What changed in this filing

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Item 1A. Risk Factors

2024-02-23 compared with 2023-02-24 · 51 added, 67 removed, 296 unchanged (29% of the section changed)

15 unchanged sentences

We must continue to innovate and to invest in research and development to improve our competitive position and to meet the test and measurement requirements of our customers.

Our future growth depends, in significant part, upon our ability to work effectively with and anticipate the future technical and operational needs of our customers and to develop and support new products and product enhancements to meet those needs on a timely and cost-effective basis.

Our future growth depends, in significant part, upon our ability to work effectively with and anticipate the future technical and operational needs of our customers and to develop and support new

products and product enhancements to meet those needs on a timely and cost-effective basis.

This may become more difficult to do as the semiconductor industry innovates to address demand for AI-related products, which may develop more slowly than we anticipate or change from one period to another.

Our customers’ needs are becoming more challenging as the semiconductor industry continues to experience rapid technological change driven by the demand for complex circuits that are shrinking in size, are increasing in speed and functionality, and are produced on shorter cycle times and at reduced unit cost.

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A relatively small number of customers account for a significant portion of our revenues.

One customer represented 19.0% of total revenues in fiscal 2022, two customers represented a combined 31.8% of total revenues in fiscal 2021 and one customer represented 31.5% of total revenues in fiscal 2020.

One customer represented 17.1% of total revenues in fiscal 2023, one customer represented 19.0% of total revenues in fiscal 2022 and two customers represented a combined 31.8% of total revenues in fiscal 2021.

We anticipate that sales of our products to a relatively small number of customers will continue to account for a significant portion of our revenues, which can drive material fluctuations in sales volume, gross margins due to changes in mix, and leverage on fixed costs.

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A decline in our customers' market share and commercial success, including their ability to compete favorably within their respective end markets, could significantly impact demand for our products and reduce our revenues.

Cancellations, reductions, deferrals or non-payment of invoices could result from another downturn in the semiconductor industry, manufacturing delays, quality or reliability issues with our products, or from interruptions to our customers’ operations due to fire, natural disasters or other events, or other issues with the financial stability of our customers.

Cancellations, reductions, deferrals or non-payment of invoices could result from downturns in the semiconductor industry, including the cyclical downturn we are now experiencing, manufacturing delays, quality or reliability issues with our products, or from interruptions to our customers’ operations due to fire, natural disasters or other events, or other issues with the financial stability of our customers.

Furthermore, because our probe cards are custom products designed for our customers’ unique wafer designs, any cancellations, reductions or delays can result in significant non-recoverable costs, including but not limited to the potential for impairment of inventories.

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Consolidation in the semiconductor industry and within the semiconductor test equipment market could adversely affect the market for our products and negatively impact our ability to compete.

Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market for our products, which could cause a decline in our revenues.

Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market for our products, which could negatively impact our revenues.

With consolidation, the number of actual and potential customers for our products has decreased in recent years.

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We may also incur significant research and development expenses in order to introduce new product architectures and platforms to serve the testing needs of new semiconductor technologies.

Cyclicality in the semiconductor industry may adversely impact our sales.

These expenses are often incurred in advance of customer adoption or other anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect.

If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be negatively impacted.

Cyclicality in the semiconductor industry has in the past and may in the future adversely impact our sales.

The semiconductor industry has historically been cyclical and is characterized by wide fluctuations in product supply and demand.

From time to time, this industry has experienced significant downturns, often in connection with, or in anticipation of,

maturing product and technology cycles, excess inventories, and declines in general economic conditions.

From time to time, this industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product and technology cycles, excess inventories, and declines in general economic conditions.

The global economic and semiconductor downturns have caused and may in the future cause our operating results to decline dramatically from one period to the next.

Global economic stability can be negatively affected by a variety of factors and interrelationships, including the impacts of epidemics and pandemics, military conflicts, climate change, trade barriers (such as the U.S.-China trade restrictions implemented during fiscal 2022) and other factors acting alone or in combination.

For example, the semiconductor industry has been experiencing a cyclical downturn since the second half of fiscal 2022, which has extended through fiscal 2023, resulting in a significant decline in demand for foundry & logic and DRAM products over the same period.

Global economic stability can be negatively affected by a variety of factors and interrelationships, including the impacts of epidemics and pandemics, military conflicts or regional tensions, climate change, trade barriers (such as the U.S.-China trade restrictions implemented since fiscal 2022) and other factors acting alone or in combination.

Some of these factors can also have a more direct adverse impact upon our operations to varying degrees.

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During industry downturns, semiconductor manufacturers sharply curtail their spending, including their spending on our products, which may adversely impact our revenues, gross margins and results of operations.

Further, a protracted downturn could cause one or more of our customers to become insolvent, resulting in a loss of revenue and impacting our ability to collect on accounts receivable.

For example, in the second half of fiscal 2022, we saw a significant decline in demand for foundry & logic and DRAM products due to cyclicality in those markets.

protracted downturn could cause one or more of our customers to become insolvent, resulting in a loss of revenue and impacting our ability to collect on accounts receivable.

The timing, length and severity of these cyclical downturns are difficult to predict, and our business depends on our ability to plan for and react to these cyclical changes.

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Rather, a substantial percentage of our revenues in any quarter depend upon customer orders for our products that we receive and fulfill in that quarter.

Because our expense levels are based in part on our expectations as to future revenues and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any unexpected shortfall in revenues, such as the decline in bookings and revenues in the second half of fiscal 2022.

Accordingly, any significant shortfall of revenues in relation to our expectations could hurt our operating results.

If our ability to forecast demand for our products or the predictability of our manufacturing yields deteriorates, we could incur high inventory losses.

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We must continuously improve our manufacturing processes in an effort to increase yields and product performance, lower our costs and reduce the time required for us to design, manufacture and deliver our products in volume.

If we cannot do these things, both our existing products and our new products may not be commercially successful, our revenues and profitability may be adversely affected, our customer relationships and our reputation may be harmed, and our business may be materially adversely affected.

If we fail to do so, both our existing products and our new products may not be commercially successful, our revenues and profitability may be adversely affected, our customer relationships and our reputation may be harmed, and our business may be materially adversely affected.

To improve our manufacturing processes, we have incurred, and may incur in the future, substantial costs in an effort to optimize capacity and yields, open new manufacturing facilities, implement new manufacturing technologies, methods and processes, purchase new equipment, upgrade existing equipment, and train technical personnel.

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These delays and other inefficiencies may arise from a variety of factors.

Further, these investments may consume available cash in the short term for a presumed future benefit that may or may not occur.

These impacts have caused, and could cause in the future, our operating results and liquidity to decline.

Further, these investments may consume available cash in the short term for anticipated benefit that may or may not occur.

Our operating results and liquidity have been and may in the future be negatively impacted by these factors.

We have also experienced, and may experience in the future, difficulties in manufacturing our complex products in volume, on time, and at acceptable yields and cost, and/or have installation issues in the field, due to the complexity of customer requirements.

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For example, many semiconductor processes, architectures, and designs never reach production, including those for which we may have expended development effort and expense.

In addition, prospective customers might decide not to use our products or use our products for a relatively small percentage of their requirements after we have expended significant effort and expense toward product design, development, and/or manufacture.

If we do not achieve the benefits anticipated from any of these investments, or if the achievement any of these benefits is delayed, our operating results may be negatively impacted.

We obtain some of the components and materials we use in our products from a sole source or a limited group of suppliers, and the partial or complete loss of one of these suppliers, or scarcity of raw materials from one of these suppliers, could cause production delays.

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Our dependence upon sole or limited source suppliers exposes us to several other risks, including inability to obtain an adequate supply of materials, late deliveries, poor component quality, and business disruptions while we seek to identify and qualify alternative suppliers.

This could be exacerbated by certain events outside the control of either the supplier or us, such as global, regional or national health crises or armed conflict.

This could be exacerbated by certain events outside the control of either the supplier or us, such as global, regional or national health crises, armed conflicts, regional tensions or other adverse global, regional and national events.

The occurrence of any of these risks could adversely impact our business, results of operations and financial condition.

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Concerns relating to climate change have led to a range of local, state, federal, and international regulatory and policy efforts to seek to address greenhouse gas (“GHG”) emissions.

In the U.S., various approaches are being proposed or adopted at the federal, state, and local government levels.

In the U.S., various approaches are being proposed or adopted at the federal, state, and local government levels, such as recent legislation enacted in California.

These efforts could lead to additional costs on the Company now or in the future, including increased energy and other capital or operational costs, or additional legal requirements on the Company.

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Any of these factors, individually or combined with one or more factors, or other unforeseen factors or other impacts of climate change, could affect the Company and adversely impact our business, operations, or financial condition.

Global, regional or national health crises, such as the COVID-19 pandemic, have impacted, and could continue to negatively impact, our operations and those of our important suppliers, business partners and customers.

We are exposed to risks associated with public health crises and outbreaks of contagious diseases, such as COVID-19.

To date, these outbreaks have had, and may continue to have, an adverse impact on our operations, our supply chains and our expenses, including as a result of precautionary measures that we take in response to them.

For example, a variety of health orders and regulations arising from the COVID-19 pandemic apply to our operations and employees in the regions where we operate which have had, and will continue to have, negative affects upon our operations and business.

The extension of existing government orders and implementation of new orders or mandates, such as government vaccine and testing mandates, could impact the availability of members of our workforce or lead to the loss of key employees, further adversely impacting our business.

I mplementation of such mandates and requirements could also have similar consequences for our suppliers, which

may impact their ability to deliver their goods and services to us.

Even as the availability of vaccines has relieved the economic effects of the COVID-19 pandemic, new variants of the virus may continue to impede the vaccines’ efficacy, or other factors may prolong or worsen the pandemic and its direct and indirect effects upon our business.

In response, many of our employees continue to work remotely, which can increase operational risk and cybersecurity risks.

If we do not respond appropriately to these health crises, or if employees, customers or others do not perceive our response positively, we could suffer damage to our reputation, which could also adversely affect our business.

We obtain some of the components and materials used in our products from a sole source or a limited group of suppliers, and in some cases alternative sources are not readily available.

Health crises may heighten the risks posed by our dependence upon sole or limited source suppliers to the extent that they could disrupt the operations of one or more of these suppliers, resulting in an inability to obtain an adequate supply of materials, late deliveries or poor component quality while we seek to identify and qualify alternative suppliers.

The extent to which these health crises impact our operations and those of our important suppliers, business partners and customers will depend on numerous evolving factors and future developments that we are not able to predict, including but not limited to:

the severity and duration of each event;

governmental, business and other actions including government vaccine and testing mandates (which could include further restrictions on our operations);

the ongoing requirements of social distancing and health orders;

the impacts on our supply chain;

the impact on economic activity;

the extent and duration of the effect on business confidence and investments by our customers;

the effects of changes to our operations that may continue indefinitely;

the effects on our workforce and our ability to meet our staffing needs, particularly if members of our workforce are exposed or infected;

any impairments in the value of our assets;

and the potential impacts upon our internal controls, including those over financial reporting, that may result from changes in working environments and other circumstances.

All of these circumstances are highly uncertain and cannot be predicted, and the circumstances which give rise to new or existing infectious diseases becoming epidemics or pandemics with potentially similar impacts to the COVID-19 pandemic are expected to persist.

Adverse global, regional and national economic conditions could have a negative effect on our business, results of operations, financial condition, liquidity, and access to capital markets.

A variety of factors, including natural disasters, health crises, climate change, military conflicts and other geopolitical events, may adversely affect national, regional and global economies and financial markets.

Any of these events may result in global, regional or national economic slowdowns or other economic downturns.

Such downturns could curtail or delay spending by businesses and consumers which may ultimately result in reductions in the demand for our products and greater volatility in demand and supply conditions.

These events may also increase uncertainty in global credit and financial markets.

Any such adverse events may result in global, regional or national economic slowdowns or other economic downturns.

Such downturns could curtail or delay spending by businesses and consumers which may ultimately result in reductions in the demand for our products, greater volatility in demand and supply conditions and other adverse impacts.

For example, any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan or elsewhere in Asia, could adversely impact our suppliers, manufacturers and customers with operations located in the region, which could disrupt our business operations, affect demand for our products or increase our costs, negatively impacting our revenues, gross margins, and overall results of operations.

Additionally, these events may also increase uncertainty in global credit and financial markets.

The impacts of such uncertainty and disruptions to the availability of credit or other sources of capital could also adversely affect our ability to access capital on favorable terms or on a timely basis to meet our objectives.

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Inflation rates in the markets in which we operate have increased and may continue to rise.

Recent inflation has led us to experience higher costs related to labor, materials from suppliers, and transportation.

Our suppliers have raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability.

Inflation in recent periods has led us to experience higher costs related to labor, materials from suppliers, and transportation.

Our suppliers raised their prices and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases, productivity improvements or cost reductions to preserve our gross margins and profitability.

If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.

We have generally been able to offset increases in these costs through various productivity and cost reduction initiatives, as well as by adjusting our selling prices to pass through some of these higher costs to our customers;

however, our ability to raise our selling prices depends on market conditions and competitive dynamics.

We have generally been able to offset increases in these costs through various productivity improvement and cost reduction initiatives, as well as by adjusting our selling prices to pass through some of these higher costs to our customers;

however, our ability to raise our selling prices depends on market conditions and

competitive dynamics.

Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

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We rely on electronic data systems, including a variety of software and networking, computing and storage equipment and other information technologies, to operate and manage our business and to collect, process, maintain, and safeguard information, including information belonging to our customers, partners, and personnel.

Our electronic data systems may be subject to defects, failures or disruptions as a result of, among other things, natural disasters, accidents, power disruptions, telecommunications failures, deficiencies in new system designs and implementations,

acts of terrorism or war, physical security breaches, computer viruses or other cyber attacks.

Such incidents or other system failures or disruptions could subject us to downtime and delays, compromise or loss of sensitive or proprietary information, destruction or corruption of data, financial losses from remedial actions, breaches of obligations to third parties under privacy laws or contracts, or damage to our reputation or customer relationships.

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These risks and challenges include:

• compliance with a wide variety of foreign laws and regulations;

• compliance with a wide variety of foreign laws and regulations, including social, political, immigration, and tax and trade policies;

• legal uncertainties regarding taxes, tariffs, quotas, export controls, export licenses and other trade barriers;

• political and economic instability or foreign conflicts, including trade wars, that involve or affect the countries of our customers;

• government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from or distribute compensation or other funds in a particular country;

• adverse changes relating to government grants, tax credits, or other government incentives, including more favorable incentives provided to competitors;

• difficulties in collecting accounts receivable and longer accounts receivable payment cycles;

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• currency exchange rate fluctuations, which could affect the value of our assets denominated in local currency, as well as the price of our products relative to locally produced products;

• the impact of pandemics or other disruptions to trade and production;

• global, regional and national geopolitical or other events, such as political instability, acts of war or terrorism, regional tensions, health crises and natural disasters;

• seasonal fluctuations in purchasing patterns in other countries;

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dollars, we incur certain costs in other currencies, and have certain foreign currency denominated assets and liabilities.

We, therefore, face exposure to fluctuations in currency exchange rates.

We, therefore, face

exposure to fluctuations in currency exchange rates.

Significant fluctuations in exchange rates between the U.S.

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Sales of our products to customers outside of the United States represent a significant part of our past and anticipated revenues, including sales involving exports from the United States to China.

There is a continuing trend of increasing trade barriers affecting exports and imports between the United States and China.

Geopolitical and trade tensions between the United States and China, one of our largest markets, have led to increased tariffs and trade restrictions and have affected customer ordering patterns, and this dynamic between the countries may persist or increase for the foreseeable future.

For example, the U.S.

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There also remains considerable uncertainty regarding the interpretation and implementation of new regulations.

In addition, the reaction to these rules by governments and private businesses outside the U.S., particularly in China, may be expected to

include retaliatory controls and preferences for non-U.S.

or local suppliers.

In China we are already observing stronger preferences for non-U.S.

In reaction to U.S.

trade regulations, governments and private businesses outside the United States, particularly in China, may implement retaliatory controls and preferences for non-U.S.

or local suppliers, which can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders.

For example, China has restricted U.S.

access to certain minerals and has blocked certain companies that provide products to Taiwan's military from selling products in China.

Also, in China, we are already observing stronger preferences for non-U.S.

suppliers in general, and in favor of new and existing local suppliers in particular.

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License agreements might not be available on terms acceptable to us or at all.

In addition, certain of our customer contracts contain provisions that require us to defend or indemnify our customers for third party intellectual property infringement claims, which could increase the costs and negative impacts of intellectual property claims.

In addition, certain of our customer contracts contain provisions that require us to defend or indemnify our customers for third

party intellectual property infringement claims, which could increase the costs and negative impacts of intellectual property claims.

We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so again in the future, which could have a material negative impact on our business.

We recorded restructuring charges in fiscal 2022 and 2021 and we may implement restructuring plans in the future, which would require us to take additional, potentially material, restructuring charges related to employee terminations, asset disposal or exit costs.

We have recorded significant restructuring charges in prior periods, and we may implement restructuring plans in the future, which would require us to take additional, potentially material, restructuring charges related to employee terminations, asset disposal or exit costs.

We may also be required to write-off additional inventory if our product build plans or usage of inventory experience declines, and such additional write-offs could constitute material charges.

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We believe our ability to manage successfully and grow our business and to develop new products depends, in large part, on our ability to recruit and retain qualified employees, particularly highly skilled technical, sales, management, and other key personnel.

Competition for qualified resources is intense, and the increased availability of work-from-home arrangements accelerated by the COVID-19 pandemic has intensified and expanded competition.

Competition for qualified resources is intense.

Other companies may have greater resources available to provide substantial inducements to lure key personnel away from us or to offer more competitive compensation packages to individuals we are trying to hire.

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As a result, these expectations may impact the attractiveness of our business, the manner in which we do business, our reputation, the costs of doing business, and the willingness of these stakeholders to engage with, invest in, or retain us.

We may be further impacted by the adoption and evolution of ESG-related regulation and legislation in the jurisdictions in which we do business, such as the Securities and Exchange Commission disclosure requirements proposed earlier in 2022, which could result in increased compliance, operational, and other costs.

In addition, the Company has provided voluntary disclosures on ESG matters, including regarding energy usage, greenhouse gas emissions, health and safety, diversity and inclusion, and labor and human rights.

We may be further impacted by the adoption and evolution of ESG-related regulation and legislation in the jurisdictions in which we do business, which could result in increased compliance, operational, and other costs.

In addition, the Company has provided voluntary disclosures on ESG matters, including energy usage, greenhouse gas emissions, health and safety, diversity and inclusion, and labor and human rights.

Such disclosures are aspirational and based on frameworks and standards for such initiatives and progress that are still developing, assumptions that may change, and disclosure control and procedures that continue to evolve.

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generally accepted accounting principles, or GAAP, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets have been impaired.

Finite-lived intangible

assets are assessed for impairment in the event of an impairment indicator.

Finite-lived intangible assets are assessed for impairment in the event of an impairment indicator.

Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results of operations and stockholders’ equity in future periods.

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Also, each of our named executive officers and certain other executives of the company have entered into change of control severance agreements, which were approved by our Compensation Committee, which could increase the costs associated with a change of control and thus potentially deter such a transaction.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors