue Revenue. Our revenue is derived from sales of high-performance RF, microwave, millimeter wave, optical and photonic semiconductor products.
The early prepayment on the Term Loans of $543.6 million was made using $443.6 million of net proceeds from our 2026 Convertible Notes and cash of $100.0 million. See Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report for additional information.
For additional information on the payment of the total outstanding principal balance of our Term Loans, see Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report.
Adjustments to reconcile our net income to cash provided by operating activities of $136.4 million primarily included depreciation and intangible amortization expense of $70.0 million, share-based compensation expense of $35.0 million, warrant liability expense of $11.1 million, accretion of the discount on convertible debt of $7.6 million and deferred financing cost amortization and write offs of $6.5 million.
Adjustments to reconcile our net income to cash provided by operating activities of $103.1 million primarily included depreciation and intangible amortization expense of $52.2 million, share-based compensation expense of $38.1 million and deferred income tax expense of $19.8 million, partially offset by $11.8 million in amortization on marketable securities.
There are a significant number of estimates and assumptions required for the initial valuation as well as for the ongoing valuation of certain share-based compensation items. These estimates may vary significantly and the assumptions may not be accurate resulting us to make adjustments to historically recorded balances.
These estimates may vary significantly and the assumptions may not be accurate resulting us to make adjustments to historically recorded balances. Income taxes 29 We are required to estimate our income taxes in each of the jurisdictions in which we operate.
Research and development expense decreased during fiscal year 2021 primarily as a result of decreased spending on software and lower depreciation, partially offset by higher suppliers expense, foundry costs and outside service costs. Selling, general and administrative.
Research and development expense increased during fiscal year 2023 primarily as a result of an increase in employee headcount primarily due to acquisitions, employee-related costs and development foundry costs, offset by decreases in design software costs, supplies expense and lower variable compensation. Selling, general and administrative.
As of September 30, 2022, we had no off-balance sheet arrangements. 34 The following is a summary of our significant contractual payment obligations for consolidated debt, purchase agreements, leases, financing obligations, other commitments and long-term liabilities as of September 30, 2022, and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands): Payments Due By Period Contractual Cash Obligations Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Principal Payments on Long-term Debt (1) $ 570,766 $ — $ 120,766 $ 450,000 $ — Interest Payments on Long-term Debt (1) 13,363 6,970 5,824 569 — Finance Lease Obligations (2) 45,611 2,820 5,639 5,398 31,754 Operating Lease Obligations (2) 35,756 7,969 12,587 7,741 7,459 Purchase Commitments (3) 141,108 109,825 9,080 3,432 18,771 Total Contractual Cash Obligations $ 806,604 $ 127,584 $ 153,896 $ 467,140 $ 57,984 ________________________________________________________________________________________________________ (1) Our Term Loans will mature in May 2024 and our 2026 Convertible Notes will mature in March 2026.
The following is a summary of our significant contractual payment obligations for consolidated debt, purchase agreements, leases, financing obligations, other commitments and long-term liabilities as of September 29, 2023, and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in thousands): Payments Due By Period Contractual Cash Obligations Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Principal Payments on Long-term Debt (1) $ 450,000 $ — $ 450,000 $ — $ — Interest Payments on Long-term Debt (1) 2,813 1,125 1,688 — — Finance Lease Obligations (2) 61,121 3,322 5,463 5,472 46,864 Operating Lease Obligations (2) 34,725 8,727 12,053 8,898 5,047 Purchase Commitments (3) 103,462 72,516 10,447 3,481 17,018 Total Contractual Cash Obligations $ 652,121 $ 85,690 $ 479,651 $ 17,851 $ 68,929 ________________________________________________________________________________________________________ (1) Our 2026 Convertible Notes will mature in March 2026.
Revenue from our primary markets, the percentage of change between the years and revenue by primary markets expressed as a percentage of total revenue were (in thousands, except percentages): Fiscal Years 2021 2020 % Change Telecom $ 188,391 $ 209,477 (10.1) % Industrial & Defense 280,221 194,506 44.1 % Data Center 138,308 126,054 9.8 % Total $ 606,920 $ 530,037 14.5 % Telecom 31.0 % 39.5 % Industrial & Defense 46.2 % 36.7 % Data Center 22.8 % 23.8 % Total 100.0 % 100.0 % In fiscal year 2021, our Telecom market revenue decreased by $21.1 million, or 10.1%, compared to fiscal year 2020.
Fiscal years 2023 and 2022 each consisted of 52 weeks. 31 Revenue from our primary markets, the percentage of change between the years and revenue by primary markets expressed as a percentage of total revenue were (in thousands, except percentages): Fiscal Years 2023 2022 % Change Industrial & Defense $ 317,128 $ 294,341 7.7 % Data Center 146,982 138,127 6.4 % Telecom 184,297 242,702 (24.1) % Total $ 648,407 $ 675,170 (4.0) % Industrial & Defense 48.9 % 43.6 % Data Center 22.7 % 20.5 % Telecom 28.4 % 35.9 % Total 100.0 % 100.0 % In fiscal year 2023, our I&D market revenue increased by $22.8 million, or 7.7%, compared to fiscal year 2022.
We provide valuation allowances for certain of our deferred tax assets, where it is more likely than not that some portion, or all of such assets, will not be realized. On a periodic basis, we reassess our valuation allowances on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets.
On a periodic basis, we reassess valuation allowances on our deferred tax assets, weighing positive and negative evidence, to assess recoverability. We determined that the valuation allowance on the majority of our domestic NOLs and R&D tax credit carryforwards and other deferred tax assets should be released as of September 30, 2022.
In fiscal year 2021, income tax expense was $5.0 million, or 0.8% of revenue, compared to an expense of $4.5 million, or 0.9% of revenue, for fiscal year 2020. The change in the provision is primarily due to a change in the valuation allowance.
In fiscal year 2023, interest income was $20.8 million, or 3.2% of our revenue, compared to $4.3 million of interest income, or 0.6% of our revenue, for fiscal year 2022. The change in fiscal year 2023 is due to higher yields on short-term investments and cash equivalents. Interest expense.
For fiscal year 2021, our effective income tax rate of 11.6% was primarily impacted by the continuation of a full valuation allowance against any tax expense associated with U.S. income and income taxed in foreign jurisdictions at generally lower tax rates. Comparison of Fiscal Year Ended October 1, 2021 to Fiscal Year Ended October 2, 2020 Revenue .
For fiscal year 2022, our effective income tax rate of (81.0)% was primarily driven by tax benefits arising from the partial release of the valuation allowance on U.S. deferred tax assets. Comparison of Fiscal Year Ended September 30, 2022 to Fiscal Year Ended October 1, 2021 Revenue .
The interest rate on the Term Loans is variable, which may result in changes to our interest obligations. See Note 15 - Deb t to the Consolidated Financial Statements included in this Annual Report for additional information. (2) Estimated future lease payments, see Note 17 - Leases to the Consolidated Financial Statements included in this Annual Report for additional information.
(2) Estimated future lease payments, see Note 17 - Leases to the Consolidated Financial Statements included in this Annual Report for additional information. (3) We have purchase commitments of $69.6 million primarily related to services and inventory supply arrangements of which approximately $56.9 million that is non-cancelable.
See Note 18 - Stockholders' Equity in this Annual Report for additional information regarding the common stock warrants. Interest expense, net. In fiscal year 2021, interest expense, net was $20.6 million, or 3.4% of our revenue, compared to $27.4 million, or 5.2% of our revenue, for fiscal year 2020.
In fiscal year 2023, interest expense was $12.4 million, or 1.9% of our revenue, compared to $8.6 million of interest expense, or 1.3% of our revenue, for fiscal year 2022.
The decrease was primarily driven by a decrease in carrier-based optical semiconductor products, including those targeted for 5G applications, offset by increased sales of legacy products, including products targeting fiber to the home, CATV infrastructure and licensing revenue. In fiscal year 2021, our I&D market revenue increased by $85.7 million, or 44.1%, compared to fiscal year 2020.
The decrease was primarily driven by a decrease in sales of products targeted for 5G applications, a decrease in sales of carrier-based optical semiconductor products, a decrease in sales of RF and microwave products for broadband access and video infrastructure and a decrease in sales of legacy backhaul products, primarily in China, partially offset by higher sales to satellite communications customers and higher sales of legacy high-performance analog Telecom products.
Removed
COVID-19 Impact See “ Item 1 - Business .” For additional information on risk factors that could impact our future results, please refer to “ Item 1A - Risk Factors ” in this Annual Report. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements.
Added
We design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability.
Removed
In fiscal year 2021, our revenue increased by $76.9 million, or 14.5%, to $606.9 million from $530.0 million for fiscal year 2020. Fiscal year 2021 consisted of 52 weeks, and fiscal year 2020 included 53 weeks.
Added
The actual pricing adjustments granted to distributors may significantly exceed or be less than the historical estimates resulting in adjustments to revenue in the incorrect period. Business Combinations We apply significant estimates and judgments in order to determine the fair value of the identified tangible and intangible assets acquired, liabilities assumed and goodwill recognized in business combinations.
Removed
The increase in gross profit during 2021 32 was primarily the result of higher sales, favorable revenue mix, production efficiencies, as well as decreases in depreciation and amortization. Research and development.
Added
The value of all assets and liabilities are recognized at fair value as of the acquisition date using a market participant approach. In measuring the fair value, we utilize a number of valuation techniques.
Removed
Selling, general and administrative expenses decreased during fiscal year 2021 primarily due to lower depreciation, amortization and other outside service costs, offset by an increase in variable selling costs. Restructuring charges. There were no restructuring charges incurred during fiscal year 2021, compared with $1.1 million, or 0.2% of our revenue, for fiscal year 2020.
Added
When determining the fair value of property and equipment acquired, generally we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset.
Removed
All restructuring actions were completed as of October 2, 2020. Refer to Note 11 - Restructurings in this Annual Report on Form 10-K for additional information. Warrant liability expense . In fiscal year 2021, we recorded warrant expense of $11.1 million, or 1.8% of revenue, compared to an expense of $12.9 million, or 2.4% of revenue, for fiscal year 2020.
Added
When determining the fair value of intangible assets acquired, typically determined using a discounted cash flow valuation method, we use assumptions such as the timing and amount of future cash flows, discount rates, weighted average cost of capital and estimated useful lives. These assessments can be significantly affected by our judgments.
Removed
The difference between periods was driven by a change in the estimated fair value of common stock warrants, primarily driven by the increase in the underlying price of our common stock, which was recorded as a liability at fair value. In fiscal year 2021, all of the warrants were exercised and 857,631 shares of common stock were issued.
Added
Goodwill and intangible asset valuation Significant management judgment is required in our valuation of goodwill and intangible assets, many of which are based on the creation of forecasts of future operating results that are used in the valuation, including (i) estimation of future cash flows, (ii) estimation of the long-term rate of growth for our business, (iii) estimation of the useful life over which cash flows will occur, (iv) terminal values, if applicable, and (v) the determination of our weighted average cost of capital, which helps determine the discount rate.
Removed
The decrease in fiscal year 2021 is primarily due to a lower effective interest rate on our Term Loans and the decrease in our long-term debt balance. Provision for income taxes .
Added
It is possible that these forecasts may change, and our performance projections included in our forecasts of future results may prove to be inaccurate.
Removed
For fiscal year 2020, our effective income tax rate of (10.9)% was primarily impacted by the continuation of a full valuation allowance against any benefit associated with U.S. losses and income taxed in foreign jurisdictions at generally lower tax rates.
Added
The value of our goodwill and purchased intangible assets could also be impacted by future adverse changes, such as a decline in the valuation of technology company stocks, including the valuation of our common stock, or a significant slowdown in the worldwide economy or in the optical communications equipment or semiconductor industry.
Removed
On November 8, 2021, our Revolving Facility (as defined in Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report), which had $160.0 million in borrowing capacity, expired and is no longer available.
Added
This valuation allowance release resulted in a tax benefit of $202.8 million, or $2.91 per basic share in fiscal year 2022. The application of tax laws and regulations to calculate our tax liabilities is subject to legal and factual interpretation, judgment and uncertainty in a multitude of jurisdictions.
Removed
(3) We have purchase commitments of $113.9 million primarily related to services and inventory supply arrangements of which approximately $95.5 million that is non- cancelable. In addition, we have $27.2 million in fixed payments associated with a power purchase agreement that is expected to commence in fiscal 2023 and has a 15-year term.
Added
For additional information related to these and other accounting policies refer to Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report which is incorporated by reference herein.
Removed
See Note 16- Financing Obligation for additional detail on the power purchase agreement. As of September 30, 2022, we estimated $1.9 million in asset retirement obligations primarily for the restoration of leased facilities upon the termination of the related leases.
Added
See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information.
Added
In fiscal year 2023, our revenue decreased by $26.8 million, or 4.0%, to $648.4 million from $675.2 million for fiscal year 2022.
Added
The increase was primarily driven by an increase in sales of our legacy connectivity products, which were supply constrained in prior periods, and an increase in sales of 400G and 800G high-performance analog Data Center products, partially offset by a decrease in sales of optical semiconductor products.
Added
In fiscal year 2023, our Telecom market revenue decreased by $58.4 million, or 24.1%, compared to fiscal year 2022.
Added
The decrease in gross profit during 2023 was primarily due to lower sales, increases in production supplies, employee headcount primarily due to acquisitions, depreciation expense and variable costs, partially offset by lower intangible asset amortization. Research and development.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo date, our international customer agreements have been denominated primarily in U.S. dollars. Accordingly, we have limited exposure to foreign currency exchange rates. The functional currency of a majority of our foreign operations continues to be in U.S. dollars with the remaining operations being local currency.
Biggest changeThe functional currency of a majority of our foreign operations continues to be in U.S. dollars with the remaining operations being local currency.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents, short-term investments and our variable rate debt, as well as foreign exchange rate risk. Interest rate risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk in the ordinary course of business, which consists primarily of interest rate risk associated with our cash and cash equivalents, short-term investments and our variable rate debt, as well as foreign exchange rate risk. 35 Interest rate risk.
The primary objectives of our investment activity are to preserve principal, provide liquidity and invest excess cash for an average rate of return. To minimize market risk, we maintain our portfolio in cash and diversified investments, which may consist of corporate bonds, bank deposits, money market funds and commercial paper.
The primary objectives of our investment activity are to preserve principal, provide liquidity and invest excess cash for an average rate of return. To minimize market risk, we maintain our portfolio in cash and diversified investments, which may consist of corporate bonds, bank deposits, money market funds, commercial paper and U.S. Treasury securities.
In the future, we may enter into foreign currency exchange hedging contracts to reduce our exposure to changes in exchange rates. 35
In the future, we may enter into foreign currency exchange hedging contracts to reduce our exposure to changes in exchange rates. 36
The interest rates are variable and fluctuate with current market conditions. The risk associated with fluctuating interest rates is limited to this investment portfolio. We believe that a 10% change in interest rates would not have a material impact on our financial position or results of operations. We do not enter into financial instruments for trading or speculative purposes.
The interest rates are variable and fluctuate with current market conditions. The risk associated with fluctuating interest rates is limited to this investment portfolio. We believe that a change in interest rates would not have a material impact on our financial position or results of operations. However, it could impact net income and earnings per share.
Removed
Our exposure to interest rate risk also relates to the increase or decrease in the amount of interest expense we must pay on the outstanding debt under the Credit Agreement.
Added
We do not enter into financial instruments for trading or speculative purposes. On August 2, 2023, we paid the total outstanding principal balance on our Term Loans. The interest rates on our 2026 Convertible Notes are fixed and therefore not subject to interest rate risk.
Removed
The interest rates on our term loans are variable interest rates based on our lender’s prime rate or a LIBOR rate, in each case plus an applicable margin, which exposes us to market interest rate risk when we have outstanding borrowings under the Credit Agreement.
Added
For additional information regarding our Term Loans and Convertible Notes, refer to Note 15 - Debt. Foreign currency risk. To date, our international customer agreements have been denominated primarily in U.S. dollars. Accordingly, we have limited exposure to foreign currency exchange rates.
Removed
As of September 30, 2022, we had $120.8 million of outstanding borrowings under the Credit Agreement. Assuming our outstanding debt remains constant under the Credit Agreement for an entire year and the applicable annual interest rate increases or decreases by 1%, our annual interest expense would increase or decrease by $1.2 million. Foreign currency risk.

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