LATTICE SEMICONDUCTOR CORP 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements: Page Consolidated Statements of Operations 38 Consolidated Statements of Comprehensive Income 39 Consolidated Balance Sheets 40 Consolidated Statements of Cash Flows 41 Consolidated Statements of Stockholders' Equity 42 Notes to Consolidated Financial Statements 43 Reports of Independent Registered Public Accounting Firm ( Ernst & Young LLP ) (PCAOB ID: 42 ) 62 37 Table of Contents LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 28, December 30, December 31, (In thousands, except per share data) 2024 2023 2022 Revenue $ 509,401 $ 737,154 $ 660,356 Cost of revenue 169,001 222,484 208,306 Gross margin 340,400 514,670 452,050 Operating expenses: Research and development 159,302 159,770 135,767 Selling, general, and administrative 116,942 137,244 122,076 Amortization of acquired intangible assets 3,479 3,478 3,778 Restructuring 12,291 1,908 2,551 Impairment of acquired intangible assets 13,929 — — Acquisition related — — 511 Total operating expenses 305,943 302,400 264,683 Income from operations 34,457 212,270 187,367 Interest income (expense), net 3,948 2,041 ( 4,146 ) Other income (expense), net ( 2,176 ) 545 ( 1,109 ) Income before income taxes 36,229 214,856 182,112 Income tax (benefit) expense ( 24,902 ) ( 44,205 ) 3,230 Net income $ 61,131 $ 259,061 $ 178,882 Net income per share: Basic $ 0.44 $ 1.88 $ 1.30 Diluted $ 0.44 $ 1.85 $ 1.27 Shares used in per share calculations: Basic 137,623 137,694 137,321 Diluted 138,322 139,790 140,667 The accompanying notes are an integral part of these Consolidated Financial Statements. 38 Table of Contents LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Net income $ 61,131 $ 259,061 $ 178,882 Other comprehensive income (loss): Translation adjustment ( 694 ) ( 16 ) ( 1,554 ) Change in actuarial valuation of defined benefit pension, net of tax ( 242 ) ( 476 ) 591 Comprehensive income $ 60,195 $ 258,569 $ 177,919 The accompanying notes are an integral part of these Consolidated Financial Statements. 39 Table of Contents LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED BALANCE SHEETS December 28, December 30, (In thousands, except share and par value data) 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 136,291 $ 128,317 Accounts receivable, net of allowance for credit losses 81,060 104,373 Inventories, net 103,410 98,826 Prepaid expenses and other current assets 44,073 36,430 Total current assets 364,834 367,946 Property and equipment, less accumulated depreciation of $ 125,901 at December 28, 2024 and $ 125,856 at December 30, 2023 52,988 49,546 Operating lease right-of-use assets 13,870 14,487 Intangible assets, net 4,587 20,974 Goodwill 315,358 315,358 Deferred income taxes 66,980 57,762 Other long-term assets 25,286 14,821 Total assets $ 843,903 $ 840,894 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,828 $ 34,487 Accrued liabilities 45,638 36,048 Accrued payroll obligations 17,156 26,865 Total current liabilities 99,622 97,400 Long-term operating lease liabilities, net of current portion 9,433 10,739 Other long-term liabilities 23,916 40,735 Total liabilities 132,971 148,874 Contingencies (Note 14) Stockholders' equity: Preferred stock, $ .01 par value, 10,000,000 shares authorized, none issued and outstanding — — Common stock, $ .01 par value, 300,000,000 shares authorized; 137,704,000 shares issued and outstanding as of December 28, 2024 and 137,340,000 shares issued and outstanding as of December 30, 2023 1,377 1,373 Additional paid-in capital 504,299 545,586 Retained earnings 209,098 147,967 Accumulated other comprehensive loss ( 3,842 ) ( 2,906 ) Total stockholders' equity 710,932 692,020 Total liabilities and stockholders' equity $ 843,903 $ 840,894 The accompanying notes are an integral part of these Consolidated Financial Statements. 40 Table of Contents LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Cash flows from operating activities: Net income $ 61,131 $ 259,061 $ 178,882 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 38,737 34,432 29,323 Stock-based compensation expense 52,985 70,197 55,530 Change in deferred income tax provision ( 12,069 ) ( 58,614 ) ( 1,420 ) Change in noncurrent taxes payable ( 19,370 ) 299 ( 3 ) Amortization of right-of-use assets 7,530 6,764 6,512 Impairment of acquired intangible assets 13,929 — — Charge for expiring production materials 7,019 — 6,002 Write-off of non-recoverable cost-method investment 2,023 — — Impairment of operating lease right-of-use asset 384 — 1,149 Other non-cash adjustments 283 253 754 Changes in assets and liabilities: Accounts receivable, net 23,313 ( 10,355 ) ( 14,159 ) Inventories, net ( 4,584 ) 11,549 ( 42,781 ) Prepaid expenses and other assets ( 11,065 ) ( 6,001 ) ( 6,276 ) Accounts payable 2,341 ( 7,549 ) 7,439 Accrued liabilities ( 3,515 ) ( 12,963 ) 15,410 Accrued payroll obligations ( 9,709 ) ( 10,005 ) 8,903 Operating lease liabilities, current and long-term portions ( 8,487 ) ( 7,480 ) ( 6,459 ) Net cash provided by (used in) operating activities 140,876 269,588 238,806 Cash flows from investing activities: Capital expenditures ( 20,985 ) ( 20,098 ) ( 23,338 ) Cash paid for software and intellectual property licenses ( 16,708 ) ( 13,152 ) ( 11,594 ) Net cash provided by (used in) investing activities ( 37,693 ) ( 33,250 ) ( 34,932 ) Cash flows from financing activities: Restricted stock unit tax withholdings ( 33,646 ) ( 52,078 ) ( 54,946 ) Proceeds from issuance of common stock 6,184 8,365 7,159 Repurchase of common stock ( 66,998 ) ( 80,004 ) ( 110,132 ) Proceeds from long-term debt, net of issuance costs — — 148,597 Repayment of long-term debt — ( 130,000 ) ( 178,750 ) Net cash provided by (used in) financing activities ( 94,460 ) ( 253,717 ) ( 188,072 ) Effect of exchange rate change on cash ( 749 ) ( 26 ) ( 1,650 ) Net increase (decrease) in cash and cash equivalents 7,974 ( 17,405 ) 14,152 Beginning cash and cash equivalents 128,317 145,722 131,570 Ending cash and cash equivalents $ 136,291 $ 128,317 $ 145,722 Supplemental disclosure of cash flow information and non-cash investing and financing activities: Interest paid $ — $ 3,240 $ 3,973 Income taxes paid, net of refunds $ 8,587 $ 15,754 $ 4,621 Operating lease payments $ 9,567 $ 8,344 $ 7,419 Accrued purchases of plant and equipment $ 2,132 $ 392 $ 1,357 Operating lease right-of-use assets obtained in exchange for lease obligations $ 7,428 $ 3,718 $ 2,134 The accompanying notes are an integral part of these Consolidated Financial Statements. 41 Table of Contents LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Retained Accumulated Common Stock Additional Earnings Other ($.01 par value) Paid-in (Accumulated Comprehensive (In thousands, except par value data) Shares Amount Capital Deficit) Income (Loss) Total Balances, January 1, 2022 137,239 $ 1,372 $ 701,688 $ ( 289,976 ) $ ( 1,451 ) $ 411,633 Components of comprehensive income, net of tax: Net income — — — 178,882 — 178,882 Other comprehensive income (loss) — — — — ( 963 ) ( 963 ) Total comprehensive income 177,919 Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes 1,812 18 ( 47,806 ) — — ( 47,788 ) Stock-based compensation expense — — 55,530 — — 55,530 Repurchase of common stock ( 1,952 ) ( 19 ) ( 110,112 ) — — ( 110,131 ) Balances, December 31, 2022 137,099 $ 1,371 $ 599,300 $ ( 111,094 ) $ ( 2,414 ) $ 487,163 Components of comprehensive income, net of tax: Net income — — — 259,061 — 259,061 Other comprehensive income (loss) — — — — ( 492 ) ( 492 ) Total comprehensive income 258,569 Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes 1,465 14 ( 43,727 ) — — ( 43,713 ) Stock-based compensation expense — — 70,197 — — 70,197 Repurchase of common stock ( 1,224 ) ( 12 ) ( 80,184 ) — — ( 80,196 ) Balances, December 30, 2023 137,340 $ 1,373 $ 545,586 $ 147,967 $ ( 2,906 ) $ 692,020 Components of comprehensive income, net of tax: Net income — — — 61,131 — 61,131 Other comprehensive income (loss) — — — — ( 936 ) ( 936 ) Total comprehensive income 60,195 Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes 1,509 15 ( 27,477 ) — — ( 27,462 ) Stock-based compensation expense — — 52,985 — — 52,985 Repurchase of common stock ( 1,145 ) ( 11 ) ( 66,795 ) — — ( 66,806 ) Balances, December 28, 2024 137,704 $ 1,377 $ 504,299 $ 209,098 $ ( 3,842 ) $ 710,932 The accompanying notes are an integral part of these Consolidated Financial Statements. 42 Table of Contents LATTICE SEMICONDUCTOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation and Significant Accounting Policies Basis of Presentation and Use of Estimates The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. 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. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, the actual results that we experience may differ materially from these estimates under different assumptions or conditions. 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 2024, 2023, and 2022 were all 52 -week years that ended on December 28, 2024, December 30, 2023, and December 31, 2022, respectively. Our fiscal 2025 will be a 53 -week year and will end on January 3, 2026. All references to quarterly or annual financial results are references to the results for the relevant fiscal period. Concentrations of Risk Potential exposure to concentrations of risk may impact revenue, trade accounts receivable, a nd supply of wafers for our new products . Sales to distributors have historically accounted for a significant portion of our total revenue. 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: Year Ended December 28, December 30, December 31, 2024 2023 2022 Arrow 33 % 32 % 28 % Weikeng 31 21 30 Macnica 11 11 10 Future 4 13 8 Other distributors 10 10 13 Revenue attributable to distributors 89 % 87 % 89 % Certain of our distributors accounted for more than 10% of net accounts receivable at the dates presented. At December 28, 2024 and December 30, 2023 , Arrow accounted for approximately 36 % and 29 %, respectively, and Weikeng accounted for approximately 45 % and 36 %, respectively. Future accounted for approximately 18 % of net accounts receivable at December 30, 2023. Concentration of credit risk with respect to trade 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. We regularly review our allowance for doubtful accounts and the aging of our accounts receivable. We rely on a limited number of foundries for our wafer purchases. We seek to mitigate the concentration of supply risk by establishing, maintaining, and managing multiple foundry relationships; however, certain of our products are sourced from a single foundry and changing from one foundry to another can have a significant cost, or create delays in production or shipments, among other factors. 43 Table of Contents Cash and Cash Equivalents We consider all investments that are readily convertible into cash and that have original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of highly liquid investments in time deposits or money market accounts and are carried at cost, which approximates fair value. Deposits with financial institutions at times exceed Federal Deposit Insurance Corporation insurance limits. Foreign Exchange and Translation of Foreign Currencies While our revenues and the majority of our expenses are denominated in U.S. 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 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). Revenue Recognition 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. We consider customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, we consider our promise to transfer each distinct product to be the identified performance obligations. Revenue for product sales is recognized at the time of product shipment, as determined by the agreed upon contract shipping terms. Our Licensing and services revenue is comprised of revenue from our IP core licensing activity, patent monetization activities, design services, and royalty and adopter fee revenue from our standards activities. These activities are complementary to our product sales and help us to monetize our IP associated with our technology and standards. We consider licensing arrangements with our customers and agreements with the standards consortia of which we are a member to be the contract. For each contract, we consider the promise to deliver a license that grants the customer the right to use the IP, as well as any professional services provided under the contract, as distinct performance obligations. We recognize license revenue at the point in time that control of the license transfers to the customer, which is generally upon delivery, or as usage occurs. We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Variable consideration is estimated and reflected as an adjustment to the transaction price. We determine variable consideration, which consists primarily of various sales price concessions, by estimating the most likely amount of consideration we expect to receive from the customer based on an analysis of historical rebate claims over a period of time considered adequate to account for current pricing and business trends. Sales rebates earned by customers are offset against their receivable balances. Rebates earned by customers when they do not have outstanding receivable balances are recorded within Accrued liabilities. 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. In some cases, the warranty period may be longer than twelve months. We do not separately price or sell the assurance warranty. Our liability is limited to either a credit equal to the purchase price or replacement of the defective part. Under the practical expedient provided by ASC 340, we generally expense sales commissions when incurred because the amortization period would be less than one year. We record these costs within Selling, general, and administrative expenses. Substantially all of our performance obligations are satisfied within twelve months. 44 Table of Contents Inventories and Cost of Revenue Inventories are stated at the lower of actual cost (determined using the first -in, first -out method) or net realizable value. We review and set standard costs quarterly to approximate current actual manufacturing costs. Our manufacturing overhead standards for product costs are calculated assuming full absorption of actual spending over actual costs. The valuation of inventory requires us to estimate excess or obsolete inventory. Material assumptions we use to estimate necessary inventory carrying value adjustments can be unique to each product and are based on specific facts and circumstances. In determining provisions for excess or obsolete products, we consider assumptions such as changes in business and economic conditions, projected customer demand for our products, and changes in technology or customer requirements. The creation of such provisions results in a write-down of inventory to net realizable value and a charge to Cost of revenue. Lower of cost or net realizable value is based on assumptions such as recent historical sales activity and selling prices, as well as estimates of future sales activity and selling prices. Shipping and handling costs are included in Cost of revenue in our Consolidated Statements of Operations. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, generally three to seven years for equipment and software, and one to five years for tooling. Leasehold improvements are amortized over the shorter of the non-cancelable lease term or the estimated useful life of the assets. We capitalize costs for the fabrication of masks used by our foundry partners to manufacture our products. The capitalized mask costs begin depreciating to Cost of revenue once the products go into production, and depreciation is straight-lined over a three -year period, which is the expected useful life of the mask. Upon disposal of property and equipment, the accounts are relieved of the costs and related accumulated depreciation and amortization, and resulting gains or losses are reflected in the Consolidated Statements of Operations for recognized gains and losses. Repair and maintenance costs are expensed as incurred. Business Combinations Business combinations are accounted for using the acquisition method of accounting, under which we allocate the purchase price paid for a company to identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Goodwill is measured as the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed. Determining the fair value of identifiable tangible and intangible assets acquired and liabilities assumed requires management to make assumptions, estimates, and judgments that are based on all available information, including comparable market data and information obtained from our management and the management of the acquired companies. The estimation of the fair values of the intangible assets requires significant judgment and the use of valuation techniques including primarily the income approach. Consideration is given to all relevant factors that might affect the fair value such as estimates of future revenues and costs, present value factors, and the estimated useful lives of intangible assets. We expense acquisition-related costs in the period incurred. Impairment of Long-Lived Assets Long-lived assets, which consist primarily of property and equipment, amortizable intangible assets, and right-of-use assets, are carried on our financial statements based on their cost less accumulated depreciation or amortization. We monitor the carrying value of our long-lived assets for potential impairment and test the recoverability of such assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. These events or changes in circumstances, including management decisions pertaining to such assets, are referred to as impairment indicators. If an impairment indicator occurs, we perform a test of recoverability by comparing the carrying value of the asset group to its undiscounted expected future cash flows. If the carrying values are in excess of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted projected cash flow analysis of the asset group; (ii) actual third -party valuations; and/or (iii) information available regarding the current market for similar asset groups. If the fair value of the asset group is determined to be less than the carrying amount of the asset group, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs and is included in our Consolidated Statements of Operations. Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually realized, which could impact our ability to accurately assess whether an asset has been impaired. Valuation of Goodwill Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is not amortized, but is instead tested for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. When evaluating whether goodwill is impaired, we make a qualitative assessment to determine if it is more likely than not that the reporting unit's fair value is less than the carrying amount. If the qualitative assessment determines that it is more likely than not that the fair value is less than the carrying amount, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, then goodwill impairment exists for the reporting unit. The impairment loss, if any, is recognized for the amount by which the carrying value exceeds the fair value. If the fair value of the reporting unit exceeds its carrying value, no further impairment analysis is needed. For purposes of testing goodwill for impairment, we currently operate as a single reporting unit. 45 Table of Contents Leases 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. 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. Operating lease ROU assets and liabilities are recognized on the commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we determine the present value of lease payments using an incremental borrowing rate based on information from our commercial bank for an equivalent borrowing and term in the respective region as of the lease commencement date. At inception, we determine if an arrangement is a lease, if it includes options to extend or terminate the lease, and if it is reasonably certain that we will exercise the options. Lease cost, representing lease payments over the term of the lease and any capitalizable direct costs less any incentives received, is recognized on a straight-line basis over the lease term as lease expense. We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center. The exercise of lease renewal options is at our sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and lease payment obligation, respectively. For our leases that contain variable lease payments, residual value guarantees, or restrictive covenants, we have concluded that these inputs are not significant to the determination of the ROU asset and lease liability. Research and Development 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 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. 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 We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of the applicable year. 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. In assessing the ability to realize deferred tax assets, we evaluate both positive and negative evidence that may exist and consider whether it is more-likely-than- not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Any adjustment to the net deferred tax asset valuation allowance is recorded in the Consolidated Statements of Operations for the period that the adjustment is determined to be required. 46 Table of Contents Our income tax calculations are based on application of the respective U.S. federal, state or foreign tax law . Our tax filings, however, are subject to audit by the relevant tax authorities. Accordingly, we recognize tax liabilities based upon our estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than- not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. To the extent the final tax liabilities are different than the amounts originally accrued, the increases or decreases as well as any interest or penalties are recorded as income tax expense or benefit in the Consolidated Statements of Operations. We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. Stock-Based Compensation We estimate the fair value of share-based awards consistent with the provisions of ASC 718, “ Compensation - Stock Compensation .” We value restricted stock units ("RSUs") restricted stock awards ("RSAs") 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 10 - Stock-Based Compensation Plans. Our current practice is to issue new shares to satisfy option exercises. For RSUs, we issue new shares when awards vest and withhold a portion of these shares on behalf of employees to satisfy the minimum statutory tax withholding requirements. New Accounting Pronouncements In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 820 ), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify the circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments require retrospective application to all periods presented. The amendments are effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We have adopted ASU 2023 - 07 with the addition of Note 15 - Segment Reporting , and it did not have a material impact on our consolidated financial statements. In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ) Improvements to Income Tax Disclosures , which require greater disaggregation of income tax disclosures. ASU 2023 - 09 aims to improve an entity’s income tax disclosures around its effective rate reconciliation, income taxes paid by jurisdiction, disaggregation of income before income taxes and income tax expense. This ASU should be applied on a prospective basis, but retrospective application is permitted. The guidance in this update is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the future effect of the adoption of this ASU will have on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses . This new guidance requires public entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of income statement. The ASU may be applied prospectively or retrospectively and is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of adoption of this new guidance on our consolidated financial statements disclosures. Note 2 - Net Income Per Share We compute basic earnings per share based on the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period, if applicable. Potentially dilutive shares of common stock from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs and RSAs, and the assumed issuance of common stock under the stock purchase plan. Our calculation of potentially dilutive shares includes the number of shares from our equity awards with market conditions or performance conditions that would be issuable under the terms of such awards at the end of the reporting period. For equity awards with a market condition, the number of shares included in the diluted share count as of the end of each period presented is determined by measuring the achievement of the market condition as of the end of the respective reporting periods. For equity awards with a performance condition, the number of shares that qualified for vesting as of the end of each period presented are included in the diluted share count when the condition for their issuance was satisfied by the end of the respective reporting periods. See " Note 10 - Stock-Based Compensation Plans " for further discussion of our equity awards with market or performance conditions. 47 Table of Contents A summary of basic and diluted Net income per share is presented in the following table: Year Ended December 28, December 30, December 31, (In thousands, except per share data) 2024 2023 2022 Net income $ 61,131 $ 259,061 $ 178,882 Shares used in basic Net income per share 137,623 137,694 137,321 Dilutive effect of employee equity incentive plans 699 2,096 3,346 Shares used in diluted Net income per share 138,322 139,790 140,667 Basic Net income per share $ 0.44 $ 1.88 $ 1.30 Diluted Net income per share $ 0.44 $ 1.85 $ 1.27 The computation of diluted Net income per share excludes the effects of employee equity incentive plans that are antidilutive, aggregating to approximately 1.0 million, 0.4 million, and 0.5 million, respectively, in fiscal 2024 , 2023, and 2022. Note 3 - Revenue from Contracts with Customers Disaggregation of Revenue The following tables provide information about revenue from contracts with customers disaggregated by channel and by geographical market, based on ship-to location of the customer: Year Ended Revenue by Channel December 28, December 30, December 31, (In thousands) 2024 2023 2022 Distributors $ 455,160 89 % $ 644,181 87 % $ 591,229 89 % Direct 54,241 11 % 92,973 13 % 69,127 11 % Total revenue $ 509,401 100 % $ 737,154 100 % $ 660,356 100 % Revenue by Geographical Market (In thousands) China $ 206,380 40 % $ 239,192 32 % 296,917 45 % Japan 81,043 16 % 110,403 15 % 90,902 14 % Other Asia 45,324 9 % 94,170 13 % 77,085 12 % Asia 332,747 65 % 443,765 60 % 464,904 71 % Americas 101,217 20 % 145,839 20 % 100,260 15 % Europe 75,437 15 % 147,550 20 % 95,192 14 % Total revenue $ 509,401 100 % $ 737,154 100 % $ 660,356 100 % 48 Table of Contents Contract Balances 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. The following table summarizes activity during the periods presented: (In thousands) Contract assets as of December 31, 2022 $ 7,347 Revenues recorded during the period 12,941 Transferred to Accounts receivable or collected ( 9,094 ) Contract assets as of December 30, 2023 $ 11,194 Revenues recorded during the period 14,408 Transferred to Accounts receivable or collected ( 7,724 ) Contract assets as of December 28, 2024 $ 17,878 Contract liabilities are included in Accrued liabilities on our Consolidated Balance Sheets. The following table summarizes activity during the periods presented: (In thousands) Contract liabilities as of December 31, 2022 $ 17,666 Less: Product shipments from prepaid customer deposit ( 12,946 ) Accruals for estimated future stock rotation and scrap returns 9,867 Less: Release of accruals for recognized stock rotation and scrap returns ( 9,283 ) Contract liabilities as of December 30, 2023 $ 5,304 Unperformed performance obligations 6,945 Accruals for estimated future stock rotation and scrap returns 13,051 Less: Release of accruals for recognized stock rotation and scrap returns ( 14,118 ) Contract liabilities as of December 28, 2024 $ 11,182 Note 4 - Balance Sheet Components Accounts Receivable Accounts receivable do not bear interest and are shown net of an allowance for expected lifetime credit losses, which reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine this allowance through an assessment of known troubled accounts, analysis of our accounts receivable aging, historical experience, expectations for future economic conditions, management judgment, and other available evidence. December 28, December 30, (In thousands) 2024 2023 Accounts receivable $ 81,060 $ 104,373 Less: Allowance for credit losses — — Accounts receivable, net of allowance for credit losses $ 81,060 $ 104,373 We had no material bad debt expense in fiscal 2024, 2023, or 2022. Inventories December 28, December 30, (In thousands) 2024 2023 Work in progress $ 82,273 $ 65,396 Finished goods 21,137 33,430 Total inventories, net $ 103,410 $ 98,826 49 Table of Contents Accrued Liabilities Included in Accrued liabilities in the Consolidated Balance Sheets are the following balances: December 28, December 30, (In thousands) 2024 2023 Current portion of liability for non-cancelable contracts $ 13,534 $ 11,418 Contract liabilities 11,182 5,304 Liability for expiring production materials 7,019 2,172 Current portion of operating lease liabilities 5,818 5,571 Foreign, VAT, and other taxes payable 3,375 6,758 Other accrued liabilities 4,710 4,825 Total accrued liabilities $ 45,638 $ 36,048 Other Long-Term Liabilities Included in Other long-term liabilities in the Consolidated Balance Sheets are the following balances: December 28, December 30, (In thousands) 2024 2023 Long-term portion of liability for non-cancelable contracts $ 16,022 $ 7,668 Long-term portion of uncertain tax positions 2,518 21,888 Other long-term liabilities 5,376 11,179 Total other long-term liabilities $ 23,916 $ 40,735 Note 5 - Property and Equipment December 28, December 30, (In thousands) 2024 2023 Production equipment and software $ 161,525 $ 159,950 Leasehold improvements 15,387 13,519 Office furniture and equipment 1,977 1,933 178,889 175,402 Accumulated depreciation and amortization ( 125,901 ) ( 125,856 ) Total property and equipment, net $ 52,988 $ 49,546 For fiscal years 2024 , 2023 , and 2022 depreciation and amortization expense for property and equipment was $ 19.3 million, $ 17.3 million, and $ 13.8 million, respectively. Property and Equipment – Geographic Information Our Property and equipment, net by country at the end of each period was as follows: December 28, December 30, (In thousands) 2024 2023 United States $ 26,578 $ 29,467 Taiwan 11,234 10,222 Philippines 6,086 4,602 China 2,504 2,778 Other 6,586 2,477 Total foreign property and equipment, net 26,410 20,079 Total property and equipment, net $ 52,988 $ 49,546 50 Table of Contents Note 6 - Intangible Assets and Goodwill In connection with our previous acquisitions , we have recorded identifiable intangible assets related to existing technology, customer relationships, and trade name / trademarks, based on guidance for determining fair value under the provisions of ASC 820, " Fair Value Measurements ." We amortize 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. These licenses are being amortized to Research and development expense over their estimated useful lives. Our review of our strategic long-range plan completed at the end of fiscal 2024 concluded that the originally acquired Mirametrix intangible assets had limited future revenue potential due to a decline in customer demand, which we determined was an indicator of impairment. Our assessment of the fair value of these intangible assets concluded that they had been fully impaired as of December 28, 2024, and we recorded an impairment charge of $ 13.9 million for fiscal 2024 in the Consolidated Statements of Operations. No impairment charges relating to acquired intangible assets were recorded for fiscal 2023 or 2022. The following tables summarize the details of our Intangible assets, net as of December 28, 2024 and December 30, 2023 : December 28, 2024 (In thousands) Weighted Average Amortization Period (in years) Gross Impairment Accumulated Amortization Intangible assets, net Existing technology — $ 124,487 $ ( 7,473 ) $ ( 117,014 ) $ — Customer relationships — 32,734 ( 5,425 ) ( 27,309 ) — Trade name / trademarks — 1,500 ( 1,031 ) ( 469 ) — Licensed technology 5.4 9,366 — ( 4,779 ) 4,587 Total identified intangible assets $ 168,087 $ ( 13,929 ) $ ( 149,571 ) $ 4,587 December 30, 2023 (In thousands) Weighted Average Amortization Period (in years) Gross Impairment Accumulated Amortization Intangible assets, net Existing technology 5.1 $ 124,487 $ — $ ( 115,085 ) $ 9,402 Customer relationships 6.1 32,734 — ( 25,909 ) 6,825 Trade name / trademarks 10.0 1,500 — ( 319 ) 1,181 Licensed technology 6.2 7,127 — ( 3,561 ) 3,566 Total identified intangible assets $ 165,848 $ — $ ( 144,874 ) $ 20,974 We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Research and development $ 1,218 $ 1,074 $ 1,054 Amortization of acquired intangible assets 3,479 3,478 3,778 $ 4,697 $ 4,552 $ 4,832 The annual expected amortization expense related to intangible assets is as follows: Fiscal year (In thousands) 2025 $ 1,653 2026 1,641 2027 1,230 2028 63 Total $ 4,587 51 Table of Contents Goodwill 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 28, 2024 is comprised of approximately $ 315.4 million from prior acquisitions. No impairment charges relating to goodwill were recorded for fiscal 2024 , 2023, or 2022. 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. We intend to use the revolving loan facility for working capital and general corporate purposes. At our option, the revolving loans accrue interest at a per annum rate based on ranges determined by our consolidated total leverage ratio of either (i) the base rate (as defined in the 2022 Credit Agreement) plus a margin ranging from 0.25 % to 1.00 %, or (ii) the adjusted Term Secured Overnight Financing Rate ("SOFR") for interest periods of 1, 3 or 6 months plus a margin ranging from 1.25 % to 2.00 %. Interest is due and payable in arrears quarterly for loans bearing interest at the base rate and at the end of an interest period (or at each three -month interval in the case of loans with interest periods greater than three months) in the case of loans bearing interest at the adjusted Term SOFR. In addition, we pay a quarterly commitment fee of 0.20 % on the unused portion of the revolving facility. The revolving loans under the 2022 Credit Agreement may be repaid and reborrowed at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan on September 1, 2027. At December 28, 2024 and December 30, 2023, we had no borrowings outstanding under the 2022 Credit Agreement, as we paid off the outstanding balance of our revolving loans during the third quarter of fiscal 2023. Interest expense related to our long-term debt is included in Interest expense on our Consolidated Statements of Operations as follows: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Contractual interest $ — $ 2,701 $ 4,500 Amortization of original issuance discount and debt costs 266 266 310 Total interest expense related to long-term debt $ 266 $ 2,967 $ 4,810 Note 8 - Restructuring In September 2024, our management commenced an internal restructuring plan ("the Q3 2024 Plan"), which includes a global workforce reduction. Under this plan, we have incurred restructuring costs of approximately $ 7.6 million through December 28, 2024. The Q3 2024 plan is expected to be largely complete in the first half of fiscal year 2025. 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 $ 5.3 million and $ 2.0 million, respectively, in fiscal 2024 and 2023. Under this plan, approximately $ 7.3 million of total costs have been incurred through December 28, 2024. All actions planned under the Q3 2023 plan have been implemented. 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. Under the Q2 2019 Sales Plan, we recorded a credit adjustment of approximately $ 0.6 million in fiscal 2024, incurred no restructuring costs in fiscal 2023, and incurred approximately $ 1.0 million of incremental restructuring costs in fiscal 2022. Under this plan, approximately $ 2.5 million of total expense has been incurred through December 28, 2024. All actions planned under the Q2 2019 Sales Plan have been implemented. Other restructuring activity in the periods presented consisted of expense adjustments on previous plans. Costs and adjustments on restructuring 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. 52 Table of Contents The following table displays the activity related to our restructuring plans: (In thousands) Severance & Related (1) Lease Termination & Fixed Assets Other (2) Total Accrued Restructuring at January 1, 2022 $ 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 Restructuring 12,896 15 ( 620 ) 12,291 Costs paid or otherwise settled ( 12,481 ) ( 1,559 ) — ( 14,040 ) Accrued Restructuring at December 28, 2024 $ 1,905 $ 2,964 $ — $ 4,869 ( 1 ) Includes employee relocation costs and outplacement costs ( 2 ) Includes termination fees on the cancellation of certain contracts Note 9 - Leases 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 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 3.0 years and the weighted-average discount rate was 6.0 % as of December 28, 2024. We recorded fixed operating lease expense of $ 8.5 million, $ 7.8 million, and $ 7.6 million, respectively, for fiscal 2024 , 2023, and 2022. The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during fiscal 2024 : Operating lease right-of-use assets (In thousands) Balance as of December 30, 2023 $ 14,487 Right-of-use assets obtained for new lease contracts during the period 7,428 Amortization of right-of-use assets during the period ( 7,530 ) Impairment of right-of use asset during the period (recorded in Restructuring charges) ( 384 ) Adjustments for present value and foreign currency effects ( 131 ) Balance as of December 28, 2024 $ 13,870 Operating lease liabilities (In thousands) Balance as of December 30, 2023 $ 16,310 Lease liabilities accrued for new lease contracts during the period 7,428 Accretion of lease liabilities 977 Operating cash used for payments on lease liabilities ( 9,567 ) Adjustments for present value and foreign currency effects 103 Balance as of December 28, 2024 15,251 Less: Current portion of operating lease liabilities (included in Accrued liabilities) ( 5,818 ) Long-term operating lease liabilities, net of current portion $ 9,433 Lease obligations for facilities restructured prior to the adoption of Topic 842 totaled approximately $ 3.0 million at December 28, 2024 and continued to be recorded in Other long-term liabilities on our Consolidated Balance Sheets. 53 Table of Contents Maturities of operating lease liabilities as of December 28, 2024 are as follows: Fiscal year (In thousands) 2025 $ 6,491 2026 4,635 2027 2,825 2028 2,224 2029 452 Total lease payments 16,627 Less: amount representing interest ( 1,376 ) Total lease liabilities $ 15,251 Note 10 - Stock-Based Compensation Plans Employee and Director Stock Options, Restricted Stock, and ESPP Plans As of December 28, 2024, 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. As of January 10, 2025, we registered the “2025 Inducement Equity Plan”, under which shares will be available for grants to new hire employees. "Incentive stock options" under Section 422 of the U.S. Internal Revenue Code, restricted stock unit ("RSU"), and restricted stock award ("RSA") grants are part of our equity compensation practices for employees who receive equity grants. Options, RSUs, and RSAs generally vest quarterly over a four -year period beginning on the grant date. The contractual terms of options granted do not exceed ten years. 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. We have treated the 2012 ESPP as a compensatory plan. At December 28, 2024 , a total of 0.8 million shares of our common stock were available for future purchases under the 2012 ESPP. At December 28, 2024 , a total of 6.9 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. The 2023 Equity Incentive Plan, 2011 Non-Employee Director Equity Incentive Plan, and the 2025 Inducement Equity Plan do not have any fungible share ratio or counting provision . Shares subject to stock option grants that expire or are canceled, without delivery of such shares, and shares subject to performance-based restricted stock units that are not delivered due to a failure to not meet the maximum payout threshold, generally become available for re-issuance under equity incentive plans. Stock-Based Compensation Expense Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Cost of revenue $ 2,731 $ 4,506 $ 3,674 Research and development 29,033 27,782 19,645 Selling, general, and administrative 21,221 37,909 32,211 Total stock-based compensation $ 52,985 $ 70,197 $ 55,530 The income tax benefit related to total stock-based compensation expense was $ 6.3 million and $ 7.6 million, respectively, for fiscal 2024 and 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 2024 was $ 1.7 million. These amounts do not include the indirect effects of stock-based compensation, which primarily relate to the R&D tax credit. 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 fiscal 2022, as they were offset by an increase in the valuation allowance. 54 Table of Contents ESPP and Stock Options The fair values of the shares expected to be issued under the employee stock purchase plan and of each option award on the date of grant were estimated using the Black-Scholes valuation model and the assumptions noted in the following table. No new stock options were granted during fiscal 2024, 2023, or 2022. The expected volatility of both ESPP shares and stock options is based on the daily historical volatility of our stock price, measured over the ESPP purchase period or the expected term of the option. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero -coupon issue with a remaining term closest to the expected term of the option. The expected term is based on historical vested option exercises and includes an estimate of the expected term for options that are fully vested and outstanding. Dividend yield has no valuation impact, as we have not paid any cash dividends since inception and do not intend to pay any cash dividends in the foreseeable future. The following table summarizes the assumptions used in the valuation of ESPP compensation for the periods presented: Year Ended December 28, December 30, December 31, 2024 2023 2022 Employee Stock Purchase Plan Weighted average expected volatility 52.6 % 48.2 % 60.3 % Weighted average risk-free interest rate 4.88 % 5.37 % 3.74 % Expected term (in months) 6 6 6 The weighted average fair values for the ESPP, calculated using the Black-Scholes option pricing model with the noted assumptions for the ESPP, were $ 15.50 , $ 24.38 , and $ 15.25 for fiscal years 2024 , 2023 , and 2022 , respectively. At December 30, 2023, there was no unrecognized compensation cost related to unvested employee and director stock options. Compensation expense for all stock-based compensation awards is recognized using the straight-line method. We recorde d stock-based compensation expense related to the ESPP of approximately $ 1.8 million, $ 2.2 million, and $ 1.5 million in fiscal 2024 , 2023 , and 2022 , respectively. Related to stock options, w e recorded no expense in fiscal 2024, 2023 , and 2022 . The following table summarizes our stock option activity and related information for the year ended December 28, 2024: (Shares and aggregate intrinsic value in thousands) Shares Weighted average exercise price Weighted average remaining contractual term (years) Aggregate Intrinsic Value Balance, December 30, 2023 428 $ 6.75 Granted — — Exercised ( 425 ) 6.76 Forfeited or expired ( 3 ) 5.73 Balance, December 28, 2024 — $ — Vested and expected to vest at December 28, 2024 — $ — — $ — Exercisable, December 28, 2024 — $ — — $ — 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. This amount changes based on the fair market value of the Company's stock. Total intrinsic value of options exercised for fiscal 2024 , 2023 , and 2022 was $ 22.9 million, $ 37.3 million, and $ 24.3 million, respectively. 55 Table of Contents Time-Based Restricted Stock Unit Awards and Restricted Stock Awards The following table summarizes the activity for our time-based RSUs and RSAs for the year ended December 28, 2024: (Shares in thousands) Shares Weighted average grant date fair value Balance, December 30, 2023 1,881 $ 72.31 Granted 1,854 60.74 Vested ( 741 ) 67.88 Forfeited or expired ( 557 ) 70.82 Balance, December 28, 2024 2,437 $ 65.19 At December 28, 2024, there was $ 155.6 million of unrecognized compensation expense related to unvested time-based RSUs and RSAs. Compensation expense for RSUs and RSAs is recognized using the straight-line method over the related vesting period. In fiscal 2024 , 2023 , and 2022 , we recorde d stock-based compensation expense related to time-based RSUs and RSAs of approximately $ 51.8 million, $ 41.5 million, and $ 30.1 million, respectively. Market-Based and Performance-Based Awards In 2022 through 2024 , we granted awards of RSUs with either a market condition or a performance condition to certain executives. Market-Based and Performance-Based Awards — Grants In fiscal 2024, 2023, and 2022, 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 t otal shareholder return ("TSR") relative to a specified index. For the 2024 and 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 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. In fiscal 2024, we also granted awards of RSUs with a performance condition to certain executives. Under the terms of these grants, the RSUs with a performance condition will vest if the Company achieves year-over-year revenue growth in excess of an industry benchmark, and the number of shares vested will scale for achievement of year-over-year revenue growth compared to certain targets, with maximum vesting up to 250 %. The performance condition will be measured annually after each fiscal year-end for one - fourth of the grants beginning in fiscal 2025 through the end of fiscal 2028. Vesting of these awards occurs 13 months after the end of each measurement period and the entire award cannot be fully earned until five and a half years from grant date. In fiscal 2024, we also granted awards of RSUs with a market condition to our new chief executive officer with vesting tied to the Company's stock price appreciation. The number of shares that become eligible to vest can range from 25 % to 250 % of the target number of shares, based on the Company's stock price growth over the 6 -year service period, which ranges from 25 % to 200 % stock price growth calculated based on the simple average of the closing Company share price for the trailing 60 trading days up to and including the measurement date. No vesting occurs for stock price growth below 25 %. Vesting will occur annually after 3 years for a portion of the vesting eligible RSUs. Market-Based and Performance-Based Awards — Vesting During fiscal 2024, the market condition for the majority of awards granted to certain executives in previous years exceeded the 75th percentile of their TSR condition, and these awards vested at 250 % or 200 %, as applicable for the respective executive. One award achieved the 54th percentile of its TSR condition and vested at approximately 97 %, while one award did not meet its minimum TSR threshold for vesting. Also during 2024, the second tranche of awards granted in fiscal 2021 and 2022 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 December 31, 2022, and the 13 -month vesting period had been met. For the third tranche of these awards, the Company met the year-over-year revenue growth performance criteria at the 116.3 % level of achievement as of December 30, 2023. During fiscal 2023, 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 250 % or 200 % for the respective executives. Also during 2023, the 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. 56 Table of Contents 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 250 % or 200 % for the respective executives. Also during fiscal 2022, the fifth and sixth tranches of 40 % and 70 %, respectively, 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 respective measurement periods. Market-Based and Performance-Based Awards — Compensation Expense For our awards with a market condition or a performance condition, we recorded benefits from forfeitures of approximately $ 29.0 million due to executive departures, partially offset by stock compensation expense of approximately $ 28.4 million, in fiscal 2024. We incurred stock-based compensation expense of approximately $ 26.4 million and $ 24.0 million in fiscal years 2023 and 2022 , respectively. These amounts are recorded as components of total stock-based compensation. At December 28, 2024, there was $ 54.4 million of unrecognized compensation expense related to unvested RSUs with a market condition or a performance condition. Awards with a market condition were valued using Monte Carlo simulation models. The following table summarizes the assumptions used at the grant date in the valuation of RSUs with a market or performance condition: Year Ended December 28, December 30, December 31, 2024 2023 2022 Executive RSUs with a market condition or performance condition Weighted average expected volatility 51.04 % to 53.96 % 50.97 % to 54.31 % 51.44 % Weighted average risk-free interest rate 3.39 % to 4.53 % 4.28 % to 4.59 % 1.67 % Expected term (years) 3 to 6 3 3 The following table summarizes the activity for our awards with a market condition or performance condition: (Shares in thousands) Shares Weighted average grant date fair value Balance, December 30, 2023 852 $ 84.72 Granted 1,641 63.06 Effect of vesting multiplier 285 Vested ( 551 ) 68.32 Canceled ( 634 ) 92.51 Balance, December 28, 2024 1,593 $ 62.24 Note 11 - Common Stock Repurchase Program On November 30, 2023, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $ 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. During the fourth quarter of fiscal 2024, we repurchased 366,969 shares for $ 20.0 million, or an average price paid per share of $ 54.50 . All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2024 Repurchase Program were retired by the end of the fourth quarter of fiscal 2024. We repurchased a total of 1,145,560 shares for $ 67.0 million, or an average price paid per share of $ 58.48 , during fiscal year 2024. On December 9, 2024, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $ 100 million of outstanding common stock could be repurchased from time to time (the "2025 Repurchase Program"). The duration of the 2025 Repurchase Program is through December 31, 2025. No shares were repurchased under the 2025 Repurchase Program during the fourth quarter of fiscal 2024. 57 Table of Contents Note 12 - Income Taxes We are subject to federal and state income tax as well as income tax in the various foreign jurisdictions in which we operate. The domestic and foreign components of Income before income taxes were as follows: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Domestic $ 2,595 $ 55,069 $ 30,362 Foreign 33,634 159,787 151,750 Income before taxes $ 36,229 $ 214,856 $ 182,112 The components of Income tax (benefit) expense are as follows: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Current: Federal $ ( 15,866 ) $ 10,331 $ 748 State 460 1,059 265 Foreign 2,573 3,019 3,637 ( 12,833 ) 14,409 4,650 Deferred: Federal ( 7,530 ) ( 56,323 ) — State — — — Foreign ( 4,539 ) ( 2,291 ) ( 1,420 ) ( 12,069 ) ( 58,614 ) ( 1,420 ) Income tax (benefit) expense $ ( 24,902 ) $ ( 44,205 ) $ 3,230 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: Year Ended December 28, December 30, December 31, 2024 2023 2022 % % % Statutory federal rate 21 21 21 Adjustments for tax effects of: State taxes, net (8) (1) (2) Federal tax credits (16) (4) (1) Stock-based compensation 9 (2) — Foreign rate differential (25) (15) (16) U.S. tax on foreign operations 18 9 33 Capital loss expiration — — 1 Valuation allowance 10 (29) (33) Change in uncertain tax benefit accrual (75) — (2) Other (3) — 1 Effective income tax rate (69) (21) 2 The decrease in provision for income taxes in fiscal year 2024 compared to fiscal year 2023 was primarily due to the release of the US federal valuation allowance in the prior year and the recognition of uncertain tax benefits in the current year. We updated our evaluation of the valuation allowance position in the United States through December 28, 2024 and concluded that we should 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. The amount of the deferred tax asset considered realizable could be adjusted if sufficient positive evidence exists. We don't have a valuation allowance on a significant portion of our U.S. Federal deferred tax assets or in any foreign jurisdictions as we have concluded that it is more likely than not that we will realize the net deferred tax assets in the future periods. 58 Table of Contents The components of our net deferred tax assets and liabilities are as follows: (In thousands) December 28, 2024 December 30, 2023 Deferred tax assets: Intangible assets $ 2,523 $ 4,274 Net operating loss carry forwards 13,332 13,829 Tax credit carry forwards 100,820 87,955 Accrued liabilities and reserves 26,638 23,249 Stock-based and deferred compensation 2,238 5,199 Other 6,791 5,162 Total deferred tax assets 152,342 139,668 Less: valuation allowance ( 82,684 ) ( 79,100 ) Net deferred tax assets 69,658 60,568 Deferred tax liabilities: Fixed assets 826 1,475 Unremitted earnings 720 620 Other 3,486 6,889 Total deferred tax liabilities 5,032 8,984 Net deferred taxes $ 64,626 $ 51,584 Reported as: Deferred tax assets $ 66,980 $ 57,762 Deferred tax liabilities (included in Other long-term liabilities) ( 2,354 ) ( 6,178 ) Net deferred taxes $ 64,626 $ 51,584 The following table displays the activity related to changes in our valuation allowance for deferred tax assets: Fiscal Years Ended Balance at beginning Charged (Credit) to costs and Charged (credit) to other Balance at end of (In thousands) of period expenses accounts period December 28, 2024 $ 79,100 $ 3,584 $ — $ 82,684 December 30, 2023 $ 140,533 $ ( 61,433 ) $ — $ 79,100 December 31, 2022 $ 200,438 $ ( 59,905 ) $ — $ 140,533 At December 28, 2024, we had U.S. federal net operating loss ("NOL") carryforwards (pretax) of approximately $ 6.8 million which will expire between 2027 and 2031. We had state NOL carryforwards (pretax) of approximately $ 132.3 million that substantially all expire at various dates from 2025 through 2041. We also had federal credit carryforwards of $ 47.2 million that expire at various dates from 2035 through 2044, and $ 84.0 million state credit carryforwards, of which substantially all do not expire. Future utilization of federal and state net operating losses and tax credit carryforwards may be limited if cumulative changes to ownership exceed 50% within any three -year period, which has not occurred through fiscal 2024. However, if there is a significant change in ownership, future tax attribute utilization may be limited and NOL carryforwards and/or R&D credits will be reduced to reflect the limitation. Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed. At December 28, 2024, U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of approximately $ 3.0 million of the undistributed earnings of our foreign subsidiaries. We intend to reinvest these earnings indefinitely. At December 28, 2024 and December 30, 2023, our unrecognized tax benefits associated with uncertain tax positions were $ 29.3 million and $ 61.4 million, respectively, of which $ 26.3 million and $ 58.7 million, respectively, if recognized, would affect the effective tax rate, subject to valuation allowance. As of December 28, 2024 and December 30, 2023, interest and penalties associated with unrecognized tax benefits were $ 0.4 million and $ 11.3 million, respectively, which are not reflected in the table below. We accrue interest and penalties related to uncertain tax positions in Income tax expense. 59 Table of Contents The following table summarizes the changes to unrecognized tax benefits for the fiscal years presented: (In thousands) Balance at January 1, 2022 $ 56,231 Additions based on tax positions related to the current year 1,594 Additions based on tax positions of prior years 2,798 Settlements ( 148 ) Reduction as a result of lapse of applicable statute of limitations ( 1,586 ) Balance at December 31, 2022 58,889 Additions based on tax positions related to the current year 2,247 Additions based on tax positions of prior years 1,128 Reductions for tax positions of prior years ( 156 ) Reduction as a result of lapse of applicable statute of limitations ( 696 ) Balance at December 30, 2023 61,412 Additions based on tax positions related to the current year 3,362 Additions based on tax positions of prior years 552 Reduction as a result of lapse of applicable statute of limitations ( 36,028 ) Balance at December 28, 2024 $ 29,298 Our liability for uncertain tax positions (including penalties and interest) was $ 2.5 million and $ 21.9 million at December 28, 20 24 and December 30, 2023 , respectively, and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets. At December 28, 2024, it is reasonably possible that $ 0.3 million of unrecognized tax benefits and less than $ 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 2021 for federal income taxes, 2020 for state income taxes, and 2018 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. Note 13 - Employee Benefit Plans Qualified Investment Plan In 1990, we adopted a 401 (k) tax-deferred savings plan, which provides all employees in the United States who meet certain eligibility requirements with an opportunity to accumulate funds for retirement. Participants may contribute up to the amount allowable as a deduction for federal income tax purposes. The plan does not allow investments in the Company's common stock. The plan allows for the Company to make discretionary matching contributions in cash. We recorded matching contributions of approximately $ 2.8 million, $ 3.1 million, and $ 2.8 million in fiscal years 2024 , 2023 , and 2022 , respectively. Corporate Incentive Plan For 2024 , 2023 , and 2022 , the Board of Directors of the Company, upon the recommendation of the Compensation Committee, approved the Corporate Incentive Plan (the “CIP”) 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 CIP. Under the CIP, individual cash incentive payments for the eligible employees will be based both on Company financial performance, as measured by achievement of operating income (before incentive plan accruals) and revenue goals within specified ranges established by the Compensation Committee, and Company performance, as measured by the achievement of personal management objectives. The Compensation Committee determines the performance of the chief executive officer, the chief financial officer and other participants based on the achievement of the management objectives established by the Compensation Committee during the first quarter of the respective fiscal year. We recorded approximately $ 1.6 million, $ 15.0 million, and $ 25.2 million of expense under the CIP in fiscal 2024 , 2023 , and 2022 , respectively. 60 Table of Contents Note 14 - Contingencies Legal Proceedings On or about December 19, 2018, Steven De Jaray, Perienne De Jaray and Darrell Oswald (collectively, the “Plaintiffs”) commenced an action against the Company 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 alleged the Company 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 (“Apex-Micro”) 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 Ms. De Jaray and Mr. Oswald. The trial for the remaining claims was held from January 30, 2024 to February 15, 2024. On February 13, 2024, the Court granted the Company’s Rule 50 motion in part and entered judgment in the Company’s favor as to all of Mr. De Jaray’s claims and Apex-Micro’s negligence claims. On February 15, 2024, the jury found that the Company was not liable for all outstanding claims and judgment was entered in favor of the Company. On March 15, 2024, Mr. De Jaray and Apex-Micro filed a Notice of Appeal to the United States Court of Appeals for the Ninth Circuit. On March 18, 2024, Ms. De Jaray filed a separate Notice of Appeal. Ms. De Jaray’s appeal was dismissed for failure to prosecute on August 1, 2024. In response to Mr. De Jaray and Apex Micro's request for an extension, their appeal opening brief was due October 7, 2024. Mr. De Jaray and Apex Micro failed to file their appeal opening brief on October 7 th . Mr. De Jaray's and Apex Micro's appeal was dismissed for failure to prosecute on October 30, 2024. From time to time, we are exposed to certain additional asserted and unasserted potential claims. We review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we then accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise estimates. Note 15 - Segment Reporting ASC 280, Segment Reporting, establishes standards for the manner in which companies report financial information about operating segments, products, services, geographic areas and major customers. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. As of December 28, 2024, we have determined that the Company operates in a single operating and reportable segment: the core Lattice business, which includes silicon-based and silicon-enabling products, evaluation boards, development hardware, and related intellectual property licensing, services, and sales. Our CODM reviews operating results and financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The following table sets forth the Company’s revenue, significant expenses, and net income by its single operating and reportable segment: Year Ended December 28, December 30, December 31, (In thousands) 2024 2023 2022 Revenue $ 509,401 $ 737,154 $ 660,356 Gross margin $ 340,400 $ 514,670 $ 452,050 Total operating expenses $ 305,943 $ 302,400 $ 264,683 Net income $ 61,131 $ 259,061 $ 178,882 61 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lattice Semiconductor Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lattice Semiconductor Corporation (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2024, 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 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 14, 2025 expressed an unqualified opinion thereon. 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. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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 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 Description of the Matter The Company's net inventory totaled $103.4 million as of December 28, 2024. 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 inventory excess and obsolescence reserves was challenging because the calculation of the estimate is complex as it considers a number of factors that are affected by market and economic conditions, such as customer demand and product lifecycle. How We Addressed the Matter in Our Audit We evaluated and tested the design and operating effectiveness of the Company's internal controls over the calculation of excess and obsolete inventory, including the determination and application of the assumptions used to estimate the excess and obsolescence reserve. Our audit procedures included, among others, evaluating the assumptions and the underlying data used in management's excess and obsolete inventory assessment. We evaluated inventory levels compared to projected customer demand, historical sales, and product lifecycle. We also assessed the historical accuracy of management's estimates and performed sensitivity analyses to evaluate the changes in inventory valuation that would result from changes in assumptions. /s/ Ernst & Young LLP We have served as the Company's auditor since 2020. San Jose, California February 14, 2025 62 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lattice Semiconductor Corporation Opinion on Internal Control Over Financial Reporting We have audited Lattice Semiconductor Corporation’s internal control over financial reporting as of December 28, 2024, 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 28, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2024, and the related notes and our report dated February 14, 2025 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Jose, California February 14, 2025 63 Table of Contents Item 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure None.