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Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-17 · 293 added, 313 removed, 669 unchanged (48% of the section changed)

16 unchanged sentences

Amortization of acquired intangible assets

Restructuring charges

Acquisition related charges

Restructuring

Acquisition related

Total operating expenses

Income from operations

Interest expense

Other (expense) income, net

Interest income (expense), net

Other income (expense), net

Income before income taxes

Income tax expense (benefit)

Income tax (benefit) expense

Net income per share:

14 unchanged sentences

Cash and cash equivalents

$ 145,722  

$ 131,570  

$ 128,317 $ 145,722

Accounts receivable, net of allowance for credit losses

94,018  

79,859  

104,373 94,018

Inventories, net

110,375  

67,594  

98,826 110,375

Prepaid expenses and other current assets

29,052  

22,328  

36,430 29,052

Total current assets

379,167  

301,351  

367,946 379,167

Property and equipment, net

47,614  

38,094  

49,546 47,614

Operating lease right-of-use assets

17,590  

23,818  

14,487 17,590

Intangible assets, net

25,070  

29,782  

315,358  

20,974 25,070

315,358 315,358

Deferred income taxes

Other long-term assets

13,914  

18,091  

$ 798,713  

$ 726,494  

14,821 12,892

$ 840,894 $ 798,713

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable

$ 42,036  

$ 34,597  

$ 34,487 $ 42,036

Accrued liabilities

48,467  

26,444  

36,048 48,467

Accrued payroll obligations

36,870  

27,967  

Current portion of long-term debt

17,173  

26,865 36,870

Total current liabilities

127,373  

106,181  

Long-term debt, net of current portion

128,752  

140,760  

97,400 127,373

Long-term debt

Long-term operating lease liabilities, net of current portion

13,618  

19,248  

10,739 13,618

Other long-term liabilities

41,807  

48,672  

40,735 41,807

Total liabilities

311,550  

314,861  

148,874 311,550

Contingencies (Note 14)

2 unchanged sentences

Common stock, $ .01 par value, 300,000,000 shares authorized;

137,099,000 shares issued and outstanding as of December 31, 2022 and 137,239,000 shares issued and outstanding as of January 1, 2022

137,340,000 shares issued and outstanding as of December 30, 2023 and 137,099,000 shares issued and outstanding as of December 31, 2022

Additional paid-in capital

599,300  

701,688  

Accumulated deficit

( 111,094 )  

545,586 599,300

Retained earnings (Accumulated deficit)

147,967 ( 111,094 )

Accumulated other comprehensive loss

( 2,414 )  

( 2,906 ) ( 2,414 )

Total stockholders' equity

487,163  

411,633  

692,020 487,163

Total liabilities and stockholders' equity

$ 798,713  

$ 726,494  

$ 840,894 $ 798,713

The accompanying notes are an integral part of these Consolidated Financial Statements.

6 unchanged sentences

Stock-based compensation expense

Change in deferred income tax provision

Amortization of right-of-use assets

11 unchanged sentences

Cash flows from investing activities:

Cash paid for business acquisition, net of cash acquired

Capital expenditures

Cash paid for software and intellectual property licenses

Cash paid for business acquisition, net of cash acquired

Net cash provided by (used in) investing activities

12 unchanged sentences

Interest paid

Operating lease payments

Income taxes paid, net of refunds

Operating lease payments

Accrued purchases of plant and equipment

7 unchanged sentences

Income (Loss)

Balances, December 28, 2019

Balances, January 2, 2021

Components of comprehensive income, net of tax:

11 unchanged sentences

Repurchase of common stock

Balances, January 1, 2022

Balances, December 31, 2022

Components of comprehensive income, net of tax:

12 unchanged sentences

Generally Accepted Accounting Principles ("U.S.

GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

They include the accounts of Lattice and its subsidiaries after the elimination of all intercompany balances and transactions.

4 unchanged sentences

We evaluate our estimates and judgments on an ongoing basis.

Certain prior year balances have been reclassified to conform to the current year’s presentation.

Fiscal Reporting Periods

We report based on a 52 or 53 -week fiscal year ending on the Saturday closest to December 31.

Our fiscal 2022 was a 52 -week year that ended on December 31, 2022. 

Our fiscal 2021 was a 52 -week year that ended on January 1, 2022, and our fiscal 2020 was a 53 -week year that ended on January 2, 2021 .

Our fiscal 2023, 2022, and 2021 were all 52 -week years that ended on December 30, 2023, December 31, 2022, and January 1, 2022, respectively.

All references to quarterly or annual financial results are references to the results for the relevant fiscal period.

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Distributors have historically accounted for a significant portion of our total revenue.

Our two largest distributor groups, the Weikeng Group ("Weikeng") and Arrow Electronics, Inc.

("Arrow"), each account for more than 10% of our total revenue and our net accounts receivable.

Certain of our largest distributors each account for more than 10% of our total revenue and our net accounts receivable.

Revenue attributable to distributors as a percentage of total revenue is presented in the following table:

December 31,  

January 1,  

January 2,  

Weikeng Group

Arrow Electronics Inc.

December 30, December 31, January 1,

2023 2022 2022

32 % 28 % 27 %

Other distributors

Revenue attributable to distributors

At December 31, 2022 and January 1, 2022 , Weikeng accounted for approximately 47 % and 59 %, respectively, and Arrow accounted for approximately 27 % and 28 %, respectively, of net accounts receivable.

87 % 89 % 87 %

Three of these distributors each accounted for more than 10% of net accounts receivable at certain dates presented.

At December 30, 2023 and December 31, 2022 , Arrow accounted for approximately 29 % and 27 %, respectively, Weikeng accounted for approximately 36 % and 47 %, respectively, and Future accounted for approximately 18 % and 9 %, respectively, of net accounts receivable.

Concentration of credit risk with respect to accounts receivable is mitigated by our credit and collection process including active management of collections, credit limits, routine credit evaluations for essentially all customers, and secure transactions with letters of credit or advance payments where appropriate.

10 unchanged sentences

dollars, we also have international subsidiaries and branch operations that conduct some transactions in currencies that differ from the functional currency of that entity.

Gains or losses from foreign exchange rate fluctuations on balances denominated in currencies that differ from the functional currencies are reflected in Other expense, net.

We translate accounts denominated in foreign currencies in accordance with ASC 830, “

Foreign Currency Matters ,”

using the current rate method under which asset and liability accounts are translated at the current rate, while stockholders' equity accounts are translated at the appropriate historical rates, and revenue and expense accounts are translated at average monthly exchange rates.

Gains or losses from foreign exchange rate fluctuations on balances denominated in currencies that differ from the functional currencies are reflected in Other income (expense), net.

We translate accounts denominated in foreign currencies in accordance with ASC 830, “ Foreign Currency Matters ,” using the current rate method under which asset and liability accounts are translated at the current rate, while stockholders' equity accounts are translated at the appropriate historical rates, and revenue and expense accounts are translated at average monthly exchange rates.

Translation adjustments related to the consolidation of foreign subsidiary financial statements are reflected in Accumulated other comprehensive loss in Stockholders' equity (See our Consolidated Statements of Stockholders' Equity).

1 unchanged sentence

Under the terms of ASC 606, "Revenue from Contracts with Customers" , we recognize revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers.

For sales to distributors, we have concluded that our contracts are with the distributor, rather than with the distributor’s end customer, as we hold a contract bearing enforceable rights and obligations only with the distributor.

Our revenue is derived primarily from sales of silicon-based products, with additional revenue from sales of silicon-enabling products.

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Rebates earned by customers when they do not have outstanding receivable balances are recorded within Accrued liabilities.

Licensing and services revenue, which includes HDMI and MHL standards revenue, as well as certain IP licenses, includes variable consideration in the form of usage-based royalties.

Revenue related to licensing and services, which includes HDMI and MHL standards revenue, as well as certain IP licenses, includes variable consideration in the form of usage-based royalties.

We generally provide an assurance warranty that our products will substantially conform to the published specifications for twelve months from the date of shipment.

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We account for leases under the terms of ASC 842, " Leases ," which requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months.

Upon adoption, we elected the "package of practical expedients" that would allow us to carryforward our historical lease classifications, not reassess historical contracts to determine if they contain leases, and not reassess the initial direct costs for any existing leases.

We also elected the practical expedient to not separate lease and non-lease components, which we applied to all asset classes.

Concurrent with our adoption of Topic 842, we early adopted ASU 2019 - 01, Leases (Topic 842 ):

Codification Improvements, which granted disclosure relief for interim periods during the year in which a company adopted Topic 842.

Under this guidance, we apply the practical expedient to not separate lease and non-lease components for all asset classes.

Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

8 unchanged sentences

Research and Development

Research and development expenses include costs for compensation and benefits, engineering wafers, depreciation, licenses, and outside engineering services.

Research and development expenses include costs for compensation and benefits, engineering wafers, depreciation and amortization, licenses and masks, and outside engineering services.

These expenditures are for the design of new products, intellectual property cores, processes, packaging, and software solutions.

Research and development costs are generally expensed as incurred, with certain licensed technology agreements capitalized as intangible assets and amortized to Research and development expense over their estimated useful lives.

Restructuring Charges

Expenses associated with exit or disposal activities are recognized when incurred under ASC 420, “

Exit or Disposal Cost Obligations ,”

for everything except severance expenses and vacated leased facilities.

Because we have a history of paying severance benefits, the cost of severance benefits associated with a restructuring plan is recorded when such costs are probable and the amount can be reasonably estimated in accordance with ASC 712, “

Compensation - Nonretirement Postemployment Benefits.

When leased facilities are vacated, the amount of any ROU asset impairment is calculated in accordance with ASC 360, " Property, Plant, and Equipment " and recorded as a part of restructuring charges.

Expenses from other exit or disposal activities, including the cancellation of software contracts and engineering tools or the abandonment of long-lived assets, is recorded as a part of Restructuring charges.

Restructuring

Expenses associated with exit or disposal activities are recognized when incurred under ASC 420, “ Exit or Disposal Cost Obligations ,” for everything except severance expenses and vacated leased facilities.

” When leased facilities are vacated, the amount of any ROU asset impairment is calculated in accordance with ASC 360, " Property, Plant, and Equipment " and recorded as a part of Restructuring.

Expenses from other exit or disposal activities, including the cancellation of software contracts and engineering tools or the abandonment of long-lived assets, are recorded as a part of Restructuring.

Accounting for Income Taxes

3 unchanged sentences

Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements using enacted tax rates and laws that will be in effect when the difference is expected to reverse.

Valuation allowances are provided to reduce deferred tax assets to an amount that in management’s judgment is more-likely-than- not to be recoverable against future taxable income.

The determination of a valuation allowance and when it should be released requires complex judgment.

11 unchanged sentences

Stock-Based Compensation

We estimate the fair value of share-based awards consistent with the provisions of ASC 718, “

Compensation - Stock Compensation .”

We value RSUs using the closing market price on the date of grant, and we value stock options using the Black-Scholes option pricing model.

We estimate the fair value of share-based awards consistent with the provisions of ASC 718, “ Compensation - Stock Compensation .” We value RSUs using the closing market price on the date of grant, and we value stock options using the Black-Scholes option pricing model.

We have also granted RSUs with a market condition or a performance condition to certain executives.

The terms of these grants, including achievement criteria and vesting schedules, are detailed under the heading " Market-Based and Performance-Based Awards —

Grants" in " Note 11 - Stock-Based Compensation Plans.

The terms of these grants, including achievement criteria and vesting schedules, are detailed under the heading " Market-Based and Performance-Based Awards — Grants" in " Note 10 - Stock-Based Compensation Plans.

" Our current practice is to issue new shares to satisfy option exercises.

11 unchanged sentences

(In thousands, except per share data)

$ 259,061 $ 178,882 $ 95,922

Shares used in basic Net income per share

137,694 137,321 136,619

Dilutive effect of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition

2,096 3,346 5,524

Shares used in diluted Net income per share

139,790 140,667 142,143

Basic Net income per share

$ 1.88 $ 1.30 $ 0.70

Diluted Net income per share

$ 1.85 $ 1.27 $ 0.67

The computation of diluted Net income per share excludes the effects of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition that are antidilutive, aggregating to approximately the following number of shares:

6 unchanged sentences

(In thousands)

Product revenue - Distributors

Product revenue - Direct

Licensing and services

$ 644,181 87 % $ 591,229 89 % $ 449,650 87 %

92,973 13 % 69,127 11 % 65,677 13 %

Total revenue

$ 737,154 100 % $ 660,356 100 % $ 515,327 100 %

Revenue by Geographical Market

(In thousands)

United States

Other Americas

239,192 32 % 296,917 45 % 281,237 55 %

110,403 15 % 90,902 14 % 47,915 9 %

94,170 13 % 77,085 12 % 55,416 10 %

443,765 60 % 464,904 71 % 384,568 74 %

145,839 20 % 100,260 15 % 80,870 16 %

147,550 20 % 95,192 14 % 49,889 10 %

Total revenue

$ 737,154 100 % $ 660,356 100 % $ 515,327 100 %

Contract Balances

Our contract assets relate to our rights to consideration for licenses and royalties due to us as a member of the HDMI consortium, with collection dependent on events other than the passage of time, such as collection of licenses and royalties from customers by the HDMI licensing agent.

The balance results primarily from the amount of estimated revenue related to HDMI that we have recognized to date, but which has not yet been collected by the agent.

Our contract assets relate to our rights to consideration for licenses and royalties due to us as a member of the HDMI Founders consortium.

The balance results primarily from the amount of estimated revenue related to HDMI that we have recognized to date, but which has not yet been distributed to us by the HDMI licensing agent.

Contract assets are recorded in Prepaid expenses and other current assets in our Consolidated Balance Sheets.

4 unchanged sentences

Transferred to Accounts receivable or collected

Contract assets as of January 1, 2022

Contract assets as of December 31, 2022

Revenues recorded during the period

5 unchanged sentences

Contract liabilities as of January 1, 2022

Prepaid customer deposit

Accruals for estimated future stock rotation and scrap returns

Release of accruals for recognized stock rotation and scrap returns

Contract liabilities as of January 1, 2022

Prepaid customer deposit

Contract liabilities as of December 31, 2022

Product shipments from prepaid customer deposit

Accruals for estimated future stock rotation and scrap returns

7 unchanged sentences

Accounts receivable

$ 104,373 $ 94,018

Allowance for credit losses

Accounts receivable, net of allowance for credit losses

$ 104,373 $ 94,018

We had no material bad debt expense in fiscal 2023, 2022, or 2021.

1 unchanged sentence

Work in progress

$ 65,396 $ 58,269

Finished goods

33,430 52,106

Total inventories, net

$ 98,826 $ 110,375

Accrued Liabilities

1 unchanged sentence

(In thousands)

Contract liability under ASC 606

Liability for non-cancelable contracts

$ 11,418 $ 10,498

Contract liabilities

Current portion of operating lease liabilities

Liability for production materials

Foreign, VAT, and other taxes payable

Other accrued liabilities

Total accrued liabilities

Cloud Based Computing Implementation Costs

Under the guidance in ASU 2018 - 15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 - 40 ) , we are capitalizing the implementation costs for cloud computing arrangements, mainly for our integrated distributor accounting management systems.

These cloud-based computing implementation costs are recorded in Prepaid expenses and other current assets and Other long-term assets on our Consolidated Balance Sheets.

The following table summarizes activity during the periods presented:

(In thousands)

Cloud based computing implementation costs as of January 2, 2021

Costs capitalized

Cloud based computing implementation costs as of January 1, 2022

Costs capitalized

Cloud based computing implementation costs as of December 31, 2022

$ 36,048 $ 48,467

Note 5 - Property and Equipment

December 30, December 31,

(In thousands)

Production equipment and software

$ 159,950 $ 149,787

Leasehold improvements

13,519 12,416

Office furniture and equipment

175,402 163,963

Accumulated depreciation and amortization

( 125,856 ) ( 116,349 )

Total property and equipment, net

$ 49,546 $ 47,614

For fiscal years 2023 , 2022 , and 2021 depreciation and amortization expense for property and equipment was $ 17.3 million, $ 13.8 million, and $ 12.0 million, respectively.

Property and Equipment –

Geographic Information

Property and Equipment – Geographic Information

Our Property and equipment, net by country at the end of each period was as follows:

December 30, December 31,

(In thousands)

United States

$ 29,467 $ 29,118

10,222 10,732

Total foreign property and equipment, net

20,079 18,496

Total property and equipment, net

Note 6 - Business Combination and Goodwill

On November 12, 2021, we acquired 100 % of the outstanding shares of Mirametrix, Inc.

("Mirametrix"), an innovator in advanced AI software and computer vision ("CV") applications.

This acquisition combines Mirametrix technology and expertise with Lattice’s innovative hardware and software solution stacks to create an end-to-end AI and computer vision solution that spans from the hardware to the application layer.

Total consideration to acquire Mirametrix was $ 68.5 million, paid 100% in cash to Mirametrix shareholders.

There is no contingent consideration included in the determination of the purchase consideration.

Purchase consideration was allocated to the tangible and intangible assets and liabilities assumed on the basis of the respective estimated fair values on the acquisition date.

The fair values of the assets acquired and liabilities assumed in the acquisition of Mirametrix, by major class, were recognized as follows:

(In thousands)

Estimated Fair Value

Assets acquired:

Cash and cash equivalents

Accounts receivable

Other current assets

Property and equipment

Intangible assets

Total assets acquired

Liabilities assumed

Accounts payable

Accrued liabilities

Accrued payroll obligations

Long-term liabilities

Total liabilities assumed

Fair value of net assets acquired

The following table presents details of the identified intangible assets acquired through the acquisition of Mirametrix, as of November 12, 2021:

(In thousands)

Existing technology

Customer relationships

Trade name / trademarks

Total identified intangible assets subject to amortization

We do not believe there is any significant residual value associated with these intangible assets.

We are amortizing the intangible assets using the straight-line method over their estimated useful lives.

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets.

The goodwill recognized in the acquisition of Mirametrix was derived from expected benefits from cost synergies and the knowledgeable and experienced workforce who joined the Company after the acquisition.

Goodwill resulting from the acquisition is not deductible for Canada income tax purposes.

The goodwill balance of approximately $ 315.4 million at December 31, 2022 is comprised of approximately $ 267.5 million from prior acquisitions combined with the approximately $ 47.8 million from the acquisition of Mirametrix.

No impairment charges relating to goodwill were recorded for fiscal 

2022 , 2021, or 2020.

Note 7 - Intangible Assets

In connection with our acquisitions of Mirametrix, Inc.

in November 2021, Silicon Image, Inc.

in March 2015, and SiliconBlue Technologies, Inc.

in December 2011, we recorded identifiable intangible assets related to developed technology, customer relationships, licensed technology, patents, and in-process research and development based on guidance for determining fair value under the provisions of ASC 820, " Fair Value Measurements ." We are amortizing the intangible assets using the straight-line method over their estimated useful lives.

$ 49,546 $ 47,614

Note 6 - Intangible Assets and Goodwill

In connection with our previous acquisitions, we have recorded identifiable intangible assets related to existing technology, customer relationships, trade names, and trademarks, based on guidance for determining fair value under the provisions of ASC 820, " Fair Value Measurements ." We are amortizing the intangible assets using the straight-line method over their estimated useful lives.

Additionally, we have entered into license agreements for third -party technology and recorded them as intangible assets.

1 unchanged sentence

No impairment charges relating to acquired intangible assets were recorded for fiscal 2023 , 2022, or 2021.

The following tables summarize the details of our Intangible assets, net as of December 31, 2022 and January 1, 2022 :

The following tables summarize the details of our Intangible assets, net as of December 30, 2023 and December 31, 2022 :

December 30, 2023

4 unchanged sentences

Existing technology

$ 124,487  

$ ( 113,157 )  

$ 11,330  

5.1 $ 124,487 $ ( 115,085 ) $ 9,402

Customer relationships

32,734  

( 24,509 )  

6.1 32,734 ( 25,909 ) 6,825

Trade name / trademarks

( 169 )  

10.0 1,500 ( 319 ) 1,181

Licensed technology

( 2,487 )  

6.2 7,127 ( 3,561 ) 3,566

Total identified intangible assets

$ 165,392  

$ ( 140,322 )  

$ 25,070  

January 1, 2022

$ 165,848 $ ( 144,874 ) $ 20,974

December 31, 2022

(In thousands)

3 unchanged sentences

Existing technology

$ 124,487  

$ ( 111,090 )  

$ 13,397  

5.1 $ 124,487 $ ( 113,157 ) $ 11,330

Customer relationships

32,734  

( 22,947 )  

6.1 32,734 ( 24,509 ) 8,225

Trade name / trademarks

( 19 )  

10.0 1,500 ( 169 ) 1,331

Licensed technology

( 1,434 )  

6.3 6,671 ( 2,487 ) 4,184

Total identified intangible assets

$ 165,272  

$ ( 135,490 )  

$ 29,782  

$ 165,392 $ ( 140,322 ) $ 25,070

We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table:

1 unchanged sentence

Research and development

$ 1,054  

$ 1,074 $ 1,054 $ 901

Amortization of acquired intangible assets

$ 4,832  

$ 3,514  

$ 4,573  

3,478 3,778 2,613

$ 4,552 $ 4,832 $ 3,514

The annual expected amortization expense of acquired intangible assets is as follows:

(In thousands)

$ 4,522  

$ 25,070  

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets.

The goodwill balance at December 30, 2023 is comprised of approximately $ 315.4 million from prior acquisitions.

No impairment charges relating to goodwill were recorded for fiscal 2023 , 2022, or 2021.

Note 7 - Long-Term Debt

On September 1, 2022, we entered into an Amended and Restated Credit Agreement (the “2022 Credit Agreement”), which provides for a five -year secured revolving loan facility with an aggregate principal amount of up to $ 350 million, along with other components and options, such as a letter of credit, swingline loan, and expansion of revolving and/or term loan commitments, currently not in use.

We drew down an initial $ 150 million revolving loan at closing, which we used along with $ 1.9 million of cash to (i) repay the $ 150.5 million term loan, revolving loan, and accrued interest obligations outstanding under our previous credit agreement (the “2019 Credit Agreement”), and (ii) pay fees and expenses totaling $ 1.4 million incurred in connection with the 2022 Credit Agreement.

We intend to use the revolving loan facility for working capital and general corporate purposes.

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In addition, we pay a quarterly commitment fee of 0.20 % on the unused portion of the revolving facility.

With the amendment of our 2019 Credit Agreement pursuant to the 2022 Credit Agreement, we capitalized $ 0.9 million of the new debt costs, and expensed $ 0.7 million of debt costs and existing original issue discount ("OID") as a loss on refinancing in Other (expense) income, net on our Consolidated Statements of Operations for fiscal 2022.

With the amendment of our 2019 Credit Agreement pursuant to the 2022 Credit Agreement, we capitalized $ 0.9 million of the new debt costs, and expensed $ 0.7 million of debt costs and existing original issue discount ("OID") as a loss on refinancing in Other income (expense), net on our Consolidated Statements of Operations for fiscal 2022.

We determine the Current portion of long-term debt, if any, as the sum of the required debt payments to be made over the next twelve months, reduced by the OID and the debt issuance costs to be amortized over the next twelve months.

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 loans on September 1, 2027.

During fiscal 2022, we made principal payments totaling $ 28.8 million, including a discretionary payment of $ 20 million on the revolving loans outstanding under the 2022 Credit Agreement and required quarterly installments totaling $ 8.8 million on the term loans outstanding under the 2019 Credit Agreement.

During fiscal 2023, we made discretionary payments totaling $ 130 million on the revolving loans outstanding under the 2022 Credit Agreement.

The fair value of our long-term debt approximates the carrying value, which is reflected in our Consolidated Balance Sheets as follows:

1 unchanged sentence

Principal amount

$ - $ 130,000

Unamortized original issuance discount and debt costs

Current portion of long-term debt

Long-term debt, net of current portion and unamortized debt issue costs

Long-term debt, net of unamortized debt issue costs

$ - $ 128,752

Interest expense related to our long-term debt is included in Interest expense on our Consolidated Statements of Operations as follows:

1 unchanged sentence

Contractual interest

$ 2,701 $ 4,500 $ 2,304

Amortization of original issuance discount and debt costs

Total interest expense related to long-term debt

$ 2,967 $ 4,810 $ 2,666

Note 8 - Restructuring

In September 2022, our management approved and implemented additional contract cancellations and headcount reductions under the Q2 2019 Sales Plan, an internal restructuring plan that our management approved and executed in April 2019.

In the third quarter of 2023, our management approved and executed an internal restructuring plan (the “Q3 2023 Plan”), which included a targeted workforce reduction intended to reorganize critical roles and focus skillsets in key growth markets.

We incurred restructuring costs of approximately $ 2.0 million in fiscal 2023.

Under this plan, approximately $ 2.0 million of total costs have been incurred through December 30, 2023.

The Q3 2023 plan is expected to be largely complete by the end of fiscal year 2024.

In September 2022, our management approved and implemented additional contract cancellations and workforce reductions under the Q2 2019 Sales Plan, an internal restructuring plan that our management approved and executed in April 2019.

The Q2 2019 Sales Plan focused on a restructuring of the global sales organization through cancellation of certain contracts and a workforce reduction.

With these actions, we incurred approximately $ 1.0 million of incremental restructuring costs in fiscal 2022.

Under this plan, no restructuring expense was incurred during fiscal 2021, and we incurred restructuring expense of approximately $ 0.1 million during fiscal 2020.

Under the Q2 2019 Sales Plan, we incurred no restructuring costs in fiscal 2023, approximately $ 1.0 million of incremental restructuring costs in fiscal 2022, and no restructuring costs in fiscal 2021.

Under this plan, approximately $ 3.1 million of total expense has been incurred through December 30, 2023.

All actions planned under the Q2 2019 Sales Plan have been implemented.

In March 2020, our management approved and executed an internal restructuring plan (the “Q1 2020 Plan”), which included a workforce reduction in order to reduce our operating cost structure by leveraging our low-cost regions as well as enhancing efficiency.

Under this plan, we recorded a credit of approximately $ 0.1 million during fiscal 2022, and we incurred restructuring expense of approximately $ 0.2 million and $ 2.0 million, respectively, during 

fiscal 2021 and 2020 .

Approximately $ 2.1 million of total expense has been incurred through December 31, 2022 under the Q1 2020 Plan.

All actions planned under the Q1 2020 Plan have been implemented.

In June 2017, our Board of Directors approved an internal restructuring plan (the "June 2017 Plan"), which included actions, among others, to reconfi gure our use of certain leased properties.

Under the June 2017 Plan, we incurred approximately $ 1.1 million of incremental restructuring costs in fiscal 2022 related to an impairment of the operating lease right-of-use asset for our partially vacated facility in San Jose, California.

Including these charges, we incurred restructuring expense of approximately $ 1.6 million during fiscal 2022, and we incurred restructuring expense of approximately $ 0.7 million and $ 1.9 million, respectively, during fiscal 2021 and 2020.

Under the June 2017 Plan, we incurred restructuring costs of approximately $ 0.1 million in fiscal 2023, approximately $ 1.6 million in fiscal 2022 (which includes approximately $ 1.1 million of incremental restructuring costs in fiscal 2022 related to an impairment of the operating lease right-of-use asset for our partially vacated facility in San Jose, California), and approximately $ 0.7 million in fiscal 2021.

Under this plan, we have incurred approximately $ 23.3 million of total expense through December 30, 2023.

All actions planned under the June 2017 Plan have been implemented.

These expenses and credits were recorded to Restructuring charges on our Consolidated Statements of Operations.

The restructuring accrual balance is presented in Accrued liabilities and Other long-term liabilities on our Consolidated Balance Sheets.

The following table displays the activity related to the restructuring plans described above:

These costs, and adjustments on previous plans, are recorded to Restructuring on our Consolidated Statements of Operations.

The restructuring accrual balance is presented in Accrued liabilities and in Other long-term liabilities on our Consolidated Balance Sheets.

The following table displays the activity related to our restructuring plans:

(In thousands)

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Lease Termination & Fixed Assets

Accrued Restructuring at December 28, 2019

Restructuring charges

Costs paid or otherwise settled

Accrued Restructuring at January 2, 2021

Restructuring charges

$ 246 $ 8,233 $ 664 $ 9,143

Restructuring

250 690 — 940

Costs paid or otherwise settled

( 245 ) ( 1,793 ) ( 664 ) ( 2,702 )

Accrued Restructuring at January 1, 2022

Restructuring charges

$ 251 $ 7,130 $ — $ 7,381

Restructuring

303 1,608 640 2,551

Costs paid or otherwise settled

( 154 ) ( 2,846 ) — ( 3,000 )

Accrued Restructuring at December 31, 2022

$ 400 $ 5,892 $ 640 $ 6,932

Restructuring

1,848 56 4 1,908

Costs paid or otherwise settled

( 758 ) ( 1,440 ) ( 24 ) ( 2,222 )

Accrued Restructuring at December 30, 2023

$ 1,490 $ 4,508 $ 620 $ 6,618

Includes employee relocation costs and outplacement costs

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We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center, all of which are leased under operating leases that expire at various times through 2029.

Our leases have remaining lease terms of 1 to 6 years, some of which include options to extend for up to 5 years, and some of which include options to terminate within 1 year.

Our leases have remaining lease terms of less than 1 year to 5 years, some of which include options to extend for up to 5 years, and some of which include options to terminate within 1 year.

The weighted-average remaining lease term was 3.3 years and the weighted-average discount rate was 5.8 % as of December 30, 2023.

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(In thousands)

Balance as of January 1, 2022

Balance as of December 31, 2022

Right-of-use assets obtained for new lease contracts during the period

Amortization of right-of-use assets during the period

Impairment of right-of use asset during the period (recorded in Restructuring charges)

Adjustments for present value and foreign currency effects

2 unchanged sentences

(In thousands)

Balance as of January 1, 2022

Balance as of December 31, 2022

Lease liabilities incurred for new lease contracts during the period

Accretion of lease liabilities

Operating cash used by payments on lease liabilities

Operating cash used for payments on lease liabilities

Adjustments for present value and foreign currency effects

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Employee and Director Stock Options, Restricted Stock, and ESPP Plans

We have two active equity incentive plans, the "2013 Incentive Plan" and the "2011 Non-Employee Director Equity Incentive Plan", under which shares remain available for grants to employees and non-employee directors, respectively.

In addition, we have made grants of inducement awards to certain executives and employees that are granted outside of, but governed by, the 2013 Incentive Plan.

As of December 30, 2023, we have two active equity incentive plans, the "2023 Equity Incentive Plan" (which was adopted in 2023 and superseded the "2013 Incentive Plan" such that no additional shares will be granted under the 2013 Incentive Plan ) and the "2011 Non-Employee Director Equity Incentive Plan", under which shares remain available for grants to employees and non-employee directors, respectively.

"Incentive stock options" under Section 422 of the U.S.

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The contractual terms of options granted do not exceed ten years.

In May 2012, the Company's stockholders approved the 2012 Employee Stock Purchase Plan ( "2012 ESPP"), which authorizes the issuance of 3.0 million shares of common stock to eligible employees to purchase shares of common stock through payroll deductions, which cannot exceed 10 % of an employee's compensation.

We also maintain the 2012 Employee Stock Purchase Plan ( "2012 ESPP"), pursuant to which eligible employees may contribute through payroll deductions up to 10 % of base compensation, subject to certain income limits, to purchase shares of our common stock.

The purchase price of the shares is the lower of 85 % of the fair market value of the stock at the beginning of each six -month offering period or 85 % of the fair market value at the end of such period.

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At December 30, 2023 , a total of 0.9 million shares of our common stock were available for future purchases under the 2012 ESPP.

At December 31, 2022 , a total of 5.0 million shares of our common stock were available for future grants under the 2013 Incentive Plan and the 2011 Non-Employee Director Equity Incentive Plan.

Following our 2018 Shareholder meeting, a share ratio of 2.2:1 was applied to the 2013 Incentive Plan.

This ratio takes two and two -tenths shares out of the 2013 Plan for every one full value share granted.

During fiscal 2022 , a total of 2.5 million shares were adjusted out of the 2013 Plan.

At December 30, 2023 , a total of 11.7 million shares of our common stock were available for future grants under the 2023 Equity Incentive Plan and the 2011 Non-Employee Director Equity Incentive Plan.

Neither the 2023 Equity Incentive Plan nor the 2011 Non-Employee Director Equity Incentive Plan have any fungible share ratio or counting provision .

Shares subject to stock option grants that expire or are canceled, without delivery of such shares, generally become available for re-issuance under equity incentive plans.

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Cost of revenue

$ 4,506 $ 3,674 $ 3,049

Research and development

27,782 19,645 14,563

Selling, general, and administrative

37,909 32,211 28,863

Total stock-based compensation

$ 70,197 $ 55,530 $ 46,475

The income tax benefit related to total stock-based compensation expense was $ 7.6 million for fiscal 2023, which is reflected in Income tax (benefit) expense in the Consolidated Statements of Operations.

The income tax benefit related to awards vested or exercised during fiscal 2023 was $ 10.4 million.

The income tax benefits related to stock-based compensation were not significant for the periods presented prior to fiscal 2023 as they were offset by an increase in valuation allowance.

ESPP and Stock Options

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Compensation expense for all stock-based compensation awards is recognized using the straight-line method.

We recorde d stock compensation expense related to the ESPP of approximately $ 1.5 million, $ 1.2 million, and $ 1.0 million in fiscal 2022 , 2021 , and 2020 , respectively.

Related to stock options, w e recorded no expense in fiscal 2022, and approximately $ 1.0 million and $ 2.0 million, in fiscal 2021 and 2020 , respectively.

We recorde d stock-based compensation expense related to the ESPP of approximately $ 2.2 million, $ 1.5 million, and $ 1.2 million in fiscal 2023 , 2022 , and 2021 , respectively.

Related to stock options, w e recorded no expense in fiscal 2023 and 2022 , and approximately $ 1.0 million in fiscal 2021 .

The following table summarizes our stock option activity and related information for the year ended December 30, 2023:

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Aggregate Intrinsic Value

Balance, January 1, 2022

Balance, December 31, 2022

Forfeited or expired

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Vested and expected to vest at December 30, 2023

428 $ 6.75 1.16 $ 26,626

Exercisable, December 30, 2023

428 $ 6.75 1.16 $ 26,626

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that day.

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Weighted average grant date fair value

Balance, January 1, 2022

Balance, December 31, 2022

1,821 $ 50.18

( 880 ) 41.63

Forfeited or expired

Balance, December 30, 2023

1,881 $ 72.31

At December 30, 2023, there was $ 121.3 million of unrecognized compensation expense related to unvested time-based RSUs.

Compensation expense for RSUs is recognized using the straight-line method over the related vesting period.

In fiscal 2022 , 2021 , and 2020 , we recorde d stock compensation expense related to time-based RSUs of approximately $ 30.1 million, $ 21.7 million, and $ 16.6 million, respectively.

In fiscal 2023 , 2022 , and 2021 , we recorde d stock-based compensation expense related to time-based RSUs of approximately $ 41.5 million, $ 30.1 million, and $ 21.7 million, respectively.

Market-Based and Performance-Based Awards

In 2021 through 2023 , we granted awards of RSUs with either a market condition or a performance condition to certain executives.

Market-Based and Performance-Based Awards —

In the first quarters of fiscal 2022, 2021 and 2020, we granted awards of RSUs with a market condition to certain executives.

Under the terms of these grants, the RSUs with a market condition vest over a three -year period based on the Company’s total shareholder return ("TSR") relative to the Russell 2000 index, which condition is measured for the 2022 and 2021 grants on the third anniversary of the grant date, and measured for one -half of the 2020 grants on the second and third anniversary of the grant date.

The awards may vest at 250 % or 200 %, depending upon the executive, if the 75th percentile of the market condition is achieved, with 100 % of the units vesting at the 55th percentile, zero vesting if relative TSR is below the 25th percentile, and vesting scaling for achievement between the 25th and 75th percentile.

In the first quarter of fiscal 2021, we also granted awards of RSUs with a performance condition to certain executives, to specifically drive additional executive attention and focus on the Company’s revenue growth priorities.

Market-Based and Performance-Based Awards — Grants

In the first and third quarters of fiscal 2023, and in the first quarters of fiscal 2022 and 2021, we granted awards of RSUs with a market condition to certain executives.

Under the terms of these grants, the RSUs with a market condition vest over a three -year period based on the Company's total shareholder return ("TSR") relative to a specified index.

For the 2023 grants, the TSR condition is measured relative to the Russell 3000 index on either the third anniversary of the grant date, or equally on the first, second, and third anniversary of the grant date, depending on the executive.

For the 2022 and 2021 grants, the TSR condition is measured relative to the Russell 2000 index on the third anniversary of the grant date .

The awards may vest at 250 % or 200 %, depending on the executive, if the 75th percentile of the market condition is achieved, with 100 % of the units vesting at the 55th percentile, zero vesting if relative TSR is below the 25th percentile, and vesting scaling for achievement between the 25th and 75th percentile.

Under the terms of these grants, the RSUs with a performance condition will vest based on the Company generating specified levels of year-over-year revenue growth, which will be measured annually for one - fourth of the grants after each fiscal year-end through the end of fiscal 2024.

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Vesting of each tranche of these awards occurs 13 months afte r the performance conditions is met, a nd the entire award cannot be fully earned until five years from grant.

For the first and second tranches of these awards, the Company had met the year-over-year revenue growth performance criteria at the 200 % level of achievement as of January 1, 2022 and December 31, 2022, respectively.

Market-Based and Performance-Based Awards —

For the second and third tranches of these awards, the Company had met the year-over-year revenue growth performance criteria at the 200 % and 116.3 % level of achievement, respectively, as of December 31, 2022 and December 30, 2023.

Market-Based and Performance-Based Awards — Vesting

During fiscal

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200 % for the respective executives.

first tranche of awards granted in fiscal

2021 with a year-over-year revenue growth performance condition vested at the

200 % level of achievement, as the Company met the maximum year-over-year revenue growth performance criteria as of

January 1, 2022, and the

13 -month vesting period had been met.

During fiscal

2022, the market condition for awards granted to certain executives in previous years exceeded the

75th percentile of their TSR condition, and applicable tranches of these awards vested at

200 % for the respective executives.

Also during fiscal

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40% of the base number.

During fiscal

2020, the market condition for awards granted to certain executives in previous years exceeded the

75th percentile of their TSR condition, and annual tranches of these awards vested at

200 %, and applicable tranches of these awards vested at

200 % for the respective executives.

Also during fiscal

first tranche of

33.3 % of the base number of the awards with an EBITDA performance condition vested, as the Company had met the adjusted EBITDA performance criteria on a trailing

four -quarter basis for

two consecutive trailing

four -quarter periods as of the end of the measurement period.

Market-Based and Performance-Based Awards —

Compensation Expense

During the first quarter of fiscal 2020, the Board of Directors approved a modification to the market condition measurement periods associated with the unvested portions of certain of the Company’s awards with a market condition that were granted prior to fiscal 2020.

The modification extended the duration of the measurement period by adjusting the beginning date of each measurement period to the original grant date, resulting in approximately $ 1.8 million additional stock compensation expense during the first quarter of fiscal 2020.

For our awards with a market condition or a performance condition, we incurred stock compensation expense, including the effect of the modification in the first quarter of fiscal 2020, of approximately $ 24.0 million, $ 22.1 million, and $ 20.8 million in fiscal years 2022 , 2021 , and 2020 , respectively, which is recorded as a component of total stock-based compensation.

Market-Based and Performance-Based Awards — Compensation Expense

For our awards with a market condition or a performance condition, we incurred stock-based compensation expense of approximately $ 26.4 million, $ 24.0 million, and $ 22.1 million in fiscal years 2023 , 2022 , and 2021 , respectively, which is recorded as a component of total stock-based compensation.

At December 30, 2023, there was $ 27.3 million of unrecognized compensation expense related to unvested RSUs with a market condition or a performance condition.

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50.97 % to 54.31 %

50.37 % to 52.11 %

Weighted average risk-free interest rate

4.28 % to 4.59 %

0.22 % to 0.77 %

Expected term (years)

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Weighted average grant date fair value

Balance, January 1, 2022

Balance, December 31, 2022

Effect of vesting multiplier

( 639 ) 40.22

Balance, December 30, 2023

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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.

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 .

The duration of the 2023 Repurchase Program was through December 30, 2023.

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.

As of December 31, 2022, the remaining portion of the amount authorized for the 2023 Repurchase Program is approximately $ 129.7 million.

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.

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.

No shares were repurchased under the 2024 Repurchase Program during the fourth quarter of fiscal 2023.

Note 12 - Income Taxes

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(In thousands)

$ 55,069 $ 30,362 $ 24,003

159,787 151,750 73,623

Income before taxes

The components of Income tax expense are as follows:

$ 214,856 $ 182,112 $ 97,626

The components of Income tax (benefit) expense are as follows:

(In thousands)

Income tax expense

Income tax expense differs from the amount of income tax determined by applying the applicable U.S.

$ 10,331 $ 748 $ 445

3,019 3,637 1,538

14,409 4,650 2,028

( 56,323 ) — —

( 2,291 ) ( 1,420 ) ( 324 )

( 58,614 ) ( 1,420 ) ( 324 )

Income tax (benefit) expense

$ ( 44,205 ) $ 3,230 $ 1,704

Income tax (benefit) expense differs from the amount of income tax determined by applying the applicable U.S.

statutory federal income tax rate to pretax income as a result of the following differences:

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Federal tax credits

Excess tax benefit from stock compensation

Excess tax benefit from stock-based compensation

Foreign rate differential

tax on foreign operations

Foreign withholding taxes

Capital loss expiration

Other deferred tax asset adjustment

Valuation allowance

1 unchanged sentence

Effective income tax rate

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.

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 will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the net deferred tax assets.

We don't have a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods .

We updated our evaluation of the valuation allowance position in the United States through December 30, 2023.

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.

Federal deferred tax assets are more likely than not to be realized.

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.

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 the deferred tax assets.

We do not maintain a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize those net deferred tax assets in future periods.

The components of our net deferred tax assets and liabilities are as follows:

(In thousands)

December 31, 2022

January 1, 2022

December 30, 2023 December 31, 2022

Deferred tax assets:

Intangible assets

$ 4,274 $ 6,264

Net operating loss carry forwards

13,829 15,362

Tax credit carry forwards

87,955 103,092

Accrued liabilities and reserves

23,249 12,932

Stock-based and deferred compensation

Total deferred tax assets

139,668 146,450

valuation allowance

( 79,100 ) ( 140,533 )

Net deferred tax assets

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Net deferred taxes

Deferred tax assets (included in Other long-term assets)

$ 51,584 $ ( 6,773 )

Deferred tax assets

$ 57,762 $ 1,022

Deferred tax liabilities (included in Other long-term liabilities)

( 6,178 ) ( 7,795 )

Net deferred taxes

$ 51,584 $ ( 6,773 )

The following table displays the activity related to changes in our valuation allowance for deferred tax assets:

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(In thousands)

of period expenses accounts period

December 30, 2023

January 1, 2022

$ 140,533 $ ( 61,433 ) $ — $ 79,100

December 31, 2022

$ 200,438 $ ( 59,905 ) $ — $ 140,533

January 1, 2022

$ 192,478 $ 7,960 $ — $ 200,438

At December 30, 2023, we had U.S.

federal net operating loss ("NOL") carryforwards (pretax) of approximately $ 16.3 million which do not expire.

federal net operating loss ("NOL") carryforwards (pretax) of approximately $ 8.0 million which will expire between 2027 and 2028.

We had state NOL carryforwards (pretax) of approximately $ 134.5 million that substantially all expire at various dates from 2024 through 2041.

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We intend to reinvest these earnings indefinitely.

At December 31, 2022 and January 1, 2022, our unrecognized tax benefits associated with uncertain tax positions were $ 58.9 million and $ 56.2 million, respectively, of which $ 56.3 million and $ 54.0 million, respectively, if recognized, would affect the effective tax rate, subject to valuation allowance.

As of December 31, 2022 and January 1, 2022, interest and penalties associated with unrecognized tax benefits were $ 10.6 million and $ 9.6 million, respectively, which are not reflected in the table below.

At December 30, 2023 and December 31, 2022, our unrecognized tax benefits associated with uncertain tax positions were $ 61.4 million and $ 58.9 million, respectively, of which $ 58.7 million and $ 56.3 million, respectively, if recognized, would affect the effective tax rate, subject to valuation allowance.

As of December 30, 2023 and December 31, 2022, interest and penalties associated with unrecognized tax benefits were $ 11.3 million and $ 10.6 million, respectively, which are not reflected in the table below.

We accrue interest and penalties related to uncertain tax positions in Income tax expense.

1 unchanged sentence

(In thousands)

Balance at December 28, 2019

Balance at January 2, 2021

Additions based on tax positions related to the current year

Additions based on tax positions of prior years

Reduction for tax positions of prior years

Additions due to acquisition

Reduction as a result of lapse of applicable statute of limitations

2 unchanged sentences

Additions based on tax positions of prior years

Additions due to acquisition

Reduction as a result of lapse of applicable statute of limitations

Balance at January 1, 2022

Balance at December 31, 2022

Additions based on tax positions related to the current year

Additions based on tax positions of prior years

Reductions for tax positions of prior years

Reduction as a result of lapse of applicable statute of limitations

Balance at December 30, 2023

Our liability for uncertain tax positions (including penalties and interest) was $ 21.6 million at both December 31, 20 22 and January 1, 2022 and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets.

The remainder of our uncertain tax position exposure of $ 47.9 million and $ 44.2 million at December 31, 2022 and January 1, 2022, respectively, is netted against deferred tax assets.

Our liability for uncertain tax positions (including penalties and interest) was $ 21.9 million and $ 21.6 million at December 30, 20 23 and December 31, 2022 , respectively, and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets.

At December 30, 2023, it is reasonably possible that $ 0.3 million of unrecognized tax benefits and $ 0.1 million of associated interest and penalties could be recognized during the next twelve months.

The years that remain subject to examination ar e 2017 for federal and state income taxes, and 2016 for foreign income taxes, including years ending thereafter.

The years that remain subject to examination ar e 2017 for federal income taxes, 2019 for state income taxes, and 2017 for foreign income taxes, including years ending thereafter.

However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward amount.

Our Singapore 2020 income tax return is currently under examination.

Note 13 - Employee Benefit Plans

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Cash Incentive Plans

For 2022 , 2021 , and 2020 , the Board of Directors of the Company, upon the recommendation of the Compensation Committee, approved the Cash Incentive Plan (the “Cash Plans”) for the respective fiscal year.

For 2023 , 2022 , and 2021 , the Board of Directors of the Company, upon the recommendation of the Compensation Committee, approved the Cash Incentive Plan (the “Cash Plans”) for the respective fiscal year.

The chief executive officer, other executive officers, and other members of senior management, including vice presidents and director-level employees, together with all other employees of the Company not on the Company's sales incentive plan are eligible to participate in the Cash Plans.

3 unchanged sentences

Note 14 - Contingencies

Legal Matters

Legal Proceedings

On or about December 19, 2018, Steven A.W.

De Jaray, Perienne De Jaray and Darrell R.

Oswald (collectively, the “Plaintiffs”) commenced an action against the Company and several unnamed defendants in the Multnomah County Circuit Court of the State of Oregon, in connection with the sale of certain products by the Company to the Plaintiffs in or around 2008.

The Plaintiffs allege that we violated The Lanham Act, engaged in negligence and fraud by failing to disclose to the Plaintiffs the export-controlled status of the subject parts.

The Plaintiffs seek damages of $ 155 million to $ 268 million, treble damages, and other remedies.

In January 2019, we removed the action to the United States District Court for the District of Oregon.

At this stage of the proceedings, we do not have an estimate of the likelihood or the amount of any potential exposure to the Company;

however, we believe that these claims are without merit and intend to vigorously defend the action.

The Plaintiffs alleged that we violated the Lanham Act, engaged in negligence, fraud, and breach of contract by failing to disclose to the Plaintiffs the export-controlled status of the subject parts.

In January 2019, we removed the action to the United States District Court for the District of Oregon (the “Court”).

On May 24, 2023, the Plaintiffs filed a second amended complaint, which added Apex-Micro Manufacturing Corporation as a plaintiff and removed the violation of the Lanham Act claim.

The Plaintiffs sought damages of $ 180 million, punitive damages, and other remedies.

On January 18, 2024, the court dismissed the claims against the Company by Perienne De Jaray and Darrell R.

The trial for the remainder of the claims was held from January 30, 2024 to February 15, 2024.

On February 13, 2024, after both parties rested their cases and prior to the submission of the case to the jury, the Company filed a Rule 50 motion for judgment as a matter of law as to all remaining claims due to insufficient evidence to support the claims.

The Court granted the Company’s Rule 50 motion in part and entered judgment in the Company’s favor as to all of Steven De Jaray’s claims and Apex-Micro Manufacturing Corporation’s negligence claims.

On February 15, 2023, the jury found that the Company was not liable for all outstanding claims and the presiding judge stated he would enter the judgment in favor of the Company.

From time to time, we are exposed to certain additional asserted and unasserted potential claims.

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To the Stockholders and the Board of Directors of Lattice Semiconductor Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Lattice Semiconductor Corporation (the Company) as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the three years in the periods ended December 31, 2022, in conformity with U.S.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lattice Semiconductor Corporation (the Company) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with U.S.

generally accepted accounting principles.

1 unchanged sentence

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Critical Audit Matter

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Valuation

1 unchanged sentence

The Company's net inventory totaled $98.8 million as of December 30, 2023.

As explained in “Note 1 - Basis of Presentation and Significant Accounting Policies”

within the consolidated financial statements, the Company records inventory at the lower of cost or net realizable value, and writes down inventories to net realizable value if it is obsolete or if quantities are in excess of projected customer demand.

Auditing management’s estimates of excess and obsolete inventory was challenging because the estimate is judgmental and considers a number of factors that are affected by market and economic conditions that are outside of the Company’s control.

In particular, excess and obsolete inventory calculations are sensitive to significant assumptions that relate to projected customer demand for the Company’s products.

As explained in “Note 1 - Basis of Presentation and Significant Accounting Policies” within the consolidated financial statements, the Company records inventory at the lower of cost or net realizable value, and writes down inventories to net realizable value if it is obsolete or if quantities are in excess of projected customer demand.

In particular, excess and obsolete inventory calculations are sensitive to significant assumptions that relate to projected customer demand for the Company’s products.

How We Addressed the Matter in Our Audit

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Opinion on Internal Control Over Financial Reporting

We have audited Lattice Semiconductor Corporation’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Lattice Semiconductor Corporation’s internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Lattice Semiconductor Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on the COSO criteria.

equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 17, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, and the related notes and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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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-K

Item 8. Financial Statements and Supplementary Data