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What changed in SEMTECH CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SEMTECH CORP'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.

+489 added−418 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-30)

Top changes in SEMTECH CORP's 2024 10-K

489 paragraphs added · 418 removed · 297 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

71 edited+11 added−19 removed46 unchanged
Biggest changeOur net sales by major end market as a percentage of total net sales are detailed below: Fiscal Years (percentage of net sales) 2023 2022 2021 Infrastructure 38 % 35 % 42 % High-End Consumer 21 % 30 % 27 % Industrial 41 % 35 % 31 % Total 100 % 100 % 100 % We believe that our diversity in end markets provides stability to our business and opportunity for growth. 9 The following table depicts our main product lines and their end market and product applications: Typical End Product Applications Product Groups Infrastructure High-End Consumer Industrial Signal Integrity Optical module ICs supporting up to 400Gb/s for Ethernet, Fibre Channel protocols in data center and access applications, and 4G/5G/LTE wireless applications Serial Digital Interconnect interface ICs for Broadcast Video, Video over IP technology for Pro AV applications Advanced Protection and Sensing Servers, workstations, desktop PC/notebooks, ultrabooks, optical modules, printers, copiers, 4G/5G/LTE base stations, 1/10 Gb/s Ethernet Smartphones, media players, tablets, wearables, cameras, TVs, set top boxes, and high end audio Industrial automation, measurement & instrumentation, automotive, IoT, and hearing aids IoT System IoT, Industrial Asset Monitoring, Tracking & Logistics, Smart Metering, Smart Home, Smart Building / City, Smart Agriculture, and Power Management IoT Connected Services IoT, Industrial Asset Monitoring and Control, Tracking & Logistics, Smart Metering, Smart Home, Smart Building / City, Smart Agriculture, and Healthcare Seasonality Our net sales are subject to some seasonal variation.
Biggest changeThe following table depicts our main product lines and their end market and product applications: Typical End Product Applications Product Groups Infrastructure High-End Consumer Industrial Signal Integrity Optical and copper module ICs supporting up to 1.6Tb/s for Ethernet, Fibre Channel protocols in data center and broadband access applications, and 4G/5G/LTE wireless applications Serial Digital Interconnect interface ICs for Broadcast Video Analog Mixed Signal and Wireless Servers, workstations, desktop PC/notebooks, ultrabooks, optical modules, printers, copiers, 4G/5G/LTE base stations, 1/10 Gb/s Ethernet Smartphones, media players, tablets, wearables, cameras, TVs, set top boxes and high end audio Industrial automation, measurement & instrumentation, automotive, hearing aids, IoT, Industrial Asset Monitoring, Tracking & Logistics, Smart Metering, Smart Home, Smart Building, Smart City, Smart Agriculture, and Power Management, Audio Video over IP for Pro AV applications IoT Systems IoT, Industrial Asset Monitoring, Tracking & Logistics, Smart Metering, Smart Home, Smart Building, Smart City, Smart Agriculture, and Power Management IoT Connected Services IoT, Industrial Asset Monitoring and Control, Tracking & Logistics, Smart Metering, Smart Home, Smart Building, Smart City, Smart Agriculture, and Healthcare Seasonality Our net sales are subject to some seasonal variation.
Additionally, there has been a trend toward consolidation in the semiconductor industry as companies attempt to strengthen or hold their market positions in an evolving industry. Such consolidations may make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, channel coverage, technology or product functionality.
Additionally, there has been a 11 trend toward consolidation in the semiconductor industry as companies attempt to strengthen or hold their market positions in an evolving industry. Such consolidations may make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, channel coverage, technology or product functionality.
We believe that a compensation program that rewards employees both for short-term and long-term performance aligns employees' and our stockholders' interests. Health and Well-being We provide access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health through tools and resources to help them maintain and improve their health status.
We believe that a compensation program that rewards employees both for short-term and long-term performance aligns employees' and our stockholders' interests. Health and Well-being We provide access to a variety of flexible and convenient health and welfare programs, including benefits that support physical and mental health through tools and resources to help employees maintain and improve their health status.
We also employ a number of software engineers and systems engineers that specialize in the development of software and systems architecture, who enable us to develop systems oriented products in select markets. Our IoT business also employs specialized engineering teams skilled in the areas of radio design, hardware design, embedded software design cloud-based application development and cellular network design.
We also employ a number of software engineers and systems engineers 12 that specialize in the development of software and systems architecture, who enable us to develop systems oriented products in select markets. Our IoT business employs specialized engineering teams skilled in the areas of radio design, hardware design, embedded software design cloud-based application development and cellular network design.
We continue our focus on improving our hiring, development, advancement and retention of diverse talent and our overall diversity representation. We continuously promote inclusion through our stated core values and principles. We provide training to all employees to improve their understanding of behaviors that can be perceived as discriminatory, exclusionary, and/or harassing.
We continue our focus on improving our hiring, development, advancement and retention of diverse talent and our overall diversity representation. 13 We continuously promote inclusion through our stated core values and principles. We provide training to all employees to improve their understanding of behaviors that can be perceived as discriminatory, exclusionary, and/or harassing.
Registration generally provides rights in addition to basic trademark protections and is typically renewable upon proof of continued use. We have registered, or are in the process of registering, our SEMTECH and other trademarks in many jurisdictions. In one location the SEMTECH 13 trademark is prohibited, but we are permitted to use our Semtech International trade name.
Registration generally provides rights in addition to basic trademark protections and is typically renewable upon proof of continued use. We have registered, or are in the process of registering, our SEMTECH and other trademarks in many jurisdictions. In one location the SEMTECH trademark is prohibited, but we are permitted to use our Semtech International trade name.
We continue to benchmark and enhance our total compensation and benefits packages across the 16 countries in which our offices are located. Talent Our talent strategy involves our efforts to achieve an optimal balance of internal development, supplemented by external hires. This approach contributes to and enhances our employee loyalty and commitment.
We continue to benchmark and enhance our total compensation and benefits packages across the countries in which our offices are located. Talent Our talent strategy involves our efforts to achieve an optimal balance of internal development, supplemented by external hires. This approach contributes to and enhances our employee loyalty and commitment.
Continue to release proprietary new products, achieve new design wins and cross-sell products We are focused on developing unique, new, and proprietary products that bring value to our target customers in our target markets. These products are typically differentiated in performance but are priced competitively. We also focus on achieving design wins for our products with current and future customers.
Continue to release new products, achieve new design wins and cross-sell products We are focused on developing unique products that bring value to our target customers in our target markets. These products are typically differentiated in performance but are priced competitively. We also focus on achieving design wins for our products with current and future customers.
Our compensation program is designed to attract, reward and retain those highly-talented individuals who possess the critical skills necessary to support our business objectives, contribute to the achievement of 14 our annual strategic goals and create long-term value for our stockholders.
Our compensation program is designed to attract, reward and retain those highly-talented individuals who possess the critical skills necessary to support our business objectives, contribute to the achievement of our annual strategic goals and create long-term value for our stockholders.
We intend to leverage our pool of skilled technical personnel to develop new products or, where appropriate, use strategic acquisitions or small strategic investments to either accelerate our position in the fastest growing areas or to gain entry into these areas.
We intend to leverage our pool of skilled technical personnel to develop new products 6 or, where appropriate, use strategic acquisitions or small strategic investments to either accelerate our position in the fastest growing areas or to gain entry into these areas.
Semiconductor Industry The semiconductor industry is characterized by decreasing average unit selling prices over the life of a product as the volumes typically increase. However, price decreases can sometimes be quite rapid and faster than the rate of increase of the associated product volumes.
Semiconductor Industry The semiconductor industry is characterized by decreasing average unit selling prices over the life of a product and as volumes increase. However, price decreases can sometimes be quite rapid and faster than the rate of increase of the associated product volumes.
Our net sales also have been affected by the cyclical nature of the semiconductor industry, and typically the fourth fiscal quarter tends to be softer in demand as compared to our other fiscal quarters.
Our net sales also have been affected by the cyclical nature of the semiconductor industry, and typically the fourth fiscal quarter tends to be softer in demand as compared to our other fiscal 9 quarters.
A significant amount of our third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in the United States ("U.S."), Taiwan, China, Vietnam and Malaysia .
A significant amount of our third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in the United States ("U.S."), China, Taiwan and Vietnam .
Our protection products can be found in a broad range of applications including smart phones, LCD and organic light-emitting diode TVs and displays, set-top boxes, monitors and displays, tablets, computers, notebooks, base stations, routers, automobile and industrial systems. Our unique sensing technology enables proximity sensing and advanced user interface solutions for our mobile and consumer products. IoT System.
Our protection products can be found in a broad range of applications including smart phones, LCD and organic light-emitting diode TVs and displays, set-top boxes, monitors and displays, tablets, computers, notebooks, base stations, routers, automobile and industrial systems. Our unique sensing technology enables proximity sensing and advanced user interface solutions for our mobile and consumer products.
Although our products are made from basic materials (principally silicon, metals and plastics), all of which are available from a number of suppliers, capacity at wafer foundries sometimes becomes constrained. The limited availability of certain materials, such as silicon wafer substrates, may impact our suppliers’ ability to meet our demand needs or impact the price we are charged.
Although our products are made from basic materials (principally silicon, metals and plastics), all of which are available from a number of suppliers, capacity at wafer foundries sometimes becomes constrained. In addition, the limited availability of certain materials, such as silicon wafer substrates, may impact our suppliers’ ability to meet our demand needs or impact the price we are charged.
Our cloud and connectivity services are a strategic differentiator of our integrated device to cloud IoT solutions offering. We have our own Smart SIM pre-integrated into our devices. Depending on the customers served, our competitors include mobile network operators and other companies who operate mobile virtual network operators or cloud platforms for the IoT market.
Our cloud and connectivity services are a strategic differentiator of our integrated device to cloud IoT solutions offering. We have our own Smart Connectivity pre-integrated into our devices. Depending on the customers served, our competitors include mobile network operators and other companies who operate mobile virtual networks or cloud platforms for the IoT market.
Some of our competitors are large corporations with manufacturing scale and financial resources at their disposal, while others are small. However, we believe that our innovation, deep expertise in wireless IoT communications, and the ability to provide an integrated end-to-end IoT solution to our customers with security features gives us an opportunity to differentiate ourselves.
Some of our competitors are large corporations with manufacturing scale and financial resources at their disposal, while others are small, but emerging enterprises. However, we believe that our innovation, deep expertise in wireless IoT communications, and the ability to provide an integrated end-to-end IoT solution to our customers with security features gives us an opportunity to differentiate ourselves.
IoT interoperability and standardization are important as the number of connected devices continues to grow, and it is essential that these devices are able to communicate with each other seamlessly, regardless of the underlying technology or platform. 6 We see enormous potential in the IoT market, particularly in verticals such as metering, connected places and asset tracking.
IoT interoperability and standardization are important as the number of connected devices continues to grow, and it is essential that these devices are able to communicate with each other seamlessly, regardless of the underlying technology or platform. We see substantial potential in the IoT market, particularly in verticals such as metering, connected places and asset tracking.
Our end products were supported with finished silicon wafers purchased from third-party wafer foundries primarily located in the U.S., Taiwan and China . Despite our use of third-party wafer foundries for sourcing our silicon needs, we do maintain internal process development capabilities. Our process engineers work closely with our third-party foundries on the improvement and development of process capabilities.
Our end products were supported with finished silicon wafers purchased from third-party wafer foundries primarily located in the U.S., China and Taiwan . Though we use third-party wafer foundries for sourcing our silicon needs, we maintain internal process development capabilities. Our process engineers work closely with our third-party foundries on the improvement and development of process capabilities.
Current key trends in IoT include: (i) the increasing adoption of edge computing, spurred by the need for real-time data processing and the desire to reduce latency and improve access to information; and (ii) the focus on security and data privacy as more devices become connected, the risk of cyber-attacks and data breaches increases, resulting in needed implementation of robust security measures across the entire IoT ecosystem.
Current key trends in IoT include: (i) the increasing adoption of edge computing, spurred by the need for real-time data processing and the desire to reduce latency and improve access to information; and (ii) the focus on security and data privacy as more devices become connected, the risk of cybersecurity incidents and data breaches increases, resulting in needed implementation of robust security measures across the entire IoT ecosystem.
Our ability to recruit and retain our engineering talent is one of the keys to maintaining our competitive advantage. Historically, we have been successful in retaining our key engineering staff and recruiting new talent. One of our strategies to recruit talent is the establishment of multiple design center locations. As a result, we have design centers throughout the world.
Our ability to recruit and retain our engineering talent is one of the keys to maintaining our competitive advantage. Historically, we have been successful in retaining our key engineering staff and recruiting new talent. One of our strategies to recruit talent is the establishment of multiple design center locations and we have design centers throughout the world.
Compensation Our pay-for-performance philosophy incentivizes individual and team performance that directly contributes to the achievement of company objectives. We provide compensation packages that include a competitive base salary, annual incentive bonuses, and long-term equity awards, as appropriate.
Compensation Our pay-for-performance philosophy incentivizes individual and team performance that directly contributes to the achievement of company objectives. We provide compensation packages that include a competitive base salary, annual incentive bonus opportunities, and long-term equity awards, as appropriate.
The portfolio includes a wide range of modules, gateways, routers, and connected services that are designed to meet the specific needs of different industries and applications. Sierra Wireless' modules are available in a variety of form factors and connectivity options, including LTE-M, NB-IoT, 5G, and LoRa®, and can be integrated into an array of devices and systems.
The portfolio includes a wide range of modules, gateways, routers, and connected services that are designed to meet the specific needs of different industries and applications. Our modules are available in a variety of form factors and connectivity options, including LTE-M, NB-IoT and 5G, and can be integrated into an array of devices and systems.
Risk Factors - Risks Relating to Production Operations and Services - We rely on a limited number of suppliers and subcontractors, many of which are foreign-based entities, for many essential components and materials and certain critical manufacturing services and any interruption or loss of supplies or services from these entities could significantly interrupt our business operations and the production of our products.” and "Item 1A.
Risk Factors - Risks Relating to Production Operations and Services - We rely on a limited number of suppliers and subcontractors, many of which are based outside the U.S., for many essential components and materials and certain critical manufacturing services and any interruption or loss of supplies or services from these entities could significantly interrupt our business operations and the production of our products." and "Item 1A.
Our reports filed with, or furnished to, the SEC are also available directly at the SEC’s website at www.sec.gov. 15
Our reports filed with, or furnished to, the SEC are also available directly at the SEC’s website at www.sec.gov. 14
Circuit design engineers, layout engineers, product and test engineers, application engineers, and field application engineers are our most valuable employees. Together they perform the critical tasks of design and layout of ICs and other products, turning these circuits into silicon devices, and conferring with customers about designing these devices into their applications.
Circuit design engineers, layout engineers, product and test engineers, application engineers, and field application engineers are key employees. Together they perform the critical tasks of design and layout of ICs and other products, turning these circuits into silicon devices, and conferring with customers about designing these devices into their applications.
As of the end of fiscal year 2023, our average employee tenure is 7.0 years, reflecting the strong engagement of our employees. As new employees continue to join Semtech, we expect their contributions to bring fresh ideas to help drive innovation and continuous improvement.
As of the end of fiscal year 2024, our average employee tenure is 8 years, reflecting the strong engagement of our employees. As new employees continue to join Semtech, we expect their contributions to bring fresh ideas to help drive innovation and continuous improvement.
Divestiture On May 3, 2022, we completed the divestiture of our high reliability discrete diodes and assemblies business (the “Disposal Group”) to Micross Components, Inc. for $26.2 million, net of cash disposed, in an all-cash transaction. For additional information on the divestiture, see Note 3, Acquisition and Divestiture, to our Consolidated Financial Statements.
For more information, see Note 3, Acquisition and Divestiture, to our Consolidated Financial Statements. 8 Divestiture On May 3, 2022, we completed the divestiture of our high reliability discrete diodes and assemblies business (the "Disposal Group") to Micross Components, Inc. for $26.2 million, net of cash disposed, in an all-cash transaction.
Intellectual Property and Licenses We have been granted 306 U.S. patents and 440 foreign patents and have numerous patent applications pending with respect to our products and to technologies associated with our business. The expiration dates of issued patents range from 2023 to 2041.
Intellectual Property and Licenses We have been granted 292 U.S. patents and 493 foreign patents and have numerous patent applications pending with respect to our products and to technologies associated with our business. The expiration dates of issued patents range from 2024 to 2042.
We operate and account for results in four reportable segments—Signal Integrity, Advanced Protection and Sensing, IoT System, and IoT Connected Services—that represent four separate operating segments (see Note 16, Segment Information, to our Consolidated Financial Statements). Signal Integrity.
We operate and account for results in four reportable segments—Signal Integrity, Analog Mixed Signal and Wireless, IoT Systems, and IoT Connected Services—that represent four separate operating segments (see Note 16, Segment Information, to our Consolidated Financial Statements). Signal Integrity.
Concentration of Net Sales - Significant Customers The following table sets forth the concentration of sales among the customers that accounted for more than 10% of our net sales in at least one of the fiscal years 2023, 2022 and 2021: Fiscal Years (percentage of net sales) 2023 2022 2021 Trend-tek Technology Ltd.
Concentration of Net Sales - Significant Customers The following table sets forth the concentration of sales among the customers that accounted for more than 10% of our net sales in one or more of the periods indicated: Fiscal Years (percentage of net sales) (1) 2024 2023 2022 Trend-tek Technology Ltd.
The market for intelligent wireless routers is quite fragmented depending on the vertical market segment, customer base and level of competition. In the segments where we compete, we believe that our market share is strong, and that competition is intensifying.
Our competitors in this line of business are specialized manufacturers of wireless communication modules and solutions. The market for intelligent wireless routers is quite fragmented depending on the vertical market segment, customer base and level of competition. In the segments where we compete, we believe that our market share is strong, and that competition is intensifying.
We believe that outsourcing our manufacturing provides us numerous benefits, including capital efficiency, the flexibility to adopt and leverage emerging process technologies without significant investment risk, and a more variable cost of goods, all of which provide us with greater operating flexibility. 7 Build new IoT solutions that combine Cellular and LoRa® technology Our strategy is to bring the best of LoRa® and cellular connectivity together.
We believe that outsourcing our manufacturing provides us numerous benefits, including capital efficiency, the flexibility to adopt and leverage emerging process technologies without significant investment risk, and a more variable cost of goods, all of which provide us with greater operating flexibility.
Another difference between the analog and digital markets is the amount of available talented labor. The analog industry relies more heavily than the digital industry on design and applications talent to distinguish its products from one another.
The end-product markets for analog and mixed-signal semiconductors are more varied and more specialized than the relatively standardized digital semiconductor product markets. Another difference between the analog and digital markets is the amount of available talented labor. The analog industry relies more heavily than the digital industry on design and applications talent to distinguish its products from one another.
As a result, we maintain some amount of business interruption insurance in part to help reduce the financial risk associated with a wafer supply interruption, but we are not fully insured against this risk.
While we maintain some amount of business interruption insurance to reduce the financial risk associated with supply or service interruption, but we are not fully insured against this risk.
In addition, analog semiconductor manufacturers tend to have lower capital investment requirements for manufacturing because their facilities tend to be less dependent than digital producers on state-of-the-art production equipment to manufacture leading edge process technologies. The end-product markets for analog and mixed-signal semiconductors are more varied and more specialized than the relatively standardized digital semiconductor product markets.
The analog and mixed-signal industry is typically characterized by longer product life cycles than the digital industry. In addition, analog semiconductor manufacturers tend to have lower capital investment requirements for manufacturing because their facilities tend to be less dependent than digital producers on state-of-the-art production equipment to manufacture leading edge process technologies.
We maintain an export compliance program under which we screen export transactions against applicable 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.
Failure to comply with these laws could result in governmental sanctions, including substantial monetary penalties and denial of export privileges. We maintain an export compliance program under which we screen export transactions against applicable 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.
In fiscal year 2023, we used various manufacturing processes, including Bipolar, CMOS, RF-CMOS and Silicon Germanium BiCMOS processes. Our IoT System products are designed internally. We maintain management of design engineering, software engineering, manufacturing engineering and manufacturing test development.
We use various manufacturing processes, including Bipolar, CMOS, RF-CMOS and Silicon Germanium BiCMOS processes. Our IoT Systems products designs are managed internally. We maintain management of design engineering, software engineering, manufacturing engineering and manufacturing test development.
We have installed our own test equipment at some of our packaging and testing subcontractors in order to ensure a certain level of capacity, assuming the subcontractor has ample employees to operate the equipment.
We have operations offices located in Canada, China, Malaysia and Vietnam that support and coordinate some of the worldwide shipment of products. We have installed our own test equipment at some of our packaging and testing subcontractors in order to ensure a certain level of capacity, assuming the subcontractor has ample employees to operate the equipment.
There were 1,064 employees in research and development, 314 employees in operations, and 870 employees in selling, general and administrative, including functions that support operational activities. Our focus on innovation gives us a unique appreciation to the importance of recruitment, retention and the professional development of our employees.
As of January 28, 2024, we had 952 employees in research and development, 255 employees in operations, and 710 employees in selling, general and administrative, including functions that support operational activities. Our focus on innovation gives us a unique appreciation to the importance of recruitment, retention and the professional development of our employees.
While we do have some redundancy of fabrication processes by using multiple third-party foundries, any interruption of supply by one or more of these foundries could materially impact us.
While we do have some redundancy of fabrication, assembly and test and EMS processes by using multiple sources, any interruption by one or more of these outsource providers could materially impact us.
Our products provide robust protection while preserving signal integrity in high-speed communications, networking and video interfaces. These products also operate at very low voltage.
Our portfolio of protection solutions include filter and termination devices that are integrated with the TVS device. Our products provide robust protection while preserving signal integrity in high-speed communications, networking and video interfaces. These products also operate at very low voltage.
We design, develop, manufacture and market a portfolio of optical data communications and video transport products used in a wide variety of infrastructure and industrial applications.
We also design, develop, manufacture and market a portfolio of specialized radio frequency products used in a wide variety of industrial, medical and communications applications.
Mixed-signal devices incorporate both analog and digital functions into a single chip and provide the ability for digital electronics to interface with the outside world. The market for analog and mixed-signal semiconductors differs from the market for digital semiconductors. The analog and mixed-signal industry is typically characterized by longer product life cycles than the digital industry.
Digital semiconductors process binary information, such as that used by computers. Mixed-signal devices incorporate both analog and digital functions into a single chip and provide the ability for digital electronics to interface with the outside world. The market for analog and mixed-signal semiconductors differs from the market for digital semiconductors.
Diversity and Inclusion We are committed in our efforts to increase diversity and foster an inclusive work environment that supports our global workforce and helps us provide innovative solutions for our customers. Our Semtech Women's Leadership Council provides a forum to elevate and empower our female employees through collaboration, education, inspiration and peer support.
Diversity and Inclusion We are committed in our efforts to increase diversity and foster an inclusive work environment that supports our global workforce and helps us provide innovative solutions for our customers.
(and affiliates) 11 % 11 % 11 % Arrow Electronics (and affiliates) 8 % 10 % 9 % Concentration of Accounts Receivable - Significant Customers The following table shows customers that had an outstanding receivable balance that represented at least 10% of our total net receivables as of one or more of the dates indicated: (percentage of net receivables) January 29, 2023 January 30, 2022 Frontek Technology Corporation (and affiliates) 8 % 17 % CEAC International Ltd.
Concentration of Accounts Receivable - Significant Customers The following table shows customers that had an outstanding receivable balance that represented at least 10% of our total net receivables as of one or more of the dates indicated: (percentage of net receivables) (1) January 28, 2024 January 29, 2023 Frontek Technology Corporation (and affiliates) 15 % * (1) In each period with an asterisk, the customer represented less than 10% of the Company's net receivables.
We intend to utilize our hardware, software and application engineering, marketing and sales talent to become a truly diversified market leader. Products and Technology We design, develop, manufacture and market high-performance analog and mixed-signal semiconductors and advanced algorithms as well as wireless semiconductors, connectivity modules, gateways, routers and connected services for IoT.
Products and Technology We design, develop and market high-performance analog and mixed-signal semiconductors and advanced algorithms, as well as wireless semiconductors, connectivity modules, gateways, routers and connected services for IoT.
Risk Factors - Risks Relating to Production Operations and Services - Our ability to increase product sales and revenue may be constrained by the manufacturing capacity of our suppliers." Our arrangements with both third-party wafer foundries and package and test subcontractors are designed to provide some assurance of capacity but are not expected to assure access to all the manufacturing capacity we may need in the future. 12 Competition The semiconductor and IoT industries are highly competitive, and we expect competitive pressures to continue.
Risk Factors - Risks Relating to Production Operations and Services - Our ability to increase product sales and revenue may be constrained by the manufacturing capacity of our suppliers." Competition The semiconductor and IoT industries are highly competitive, and we expect competitive pressures to continue.
Human Capital As of January 29, 2023, our year-over-year headcount increased from 1,439 to 2,248 full-time employees worldwide, of whom 1,685 employees were based outside of the U.S. The increase in headcount was primarily related to the acquisition of Sierra Wireless in January 2023.
Human Capital As of January 28, 2024, our year-over-year headcount decreased from 2,248 to 1,917 full-time employees worldwide, of whom 1,457 employees were based outside of the U.S.
We design, develop, manufacture and market a portfolio of specialized radio frequency products used in a wide variety of industrial, medical and communications applications. Our wireless products, which include our LoRa® devices and wireless radio frequency technology ("LoRa Technology"), feature industry leading and longest range industrial, scientific and medical radio, enabling a lower total cost of ownership and increased reliability.
Our wireless products, which include our LoRa® devices and wireless radio frequency technology ("LoRa Technology"), feature industry leading and longest range industrial, scientific and medical radio, enabling a lower total cost of ownership and increased reliability. These features make these products particularly suitable for machine-to-machine and IoT applications.
We have direct sales personnel located throughout North America, Europe, and Asia-Pacific who manage the sales activities of independent sales representative firms and independent distributors. We expense our advertising costs as they are incurred. We operate internationally through our foreign subsidiaries. Semtech (International) AG and certain other foreign subsidiaries serve the European and Asian markets.
We have direct sales personnel located throughout North America, Europe and Asia-Pacific who manage the sales activities of independent sales representative firms and independent distributors. We expense our advertising costs as they are incurred. We are a global business with customers and suppliers around the world.
Item 1. Business Completion of Acquisition On January 12, 2023, we, through one of our wholly-owned subsidiaries, completed the acquisition of all the issued and outstanding common shares of Sierra Wireless, Inc., a corporation existing under the Canada Business Corporations Act ("Sierra Wireless"), in an all-cash transaction representing a total purchase consideration of approximately $1.3 billion.
On January 12, 2023, we completed the acquisition of all of the issued and outstanding common shares of Sierra Wireless, Inc. ("Sierra Wireless") in an all-cash transaction representing a total purchase consideration of approximately $1.3 billion (the "Sierra Wireless Acquisition"). The transaction was accounted for as a business combination and the purchase price allocation was finalized during fiscal year 2024.
Overview of the Semiconductor and IoT Industries The semiconductor industry is broadly divided into analog and digital semiconductor products. Analog semiconductors condition and regulate "real world" functions such as temperature, speed, sound and electrical current. Digital semiconductors process binary information, such as that used by computers.
Our IoT module, router, gateways and managed connectivity solutions ship to IoT device makers, enterprises and solution providers to provide IoT connectivity to end devices. Overview of the Semiconductor and IoT Industries The semiconductor industry is broadly divided into analog and digital semiconductor products. Analog semiconductors condition and regulate "real world" functions such as temperature, speed, sound and electrical current.
TVS devices provide protection for electronic systems where voltage spikes (called transients), such as electrostatic discharge, electrical over stress or secondary lightning surge energy, can permanently damage sensitive ICs. Our portfolio of protection solutions include filter and termination devices that are integrated with the TVS device.
We design, develop, manufacture and market high-performance protection devices, which are often referred to as transient voltage suppressors ("TVS") and specialized sensing products. TVS devices provide protection for electronic systems where voltage spikes (called transients), such as electrostatic discharge, electrical over stress or secondary lightning surge energy, can permanently damage sensitive ICs.
We are monitoring general economic conditions, including recessions or inflationary pressures, bank failures and uncertainty in the banking system, geopolitical turmoil and supply chain disruptions, on our suppliers and third-party subcontractors and cannot determine the extent of the impact they may have on our operations. See “Item 1A.
While we monitor general economic conditions, including recessions or inflationary pressures, bank failures and uncertainty in the banking system, geopolitical turmoil and supply chain disruptions, and their potential impact on our suppliers and third-party subcontractors, we may be unable to prevent or mitigate the effect of these conditions on our suppliers or find alternate sources of supply, which may impact our operations and ability to meet the demands of our customers.
The EMS partners manufacture our IoT System products from surface-mount technology ("SMT") assembly to product assembly, which includes product testing and configuration. We believe this outsourcing permits us to take advantage of the best available technology, leverage the capital investment of others and reduce our operating costs associated with manufacturing assets.
We believe this outsourcing permits us to take advantage of the best available technology, leverage the capital investment of others and reduce our operating costs associated with manufacturing assets. 10 In keeping with our "fabless" business model, we have no wafer fabrication facilities.
Some of our distributors and sales representatives also offer products from our competitors, as is customary in the industry. 10 Customers, Sales Data and Backlog As a result of the breadth of our products and markets, we have a broad and balanced range of customers. Representative Customers by End Markets: Infrastructure High-End Consumer Industrial Accelink Technologies Corporation Future Electronics Inc.
Customers, Sales Data and Backlog As a result of the breadth of our products and markets, we have a broad and balanced range of customers. Our customers include major OEMs, Solution Providers, and their subcontractors in the infrastructure, high-end consumer and industrial end markets.
High-End Consumer: smartphones, tablets, wearables, desktops, notebooks, and other handheld products, wireless charging, set-top boxes, digital televisions, monitors and displays, digital video recorders and other consumer equipment. Industrial: IoT applications, analog and digital video broadcast equipment, video-over-IP solutions, automated meter reading, smart grid, wireless charging, medical, security systems, automotive, industrial and home automation and other industrial equipment.
Industrial: IoT applications, analog and digital video broadcast equipment, video-over-IP solutions, automated meter reading, smart grid, wireless charging, medical, security systems, automotive, industrial and home automation and other industrial equipment. Our end customers for our silicon solutions are primarily original equipment manufacturers ("OEMs") that produce and sell technology solutions.
These features make these products particularly suitable for machine-to-machine and IoT applications. We also design, develop, and market power product devices that control, alter, regulate, and condition the power within electronic systems focused on the LoRa® and IoT infrastructure segment.
We also design, develop, and market power product devices that control, alter, regulate, and condition the power within electronic systems focused on the LoRa® and IoT infrastructure segment. The highest volume product types within this category are switching voltage regulators, combination switching and linear regulators, smart regulators, isolated switches, and wireless charging.
In markets where the end system life cycles are relatively short, customers typically request delivery in four to eight weeks. A backlog analysis at any given time gives little indication of our future business except on a short-term basis, principally within the next 45 days. We do not have any significant backlog with deliveries beyond 18 months.
In markets where the end system life cycles are relatively short, customers typically request delivery in four to eight weeks. We do not have any significant backlog with deliveries beyond 18 months. Manufacturing Capabilities Our strategy is to outsource most of our manufacturing functions to third-party foundries, assembly and test contractors and electronics manufacturing services ("EMS") partners.
In addition to our development and production facilities in Colorado Springs, Colorado, which provide assembly services for a majority of our very small form factor protection devices, we use third-party subcontractors to perform almost all of our other assembly and test operations.
In most cases, we do not procure these materials ourselves, but we are nevertheless reliant on these materials for producing our products because our third-party foundry and package and test subcontractors must procure them. Our development and production facilities in Colorado Springs, Colorado provide assembly and services for a portion of our very small form factor protection devices.
We design, develop, manufacture and market a wide range of products for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets. Infrastructure: data centers, passive optical networks ("PON"), base stations, optical networks, servers, carrier networks, switches and routers, cable modems, wireless local area network ("LAN") and other communication infrastructure equipment.
Infrastructure: data centers, passive optical networks ("PON"), base stations, optical networks, servers, carrier networks, switches and routers, cable modems, wireless local area network ("LAN") and other communication infrastructure equipment. High-End Consumer: smartphones, tablets, wearables, desktops, notebooks, and other handheld products, wireless charging, set-top boxes, digital televisions, monitors and displays, digital video recorders and other consumer equipment.
We perform a limited amount of internal probe and final test activities at our facilities in Camarillo, Irvine and San Diego in California, and Neuchâtel in Switzerland. These activities accommodate situations in which tight coupling with product design is desirable or where there are unique requirements.
These activities accommodate situations in which tight coupling with product design is desirable or where there are unique requirements. We use third-party subcontractors to perform almost all of our other assembly and test operations and a majority of our assembly and test activity is conducted by third-party subcontractors located in China, Malaysia, Mexico, Taiwan and Vietnam.
Manufacturing Capabilities Our strategy is to outsource most of our manufacturing functions to third-party foundries, assembly, test contractors and electronics manufacturing services ("EMS") partners. The third-party foundries fabricate silicon wafers, while the assembly and test contractors package and test our products.
Third-party foundries fabricate silicon wafers, while assembly and test contractors package and test our products. EMS partners manufacture our IoT Systems products from surface-mount technology ("SMT") assembly to product assembly, which includes product testing and configuration.
Our comprehensive portfolio of integrated circuits ("ICs") for data centers, enterprise networks, PON, and wireless base station optical transceivers and high-speed interfaces ranges from 100Mbps to 400Gbps and supports key industry standards such as Fibre Channel, Infiniband, Ethernet, PON and synchronous optical networks.
Our high-speed interfaces range from 100Mbps to 1.6Tbps and support key industry standards such as Fibre Channel, Infiniband, 7 Ethernet, PON and synchronous optical networks. Our video products offer advanced solutions for next generation high-definition broadcast applications. Analog Mixed Signal and Wireless.
Our services have been purpose-built for IoT applications and include features such as SIM and subscription management, device and data management, geolocation support, as well as reporting and alerting that can be configured or tailored to a variety of IoT use cases. 8 Our net sales by product line were as follows: Fiscal Years (in thousands) 2023 2022 2021 Signal Integrity $ 304,124 $ 291,114 $ 255,640 Advanced Protection and Sensing 236,890 306,932 243,085 IoT System 210,326 142,812 96,392 IoT Connected Services 5,193 — — Total $ 756,533 $ 740,858 $ 595,117 Recent Acquisitions and Divestitures Acquisition of Sierra Wireless, Inc.
Our services have been purpose-built for IoT applications and include features such as SIM and subscription management, device and data management, geolocation support, as well as reporting and alerting that can be configured or tailored to a variety of IoT use cases. Our net sales by operating segment are detailed in the table below.
Sales and Marketing Net sales made directly to custome rs during fiscal years 2023, 2022 and 2021, were approximately 15%, 13% and 18% of total net sales, respectively. The remaining 85%, 87% and 82% of net sales, respectively, were made through independent distributors.
Sales and Marketing Net sales made through independent distributors during fiscal years 2024, 2023 and 2022 were 66%, 85% and 87%, respectively, and the remainder were made directly to customers. The lower percentage of distributor sales in fiscal year 2024 primarily relates to sales channels associated with the Sierra Wireless business, which we acquired in January 2023.
In fiscal years 2023, 2022 and 2021, sales in the U.S. represented 13%, 10% and 10% of our sales, r espectively, while foreign sales represented 87%, 90% and 90% of our sales, respectively . Sales to customers located in China (including Hong Kong) and South Korea comprised 53% and 5% of our sales, respectively, in fiscal year 2023.
Net sales to customers located in China (including Hong Kong), Japan, Taiwan, Singapore and Australia comprised 32%, 6%, 6%, 5% and 5% of our net sales, respectively, in fiscal year 2024. No other geography outside the U.S. comprised more than 5% of our sales in fiscal year 2024.
The highest volume product types within this category are switching voltage regulators, combination switching and linear regulators, smart regulators, isolated switches, and wireless charging. We also offer a comprehensive product portfolio of IoT solutions that enable businesses to connect and manage their devices, collect and analyze data, and improve decision-making.
Our video products offer advanced solutions for highly differentiated audio video-over-IP technology for professional audio video ("Pro AV") applications. IoT Systems. We design, develop, operate and market a comprehensive product portfolio of IoT solutions that enable businesses to connect and manage their devices, collect and analyze data, and improve decision-making.
(and affiliates) 16 % 17 % 17 % Frontek Technology Corporation (and affiliates) 13 % 18 % 16 % CEAC International Ltd.
(and affiliates) * 16 % 17 % Frontek Technology Corporation (and affiliates) 10 % 13 % 18 % CEAC International Ltd. (and affiliates) * 11 % 11 % Arrow Electronics (and affiliates) * * 10 % (1) In each period with an asterisk, the customer represented less than 10% of the Company's net sales.
Sharp Corporation Nokia Corporation Sonova International Samsung Electronics Co., Ltd. Sony Corp Sumitomo Electric Symmetry Electronics ZTE Corporation Our customers include major OEMs and their subcontractors in the infrastructure, high-end consumer and industrial end markets. Our products are typically purchased by these customers for their performance, price and/or technical support, as compared to our competitors.
Our products are typically purchased by these customers for their performance, price and/or technical support, as compared to our competitors. In fiscal years 2024, 2023 and 2022, net sales in the U.S. represented 24%, 13% and 10% of our net sales .
Removed
We believe that through the acquisition of Sierra Wireless we have brought together the ultra-low power benefits of LoRa® with higher bandwidth capabilities of cellular to create a new Internet of things ("IoT") Cloud-to-Chip system leader. General We are a high-performance semiconductor, IoT systems and Cloud connectivity service provider and were incorporated in Delaware in 1960.
Added
Item 1. Business General We are a high-performance semiconductor, Internet of Things ("IoT") systems and cloud connectivity service provider and were incorporated in Delaware in 1960. We design, develop, manufacture and market a wide range of products and services for commercial applications, the majority of which are sold into the infrastructure, high-end consumer and industrial end markets.
Removed
Our end customers for our silicon solutions are primarily original equipment manufacturers ("OEMs") that produce and sell technology solutions. Our IoT module, router, gateways and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices.
Added
We design, develop, manufacture and market a portfolio of optical and copper data communications and video transport products used in a wide variety of infrastructure and industrial applications. Our comprehensive portfolio includes integrated circuits ("ICs") for data centers, enterprise networks, PON, and wireless base station optical transceivers.
Removed
Whereas LoRa takes advantage of low-power, long-range wireless communication, cellular offers pervasive high speed data to bring a fully-integrated solution that can simplify IoT connectivity and make it easier to deploy and utilize. The combination will provide greater choice, flexibility and one stop shop for all IoT connectivity for the market enabling new use cases and new vertical application.
Added
As described in Note 16, Segment Information, to our Consolidated Financial Statements, our segment results reflect changes in our operating segments that went into effect following organizational restructurings in the fourth quarter of fiscal year 2024 and the fourth quarter of fiscal year 2023. We currently have four reportable segments.
Removed
Our video products offer advanced solutions for next generation high-definition broadcast applications, as well as highly differentiated video-over-IP technology for professional audio video ("Pro AV") applications. Advanced Protection and Sensing. We design, develop, manufacture and market high-performance protection devices, which are often referred to as transient voltage suppressors ("TVS") and specialized sensing products.
Added
All prior year information in the tables below has been revised retrospectively to reflect the change to the Company's reportable segments: Fiscal Years (in thousands) 2024 2023 2022 Signal Integrity $ 177,033 $ 298,290 $ 286,259 Analog Mixed Signal and Wireless 260,264 443,239 454,599 IoT Systems 334,904 9,811 — IoT Connected Services 96,557 5,193 — Total $ 868,758 $ 756,533 $ 740,858 Recent Acquisition and Divestiture Acquisition of Sierra Wireless, Inc.
Removed
On January 12, 2023 (the "Acquisition Closing Date"), we completed the acquisition of Sierra Wireless, pursuant to the Arrangement Agreement dated as of August 2, 2022 (the "Arrangement Agreement"), by and among us, 13548597 Canada Inc., a corporation formed under the Canada Business Corporations Act, and our wholly-owned subsidiary (the "Purchaser"), and Sierra Wireless.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIt is not certain that Sierra Wireless’ business can be successfully integrated with our business in a timely manner or at all, or that any of the anticipated benefits will be realized for a variety of reasons, including, but not limited to the following: • difficulties entering new markets and integrating new technologies in which we have no or limited direct prior experience; • failure to leverage the increased scale of the combined businesses quickly and effectively; • successfully managing relationships with our combined customer, supplier and distributor base; • coordinating and integrating independent research and development and engineering teams across technologies and product platforms to enhance product development while reducing costs; • consolidating and integrating corporate, finance and administrative infrastructures and integrating and harmonizing business systems; • coordinating sales and marketing efforts to effectively position our capabilities and the direction of product development; • unanticipated costs or liabilities associated with the integration; • the increased scale and complexity of our operations; • adverse changes in general economic conditions in regions in which we and Sierra Wireless operate; • retaining key employees; • potential litigation associated with the Sierra Wireless Acquisition; • difficulties in the assimilation of employees and culture; • obligations to counterparties of Sierra Wireless that arise as a result of the change in control of Sierra Wireless, including with respect to limitations or restrictions that may be imposed on our ability to integrate products or technology used or produced by Sierra Wireless into our new or existing products; and • diversion of capital and other resources, including management’s attention from other important business objectives.
Biggest changeRisks related to our ability to successfully complete the integration of the Sierra Wireless business and realize the benefits we anticipated from the Sierra Wireless Acquisition include, but are not limited to the following: • continuation or worsening of adverse macroeconomic conditions in regions in which we and Sierra Wireless operate; • difficulties entering new markets and integrating new technologies in which we have no or limited direct prior experience; • failure to leverage the increased scale of the combined businesses quickly and effectively; • successfully managing relationships with our combined customer, supplier and distributor base; • coordinating and integrating independent research and development and engineering teams across technologies and product platforms to enhance product development while reducing costs; • consolidating and integrating corporate, finance and administrative infrastructures and integrating and harmonizing business systems, including remediating the material weaknesses described in Part II, Item 9A, "Controls and Procedures"; • challenges identifying and assessing changes in the business that could impact our system of internal controls, which resulted in a material weakness and contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level; • coordinating sales and marketing efforts to effectively position our capabilities and the direction of product development; • unanticipated costs or liabilities associated with the integration; • the increased scale and complexity of our operations; • potential litigation associated with the Sierra Wireless Acquisition; • difficulties in the assimilation of employees and culture and the impact on the business from the loss of employees due to workforce reductions or other departures; • obligations to counterparties of Sierra Wireless that arise as a result of the change in control of Sierra Wireless, including with respect to limitations or restrictions that may be imposed on our ability to integrate products or technology used or produced by Sierra Wireless into our new or existing products; and • diversion of capital and other resources, including management’s attention from other important business objectives.
While our utilization of multiple third-party foundries and manufacturers does create some redundancy, any interruption of supply by one or more of these foundries or manufacturers could materially impact us. A majority of our package and test operations are performed by third-party contractors based in the U.S., Taiwan and China.
While our utilization of multiple third-party foundries and manufacturers does create some redundancy, any interruption of supply by one or more of these foundries or manufacturers could materially impact us. A majority of our package and test operations are performed by third-party contractors based in the U.S., China and Taiwan.
Regardless of whether these infringement claims have merit or not, we may be subject to the following: 22 • we may be found to be liable for substantial damages, liabilities and litigation costs, including attorneys' fees; • we may be prohibited from further use of intellectual property because of an injunction and may be required to cease selling our products that are subject to the claim; • we may have to license third party intellectual property, incurring royalty fees that may or may not be on commercially reasonable terms; in addition, there is no assurance that we will be able to successfully negotiate and obtain such a license from the third party; • we may have to develop a non-infringing alternative, which could be costly and delay or result in the loss of sales; in addition, there is no assurance that we will be able to develop such a non-infringing alternative; • management attention and resources may be diverted; • our relationships with customers may be adversely affected; • we may be required to indemnify our customers for certain costs and damages they incur in respect of such a claim; and • we may decide to cease selling certain product lines or not launch certain product lines to avoid infringement claims.
Regardless of whether these infringement claims have merit or not, we may be subject to the following: • we may be found to be liable for substantial damages, liabilities and litigation costs, including attorneys' fees; • we may be prohibited from further use of intellectual property because of an injunction and may be required to cease selling our products that are subject to the claim; • we may have to license third party intellectual property, incurring royalty fees that may or may not be on commercially reasonable terms; in addition, there is no assurance that we will be able to successfully negotiate and obtain such a license from the third party; • we may have to develop a non-infringing alternative, which could be costly and delay or result in the loss of sales; in addition, there is no assurance that we will be able to develop such a non-infringing alternative; • management attention and resources may be diverted; • our relationships with customers may be adversely affected; 20 • we may be required to indemnify our customers for certain costs and damages they incur in respect of such a claim; and • we may decide to cease selling certain product lines or not launch certain product lines to avoid infringement claims.
In addition, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel 24 companies that do business in China to partner with local companies to conduct business, or provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, operating results and financial condition.
In addition, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, or provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, operating results and financial condition.
In addition, as regulatory and private sector stakeholders have expressed concerns about the negative effects and dangers posed to others by the deployment of 5G technology, unfavorable developments with evolving laws and regulations worldwide related to 5G or 5G suppliers may limit global adoption, impede our strategy, and negatively impact our long-term expectations in this area.
In addition, as regulatory and private sector stakeholders have expressed concerns about the 19 negative effects and dangers posed to others by the deployment of 5G technology, unfavorable developments with evolving laws and regulations worldwide related to 5G or 5G suppliers may limit global adoption, impede our strategy, and negatively impact our long-term expectations in this area.
As a global enterprise, we face exposure to adverse movements in foreign currency exchange rates. Certain of our assets, including certain bank accounts, exist in non-U.S. Dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations. The non-U.S. Dollar-denominated currencies are principally the Swiss Franc, Euro, Canadian Dollar, Mexican Peso, Japanese Yen and Great British Pound.
As a global enterprise, we face exposure to adverse movements in foreign currency exchange rates. Certain of our assets, including certain bank accounts, exist in non-U.S. dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations. The non-U.S. dollar-denominated currencies are principally the Swiss franc, euro, Canadian dollar, Mexican peso, Japanese yen, Great British pound and Australian dollar.
Complying with these varying state, federal and international requirements could cause us to incur additional costs and change our business practices. In addition, because our products and services are sold and used worldwide, we may be required to comply with laws and regulations in countries or states where we have no local entity, employees, or infrastructure.
Complying 26 with these varying state, federal and international requirements could cause us to incur additional costs and change our business practices. In addition, because our products and services are sold and used worldwide, we may be required to comply with laws and regulations in countries or states where we have no local entity, employees, or infrastructure.
Numerous state, federal and international laws, rules and regulations govern the Processing of personal information and can expose us to third 28 party claims, enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties, significant legal liability and harm to our reputation if our compliance efforts fail or are perceived to fail.
Numerous state, federal and international laws, rules and regulations govern the Processing of personal information and can expose us to third party claims, enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties, significant legal liability and harm to our reputation if our compliance efforts fail or are perceived to fail.
Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results.
Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases ("GHG"), limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results.
These obligations typically arise pursuant to contracts under which we agree to hold the other party harmless against losses arising from a breach of representations and covenants related to certain matters, such as acts or omissions of our employees, infringement of third-party intellectual property rights, and certain environmental matters.
These obligations typically arise pursuant to contracts under which we agree to hold the other party harmless 31 against losses arising from a breach of representations and covenants related to certain matters, such as acts or omissions of our employees, infringement of third-party intellectual property rights, and certain environmental matters.
In certain cases, our mobile network operator partners may also offer services that compete with our IoT services business. Risks Relating to Research and Development, Engineering, Intellectual Property and New Technologies We may be unsuccessful in developing and selling new products, which is central to our objective of maintaining and expanding our business.
In certain cases, our mobile network operator partners may also offer services that compete with our IoT services business. 18 Risks Relating to Research and Development, Engineering, Intellectual Property and New Technologies We may be unsuccessful in developing and selling new products, which is central to our objective of maintaining and expanding our business.
Conversely, when circumstances create longer lead times customers may order in excess of what they need to ensure availability, then cancel orders if lead times are reduced. A rapid and sudden decline in customer demand for products or cancellation of orders can result in excess quantities of certain products relative to demand.
Conversely, when circumstances create longer lead times customers may order in excess of what they need to ensure availability, then cancel orders if lead times are reduced. A rapid and sudden decline in customer demand for products or 23 cancellation of orders can result in excess quantities of certain products relative to demand.
We are 29 also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service of the U.S. ("IRS") and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes.
We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service of the U.S. ("IRS") and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes.
As smaller geometry processes become more prevalent, we expect to continue to integrate greater levels of functionality into our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis or at all.
As smaller geometry processes become more prevalent, we expect to continue to integrate 21 greater levels of functionality into our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis or at all.
Sales to our customers are generally made on open account, subject to credit limits we may impose, and the receivables are subject to the risk of being uncollectible. 25 We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers and end customers.
Sales to our customers are generally made on open account, subject to credit limits we may impose, and the receivables are subject to the risk of being uncollectible. We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers and end customers.
In addition, we may be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches in the future, and our insurance may not be adequate to fully reimburse us for 33 all costs and losses we incur.
In addition, we may be required to incur significant costs to protect against or repair the damage caused by these disruptions or security breaches in the future, and our insurance may not be adequate to fully reimburse us for all costs and losses we incur.
There is a risk that open source licenses could be construed in a way that 23 could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely affect our business, operating results and financial condition.
There is a risk that open source licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely affect our business, operating results and financial condition.
Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon 30 ESG or “sustainability” metrics.
Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics.
Risks Relating to our Business Strategies, Personnel and Other Operations Our business and growth depend on our ability to attract and retain qualified personnel, including our management team and other key personnel, and the inability to attract, hire, integrate, train, retain, or motivate specialized technical and management personnel could harm our business and growth.
Risks Relating to our Business Strategies, Integration, Personnel and Other Operations Our business and growth depend on our ability to attract and retain qualified personnel, including our management team and other key personnel, and the inability to attract, hire, integrate, train, retain, or motivate specialized technical and management personnel could harm our business and growth.
In Canada, similar regulations are administered by the Innovation, Science and Economic Development Canada and the Canadian Radio-television 27 and Telecommunications Commission. European Union directives provide comparable regulatory guidance in Europe.
In Canada, similar regulations are administered by the Innovation, Science and Economic Development Canada and the Canadian Radio-television and Telecommunications Commission. European Union directives provide comparable regulatory guidance in Europe.
We may be subject to increased tax liabilities and an increased effective tax rate if we need to remit funds held by our foreign subsidiaries. With the enactment of the Tax Cuts and Jobs Act (“Tax Act”), all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax.
We may be subject to increased tax liabilities and an increased effective tax rate if we need to remit funds held by our subsidiaries outside the U.S. With the enactment of the Tax Cuts and Jobs Act (“Tax Act”), all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax.
For fiscal year 2023, our largest distributors were based in Asia. The termination of any of our distributor relationships could impact our net sales and limit our access to certain end-customers. It could also result in the return of excess inventory of our product held by that distributor.
For fiscal year 2024, our largest distributors were based in Asia. The termination of any of our distributor relationships could impact our net sales and limit our access to certain end-customers. It could also result in the return of excess inventory of our product held by that distributor.
Chinese and other foreign customers affected by future U.S. government export control measures or sanctions or threats of export control measures or sanctions may respond by developing their own solutions to replace our products or by adopting our foreign competitors’ solutions.
Chinese and other customers outside the U.S. affected by future U.S. government export control measures or sanctions or threats of export control measures or sanctions may respond by developing their own solutions to replace our products or by adopting our foreign competitors’ solutions.
Certain provisions in the indenture governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us. Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us.
Certain provisions in the indentures governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us. Certain provisions in the indentures governing the Notes may make it more difficult or expensive for a third party to acquire us.
We may be required to recognize additional impairment charges in the future which could have an adverse effect on our financial condition and operating results.
We have incurred substantial impairment charges, and we may be required to recognize additional impairment charges in the future, which could have an adverse effect on our financial condition and operating results.
For example, the indenture governing the Notes generally requires us, at the option of the holders, to repurchase the Notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Notes in connection with a make-whole fundamental change, as defined in the indenture for the Notes.
For example, the indentures governing the Notes generally require us, at the option of the holders, to repurchase the Notes for cash upon the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Notes in connection with a make-whole fundamental change, as defined in the indenture for the Notes.
Our future results may fluctuate, fail to match past performance or fail to meet expectations as a result of conditions beyond our control, such as general economic conditions in the markets we compete, conditions unique to our industry and the financial health and viability of our suppliers and customers.
Risks Relating to Macroeconomic and Industry Conditions Our future results may fluctuate, fail to match past performance or fail to meet expectations as a result of conditions beyond our control, such as general economic conditions in the markets we compete, conditions unique to our industry and the financial health and viability of our suppliers and customers.
The termination of a distributor could negatively impact our business, including net sales and accounts receivable. In fiscal year 2023, authorized distributors accounted for approximately 85% of our net sales. We generally do not have long-term contracts with our distributors and most can terminate their agreement with us with little or no notice.
The termination of a distributor could negatively impact our business, including net sales and accounts receivable. In fiscal year 2024, authorized distributors accounted for approximately 66% of our net sales. We generally do not have long-term contracts with our distributors and most can terminate their agreement with us with little or no notice.
Our largest customers have varied from year to year. Historically, we have had significant customers that individually accounted for 10% or more of consolidated revenues in certain quarters or years or represented 10% or more of net accounts receivables at any given date.
Our largest customers have varied from year to year. Historically, we have had significant customers that individually accounted for 10% or more of sales in certain quarters or years or represented 10% or more of net accounts receivables at any given date.
Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate for a variety of reasons beyond our control, including: general economic conditions in the countries where we sell our products, including recessions or inflationary pressures; financial market instability or disruptions to the banking system due to bank failures, particularly in light of the recent events that have occurred with respect to SVB; geopolitical turmoil, such as the conflict between Russia and Ukraine and any sanctions, export controls or other retaliatory actions against, or restrictions on doing business with Russia, as well as any resulting disruption, instability or volatility in the global markets and industries resulting from such conflict; the availability of adequate supply commitments from our outside suppliers; the timing of new product introductions by us, our customers and our competitors; seasonality and variability in the computer market and our other end markets; product obsolescence; the scheduling, rescheduling or cancellation of orders by our customers; the cyclical nature of demand for our customers’ products; our ability to predict and meet evolving industry standards and consumer preferences; our ability to develop new process technologies and achieve volume production; changes in manufacturing yields; capacity utilization; product mix and pricing; movements in exchange rates, interest rates or tax rates; our ability to integrate and realize synergies from acquisitions; the 17 manufacturing and delivery capabilities of our subcontractors and litigation and regulatory matters.
Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate for a variety of reasons beyond our control, including: general economic conditions in the countries where we sell our products, including recessions or inflationary pressures; financial market instability or disruptions to the banking system due to bank failures, geopolitical turmoil, such as the conflicts in the Middle East and between Russia and Ukraine and any sanctions, export controls or other retaliatory actions against, or restrictions on doing business with Russia, as well as any resulting disruption, instability or volatility in the global markets and industries resulting from such conflict; the availability of adequate supply commitments from our outside suppliers; the timing of new product introductions by us, our customers and our competitors; seasonality and variability in the computer market and our other end markets; product obsolescence; the scheduling, rescheduling or cancellation of orders by our customers; the cyclical nature of demand for our customers’ products; our ability to predict and meet evolving industry standards and consumer preferences; our ability to develop new process technologies and achieve volume production; changes in manufacturing yields; capacity utilization; product mix and pricing; movements in exchange rates, interest rates or tax rates; our ability to integrate and realize synergies from acquisitions; the manufacturing and delivery capabilities of our subcontractors and litigation and regulatory matters.
Our increased indebtedness as a result of this financing could have important consequences to us and our stockholders, including: increasing our vulnerability to general adverse economic and industry conditions; limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; with respect to variable rate indebtedness, risks associated with increases in interest rates; requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, future acquisitions, capital expenditures, stock repurchases and general corporate requirements; limiting our flexibility in planning for, 32 or reacting to, changes in our business and our industry; and putting us at a disadvantage compared to our competitors with less indebtedness.
Our increased indebtedness as a result of this financing has had, and likely will continue to have, important consequences to us and our stockholders, including: increasing our vulnerability to general adverse economic and industry conditions; limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; with respect to variable rate indebtedness, risks associated with increases in interest rates; requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, future acquisitions, capital expenditures, stock repurchases and general corporate requirements; limiting our flexibility in planning for, or reacting to, 29 changes in our business and our industry; and putting us at a disadvantage compared to our competitors with less indebtedness.
Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
Department of Treasury, Federal Deposit Insurance Corporation and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.
The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered businesses to provide new disclosures to California residents and provide such individuals ways to opt-out of certain sales of personal information.
For example, the California Consumer Privacy Act ("CCPA") gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered businesses to provide new disclosures to California residents and provide such individuals ways to opt-out of certain sales of personal information.
Many of our products are based on industry standards that are continually evolving. Our ability to compete in the future will depend in part on our ability to anticipate, identify and ensure compatibility or compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by our customers and potential customers.
Our ability to compete in the future will depend in part on our ability to anticipate, identify and ensure compatibility or compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by our customers and potential customers.
As of January 29, 2023, the Notes are not convertible at the option of the holders. Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. The conversion of some or all of the Notes may dilute the ownership interests of our stockholders.
As of January 28, 2024, the Notes are not convertible at the option of the holders. Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock. The conversion of some or all of the Notes may dilute the ownership interests of our stockholders.
See the risk factor captioned "We may be subject to increased tax liabilities and an increased effective tax rate if we need to remit funds held by our foreign subsidiaries" above.
See the risk factor captioned "We may be subject to increased tax liabilities and an increased effective tax rate if we need to remit funds held by our subsidiaries outside the U.S." above.
We maintain some business interruption insurance to help reduce the effect of business interruptions, but we are not fully insured against such risks. Also as a result of these events, insurance premiums for businesses may increase and the scope of coverage may be decreased.
We maintain some business interruption insurance to help reduce the effect of business interruptions, but we are not fully insured against such risks. Also as a result of these events, insurance premiums for businesses may increase and the scope of coverage may be decreased. Consequently, we may not be able to obtain adequate insurance coverage for our business and properties.
In fiscal year 2023, sales to customers in China comprised 53% of our net sales. The economic slowdown in China could adversely affect our sales to customers in China and consequently, our business, operating results and financial condition.
In fiscal year 2024, sales to customers in China comprised 32% of our net sales. The continuing economic slowdown in China could adversely affect our sales to customers in China and consequently, our business, operating results and financial condition.
Any such reputational harm could result in the loss of investors, suppliers or customers, which could harm our business, financial condition, operating results or prospects. We sell and trade with foreign customers, which subjects our business to increased risks. Sales to foreign customers accounted for approximately 87% of net sales for fiscal year 2023.
Any such reputational harm could result in the loss of investors, suppliers or customers, which could harm our business, financial condition, operating results or prospects. We sell and trade with customers outside the U.S., which subjects our business to increased risks. Sales to customers outside the U.S. accounted for approximately 76% of net sales for fiscal year 2024.
The Credit Agreement includes covenants restricting, among other things, our and our subsidiaries’ ability to: incur or guarantee additional debt or issue certain preferred stock; pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock; make certain investments and acquisitions; create liens on our or our subsidiaries’ assets; enter into transactions with affiliates; merge or consolidate with another person or sell or otherwise dispose of substantially all of our assets; make certain payments in respect of other material indebtedness; and alter the business that we conduct. 34 Under the Credit Agreement, we are required to maintain a maximum consolidated leverage ratio and a minimum interest expense coverage ratio.
The Credit Agreement includes covenants restricting, among other things, our and our subsidiaries’ ability to: incur or guarantee additional debt or issue certain preferred stock; pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock; make certain investments and acquisitions; create liens on our or our subsidiaries’ assets; enter into transactions with affiliates; merge or consolidate—with another person or sell or otherwise dispose of substantially all of our assets; make certain payments in respect of other material indebtedness; and alter the business that we conduct.
In addition, although the CHIPS Act provides various incentives and tax credits to U.S. companies in connection with semiconductor manufacturing, we may be unsuccessful (including, relative to the efforts of our competitors) in any efforts to obtain such incentives and tax credits.
In addition, although the Creating Helpful Incentives to Produce Semiconductors and Science Act (“CHIPS Act”) provides various incentives and tax credits to U.S. companies in connection with semiconductor manufacturing, we may be unsuccessful (including, relative to the efforts of our competitors) in any efforts to obtain such incentives and tax credits.
During fiscal years 2023, 2022 and 2021, we recorded $1.2 million, $1.3 million and $6.8 million of non-cash impairment charges and credit loss reserves on certain of our investments.
During fiscal years 2024, 2023 and 2022, we also recorded $3.9 million, $1.2 million and $1.3 million of non-cash impairment charges and credit loss reserves on certain of our investments.
We may experience intense competition on our businesses, including: • competition from more established and larger companies with strong brands and greater financial, technical and marketing resources or companies with different business models; • competition from companies that operate in lower cost jurisdictions than we do, or who receive government support or subsidies that we do not; • business combinations or strategic alliances by our competitors which could weaken our competitive position; • introduction of new products or services by us that put us in direct competition with major new competitors; • existing or future competitors who may be able to respond more quickly to technological developments and changes and introduce new products or services before we do; and • competitors who may independently develop and patent technologies and products that are superior to ours or achieve greater acceptance due to factors such as more favorable pricing, more desired or better-quality features or more efficient sales channels.
We may experience intense competition on our businesses, including: • competition from more established and larger companies with strong brands and greater financial, technical and marketing resources or companies with different business models; • competition from companies that operate in lower cost jurisdictions than we do, or who receive government support or subsidies that we do not; • business combinations or strategic alliances by our competitors which could weaken our competitive position; • introduction of new products or services by us that put us in direct competition with major new competitors; • existing or future competitors who may be able to respond more quickly to technological developments and changes and introduce new products or services before we do; and • competitors who may independently develop and patent technologies and products that are superior to ours or achieve greater acceptance due to factors such as more favorable pricing, more desired or better-quality features or more efficient sales channels. 24 If we are unable to compete effectively with our competitors' pricing strategies, technological advances and other initiatives, we may lose customer orders and market share and we may need to reduce the price of our products and services, resulting in reduced revenue and gross margins.
We may be required to undertake additional cost-cutting measures, and may be unable to invest in marketing, research and development and engineering at the levels we believe are necessary to maintain our competitive position. Our failure to make these investments could seriously harm our business.
We may be required to undertake additional cost-cutting measures, and may be unable to invest in marketing, research and development and engineering at the levels we believe are necessary to maintain our competitive position.
Restrictive covenants in the Credit Agreement governing our credit facilities may restrict our ability to pursue our business strategies. The Credit Agreement (as defined below) contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests.
The Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests.
The application of the treasury-stock method may reduce our reported diluted earnings per share. Furthermore, in the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert their Notes at any time during specified periods at their option.
Additionally, we apply the if-converted method to the Notes in calculating earnings per share, which may reduce our reported diluted earnings per share. Furthermore, in the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert their Notes at any time during specified periods at their option.
We also separately entered into privately negotiated warrant transactions (the “Warrants”) with the Counterparties. The Convertible Note Hedge Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be.
The Convertible Note Hedge Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2027 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2027 Notes, as the case may be.
These developments have increased, and may continue to increase, our legal compliance and financial reporting costs. These developments also may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
These developments also may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
Consequently, we may not be able to obtain adequate 20 insurance coverage for our business and properties. Further, any loss of revenue due to a slowdown or cessation of end customer demand is uninsured. Accordingly, any of these disruptions could significantly harm our business. We depend on mobile network operators to promote and offer acceptable wireless data services.
Further, any loss of revenue due to a slowdown or cessation of end customer demand is uninsured. Accordingly, any of these disruptions could significantly harm our business. We depend on mobile network operators to promote and offer acceptable wireless data services.
Additionally, disruptions in U.S. government operations may negatively impact regulatory approvals and guidance that are important to our operations. 18 Risks Relating to Production Operations and Services We rely on a limited number of suppliers and subcontractors, many of which are foreign-based entities, for many essential components and materials and certain critical manufacturing services and any interruption or loss of supplies or services from these entities could significantly interrupt our business operations and the production of our products.
Risks Relating to Production Operations and Services We rely on a limited number of suppliers and subcontractors, many of which are based outside the U.S., for many essential components and materials and certain critical manufacturing services and any interruption or loss of supplies or services from these entities could significantly interrupt our business operations and the production of our products.
If we are unsuccessful or delayed in qualifying any of our products with a customer, such failure or delay would preclude or delay sales of such product to the customer, which may impede our growth and cause our business to suffer. 21 Our products may fail to meet new industry standards or requirements and the efforts to meet such industry standards or requirements could be costly .
If we are unsuccessful or delayed in qualifying any of our products with a customer, such failure or delay would preclude or delay sales of such product to the customer, which may impede our growth and cause our business to suffer.
Canada’s Personal Information Protection and Electronic Documents Act and applicable provincial laws also impose strict requirements for Processing personal information that applies to our business operations. And in the United States, a number of states have enacted or have proposed to enact state privacy laws. For example, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
Canada’s Personal Information Protection and Electronic Documents Act and applicable provincial laws also impose strict requirements for Processing personal information that applies to our business operations. And in the U.S., a number of states have enacted or have proposed to enact state privacy laws.
A takeover of us may trigger the requirement that we repurchase the Notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover. Such additional costs may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to investors.
A takeover of us may trigger the requirement that we repurchase the Notes and/or increase the conversion rate, which could make it costlier for a potential acquirer to engage in such takeover.
Many of our third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers and contract manufacturers that manufacture our modules and routers, are located in foreign countries or territories including Taiwan, China, Vietnam and Malaysia .
Many of our third-party subcontractors and suppliers, including third-party foundries that supply silicon wafers and contract manufacturers that manufacture our modules and routers, are located in geographies outside the U.S. including China, Taiwan and Vietnam .
However, the Warrants transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the Warrants. 35 In addition, the Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do in connection with any conversion of the Notes or redemption or repurchase of the Notes).
In addition, the Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2027 Notes (and are likely to do in connection with any conversion of the 2027 Notes or redemption or repurchase of the 2027 Notes).
The Sierra Wireless Acquisition increased the amount of our debt resulting in additional interest expense. We borrowed term loans in an aggregate principal amount of $895 million under the Term Loan Facility in order to fund a portion of the consideration for the Sierra Wireless Acquisition and related fees and expenses.
In the fourth quarter of fiscal year 2023, we borrowed term loans in an aggregate principal amount of $895.0 million under the Term Loan Facility in order to fund a portion of the consideration for the Sierra Wireless Acquisition and related fees and expenses.
There can be no assurance that we will be able to retain key employees or that we will be successful in attracting, integrating or retaining other highly qualified personnel in the future.
There can be no assurance that we will be able to retain key employees or that we will be successful in attracting, integrating or retaining other highly qualified personnel in the future. If we are unable to retain the services of key employees or are unsuccessful in attracting new highly qualified employees, our business could be harmed.
With the growth of our international business, our foreign currency exposures may grow and, under certain circumstances, could harm our business. As a means of managing our foreign exchange exposure, we routinely convert U.S. Dollars into foreign currency in advance of the expected payment. We regularly assess whether or not to hedge foreign exchange exposure.
As a means of managing our foreign exchange exposure, we routinely convert U.S. dollars into foreign currency in advance of the expected payment. We regularly assess whether or not to hedge foreign exchange exposure.
The Convertible Note Hedge Transactions and Warrants transactions may affect the trading price of our common stock. On October 6, 2022 and October 19, 2022, we entered into privately negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with an affiliate of one of the initial purchasers of the Notes and another financial institution (collectively, the “Counterparties”).
On October 6, 2022 and October 19, 2022, we entered into privately negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with an affiliate of one of the initial purchasers of the 2027 Notes and another financial institution (collectively, the “Counterparties”). We also separately entered into privately negotiated warrant transactions (the “Warrants”) with the Counterparties.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in expected revenues and diversion of management’s time and attention, which could materially impact the combined company.
Many of these factors are outside of our control and have resulted, and could continue to result, in increased costs, decreases in expected revenues and diversion of management’s time and attention, which has materially impacted, and could continue to materially impact the combined company.
Corporate responsibility, specifically related to environmental, social and governance (“ESG”) matters, may impose additional costs and expose us to new risks. Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties.
If these taxes are not properly collected and paid, our operating results could be materially adversely affected. Corporate responsibility, specifically related to environmental, social and governance (“ESG”) matters, may impose additional costs and expose us to new risks. Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties.
Similarly, our service offerings are highly complicated and involve the use of numerous systems, networks and technologies, any of which could cause our service offerings to fail or malfunction. 19 We face an inherent business risk of exposure to warranty and product liability claims in the event that our products or services fail to perform as expected or such failure of our products or services results, or is alleged to result, in bodily injury or property damage (or both).
We face an inherent business risk of exposure to warranty and product liability claims in the event that our products or services fail to perform as expected or such failure of our products or services results, or is alleged to result, in bodily injury or property damage (or both).
While we maintain some insurance for such events, a successful warranty or product liability claim against us in excess of our available insurance coverage, if any, and established reserves, or a requirement that we participate in a product recall, would have adverse effects (that could be material) on our business, operating results and financial condition.
We attempt to limit our liability through our standard terms and conditions and negotiation of sale and other customer contracts, but there is no assurance that such limitations will be accepted or effective. 17 While we maintain some insurance for such events, a successful warranty or product liability claim against us in excess of our available insurance coverage, if any, and established reserves, or a requirement that we participate in a product recall, would have adverse effects (that could be material) on our business, operating results and financial condition.
As a result, our 1.625% Convertible Senior Notes due 2027 (the “Notes”) are recorded on our balance sheet at face value less unamortized debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the capitalized issuance costs. Additionally, we apply the treasury-stock method to the Notes in calculating earnings per share.
As a result, our 1.625% Convertible Senior Notes due 2027 (the “2027 Notes”) and 4.00% Convertible Senior Notes due 2028 (the “2028 Notes” and, together with the 2027 Notes, the "Notes"), are recorded on our balance sheet at face value less unamortized debt issuance costs, with interest expense reflecting the cash coupon plus the amortization of the capitalized issuance costs.
There can be no assurance that problems will not occur in the future with suppliers or subcontractors. Disruption or termination of our supply sources or subcontractors could significantly delay our shipments to customers, which could damage relationships with current and prospective customers and harm our business.
Disruption or termination of our supply sources or subcontractors could significantly delay our shipments to customers, which could damage relationships with current and prospective customers and harm our business.
Such action by the U.S. Department of Commerce or future regulatory activity may materially interfere with our ability to make sales to certain Chinese or other foreign customers.
We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Actions by the U.S. Department of Commerce or future regulatory activity may materially interfere with our ability to make sales to certain Chinese or other foreign customers.
In addition, our inability to control gray market activities could result in customer satisfaction issues because when products are purchased outside of our authorized distribution channels there is a risk that our customers are buying products that may have been altered, mishandled or damaged, or are used products represented as new. 26 Competition from new or established IoT, cloud services and wireless services companies, or from those with greater resources, may prevent us from increasing or maintaining our market and could result in price reductions and/or loss of business, resulting in reduced revenues and gross margins.
In addition, our inability to control gray market activities could result in customer satisfaction issues because when products are purchased outside of our authorized distribution channels there is a risk that our customers are buying products that may have been altered, mishandled or damaged, or are used products represented as new.
However, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program. We either hold the vast majority of our financial assets in our name through a third-party financial institution, or we have transferred them out of SVB.
We either hold the vast majority of our financial assets in our name through a third-party financial institution, or we have transferred them out of SVB.
Adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to market-wide liquidity problems.
Adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”), Signature Bank and Silvergate Capital Corp. were each swept into receivership.
If the value of the U.S. Dollar weakens relative to these specific currencies, the cost of doing business in terms of U.S. Dollars rises. Whereas if the value of the U.S. Dollar strengthens relative to these specific currencies, it could make the pricing of our products less competitive and affect demand for our products.
Whereas if the value of the U.S. dollar strengthens relative to these specific currencies, it could make the pricing of our products less competitive and affect demand for our products. With the growth of our international business, our foreign currency exposures may grow and, under certain circumstances, could harm our business.
Any additional new regulations or the amendment or modification of previously implemented regulations could require us and our manufacturing partners to change our business plans, increase our costs, or limit our ability to sell products and conduct activities in China, which could adversely affect our business and operating results.
The Chinese government exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. 22 Any additional new regulations or the amendment or modification of previously implemented regulations could require us and our manufacturing partners to change our business plans, increase our costs, or limit our ability to sell products and conduct activities in China, which could adversely affect our business and operating results.
In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors. We expect that we will have to similarly reduce prices in the future for older generations of products.
As is typical in the semiconductor and IoT industries, the average selling price of particular products have historically declined significantly over the life of the product. In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors.
If domestic and global economic conditions worsen, particularly in light of potential global recession, uncertainty in the banking system, and the direct and indirect impacts of the COVID-19 pandemic, overall spending on 5G infrastructure may be reduced, which would adversely impact demand for our products in these markets.
Markets for 5G infrastructure may not develop in the manner or in the time periods we anticipate. If domestic and global economic conditions worsen, overall spending on 5G infrastructure may be reduced, which would adversely impact demand for our products in these markets.
Events outside our control, including changes in regulation and laws as well as economic trends, also could adversely affect our ability to realize the expected benefits from the Sierra Wireless Acquisition. We face risks associated with companies we have acquired in the past and may acquire in the future.
Events outside our control, including economic trends and changes in regulation and laws, also could adversely affect our ability to realize the expected benefits from the Sierra Wireless Acquisition. As a result of the Sierra Wireless Acquisition, the amount of our debt increased substantially, resulting in additional interest expense.
Further, following an event of default under the Credit Agreement, the lenders will have the right to proceed against the collateral granted to them to secure that debt.
Further, if an event of default occurs, the lenders will have the right to proceed against the collateral granted to them to secure that debt. If the debt under the Credit Agreement were to be accelerated, our assets may not be sufficient to repay in full that debt that may become due as a result of that acceleration.
The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. As is typical in the semiconductor and IoT industries, the average selling price of a particular product has historically declined significantly over the life of the product.
Our failure to make these investments could seriously harm our business. 15 The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.
However, in certain instances, we have agreed to other terms, including some indemnification provisions, which could prove to be significantly more costly than our standard remedies. We attempt to limit our liability through our standard terms and conditions and negotiation of sale and other customer contracts, but there is no assurance that such limitations will be accepted or effective.
However, in certain instances, we have agreed to other terms, including some indemnification provisions, which could prove to be significantly more costly than our standard remedies.
If we cannot successfully integrate our and Sierra Wireless’ businesses and operations, or if there are delays in combining the businesses, it could negatively impact our ability to develop or sell new products and impair our ability to grow our business, which in turn could adversely affect our financial condition and operating results.
If we cannot successfully integrate our and Sierra Wireless’ businesses and operations, or if there are further delays in completing the integration, it could further negatively impact our ability to realize the anticipated benefits of the Sierra Wireless Acquisition, which in turn could adversely affect our financial condition and operating results. 30 We face risks associated with companies we have acquired in the past and may acquire in the future.
As of January 30, 2022, we have adopted accounting guidance that simplifies the accounting for convertible debt that may be settled in cash.
The accounting method for the Notes could adversely affect our financial condition and results. We have adopted accounting guidance that simplifies the accounting for convertible debt that may be settled in cash.
Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product. If not offset by sales of other products with higher gross margins, our overall gross margins may be adversely affected.
We expect that we will have to similarly reduce prices in the future for older generations of products. Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe locations and primary functions of significant properties are summarized in the following table: In addition to the properties listed in the above table, we also lease Sales and Marketing, Research and Development, and Administrative offices at various locations in the U.S. and internationally under operating leases, none of which are material to our future cash flows.
Biggest changeThe locations and primary functions of significant properties are summarized in the following table: Locations Square Feet Administration Research and/or development Manufacturing support Sales and marketing Application engineering Test and assembly Reliability testing Leased Camarillo, California 88,000 ● ● ● ● ● ● Colorado Springs, Colorado 25,967 ● ● ● ● ● ● ● Colorado Springs, Colorado 51,588 ● ● ● ● ● ● Irvine, California 20,072 ● ● ● ● San Diego, California 18,189 ● ● ● ● ● Richmond, British Columbia, Canada 76,000 ● ● ● ● ● Burlington, Ontario, Canada 68,000 ● ● ● ● ● ● Neuchatel, Switzerland 37,275 ● ● ● ● ● ● ● ● Taipei, Taiwan 36,720 ● ● ● Pune, India 30,100 ● ● Kanata, Ontario, Canada 29,221 ● ● ● ● ● Rapperswil, Switzerland 17,760 ● ● ● Bristol, United Kingdom 17,430 ● ● ● ● ● ● Shenzhen, China 15,678 ● ● ● ● In addition to the properties listed in the above table, we also lease Sales and Marketing, Research and Development, and Administrative offices at various locations in the U.S. and internationally under operating leases, none of which are material to our future cash flows.
Our leases expire at various dates through 2031. We believe that our existing leased and owned space is more than adequate for our current operations, and that suitable replacement and additional space will be available in the future on commercially reasonable terms as circumstances warrant.
Our leases expire at various dates through 2032. We believe that our existing leased and owned space is more than adequate for our current operations, and that suitable replacement and additional space will be available in the future on commercially reasonable terms as circumstances warrant.
Item 2. Properties Our corporate headquarters is located in Camarillo, California where we own an approximately 88,000 square foot facility. The parcel on which our headquarters is located can accommodate substantial expansion. As of January 29, 2023, we owned or leased multiple properties.
Item 2. Properties Our corporate headquarters is located in Camarillo, California where we own an approximately 88,000 square foot facility. The parcel on which our headquarters is located can accommodate substantial expansion. As of January 28, 2024, we owned or leased multiple properties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe intend to fund repurchases under the program from cash on hand and borrowings on our Revolving Credit Facility (as defined below). We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time. The Company did not repurchase any shares under the program during the fourth quarter of fiscal year 2023.
Biggest changeTo the extent we repurchase any shares of our common st ock under the program in the future, w e expect to fund such repurchases from cash on hand and borrowings on our Revolving Credit Facility (as defined below). We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
Currently, we intend to retain earnings to finance the growth of our business. We did not pay cash dividends on our common stock during fiscal years 2023, 2022 or 2021, and our Board of Directors has not indicated an intent to declare a cash dividend on our common stock in the foreseeable future.
Currently, we intend to retain earnings to finance the growth of our business. We did not pay cash dividends on our common stock during fiscal years 2024, 2023 or 2022, and our Board of Directors has not indicated an intent to declare a cash dividend on our common stock in the foreseeable future.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol "SMTC." Holders As of March 24, 2023, we had 171 hold ers of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol "SMTC." Holders As of March 22, 2024, we had 171 hold ers of record of our common stock.
Sales of Unregistered Securities We did not make any sales of unregistered securities during fiscal year 2023 that have not been previously reported.
Sales of Unregistered Securities We did not make any sales of unregistered securities during fiscal year 2024 that have not been previously reported.
On March 11, 2021, our Board of Directors approved the expansion of the stock repurchase program by an additional $350.0 million. During fiscal year 2023, we repurchased $50.0 million of our common stock. As of January 29, 2023, the remaining authorization under our stock repurchase program was $209.4 million.
On March 11, 2021, our Board of Directors approved the expansion of the stock repurchase program by an additional $350.0 million. We did not repurchase any shares of our common stock under the program during fiscal year 2024 . As of January 28, 2024, the remaining authorization under the program was $209.4 million.
Fiscal Year 2018 2019 2020 2021 2022 2023 Semtech $100 $137 $144 $195 $186 $91 Nasdaq Composite $100 $95 $124 $174 $183 $155 PHLX SEMICONDUCTOR SECTOR $100 $93 $139 $209 $239 $213 The information contained in this Item 5 under the heading "Performance Graph" (i) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and (ii) shall not be incorporated by reference into any registration statement or other document pursuant to the Exchange Act, or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing to this Item 5 Performance Graph information.
Fiscal Year 2019 2020 2021 2022 2023 2024 Semtech $ 100 $ 106 $ 143 $ 136 $ 67 $ 41 Nasdaq Composite $ 100 $ 130 $ 182 $ 192 $ 162 $ 216 PHLX SEMICONDUCTOR SECTOR $ 100 $ 150 $ 225 $ 258 $ 230 $ 339 The information contained in this Item 5 under the heading "Performance Graph" (i) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and (ii) shall not be incorporated by reference into any registration statement or other document pursuant to the Exchange Act, or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing to this Item 5 Performance Graph information.
Performance Graph This chart and graph show the value of a $100 cash investment on the last day of fiscal year 2018 in (i) our common stock, (ii) the Nasdaq Composite Index, and (iii) the Philadelphia ("PHLX") Semiconductor Index. Note that historic stock price performance is not necessarily indicative of future stock price performance.
Performance Graph This chart and graph show the value of a $100 cash investment at the close of market on the last trading day of fiscal year 2019 in (i) our common stock, (ii) the Nasdaq Composite Index, and (iii) the Philadelphia ("PHLX") Semiconductor Index, and assumes that all dividends are reinvested.
Added
Note that historic stock price performance is not necessarily indicative of future stock price performance.

Item 7. Management's Discussion & Analysis

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

117 edited+121 added−66 removed30 unchanged
Biggest changeIn addition, we must comply with financial covenants, including: • maintaining a maximum consolidated leverage ratio, determined as of the last day of each fiscal quarter, of (i) 4.75 to 1.00, for the fiscal quarter ending on or around April 30, 2023, (ii) 5.75 to 1.00, unless the financial covenant relief period (the “Relief Period”) has been terminated, in which case 4.75 to 1.00, for the fiscal quarter ending on or around July 31, 2023, (iii) 5.75 to 1.00, unless the Relief Period has been terminated, in which case 4.75 to 1.00, for the fiscal quarter ending on or around October 31, 2023, (iv) 5.50 to 1.00, unless the Relief Period has been terminated, in which case 4.75 to 1.00, for the fiscal quarter ending on or around January 31, 2024, (v) 4.75 to 1.00, unless the Relief Period has been terminated, in which case 4.50 to 1.00, for the fiscal quarter ending on or around April 30, 2024, (vi) 4.50 to 1.00, for the fiscal quarter ending on or around July 31, 2024, and (vii) 3.75 to 1.00, for the fiscal quarter ending on or around October 31, 2024 and each fiscal quarter thereafter subject to increase to 4.25 to 1.00 for the four full consecutive fiscal quarters ending on or after the date of consummation of a permitted acquisition that constitutes a "Material Acquisition" under the Credit Agreement, subject to the satisfaction of certain conditions; and • maintaining a minimum consolidated interest expense coverage ratio, determined as of the last day of each fiscal quarter, of (i) 2.50 to 1.00, unless the Relief Period has been terminated, in which case 3.50 to 1.00, for the fiscal quarter ending on or around April 30, 2023, (ii) 2.25 to 1.00, unless the Relief Period has been terminated, in which case 3.50 to 1.00, for the fiscal quarter ending on or around July 31, 2023, (iii) 2.00 to 1.00, unless the Relief Period has been terminated, in which case 3.50 to 1.00, for the fiscal quarter ending on or around October 31, 2023, (iv) 2.25 to 1.00, unless the Relief Period has been terminated, in which case 3.50 to 1.00, for the fiscal quarter ending on or around January 31, 2024, (v) 2.50 to 1.00, unless the Relief Period has been terminated, in which case 3.50:1.00, for the fiscal quarter ending on or around April 30, 2024, and (vi) 3.50 to 1.00, for the fiscal quarter ending on or around July 31, 2024 and each fiscal quarter thereafter. 48 The Credit Agreement also contains customary provisions pertaining to events of default.
Biggest changeIn addition, the Company must comply with financial covenants which, after effectiveness of the Third Amendment are as follows (in each case, during the covenant relief period): 50 • maintaining a maximum consolidated leverage ratio, determined as of the last day of each fiscal quarter, of (i) 8.17 to 1.00 for the fiscal quarter ending on or around October 31, 2023, (ii) 10.27 to 1.00 for the fiscal quarter ending on or around January 31, 2024, (iii) 10.21 to 1.00 for the fiscal quarter ending on or around April 30, 2024, (iv) 9.93 to 1.00 for the fiscal quarter ending on or around July 31, 2024, (v) 8.42 to 1.00 for the fiscal quarter ending on or around October 31, 2024, (vi) 7.68 to 1.00 for the fiscal quarter ending on or around January 31, 2025, (vii) ) 6.75 to 1.00 for the fiscal quarter ending on or around April 30, 2025, (viii) 6.28 to 1.00 for the fiscal quarter ending on or around July 31, 2025, (ix) 5.81 to 1.00 for the fiscal quarter ending on or around October 31, 2025, (x) 5.30 to 1.00 for the fiscal quarter ending on or around January 31, 2026, and (xi) 3.75 to 1.00 for the fiscal quarter ending on or around April 30, 2026 and each fiscal quarter thereafter, subject to increase to 4.25 to 1.00 for the four full consecutive fiscal quarters ending on or after the date of consummation of a permitted acquisition that constitutes a "Material Acquisition" under the Credit Agreement, subject to the satisfaction of certain conditions; • maintaining a minimum consolidated interest expense coverage ratio, determined as of the last day of each fiscal quarter, of (i) 1.66 to 1.00 for the fiscal quarter ending on or around October 31, 2023, (ii) 1.40 to 1.00 for the fiscal quarter ending on or around January 31, 2024, (iii) 1.37 to 1.00 for the fiscal quarter ending on or around April 30, 2024, (iv) 1.41 to 1.00 for the fiscal quarter ending on or around July 31, 2024, (v) 1.73 to 1.00 for the fiscal quarter ending on or around October 31, 2024, (vi) 1.90 to 1.00 for the fiscal quarter ending on or around January 31, 2025, (vii) 2.14 to 1.00 for the fiscal quarter ending on or around April 30, 2025, (viii) 2.37 to 1.00 for the fiscal quarter ending on or around July 31, 2025, (ix) 2.68 to 1.00 for the fiscal quarter ending on or around October 31, 2025, (x) 3.01 to 1.00 for the fiscal quarter ending on or around January 31, 2026, and (xi) 3.50 to 1.00 for the fiscal quarter ending on or around April 30, 2026 and each fiscal quarter thereafter; and • until January 31, 2025, maintaining a minimum consolidated liquidity (as further defined in the Credit Agreement but excluding revolving credit commitments scheduled to expire in 2024) of $150 million as of the last day of each monthly accounting period of the Company.
The Notes bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased.
The 2027 Notes bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The 2027 Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased.
Net Sales Fiscal Year 2023 Compared with Fiscal Year 2022 The following table summarizes our net sales by major end market: Fiscal Years (in thousands, except percentages) 2023 2022 Net Sales % Net Sales Net Sales % Net Sales Change Infrastructure $ 287,270 38 % $ 264,464 35 % 9 % High-End Consumer 158,416 21 % 220,380 30 % (28) % Industrial 310,847 41 % 256,014 35 % 21 % Total $ 756,533 100 % $ 740,858 100 % 2 % Net sales for fiscal year 2023 were $756.5 million, an increase of 2% compared to $740.9 million for fiscal year 2022.
Net Sales The following table summarizes our net sales by major end market: Fiscal Years (in thousands, except percentages) 2023 2022 Net Sales % Net Sales Net Sales % Net Sales Change Infrastructure $ 287,270 38 % $ 264,464 35 % 9 % High-End Consumer 158,416 21 % 220,380 30 % (28) % Industrial 310,847 41 % 256,014 35 % 21 % Total $ 756,533 100 % $ 740,858 100 % 2 % Net sales for fiscal year 2023 were $756.5 million, an increase of 2% compared to $740.9 million for fiscal year 2022.
We determine revenue recognition through the following five steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract 41 • Recognition of revenue when, or as, performance obligations are satisfied We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
We determine revenue recognition through the following five steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, performance obligations are satisfied We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
We intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities, which may require additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products. Certain of these expenditures, particularly the addition of design engineers, do not generate significant payback in the 49 short-term.
We intend to continue to focus on those areas that have shown potential for viable and profitable market opportunities, which may require additional investment in equipment and the hiring of additional design and application engineers aimed at developing new products. Certain of these expenditures, particularly the addition of design engineers, do not generate significant payback in the short-term.
Credit Agreement On November 7, 2019, we, with certain of our domestic subsidiaries as guarantors, entered into the Credit Agreement with the lenders party thereto and HSBC Bank USA, National Association, as administrative agent, swing line lender and letter of credit issuer.
Credit Agreement On November 7, 2019, we, with certain of our domestic subsidiaries as guarantors, entered into a credit agreement with the lenders party thereto and HSBC Bank USA, National Association, as administrative agent, swing line lender and letter of credit issuer.
Net sales from our industrial end market increased $54.8 million versus the prior year primarily due to an approximately $53 million 42 increase in LoRa-enabled product sales led by an increase in pico gateways.
Net sales from our industrial end market increased $54.8 million versus the prior year primarily due to an approximately $53 million increase in LoRa-enabled product sales led by an increase in pico gateways.
We used approximately $29.7 million of the net proceeds from the Notes to pay for the cost of the Convertible Note Hedge Transactions, after such cost was partially offset by approximately $42.9 million of proceeds to us from the sale of Warrants in connection with the issuance of the Notes, all as described in Note 10, Long-Term Debt to our Consolidated Financial Statements.
We used approximately $29.7 million of the net proceeds from the Notes to pay for the cost of the Convertible Note Hedge Transactions (as defined in Note 10, Long-Term Debt), after such cost was partially offset by approximately $42.9 million of proceeds to us from the sale of Warrants in connection with the issuance of the 2027 Notes, all as described in Note 10, Long-Term Debt to our Consolidated Financial Statements.
The Notes were initially issued pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
The 2027 Notes were initially issued pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
Following this organizational restructuring, we determined that Signal Integrity and the revised Wireless and Sensing operating segments were no longer economically similar and as a result we concluded that Signal Integrity should be separately reported as its own reportable segment.
Following this organizational restructuring, the Company determined that Signal Integrity and the revised Wireless and Sensing operating segments were no longer economically similar and as a result the Company concluded that Signal Integrity should be separately reported as its own reportable segment.
Historically, we had three operating segments—Signal Integrity, Wireless and Sensing, and Protection—that had been aggregated into two reportable segments identified as the High-Performance Analog Group, which was comprised of the Signal Integrity and Wireless and Sensing operating segments, and the System Protection Group, which was comprised of the Protection operating segment.
Historically, the Company had three operating segments—Signal Integrity, Wireless and Sensing, and Protection—that had been aggregated into two reportable segments identified as the High-Performance Analog Group, which was comprised of the Signal Integrity and Wireless and Sensing operating segments, and the System Protection Group, which was comprised of the Protection operating segment.
Convertible Senior Notes On October 12, 2022 and October 21, 2022, we issued and sold $300 million and $19.5 million, respectively, in aggregate principal amount of our 1.625% Convertible Senior Notes due 2027 (the “Notes”) in a private placement.
Convertible Senior Notes due 2027 On October 12, 2022 and October 21, 2022, we issued and sold $300 million and $19.5 million, respectively, in aggregate principal amount of 1.625% Convertible Senior Notes due 2027 (the "2027 Notes") in a private placement.
Operating Leases We have operating leases for real estate, vehicles, and office equipment with remaining lease terms of up to nine years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.
Operating Leases We have operating leases for real estate, vehicles, and office equipment with remaining lease terms of up to eight years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.
Net sales from our infrastructure end market increased $22.8 million driven by an approximately $37 million increase in PON sales, partially offset by an approximately $11 million decline in data center demand and an approximately $5 million decrease in wireless infrastructure sales.
Net sales from our infrastructure end market increased $22.8 million driven by an approximately $37 million increase in PON sales, partially offset by an approximately $11 million decrease in data center sales and an approximately $5 million decrease in wireless infrastructure sales.
Variable consideration is estimated using the expected value method considering all reasonably available information, including our historical experience and our current expectations, and is reflected in the transaction price when sales are recorded. Sales returns are generally accepted at our discretion or from distributors with such rights.
Variable consideration includes expected sales returns and other price adjustments. Variable consideration is estimated using the expected value method considering all reasonably available information, including our historical experience and our current expectations, and is reflected in the transaction price when sales are recorded. Sales returns are generally accepted at our discretion or from distributors with such rights.
The Convertible Note Hedge Transactions and Warrants transactions are indexed to, and potentially settled in, our common stock and the net cost of $29.7 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of shareholders’ equity.
The Convertible Note Hedge Transactions and Warrants transactions are indexed to, and potentially settled in, our common stock and the net cost of $29.7 million has been recorded as a reduction to additional paid-in capital in the consolidated statement of stockholders’ equity (deficit).
We have elected to treat GILTI as a period cost and the additional capitalization of R&D costs within GILTI increases our provision for income taxes. We receive a tax benefit from a tax holiday that was granted in Switzerland. The tax holiday commenced on January 30, 2017, and was effective for five years (the “Initial Term”).
We have elected to treat global intangible low-taxed income ("GILTI") as a period cost and the additional capitalization of R&D costs within GILTI increases our provision for income taxes. We receive a tax benefit from a tax holiday that was granted in Switzerland. The tax holiday commenced on January 30, 2017, and was effective for five years (the “Initial Term”).
Based on fiscal year 2023 ending inventory, an increase in the write-down by one percent of gross inventory would decrease net inventory and increase cost of goods sold by $2.8 million. • Revenue recognition - Net sales reflect the transaction prices for contracts, which include units shipped at selling prices reduced by variable consideration.
Based on fiscal year 2024 ending inventory, an increase in the write-down by one percent of gross inventory would decrease net inventory and increase cost of goods sold by $2.3 million. • Revenue recognition - Net sales reflect the transaction prices for contracts, which include units shipped at selling prices reduced by variable consideration.
When using a quantitative approach, changes in our projections used in the discounted cash flow model could affect the estimated fair value of certain of our reporting units and could result in a goodwill impairment charge in a future period.
When using a quantitative approach, changes in our projections used in the discounted cash flow model and public company guideline model could affect the estimated fair value of certain of our reporting units and could result in a goodwill impairment charge in a future period.
Interest on loans made under the Revolving Credit Facility in Alternative Currencies (as defined in the Credit Agreement) accrues at a rate per annum equal to a customary benchmark rate (including, in certain cases, credit spread adjustments) plus the Applicable Margin.
Interest on loans made under the Revolving Credit Facility in Alternative Currencies accrues at a rate per annum equal to a customary benchmark rate (including, in certain cases, credit spread adjustments) plus the Applicable Margin.
The Notes were issued pursuant to an indenture, dated October 12, 2022, by and among us, the Subsidiary Guarantors (as defined below) party thereto and U.S. Bank Trust Company, National Association, as trustee (the "Indenture").
The 2027 Notes were issued pursuant to an indenture, dated October 12, 2022, by and among us, the Subsidiary Guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee.
Despite various macroeconomic challenges, we remained focused on furthering our role as a leading provider of disruptive platforms that enable our customers to deliver solutions to create a smarter planet. We continued to invest in secular trends that enable a smarter, more sustainable planet; enable higher bandwidth; and enable greater mobility.
We remained focused on furthering our role as a leading provider of disruptive platforms that enable our customers to deliver solutions to create a smarter planet. We continued to invest in secular trends that enable a smarter, more sustainable planet; enable higher bandwidth; and enable greater mobility.
We believe that our cash on hand, cash available from future operations and available borrowing capacity under our Revolving Credit Facility (as defined below) are sufficient to meet liquidity requirements for at least the next 12 months, including funds needed for our material cash requirements.
We believe that our cash on hand, cash available from future operations and available borrowing capacity under the revolving credit facility under the Credit Agreement (the "Revolving Credit Facility") are sufficient to meet liquidity requirements for at least the next 12 months, including funds needed for our material cash requirements.
Liquidity and Capital Resources Our capital requirements depend on a variety of factors including, but not limited to, the rate of increase or decrease in our existing business base; the success, timing and amount of investment required to bring new products to market; sales growth or decline; potential acquisitions; the general economic environment in which we operate; and our ability to generate cash flow from operations.
Liquidity and Capital Resources Our capital requirements depend on a variety of factors including, but not limited to, the rate of increase or decrease in our existing business base; the success, timing and amount of investment required to bring new products to market; sales growth or decline; potential acquisitions or divestitures; the general economic environment in which we operate; and our ability to generate cash flows from operating activities.
See also “Special Note Regarding Forward Looking and Cautionary Statements and Summary Risk Factors” at the beginning of this Annual Report on Form 10-K. Overview We are a high-performance semiconductor, IoT systems and Cloud connectivity service provider and were incorporated in Delaware in 1960.
See also “Special Note Regarding Forward Looking and Cautionary Statements” at the beginning of this Annual Report on Form 10-K. Overview We are a high-performance semiconductor, IoT systems and cloud connectivity service provider and were incorporated in Delaware in 1960.
Also in the fourth quarter of fiscal year 2023, in conjunction with the acquisition of Sierra Wireless we formed two additional operating segments including the IoT System operating segment, which absorbed our revised Wireless and Sensing operating segment, and the IoT Connected Services operating segment.
Also in the fourth quarter of fiscal year 2023, in conjunction with the Sierra Wireless Acquisition, the Company formed two additional operating segments including the IoT System operating segment, which absorbed the Company's revised Wireless and Sensing operating segment, and the IoT Connected Services operating segment.
We may voluntarily prepay borrowings at any time and from time to time, without premium or penalty, other than customary "breakage costs" in certain circumstances.
The Company may voluntarily prepay borrowings at any time and from time to time, without premium or penalty, other than customary "breakage costs" in certain circumstances.
The estimation of customer demand requires management to evaluate and make assumptions of the impact of changes in demand or changes in product life cycles on current sales levels. Our write-down to net realizable value at the end of fiscal year 2023 and 2022 represented 25.8% and 27.5% of gross inventory, respectively.
The estimation of customer demand requires management to evaluate and make assumptions of the impact of changes in demand or changes in product life cycles on current sales levels. Our write-down to net realizable value at the end of fiscal year 2024 and 2023 represented 35.7% and 25.8% of gross inventory, respectively.
As of January 29, 2023, our historical undistributed earnings of our foreign subsidiaries are intended to be permanently reinvested outside of the U.S. With the enactment of the Tax Act, all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax.
As of January 28, 2024, our historical undistributed earnings prior to fiscal year 2023 of our foreign subsidiaries are intended to be permanently reinvested outside of the U.S. With the enactment of the Tax Act, all post-1986 previously unremitted earnings for which no U.S. deferred tax liability had been accrued were subject to U.S. tax.
Working Capital Working capital, defined as total current assets less total current liabilities, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. In times of escalating demand, our working capital requirements may increase as we purchase additional manufacturing materials and increase production.
Working Capital Working capital, defined as total current assets less total current liabilities including the current portion of long-term debt, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. In times of escalating demand, our working capital requirements may increase as we purchase additional manufacturing materials and increase production.
This reclassification did not impact our operating income, net income or earnings per share for any historical periods and also did not impact our Balance Sheets or Statements of Cash Flows.
This reclassification did 42 not impact our gross profit, operating income, net income or earnings per share for any historical periods and also did not impact the Balance Sheets or Statements of Cash Flows.
Since we met certain staffing targets, the holiday has been extended for an additional five years. The maximum benefit under this tax holiday is CHF 500.0 million of cumulative after tax profit, which equates to a maximum potential tax savings of CHF 44.0 million.
Since we met certain staffing targets, the holiday has been extended for an additional five years. The maximum benefit under this tax holiday is CHF 500.0 million of cumulative after tax profit, which equates to a maximum potential tax savings of CHF 44.0 million. The extended term of the tax holiday is effective until fiscal year 2027.
The Credit Agreement contains customary covenants, including limitations on our ability to, among other things, incur indebtedness, create liens on assets, engage in certain fundamental corporate changes, make investments, repurchase stock, pay dividends or make similar distributions, engage in certain affiliate transactions, or enter into agreements that restrict our ability to create liens, pay dividends or make loan repayments.
The Credit Agreement contains customary representation and warranties, and affirmative and negative covenants, including limitations on the Company’s ability to, among other things, incur indebtedness, create liens on assets, engage in certain fundamental corporate changes, make investments, repurchase stock, pay dividends or make similar distributions, engage in certain affiliate transactions, or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments.
Capital expenditures were $28.3 million and $26.2 million in fiscal years 2023 and 2022, respectively, as we made significant investments to update and expand our production capabilities. In fiscal years 2023 and 2022 we paid $6.7 million and $8.2 million, respectively, for strategic investments, including investments in companies that are enabling the LoRa and LoRaWAN®-based ecosystem.
Capital expenditures were $29.2 million and $28.3 million in fiscal years 2024 and 2023, respectively, as we made significant investments to update and expand our production capabilities. In fiscal years 2024 and 2023, we paid $0.9 million and $6.7 million, respectively, for strategic investments, including investments in companies that are enabling the LoRa and LoRaWAN®-based ecosystem.
With the exception of net sales and gross profit, which are discussed below to reflect the changes to our reportable segments, a discussion of our results of operations for the fiscal year ended January 31, 2021 and year-over-year comparisons between fiscal years 2022 and 2021 have been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
With the exception of net sales, gross profit and operating expenses, which are discussed below to reflect the changes to our reportable segments and reclassification of restructuring costs (see "Reclassification" below), a discussion of our results of operations for the fiscal year ended January 30, 2022 and year-over-year comparisons between fiscal years 2023 and 2022 have been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Our IoT module, router, gateway and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices. We report results on the basis of 52 and 53 week periods and our fiscal year ends on the last Sunday in January.
Our IoT module, router, gateway and managed connectivity solutions ship to IoT device makers and enterprises to provide IoT connectivity to end devices. We report results on the basis of 52 and 53 week periods and our fiscal year ends on the last Sunday in January. Fiscal years 2024, 2023 and 2022 each consisted of 52 weeks.
Operating Costs and Expenses, net Fiscal Years (in thousands, except percentages) 2023 2022 Cost/Exp. % Net Sales Cost/Exp. % Net Sales Change Selling, general and administrative $ 235,801 31 % $ 168,210 23 % 40 % Product development and engineering 167,450 22 % 147,925 20 % 13 % Intangible amortization 821 — % — — % 100 % Gain on sale of business (18,313) (2) % — — % (100) % Changes in the fair value of contingent earn-out obligations — — % (13) — % 100 % Total operating costs and expenses, net $ 385,759 51 % $ 316,122 43 % 22 % Selling, General & Administrative Expenses SG&A expenses for fiscal year 2023 increase d by $67.6 million primarily driven by approximately $34 million of share-based compensation acceleration expense, approximately $29 million of other transaction costs related to the Sierra Wireless Acquisition and approximately $11 million in restructuring expense, partially offset by an $11 million decrease in share-based compensation caused by the impact of the lower closing stock price at year-end on the cash-settled awards.
Operating Costs and Expenses, net Fiscal Years (in thousands, except percentages) 2023 2022 Cost/Exp. % Net Sales Cost/Exp. % Net Sales Change Selling, general and administrative $ 224,812 30 % $ 168,210 23 % 34 % Product development and engineering 166,948 22 % 147,925 20 % 13 % Intangible amortization 821 — % — — % 100 % Restructuring 11,491 2 % — — % 100 % Gain on sale of business (18,313) (2) % — — % 100 % Changes in the fair value of contingent earn-out obligations — — % (13) — % (100) % Total operating costs and expenses, net $ 385,759 52 % $ 316,122 43 % 22 % Selling, General & Administrative Expenses Selling, general and administrative expenses increased $56.6 million for fiscal year 2023 compared to fiscal year 2022 primarily driven by $34 million of share-based compensation acceleration expense and approximately $29 million of other transaction costs related to the Sierra Wireless Acquisition, partially offset by an $11 million decrease in share-based compensation caused by the impact of the lower closing stock price at year-end on the cash-settled awards.
Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise we perform a quantitative impairment test.
Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise we perform a quantitative impairment test. We perform a quantitative test for each reporting unit at least once every three years.
We include revenue related to granted technology licenses as part of "Net sales" in the Statements of Income. Historically, revenue from these arrangements has not been significant though it is part of our recurring ordinary business.
Historically, these recoveries have not exceeded the cost of the related development efforts. We include revenue related to granted technology licenses as part of "Net sales" in the Statements of Operations. Historically, revenue from these arrangements has not been significant though it is part of our recurring ordinary business.
Provision for Income Taxes We recorded income tax expense of $17.3 million for fiscal year 2023 compared to income tax expense of $15.5 million for fiscal year 2022. The effective tax rates for fiscal years 2023 and 2022 were provision rates of 22.0% and 11.0%, respectively.
Provision for Income Taxes We recorded income tax expense of $50.5 million for fiscal year 2024 compared to income tax expense of $17.3 million for fiscal year 2023. The effective tax rates for fiscal years 2024 and 2023 were (4.9%) and 22.0%, respectively.
Investing Activities Net cash used in investing activities is primarily attributable to acquisitions, net of any cash received, capital expenditures, purchases of investments and premiums paid for corporate-owned life insurance, net of proceeds from sales of property, plant and equipment and proceeds from sales of investments.
Investing Activities Net cash provided by or used in investing activities is primarily driven by acquisitions, net of any cash received, proceeds from divestitures, capital expenditures, purchases of investments, proceeds from or premiums paid for corporate-owned life insurance, proceeds from sales of property, plant and equipment, proceeds from sales of investments, and purchases of intangibles.
In fiscal year 2023 , net sales were reduced by $24.2 million in estimated variable consideration, or 3.1% of gross revenue. In fiscal year 2022 , net sales were reduced by $21.0 million in estimated variable consideration, or 2.8% of gross revenue.
In fiscal year 2024 , net sales were reduced by $55.2 million in estimated variable consideration, or 6.0% of gross revenue. In fiscal year 2023 , net sales were reduced by $24.2 million in estimated variable consideration, or 3.1% of gross revenue.
They are not recorded liabilities in our Consolidated Balance Sheets as of January 29, 2023, as we have not yet received the related goods or taken title to the goods or received services. As of January 29, 2023, we had $12.0 million in open capital purchase commitments and $202.0 million in other open purchase commitments.
They are not recorded liabilities in our Consolidated Balance Sheets as of January 28, 2024, as we have not yet received the related goods or taken title to the goods or received services. As of January 28, 2024, we had $5.5 million in open capital purchase commitments and $265.1 million in other open purchase commitments.
New Accounting Standards New accounting standards are discussed in Note 2, Significant Accounting Policies, to our Consolidated Financial Statements.
Recent Accounting Pronouncements Recent accounting pronouncements are discussed in Note 2, Significant Accounting Policies, to our Consolidated Financial Statements.
Our consistently solid profitability and operating cash flow are driven by our ability to value price for the differentiated technology that we provide, as well as our fabless business model, which is highly flexible to changes in customer demand.
Expected Sources and Uses of Liquidity Operating Cash Flows Our operating cash flows are driven by our ability to value price for the differentiated technology that we provide, as well as our fabless business model, which is highly flexible to changes in customer demand.
As a result of the reorganization and the Sierra Wireless Acquisition, we have four reportable segments. All prior year information in the tables below has been revised retrospectively to reflect the change to our reportable segments. See Note 16, Segment Information, to our Consolidated Financial Statements for segment information.
As a result of these changes, the Company has four reportable segments. All prior year information in the tables below has been revised retrospectively to reflect the change to the Company's reportable segments. See Note 16, Segment Information, to our Consolidated Financial Statements for segment information.
Our gross margin was 63.3% in fiscal year 2023, compared to 62.2% in fiscal year 2022. Gross margin in our Signal Integrity Products Group was 69.6% in fiscal year 2023 , compared to 68.8% in fiscal year 2022 primarily driven by higher PON sales, including 10G PON.
Our gross margin was 63.3% in fiscal year 2023, compared to 62.2% in fiscal year 2022 . Gross margin for Signal Integrity was 69.9% in fiscal year 2023 , compared to 68.5% in fiscal year 2022 primarily driven by higher PON sales.
Intangible Amortization Intangible amortization for fiscal year 2023 increased by $0.8 million due to intangibles acquired in the Sierra Wireless Acquisition related to customer relationships and trade name.
Intangible Amortization Intangible amortization increased $0.8 million for fiscal year 2023 compared to fiscal year 2022 due to intangibles acquired in the Sierra Wireless Acquisition related to customer relationships and trade name. Amortization of acquired technology intangibles is reflected in cost of sales.
Net sales from our IoT Connected Services Group increased $5.2 million in fiscal year 2023 versus fiscal year 2022 primarily due to approximately $5 million in managed connectivity sales.
Net sales from IoT Connected Services increased $5.2 million in fiscal year 2023 versus fiscal year 2022 primarily due to approximately $5 million in managed connectivity sales driven by the Sierra Wireless Acquisition.
Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions may have a material effect on the results of our impairment analysis. During the fourth quarter of fiscal 2023, we had 3 reporting units for goodwill impairment testing.
Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded goodwill, differences in assumptions may have a material effect on the results of our impairment analysis.
The liability associated with vested, but unsettled restricted stock awards that are to be settled in cash totaled $6.1 million and $11.5 million as of January 29, 2023 and January 30, 2022 , respectively, and was included in "Other long-term liabilities" in the Balance Sheets.
The liability associated with vested, but unsettled restricted stock awards that are to be settled in cash totaled $4.4 million as of January 28, 2024, of which $2.6 million was included in "other long-term liabilities" and $1.8 million was included in "accrued liabilities" in the Balance Sheets , compared to $6.1 million as of January 29, 2023 , which was included in "other long-term liabilities" in the Balance Sheets.
A qualitative test was performed for one reporting unit and a quantitative test was performed for the remaining two reporting units. Our analysis for fiscal 2023 indicated that in all instances, the fair value of our reporting units exceeded their carrying values and consequently did not result in an impairment charge.
Our analysis for fiscal year 2023 indicated that in all instances, the fair value of our reporting units exceeded their carrying values and consequently did not result in an impairment charge.
Investment Impairments and Credit Loss Reserves In fiscal year 2023, investment impairments and credit loss reserves totaled a loss of $1.2 million as we had $0.3 million of recoveries on our credit loss reserves for our available-for-sale ("AFS") debt securities, consisting of our convertible debt investments in privately-held companies and recorded a $1.5 million impairment on one of our non-marketable equity investments.
In fiscal year 2023, investment impairments and credit loss reserves totaled a loss of $1.2 million as w e had a recovery on our credit loss reserves of $0.3 million for our available-for-sale debt securities and recorded a $1.5 million other-than-temporary impairment on one of our non-marketable equity investments .
Amortization of acquired technology intangibles is reflected in cost of sales. 45 Gain on Sale of Business Gain on sale of business was $18.3 million in fiscal year 2023 , resulting from our divestiture of the Disposal Group in May 2022.
Gain on Sale of Business Gain on sale of business was $18.3 million in fiscal year 2023, resulting from our divestiture of the Disposal Group in May 2022.
Changes in the Fair Value of Contingent Earn-out Obligations The change in the fair value of contingent earn-out obligations in fiscal year 2022 reflects the difference between the final earn-out targets achieved for Cycleo SAS and the final earn-out payments made. Interest Expense Interest expense was $17.6 million and $5.1 million for fiscal years 2023 and 2022, respectively.
Changes in the Fair Value of Contingent Earn-out Obligations The change in the fair value of contingent earn-out obligations in fiscal year 2022 reflects the difference between the final earn-out targets achieved for Cycleo SAS and the final earn-out payments made.
If any event of default occurs, the obligations under the Credit Agreement may be declared due and payable, terminated upon written notice to us and existing letters of credit may be required to be cash collateralized. As of January 29, 2023 , we were in compliance with the financial covenants in our Credit Agreement.
If any event of default occurs, the obligations under the Credit Agreement may be declared due and payable, terminated upon written notice to us and existing letters of credit may be required to be cash collateralized.
Our operating lease liabilities totaled $32.7 million and $20.6 million as of January 29, 2023 and January 30, 2022, respectively. Purchase Commitments Capital purchase commitments and other open purchase commitments are for the purchase of plant, equipment, raw materials, supplies and services.
Our operating lease liabilities totaled $28.6 million and $32.7 million as of January 28, 2024 and January 29, 2023, respectively, and are included in "accrued liabilities" and "other long-term liabilities" in our Consolidated Balance Sheets. Purchase Commitments Capital purchase commitments and other open purchase commitments are for the purchase of plant, equipment, raw materials, supplies and services.
Doing business in foreign locations also subjects us to export restrictions and trade laws, which may limit our ability to sell to certain customers. We use several metrics as indicators of future potential growth. The indicators that we believe best correlate to potential future sales growth are design wins and new product releases.
We are subject to export restrictions and trade regulations, which have limited our ability to sell to certain customers. We use several metrics as indicators of future potential growth. The indicators that we believe best correlate to potential future sales growth are design wins and new product releases.
We determine the cost of inventory by the first-in, first-out method. Operating Costs and expenses, net Our operating costs and expenses generally consist of selling, general and administrative, product development and engineering costs, costs associated with acquisitions, restructuring charges, and other operating related charges.
Operating Costs and expenses, net Our operating costs and expenses generally consist of selling, general and administrative, product development and engineering costs, costs associated with acquisitions, restructuring charges, and other operating related charges.
Our liability for deferred compensation under this plan was $42.3 million and $45.2 million as of January 29, 2023 and January 30, 2022, respectively, and is included in accrued liabilities and other long-term liabilities in the Consolidated Balance Sheets.
Our liabilities for deferred compensation under this plan were $39.7 million and $42.3 million as of January 28, 2024 and January 29, 2023, respectively, and are included in "accrued liabilities" and "other long-term liabilities" in the Consolidated Balance Sheets.
Bank Trust Company, National Association, as trustee. The Notes will bear interest at a rate of 1.625% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2023. The Notes will mature on November 1, 2027, unless earlier converted, redeemed or repurchased.
The 2028 Notes bear interest at a rate of 4.00% per year, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2024. The 2028 Notes will mature on November 1, 2028, unless earlier converted, redeemed or repurchased.
Finally, the increasing demand for smaller, lower-powered higher performance mobile platforms with more enjoyable organic light-emitting diode displays has benefited our protection and proximity sensing solutions that protect these mobile devices and their users from dangerous radio frequency signals.
Finally, the increasing demand for smaller, lower-powered higher performance mobile platforms with more enjoyable organic light-emitting diode displays has benefited our protection and proximity sensing solutions that protect these mobile devices and help our customers comply with radio frequency absorption regulations. Through our acquisition of Sierra Wireless, Inc.
In fiscal year 2023 , we paid $14.2 million for employee share-based compensation payroll taxes and received $0.6 million in proceeds from the exercise of stock options, compared to payments of $19.4 million for employee share-based compensation payroll taxes and proceeds of $5.3 million from the exercise of stock options in fiscal year 2022 .
In fiscal year 2023 , we paid $14.2 million for employee share-based compensation payroll taxes and received proceeds of $0.6 million from the exercise of stock options. We do not directly control the timing of the exercise of stock options.
We do not directly control the 51 timing of the exercise of stock options. Such exercises are independent decisions made by grantees and are influenced most directly by the stock price and the expiration dates of stock option awards. Such proceeds are difficult to forecast, resulting from several factors which are outside our control.
Such exercises are independent decisions made by grantees and are influenced most directly by the stock price and the expiration dates of stock option awards. Such proceeds are difficult to forecast, resulting from several factors which are outside our control. We believe that such proceeds will remain a nominal source of cash in the future.
We believe that such proceeds will remain a nominal source of cash in the future. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosure of contingent assets and liabilities. Accordingly, actual results could differ materially from our estimates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 30, 2022 , filed with the SEC on March 16, 2022 and is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 29, 2023 , filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023.
The levels of product development and engineering expenses reported in a fiscal period can be significantly impacted, and therefore experience period-over-period volatility, by the number of new product tape-outs and by the timing of recoveries from non-recurring engineering services, which are typically recorded as a reduction to product development and engineering expense.
The levels of product development and engineering expenses reported in a fiscal period can be significantly impacted, and therefore experience period-over-period volatility, by the number of new product tape-outs and by the timing of recoveries from non-recurring engineering services, which are typically recorded as a reduction to product development and engineering expense. 44 Intangible Amortization Intangible amortization for fiscal year 2024 increased $14.1 million for fiscal year 2024 compared to fiscal year 2023 due to intangibles acquired in the Sierra Wireless Acquisition related to customer relationships and trade name.
In summary, our cash flows for each period were as follows: Fiscal Years (in thousands) 2023 2022 Net cash provided by operating activities $ 126,711 $ 203,123 Net cash used in investing activities (1,247,322) (40,316) Net cash provided by (used in) financing activities 1,076,520 (152,097) Net (decrease) increase in cash and cash equivalents $ (44,091) $ 10,710 Operating Activities Net cash provided by operating activities is driven by net income, adjusted for non-cash items and fluctuations in operating assets and liabilities.
Cash Flows In summary, our cash flows for each period were as follows: Fiscal Years (in thousands) 2024 2023 Net cash (used in) provided by operating activities $ (93,920) $ 126,711 Net cash used in investing activities (22,697) (1,247,322) Net cash provided by financing activities 10,550 1,076,520 Effect of foreign exchange rate changes on cash and cash equivalents (858) — Net decrease in cash and cash equivalents $ (106,925) $ (44,091) Operating Activities Net cash provided by or used in operating activities is driven by net income or loss adjusted for non-cash items and fluctuations in operating assets and liabilities.
Gross Profit Gross profit is equal to our net sales less our cost of sales. Our cost of sales includes materials, depreciation on fixed assets used in the manufacturing process, shipping costs, direct labor and overhead. The majority of our manufacturing is outsourced, resulting in relatively low fixed manufacturing costs and variable costs that highly correlate with volume.
Gross Profit Gross profit is equal to our net sales less our cost of sales. Our cost of sales includes materials, depreciation on fixed assets used in the manufacturing process, shipping costs, direct labor and overhead, as well as amortization of acquired technology and acquired technology impairments.
The Company and the guarantors have also pledged substantially all of their assets to secure their obligations under the Credit Agreement. No amortization is required with respect to the revolving loans. The Term Loans amortize in equal quarterly installments of 1.25% of the original principal amount thereof, with the balance due at maturity.
The Company and the guarantors have also pledged substantially all of their assets to secure their obligations under the Credit Agreement. No amortization is required with respect to the revolving loans.
For further information on the effective tax rate and the Tax Act’s impact, see Note 12, Income Taxes, to our Consolidated Financial Statements.
For further information on the effective tax rate and the Tax Act’s impact, see Note 12, Income Taxes, to our Consolidated Financial Statements. Fiscal Year 2023 Compared with Fiscal Year 2022 The discussion below updates the discussion included in “Item 7.
Financing Activities Net cash provided by financing activities is primarily attributable to proceeds from the Term Loan Facility, the Revolving Credit Facility, the Notes, the sale of the Warrants and stock option exercises, offset by the purchase of the Convertible Note Hedge Transactions, repurchases of outstanding common stock, payments on the Revolving Credit Facility, deferred financing costs and payments related to employee share-based compensation payroll taxes.
All $5.1 million of the proceeds were re-invested into our corporate-owned life insurance policy in order to provide substantive coverage for our deferred compensation liability. 53 Financing Activities Net cash provided by or used in financing activities is primarily attributable to proceeds from our Revolving Credit Facility, the Term Loans, the 2028 Notes, the 2027 Notes, the sale of the Warrants and stock option exercises, offset by the purchase of the Convertible Note Hedge Transactions, repurchases of outstanding common stock, payments on the Revolving Credit Facility and the Term Loans, deferred financing costs and payments related to employee share-based compensation payroll taxes.
Gross Profit Fiscal Year 2023 Compared with Fiscal Year 2022 The following table summarizes our gross profit and gross margin by reportable segment: Fiscal Years (in thousands, except percentages) 2023 2022 Gross Profit Gross Margin Gross Profit Gross Margin Signal Integrity Products Group $ 211,791 69.6 % $ 200,251 68.8 % Advanced Protection and Sensing Products Group 125,584 53.0 % 163,474 53.3 % IoT System Products Group 148,895 70.8 % 106,474 74.6 % IoT Connected Services Group 2,489 47.9 % — — % Unallocated costs, including share-based compensation and amortization of acquired technology (10,201) (9,060) Total $ 478,558 63.3 % $ 461,139 62.2 % In fiscal year 2023, gross profit increased to $478.6 million from $461.1 million in fiscal year 2022 as a result of higher sales.
Gross Profit The following table summarizes our gross profit and gross margin by reportable segment: Fiscal Years (in thousands, except percentages) 2023 2022 Gross Profit Gross Margin Gross Profit Gross Margin Signal Integrity $ 208,510 69.9 % $ 195,984 68.5 % Analog Mixed Signal and Wireless 274,515 61.9 % 274,215 60.3 % IoT Systems 3,245 33.1 % — — % IoT Connected Services 2,489 47.9 % — — % Unallocated costs, including share-based compensation and amortization of acquired technology (10,201) (9,060) Total $ 478,558 63.3 % $ 461,139 62.2 % In fiscal year 2023, gross profit increased to $478.6 million from $461.1 million in fiscal year 2022 as a result of higher sales.
We intend to fund repurchases under the program from cash on hand and borrowings on our Revolving Credit Facility. We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
We have no obligation to repurchase any shares under the program and may suspend or discontinue it at any time.
Revenue is recognized when control of these products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for these products. Control is generally transferred when products are shipped and, to a lesser extent, when the products are delivered.
Revenue We derive our revenue primarily from the sale of our products into various end markets. Revenue is recognized when control of these products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for these products.
As a result, although a design win or new product introduction is an important step towards generating future sales, it does not inevitably result in us being awarded business or receiving a purchase commitment. Inflationary factors have not had a significant effect on our performance over the past several years.
As a result, although a design win or new product introduction is an important step towards generating future sales, it does not necessarily result in us being awarded business or receiving a purchase commitment. Inflationary factors could affect our future performance if we are unable to pass higher costs on to our customers.
Our effective tax rate for fiscal year 2023 differs from the statutory federal income tax rate of 21% primarily due to our regional mix of income, impact of global intangible low-taxed income ("GILTI") and research and development ("R&D") tax credits.
Our effective tax rate for fiscal year 2024 differs from the statutory federal income tax rate of 21% primarily due to our regional mix of income, 45 changes in valuation allowance, non-deductibility of goodwill impairment and research and development ("R&D") tax credits.
The cash surrender value of our corporate-owned life insurance was $33.7 million and $35.2 million as of January 29, 2023 and January 30, 2022, respectively, and is included in other assets in the Consolidated Balance Sheets.
The cash surrender value of our corporate-owned life insurance was $29.6 million as of January 28, 2024, of which $25.1 million was included in "other assets" and $4.5 million was included in "other current assets" in the Consolidated Balance Sheets, compared to $33.7 million as of January 29, 2023, which was included in "other assets" in the Consolidated Balance Sheets.
Notwithstanding the U.S. taxation of these amounts, we have determined that none of our current foreign earnings will be permanently reinvested. If we needed to remit all or a portion of our historical undistributed earnings to the U.S. for investment in our domestic operations, any such remittance could result in increased tax liabilities and a higher effective tax rate.
If we needed to remit all or a portion of our historical undistributed earnings to the U.S. for investment in our domestic operations, any such remittance could result in increased tax liabilities and a higher effective tax rate. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not practicable.
Convertible Senior Notes As discussed above, on October 12, 2022 and October 21, 2022, we issued and sold $300 million and $19.5 million, respectively, in aggregate principal amount of the Notes in a private placement. The Notes were issued pursuant to an indenture, dated October 12, 2022, by and among us, the Subsidiary Guarantors party thereto and U.S.
Convertible Senior Notes due 2028 On October 26, 2023, we issued and sold $250.0 million in aggregate principal amount of the 2028 Notes in a private placement. The 2028 Notes were issued pursuant to an indenture, dated October 26, 2023, by and among the Company, the 51 subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

12 edited+4 added−3 removed9 unchanged
Biggest changeOur investment strategy limits investment of new funds and maturing securities to U.S. Treasury, Federal agency securities, high quality money market funds and time deposits with our principal commercial banks. Outside of these investment guidelines, we also invest in a limited amount of debt securities in privately held companies that we view as strategic to our business.
Biggest changeThese restrictions are intended to limit risk by restricting our investments to high quality debt instruments with relatively short-term durations. Our investment strategy limits investment of new funds and maturing securities to U.S. Treasury, Federal agency securities, high quality money market funds and time deposits with our principal commercial banks.
We do not enter into formal hedging arrangements to mitigate against commodity risk. Foreign Currency Risk Our foreign operations expose us to the risk of fluctuations in foreign currency exchange rates against our functional currencies and we may economically hedge this risk with foreign currency contracts (such as currency forward contracts).
We do not enter into formal hedging arrangements to mitigate against commodity risk. 56 Foreign Currency Risk Our foreign operations expose us to the risk of fluctuations in foreign currency exchange rates against our functional currencies and we may economically hedge this risk with foreign currency contracts (such as currency forward contracts).
To date, we have not experienced any losses associated with this credit risk and continue to believe that this exposure is not significant. 54
To date, we have not experienced any losses associated with this credit risk and continue to believe that this exposure is not significant. 57
Gains or losses on these balances are generally offset by corresponding losses or gains on the related hedging instruments. As of January 29, 2023 , our largest foreign currency exposures were from the Canadian Dollar, Swiss Franc and Great British Pound.
Gains or losses on these balances are generally offset by corresponding losses or gains on the related hedging instruments. As of January 28, 2024 , our largest foreign currency exposures were from the Canadian Dollar, Swiss Franc and Great British Pound.
During fiscal year 2021, we entered into an interest rate swap agreement with a three-year term to hedge the variability of interest payments on the first $150.0 million of debt outstanding under our Revolving Credit Facility at a LIBOR-referenced rate of 0.73%, plus a 53 variable margin and spread based on our consolidated leverage ratio.
In the first quarter of fiscal year 2021, we entered into an interest rate swap agreement with a 3 year term to hedge the variability of interest payments on the first $150.0 million of debt outstanding under the Revolving Credit Facility at a LIBOR-referenced rate of 0.73%, plus a variable margin and spread based on our consolidated leverage ratio.
Interest Rate and Credit Risk We are subject to interest rate risk in connection with the portion of the outstanding debt under our Credit Agreement that bears interest at a variable rate as of January 29, 2023 .
Interest Rate and Credit Risk We are subject to interest rate risk in connection with the portion of the outstanding debt under our Credit Agreement that bears interest at a variable rate as of January 28, 2024 .
These reasonably possible adverse changes were applied to our total monetary assets and liabilities denominated in currencies other than our functional currency as of January 29, 2023. The adverse impact these changes would have had (after taking into account balance sheet hedges only) on our income before taxes is $2.4 million.
These reasonably possible adverse changes were applied to our total monetary assets and liabilities denominated in currencies other than our functional currency as of January 28, 2024. The adverse impact these changes would have had (after taking into account balance sheet hedges only) on our income before taxes is $1.9 million.
On January 12, 2023, we entered into an interest rate swap agreement with a five-year term to hedge the variability of interest payments on the first $450.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.44%, plus a variable margin and spread based on our consolidated leverage ratio.
In the fourth quarter of fiscal year 2023, we entered into an interest rate swap agreement with a 5 year term to hedge the variability of interest payments on $450.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.44%, plus a variable margin and spread based on our consolidated leverage ratio.
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. We maintain cash held in deposit at financial institutions in the U.S.
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. We maintain cash held in deposit at financial institutions in the U.S. These deposits are insured by the FDIC in an amount up to $250,000 for any depositor.
A majority of our cash and cash equivalents generate interest income based on prevailing interest rates. Interest income, net of reserves, generated by our investments and cash and cash equivalents was $5.8 million in fiscal year 2023. A significant change in interest rates would impact the amount of interest income generated from our cash and investments.
As of January 28, 2024, we had $128.6 million of cash and cash equivalents. A majority of our cash and cash equivalents generate interest income based on prevailing interest rates. Interest income, net of reserves, generated by our investments and cash and cash equivalents was $3.1 million in fiscal year 2024.
It would also impact the market value of our investments. Our investments are primarily subject to credit risk. Our investment guidelines prescribe credit quality, permissible investments, diversification, and duration restrictions. These restrictions are intended to limit risk by restricting our investments to high quality debt instruments with relatively short-term durations.
A significant change in interest rates would impact the amount of interest income generated from our cash and investments. It would also impact the market value of our investments. Our investments are primarily subject to credit risk. Our investment guidelines prescribe credit quality, permissible investments, diversification, and duration restrictions.
For example, many of these investments are in companies that are enabling the LoRa- and LoRaWAN®-based ecosystem.
Outside of these investment guidelines, we also invest in a limited amount of debt securities in privately held companies that we view as strategic to our business. For example, many of these investments are in companies that are enabling the LoRa®- and LoRaWAN®-based ecosystem.
Removed
Market Conditions A deterioration of global economic conditions can impact demand for our products which could result in changes in customer order patterns, including order cancellations, and changes in the level of inventory held by vendors.
Added
In the first quarter of fiscal year 2024, we entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.58%, plus a variable margin and spread based on our consolidated leverage ratio.
Removed
See above under "Liquidity and Capital Resources - Credit Facility" for the interest rates applicable to U.S. and Alternative Currencies borrowings under our Revolving Credit Facility in excess of $150.0 million. Interest rates also affect our return on excess cash and investments. As of January 29, 2023, we had $235.5 million of cash and cash equivalents.
Added
This interest rate swap agreement matured during the first quarter of fiscal year 2024. Based upon our $237.6 million of unhedged floating-rate outstanding indebtedness as of January 28, 2024, the adverse impact a one percentage point increase in Term SOFR would have on our interest expense is $2.4 million. Interest rates also affect our return on excess cash and investments.
Removed
These deposits are insured by the FDIC in an amount up to $250,000 for any depositor, and with respect to SVB are fully insured per recent correspondence from the FDIC.
Added
There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or any applicable foreign government in the future or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a future failure or liquidity crisis.
Added
In addition, if any of our partners or parties with whom we conduct business are unable to access funds due to the status of their financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.

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