What changed in this filing

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Item 1A. Risk Factors

2024-10-28 compared with 2024-04-29 · 42 added, 48 removed, 429 unchanged (17% of the section changed)

9 unchanged sentences

The changes in demand may require our management to adjust spending and other resources allocated to operating activities.

During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis.

During periods of rapid growth or decline in demand for our products and services, we may face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis.

If we do not adequately meet these challenges during periods of increasing or declining demand, our gross margins and earnings may be negatively impacted.

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We Have a Limited Number of Key Customers

Sales to a limited number of large customers constitute a significant portion of our overall revenue, shipments, cash flows, collections, and profitability.

Sales to a limited number of large customers constitute a significant portion of our overall shipments, revenue, cash flows and profitability.

As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict.

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We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours.

In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, who are able to sell products for certain applications at certain customers that we are prohibited from selling to under applicable export controls, allowing the freedom of action in ways that we may be unable to match.

In many cases, speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives.

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That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development.

In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development.

In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence (“AI”) that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development.

In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customers’ requirements.

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Semiconductor manufacturing companies from time to time enter into strategic alliances or consolidate with one another to expedite the development of processes and other manufacturing technologies and/or achieve economies of scale.

The outcomes of such an alliance can be the definition of a particular tool set for a certain function and/or the standardization of a series of process steps that use a specific set of manufacturing equipment, while the outcomes of consolidation can lead to an overall reduction in the market for semiconductor manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing power based on their higher volumes.

In addition, the outcomes of consolidation can potentially lead to an overall reduction in the market for semiconductor manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing power based on their higher volumes.

In certain instances, this could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such functions or processes.

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government restricting exports to China) or changes in the interpretation or enforcement of existing requirements;

• macroeconomic, industry and market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, bank failures;

• macroeconomic, industry and market conditions, including those caused by war, conflict in the Middle East, bank failures;

and geopolitical issues;

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sales, as reflected in Part I Item 2.

Results of Operations of this quarterly report on Form 10-Q, accounted for approximately 93%, 91%, and 92% of total revenue in the nine months ended March 31, 2024 and fiscal years 2023, and 2022, respectively.

Results of Operations of this quarterly report on Form 10-Q, accounted for approximately 88%, 93%, and 91% of total revenue in the three months ended September 29, 2024 and fiscal years 2024, and 2023, respectively.

We expect that international sales will continue to account for a substantial majority of our total revenue in future years.

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• our ability to secure and retain qualified people, and effectively manage people, in all necessary locations for the successful operation of our business.

There is inherent risk, based on the complex relationships among China, Japan, Korea, Taiwan, and the United States, that political, diplomatic and national security influences can lead to trade disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry.

There is inherent risk, based on the complex relationships among the world’s major trading nations, that political, diplomatic and national security influences can lead to trade disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry.

This can adversely affect our business with China, Japan, Korea, and/or Taiwan and perhaps the entire Asia Pacific region or global economy.

6 unchanged sentences

and China,” the U.S.

government has recently imposed new controls, including expanded export license requirements, that significantly impact trade with China.

government has in recent years imposed new controls, including expanded export license requirements and restrictions on sales to certain Chinese entities that significantly impact trade with China.

In addition, the U.S.

1 unchanged sentence

The implementation by the U.S.

government of broad export controls restricting access to our technology (such as recent controls limiting exports to China) may cause customers with international operations to reconsider their use of and reliance on our products, which could adversely impact our future revenue and profits.

Furthermore, there are risks that foreign governments may, among other things, take retaliatory actions;

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and provide special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours;

all of which could adversely impact our revenues and margins.

all of which could adversely impact our ability to compete as well as our revenues and margins.

We are exposed to potentially adverse movements in foreign currency exchange rates.

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In addition, we make use of Software-as-a-Service (SaaS) products for certain important business functions that are provided by third parties and hosted on their own networks and servers, or third-party networks and servers, all of which rely on networks, email and/or the Internet for their function.

The technology, data, intellectual property and other sensitive information we seek to protect are subject to loss, release, misappropriation or misuse, and the information systems containing or transmitting such technology, data, intellectual property and other sensitive information are subject to disruption, breach or failure, in each case as a result of various possible causes.

Such causes may include mistakes or unauthorized actions by our employees or contractors, phishing schemes and other third-party attacks, and degradation or loss of service or access to data due to viruses, malware, denial of service attacks, destructive or

Such causes may include mistakes or unauthorized

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inadequate code, power failures, or physical damage to computers, hard drives, communication lines, or networking equipment.

actions by our employees or contractors, phishing schemes and other third-party attacks, and degradation or loss of service or access to data due to viruses, malware, denial of service attacks, destructive or inadequate code, power failures, or physical damage to computers, hard drives, communication lines, or networking equipment, in each case with respect to us or the third-party product and service providers upon which we rely.

Such causes may also include the use of techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, or that may continue undetected for an extended period of time.

In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks.

Further, the use of artificial intelligence by us, our customers, suppliers, and third-party providers, among others, may also introduce unique vulnerabilities.

We have experienced cybersecurity and other threats and incidents in the past.

In addition, to the extent AI capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks.

Further, the use of AI by us, our customers, suppliers, and third-party providers, among others, may also introduce unique vulnerabilities whose existence or exploitation could have a material adverse effect on our business or operations.

We experience cybersecurity and other threats and incidents in the course of our operations.

Although past threats and incidents have not resulted in a material adverse effect, we may incur material losses related to cybersecurity and other threats or incidents in the future.

If we were subject to a cybersecurity or other incident, it could have a material adverse effect on our business.

Cybersecurity or other incidents could have a material adverse effect on our business.

Such adverse effects might include:

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• our failure to meet, or violation of, regulatory or other legal obligations, such as the timely publication or filing of financial statements, tax information, and other required communications.

While we have implemented ISO 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer cybersecurity and other incidents.

While we have implemented International Organization for Standardization (“ISO”) 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer cybersecurity and other incidents, which could have a material adverse effect on our business or operations.

It has been difficult and may continue to be difficult to hire and retain employees with substantial cybersecurity acumen.

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We May Not Achieve the Expected Benefits of Our Restructuring Plans and Business Transformation Initiatives, and These Efforts Could Have a Material Adverse Effect on Our Business, Operations, Financial Condition, Results of Operations and Competitive Position

In January 2023, we announced that we are implementing a restructuring plan consisting of a workforce reduction, and that we anticipate undertaking, and may in the future undertake, additional business restructuring, realignment and transformation initiatives.

We expect to incur material costs and charges in connection with these plans and initiatives.

While the restructuring plan is intended to better align our cost structure with the current economic environment and future business opportunities, and our anticipated transformation initiatives have the goal of strengthening our operations and achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives.

Implementation of these plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all.

In January 2023, we announced that we were implementing a restructuring plan consisting of a workforce reduction, and that we anticipated undertaking, and may in the future undertake, additional business restructuring, realignment and transformation initiatives.

While the restructuring plan was intended to better align our cost structure with the current economic environment and future business opportunities, and our anticipated transformation initiatives have the goal of strengthening our operations and achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives.

Implementation of such plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all.

Restructuring and transformation may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods, may require a significant amount of management and other employees' time and focus, and may be distracting to employees and management, which may divert attention from operating and growing our business.

4 unchanged sentences

Our supply chain has played and will continue to play a key role in our product development, manufacturing operations, field installation and support.

Our business depends on our timely supply of products and services to meet the demand from our customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by other companies.

In addition, outsource providers have

Our business depends on our timely supply of products and services to meet the demand from our

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played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization.

customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by other companies.

In addition, outsource providers have played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization.

These providers and suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity arrangements that preclude further business with us, or be unable to meet our requirements or expectation due to their independent business decisions or force majeure events that could interrupt or impair their continued ability to perform as we expect.

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The COVID-19 pandemic and efforts by national, state and local governments worldwide to control its spread resulted in measures aimed at containing the disease such as quarantines, travel bans, shutdowns, and shelter in place or “stay at home” orders, which collectively significantly restricted the movement of people and goods and the ability of businesses to operate.

While the exceptional COVID-19 related challenges have mostly subsided, these restrictions and measures, incidents of confirmed or suspected infections within our workforce or those of our suppliers or other business partners, and our efforts to act in the best interests of our employees,

While the exceptional

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customers, and suppliers, previously affected and in the future may affect our business and operations by, among other things, causing facility closures, production delays and capacity limitations;

COVID-19 related challenges have mostly subsided, these restrictions and measures, incidents of confirmed or suspected infections within our workforce or those of our suppliers or other business partners, and our efforts to act in the best interests of our employees, customers, and suppliers, previously affected and in the future may affect our business and operations by, among other things, causing facility closures, production delays and capacity limitations;

disrupting production by our supply chain;

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• a failure to release new or enhanced versions of our products on a timely basis.

In addition, the fact that we offer limited product lines creates the risk that our customers may view us as less important to their business than our competitors that offer additional products and/or product capabilities, including new products that take advantage of “big data” or other new technologies such as machine learning and artificial intelligence.

This may impact our ability to maintain or expand our business with certain customers.

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This is an ongoing challenge due to intense competition for top talent, fluctuations in industry or business economic conditions, as well as increasing geographic expansion, and these factors in combination may result in cycles of hiring activity and workforce reductions.

Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to

Our success in hiring depends on a variety of factors, including the attractiveness

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obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment.

of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment.

We periodically evaluate our overall compensation and benefit programs and make adjustments, as appropriate, to maintain or enhance their competitiveness.

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China represents a large and fast-developing market for the semiconductor equipment industry and therefore is important to our business.

Revenue in China, which includes global customers and domestic Chinese customers with manufacturing facilities in China, represented approximately 43%, 26%, and 31% of our total revenue for the nine months ended March 31, 2024 and fiscal years 2023 and 2022, respectively.

Revenue in China, which includes global customers and domestic Chinese customers with manufacturing facilities in China, represented approximately 37%, 42%, and 26% of our total revenue for the three months ended September 29, 2024 and fiscal years 2024 and 2023, respectively.

and China have historically had a complex relationship that has included actions that have impacted trade between the two countries.

Recently, these actions have included an expansion of export license requirements imposed by the U.S.

In recent years, these actions have included an expansion of export license requirements imposed by the U.S.

government, which have limited the market for our products, adversely impacted our revenues, and increased our exposure to foreign competition, and could potentially do so to an even greater extent in the future.

Most recently, the U.S.

Additionally, the U.S.

government has enacted new rules aimed at restricting China’s ability to manufacture advanced semiconductors, which include restrictions on exports, reexports or transfers to, or shipping, transmitting, transferring, or facilitating such movement to, or performing services at, customer facilities in China engaged in certain technology end-uses, without appropriate authorizations obtained from U.S.

In addition, the U.S.

Department of Commerce has enacted new rules that have expanded export license requirements for U.S.

Department of Commerce has also enacted rules that have expanded export license requirements for U.S.

companies to sell certain items to companies and other end-users in China that are designated as military end-users or have operations that could support military end uses;

has added additional Chinese companies to its restricted entity list and unverified list under suspicion of military-civil fusion, support of Russia, or other factors associated with a broadening scope of national security concerns (including Semiconductor Manufacturing International Corporation, or SMIC, and related entities, and Yangtze Memory Technologies Co., Ltd., or YMTC, and related entities);

and has expanded an existing rule (referred to as the foreign direct product rule) in a manner that could cause foreign-made wafers, chipsets, and certain related items produced with many of our products to be subject to U.S.

1 unchanged sentence

Ltd (“Huawei”) or its affiliates are parties to a transaction involving the items.

These rules have required and may require us to apply for and obtain additional export licenses to supply certain of our products to customers in China, such as SMIC, YMTC and ChangXin Memory Technologies, Inc., and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all.

These rules have required and may require us to apply for and obtain additional export licenses to supply certain of our products to customers in China, and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all.

In addition, our customers (including, but not limited to, Chinese customers) may require U.S.

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government is uncertain and evolving, and these rules, other regulatory actions or changes, and other actions taken by the governments of either the U.S.

or China, or both, that have occurred and may occur in the future could materially and adversely affect our results of operations.

or China, or both, that have occurred and may occur in the future could weaken our competitive position and materially and adversely affect our results of operations.

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Our Financial Results May Be Adversely Impacted by Higher than Expected Tax Rates or Exposure to Additional Tax Liabilities

We are subject to income, transaction, and other taxes in the United States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax liabilities.

We are subject to income, transaction, and other taxes in the United States and various foreign jurisdictions, and judgment is required to determine worldwide tax liabilities.

The amount of taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.

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In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent upon our ability to generate future taxable income in the United States.

On August 16, 2022, the IRA was signed into law.

In general, the provisions of the IRA are effective beginning with our fiscal year 2024, with certain exceptions.

The IRA includes a new 15% corporate minimum tax.

We have evaluated the potential impacts of the IRA and do not expect it to have a material impact on our effective tax rate.

However, we expect future guidance from the Treasury Department and will further analyze when the guidance is issued.

Recommendations made by the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting 2.0 (“BEPS 2.0”) project have the potential to lead to changes in the tax laws in numerous countries, including the implementation of a global minimum tax.

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We will continue to monitor the progress of the BEPS 2.0 implementation.

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In addition, the U.S.

1 unchanged sentence

If enacted, such changes could have a material impact on our effective tax rate.

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Increasing and Evolving Environmental Regulations May Adversely Affect Our Operating Results

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• economic or political events, trends, and unexpected developments occurring nationally, globally, or in any of our key sales regions;

• macroeconomic, industry and market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, or bank failures;

• macroeconomic, industry and market conditions, including those caused by war, conflict in the Middle East, or bank failures;

and geopolitical issues;

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We review all other long-lived assets, including finite-lived intangible assets, whenever events or changes in circumstance indicate that these assets may not be recoverable.

The process of evaluating the potential impairment of goodwill and other long-lived assets requires significant judgment.

The process of evaluating the potential impairment of goodwill and other long-lived assets requires judgment.

Negative industry or economic trends, including reduced market prices of our Common Stock, reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets.

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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-Q

Item 1A. Risk Factors