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

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Paragraph-level year-over-year comparison of LATTICE SEMICONDUCTOR 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.

+224 added−199 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in LATTICE SEMICONDUCTOR CORP's 2024 10-K

224 paragraphs added · 199 removed · 171 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe combine all of these elements to solve specific customer problems such as the need to quickly implement low power AI inferencing in Edge applications. Further, we have application software such as Glance by Mirametrix™ that allows users to control the AI and computer vision experience of their end systems.
Biggest changeFurther, we have application software such as Glance by Mirametrix™ that allows users to control the AI and computer vision experience of their end systems for Client computing, industrial, and automotive applications. Depending on the application, we may compete with other FPGA vendors, as well as producers of ASICs, ASSPs, and microcontrollers.
To serve these emerging needs, customer solutions require power efficiency, memory bandwidth, processing power, and the ability to integrate complex functionality into a highly compact footprint. These requirements align with the capabilities of our FPGA devices. Our flexible, low power, small form factor, performance optimized FPGAs put us in a unique position to meet these growing market needs.
To serve these needs, customer solutions require power efficiency, memory bandwidth, processing power, and the ability to integrate complex functionality into a highly compact footprint. These requirements align with the capabilities of our FPGA devices. Our flexible, low power, small form factor, performance optimized FPGAs put us in a unique position to meet these growing market needs.
Lattice FPGAs solve these customer problems. Our FPGAs are optimized for input/output ("I/O") expansion, hardware acceleration, and hardware management. Our FPGAs consume power at very low rates, which reduces operating costs. Their small form factor enables higher functional density in less space.
Lattice FPGAs help solve these customer problems. Our FPGAs are optimized for input/output ("I/O") expansion, hardware acceleration, and hardware management. Our FPGAs consume power at very low rates, which reduces operating costs. Their small form factor enables higher functional density in less space.
We solve customer problems across the network, from the Edge to the Cloud, in the growing Communications, Computing, Industrial, Automotive, and Consumer markets. Our technology, long-standing relationships, and commitment to world-class support enable our customers to create a smart, secure, and connected world.
We solve customer problems across the network, from the Edge to the Cloud, in the Communications, Computing, Industrial, Automotive, and Consumer markets. Our technology, long-standing relationships, and commitment to world-class support enable our customers to create a smart, secure, and connected world.
CrossLink combines the power and speed benefits of hardened video camera and display bridging cores with the flexibility of FPGA fabric. Lattice CrossLinkPlus™ devices provide users with instant-on capabilities for video display. Lattice CrossLink-NX™ FPGAs, built on the Lattice Nexus platform, provide the lowest power in the smallest packages in its class, higher performance, and high reliability.
CrossLink combines the power and speed benefits of hardened video camera and display bridging cores with the flexibility of FPGA fabric and Lattice CrossLinkPlus™ devices provide users with instant-on capabilities for video display. Lattice CrossLink-NX™ FPGAs, built on the Lattice Nexus platform, provide the lowest power in the smallest packages in their class, higher performance, and high reliability.
Finally, our FPGAs are I/O rich, which allows for more connections with system application specific integrated circuits ("ASICs") and application specific standard products ("ASSPs"). 3 Table of Contents Examples of where our products enable intelligent automation in the Industrial and Automotive Market include Industrial Internet of Things ("IoT"), machine vision, robotics, factory automation, advanced driver assistance systems ("ADAS"), and automotive infotainment.
Finally, our FPGAs are I/O rich, which allows for more connections with system application specific integrated circuits ("ASICs") and application specific standard products ("ASSPs"). 3 Table of Contents Examples of where our products enable intelligent automation in the Industrial and Automotive Market include industrial Internet of Things ("IoT") and "Industry 4.0", machine vision, robotics, factory automation, advanced driver assistance systems ("ADAS"), and automotive infotainment.
In particular, we believe there are several emerging trends in servers, infrastructure, and smart devices that are opportunities for Lattice: ● With the growth of hyperscale datacenters, our “processor agnostic” solutions are ideal for control and connect functions in enterprise and datacenter server applications. ● With the expected continued Communications infrastructure build-out from 5G deployment and beyond, as well as continued datacenter network expansion, Lattice solutions are being adopted to control and connect a variety of functions in critical systems. ● With the increase in electrification and the proliferation of sensors in smart factories, smart homes, and automobiles, our low power, small form factor solutions are ideal for everything from battery powered systems and sensor applications to embedded vision. ● With the increase in artificial intelligence ("AI") and a multitude of applications at the network edge, Lattice devices support applications like face detection, image recognition, and video analytics. ● With the demand for more hardware security in the Communications, Computing, Industrial, Automotive, and Consumer markets, our devices provide enhanced platform security.
In particular, we believe there are several emerging trends in servers, infrastructure, and smart devices that are opportunities for Lattice: ● With the growth of hyperscale data centers, our “processor agnostic” solutions are ideal for dataplane control and connect functions in enterprise and data center server applications. ● With the expected continued Communications infrastructure build-out from 5G deployment and beyond, as well as continued data center network expansion, Lattice solutions are being adopted to control and connect a variety of functions in critical systems. ● With the increase in electrification and the proliferation of sensors in smart factories, smart homes, and automobiles, our low power, small form factor solutions are ideal for everything from battery powered systems and sensor applications to embedded vision. ● With the increase in artificial intelligence ("AI") and a multitude of applications at the network edge, Lattice devices support applications like face detection, image recognition, and video analytics. ● With the demand for more hardware security in the Communications, Computing, Industrial, Automotive, and Consumer markets, our devices provide enhanced platform security.
We maintain numerous domestic and international field sales offices in major metropolitan areas. 6 Table of Contents In fiscal years 2022, 2021, and 2020, sales to distributors accounted for approximately 89%, 87%, and 83%, respectively, of our net revenue.
We maintain numerous domestic and international field sales offices in major metropolitan areas. 6 Table of Contents In fiscal years 2023, 2022, and 2021, sales to distributors accounted for approximately 87%, 89%, and 87%, respectively, of our net revenue.
Revenue from foreign sales as a percentage of total revenue was 86%, 88%, and 89% for fiscal 2022, 2021, and 2020, respectively. We assign revenue to geographies based on ship-to location of our customers. Both foreign and domestic sales are denominated in U.S. dollars.
Revenue from foreign sales as a percentage of total revenue was 82%, 86%, and 88% for fiscal 2023, 2022, and 2021, respectively. We assign revenue to geographies based on ship-to location of our customers. Both foreign and domestic sales are denominated in U.S. dollars.
The latest member of the family, the iCE40 UltraPlus™ device, is focused on IoT Edge devices with its AI capabilities, low power, and small form factor. ● The Lattice CrossLink™ device family are our "Video Connectivity FPGAs" and are optimized for high-speed video and sensor applications.
The latest member of the family, the iCE40 UltraPlus™ device, is focused on IoT Edge devices with its AI capabilities, low power, and small form factor. ● The Lattice CrossLink™ device family are our "Video Connectivity FPGAs" and are optimized for high-speed video and sensor applications for the Industrial, Automotive, Communications, Computing, and Consumer markets.
Human Capital Management We provide a safe and positive work environment that emphasizes respect for individuals, ethical conduct, and learning and development that is facilitated by a direct employee engagement model. The health and safety of our employees is of utmost importance to us.
Human Capital Management We provide a safe and positive work environment that emphasizes respect for individuals, ethical conduct, and learning and development that is facilitated by a direct employee engagement model. The health and safety of our employees is of utmost importance to us. We undertake appropriate actions to safeguard the health and well-being of our employees and our business.
We have developed integrated system-level solution stacks, such as Lattice ORAN™ for robust control data security, flexible fronthaul synchronization, and low power hardware acceleration for secure, adaptable, Open Radio Access Network (ORAN) deployment, as well as Lattice sensAI™ for Edge AI applications, Lattice mVision™ for low power embedded vision, Lattice Sentry™ for implementing hardware security, and Lattice Automate™ for industrial automation and robotics.
We have developed integrated system-level solution stacks, including Lattice Automate™ for industrial automation and robotics, Lattice mVision™ for low power embedded vision, Lattice ORAN™ for robust control data security, flexible fronthaul synchronization, and low power hardware acceleration for secure, adaptable, Open Radio Access Network (ORAN) deployment, Lattice sensAI™ for Edge AI applications, Lattice Sentry™ for implementing hardware security, and our newest solution stack - Lattice Drive™ for advanced, flexible automotive system designs and applications.
The latest introduction in our general purpose family, Lattice Avant-E™ FPGAs, are designed to solve key customer challenges at the Edge by combining class-leading power efficiency, size and performance with an optimized feature set tailored to the needs of mid-range FPGA Edge applications like data processing and AI. ● The Lattice Mach™ device family are our “Control & Security FPGAs” and are designed for platform management and security applications.
The latest introductions in our general purpose family, Lattice Avant-G™ and Lattice Avant-X™ FPGAs, are designed to solve key customer challenges by combining class-leading power efficiency, size and performance with an optimized feature set tailored to the needs of mid-range FPGA applications like sensor fusion, datapath networking, and AI. ● The Lattice Mach™ device family are our “Control & Security FPGAs” and are designed for platform management and security applications.
Among other activities, these outsourced services relate to direct sales logistics, which include order fulfillment, inventory management and warehousing, and the shipment of inventory to third party distributors.
Among other activities, these outsourced services relate to inventory management and warehousing, lead time management, order fulfillment, and the shipment of inventory to third party distributors.
We are investing in our design software, such as Lattice Radiant™, to deliver best-in-class tools that enable predictable design convergence, and Lattice Propel™ for unparalleled ease in creating embedded processor-based designs.
To enable our customers to get to market faster we support our FPGAs with IP cores, reference designs, development kits, and design software. We are investing in our design software, such as Lattice Radiant™, to deliver best-in-class tools that enable predictable design convergence, and Lattice Propel™ for unparalleled ease in creating embedded processor-based designs.
Lattice MachXO5™-NX family, the fifth device built on the award-winning Lattice Nexus™ platform are our latest addition to the Mach™ FPGA family, enabling the latest generation of secure control through increased logic and memory resources, robust 3.3 V I/O support, and a differentiated security feature set. 4 Table of Contents ● The Lattice iCE™ device family are our “Ultra Low Power FPGAs.” Their small size and ultra-low power make them the optimal products for each of our core segments where small form factor and customizing is required.
The Lattice MachXO5T™-NX family, the latest devices built on the award-winning Lattice Nexus™ platform are the newest addition to the Mach™ FPGA family, bringing Lattice’s long-standing leadership in control FPGAs to a broader set of control function designs and applications for enterprise networking, machine vision, and industrial IoT. 4 Table of Contents ● The Lattice iCE™ device family are our “Ultra Low Power FPGAs.” Their small size and ultra-low power make them the optimal products for each of our core segments where small form factor and customizing is required.
Depending on the application, we may compete with other FPGA vendors, as well as producers of ASICs, ASSPs, and microcontrollers. We believe that Lattice has developed products and solutions with differentiated advantages. Legacy Semiconductor Products We also sell Video Connectivity ASSPs, although we are not developing new products in this area and their support requirements are minimal.
We believe that Lattice has developed products and solutions with differentiated advantages. Legacy Semiconductor Products We also sell Video Connectivity ASSPs, although we are not developing new products in this area and their support requirements are minimal. IP Licensing and Services Lattice has a broad set of technological capabilities and many U.S. and international patents.
We have aligned to local COVID-19 guidance to return to normal operations while maintaining actions to safeguard the health and well-being of our employees and our business. Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. As of December 31, 2022, we had 949 employees worldwide.
Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. As of December 30, 2023, we had 1,156 employees worldwide.
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These products are designed for Computing, Industrial, Automotive, and Consumer markets, but also find use in Communications. To enable our customers to get to market faster we support our FPGAs with IP cores, reference designs, development kits, and design software.
Added
The latest device family – Lattice CrossLinkU-NX – are the industry’s first FPGAs with integrated USB device functionality in their class, designed to meet growing customer needs to simplify USB-based design for applications across the Computing, Industrial, Automotive, and Consumer markets.
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IP Licensing and Services Lattice has a broad set of technological capabilities and many U.S. and international patents.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhere license requirements are imposed, there can be no assurance that the U.S. government will grant licenses to permit the continuation of business with these customers. Future sanctions similar to those imposed in the past and to those recently imposed could adversely affect our ability to earn revenue from these and similar customers.
Biggest changeThese controls and restrictions were revised by the U.S. government in October 2023 with the intent to further restrict China’s ability to obtain such technology and to enhance U.S. national security interests. 10 Table of Contents Where license requirements are imposed, there can be no assurance that the U.S. government will grant licenses to permit the continuation of business with these customers.
Risk Factor Summary Factors Related to Economic, Legal, Regulatory & Political Business Conditions ● Economic, legal, regulatory, political, and business conditions related to our global business. ● The impact of tariffs, trade sanctions or similar actions on our business. ● The impact of pandemics or widespread global health problems on our business.
Risk Factor Summary Factors Related to Economic, Political, Legal & Regulatory Business Conditions ● Economic, political, and business conditions related to our global business. ● The impact of tariffs, trade sanctions or similar actions on our business. ● Legal and regulatory conditions related to our global business. ● The impact of pandemics or widespread global health problems on our business.
Our obligations under the 2022 Credit Agreement are guaranteed by certain of our U.S. subsidiaries meeting materiality thresholds set forth in the 2022 Credit Agreement, and the revolving loans under the 2022 Credit Agreement may be repaid and reborrowed at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan facility on September 1, 2027.
Our obligations under the 2022 Credit Agreement are guaranteed by certain of our U.S. subsidiaries meeting materiality thresholds set forth in the 2022 Credit Agreement, and the revolving loans under the 2022 Credit Agreement may be reborrowed and repaid at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan facility on September 1, 2027.
Additionally, in October 2022 the U.S. government announced new controls regarding semiconductor- and supercomputer-related products and new restrictions affecting U.S. persons’ ability to send certain chips and chip-related technology and software to China without an export license, which may impact the global supply chain and could negatively affect our business.
Additionally, in October 2022 the U.S. government announced controls regarding semiconductor- and supercomputer-related products and restrictions affecting U.S. persons’ ability to send certain chips and chip-related technology and software to China without an export license, which may impact the global supply chain and could negatively affect our business.
Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. Effects from global health, business, or political events, and the related impacts to economic and operating conditions, may further affect the volatility or degree of known and unknown risks.
Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. Effects from global business or political events, and the related impacts to economic and operating conditions, may further affect the volatility or degree of known and unknown risks.
We have significant domestic and international operations. Our international operations include foreign sales offices to support our international customers and distributors, which account for the majority of our revenue, and operational and research and development sites in China, the Philippines, and other Asian locations.
We have significant domestic and international operations. Our international operations include foreign sales offices to support our international customers and distributors, which account for the majority of our revenue, and operational and research and development sites in China, the Philippines, Malaysia, and other Asian locations.
Other countries outside of the European Union, including the United Kingdom, China, and Brazil, also have enacted robust legislation addressing privacy, data protection, and cybersecurity and providing for substantial penalties for noncompliance.
Other countries outside of the European Union, including the United Kingdom and China, also have enacted robust legislation addressing privacy, data protection, and cybersecurity and providing for substantial penalties for noncompliance.
Any cyber-attack or other security breach or incident that we or our third-party providers may suffer, or the perception that any such attack, breach, or incident has occurred, could result in a loss of customer confidence in our security measures, damage to our brand, reputation, and market position, result in unauthorized access to or disclosure, modification, misuse, loss, corruption, unavailability, or destruction of our data or other sensitive data that we or our third-party providers process or maintain, disrupt normal business operations, require us to spend material resources to investigate or correct any breach or incident and to prevent future security breaches and incidents, expose us to legal claims and liabilities, including litigation, regulatory investigations and enforcement actions, and indemnity obligations, and adversely affect our revenues and operating results.
Any cyberattack or other security breach or cybersecurity incident that we or our third-party providers may suffer, or the perception that any such attack, breach, or incident has occurred, could result in a loss of customer confidence in our security measures, damage to our brand, reputation, and market position, result in unauthorized access to or disclosure, modification, misuse, loss, corruption, unavailability, or destruction of our data or other sensitive data that we or our third-party providers process or maintain, disrupt normal business operations, require us to spend material resources to investigate or correct any breach or incident and to prevent future security breaches and incidents, expose us to legal claims and liabilities, including litigation, regulatory investigations and enforcement actions, and indemnity obligations, and adversely affect our revenues and operating results.
Certain claims may not yet be resolved, including but not limited to any that are discussed under Note 15 - Contingencies to our Consolidated Financial Statements in Part II, Item 8 of this report, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty.
Certain claims may not yet be resolved, including but not limited to any that are discussed under Note 14 - Contingencies to our Consolidated Financial Statements in Part II, Item 8 of this report, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty.
In the past, third parties have attempted to penetrate and/or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems. In addition, we are subject to the risk of third parties falsifying invoices and similar fraud, frequently by obtaining unauthorized access to our vendors’ and business partners’ networks.
In the past, third parties have attempted to penetrate and/or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems. In addition, we are subject to the risk of third parties falsifying invoices and similar fraud, including by obtaining unauthorized access to our vendors’ and business partners’ networks.
Any adverse change to our relationships or agreements with our distributors, a failure by one or more of our distributors to perform its obligations to us, or consolidation in the distribution industry could have a material impact on our business, including a reduction in our access to certain end customers, or our ability to sell our products.
Any adverse change to our relationships or agreements with our distributors, a failure by one or more of our distributors to perform its obligations to us, a reduction in a distributor's business volume with us, or consolidation in the distribution industry could have a material impact on our business, including a reduction in our access to certain end customers, or our ability to sell our products.
For purposes of testing goodwill for impairment, the Company currently operates as one reporting unit: the core Lattice business, which includes intellectual property and semiconductor devices. There were no impairment charges to goodwill or amortizable intangible assets in fiscal years 2022, 2021, or 2020.
For purposes of testing goodwill for impairment, the Company currently operates as one reporting unit: the core Lattice business, which includes intellectual property and semiconductor devices. There were no impairment charges to goodwill or amortizable intangible assets in fiscal years 2023, 2022, or 2021.
We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to eliminate or otherwise address security vulnerabilities, and we and our third-party service providers may face difficulties or delays in identifying or otherwise responding to any potential security breach or incident. 14 Table of Contents Further, the increase in cyber-attacks has resulted in an increased focus on cybersecurity by certain government agencies.
We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to eliminate or otherwise address security vulnerabilities, and we and our third-party service providers may face difficulties or delays in identifying or otherwise responding to any potential security breach or incident. 14 Table of Contents Further, the increase in cyberattacks has resulted in an increased focus on cybersecurity by certain government agencies.
Our competitive position and success depend on our ability to innovate, develop, and introduce new products that compete effectively on the basis of price, density, functionality, power consumption, form factor, and performance, and our addressing the evolving needs of the markets we serve, among other things.
Our competitive position and success depend on our ability to innovate, develop, and introduce new products that compete effectively on the basis of price, density, functionality, power consumption, form factor, and performance, and our ability to address the evolving needs of the markets we serve, among other things.
Any infringement claim, indemnification claim, or impairment or loss of use of our intellectual property could materially adversely affect our financial condition and results of operations. 13 Table of Contents Factors Related to Overall Business & Operations Our business depends on the proper functioning of information technology systems.
Any infringement claim, indemnification claim, or impairment or loss of use of our intellectual property could materially adversely affect our financial condition and results of operations. 13 Table of Contents Factors Related to Overall Business & Operations Our business depends on the use of information technology systems.
This lengthy sales cycle may cause us to incur significant expenses, which could be exacerbated by rising inflation, experience significant production delays and to incur additional inventory costs before we receive a customer order that may be delayed or never get placed.
This lengthy sales cycle may cause us to incur significant expenses, which could be exacerbated by rising inflation, significant production delays, or additional inventory costs before we receive a customer order that may be delayed or never get placed.
Any security breaches or incidents that we or our third-party providers may suffer could compromise our intellectual property, expose sensitive business information and otherwise result in unauthorized access to or disclosure, modification, misuse, loss or destruction of sensitive information.
Any security breaches or incidents that we or our third-party providers may suffer could compromise our intellectual property, expose sensitive business information and otherwise result in unauthorized access to or disclosure, modification, misuse, loss, destruction, or other processing of sensitive information.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes, tsunamis, or floods; hurricanes, cyclones, or typhoons; fires, or other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; manufacturing equipment failures; IT system failures; cybersecurity attacks; data breaches; medical epidemics or pandemics (such as COVID-19); terrorist acts, civil unrest, military actions, conflicts, or wars; or other natural or man-made disasters or catastrophic events.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes, tsunamis, or floods; hurricanes, cyclones, or typhoons; fires, or other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; manufacturing equipment failures; IT system failures; cybersecurity attacks; data breaches; medical epidemics or pandemics; terrorist acts, civil unrest, military actions, conflicts, or wars; or other natural or man-made disasters or catastrophic events.
Although it is impossible to completely predict the occurrences or consequences of any such events, forecasting disruptive events and building additional resiliency into our operations accordingly will become an increasing business imperative. The trading price of our common stock has been and may continue to be subject to volatility in response to a variety of factors.
Although it is impossible to completely predict the occurrences or consequences of any such events, forecasting disruptive events and building additional resiliency into our operations accordingly will become an increasing business imperative. 21 Table of Contents The trading price of our common stock has been and may continue to be subject to volatility in response to a variety of factors.
While we may issue guidance, difficulty in forecasting financial performance, relative customer and product mix, and the unpredictability of unknown variables and their impact on our financial performance may impair the accuracy of our forward-looking financial measures. Accounting requirements related to sales through our distribution channel could result in our reporting revenue in excess of demand.
While we may issue guidance, difficulty in forecasting financial performance, relative customer and product mix, and the unpredictability of unknown variables and their impact on our financial performance may impair the accuracy of our forward-looking financial measures. 20 Table of Contents Accounting requirements related to sales through our distribution channel could result in our reporting revenue in excess of demand.
To the extent inflation results in rising interest rates and has other adverse effects on the market, including the possibility of recession, it may adversely affect our consolidated financial condition and results of operations. Business disruptions could seriously harm our future revenue, cash flows, and financial condition and increase our costs and expenses.
To the extent inflation, or government responses to inflation, results in rising interest rates and has other adverse effects on the market, including the possibility of recession, it may adversely affect our consolidated financial condition and results of operations. Business disruptions could seriously harm our future revenue, cash flows, and financial condition and increase our costs and expenses.
General Risk Factors ● Our operations are subject to the effects of rising inflation and recessionary concerns. ● Disruptions to our worldwide operations and supply chain due to natural or human-induced disasters. ● The trading price of our common stock has been and may continue to be subject to volatility. ● Disruption in and impacts of acquisitions, divestitures, strategic investments and strategic partnerships on our business. 9 Table of Contents Factors Related to Economic, Legal, Regulatory & Political Business Conditions Our global business operations expose us to various economic, legal, regulatory, political, and business risks, which could impact our business, operating results and financial condition.
General Risk Factors ● Our operations are subject to the effects of rising inflation and recessionary concerns. ● Disruptions to our worldwide operations and supply chain due to natural or human-induced disasters. ● The trading price of our common stock has been and may continue to be subject to volatility. ● The impact of actual and potential litigation and unfavorable results of legal proceedings on our business. ● Disruption in and impacts of acquisitions, divestitures, strategic investments and strategic partnerships on our business. 9 Table of Contents Factors Related to Economic, Political, Legal & Regulatory Business Conditions Our global business operations expose us to various economic, political, and business risks, which could impact our business, operating results and financial condition.
Our intellectual property licensing agreements are complex and may depend upon many factors that require significant judgments, including completion of milestones, allocation of values to delivered items and customer acceptance. 12 Table of Contents Our sale of patents and intermittent significant licensing transactions can cause material fluctuations in our revenue and gross margins.
Our intellectual property licensing agreements are complex and may depend upon many factors that require significant judgments, including completion of milestones, allocation of values to delivered items and customer acceptance. Our sale of patents and intermittent significant licensing transactions can cause material fluctuations in our revenue and gross margins.
Further, any such actual or perceived breach or incident, and any claims, demands, litigation, or investigations or enforcement actions related to cybersecurity could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key information technology resources.
Further, any such actual or perceived breach or incident, and any claims, demands, litigation, or investigations or enforcement actions related to cybersecurity could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key IT resources.
We cannot be certain that our insurance coverage will be adequate for data security liabilities incurred and, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
We cannot be certain that our insurance coverage will be adequate for cybersecurity liabilities incurred and, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
The failure of any of these factors, among others, could adversely affect our product innovation, development and introduction efforts and our financial condition and results of operations. 18 Table of Contents We compete against companies that have significantly greater resources than us and numerous other product solutions.
The failure of any of these factors, among others, could adversely affect our product innovation, development and introduction efforts and our financial condition and results of operations. We compete against companies that have significantly greater resources than us and numerous other product solutions.
We may also encounter errors in corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.
We may also encounter corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.
Furthermore, various levels of government are focused on tax reform and other legislative actions to increase tax revenue. We also may be impacted by changes in the tax laws of the United States and foreign jurisdictions.
Furthermore, various levels of government are focused on tax reform and other legislative actions to increase tax revenue. 15 Table of Contents We also may be impacted by changes in the tax laws of the United States and foreign jurisdictions.
Cyber-attacks have become more prevalent, sophisticated and much harder to detect and defend against and it is often difficult to anticipate or detect such incidents on a timely basis and to assess the damage caused by them.
Cyberattacks have become more prevalent, sophisticated and much harder to detect and defend against and it is often difficult to anticipate or detect such incidents on a timely basis and to assess the damage caused by them.
If we lose existing qualified personnel or are unable to hire new qualified personnel, as needed, we could have difficulty competing in our highly competitive and innovative environment. 16 Table of Contents Our insurance may not adequately cover certain risks and, as a result, our financial condition and results may be adversely affected.
If we lose existing qualified personnel or are unable to hire new qualified personnel, as needed, we could have difficulty competing in our highly competitive and innovative environment. Our insurance may not adequately cover certain risks and, as a result, our financial condition and results may be adversely affected.
In the normal course of business, we may implement new or updated IT systems and, as a result, we may experience delays or disruptions in the integration of these systems, or the related procedures or controls. The policies and security measures established with our IT systems may be vulnerable to security breaches and incidents, cyber-attacks, or fraud.
In the normal course of business, we may implement new or updated IT systems and, as a result, we may experience delays or disruptions in the integration of these systems, or the related procedures or controls. The policies and security measures established with our IT systems may be vulnerable to cybersecurity incidents such as security breaches and cyberattacks, or cyber-fraud.
For example, the continuing military conflict between Ukraine and Russia, as well as the financial and trade-related restrictions associated with Russia and Belarus and economic sanctions on certain individuals and entities in Russia and Belarus, may further disrupt global supply chains and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.
For example, the military conflict between Israel and Hamas and the potential for regional expansion, the continuing military conflict between Ukraine and Russia, as well as the financial and trade-related restrictions associated with Russia and Belarus and economic sanctions on certain individuals and entities in Russia and Belarus, may further disrupt global supply chains and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.
The trading price of our common stock may fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results; changes in financial estimates by us or financial or other market estimates and ratings by securities and other analysts; our ability to develop new products, enter new market segments, gain market share, manage cyber-security and litigation risk, diversify our customer base, and successfully secure manufacturing capacity; news regarding our products or products of our competitors; any mergers, acquisitions or divestitures of assets undertaken by us; inflationary conditions, interest rate changes, and recessionary concerns; regulatory changes to international trade policies, economic sanctions, or export controls, such as new licensing requirements for exporting certain chip-related technology to China; terrorist acts or acts of war, including the ongoing conflict between Ukraine and Russia; epidemics and pandemics, such as developments and restrictions with respect to the COVID-19 pandemic; trading activity in our common stock, including stock repurchases, actions by institutional or other large stockholders, or our inclusion in market indices; or general economic, industry, and market conditions worldwide.
The trading price of our common stock has and may continue to fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results; changes in financial estimates by us or financial or other market estimates and ratings by securities and other analysts; our ability to develop new products, enter new market segments, gain market share, manage cybersecurity and litigation risk, diversify our customer base, and successfully secure manufacturing capacity; news regarding our products or products of our competitors; any mergers, acquisitions or divestitures of assets undertaken by us; inflationary conditions, interest rate changes, and recessionary concerns; regulatory changes to international trade policies, economic sanctions, or export controls, such as new licensing requirements for exporting certain chip-related technology to China; terrorist acts or acts of war, including the ongoing conflict between Ukraine and Russia; epidemics and pandemics; trading activity in our common stock, including stock repurchases, actions by institutional or other large stockholders, or our inclusion in market indices; or general economic, industry, and market conditions worldwide.
President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) on August 16, 2022 and the CHIPS and Science Act of 2022 on August 9, 2022. These laws implement new tax provisions, including a 1% excise tax on certain stock repurchases made by publicly traded corporations after December 31, 2022, and provide for various incentives and tax credits.
President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) on August 16, 2022 and the CHIPS and Science Act of 2022 on August 9, 2022. These laws implemented tax provisions, including a 1% excise tax on certain stock repurchases made by publicly traded corporations after December 31, 2022, and provided for various incentives and tax credits.
GAAP and may not achieve the anticipated benefits of any strategic transaction. We may incur unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse. 21 Table of Contents Item 1B.
GAAP and may not achieve the anticipated benefits of any strategic transaction. We may incur unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse.
Additionally, the U.S. government announced new controls regarding semiconductor- and supercomputer-related products and new restrictions affecting U.S. persons’ ability to send certain chips and chip-related technology and software to China without an export license.
Additionally, the U.S. government has implemented controls regarding semiconductor- and supercomputer-related products and restrictions affecting U.S. persons’ ability to send certain chips and chip-related technology and software to China without an export license.
We anticipate that our efforts to comply with evolving laws and regulations addressing privacy, data protection, and cybersecurity will be a rigorous and time-intensive process that may increase our cost of doing business and may require us to change our policies and practices.
These and other regulatory frameworks are evolving rapidly, and we anticipate that our efforts to comply with evolving laws and regulations addressing privacy, data protection, and cybersecurity will be a rigorous and time-intensive process that may increase our cost of doing business and may require us to change our policies and practices.
We depend on a concentrated group of distributors to sell our products to end customers, complete order fulfillment, maintain sufficient inventory of our products and provide services to our end customers. In fiscal 2022, revenue attributable to sales to distributors accounted for 89% of our total revenue, with two distributors accounting for 59% of total revenue.
We depend on a concentrated group of distributors to sell our products to end customers, complete order fulfillment, maintain sufficient inventory of our products and provide services to our end customers. In fiscal 2023, revenue attributable to sales to distributors accounted for 87% of our total revenue, with two distributors accounting for 52% of total revenue.
We depend on subcontractors to provide cost effective and efficient services in our product development and supply chain functions, including test and assembly services, software and hardware development, support of intellectual property cores, inventory management, order fulfillment and direct sales logistics.
We depend on subcontractors to provide cost effective and efficient services in our product development and supply chain functions, including test and assembly services, software and hardware development, support of intellectual property cores, inventory management, lead time management, technical support, and order fulfillment.
Global climate change is causing, and is projected to continue to cause, an increase in the frequency and intensity of certain natural disasters and adverse weather, such as drought, wildfires, storms, sea-level rise, flooding, heat waves, and cold waves, occurring more frequently or with greater intensity.
Climate-related risks are inherent wherever our business is conducted. Global climate change is causing, and is projected to continue to cause, an increase in the frequency and intensity of certain natural disasters and adverse weather, such as drought, wildfires, storms, sea-level rise, flooding, heat waves, and cold waves, occurring more frequently or with greater intensity.
Factors Related to Intellectual Property and Litigation ● Fluctuations in our revenue and margins caused by the intellectual property licensing component of our business strategy. ● Material fluctuations in our revenue and gross margins caused by intermittent sales of patents and significant licensing transactions. ● The impact of actual and potential litigation and unfavorable results of legal proceedings on our business. ● Variability in our share of royalties for the HDMI standard as a result of our evolving participation in the HDMI standard. ● Our ability to protect our new and existing intellectual property rights.
Factors Related to Intellectual Property ● Fluctuations in our revenue and margins caused by the intellectual property licensing component of our business strategy. ● Material fluctuations in our revenue and gross margins caused by intermittent sales of patents and significant licensing transactions. ● Variability in our share of royalties for the HDMI standard as a result of our evolving participation in the HDMI standard. ● Our ability to protect our new and existing intellectual property rights.
Any inability or perceived inability to adequately comply with applicable laws or regulations could result in claims, demands, and litigation by private actors or governmental authorities, investigations and other proceedings by governmental authorities, injunctive relief, fines, penalties, and other liabilities, any of which may harm our reputation and market position and could adversely affect our business, financial condition, and results of operations. 10 Table of Contents Our business could suffer as a result of tariffs and trade sanctions or similar actions.
Any inability or perceived inability to adequately comply with applicable laws or regulations could result in claims, demands, and litigation by private actors or governmental authorities, investigations and other proceedings by governmental authorities, injunctive relief, fines, penalties, and other liabilities, any of which may harm our reputation and market position and could adversely affect our business, financial condition, and results of operations.
These systems are supported by subcontractors, and they may also be subject to power and telecommunication outages or other general system failures. The legal, regulatory and contractual environments surrounding information security, data privacy, and data protection are complex and evolving.
These systems are also supported by subcontractors and third-party providers who may also be subject to power and telecommunication outages or other general system failures and cybersecurity threats and cybersecurity incidents. The legal, regulatory and contractual environments surrounding information security, data privacy, and data protection are complex and evolving.
If we fail to maintain our foundry and OSAT relationships, if these partners do not provide facilities and support for our development efforts, if they are insolvent or experience financial difficulty, if their operations are interrupted by the ongoing COVID-19 pandemic, or if we elect or are required to change foundries or OSATs, we may incur significant costs and delays.
If we fail to maintain our foundry and OSAT relationships, if these partners do not provide facilities and support for our development efforts, if they are insolvent or experience financial difficulty, if their operations are interrupted by a widespread public health hazard, or if we elect or are required to change foundries or OSATs, we may incur significant costs and delays.
Factors Related to Overall Business & Operations ● Proper functioning of our information technology systems, including in response to data breaches, cyber-attacks, or cyber-fraud. ● The impact of climate change on our business. ● Goodwill impairments and other impairments under U.S.
Factors Related to Overall Business & Operations ● Proper functioning of our information technology systems, including in response to data breaches, cyberattacks, or cyber-fraud. ● Goodwill impairments and other impairments under U.S.
Companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking, phishing, malware, ransomware, and other attempts to gain unauthorized access to systems or data, or to engage in fraudulent behavior.
Companies have been increasingly subject to a wide variety of cybersecurity incidents such as cyberattacks, hacking, phishing, malware, ransomware, and other attempts to gain unauthorized access to systems or data, or to engage in fraudulent behavior.
GAAP that may impact our business. ● Changes to financial accounting standards applicable to us and any related changes to our business practices. ● Exposure to unanticipated tax consequences as a result of changes in effective tax rates, tax laws and our global organizational structure and operations. ● Weakness in our internal control over financial reporting and business processes. ● Our ability to compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel. ● Our failure to adequately foresee and insure against risks related to our business. ● Limitations to our flexibility caused by our outstanding indebtedness.
GAAP that may impact our business. ● Changes to financial accounting standards applicable to us and any related changes to our business practices. ● Exposure to unanticipated tax consequences as a result of changes in effective tax rates, tax laws and our global organizational structure and operations. ● Weakness in our internal control over financial reporting and business processes. ● Our ability to compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel. ● Our failure to adequately foresee and insure against risks related to our business. ● Limitations to our flexibility caused by incurring indebtedness. ● Risks relating to the use or application of emerging technologies, including artificial intelligence ("AI") ● The impact of climate change and climate change-related policies & regulations on our business.
These controls may also impact the global supply chain and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.
These, as well as future controls impacting the semiconductor ecosystem, may impact the global supply chain and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.
Pandemics or other widespread public health problems could adversely affect our business, results of operations, and financial condition in a material way. Pandemics, epidemics or other widespread public health problems, such as the ongoing COVID-19 pandemic, could negatively impact our business.
Pandemics or other widespread public health problems could adversely affect our business, results of operations, and financial condition in a material way. Pandemics, epidemics or other widespread public health problems could negatively impact our business.
Our policies and security measures cannot guarantee security, and our information technology infrastructure, including our networks and systems, may be vulnerable to security breaches and incidents, cyber-attacks, or fraud.
Our policies and security measures cannot guarantee security, and our IT infrastructure, including our networks and systems, may be vulnerable to security breaches and cybersecurity incidents, cyberattacks, or cyber-fraud.
If our third-party supply chain providers were to reduce or discontinue services for us or their operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, weak economic conditions, inflation, recession, labor market disruptions, or any other reason, our financial condition and results of operations could be adversely affected.
If our third-party supply chain providers were to reduce or discontinue services for us or their operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, weak economic conditions, inflation, recession, labor market disruptions, or any other reason, our financial condition and results of operations could be adversely affected. 19 Table of Contents Factors Related to Our Sales and Revenue Our revenues depend on our relationships with our distributors and on a concentrated group of end customers.
The Organisation for Economic Co-operation and Development, which represents a coalition of member countries, recommended changes to numerous long-standing tax principles, including a 15% global minimum tax.
The Organisation for Economic Co-operation and Development, which represents a coalition of member countries, continues to advance proposals with changes to numerous long-standing tax principles, including the introduction of global minimum tax standards.
Such shortages have resulted in inflationary cost increases for labor, materials, and services across the economy, and could continue to cause costs to increase as well as scarcity of certain products. If the inflation rate continues to increase, it will affect our expenses.
Such shortages have resulted in inflationary cost increases for labor, materials, and services across the economy, and could continue to cause costs to increase as well as scarcity of certain products.
For these reasons, investors should not rely on recent or historical trends to predict future trading prices of our common stock, financial condition, results of operations, or cash flows. Acquisitions, divestitures, strategic investments and strategic partnerships could disrupt our business and adversely affect our financial condition and operating results.
For these reasons, investors should not rely on recent or historical trends to predict future trading prices of our common stock, financial condition, results of operations, or cash flows. Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results.
Factors Related to Our Sales and Revenue Our revenues depend on our relationships with our distributors and on a concentrated group of end customers. An adverse change in the relationships with, or performance of, our distributors, or any reduction in the use of our products by our end customers, could harm our sales and significantly decrease our revenue.
An adverse change in the relationships with, or performance of, our distributors, or any reduction in the use of our products by our end customers, could harm our sales and significantly decrease our revenue.
In 2020, the U.S. imposed additional regulatory restrictions on the sale of U.S. controlled technology to customers in China, including establishing additional licensing requirements for the sale of U.S.-originated technology for certain applications or to companies that participate in the Chinese national security supply chain and limiting the fabrication of devices for certain Chinese companies where U.S. technology is involved in the fabrication process.
In 2020, the U.S. imposed additional regulatory restrictions on the sale of U.S. controlled technology to customers in China. These restrictions include establishing additional licensing requirements in order to sell U.S.-originated technology for certain applications or to companies that participate in the Chinese national security supply chain.
Furthermore, in August 2020 the U.S. established additional licensing requirements for one of our China customers and its affiliates that limit any sales of products to that customer or for that customer’s products absent a license.
These restrictions also limit the fabrication of devices for certain Chinese companies where U.S. technology is involved in the fabrication process. Furthermore, in August 2020 the U.S. established additional licensing requirements for one of our China customers and its affiliates that limit any sales of products to that customer or for that customer’s products absent a license.
A number of factors, including how products are manufactured to support end markets, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, product quality, geographic and/or end market mix, and pricing strategies, can cause our revenue, gross margins, net income, and inventory to fluctuate significantly either positively or negatively from period to period. 19 Table of Contents We have limited visibility into the demand for our products, particularly new products, because demand for our products depends upon our products being designed into our end customers' products and those products achieving market acceptance.
A number of factors, including how products are manufactured to support end markets, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, product quality, geographic and/or end market mix, and pricing strategies, can cause our revenue, gross margins, net income, and inventory to fluctuate significantly either positively or negatively from period to period.
The amount of our portion of the royalty allocation is dependent on the royalties generated by adopter sales of royalty-bearing HDMI technology, which are subject to variability in economic trends particularly in the market for consumer electronics.
The HDMI Founders are currently negotiating a new agreement covering the next sharing period beginning January 1, 2023. The amount of our portion of the royalty allocation is dependent on the royalties generated by adopter sales of royalty-bearing HDMI technology, which are subject to variability in economic trends particularly in the market for consumer electronics.
Factors Related to Intellectual Property and Litigation The intellectual property licensing component of our business strategy increases our business risk and fluctuation of our revenue and margins. Our business strategy includes licensing our intellectual property to companies that incorporate it into their technologies that address multiple markets, including markets where we participate and compete.
Our business strategy includes licensing our intellectual property to companies that incorporate it into their technologies that address multiple markets, including markets where we participate and compete.
If there are significant product defects, the costs to remediate such defects, net of reimbursed amounts from our vendors, if any, or to resolve warranty claims may adversely affect our financial condition and results of operations and may harm our reputation.
If there are significant product defects, the costs to remediate such defects, net of reimbursed amounts from our vendors, if any, or to resolve warranty claims may adversely affect our financial condition and results of operations and may harm our reputation. 12 Table of Contents Factors Related to Intellectual Property The intellectual property licensing component of our business strategy increases our business risk and fluctuation of our revenue and margins.
If we are unable to accomplish any of the foregoing, or to offset the volatility of cyclical changes in the semiconductor industry or our end markets through diversification into other markets, these factors could materially and adversely affect our business, financial condition, and operating results.
If we are unable to accomplish any of the foregoing, or to offset the volatility of cyclical changes in the semiconductor industry or our end markets through diversification into other markets, these factors could materially and adversely affect our business, financial condition, and operating results. 18 Table of Contents Our success and future revenue depend on our ability to develop and introduce new products that achieve customer and market acceptance.
In addition, our agreements with third-party providers, including but not limited to the liability limitations and insurance provisions contained in such agreements, may be inadequate to cover the liability, if any, associated with any security breaches. Increasing geopolitical tensions or conflicts have also created, and may continue to create, a heightened risk of cyberattacks.
In addition, our agreements with third-party providers, including but not limited to the liability limitations and insurance provisions contained in such agreements, may be inadequate to cover the liability, if any, associated with any security breaches.
We prepare our consolidated financial statements to conform to generally accepted accounting principles in the United States. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create accounting rules and regulations.
These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create accounting rules and regulations.
If we are unable to repay or refinance the indebtedness upon acceleration or at maturity, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our assets and subsidiaries securing the facility, which could materially decrease the value of our common stock. 17 Table of Contents Factors Related to Our Markets and Product Development The semiconductor industry routinely experiences cyclical market patterns and our products are used across different end markets.
If we are unable to repay or refinance the indebtedness upon acceleration or at maturity, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our assets and subsidiaries securing the facility, which could materially decrease the value of our common stock.
These disruptions could make it more difficult and costly for us to deliver our products and services, obtain components or other supplies through our supply chain, maintain, or resume operations or perform other critical corporate functions, and could reduce customer demand for our products and services.
These disruptions could make it more difficult and costly for us to deliver our products and services, obtain components or other supplies through our supply chain, maintain, or resume operations or perform other critical corporate functions, and could reduce customer demand for our products and services. 17 Table of Contents The increasing concern over climate change could also result in transition risks such as shifting customer preferences.
The impacts and frequency of any of the above could furthermore be exacerbated by climate change, particularly in countries where we, or our suppliers or customers, operate that have limited infrastructure and disaster recovery resources. 20 Table of Contents Our operations and those of our significant suppliers and distributors could be adversely affected if manufacturing, logistics, or other operations in key locations, including logistics hubs in Asia, are disrupted for any reason, such as those described above or other economic, business, labor, environmental, public health, regulatory or political reasons.
Our operations and those of our significant suppliers and distributors could be adversely affected if manufacturing, logistics, or other operations in key locations, including logistics hubs in Asia, are disrupted for any reason, such as those described above or other economic, business, labor, environmental, public health, regulatory or political reasons.
We may pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships. The identification of suitable acquisition, strategic investment or strategic partnership candidates can be costly and time consuming and can distract our management team from our current operations.
The identification of suitable acquisition, strategic investment or strategic partnership candidates can be costly and time consuming and can distract our management team from our current operations.
The 2022 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and our subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2022 Credit Agreement.
Prevailing economic conditions and global credit markets could adversely impact our ability to sell material assets, restructure or refinance our debt on terms acceptable to us, or at all, or we may not be able to restructure or refinance our debt without incurring significant additional fees and expenses. 16 Table of Contents The 2022 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and our subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2022 Credit Agreement.
Our outstanding indebtedness could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations. As of December 31, 2022, we had approximately $130 million outstanding in revolving loans under an amended and restated credit agreement, dated September 1, 2022 (the “2022 Credit Agreement”).
We may incur indebtedness which could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations. Our amended and restated credit agreement, dated September 1, 2022 (the “2022 Credit Agreement”) allows us to draw up to $350 million.
Recent inflation is primarily believed to be the result of the economic impacts from the ongoing COVID-19 pandemic, including the global supply chain disruptions, strong economic recovery and associated widespread demand for goods, and government stimulus packages, among other factors. For instance, global supply chain disruptions have resulted in shortages in materials and services.
Recent inflation caused by global supply chain disruptions, strong economic recovery and associated widespread demand for goods, and government stimulus packages, among other factors, continues to impact our business. For instance, global supply chain disruptions have resulted in shortages in materials and services.
Our future success depends, in part, upon our ability to retain such personnel and attract and retain other highly qualified personnel, particularly product engineers who can respond to market demands and required product innovation.
Our future success depends, in part, upon our ability to retain such personnel and attract and retain other highly qualified personnel, particularly product engineers who can respond to market demands and required product innovation. Competition for such personnel has been increasing generally throughout the economy, and we may not be successful in hiring or retaining new or existing qualified personnel.
Accordingly, our expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.
Accordingly, our expectations are subject to change without warning and investors are cautioned not to place undue reliance on them. Our business could suffer as a result of tariffs and trade sanctions or similar actions.
Where new laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet such obligations. Climate change also may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.
Climate change also may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.
A significant downturn in the industry or in any of these end markets could cause a meaningful reduction in demand for our products and adversely affect our operating results. Our revenue and gross margin can fluctuate significantly due to downturns in the highly cyclical semiconductor industry.
Factors Related to Our Markets and Product Development The semiconductor industry routinely experiences cyclical market patterns and our products are used across different end markets. A significant downturn in the industry or in any of these end markets could cause a meaningful reduction in demand for our products and adversely affect our operating results.
Outbreaks have, and could again, result in significant government measures to control the spread of disease, including, among others, restrictions on travel, manufacturing, and the movement of employees.
Outbreaks have resulted, and could again, result in significant government measures to control the spread of disease, including, among others, restrictions on travel, manufacturing, and the movement of employees. Jurisdictions in which we operate have had varying responses to pandemic and other widespread public health problems and the impact of such responses is difficult to anticipate.
In addition, we purchase our wafers from foreign foundries; have our commercial products assembled, packaged, and tested by subcontractors located outside of the United States; and rely on international service providers for inventory management, order fulfillment, and direct sales logistics. Worldwide political and economic conditions may create uncertainties that could adversely affect our business.
In addition, we purchase our wafers from foreign foundries; have our commercial products assembled, packaged, and tested by subcontractors located outside of the United States; and rely on international service providers for a variety of services, including inventory management, lead time management, technical support, factory engagement meetings, and order fulfillment.
These expectations may cause us to incur additional costs or make other changes to our operations to respond to them, which could adversely affect our financial results. If we fail to manage transition risks and customer expectations in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer.
If we fail to manage transition risks and customer expectations in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer.
Our success and future revenue depend on our ability to develop and introduce new products that achieve customer and market acceptance. We compete in a dynamic environment characterized by rapid technology and product evolution, generally followed by a relatively longer process of ramping up to volume production on advanced technologies.
We compete in a dynamic environment characterized by rapid technology and product evolution, generally followed by a relatively longer process of ramping up to volume production on advanced technologies. Our end customers’ continued use of our products is frequently reevaluated, as certain of our customers' product life cycles are relatively short and they continually develop new products.
We cannot predict what impact these and future actions, sanctions or criminal charges could have on our customers or suppliers, and therefore our business.
Further, the Chinese government has developed an unreliable entity list, which limits the ability of companies on the list to engage in business with Chinese customers. We cannot predict what impact these and future actions, sanctions or criminal charges could have on our customers or suppliers, and therefore our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn Shanghai, China, we lease 68,027 square feet through May 2024 for research and development operations. We also lease office facilities in multiple other metropolitan locations for our domestic and international sales staff. We believe that our existing facilities are suitable and adequate for our current and foreseeable future needs.
Biggest changeIn Shanghai, China, we lease 68,027 square feet through May 2024 for research and development operations. In Penang, Malaysia, we lease 23,272 square feet through September 2029 for research and development and operations facilities. We also lease office facilities in multiple other metropolitan locations for our domestic and international sales staff.
Item 2. Properties We lease a 47,800 square foot space in Hillsboro, Oregon as our corporate headquarters and a research and development facility through October 2028. In San Jose, California, we have 98,874 square feet under lease through September 2026, of which we use 49,579 square feet as a research and development facility.
Item 2. Properties We lease a 47,800 square foot space in Hillsboro, Oregon as our corporate headquarters and a research and development facility through October 2028. In San Jose, California, we have 98,874 square feet under lease through September 2026, of which we use 49,579 square feet primarily for research and development.
We vacated 49,295 square feet during the fourth quarter of 2018. During 2019, we vacated a 23,680 square foot office space in Portland, Oregon, which we have subleased through the end of the lease in March 2025. In Muntinlupa City, Philippines, we lease a total of 50,503 square feet through May 2025 for research and development and operations facilities.
During 2019, we vacated a 23,680 square foot office space in Portland, Oregon, which we have subleased through the end of the lease in March 2025. In Muntinlupa City, Philippines, we lease a total of 50,503 square feet through May 2025 for research and development and operations facilities.
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We believe that our existing facilities are suitable and adequate for our current and foreseeable future needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlso, see “Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results” in “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 22 Table of Contents PART II
Biggest changeAlso, see “Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results” in “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 23 Table of Contents PART II
Item 3. Legal Proceedings The information contained under the heading "Legal Matters" in Note 15 - Contingencies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part I, Item 3.
Item 3. Legal Proceedings The information contained under the heading "Legal Matters" in Note 14 - Contingencies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part I, Item 3.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 22 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 23 Item 6. Reserved 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 24 Item 6. Reserved 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 35 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table contains information regarding our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the fourth quarter of fiscal 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($M) (b) October 2, 2022 through October 29, 2022 — $ — — $ 149.7 October 30, 2022 through November 26, 2022 — $ — — $ 149.7 November 27, 2022 through December 31, 2022 288,652 $ 69.27 288,652 $ 129.7 Total 288,652 $ 69.27 288,652 $ 129.7 (a) All repurchases during the quarter were open-market transactions funded from available working capital made under the authorization from our Board of Directors to purchase up to $150.0 million of our common stock announced August 8, 2022 (b) As of December 31, 2022 this amount consisted of the remaining portion of the $150.0 million program authorized through the end of December 2023 that was announced August 8, 2022 . 23 Table of Contents Comparison of Total Cumulative Stockholder Return The following graph shows the five-year comparison of cumulative stockholder return on our common stock, the Standard and Poor's (“S&P”) 500 Index and the Philadelphia Semiconductor Index (“PHLX”) from December 2017 through December 2022.
Biggest changeThe following table contains information regarding our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the fourth quarter of fiscal 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($M) (b) October 1, 2023 through October 28, 2023 — $ — — $ 99.7 October 29, 2023 through November 25, 2023 838,602 $ 57.46 838,602 $ 51.5 November 26, 2023 through December 30, 2023 34,392 $ 58.37 34,392 $ 250.0 Total 872,994 $ 57.49 872,994 $ 250.0 (a) All repurchases during the quarter were open-market transactions funded from available working capital made under the authorization from our Board of Directors to purchase up to $150.0 million of our common stock announced August 8, 2022 (b) At December 30, 2023, this amount consists of the remaining portion of the $250 million program authorized through December 28, 2024 that was announced November 30, 2023 .
Issuer Purchases of Equity Securities On August 8, 2022, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $150 million of outstanding common stock could be repurchased from time to time (the "2023 Repurchase Program"). The duration of the 2023 Repurchase Program is through the end of December 2023.
Issuer Purchases of Equity Securities On August 8, 2022, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $150 million of outstanding common stock could be repurchased from time to time (the "2023 Repurchase Program"). The duration of the 2023 Repurchase Program was through December 30, 2023.
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 "LSCC". Holders As of February 13, 2023, we had approximately 177 stockholders of record.
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 "LSCC". Holders As of February 12, 2024, we had approximately 160 stockholders of record.
Under the 2023 Repurchase Program during the fourth quarter of fiscal 2022, we repurchased 288,652 shares for $20.0 million, or an average price paid per share of $69.27. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2023 Repurchase Programs were retired by the end of the fourth quarter of fiscal 2022.
During the fourth quarter of fiscal 2023, we repurchased 872,994 shares for $50.2 million, or an average price paid per share of $57.49, under the 2023 Repurchase Program. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2023 Repurchase Program were retired by the end of the fourth quarter of fiscal 2023.
We have repurchased a total of 1,951,934 shares for $110.1 million, or an average price paid per share of $56.42, during fiscal year 2022.
We repurchased a total of 1,224,443 shares for $80.2 million, or an average price paid per share of $65.50, during fiscal year 2023.
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On November 30, 2023, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $250 million of outstanding common stock could be repurchased from time to time (the "2024 Repurchase Program"). The duration of the 2024 Repurchase Program is through December 28, 2024.
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No shares were repurchased under the 2024 Repurchase Program during the fourth quarter of fiscal 2023.
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The remaining portion of the $150 million program authorized through December 30, 2023 expired with no additional shares repurchased. 24 Table of Contents Comparison of Total Cumulative Stockholder Return The following graph shows the five-year comparison of cumulative stockholder return on our common stock, the Standard and Poor's (“S&P”) 500 Index and the Philadelphia Semiconductor Index (“PHLX”) from December 2018 through December 2023.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. 26 Table of Contents Results of Operations Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table: Year Ended * December 31, January 1, January 2, (In thousands) 2022 2022 2021 Revenue $ 660,356 100.0 % $ 515,327 100.0 % $ 408,120 100.0 % Gross margin 452,050 68.5 321,675 62.4 245,306 60.1 Research and development 135,767 20.6 110,518 21.4 89,223 21.9 Selling, general and, administrative 122,076 18.5 105,617 20.5 95,331 23.4 Amortization of acquired intangible assets 3,778 0.6 2,613 0.5 4,449 1.1 Restructuring charges 2,551 0.4 940 0.2 3,937 1.0 Acquisition related charges 511 0.1 1,171 0.2 — — Income from operations $ 187,367 28.4 % $ 100,816 19.6 % $ 52,366 12.8 % * The year ended January 2, 2021 was a 53-week year as compared to the other years presented, which were based on our standard 52-week year.
Biggest changeWe recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. 27 Table of Contents Results of Operations Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table: Year Ended December 30, December 31, January 1, (In thousands) 2023 2022 2022 Revenue $ 737,154 100.0 % $ 660,356 100.0 % $ 515,327 100.0 % Gross margin 514,670 69.8 452,050 68.5 321,675 62.4 Research and development 159,770 21.7 135,767 20.6 110,518 21.4 Selling, general and, administrative 137,244 18.6 122,076 18.5 105,617 20.5 Amortization of acquired intangible assets 3,478 0.5 3,778 0.6 2,613 0.5 Restructuring 1,908 0.3 2,551 0.4 940 0.2 Acquisition related — — 511 0.1 1,171 0.2 Income from operations $ 212,270 28.8 % $ 187,367 28.4 % $ 100,816 19.6 % Revenue Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Revenue $ 737,154 $ 660,356 $ 515,327 11.6 % 28.1 % Revenue increased $76.8 million, or 11.6%, in fiscal 2023 compared to fiscal 2022, primarily from increased demand for our products used in industrial automation, robotics applications, and data center servers, partially offset by lower demand for our products used in wireless infrastructure and consumer applications.
For fiscal 2022 and 2021, Acquisition related charges were entirely attributable to our acquisition of Mirametrix in November 2021 and were comprised primarily of professional services including legal and accounting fees, as well as closing costs.
For fiscal 2022 and 2021, Acquisition related charges were attributable to our acquisition of Mirametrix in November 2021 and were comprised primarily of professional services including legal and accounting fees, as well as closing costs.
The revenue recognized based on estimated price adjustments and stock rotation reserves may be materially different from the actual consideration received if the actual distributor price adjustments and stock rotation returns differ significantly from the historical trends used in the estimates. 25 Table of Contents Inventories and Cost of Revenue Inventories are stated at the lower of actual cost (determined using the first-in, first-out method) or net realizable value.
The revenue recognized based on estimated price adjustments and stock rotation reserves may be materially different from the actual consideration received if the actual distributor price adjustments and stock rotation returns differ significantly from the historical trends used in the estimates. 26 Table of Contents Inventories and Cost of Revenue Inventories are stated at the lower of actual cost (determined using the first-in, first-out method) or net realizable value.
Details of our restructuring plans and expenses incurred under them are discussed in Note 9 - Restructuring to our Consolidated Financial Statements in Part II, Item 8 of this report.
Details of our restructuring plans and expenses incurred under them are discussed in Note 8 - Restructuring to our Consolidated Financial Statements in Part II, Item 8 of this report.
Acquisition Related Charges The composition of our Acquisition related charges, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Acquisition related charges $ 511 $ 1,171 $ — (56.4 )% 100+% Percentage of revenue 0.1 % 0.2 % — % 30 Table of Contents Acquisition related charges include legal and professional fees directly related to acquisitions.
Acquisition Related Charges The composition of our Acquisition related charges, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Acquisition related $ — $ 511 $ 1,171 (100.0 )% (56.4 )% Percentage of revenue — % 0.1 % 0.2 % 31 Table of Contents Acquisition related charges include legal and professional fees directly related to acquisitions.
For further information on our cash commitments for operating lease liabilities, see Note 10 - Leases to our Consolidated Financial Statements in Part II, Item 8 of this report. In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings.
For further information on our cash commitments for operating lease liabilities, see Note 9 - Leases to our Consolidated Financial Statements in Part II, Item 8 of this report. In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings.
For revenue recognized on both sales to distributors and related to HDMI and other royalties, the amount of consideration we expect to be entitled to receive is based on estimates that require assumptions and judgments relating to trends in recent and historical activity.
For revenue recognized on both sales to distributors and related to royalties, the amount of consideration we expect to be entitled to receive is based on estimates that require assumptions and judgments relating to trends in recent and historical activity.
New Accounting Pronouncements The information contained under the heading "New Accounting Pronouncements" in Note 1 - Nature of Operations and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part II, Item 7.
New Accounting Pronouncements The information contained under the heading "New Accounting Pronouncements" in Note 1 - Nature of Operations and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part II, Item 7. 34 Table of Contents
The details of this arrangement are described in Note 8 - Long-Term Debt to our Consolidated Financial Statements in Part II, Item 8 of this report. As of December 31, 2022, we had no used or unused credit arrangements beyond the secured revolving loan facility described in the 2022 Credit Agreement.
The details of this arrangement are described in Note 7 - Long-Term Debt to our Consolidated Financial Statements in Part II, Item 8 of this report. As of December 30, 2023, we had no used or unused credit arrangements beyond the secured revolving loan facility described in the 2022 Credit Agreement.
On September 1, 2022, we entered into our 2022 Credit Agreement, as described in Note 8 - Long-Term Debt to our Consolidated Financial Statements in Part II, Item 8 of this report. As of December 31, 2022, we did not have significant long-term commitments for capital expenditures.
On September 1, 2022, we entered into our 2022 Credit Agreement, as described in Note 7 - Long-Term Debt to our Consolidated Financial Statements in Part II, Item 8 of this report. As of December 30, 2023, we did not have significant long-term commitments for capital expenditures.
Details of our deferred tax assets and valuation allowance are discussed in Note 13 - Income Taxes to our Consolidated Financial Statements in Part II, Item 8 of this report. 31 Table of Contents Liquidity and Capital Resources The following sections discuss material changes in our financial condition from the end of fiscal 2021, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources.
Details of our deferred tax assets and valuation allowance are discussed in Note 12 - Income Taxes to our Consolidated Financial Statements in Part II, Item 8 of this report. 32 Table of Contents Liquidity and Capital Resources The following sections discuss material changes in our financial condition from the end of fiscal 2022, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources.
This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of December 31, 2022, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.
This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of December 30, 2023, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.
Financing activities — Financing cash flows consist primarily of repurchases of common stock, tax payments related to the net share settlement of restricted stock units, proceeds from the exercise of options to acquire common stock, and activity on our long-term debt. Net cash used by financing activities in fiscal 2022 was $188.1 million compared to $128.6 million in fiscal 2021.
Financing activities — Financing cash flows consist primarily of activity on our long-term debt, repurchases of common stock, tax payments related to the net share settlement of restricted stock units, and proceeds from the exercise of options to acquire common stock. Net cash used by financing activities in fiscal 2023 was $253.7 million compared to $188.1 million in fiscal 2022.
Distributors have historically accounted for a significant portion of our total revenue, and the two distributor groups noted below individually accounted for more than 10% of our total revenue in the periods covered by this report.
Distributors have historically accounted for a significant portion of our total revenue, and the distributors noted below individually accounted for more than 10% of our total revenue in certain periods covered by this report.
We believe that investing in research and development is important to delivering innovative products to our customers and, therefore, we expect to continue to increase our investment in research and development. 29 Table of Contents Selling, General, and Administrative Expense The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Selling, general, and administrative $ 122,076 $ 105,617 $ 95,331 15.6 % 10.8 % Percentage of revenue 18.5 % 20.5 % 23.4 % Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses.
We believe that investing in research and development is important to delivering innovative products to our customers and, therefore, we expect to continue to increase our investment in research and development. 30 Table of Contents Selling, General, and Administrative Expense The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Selling, general, and administrative $ 137,244 $ 122,076 $ 105,617 12.4 % 15.6 % Percentage of revenue 18.6 % 18.5 % 20.5 % Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses.
Discussions of results for prior periods (fiscal 2021 compared to fiscal 2020) are incorporated by reference from our Annual Report on Form 10-K for the year ended January 1, 2022 .
Discussions of results for prior periods (fiscal 2022 compared to fiscal 2021) are incorporated by reference from our Annual Report on Form 10-K for the year ended December 31, 2022 .
Revenue from the Industrial and Automotive end market increased by 41% in fiscal 2022 compared to fiscal 2021, primarily due to strong customer adoption in a broad range of applications, including industrial automation and robotics. Growth in Automotive was driven by the adoption of new designs in ADAS and infotainment applications.
Revenue from the Industrial and Automotive end market increased by 36% in fiscal 2023 compared to fiscal 2022, primarily due to strong customer adoption in a broad range of applications, including industrial automation and robotics. Growth in Automotive was driven by the adoption of new designs in advanced driver assistance ("ADAS") and infotainment applications.
Within these end markets, there are multiple segment drivers, including: • Communications and Computing: datacenter servers and networking equipment, client computing platforms, and 5G communications infrastructure deployments, • Industrial and Automotive: factory automation, robotics, automotive electronics, and industrial IoT, • Consumer: smart home, prosumer, and other applications.
Within these end markets, there are multiple drivers, including: • Communications and Computing: data center servers and networking equipment, client computing platforms, and wireless and wireline communications infrastructure deployments, • Industrial and Automotive: factory automation, robotics, automotive electronics, and industrial IoT, • Consumer: smart home, prosumer, and other applications.
Impact of COVID-19 and Global Economic Environment on our Business The COVID-19 pandemic, increased financial market volatility, inflationary pressure, rising interest rates, recessionary concerns, and geopolitical tension continue to impact business globally and may impact our operations by causing disruption to our labor markets and supply chains.
Impact of Global Economic Activity on our Business Increased financial market volatility, inflationary pressure, rising interest rates, recessionary concerns, uncertainty in the financial and banking industry, and geopolitical tension continue to impact business globally and may impact our operations by causing disruption to our labor markets and supply chains.
Operating Expenses Research and Development Expense The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Research and development $ 135,767 $ 110,518 $ 89,223 22.8 % 23.9 % Percentage of revenue 20.6 % 21.4 % 21.9 % Research and development expense includes costs for compensation and benefits, stock compensation, engineering wafers, depreciation, licenses, and outside engineering services.
Operating Expenses Research and Development Expense The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Research and development $ 159,770 $ 135,767 $ 110,518 17.7 % 22.8 % Percentage of revenue 21.7 % 20.6 % 21.4 % Research and development expense includes costs for compensation and benefits, stock-based compensation, engineering wafers, depreciation and amortization, licenses, and outside engineering services.
Revenue by End Market We sell our products globally to a broad base of customers in three primary end markets groups: Communications and Computing, Industrial and Automotive, and Consumer. We also provide IP licensing and services to these end markets.
Revenue by End Market We sell our products globally to a broad base of customers in three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer.
The net increase in Cash and cash equivalents of $14.2 million between January 1, 2022 and December 31, 2022 was primarily driven by cash flows from the following activities: Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities.
The net decrease in Cash and cash equivalents of $17.4 million between December 30, 2023 and December 31, 2022 was primarily driven by cash flows from the following activities: Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities.
The composition of our revenue by geography is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Asia $ 464,904 70.5 % $ 384,568 74.6 % $ 305,183 74.8 % 20.9 % 26.0 % Americas 100,260 15.2 80,870 15.7 62,137 15.2 24.0 30.1 Europe 95,192 14.3 49,889 9.7 40,800 10.0 90.8 22.3 Total revenue $ 660,356 100.0 % $ 515,327 100.0 % $ 408,120 100.0 % 28.1 % 26.3 % 28 Table of Contents Revenue from Customers We sell our products to independent distributors and directly to customers.
The composition of our revenue by geography is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Asia $ 443,765 60.2 % $ 464,904 70.5 % $ 384,568 74.6 % (4.5 )% 20.9 % Americas 145,839 19.8 100,260 15.2 80,870 15.7 45.5 24.0 Europe 147,550 20.0 95,192 14.3 49,889 9.7 55.0 90.8 Total revenue $ 737,154 100.0 % $ 660,356 100.0 % $ 515,327 100.0 % 11.6 % 28.1 % 29 Table of Contents Revenue from Customers We sell our products to independent distributors and directly to customers.
Other (Expense) Income, net The composition of our Other (expense) income, net, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Other (expense) income, net $ (1,109 ) $ (452 ) $ (208 ) 145.4 % 117.3 % Percentage of revenue (0.2 )% (0.1 )% (0.1 )% For fiscal 2022 compared to fiscal 2021, the increase in Other (expense) income, net was primarily due to the $0.7 million loss on refinancing of our long-term debt during the current year .
Other Income (Expense), net The composition of our Other income (expense), net, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Other income (expense), net $ 545 $ (1,109 ) $ (452 ) (149.1 )% 145.4 % Percentage of revenue 0.1 % (0.2 )% (0.1 )% For fiscal 2023 compared to fiscal 2022, the change in Other income (expense), net was primarily due to a research credit of $0.9 million in the current year compared to the non-recurrence of $0.7 million of loss on the refinancing of our long-term debt in the prior year, and to foreign currency effects.
The composition of our revenue by customer is presented in the following table: % of Total Revenue Year Ended December 31, January 1, January 2, 2022 2022 2021 Weikeng Group 30.3 % 37.2 % 34.8 % Arrow Electronics Inc. 28.5 27.1 25.1 Other distributors 30.7 23.0 23.2 All distributors 89.5 87.3 83.1 % Direct customers 7.9 8.7 12.1 Licensing and services revenue 2.6 4.0 4.8 Total revenue 100.0 % 100.0 % 100.0 % Gross margin The composition of our gross margin, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, (In thousands) 2022 2022 2021 Gross margin $ 452,050 $ 321,675 $ 245,306 Gross margin percentage 68.5 % 62.4 % 60.1 % Product gross margin % 67.6 % 60.9 % 58.1 % Licensing and services gross margin % 100.0 % 100.0 % 100.0 % Gross margin percentage increased 610 basis points from fiscal 2021 to fiscal 2022.
The composition of our revenue by customer is presented in the following table: % of Total Revenue Year Ended December 30, December 31, January 1, 2023 2022 2022 Arrow 31.6 % 28.5 % 27.1 % Weikeng 20.5 30.3 37.2 Future 12.6 8.3 6.5 Macnica 10.8 9.7 6.6 Other distributors 11.9 12.7 9.9 All distributors 87.4 89.5 87.3 Direct customers 12.6 10.5 12.7 Total revenue 100.0 % 100.0 % 100.0 % Gross margin The composition of our gross margin, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, (In thousands) 2023 2022 2022 Gross margin $ 514,670 $ 452,050 $ 321,675 Gross margin percentage 69.8 % 68.5 % 62.4 % Gross margin percentage increased 130 basis points from fiscal 2022 to fiscal 2023.
Amortization of Acquired Intangible Assets The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Amortization of acquired intangible assets $ 3,778 $ 2,613 $ 4,449 44.6 % (41.3 )% Percentage of revenue 0.6 % 0.5 % 1.1 % The increase in Amortization of acquired intangible assets for fiscal 2022 compared to fiscal 2021 was due to the amortization expense for new intangible assets added in the fourth quarter of fiscal 2021 through the acquisition of Mirametrix, Inc., partially offset by end of the amortization period during the first quarter of fiscal 2022 for acquired intangible assets from previous acquisitions.
Amortization of Acquired Intangible Assets The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Amortization of acquired intangible assets $ 3,478 $ 3,778 $ 2,613 (7.9 )% 44.6 % Percentage of revenue 0.5 % 0.6 % 0.5 % The decrease in Amortization of acquired intangible assets for fiscal 2023 compared to fiscal 2022 was due to the end of the amortization period during the first quarter of fiscal 2022 for acquired intangible assets from previous acquisitions.
Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses, and a business acquisition in fiscal 2021. Net cash used by investing activities in fiscal 2022 was $34.9 million compared to $89.8 million in fiscal 2021.
Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses . Net cash used by investing activities in fiscal 2023 was $33.3 million compared to $34.9 million in fiscal 2022. This $1.6 million decrease was primarily a result of decreased capital expenditures.
Restructuring Charges The composition of our Restructuring charges, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Restructuring charges $ 2,551 $ 940 $ 3,937 171.4 % (76.1 )% Percentage of revenue 0.4 % 0.2 % 1.0 % Restructuring charges are comprised of expenses resulting from reductions in our worldwide workforce, consolidation of our facilities, removal of fixed assets from service, and cancellation of software contracts and engineering tools.
Restructuring The composition of our Restructuring activity, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Restructuring $ 1,908 $ 2,551 $ 940 (25.2 )% 171.4 % Percentage of revenue 0.3 % 0.4 % 0.2 % Restructuring activity is generally comprised of expenses resulting from workforce reductions, cancellation of contracts, and consolidation of our facilities.
This resulted primarily from higher revenue shipments in the fourth quarter of fiscal 2022 compared to the fourth quarter of fiscal 2021. We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.
We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.
These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of the applicable year.
Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of the applicable year.
Liquidity Cash and cash equivalents (In thousands) December 31, 2022 January 1, 2022 $ Change % Change Cash and cash equivalents $ 145,722 $ 131,570 $ 14,152 10.8 % As of December 31, 2022, we had Cash and cash equivalents of $145.7 million, of which approximately $30.9 million in Cash and cash equivalents was held by our foreign subsidiaries.
Liquidity Cash and cash equivalents (In thousands) December 30, 2023 December 31, 2022 $ Change % Change Cash and cash equivalents $ 128,317 $ 145,722 $ (17,405 ) (11.9 )% As of December 30, 2023, we had Cash and cash equivalents of $128.3 million, of which approximately $36.1 million in Cash and cash equivalents was held by our foreign subsidiaries.
The increase in Selling, general, and administrative expense for fiscal 2022 compared to fiscal 2021 was due primarily to increased headcount-related costs to support the growth of our business, and to increased legal expenses primarily related to the defense of claims outside the ordinary course of business.
The increase in Selling, general, and administrative expense for fiscal 2023 compared to fiscal 2022 was due primarily to increased headcount-related costs, including stock-based compensation and other costs, related to demand creation to support the growth of our business.
We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types. 27 Table of Contents The following are examples of end market applications for the fiscal years presented: Communications and Computing Industrial and Automotive Consumer Licensing and Services Wireless Security and Surveillance Cameras IP Royalties Wireline Machine Vision Displays Adopter Fees Data Backhaul Industrial Automation Wearables IP Licenses Server Computing Robotics Televisions Patent Sales Client Computing Automotive Home Theater Data Storage Drones The composition of our revenue by end market is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Communications and Computing $ 274,754 41.6 % $ 217,960 42.3 % $ 174,656 42.8 % 26.1 % 24.8 % Industrial and Automotive 319,399 48.4 226,240 43.9 168,323 41.2 41.2 34.4 Consumer 49,064 7.4 50,652 9.8 45,523 11.2 (3.1 ) 11.3 Licensing and Services 17,139 2.6 20,475 4.0 19,618 4.8 (16.3 ) 4.4 Total revenue $ 660,356 100.0 % $ 515,327 100.0 % $ 408,120 100.0 % 28.1 % 26.3 % Revenue from the Communications and Computing end market increased by 26% in fiscal 2022 compared to fiscal 2021 primarily due to content expansion in datacenter servers, new greenfield client computing opportunities, 5G infrastructure, and datacenter networking.
We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types. 28 Table of Contents The following are examples of end market applications for the fiscal years presented: Communications and Computing Industrial and Automotive Consumer Wireless Security and Surveillance Cameras Wireline Machine Vision Displays Data Backhaul Industrial Automation Wearables Server Computing Robotics Televisions Client Computing Automotive Home Theater Data Storage Drones The composition of our revenue by end market is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Communications and Computing $ 257,536 34.9 % $ 282,913 42.8 % $ 227,911 44.2 % (9.0 )% 24.1 % Industrial and Automotive 433,482 58.8 319,398 48.4 226,260 43.9 35.7 41.2 Consumer 46,136 6.3 58,045 8.8 61,156 11.9 (20.5 ) (5.1 ) Total revenue $ 737,154 100.0 % $ 660,356 100.0 % $ 515,327 100.0 % 11.6 % 28.1 % Revenue from the Communications and Computing end market decreased by 9% in fiscal 2023 compared to fiscal 2022 primarily due to softer end market demand in both wireless and wireline communications infrastructure, partially offset by strong demand in data center applications.
The extent to which the COVID-19 pandemic, increased financial market volatility, inflationary pressures and related uncertainty will impact our business activities will depend on future developments that are highly uncertain and cannot be predicted at this time. See the section entitled “Risk Factors” in Item 1A of Part I of this report for further information about related risks and uncertainties.
The extent to which increased financial market volatility, inflationary pressures, global pandemics, and related uncertainty will impact our business activities will depend on future developments that are highly uncertain and cannot be predicted at this time.
With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue for which end customers and end markets are not yet known.
The end market data we use is derived from data provided to us by our customers. With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment.
These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The increase in Research and development expense for fiscal 2022 compared to fiscal 2021 was due primari ly to increased headcount-related costs as we continue to invest in our long-term product roadmap.
The increase in Research and development expense for fiscal 2023 compared to fiscal 2022 was due primari ly to increased headcount-related costs, including stock-based compensation, as we continue to invest in our long-term product roadmap, and depreciation and amortization related to our research and development equipment.
Interest Expense The composition of our Interest expense, including as a percentage of revenue, is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Interest expense $ (4,146 ) $ (2,738 ) $ (3,702 ) 51.4 % (26.0 )% Percentage of revenue (0.6 )% (0.5 )% (0.9 )% Interest expense is primarily related to our long-term debt.
Interest Income (Expense), net The composition of our Interest income (expense), net, including as a percentage of revenue, is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Interest income (expense), net $ 2,041 $ (4,146 ) $ (2,738 ) (149.2 )% 51.4 % Percentage of revenue 0.3 % (0.6 )% (0.5 )% The change in Interest income (expense) for fiscal 2023 compared to fiscal 2022 was driven by increased interest income, coupled with lower interest expense as we paid off the outstanding balance of our long-term debt during the third quarter of fiscal 2023.
There continues to be uncertainty around the extent and duration of the disruption to our business, including from the effects of the ongoing COVID-19 pandemic, market volatility, and inflationary pressures, which may impact our liquidity and working capital needs in future periods.
There continues to be uncertainty around the extent of market volatility, inflationary pressures, rising interest rates, recessionary concerns, uncertainty in the financial and banking industry, and geopolitical tension, which may impact our liquidity and working capital needs in future periods.
Income Taxes The composition of our Income tax expense is presented in the following table: Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Income tax expense (benefit) $ 3,230 $ 1,704 $ 1,064 89.6 % 60.2 % Our Income tax expense (benefit) is composed primarily of foreign income and withholding taxes, partially offset by benefits resulting from the release of uncertain tax positions ("UTP") due to statute of limitation expirations that occurred in the respective periods.
Income Taxes The composition of our Income tax (benefit) expense is presented in the following table: Year Ended December 30, December 31, January 1, % Change in (In thousands) 2023 2022 2022 2023 2022 Income tax (benefit) expense $ (44,205 ) $ 3,230 $ 1,704 (100+)% 89.6 % Our Income tax (benefit) expense includes taxes on foreign income and withholding taxes, partially offset by benefits resulting from excess tax benefits from stock-based compensation.
This $59.5 million increase was due to the following mix of activities. During fiscal 2022, we repurchased approximately 2.0 million shares of common stock for $110.1 million compared to repurchases in fiscal 2021 of approximately 1.3 million shares of common stock for $70.1 million.
We repurchased approximately 1.2 million shares of common stock for $80.0 million in fiscal 2023 compared to repurchases of approximately 2.0 million shares of common stock for $110.1 million in fiscal 2022.
Cash provided by operating activities was $238.8 million in fiscal 2022 compared to $167.7 million in fiscal 2021. This increase of $71.1 million was primarily driven by an increase of $98.9 million provided by improved operating performance, partially offset by $27.8 million of changes in working capital, primarily from cash used by inventories.
This increase of $30.8 million was primarily driven by an increase of $40.1 million provided by improved operating performance, partially offset by $9.3 million of changes in working capital, primarily from cash used by accrued liabilities, payroll obligations, and accounts payable, net of cash provided by inventories.
Consideration is given to all relevant factors that might affect the fair value such as estimates of future revenues and costs, present value factors, and the estimated useful lives of intangible assets. Accounting for Income Taxes We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world.
Accounting for Income Taxes We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex.
In making this evaluation, we considered the uncertain stability of the current economic and operating environment and estimates about our ability to generate taxable income in future periods within the United States. We continue to evaluate future projected financial performance to determine whether such performance is sufficient evidence to support a reduction in or reversal of the valuation allowance.
In making this evaluation, we considered our operating environment and estimates about our ability to generate taxable income in future periods within the United States. As a result of our consistent and continued profitability over the preceding three-year period and our expectations about generating sufficient U.S. Federal taxable income, we have determined that there is sufficient evidence that our U.S.
Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $47.8 million in fiscal 2022, an increase of approximately $2.4 million from the net $45.4 million used in fiscal 2021.
Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $43.7 million in fiscal 2023, a decrease of approximately $4.1 million from the net $47.8 million used in fiscal 2022. 33 Table of Contents Accounts receivable, net (In thousands) December 30, 2023 December 31, 2022 $ Change % Change Accounts receivable, net $ 104,373 $ 94,018 $ 10,355 11.0 % Days sales outstanding - Overall 56 49 7 Accounts receivable, net as of December 30, 2023 increased by approximately $10.4 million, or approximately 11%, compared to December 31, 2022.
Inventories (In thousands) December 31, 2022 January 1, 2022 $ Change % Change Inventories $ 110,375 $ 67,594 $ 42,781 63.3 % Days of inventory on hand 187 122 65 Inventories as of December 31, 2022 increased $42.8 million, or approximately 63%, compared to January 1, 2022 primarily to meet the increased demands of our customers and for new product ramps.
Inventories (In thousands) December 30, 2023 December 31, 2022 $ Change % Change Inventories $ 98,826 $ 110,375 $ (11,549 ) (10.5 )% Days of inventory on hand 175 187 (12 ) Inventories as of December 30, 2023 decreased $11.5 million, or approximately 11%, compared to December 31, 2022 primarily as a result of increased product shipments to meet customer demand.
Restructuring charges increased in fiscal 2022 compared to fiscal 2021 due to additional lease right-of-use asset impairment charges for our partially vacated facility in San Jose, California and contract termination fees in the current year under the internal restructuring plan that our management approved and executed in April 2019, as compared to minimal activity in the prior year.
Restructuring costs decreased in fiscal 2023 compared to fiscal 2022 due to lower costs in the current year periods for severance compared to higher costs in the prior year periods for lease right-of-use impairment and contract termination fees.
Improved margins were driven by benefits from our gross margin expansion strategy. Because of its higher margin, the licensing and services portion of our overall revenue can have a disproportionate impact on Gross margin.
Improved margins were driven by benefits from our gross margin expansion strategy including mix.
Revenue from the Consumer end market decreased by 3% in fiscal 2022 compared to fiscal 2021 primarily due to macroeconomic weakness in Consumer in the current year. Revenue from the Licensing and Services end market decreased by 16% in fiscal 2022 compared to fiscal 2021 primarily due to decreased licensing and IP royalties.
Revenue from Asia decreased in fiscal 2023 compared to fiscal 2022 primarily due to the macroeconomic environment in the region, while revenue from the Americas and Europe increased due to increased demand in these regions driven by our Industrial and Automotive end market.
During fiscal 2022, we made a discretionary payment of $20.0 million on our current revolving loans, and we paid required quarterly installments on our previous long-term debt totaling $8.8 million.
This $65.6 million increase was due to the following activities. During fiscal 2023, we made discretionary payments totaling $130.0 million on our revolving loans under the 2022 Credit Agreement, an increase of $99.8 million from the $30.2 million of net payment and refinancing activity on our long-term debt in fiscal 2022.
We updated our evaluation of the valuation allowance position in the United States through December 31, 2022 and concluded that we should continue to maintain a full valuation allowance against the net federal and state deferred tax assets.
Accordingly, we reduced the valuation allowance against a significant portion of our U.S. deferred tax assets resulting in the inclusion of $56.9 million of U.S. Federal deferred tax assets on our Consolidated Balance Sheets. We continue to maintain a full valuation allowance against our state deferred tax assets due to insufficient income sources.
Removed
The ongoing COVID-19 pandemic, including the periodic resurgence of cases relating to the spread of new variants, has and continues to impact worldwide economic activity and poses the risk that our employees, contractors, suppliers and other partners may be prevented from conducting business activities.
Added
Additionally, our business is impacted by the cyclic correction affecting the broader semiconductor industry, which has seen softened demand across our end markets and customers reducing or rebalancing their inventory levels.
Removed
Business Combinations Business combinations are accounted for using the acquisition method of accounting, under which we allocate the purchase price paid for a company to identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
Added
In determining the need to establish or maintain a valuation allowance, we consider the four sources of jurisdictional taxable income: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in prior carryback year(s) if carryback is permitted under the tax law; and (iv) viable and prudent tax planning strategies.
Removed
Goodwill is measured as the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed.
Added
Through the end of fiscal 2023, we demonstrated consistent and continued profitability over the preceding three-year period. In assessing the realizability of the deferred tax assets, we considered our operating environment and estimates about our ability to generate taxable income in future periods within the United States.
Removed
Determining the fair value of assets acquired and liabilities assumed requires management to make assumptions, estimates, and judgments that are based on all available information, including comparable market data and information obtained from our management and the management of the acquired companies.
Added
As a result, in the fourth quarter of fiscal 2023, we concluded that our history of profitable operating results, including the current period results, along with our expectations about generating sufficient U.S. Federal taxable income, provided sufficient positive evidence supporting the realizability of our U.S. Federal deferred tax assets.
Removed
These judgments affect the amount of consideration paid that is allocable to identified tangible and intangible assets acquired and liabilities assumed in the business combination. The estimation of the fair values of the intangible assets requires significant judgment and the use of valuation techniques including primarily the income approach.
Added
We do not maintain a valuation allowance in any foreign jurisdictions as we have concluded that it is more likely than not that we will realize those net deferred tax assets in the future periods.
Removed
Revenue Year Ended December 31, January 1, January 2, % Change in (In thousands) 2022 2022 2021 2022 2021 Revenue $ 660,356 $ 515,327 $ 408,120 28.1 % 26.3 % Revenue increased $145.0 million, or 28.1%, in fiscal 2022 compared to fiscal 2021, primarily from our products used in data center servers, client computing solutions, 5G wireless infrastructure, industrial automation, and robotics applications.
Added
Across our end markets, our products are increasingly used for Artificial Intelligence ("AI")-related applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, and AI-enabled robotics and ADAS systems, among others. We also provide IP licensing and services to our end markets.
Removed
We also generate revenue from the licensing of our IP, the collection of certain royalties, patent sales, the revenue related to our participation in consortia and standard-setting activities, and services.
Added
We also recognize certain revenue for which end customers and end markets are not yet known.
Removed
While these activities may be associated with multiple markets, Licensing and services revenue is reported as a separate end market as it has characteristics that differ from other categories, most notably a higher gross margin. The end market data below is derived from data provided to us by our customers.
Added
Revenue from the Consumer end market decreased by 21% in fiscal 2023 compared to fiscal 2022 primarily due to macroeconomic weakness in Consumer. While we do not consider AI applications as a distinct end market, we expect AI-related revenue to grow over the next few years based on the growing pipeline of AI-related design wins.
Removed
Revenue by Geography We assign revenue to geographies based on ship-to location of the customer.
Added
Revenue by Geography We have a diverse base of customers where distributors represent a significant portion of our total revenue. Our revenue by geographical market is based on the ship-to location of our customers, which can vary from time to time.
Removed
This interest expense is comprised of contractual interest and amortization of original issue discount and debt issuance costs based on the effective interest method.
Added
These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions.
Removed
The increase in Interest expense for fiscal 2022 compared to fiscal 2021 was driven by the increase in the applicable base rate for our long-term debt, the adjusted Term Secured Overnight Financing Rate ("SOFR") from September 1, 2022, and the London Interbank Offered Rate ("LIBOR") prior to that date.
Added
In the fourth quarter of fiscal 2023, we reduced the valuation allowance against a significant portion of our U.S. deferred tax assets resulting in the inclusion of $56.9 million of U.S. Federal deferred tax assets on our Consolidated Balance Sheets.
Removed
The increase in expense in fiscal 2022 as compared to fiscal 2021 is primarily due to increased worldwide income and changes in uncertain tax positions .
Added
The income tax benefit from the release of a portion of the valuation allowance was partially offset by an increase in expense in fiscal 2023 as compared to fiscal 2022 primarily due to increased worldwide income and U.S. tax on foreign operations. We updated our evaluation of the valuation allowance position in the United States through December 30, 2023.
Removed
This $54.9 million decrease was primarily a result of the acquisition of Mirametrix in the prior year, which used cash, net of cash acquired, of $68.1 million. Total cash used for capital expenditures and payments for software and intellectual property licenses increased $13.2 million to $34.9 million in fiscal 2022 from $21.7 million in fiscal 2021.
Added
Federal deferred tax assets are more likely than not to be realized. We continue to maintain a full valuation allowance against our state deferred tax assets due to insufficient income sources. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize those deferred tax assets.
Removed
In September 2022, we entered into our 2022 Credit Agreement and drew down an initial $150.0 million revolving loan at closing, which we used to pay off the $150.0 million outstanding balance on our previous term and revolving loans. In connection with the 2022 Credit Agreement, we paid $1.4 million in debt issuance costs.
Added
The amount of the deferred tax asset considered realizable could be adjusted if sufficient positive evidence exists. We do not maintain a valuation allowance in any foreign jurisdictions as we have concluded that it is more likely than not that we will realize those net deferred tax assets in the future periods.
Removed
During fiscal 2021, we paid required quarterly installments on our long-term debt totaling $13.1 million. 32 Table of Contents Accounts receivable, net (In thousands) December 31, 2022 January 1, 2022 $ Change % Change Accounts receivable, net $ 94,018 $ 79,859 $ 14,159 17.7 % Days sales outstanding - Overall 49 51 (2 ) Accounts receivable, net as of December 31, 2022 increased by approximately $14.2 million, or approximately 18%, compared to January 1, 2022.
Added
Cash provided by operating activities was $269.6 million in fiscal 2023 compared to $238.8 million in fiscal 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Removed
GAAP. Interest Rate Risk We are exposed to interest rate risk related to our indebtedness. At December 31, 2022, we had $130.0 million outstanding under our 2022 Credit Agreement. A hypothetical increase in the one-month SOFR by 1% (100 basis points) would increase our future interest expense by approximately $0.3 million per quarter. 33 Table of Contents
Added
GAAP. Interest Rate Risk Interest Income Our interest income is sensitive to changes in the general level of interest rates. As of December 30, 2023, a hypothetical 100 basis point change in interest rates would have resulted in less than $1.5 million change in interest income.
Added
Interest Expense We may be exposed to interest rate risk via the terms of our 2022 Credit Agreement, which specifies an interest rate on revolving loans that consists of a variable-rate of interest and an applicable margin. While we have drawn from this credit facility in the past, we have no borrowings outstanding as of December 30, 2023.
Added
If we borrow from the credit facility in the future, we will again be exposed to interest rate fluctuations. 35 Table of Contents

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