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What changed in MACOM Technology Solutions Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MACOM Technology Solutions Holdings, Inc.'s 2023 and 2024 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 2024 report.

+230 added−257 removedSource: 10-K (2024-11-12) vs 10-K (2023-11-13)

Top changes in MACOM Technology Solutions Holdings, Inc.'s 2024 10-K

230 paragraphs added · 257 removed · 201 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

55 edited+5 added−7 removed68 unchanged
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.
Biggest changeMAJOR PRODUCT FAMILIES Amplifiers Lasers Pin Diodes Amplifier Linearizers Laser Drivers Radar Core Chips Attenuators Modulator Drivers RF over Fiber Modules Bias Networks Limiters & Detectors RF Power Pallets Capacitors Linear Equalizers Schottky Diodes Clock and Data Recovery Low Noise Amplifiers Silicon Transistors Crosspoint Switches MMIC Power Amplifiers SDI Cable Products Filters Network Connectivity Solutions Space Qualified Modules Frequency Conversion Optical Clock Recovery Modules SSPA Modules Frequency Generation Passives RF Switches Front End Modules Phase Shifters Transimpedance Amplifiers GaN Power Amplifiers Phase Detectors True Time Delays Hybrid Amplifiers Photodiodes Varactor Diodes Integrated IC & Modules Photoreceivers 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 our ability to select both internal and external technologies in our product solutions is a competitive advantage because it helps us to provide a unique and optimized solution for our customers. Our internal wafer fabrication and the majority of our internal assembly and test operations are conducted at our Lowell, Massachusetts headquarters.
We believe our ability to select both internal and external technologies in our product solutions is a competitive advantage because it helps us to provide a unique and optimized solution for our customers. The majority of our internal wafer fabrication and internal assembly and test operations are conducted at our Lowell, Massachusetts headquarters.
We are also regulated under a number of federal, state and local laws regarding responsible sourcing, recycling, product packaging and product content requirements in the U.S. and other countries, including legislation enacted in the European Union and other foreign jurisdictions that have placed greater restrictions on the use of lead, among other chemicals, in electronic products, which affects materials composition and semiconductor packaging.
We are also regulated under a number of federal, state and local laws regarding responsible sourcing, recycling, product packaging and product content requirements in the U.S. and other countries, including legislation enacted in the European Union and other foreign jurisdictions that have placed greater restrictions on the use of lead, among other chemicals, in electronic products, which 8 affects materials composition and semiconductor packaging.
We also believe that our U.S.-based wafer fabrication facilitates shorter time to market for both new and existing products, shorter production lead times than if we utilized external foundries and allows us to efficiently produce a wide range of low, medium and high-volume products.
We also believe that our U.S.-based wafer fabrication facilitates shorter time to market for both new and existing products, shorter production lead times than if we utilized external foundries and allows us to efficiently produce a wide range of low, 7 medium and high-volume products.
Our extensive packaging expertise enables us to model the interaction between the semiconductor and its package. Our engineers adjust the design of both the semiconductor and the package, to optimize performance. We offer products in a variety of different package types for specific applications, including plastic over-molded, ceramic and laminate-based packaging.
Our extensive packaging expertise enables us to model the interaction between the semiconductor and its package. Our engineers adjust the design of both the semiconductor and the package, to optimize performance. We offer products in a variety of different package types for specific applications, including plastic over-molded, ceramic and laminate-based packaging. Systems expertise .
We leverage our domestic semiconductor wafer fabrication capabilities and our foundry suppliers to offer customers the right process technology to meet their particular requirements. Depending on the requirements for the application, our semiconductor products may be designed using an internally developed or externally sourced process technology. Packaging expertise.
We leverage our semiconductor wafer fabrication capabilities and our foundry suppliers to offer customers the right process technology to meet their particular requirements. Depending on the requirements for the application, our semiconductor products may be designed using an internally developed or externally sourced process technology. Packaging expertise.
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”).
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.
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.
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, satellite networks and test and measurement applications.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of the websites mentioned above, as well as our LinkedIn, Facebook and YouTube pages and Twitter account, are not incorporated into and should not be considered a part of this report. 10
The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of the websites mentioned above, as well as our LinkedIn, Facebook and YouTube pages and X account, are not incorporated into and should not be considered a part of this report. 10
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.
ITEM 1. BUSINESS Overview We design, develop and manufacture differentiated semiconductor products and solutions for the Industrial and Defense (“I&D”), Data Center and Telecommunications (“Telecom”) industries for customers who demand high performance, quality and reliability. We are headquartered in Lowell, Massachusetts, with operational facilities throughout North America, Europe and Asia.
We believe our analog design capabilities, technology portfolio, in-depth knowledge of critical radar system requirements, integration expertise and track record of reliability make us a valued resource for our I&D customers faced with demanding application parameters.
We believe that our analog design capabilities, technology portfolio, in-depth knowledge of critical radar system requirements, integration expertise and track record of reliability make us a valued resource for our I&D customers faced with demanding 4 application parameters.
Certain of our facilities have achieved certification to the IATF16949 automotive standard, the AS9100D aerospace standard, the ISO9001 international quality standard, the ISO14001 environmental management standard and the ANSI/ESD S20.20:2014 standard . We manufacture compound semiconductors including GaAs, GaN and InP .
Certain of our facilities have achieved certification to the IATF16949 automotive standard, the AS9100D aerospace standard, the ISO9001 international quality standard, the ISO14001 environmental management standard and the ANSI/ESD S20.20:2021 standard. We manufacture compound semiconductors including GaAs, GaN and InP.
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.
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, electronic warfare, test and measurement, scientific, medical and other industrial applications.
Through our charitable giving program, we encourage employees to volunteer up to eight hours per year to the communities in which we operate. Additionally, our employees engage directly with the community, volunteering their time to a number of organizations.
Through our charitable giving program, we encourage employees to volunteer up to eight hours per year during working hours to the communities in which we operate. Additionally, our employees engage directly with the community, volunteering their time to a number of organizations.
Quality Assurance The goal of our quality assurance program is for our products to meet our customers’ requirements, be delivered on time, and function reliably throughout their useful lives. The ISO provides models for quality assurance for various operational disciplines, such as design, manufacturing, and testing, which comprise part of our overall quality managem ent system.
Quality Assurance The goal of our quality assurance program is for our products to meet our customers’ requirements, be delivered on time, and function reliably throughout their useful lives. The ISO provides models for quality assurance for various operational disciplines, such as design, manufacturing, and testing, which comprise part of our overall quality management system.
MACOM Technology Solutions Inc., our primary operating subsidiary, which provides high-performance analog semiconductor solutions for use in wireless and wireline applications across the RF, microwave, millimeter wave and lightwave spectrum, was incorporated under the laws of the state of Delaware on July 16, 2008.
History and Recent Developments MACOM Technology Solutions Inc., our primary operating subsidiary, which provides high-performance analog semiconductor solutions for use in wireless and wireline applications across the RF, microwave, millimeter wave and lightwave spectrum, was incorporated under the laws of the state of Delaware on July 16, 2008.
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.
We perform internal assembly and test functions at our Lowell, Massachusetts, Nashua, New Hampshire, Ann Arbor, Michigan, Hamilton, New Jersey, Morgan Hill, California, 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.
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.
The following locations have each received ISO 9001:2015 certifications in one or more of their principal functional areas: Lowell, Massachusetts; Ann Arbor, Michigan; Ithaca, New York; Mesa, Arizona; Morgan Hill, Newport Beach and Santa Clara, California; Morrisville, North Carolina; Nashua, New Hampshire; Hamilton, New Jersey; Hsinchu, Taiwan; Cork, Ireland; and Limeil-Brévannes, France.
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 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 2024, our voluntary attrition rate was approximately 7%. Compensation. Our compensation policies recognize and reward individual and collective contributions to our growth and success.
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.
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 S20.20:2021 certification: Lowell, Massachusetts; Ann Arbor, Michigan; Newport Beach, California; Morrisville, North Carolina; Nashua, New Hampshire; and Hsinchu, Taiwan.
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.
We expect our revenue in the Telecom market to be driven, in part, by 5G and future generation telecommunication deployments and expansion of optical networks, with continued upgrades and expansion of communications equipment and increasing adoption of bandwidth-rich services. Industrial & Defense.
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.
Our primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications (“SATCOM”) and various wired and wireless 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, 1.6T and higher speeds, enabled by our broad portfolio of analog ICs and photonic components for high speed connectivity customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and 6G infrastructure, satellite communications and Fiber-to-the-X (FTTx)/passive optical network (“PON”), among others.
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.
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 2024 to 2043.
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.
Approximately 70% of our workforce is male and 30% of our workforce is female. Females represented approximately 14% 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.
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.
The following facilities have also achieved certification to the AS9100D aerospace standard: Lowell, Massachusetts; Ann Arbor, Michigan; Hamilton, New Jersey; Mesa, Arizona; Morgan Hill, California; Morrisville, North Carolina; and Nashua, New Hampshire. In addition, our Lowell, Massachusetts facility has received IATF16949:2016 automotive quality management system certification and the ISO 14001:2015 environmental management system certification.
(“Qorvo”), Semtech Corporation (“Semtech”), Skyworks Solutions, Inc. (“Skyworks”) and Wolfspeed, Inc. (“Wolfspeed”). Backlog and Inventory Our sales are made primarily on a purchase order basis, rather than pursuant to long-term contracts where the customer commits to buy any minimum amount of product over an extended period.
(“Qorvo”), Semtech Corporation (“Semtech”), Skyworks Solutions, Inc. (“Skyworks”) and Sumitomo Electric Device Innovations, Inc. (“Sumitomo”). Backlog and Inventory Our sales are made primarily on a purchase order basis, rather than pursuant to long-term contracts where the customer commits to buy any minimum amount of product over an extended period.
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.
Our manufacturing model consists of operating internal semiconductor wafer fabrication and assembly and test facilities supplemented with 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.
Sales to our distributors accounted for 24.0%, 30.9% and 35.0% of our revenue in fiscal years 2023, 2022 and 2021, respectively.
Sales to our distributors accounted for 29.3%, 24.0% and 30.9% of our revenue in fiscal years 2024, 2023 and 2022, respectively.
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.
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. Most of our products are subject to the Export Administration Regulations, administered by the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”).
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.
We expect revenue growth in the Data Center market to be driven by the adoption of higher speed processing technologies and the upgrade of data center architectures utilizing 100G, 200G, 400G, 800G, and 1.6T interconnects, which we expect will drive adoption of higher speed optical and photonic links.
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.
None of our U.S.- or Asia-based employees are represented by a collective bargaining agreement; however, as of September 27, 2024, approximately 128 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.
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.
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. In December 2023, we completed the acquisition of certain assets and specified liabilities of the RF business of Wolfspeed, Inc.
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.
Our DEI&B efforts are guided by the following principles: 9 • 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.
Many of our products have long life cycles ranging from five to ten years, and some of our products have been generating revenue for over 20 years. We continue to develop new products and technologies to improve our ability to serve our primary markets.
Certain of our products have long life cycles ranging from five to ten years, with some of our products generating revenue for over 20 years while others may have shorter life cycles of less than five years. We continue to develop new products and technologies to improve our ability to serve our primary markets.
We continue to invest in proprietary processes and packaging technologies to enable us to develop and manufacture high-value solutions. Our engineers’ radar, optical, microwave and millimeter wave system-level design expertise allow us to offer differentiated solutions that leverage multiple process technologies and are integrated into a single, higher-level assembly, thereby delivering our customers enhanced functionality.
Our engineers’ radar, optical, microwave and millimeter wave system-level design expertise allow us to offer differentiated solutions that leverage multiple process technologies and are integrated into a single, higher-level assembly, thereby delivering our customers enhanced functionality.
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.
These regulations are constantly changing and may affect our ability to sell certain products in certain markets. We maintain an export compliance program staffed by dedicated personnel under which we screen export transactions against current lists of restricted products, destinations and end users with the objective of managing export-related decisions, transactions and shipping logistics to ensure compliance with these requirements.
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.
Workforce Employees. As of September 27, 2024, we employed approximately 1,700 individuals worldwide, including approximately 700 in research and development (“R&D”). We have employees across 17 countries, with 73% in North America, 15% in Asia Pacific and 12% in Europe.
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.
In MRI systems, we provide critical non-magnetic diode products for body coils. 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.
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 27, 2024, we had 726 U.S. and 451 foreign issued patents and 178 U.S. and 311 foreign pending patent applications covering elements of semiconductor devices, circuit design, manufacturing and wafer fabrication.
Additionally, some of our products are subject to the International Traffic in Arms Regulations, which restrict the export of information and material that may be used for military or intelligence applications by a foreign person. Similar controls exist in other jurisdictions.
Certain of our products and technology require an export license from BIS before we can export them to specified countries. Additionally, some of our products are subject to the International Traffic in Arms Regulations, which restrict the export of information and material that may be used for military or intelligence applications by a foreign person.
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.
We have completed several acquisitions and divestitures to attempt to further align our businesses to our primary markets. Those recent transactions include: 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”).
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.
For fiscal years 2024, 2023 and 2022, 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 47.0%, 51.5% and 47.1% of our revenue, respectively. Competition The markets for our products are highly competitive and are characterized by continuously evolving customer requirements.
To solve these challenges, we leverage our broad optical and photonic portfolio of products to enable our customers to deliver optical transceivers that meet the requirements of today’s Cloud Data Center deployments. By building a comprehensive portfolio of complementary products that enable our customers’ optical transceiver applications, we can offer high performing, cost-effective component solutions for next-generation networks.
By building a comprehensive portfolio of complementary products that enable our customers’ optical transceiver applications, we can offer high performing, cost-effective component solutions for next-generation networks.
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.
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.
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.
One of our resellers accounted for 11.3% of our revenue in fiscal year 2024 but did not exceed 10% in fiscal years 2023 and 2022.
See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
We acquired Linearizer to further strengthen our component and subsystem design expertise in our target markets. See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
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.
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 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.
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. 3 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.
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.
We also utilize external semiconductor foundries to access additional process technologies and capacity. 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.
Failure to comply with these laws could result in sanctions by the government, including substantial monetary penalties, denial of export privileges and debarment from government contracts.
Certain of our products and technology require an export license under the EU Regulation before we can export them to specified countries. Similar controls exist in other jurisdictions. Failure to comply with these laws could result in sanctions by the government, including substantial monetary penalties, denial of export privileges and debarment from government contracts.
Demand by Cloud Data Center providers for faster data delivery speeds at cost-effective prices is growing rapidly, where higher speeds are necessary to process the current growth in traffic.
Demand by Data Center providers for faster data delivery speeds at cost-effective prices is growing rapidly, where higher speeds are necessary to process the current growth in traffic. To solve these challenges, we leverage our broad optical and photonic portfolio of products to enable our customers to deliver optical transceivers that meet the requirements of today’s Data Center deployments.
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 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.
Our operations are conducted through our various subsidiaries, which are organized and operated according to the laws of their respective jurisdictions of incorporation.
We were incorporated under the laws of the State of Delaware in March 2009. Our operations are conducted through our various subsidiaries, which are organized and operated according to the laws of their respective jurisdictions of incorporation. Research and Development Our research and development efforts aim to rapidly develop 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.
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. 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.
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.
(“Wolfspeed”) (the “RF Business,”). The RF Business includes a portfolio of GaN on Silicon Carbide products used in high-performance RF and microwave applications. See Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report for more information.
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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.
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Our system-level RF design knowledge, broad technology portfolio, in-depth understanding of critical system requirements, integration expertise and track record of reliability make us a valued resource for our I&D customers faced with demanding application parameters. We continue to invest in proprietary processes, circuit design and packaging technologies to enable us to develop and manufacture high-value solutions.
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Our orders from and sales to customers in the telecommunications infrastructure and networking markets may tend to be lower in our first fiscal quarter as compared to other quarters due to seasonal inventory management by large OEM and contract manufacturing customers. Competition The markets for our products are highly competitive and are characterized by continuously evolving customer requirements.
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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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Department of Commerce, Bureau of Industry and Security (“BIS”), which require that we obtain an export license before we can export certain controlled products or technology to specified countries.
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We also operate wafer fabrication facilities in Ann Arbor, Michigan and in Limeil-Brévannes, France and we expect to assume control of a wafer fabrication facility in Research Triangle Park, North Carolina in the future.
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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 European products and technologies are subject to the European Union Dual-Use Regulation (EU) No. 2021/821 (the “EU Regulation”), which governs the export of certain goods, software and technology that can be used for both civil and military applications.
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We have completed several acquisitions and divestitures to attempt to further align our businesses to our primary markets.
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We regularly use our employee newsletter, internal web page 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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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.
Removed
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

79 edited+15 added−16 removed199 unchanged
Biggest changeOur 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.
Biggest changeWe rely on our information technology (“IT”) systems and services for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business. These systems and services are both internally managed and outsourced, and, in many cases, we rely upon third party service providers.
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.
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, 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.
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.
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 16 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 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 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; 18 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.
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.
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 21 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.
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.
Our failure to successfully compete could result in lower revenue, decreased profitability and a lower stock price. 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.
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.
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 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.
Any such suspension or debarment or other sanction could have an adverse effect on 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.
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.
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 U.S.
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, 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 19 GaN-on-Silicon, certain Laser products and our Air Force Research Laboratory related process technology transfer.
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.
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 in our industry 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 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.
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.
Our board of directors could rely on Delaware law to prevent or delay an acquisition of the Company and this reliance could reduce our value. We do not intend to pay dividends for the foreseeable future. We do not intend to pay any cash dividends on our common stock in the foreseeable future.
Our board of directors could rely on Delaware law to prevent or delay an acquisition of the Company and this reliance could reduce our value. 24 We do not intend to pay dividends for the foreseeable future. We do not intend to pay any cash dividends on our common stock in the foreseeable future.
Similarly, counterparties to our intellectual property agreements may fail to comply with their obligations under those agreements, requiring us to resort to expensive and time-consuming litigation in an attempt to protect our rights, which may or may not be successful.
Similarly, counterparties to our intellectual property agreements may fail to comply with their obligations under those agreements, requiring us 20 to resort to expensive and time-consuming litigation in an attempt to protect our rights, which may or may not be successful.
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.
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.
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
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.
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.
Our ability to successfully develop products 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.
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 existence of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.
Although our internal information technology team actively takes steps to protect our information and operational systems, unauthorized persons or disloyal insiders may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious software programs that compromise our confidential information or that of third parties and cause a disruption or failure of our information and/or operational technology systems.
Although our internal IT team actively takes steps to protect our information and operational systems, unauthorized persons or disloyal insiders may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious software programs that compromise and/or exfiltrate our confidential information or that of third parties and cause a disruption or failure of our information and/or operational technology systems.
As a result, we may be limited in our ability to enforce our rights under such agreements and to collect amounts owed to us. The majority of our assembly, packaging and test vendors are located in Asia. We generally do business with our foreign assemblers in U.S. dollars.
As a result, we may be limited in our ability to enforce our rights under such agreements and to collect amounts owed to us. 15 The majority of our contract assembly, packaging and test vendors are located in Asia. We generally do business with our foreign assemblers in U.S. dollars.
Legal and regulatory requirements, as well as investor expectations, on corporate ESG practices and disclosure are subject to change, can be unpredictable and may be difficult and expensive for us to comply with, given the complexity of our supply chain and manufacturing.
Legal and regulatory requirements, as well as investor expectations, on corporate sustainability practices and disclosure are subject to change, can be unpredictable and may be difficult and expensive for us to comply with, given the complexity of our supply chain and manufacturing.
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.
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 Sumitomo as well as increased competition from Chinese companies.
In addition, this concentration of ownership may delay or prevent a change in control of us and might affect the market price of our securities. In addition, the interests of these stockholders may not always coincide with your interests or the interests of other stockholders.
In addition, this concentration of ownership may delay or prevent a change in control of us and might affect the market price of our securities. In addition, the interests of this stockholder may not always coincide with your interests or the interests of other stockholders.
If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.
If inflation rates rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.
A number of our customers have adopted, or may adopt, procurement policies that include ESG provisions or requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions. An increasing number of investors are also requiring companies to disclose corporate ESG policies, practices and metrics.
A number of our customers have adopted, or may adopt, procurement policies that include sustainability-related provisions or requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions. An increasing number of investors are also requiring companies to disclose corporate sustainability policies, practices and metrics.
In the event that these third parties do not properly safeguard our data, security breaches could result and negatively impact our business, operations and financial results.
In the event that our employees or these third parties do not properly safeguard our data, security breaches could result and negatively impact our business, operations and financial results.
Sources for certain components, materials and services are limited, which could result in interruptions, delays or reductions in product shipments. Our industry may be affected from time to time, and is currently being affected, by limited supplies of certain key components, materials and services.
Sources for certain components, materials and services are limited, which could result in interruptions, delays or reductions in product shipments. Our industry may be affected from time to time by limited supplies of certain key components, materials and services.
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.
For example, 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.
Risks Relating to Ownership of our Common Stock We may engage in future capital-raising transactions that dilute the ownership of our existing stockholders or cause us to incur debt. We may issue additional equity, debt or convertible securities to raise capital in the future. If we do, existing stockholders may experience significant further dilution.
We may engage in future capital-raising transactions that dilute the ownership of our existing stockholders or cause us to incur debt. We may issue additional equity, debt or convertible securities to raise capital in the future. If we do, existing stockholders may experience significant further dilution.
Our effective tax rate as well as the actual tax ultimately payable could be adversely affected by changes in the amount of our earnings attributable to countries with differing statutory tax rates, changes in the valuation of our deferred tax assets, changes in tax laws (or the interpretation of those laws by regulators) or tax rates (particularly in the U.S. or Ireland), increases in non-deductible expenses, the availability of tax credits, material audit assessments or repatriation of non-U.S. earnings, each of which could materially affect our profitability.
Our effective tax rate as well as the actual tax ultimately payable could be adversely affected by changes in the amount of our earnings attributable to countries with differing statutory tax rates, changes in the valuation of our deferred tax assets, changes in tax laws (or the interpretation of those laws by regulators) or tax rates (particularly in the U.S. or Ireland), increases in non-deductible expenses, the availability of tax credits (including, but not limited to through the CHIPS Act), material audit assessments or repatriation of non-U.S. earnings, each of which could materially affect our profitability.
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.
It is costly to comply with the GDPR, CCPA, CPRA and other similar laws and regulations. Further, a number of these laws and regulations provide 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.
Environmental, social and governance responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors. There has been an increased focus on corporate environmental, social and governance (“ESG”) responsibility in the semiconductor industry, particularly with OEMs that manufacture consumer electronics.
Sustainability-related regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors. There has been an increased focus on corporate sustainability responsibility in the semiconductor industry, particularly with OEMs that manufacture consumer electronics.
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.
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 and Limeil-Brévannes, France sites. 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 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 maintain other internal assembly and test operation facilities as well, including leased sites in Hamilton, New Jersey, Morgan Hill, California, 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.
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.
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.
As a result, we are subject to regulatory, geopolitical and other risks associated with doing business outside of the U.S., including currency controls, currency exchange rate fluctuations, new or potential international trade agreements, tariffs, required import and export licenses, and other related international trade restrictions and regulations.
We have operations in Europe and Asia, and customers around the world. As a result, we are subject to regulatory, geopolitical and other risks associated with doing business outside of the U.S., including currency controls, currency exchange rate fluctuations, new or potential international trade agreements, tariffs, required import and export licenses, and other related international trade restrictions and regulations.
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.
For example, as of September 27, 2024, we had $265.1 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 2036, while those generated subsequent to the Tax Act have an indefinite carryforward with no expiration.
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.
Our R&D expenses were $182.2 million for the fiscal year ended September 27, 2024. 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.
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.
Variability in self-insurance liability estimates could adversely impact our results of operations. 14 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.
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.
For example, fiscal year 2024 sales to customers in China and the Asia Pacific region accounted for 24.4% and 12.2% of total fiscal year 2024 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.
A new product design effort may last over one year, and requires significant investment in engineering, as well as sales and marketing, which may not be recouped. Our failure to anticipate or timely develop new or enhanced products or technologies in response to technological shifts could result in decreased revenue and others obtaining design wins.
A new product design effort may last over one year, and requires significant investment in engineering, as well as sales and marketing, which may take several years to recoup, if at all. Our failure to anticipate or timely develop new or enhanced products or technologies in response to technological shifts could result in decreased revenue and others obtaining design wins.
Therefore, any financial crisis, trade war or dispute, domestic semiconductor supply chain initiatives, health crisis or other major event causing business disruption in international jurisdictions generally, and China and the Asia Pacific region in particular, could negatively affect our future revenues and results of operations. For example, in May 2019, the BIS added Huawei Technologies Co. Ltd.
Therefore, any financial crisis, trade war or dispute, domestic semiconductor supply chain initiatives, health crisis or other major event causing business disruption in international jurisdictions generally, and China and the Asia Pacific region in particular, could negatively affect our future revenues and results of operations.
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.
Any catastrophic loss or significant damage to any of these facilities, particularly our Lowell, Massachusetts, Nashua, New Hampshire, Limeil-Brévannes, France, Morgan Hill, California and Hsinchu, Taiwan locations, as well as the Wolfspeed-managed fabrication facility in Durham, North Carolina, 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.
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.
Our ability to make payments of the principal of, to pay interest on, or to refinance, our 2026 Convertible Notes (as defined in Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report), 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.
If the global financial markets continue to experience volatility or deteriorate, our investment portfolio and cash balances may be impacted and some or all of our investments may become illiquid or otherwise experience loss which could adversely impact our financial results and position.
If the global financial markets continue to experience volatility or deteriorate, our investment portfolio and cash balances may be impacted and some or all of our investments may become illiquid or otherwise experience loss which could adversely impact our financial results and position. Risks Relating to International Operations We are subject to risks from our international sales and operations.
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.
Further, 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.
Any compromise of our information or operational technology systems could result in unauthorized publication, exfiltration or misappropriation of our confidential business or proprietary information or intellectual property; result in the unauthorized release of customer, supplier or employee data; lead to violations of privacy or other laws; extortion; allow competitors to profit from our intellectual property or trade secrets; delay or disrupt our operations; expose us to a risk of investigations and litigation; cause us to incur direct losses if attackers access our bank or investment accounts; undermine investor or market confidence, or damage our reputation.
Recent global developments have created an environment in which malicious actors may have increased opportunity and motivation for breaching or compromising our systems. 13 Any compromise of our information or operational technology systems could result in unauthorized publication, exfiltration or misappropriation of our confidential business or proprietary information or intellectual property; result in the unauthorized release of customer, supplier or employee data; lead to violations of privacy or other laws; extortion; allow competitors to profit from our intellectual property or trade secrets; delay or disrupt our operations; expose us to a risk of investigations and litigation; cause us to incur direct losses if attackers access our bank or investment accounts; undermine investor or market confidence, or damage our reputation.
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.
Sales to customers located outside the U.S. accounted for 55.1% of our revenue for the fiscal year ended September 27, 2024. 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.
For example, we have focused significant internal resources to meet potential product demand in the Cloud Data Center Market, but our ability to capitalize on this and other market opportunities in 100G optical networks and GaN technology will depend on, among other things, the future size and actual growth rates of these markets, the next generation technologies selected by customers, the timing of network upgrades in these markets and the pace of adoption of our products in these markets.
For example, we have focused significant internal resources to address growth trends in the Data Center Market, but our ability to capitalize on this will depend on, among other things, the future size and actual growth rates of these markets, the next generation technologies selected by customers, the timing of network upgrades in these markets and the pace of adoption of our products in these markets.
Risks Relating to Government Regulations Changes in U.S. and international laws, accounting standards, export and import controls and trade policies or the enforcement of, or attempt to enforce, such laws, standards, controls and policies may adversely impact our business and operating results.
Such events could have an adverse effect on our financial condition and results of operations. Risks Relating to Government Regulations Changes in U.S. and international laws, accounting standards, export and import controls and trade policies or the enforcement of, or attempt to enforce, such laws, standards, controls and policies may adversely impact our business and operating results.
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.
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.
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.
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 stockholder controls a significant amount of our outstanding common stock. As of September 27, 2024, Susan Ocampo beneficially owned 17.8% of our common stock.
As of September 29, 2023, we had approximately $111.4 million in money market funds and $340.6 million in short-term investments, respectively. The debt security investments consisted of commercial paper, corporate bonds and U.S. Treasury securities. We currently do not use derivative financ ial instruments to adjust our investment portfolio risk or income profile.
As of September 27, 2024, we had approximately $74.8 million in money market funds and $435.1 million in short-term investments, respectively. The debt security investments consisted of commercial paper, corporate bonds and U.S. Treasury securities. We currently do not use derivat ive financ ial instruments to adjust our investment portfolio risk or income profile.
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.
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.
If our sales representatives or distributors cease doing business with us or fail to successfully market and sell our products, our ability to sustain and grow our revenue could be materially adversely affected. We may experience difficulties in managing any future growth.
Sales to distributors accounted for approximately 29.3% of our revenue for the fiscal year ended September 27, 2024. If our sales representatives or distributors cease doing business with us or fail to successfully market and sell our products, our ability to sustain and grow our revenue could be materially adversely affected. We may experience difficulties in managing any future growth.
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.
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.
Furthermore, obtaining additional supply in the face of any component shortages may be costly or impossible, particularly in the short term, due to ongoing supply chain constraints and growing inflationary pressures, which could prevent us from fulfilling orders in a timely manner or at all.
Furthermore, obtaining additional supply may be costly or impossible due to supply chain constraints and inflationary pressures, which could prevent us from fulfilling orders in a timely manner or at all.
However, the proceedings are ongoing and several factors beyond our control could cause this loss accrual to prove inadequate, and any future increases to our allocation of responsibility among the PRPs or the future reduction of parties participating in the PRP group could materially increase our potential liability relating to the Omega Site.
However, the proceedings are ongoing and several factors beyond our control could cause this loss accrual to prove inadequate, and any future increases to our allocation of responsibility among the PRPs or the future reduction of parties participating in the PRP group could materially increase our potential liability relating to the Omega Site. 22 Environmental regulations such as the WEEE and RoHS directives limit our flexibility and may require us to incur material expense.
Environmental regulations such as the WEEE and RoHS directives limit our flexibility and may require us to incur material expense. Various countries require companies selling a broad range of electrical equipment to conform to regulations such as the Waste Electrical and Electronic Equipment (“WEEE”) and the European Directive on Restriction of Hazardous Substances (“RoHS”).
Various countries require companies selling a broad range of electrical equipment to conform to regulations such as the Waste Electrical and Electronic Equipment (“WEEE”) and the European Directive on Restriction of Hazardous Substances (“RoHS”).
We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our revenue and profitability.
We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our revenue and profitability. If key components, materials or services are unavailable, our costs could increase and our revenue could decline.
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.
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 .
Despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of third party data or to comply with the applicable data privacy regimes.
Despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm if we fail to protect the privacy of third party data or to comply with the applicable data privacy regimes. 23 Risks Relating to Ownership of our Common Stock The market price of our common stock may be volatile, which could result in substantial losses for investors.
In addition, we have in the past and may in the future be subject to “phishing” attacks in which third parties send emails purporting to be from reputable companies to obtain personal information and infiltrate our systems to initiate wire transfers or otherwise obtain proprietary or confidential information or disrupt operations by deploying malicious code.
In addition, we have in the past and may in the future be subject to attacks in which third parties attempt to obtain personal information and or infiltrate our systems to obtain proprietary or confidential information, disrupt operations by deploying malicious code, viruses or malware (such as ransomware).
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.
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.
In addition, from time to time, we may recruit and hire employees from our competitors, customers, suppliers and distributors, which could result in liability to us and has in the past and could in the future, damage our business relationship with these parties. We depend on third-party sales representatives and distributors for a material portion of our revenues.
In addition, from time to time, we may recruit and hire employees from our competitors, customers, suppliers and distributors, which could result in liability to us and damage our business relationship with these parties.
Inflation rates in the markets in which we operate have increased and may continue to rise. Recent inflation has led us to experience higher labor costs, wafer and other costs for materials from suppliers, and transportation costs.
Sustained inflation could have a material adverse effect on our business, financial condition, results of operations and liquidity. Inflation rates in the markets in which we operate may rise. Recent inflation has led us to experience higher labor costs, wafer and other costs for materials from suppliers, and transportation costs.
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 .
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.
Adverse global economic conditions have, from time to time, caused or exacerbated significant slowdowns in the industries and markets in which we operate, which have adversely affected our business and results of operations. Geopolitical issues, macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses.
Adverse global economic conditions have, from time to time, caused or exacerbated significant slowdowns in the industries and markets in which we operate, which have adversely affected our business and results of operations.
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.
We depend on orders from a limited number of customers for a significant percentage of our revenue. In the fiscal year ended September 27, 2024, 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 55.8% of our revenue.
Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, lost sales or damaged customer relationships and diversion of management’s attention and resources. Certain of our products currently incorporate technology licensed or acquired from third parties and we expect our products in the future to also require technology from third parties.
Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, lost sales or damaged customer relationships and diversion of management’s attention and resources. We depend on third parties for products and services required for our business, which may limit our ability to meet customer demand, assure product quality and control costs.
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 future growth depends on our ability to anticipate demand and respond to it with products that address our customers' needs. 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.
Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs. Underutilization, price competition, acquisitions and various other factors may reduce our gross margin, which could negatively affect our business, financial condition and results of operations.
Underutilization, price competition, acquisitions and various other factors may reduce our gross margin, which could negatively affect our business, financial condition and results of operations.
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.
We are unable to predict the extent to which our independent sales representatives and distributors will be successful in marketing and selling our products. 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.
Any significant future cancellation or deferral of product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory or adversely affect our operating results and stock price. Sustained inflation could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Any significant future cancellation or deferral of product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory or adversely affect our operating results and stock price. If demand for our products in our primary markets declines or fails to grow, our revenue and profitability may suffer.
Any delayed sales, significant costs or lost customers resulting from a technology failure could adversely affect our business, operations and financial results. Third parties with which we conduct business, such as foundries, assembly and test contractors and distributors, have access to certain portions of our sensitive data (including trade secrets and other intellectual property).
Third parties with which we conduct business, such as foundries, assembly and test contractors and distributors, have access to certain portions of our sensitive data (including trade secrets and other intellectual property), and certain aspects of effective cybersecurity are dependent upon our employees, contractors and other trusted partners reliably safeguarding such sensitive data.
We regularly maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit.
These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks. We regularly maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit.
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.
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.
We sell many of our products to customers through independent sales representatives and distributors, as well as through our direct sales force. We are unable to predict the extent to which our independent sales representatives and distributors will be successful in marketing and selling our products.
We depend on third-party sales representatives and distributors for a material portion of our revenues. 17 We sell many of our products to customers through independent sales representatives and distributors, as well as through our direct sales force.
A number of large, public companies have recently experienced losses based on ransomware and/or phishing attacks and other cyber-attacks. In addition to other factors, our position within the supply chain to the U.S. Government may increase our risk of being targeted by malicious actors.
Since the techniques used by cyber attackers change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition to other factors, our position within the supply chain to the U.S. Government may increase our risk of being targeted by malicious actors.
Removed
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.

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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 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).
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 Morgan Hill, California A, P&F, R&D, AE, RT, T&A 83,828 February 2028 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 Santa Clara, California R&D, AE and S&M 46,270 October 2024 Nashua, New Hampshire R&D, T&A, P&F and RT 33,750 December 2027 Hamilton, New Jersey A, T&A, AE, R&D, S&M and RT 25,750 November 2033 Durham, North Carolina R&D, S&M 25,660 December 2025 Hsinchu, Taiwan P&F, T&A and RT 24,282 December 2027 Milpitas, California R&D, AE and S&M 22,246 September 2029 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).

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 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.
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. 27 September 27, 2019 October 2, 2020 October 1, 2021 September 30, 2022 September 29, 2023 September 27, 2024 MACOM Technology Solutions Holdings, Inc. $100.00 $155.90 $301.38 $238.88 $376.29 $514.39 Nasdaq Composite Index $100.00 $140.86 $186.51 $136.43 $172.05 $237.60 PHLX Semiconductor Index $100.00 $143.96 $211.37 $149.51 $222.59 $338.15 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 27, 2024.
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
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] 28
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.
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 6, 2024 was approximately 73.
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.
The amounts represented below assume an investment of $100.00 in our common stock at the closing price of $21.68 on September 27, 2019 and in the Nasdaq Composite Index and the PHLX Semiconductor Index on the closest month end date of September 27, 2019, and assume reinvestment of dividends.
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.
Stock Price Performance Graph The following graph shows a comparison from September 27, 2019 through September 27, 2024 of the total cumulative return of our common stock with the total cumulative return of the NASDAQ Composite Index and the PHLX Semiconductor Index.
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.
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 June 29, 2024—July 26, 2024 737 $ 111.30 — — July 27, 2024—August 23, 2024 1,690 103.13 — — August 24, 2024—September 27, 2024 845 101.45 — — Total 3,272 $ 104.53 — — (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 7. Management's Discussion & Analysis

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

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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.
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. 31 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our Statements of Operations data (in thousands): Fiscal Years 2024 2023 2022 Revenue $ 729,578 $ 648,407 $ 675,170 Cost of revenue (1) 335,805 262,610 268,989 Gross profit 393,773 385,797 406,181 Operating expenses: Research and development (1) 182,158 148,545 148,228 Selling, general and administrative (1) (2) 137,949 129,852 125,279 Total operating expenses 320,107 278,397 273,507 Income from operations 73,666 107,400 132,674 Other income (expense): Interest income 22,986 20,807 4,251 Interest expense (5,136) (12,384) (8,551) Other income (expense), net (3) 10 (665) 114,746 Other income, net 17,860 7,758 110,446 Income before income taxes 91,526 115,158 243,120 Income tax expense (benefit) (4) 14,667 23,581 (196,835) Net income $ 76,859 $ 91,577 $ 439,955 (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 2024 2023 2022 (a) Intangible amortization expense: Cost of revenue $ 14,790 $ 4,369 $ 7,839 Research and development 4,763 — — Selling, general and administrative 17,612 23,735 25,592 Total intangible amortization expense $ 37,165 $ 28,104 $ 33,431 (b) Share-based compensation expense: Cost of revenue $ 5,938 $ 4,325 $ 4,038 Research and development 18,072 14,808 14,940 Selling, general and administrative 21,634 18,970 22,207 Total share-based compensation expense $ 45,644 $ 38,103 $ 41,185 (2) Fiscal years 2024 and 2023 includes $7.7 million and $9.1 million, respectively, of acquisition transaction costs.
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.
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.
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.
OVERVIEW We design and manufacture semiconductor products and solutions 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.
The preparation of financial statements, in conformity with generally accepted accounting principles in the U.S., requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
The preparation of financial statements, in conformity with U.S. generally accepted accounting principles (“GAAP”), requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements.
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.
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 2024, 2023 and 2022 each consisted of 52 weeks.
We design, develop and manufacture differentiated semiconductor products for customers who demand high performance, quality and reliability.
We design, develop and manufacture differentiated semiconductor products and solutions for customers who demand high performance, quality and reliability.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. This Management’s Discussion and Analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Annual Report.
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.
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 semiconductor industry.
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.
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 to do so on favorable terms or at all. As of September 27, 2024, we had no off-balance sheet arrangements.
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.
As of September 27, 2024, 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. 35
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.
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 Net Operating Losses (“NOL”) and R&D tax credit carryforwards and other deferred tax assets should be released as of September 30, 2022.
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 primary end markets are: (1) I&D, which includes military and commercial radar, RF jammers, electronic countermeasures, communication data links, satellite communications and various wired and wireless 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 connectivity customers; and (3) Telecom, which includes carrier infrastructure such as long-haul/metro, 5G and future generation infrastructure, satellite communications and FTTx/PON, among others.
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.
As of September 27, 2024, cash held by our indefinitely reinvested foreign subsidiaries was $6.5 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.
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.
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 common stock withheld associated with employee taxes on vested equity awards, partially offset by $5.6 million of proceeds from employee stock purchases.
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.
In measuring the fair value, we utilize a number of valuation techniques. 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.
(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.
(3) Fiscal year 2022 includes a gain on sale of our equity method investment of $118.2 million and includes a non-cash net loss of $3.3 million associated with our equity method investment based on our proportionate share of its losses and changes in equity.
We expect our revenue 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 components.
We expect our revenue in the Data Center market to be driven by the adoption of higher speed processing technologies and the upgrade of data center architectures to 100G, 200G, 400G, 800G and 1.6T interconnects, which we expect will drive adoption of higher speed optical and photonic components.
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.
See Note 5 - Investments to the Consolidated Financial Statements included in this Annual Report for additional information. (4) Fiscal years 2024, 2023 and 2022 includes a non-cash benefit of $3.6 million, $12.1 million and $202.8 million, respectively, related to the partial release of our valuation allowance.
We plan to use our remaining available cash and cash equivalents as well as our short-term investments for general corporate purposes, including working capital, or for the acquisition of or investment in complementary technologies, design teams, products and businesses.
We plan to use our remaining available cash and cash equivalents and short-term investments for general corporate purposes, including working capital, payment on the 2026 Convertible Notes and leases, or for the acquisition of or investment in complementary technologies, design teams, products and businesses.
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.
Income taxes We are required to estimate our income taxes in each of the jurisdictions in which we operate. 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 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.
In fiscal year 2024, research and development expense increased by $33.6 million, or 22.6%, to $182.2 million, representing 25.0% of revenue, compared with $148.5 million, representing 22.9% of revenue, in fiscal year 2023.
In addition, we have $25.5 million in fixed payments associated with a power purchase agreement that commenced in fiscal 2023 and has a remaining 14-year term. See Note 16- Financing Obligation for additional detail on the power purchase agreement. Remaining purchase commitment of $8.4 million relates to amounts payable for software over a two year period.
In addition, we have $23.9 million in fixed payments associated with a power purchase agreement that commenced in fiscal 2023 and has a remaining 13-year term. See Note 16- Financing Obligation for additional detail on the power purchase agreement. Lastly, we have a purchase commitment of $6.7 million related to amounts payable for software over a two year period.
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.
See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information. 32 The following table sets forth, for the periods indicated, our Statements of Operations data expressed as a percentage of our revenue: Fiscal Years 2024 2023 2022 Revenue 100.0 % 100.0 % 100.0 % Cost of revenue 46.0 40.5 39.8 Gross profit 54.0 59.5 60.2 Operating expenses: Research and development 25.0 22.9 22.0 Selling, general and administrative 18.9 20.0 18.6 Total operating expenses 43.9 42.9 40.5 Income from operations 10.1 16.6 19.7 Other income (expense): Interest income 3.1 3.2 0.6 Interest expense (0.7) (1.9) (1.2) Other income (expense), net — (0.1) 17.0 Total other income, net 2.4 1.2 16.4 Income before income taxes 12.5 17.8 36.0 Income tax expense (benefit) 2.0 3.7 (29.2) Net income 10.5 % 14.1 % 65.2 % Comparison of Fiscal Year Ended September 27, 2024 to Fiscal Year Ended September 29, 2023 Revenue.
Our effective tax rate for fiscal year 2023, as compared to the U.S. federal income tax rate, is impacted primarily by income earned outside the U.S.
For fiscal year 2024, our effective tax rate was 16.0%. Our effective tax rate for fiscal year 2024, as compared to the U.S. federal income tax rate of 21%, is impacted primarily by income earned outside the U.S.
The increase in fiscal year 2023 is primarily due to an increase in our interest rate on the Term Loans (as defined in Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report) prior to our repayment of the total outstanding principal balance of the Term Loans in August 2023. Income tax expense (benefit) .
The decrease in fiscal year 2024 is primarily due to the August 2023 payment of the total outstanding principal balance of the Term Loans (as defined in Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report). Income tax expense .
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 2024, selling, general and administrative expenses increased by $8.1 million, or 6.2%, to $137.9 million, or 18.9% of revenue, compared with $129.9 million, or 20.0% of revenue, for fiscal year 2023.
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.
In addition, cash used by operating assets and liabilities was $31.0 million for fiscal year 2024, primarily driven by an increase in inventory of $30.2 million, an increase in accounts receivable of $16.8 million and a decrease in accrued and other liabilities of $7.3 million, partially offset by an increase in accounts payable of $18.2 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.
LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our cash flow activities for the fiscal years ended September 27, 2024 and September 29, 2023, respectively (in thousands): Fiscal Year Ended September 27, 2024 September 29, 2023 Cash and cash equivalents, beginning of period $ 173,952 $ 119,952 Net cash provided by operating activities 162,640 166,917 Net cash used in investing activities (181,133) 36,341 Net cash used in financing activities (9,064) (149,020) Effect of exchange rates on cash balances 411 (238) Cash and cash equivalents, end of period $ 146,806 $ 173,952 Cash Flow from Operating Activities: Our cash flow from operating activities for fiscal year 2024 was $162.6 million and consisted of a net income of $76.9 million, plus adjustments to reconcile our net income to cash provided by operating activities of $116.8 million, and cash used by operating assets and liabilities of $31.0 million.
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.
Interest expense. In fiscal year 2024, interest expense was $5.1 million, or 0.7% of our revenue, compared to $12.4 million of interest expense, or 1.9% of our revenue, for fiscal year 2023.
(i.e., global intangible low taxed income), resulting in a 15.7% increase, offset primarily by partial release of our valuation 32 allowance, resulting in a 10.6% decrease and research and development credits, resulting in a 4.8% decrease.
(i.e., global intangible low taxed income), resulting in a 12.7% increase, offset primarily by research and development credits, resulting in a 9.4% decrease, Foreign-derived intangible income deduction, resulting in a 4.5% decrease and partial release of our valuation allowance, resulting in a 4.0% decrease.
We expect our revenue in the I&D market to be driven by the expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, industrial, automotive, scientific and medical applications, further supported by growth in applications for our multi-market catalog products.
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. 29 We expect our revenue in the I&D market to be driven by the expanding product portfolio that we offer which services applications such as test and measurement, satellite communications, civil and military radar, industrial, automotive, scientific and medical applications, further supported by growth in applications for our multi-market catalog products.
Selling, general and administrative expenses increased during fiscal year 2023 primarily due to an increase in acquisition-related professional fees, employee headcount, travel expense and software costs, partially offset by decreases in intangible amortization, share-based compensation expense and lower variable compensation. Interest income.
Selling, general and administrative expenses increased during fiscal year 2024 primarily due to increases in employee-related costs, primarily driven by headcount from acquisitions, and share-based compensation, partially offset by lower professional fees and intangible amortization. Interest income.
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.
Cash Flow from Financing Activities: During fiscal year 2024, our cash used in financing activities of $9.1 million was primarily related to $14.2 million of common stock withheld associated with employee taxes on vested equity awards, partially offset by $6.6 million of proceeds from stock option exercises and employee stock purchases.
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.
Share-based compensation expense 30 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.
In fiscal year 2023, income tax expense was $23.6 million, or 3.7% of revenue, compared to a benefit of $196.8 million, or 29.2% of revenue, for fiscal year 2022.
In fiscal year 2024, income tax expense was $14.7 million, or 2.0% of revenue, compared to an expense of $23.6 million, or 3.7% of revenue, for fiscal year 2023.
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.
In fiscal year 2024, interest income was $23.0 million, or 3.1% of our revenue, compared to $20.8 million of interest income, or 3.2% of our revenue, for fiscal year 2023. The change in fiscal year 2024 is primarily due to the general increase in interest rates on our short-term investments and due to the increase in our short-term investments.
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.
We expect our revenue in the Telecom market to be driven by 5G deployments, with continued upgrades and expansion of communications equipment, satellite communications networks and increasing adoption of our high-performance RF, millimeter wave, optical and photonic components.
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.
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 2024 2023 % Change Industrial & Defense $ 351,639 $ 317,128 10.9 % Data Center 197,875 146,982 34.6 % Telecom 180,064 184,297 (2.3) % Total $ 729,578 $ 648,407 12.5 % Industrial & Defense 48.2 % 48.9 % Data Center 27.1 % 22.7 % Telecom 24.7 % 28.4 % Total 100.0 % 100.0 % In fiscal year 2024, our I&D market revenue increased by $34.5 million, or 10.9%, compared to fiscal year 2023.
Revenue reserves We establish revenue reserves, primarily for distributor price adjustments, which requires the use of judgment and estimates that impact the amount and timing of revenue recognition. We record reductions of revenue for such distributor pricing adjustments in the same period that the related revenue is recorded based on estimates of historical pricing adjustments granted to distributors.
Revenue reserves We establish revenue reserves, primarily for product returns, price adjustments and stock rotations for products sold. Each revenue reserve requires the use of judgment and estimates that impact the amount and timing of revenue recognition. We record reductions of revenue for such reserve adjustments, in the same period that the related revenue is recorded.
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.
For additional information on the cash paid for our acquisitions, net of cash acquired, see Note 4 - Acquisitions to our Consolidated Financial Statements included in this Annual Report.
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.
Gross profit. In fiscal year 2024, our gross profit increased by $8.0 million, or 2.1%, compared to fiscal year 2023. Gross margin of 54.0% in fiscal year 2024 decreased 550 basis points, compared to fiscal year 2023.
The decrease was primarily due to a decrease in sales of legacy products partially offset by an increase in sales of our high performance analog Data Center products. Gross profit . In fiscal year 2022, our gross profit increased by $64.3 million, or 18.8%, compared to fiscal year 2021.
The increase was primarily driven by an increase in sales of 400G and 800G high-performance analog Data Center products, partially offset by a decrease in sales of our legacy connectivity products. In fiscal year 2024, our Telecom market revenue decreased by $4.2 million, or 2.3%, compared to fiscal year 2023.
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.
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.
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.
In fiscal year 2024, our revenue increased by $81.2 million, or 12.5%, to $729.6 million from $648.4 million for fiscal year 2023. Fiscal years 2024 and 2023 each consisted of 52 weeks.
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.
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. Liquidity As of September 27, 2024, we held $146.8 million of cash and cash equivalents, primarily deposited with financial institutions as well as $435.1 million of liquid short-term investments.
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.
The increase was primarily driven by revenue from recent acquisitions, partially offset by lower sales of legacy products for industrial markets. In fiscal year 2024, our Data Center market revenue increased by $50.9 million, or 34.6%, compared to fiscal year 2023.
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.
Research and development expense increased during fiscal year 2024 primarily as a result of increases in employee-related costs, driven by higher headcount associated with acquisitions, higher intangible asset amortization and share-based compensation expense. 33 Selling, general and administrative.
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.
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. The value of all assets and liabilities are recognized at fair value as of the acquisition date using a market participant approach.
(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.
For additional information related to our Liquidity and Capital Resources, see Note 15 - Debt to our Consolidated Financial Statements included in this Annual Report. Our other significant contractual payment obligations consist of purchase agreements and other commitments. We have purchase commitments of $151.1 million primarily related to services and inventory supply arrangements of which approximately $138.7 million is non-cancelable.
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.
The increase in gross profit during 2024 was primarily as a result of higher sales primarily driven by recent acquisitions, partially offset by product mix, increased employee-related costs, primarily driven by headcount from acquisitions, higher intangible asset amortization and depreciation expense. Research and development.
We believe the decision to reinvest these earnings will not have a significant impact on our liquidity.
The undistributed earnings of certain foreign subsidiaries are considered indefinitely reinvested for the periods presented and we do not intend to repatriate such earnings. We believe the decision to reinvest these earnings will not have a significant impact on our liquidity.
Adjustments to reconcile our net income to cash provided by operating activities of $216.3 million primarily included a gain of $200.4 million primarily related to the release of the valuation allowance, a net gain of $114.9 million related to the sale of our equity method investment offset by equity method investment losses, depreciation and intangible amortization expense of $57.2 million and share-based compensation expense of $41.2 million.
Adjustments to reconcile our net income to cash provided by operating activities of $116.8 million primarily included depreciation and intangible amortization expense of $67.2 million, share-based compensation expense of $45.6 million and deferred income tax expense of $4.9 million, partially offset by $7.6 million in amortization on marketable securities.
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.
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.
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.
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. 34 Cash Flow from Investing Activities: Our cash flow used in investing activities for fiscal year 2024 of $181.1 million consisted primarily of cash paid for acquisitions, net of cash acquired of $72.6 million, capital expenditures of $22.4 million, purchases of $426.6 million of short-term investments and other investing activities of $4.3 million, offset by proceeds of $344.8 million for the sale and maturities of short-term investments.
The change in the provision is primarily due to the $202.8 million partial release of the valuation allowance on our domestic NOL and R&D tax credit carryforwards and other deferred taxes in our fiscal fourth quarter of 2022. See Note 20 - Income Taxes to the Consolidated Financial Statements included in this Annual Report for additional information.
The decrease in the provision is primarily due to lower Income before taxes, the Foreign-derived intangible income deduction in the fiscal year ended September 27, 2024 plus a $3.6 million partial release of the valuation allowance, primarily relating to our domestic NOL and R&D tax credit carryforwards, released in our fiscal fourth quarter of 2024.
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.
The reserves are estimated based on the expected value method derived from historical data, current expectations and economic conditions, and contractual terms with customers, including distributors. The actual pricing adjustments granted may significantly exceed or be less than the historical estimates resulting in adjustments to revenue in the incorrect period.
Removed
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.
Added
The following section generally discusses our financial condition and results of operations for our fiscal year ended September 27, 2024 (“fiscal year 2024 ”) compared to our fiscal year ended September 29, 2023 (“fiscal year 2023”).
Removed
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.
Added
A discussion regarding our financial condition and results of operations for fiscal year 2023 compared to our fiscal year ended September 30, 2022 (“fiscal year 2022”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2023, filed with the Securities and Exchange Commission (the “SEC”) on November 13, 2023.
Removed
(3) Represents changes in the fair value of common stock warrants recorded as liabilities and adjusted each reporting period to fair value. See Note 18 - Stockholders' Equity to the Consolidated Financial Statements included in this Annual Report for additional information regarding the common stock warrants.
Added
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements.
Removed
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.
Added
The decrease was primarily driven by a decrease in sales in broadband access, PON, carrier-based optical semiconductor products and other telecom markets, partially offset by incremental revenue from recent acquisitions. We continue to be negatively impacted by the current macroeconomic conditions, which we expect may result in weaker near-term demand for our products across all three of our primary markets.
Removed
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
Holders of the 2026 Convertible Notes (as defined in Note 15 - Debt to the Consolidated Financial Statements included in this Annual Report) may convert their notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2025 in multiples of $1,000 principal amount, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to $106.76 for the notes on each applicable trading day.
Removed
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
We made an irrevocable election to pay cash for the principal amount of notes to be converted. The aggregate principal balance of the 2026 Convertible Notes is $450.0 million.
Removed
In fiscal year 2023, our Telecom market revenue decreased by $58.4 million, or 24.1%, compared to fiscal year 2022.
Removed
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
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.
Removed
Further information on the significant judgments related to its release can be found above in “Critical Accounting Policies and Estimates.” For fiscal year 2023, our effective tax rate was 20.5% and was comparable to the U.S. federal income tax rate of 21%.
Removed
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 .
Removed
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 2022 2021 % Change Telecom $ 242,702 $ 188,391 28.8 % Industrial & Defense 294,341 280,221 5.0 % Data Center 138,127 138,308 (0.1) % Total $ 675,170 $ 606,920 11.3 % Telecom 35.9 % 31.0 % Industrial & Defense 43.6 % 46.2 % Data Center 20.5 % 22.8 % Total 100.0 % 100.0 % In fiscal year 2022, our Telecom market revenue increased by $54.3 million, or 28.8%, compared to fiscal year 2021.
Removed
The increase was primarily driven by an increase in RF and microwave products for metro long haul broadband access and video infrastructure, products targeted for 5G applications and carrier-based optical semiconductor products. In fiscal year 2022, our I&D market revenue increased by $14.1 million, or 5.0%, compared to fiscal year 2021.
Removed
The increase was primarily related to new program wins and expansion of our product lines, partially offset by lower sales of legacy products. In fiscal year 2022, our Data Center market revenue decreased by $0.2 million, or 0.1%, compared to fiscal year 2021.
Removed
Gross margin of 60.2% in fiscal year 2022 increased 390 basis points, compared to fiscal year 2021. The increase in gross profit during 2022 was primarily as a result of higher sales, favorable revenue mix, production efficiencies, as well as decreases in intangible amortization expense, partially offset by increases in variable costs, production supplies, employee headcount and employee-related costs.
Removed
Research and development. In fiscal year 2022, research and development expense increased by $9.4 million, or 6.8%, to $148.2 million representing 22.0% of revenue, compared with $138.8 million, representing 22.9% of revenue in fiscal year 2021.
Removed
In fiscal year 2022, selling, general and administrative expenses increased by $3.3 million, or 2.7%, to $125.3 million, or 18.6% of revenue, compared with $122.0 million, or 20.1% of revenue, for fiscal year 2021.
Removed
Selling, general and administrative expenses increased during fiscal year 2022 primarily due to an increase in employee-related costs, share-based compensation expense and variable selling costs, partially offset by a decrease in intangible amortization. Warrant liability expense .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+3 added−1 removed4 unchanged
Biggest changeWe 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.
Biggest changeWe believe that a change in interest rates would not have a material impact on our results of operations, however, it could impact net income and earnings per share. We do not enter into financial instruments for trading or speculative purposes. The interest rates on our 2026 Convertible Notes are fixed and therefore not subject to 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.
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.
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.
For additional information regarding our 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.
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.
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 1% change in interest rates would have a $5.8 million impact on our interest income, based on cash and cash equivalents and short-term investments balances as of September 27, 2024.
Removed
In the future, we may enter into foreign currency exchange hedging contracts to reduce our exposure to changes in exchange rates. 36
Added
We have entered into foreign currency exchange hedging contracts to reduce the impact of foreign currency changes on certain intercompany foreign currency denominated debt. These foreign currency forward contracts are entered into for periods consistent with currency transaction exposures, generally one month.
Added
They are not designated as cash flow or fair value hedges under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging . These forward contracts are marked-to-market with changes in fair value recorded to earnings. As of September 27, 2024, we had $34.4 million in notional forward foreign currency contracts, which were denominated in Euro and Yen.
Added
These forward contracts had a fair value of $0.1 million as of September 27, 2024. 36

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