MONOLITHIC POWER SYSTEMS, INC. 10-K

Item 8. Financial Statements and Supplementary Data MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS Contents Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) 41 Consolidated Balance Sheets 44 Consolidated Statements of Operations 45 Consolidated Statements of Comprehensive Income 46 Consolidated Statements of Stockholders ’ Equity 47 Consolidated Statements of Cash Flows 48 Notes to Consolidated Financial Statements 49 40 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Monolithic Power Systems, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Monolithic Power Systems, Inc. (the Company) as of December 31, 2024 and 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 31, 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 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 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 31, 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 March 3, 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 Matters The critical audit matters 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: (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Inventory Valuation Description of the Matter The Company’s inventories totaled $419.6 million as of December 31, 2024, representing 11.6% of total assets. As explained in Note 1 to the consolidated financial statements, the Company values inventories at the lower of standard cost (which approximates actual cost determined on a first-in first-out basis) and estimated net realizable value in each reporting period. Excess and obsolete inventory is written down to its estimated net realizable value if less than cost. Auditing management’s estimates for excess and obsolete inventory involved subjective auditor judgment because management’s assessment of whether a write down is required and the measurement of any excess of cost over net realizable value is judgmental and considers a number of qualitative factors that are affected by market and economic conditions outside the Company’s control. In particular, determination of excess and obsolete inventory utilizes assumptions, including estimated demand for the Company’s products, new product launches, expected industry sales growth, and product lifecycle. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s excess and obsolete inventory write down process. This included controls over management’s assessment of inventory valuation, including the determination of forecasted usage of inventories. Our audit procedures included, among others, evaluating the significant assumptions stated above and testing the completeness and accuracy of the underlying data used in management’s excess and obsolete inventory valuation assessment. We evaluated inventory levels compared to forecasted product demand, historical sales and specific product considerations. We also assessed the historical accuracy of management’s estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the excess and obsolete inventory estimates that would result from changes in the underlying assumptions. 41 Table of Contents Income Taxes – Realizability of foreign tax incentive Description of the Matter As discussed in Note 12 to the financial statements, the Company was granted a tax incentive of $1.4 billion with a ten-year life by a foreign jurisdiction in the year ended December 31, 2024 that may be utilized beginning in 2025. This tax incentive resulted in a net deferred tax asset with a corresponding tax benefit of $1.3 billion, due to $0.1 billion valuation allowance to reduce the carrying value of the deferred tax asset to the amount management believes it is more likely than not to realize. Auditing the realizability of the deferred tax asset for the foreign tax incentive was complex as the assessment process includes forecasting future sources of taxable income, scheduling the use the of the tax incentive, which involves subjective assumptions, and the amounts involved are material to the financial statements as a whole. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s development of the analysis of the realizability of the foreign tax incentive expected to be utilized. To test the realizability of the deferred tax asset related to the foreign tax incentive, we performed audit procedures that included, among others, testing the significant assumptions used in the forecasted taxable income, including validating the completeness and accuracy of the underlying data supporting the assumptions and estimates. We compared the more sensitive assumption related to revenue growth to current industry and the Company’s own historical results. We also assessed the historical accuracy of management’s own forecasts. In addition, we tested the Company’s scheduling of the utilization of the foreign tax incentive with the assistance of our tax professionals. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. San Mateo, California March 3, 2025 42 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Monolithic Power Systems, Inc. Opinion on Internal Control Over Financial Reporting We have audited Monolithic Power Systems, Inc.’s internal control over financial reporting as of December 31, 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, Monolithic Power Systems, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 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 31, 2024 and 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 31, 2024, and the related notes and our report dated March 3, 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 Mateo, California March 3, 2025 43 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 691,816 $ 527,843 Short-term investments 171,130 580,633 Accounts receivable, net 172,518 179,858 Inventories 419,611 383,702 Other current assets 109,978 147,463 Total current assets 1,565,053 1,819,499 Property and equipment, net 494,945 368,952 Acquisition-related intangible assets, net 9,938 - Goodwill 25,944 6,571 Deferred tax assets, net 1,326,840 28,054 Other long-term assets 194,377 211,277 Total assets $ 3,617,097 $ 2,434,353 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 102,526 $ 62,958 Accrued compensation and related benefits 63,918 56,286 Other accrued liabilities 128,123 115,791 Total current liabilities 294,567 235,035 Income tax liabilities 65,193 60,724 Other long-term liabilities 111,570 88,655 Total liabilities 471,330 384,414 Commitments and contingencies Stockholders’ equity: Common stock and additional paid-in capital: $ 0.001 par value; shares authorized: 150,000 ; shares issued and outstanding: 47,823 and 48,028 , respectively 706,817 1,129,937 Retained earnings 2,487,461 947,064 Accumulated other comprehensive loss ( 48,511 ) ( 27,062 ) Total stockholders’ equity 3,145,767 2,049,939 Total liabilities and stockholders’ equity $ 3,617,097 $ 2,434,353 See accompanying notes to consolidated financial statements. 44 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 Revenue $ 2,207,100 $ 1,821,072 $ 1,794,148 Cost of revenue 986,230 799,953 745,596 Gross profit 1,220,870 1,021,119 1,048,552 Operating expenses: Research and development 324,748 263,643 240,171 Selling, general and administrative 356,764 275,740 281,596 Total operating expenses 681,512 539,383 521,767 Operating income 539,358 481,736 526,785 Other income (expense), net 33,554 24,105 ( 1,848 ) Income before income taxes 572,912 505,841 524,937 Income tax expense (benefit), net ( 1,213,788 ) 78,467 87,265 Net income $ 1,786,700 $ 427,374 $ 437,672 Net income per share: Basic $ 36.76 $ 8.98 $ 9.37 Diluted $ 36.59 $ 8.76 $ 9.05 Weighted-average shares outstanding: Basic 48,599 47,610 46,727 Diluted 48,835 48,771 48,358 See accompanying notes to consolidated financial statements. 45 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2024 2023 2022 Net incom $ 1,786,700 $ 427,374 $ 437,672 Other comprehensive loss, net of tax: Foreign currency translation adjustments ( 22,843 ) ( 9,528 ) ( 32,293 ) Change in unrealized gains and losses on available-for-sale securities, net of tax of $( 153 ), $ 1,352 and $( 184 ), respectively 1,394 5,543 ( 6,664 ) Other comprehensive loss, net of tax ( 21,449 ) ( 3,985 ) ( 38,957 ) Comprehensive income $ 1,765,251 $ 423,389 $ 398,715 See accompanying notes to consolidated financial statements. 46 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (In thousands, except per share amounts) Accumulated Common Stock and Other Total Additional Paid-in Capital Retained Comprehensive Stockholders’ Shares Amount Earnings Income (Loss) Equity Balance as of January 1, 2022 46,256 $ 803,226 $ 424,879 $ 15,880 $ 1,243,985 Net income - - 437,672 - 437,672 Other comprehensive loss - - - ( 38,957 ) ( 38,957 ) Dividends and dividend equivalents declared ($ 3.00 per share) - - ( 146,148 ) - ( 146,148 ) Common stock issued under the employee equity incentive plan 837 5,358 - - 5,358 Common stock issued under the employee stock purchase plan 14 5,877 - - 5,877 Stock-based compensation expense - 160,815 - - 160,815 Balance as of December 31, 2022 47,107 975,276 716,403 ( 23,077 ) 1,668,602 Net income - - 427,374 - 427,374 Other comprehensive loss - - - ( 3,985 ) ( 3,985 ) Dividends and dividend equivalents declared ($ 4.00 per share) - - ( 196,713 ) - ( 196,713 ) Common stock issued under the employee equity incentive plan 911 1,118 - - 1,118 Common stock issued under the employee stock purchase plan 17 7,568 - - 7,568 Repurchases of common stock ( 7 ) ( 3,741 ) - - ( 3,741 ) Stock-based compensation expense - 149,716 - - 149,716 Balance as of December 31, 2023 48,028 1,129,937 947,064 ( 27,062 ) 2,049,939 Net income - - 1,786,700 - 1,786,700 Other comprehensive loss - - - ( 21,449 ) ( 21,449 ) Dividends and dividend equivalents declared ($ 5.00 per share) - - ( 246,303 ) - ( 246,303 ) Common stock issued under the employee equity incentive plan 778 - - - - Common stock issued under the employee stock purchase plan 18 8,727 - - 8,727 Repurchases of common stock ( 1,001 ) ( 637,478 ) - - ( 637,478 ) Stock-based compensation expense - 205,631 - - 205,631 Balance as of December 31, 2024 47,823 $ 706,817 $ 2,487,461 $ ( 48,511 ) $ 3,145,767 See accompanying notes to consolidated financial statements. 47 Table of Contents MONOLITHIC POWER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income $ 1,786,700 $ 427,374 $ 437,672 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 36,430 40,168 37,114 Amortization of premium (discount) on available-for-sale securities ( 20,145 ) ( 5,277 ) 4,375 Loss (gain) on deferred compensation plan investments ( 9,400 ) ( 8,505 ) 6,600 Deferred taxes, net ( 1,302,911 ) 5,865 ( 13,220 ) Gain on sale of equity investment - ( 1,424 ) - Stock-based compensation expense 205,640 149,711 160,992 Other 28 ( 23 ) 97 Changes in operating assets and liabilities: Accounts receivable 7,325 2,884 ( 77,903 ) Inventories ( 35,215 ) 63,583 ( 188,073 ) Other assets 54,544 ( 24,310 ) ( 177,284 ) Accounts payable 23,169 4,797 ( 11,240 ) Accrued compensation and related benefits 8,743 ( 31,187 ) 28,514 Income tax liabilities 13,226 ( 308 ) 16,559 Other accrued liabilities 20,276 14,865 22,471 Net cash provided by operating activities 788,410 638,213 246,674 Cash flows from investing activities: Purchases of property and equipment ( 146,118 ) ( 57,578 ) ( 58,843 ) Cash paid for an assumed lease ( 18,175 ) - - Purchases of investments ( 1,082,706 ) ( 582,603 ) ( 65,785 ) Maturities and sales of investments 1,508,135 468,308 128,610 Cash paid for acquisition, net of cash acquired ( 33,283 ) - - Contributions to deferred compensation plan, net ( 4,806 ) ( 6,853 ) ( 16,492 ) Net cash provided by (used in) investing activities 223,047 ( 178,726 ) ( 12,510 ) Cash flows from financing activities: Property and equipment purchased on extended payment terms ( 4,087 ) ( 2,826 ) ( 2,055 ) Proceeds from common stock issued under the employee equity incentive plan - 1,118 5,358 Proceeds from common stock issued under the employee stock purchase plan 8,727 7,568 5,877 Repurchases of common stock ( 636,244 ) ( 3,741 ) - Dividends and dividend equivalents paid ( 240,623 ) ( 185,844 ) ( 137,965 ) Net cash used in financing activities ( 872,227 ) ( 183,725 ) ( 128,785 ) Effect of change in exchange rates ( 8,470 ) ( 3,310 ) ( 6,039 ) Net increase in cash, cash equivalents and restricted cash 130,760 272,452 99,340 Cash, cash equivalents and restricted cash, beginning of period 561,181 288,729 189,389 Cash, cash equivalents and restricted cash, end of period $ 691,941 $ 561,181 $ 288,729 Supplemental disclosures for cash flow information: Cash paid for income taxes, net $ 79,562 $ 85,128 $ 85,031 Non-cash investing and financing activities: Liability accrued for property and equipment purchases $ 22,292 $ 1,784 $ 5,743 Liability accrued for dividends and dividend equivalents $ 63,409 $ 53,213 $ 40,939 See accompanying notes to consolidated financial statements. 48 Table of Contents MONOLITHIC POWER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Monolithic Power Systems, Inc. (the “Company”) was incorporated in the State of California on August 22, 1997. On November 17, 2004, the Company was reincorporated in the State of Delaware. MPS is a fabless global company that provides high-performance, semiconductor-based power electronics solutions. MPS’s mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these consolidated financial statements primarily include those related to income tax valuation allowances, inventory valuation and stock-based compensation. Actual results could differ from these estimates and assumptions, and any such differences may be material to the Company’s consolidated financial statements. Foreign Currency The functional currency of the Company’s foreign subsidiaries is the local currency, with the exception of certain subsidiaries which invoice revenues in U.S. Dollars. The primary subsidiaries are located in China, Taiwan and Europe, which utilize the Renminbi, the New Taiwan Dollar and the Euro as their currencies, respectively. Accordingly, assets and liabilities of the foreign subsidiaries are translated using exchange rates in effect at the end of the period. Revenue and costs are translated using average exchange rates for the period. The resulting translation adjustments are recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. In addition, the Company incurs foreign currency exchange gains or losses related to certain transactions, including intercompany transactions, that are denominated in a currency other than the functional currency. Foreign currency exchange gains and losses in connection with the remeasurement and settlement of the balances were reported in other income (expense), net, on the Consolidated Statements of Operations and were not material in any of the periods presented. For intercompany transactions that are of a long-term investment nature, the Company records the foreign currency exchange gains and losses in accumulated other comprehensive loss on the Consolidated Balance Sheets. Cash Equivalents and Debt Investments The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents. The Company may classify investments with maturities beyond one year as short-term based on the nature of the investments and their availability for use in current operations. Cash equivalents are stated at cost, which approximates fair market value. The Company’s short-term and long-term debt investments are classified as available-for-sale securities and are stated at their fair market value, with unrealized gains and losses recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. Premiums and discounts on debt investments are generally amortized or accreted over the life of the related available-for-sale securities. Interest income is recognized when earned. The cost of investments sold is determined on the basis of the specific identification method. 49 Table of Contents Available-for-sale investments are subject to impairment reviews when the fair value is below the amortized cost basis. If the Company determines that the decline in fair value below the amortized cost basis is due to credit-related factors, the impairment is recognized as an allowance on the Consolidated Balance Sheets with a corresponding adjustment to earnings. An impairment that is not credit-related is recognized in accumulated other comprehensive loss on the Consolidated Balance Sheets. If the Company intends to sell the impaired investments, or more likely than not will be required to sell such investments before recovering the amortized cost basis, the entire impairment amount is recognized in earnings with a corresponding adjustment to the amortized cost basis. Fair Value of Financial Instruments Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value, the Company considers the principal or most advantageous market in which the Company would transact, as well as assumptions that market participants would use when pricing the assets or liabilities. Fair value is estimated by applying the fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. See Note 5 for additional information on the fair value of the Company’s financial instruments. Inventories Inventories are stated at the lower of standard cost (which approximates actual cost determined on a first-in first-out basis) and estimated net realizable value. The Company writes down excess and obsolete inventories based on their age and forecasted demand, which includes estimates taking into consideration the Company’s revenue forecast, outlook on market and economic conditions, technology changes, new product introductions and changes in strategic direction. Actual demand may differ from forecasted demand, and such a difference may have a material effect on recorded inventory values. When the Company records a write-down on inventory, it establishes a new, lower cost basis for that inventory, and subsequent changes in facts and circumstances will not result in the restoration or increase in that newly established cost basis. Property and Equipment Property and equipment are stated at cost. Depreciation commences when an asset is placed in service and available for its intended use. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Buildings and building improvements have estimated useful lives of 20 to 40 years. Leasehold improvements are amortized over the shorter of the estimated useful lives or the lease period. Lab equipment and production equipment have estimated useful lives of three to ten years. Software has estimated useful lives of one to seven years. Transportation equipment has estimated useful lives of 5 to 20 years. Furniture and fixtures have estimated useful lives of three to five years. Land is not depreciated. Goodwill and Acquisition-Related Intangible Assets Goodwill represents the excess of the fair value of purchase consideration over the fair value of net tangible and identified intangible assets as of the date of acquisition. Goodwill is not amortized. The Company tests goodwill for impairment at least annually in the fourth quarter of each year, or whenever events or changes in circumstances indicate that goodwill may be impaired. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then a quantitative goodwill impairment test is performed to measure the impairment loss. No impairment of goodwill has been identified in any of the periods presented. In-process research and development (“IPR&D”) assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as of the date of acquisition. IPR&D assets are initially capitalized at fair value as intangible assets with indefinite lives. When IPR&D projects are completed, they are reclassified as amortizable intangible assets and are amortized over their estimated useful lives. Alternatively, if IPR&D projects are abandoned, they are impaired and expensed as R&D costs. Acquisition-related intangible assets with finite lives consist of developed technologies, which are amortized on a straight-line basis over their estimated remaining useful lives. The amortization expense is recorded in cost of revenue in the Consolidated Statements of Operations. No impairment of acquisition-related intangible assets has been identified in any of the periods presented. Impairment of Long-Lived Assets The Company evaluates its long-lived assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Such impairment loss would be measured as the difference between the carrying amount of the asset and its fair value based on the present value of estimated future cash flows. The Company did not record material impairments in any of the periods presented. 50 Table of Contents Deferred Compensation Plan The Company has a non-qualified, unfunded deferred compensation plan, which provides certain key employees, including executive officers, with the ability to defer the receipt of compensation in order to accumulate funds for retirement on a tax deferred basis. The Company does not make contributions to the plan or guarantee returns on the investments. The Company is responsible for the plan’s administrative expenses. Participants’ deferrals and investment gains and losses remain as the Company’s liabilities and the underlying assets are subject to claims of general creditors. The liabilities for compensation deferred under the plan are recorded at fair value as of the end of each reporting period. Changes in the fair value of the liabilities are included in operating expenses on the Consolidated Statements of Operations. The Company manages the risk of changes in the fair value of the liabilities by electing to match the liabilities with investments in corporate-owned life insurance policies, mutual funds and money market funds that offset a substantial portion of the exposure. The investments are recorded at the cash surrender value of the corporate-owned life insurance policies, and at the fair value of the mutual funds and money market funds. Changes in the cash surrender value of the corporate-owned life insurance policies and the fair value of mutual fund and money market fund investments are included in other income (expense), net, on the Consolidated Statements of Operations. The following table summarizes the deferred compensation plan balances on the Consolidated Balance Sheets (in thousands): December 31, 2024 2023 Deferred compensation plan asset components: Cash surrender value of corporate-owned life insurance policies $ 27,249 $ 23,545 Fair value of mutual funds and money market funds 65,337 54,836 Total $ 92,586 $ 78,381 Deferred compensation plan assets reported in: Other long-term assets $ 92,586 $ 78,381 Deferred compensation plan liabilities reported in: Accrued compensation and related benefits $ 2,323 $ 384 Other long-term liabilities 93,653 80,903 Total $ 95,976 $ 81,287 Revenue Recognition The Company recognizes revenue when it transfers control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. See Note 2 for further discussion. R&D Costs incurred in R&D are expensed as incurred. Warranty Reserve The Company generally provides either a one - or two -year warranty against defects in materials and workmanship and will repair the products, provide replacements at no charge to customers or issue a refund. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. Warranty reserve requirements are generally based on a specific assessment of the products sold with warranties when a customer asserts a claim for warranty or for a product defect. 51 Table of Contents Leases The Company determines if an arrangement is a lease at inception. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term. ROU assets also include any initial direct costs incurred and prepaid lease payments, less lease incentives received. Because the implicit rate in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the remaining lease payment. The Company recognizes operating lease costs on a straight-line basis over the lease term. The Company does not record short-term leases with a term of 12 months or less at the commencement date on the Consolidated Balance Sheets. For lease arrangements that contain lease and non-lease components, the Company accounts for them as single lease components. Stock-Based Compensation The Company’s restricted stock units (“RSUs”) include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of time-based RSUs is determined based on the grant date stock price. The fair value of all other awards, including PSUs that have a purchase price adjustment, MSUs and MPSUs is determined based on the Monte Carlo simulation model. The valuation model considers inputs including stock price, expected volatility, expected term of awards, risk-free interest rate, and expected dividend yield. Expected volatility used in the model is determined based on historical volatility of the Company’s stock price for the period, which corresponds to the expected term of the awards, immediately preceding the granting of the awards. Compensation expense related to awards with service conditions is recorded on a straight-line basis over the requisite service period. Compensation expense related to awards subject to performance or market conditions is recognized over the requisite service period for each separately vesting tranche. For awards with only market conditions, compensation expense is not reversed if the market conditions are not satisfied. For awards with only performance conditions, as well as awards containing both market and performance conditions, the Company recognizes compensation expense when it becomes probable that the performance goals will be achieved. Management performs the probability assessment on a quarterly basis by reviewing external factors, such as macroeconomic conditions and the analog industry revenue forecasts, and internal factors, such as our business and operational objectives and revenue forecasts. Changes in the probability assessment of achievement of the performance conditions are accounted for in the period of change by recording a cumulative catch-up adjustment as if the new estimate had been applied since the service inception date. Any previously recognized compensation expense is reversed if the performance conditions are not expected to be satisfied as a result of management’s assessment. The Company accounts for forfeitures of equity awards when they occur. Accounting for Income Taxes The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. The Company also recognizes federal, state and foreign deferred tax assets or liabilities for its estimate of future tax effects attributable to temporary differences and carryforwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. The Company’s calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. The Company’s estimates of current and deferred tax assets and liabilities may change based on, in part, added certainty, finality or uncertainty to an anticipated outcome, changes in accounting or tax laws in the U.S. or foreign jurisdictions where the Company operates, or changes in other facts or circumstances. In addition, the Company recognizes liabilities for potential U.S. and foreign income tax for uncertain income tax positions taken on its tax returns if it has less than a 50% likelihood of being sustained. If the Company determines that payment of these amounts is unnecessary or if the recorded tax liability is less than its current assessment, the Company may be required to recognize an income tax benefit or additional income tax expense in its financial statements in the period such determination is made. The Company has calculated its uncertain tax positions which were attributable to certain estimates and judgments. Litigation and Contingencies The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. The Company has also been subject to litigation initiated by its stockholders. The pending proceedings involve complex questions of fact and law and will require the expenditure of significant funds and the diversion of other resources to prosecute and defend. In addition, from time to time, the Company becomes aware that it is subject to other contingent liabilities. When this occurs, the Company will evaluate the appropriate accounting for the potential contingent liabilities to determine whether a contingent liability should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. Based on the facts and circumstances in each matter, the Company uses its judgment to determine whether it is probable that a contingent loss has occurred and whether the amount of such loss can be estimated. If the Company determines a loss is probable and estimable, the Company records a contingent loss. In determining the amount of a contingent loss, the Company takes into account advice received from experts for each specific matter regarding the status of legal proceedings, settlement negotiations, prior case history and other factors. Should the judgments and estimates made by management need to be adjusted as additional information becomes available, the Company may need to record additional contingent losses. Alternatively, if the judgments and estimates made by management are adjusted, for example, if a particular contingent loss does not occur, the contingent loss recorded would be reversed. 52 Table of Contents Net Income per Share Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share reflects the potential dilution from contingently issuable shares and calculated using the treasury stock method. Contingently issuable shares, including all types of equity awards, are considered outstanding shares of common stock and included in the basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in the diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period. The Company’s RSUs contain forfeitable rights to receive cash dividend equivalents, which are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. Accordingly, these awards are not treated as participating securities in the net income per share calculation. Comprehensive Income Comprehensive income represents the change in the Company’s net assets during the period from non-owner sources. Accumulated other comprehensive loss presented on the Consolidated Balance Sheets primarily consists of unrealized gains and losses related to available-for-sale investments and foreign currency translation adjustments. Recently Adopted Accounting Pronouncement In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which aims to improve disclosures regarding a public entity’s reportable segments, primarily through more comprehensive disclosures around significant segment expenses. The Company adopted the guidance during the three months ended December 31, 2024 and the adoption did not have a significant impact on the related Note 16 to the consolidated financial statements. New Accounting Pronouncements Not Yet Adopted as of December 31, 2024 In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which aims to improve an entity’s income tax disclosures around its effective rate reconciliation, income taxes paid, disaggregation of income before income taxes and income tax expense. The guidance will be effective for annual reporting for fiscal year 2025. The standard should be applied prospectively and retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. 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 , which aims to provide more detailed information about the types of expenses in commonly presented expense captions. The guidance will be effective for annual reporting for fiscal year 2027 and interim reporting for the first quarter in 2028. The standard can be applied prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of adoption on its consolidated financial statements. 2. REVENUE RECOGNITION Revenue from Product Sales The Company generates revenue primarily from product sales, which include assembled and tested ICs, power modules as well as dies in wafer form. The remaining revenue, which primarily consists of royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties, was not significant in any of the periods presented. See Note 16 for the disaggregation of the Company’s revenue by geographic region. The Company sells its products primarily through third-party distributors and value-added resellers. In addition, the Company sells directly to certain OEMs, ODMs and end customers. For the years ended December 31, 2024, 2023 and 2022 , 90 %, 80 % and 83 %, respectively, of the Company’s product sales were made through distribution arrangements. These distribution arrangements contain enforceable rights and obligations specific to those distributors and not the end customers. Purchase orders, which are generally governed by sales agreements or the Company’s standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed between the Company and the customer. The Company considers purchase orders to be the contracts with customers. The unit price as stated on the purchase orders is considered the observable, stand-alone selling price for the arrangements. 53 Table of Contents The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue. Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company’s facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term). Under certain consignment agreements, the Company recognizes revenue when the customers consume the products from the consigned inventory locations, at which time control transfers to the customers and the Company issues invoices. Variable Consideration The Company accounts for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Certain U.S.-based distributors have price adjustment rights when they sell the Company’s products to their customers at a price that is lower than the distribution price invoiced by the Company. When the Company receives claims from the distributors that products have been sold to the end customers at the lower prices, the Company issues the distributors credit memos for the price adjustments. The Company estimates the price adjustments using the expected value method based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix. Other U.S. distributors and non-U.S. distributors do not have price adjustment rights. The Company records a credit against accounts receivable for the estimated price adjustments, with a corresponding reduction to revenue. Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months’ purchases in accordance with the contract terms. The Company estimates the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue. Contract Balances Accounts Receivable: The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. The Company’s accounts receivables are short-term, with standard payment terms generally ranging from 30 to 90 days. The Company does not require its customers to provide collateral to support accounts receivable. The Company assesses collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers’ financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that may affect collectability of the outstanding receivables. For certain customers, the Company requires standby letters of credit or advance payments prior to shipments of goods. The Company did not recognize any write-offs of accounts receivable or record any allowance for credit losses for the periods presented. Contract Liabilities: For customers without credit terms, the Company requires cash payments two weeks before the products are scheduled to be shipped to the customers. The Company records these payments received in advance of performance as customer prepayments within other accrued liabilities. As of December 31, 2024 and 2023, customer prepayments totaled $ 6.9 million and $ 2.8 million, respectively. The increase in the customer prepayment balance for the year ended December 31, 2024 resulted from an increase in unfulfilled customer orders for which the Company had received payments. Practical Expedients The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have been one year or less. The Company’s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For those customers who are required to pay in advance, the Company satisfies the performance obligations generally within a quarter. For these reasons, the Company has elected not to determine whether contracts with customers contain significant financing components. The Company’s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company has not yet shipped. Because the Company expects to fulfill these performance obligations within one year, the Company has elected not to disclose the amount of these remaining performance obligations. 54 Table of Contents 3. ACQUISITION On January 3, 2024 (the “Acquisition Date”), the Company acquired 100 % of the outstanding capital stock of Axign, a Dutch company that designs and develops class-D audio ICs, targeting applications ranging from portable consumer speakers to automotive and professional-grade multi-speaker systems. Commencing on the Acquisition Date, Axign became a wholly-owned subsidiary of the Company and its results of operations have been included in the Company’s consolidated financial statements. Purchase Consideration The purchase consideration was $ 33.4 million in cash. In connection with the acquisition, the Company incurred $ 0.4 million in transaction costs that were expensed as incurred and included in selling, general and administrative expenses in the Consolidated Statements of Operations. Purchase Price Allocation The purchase price allocation for Axign was as follows (in thousands): Inventory $ 720 Other tangible assets acquired, net of liabilities assumed 1,623 Intangible assets: Developed technology 9,184 IPR&D 2,147 Total identifiable net assets acquired 13,674 Goodwill 19,724 Total net assets acquired $ 33,398 The intangible asset acquired with a finite life includes the core developed technology with an estimated remaining useful life of eight years. The acquired intangible asset with an indefinite life includes an incomplete R&D project that had not reached technological feasibility as of the Acquisition Date. The fair values of the developed technology and the IPR&D were determined using the income approach. The goodwill arising from the acquisition was primarily attributed to the assembled workforce and synergies that are anticipated to enable the Company to develop solutions with lower power consumption in the consumer and automotive end markets using Axign’s digital feedback technology. The goodwill is not expected to be deductible for tax purposes. 55 Table of Contents 4. CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands): December 31, 2024 2023 Cash $ 679,949 $ 392,329 Money market funds 11,867 135,514 Certificates of deposit 164,418 127,123 Corporate debt securities 6,712 95,101 U.S. treasuries and government agency bonds - 358,409 Auction-rate securities backed by student-loan notes 148 567 Total $ 863,094 $ 1,109,043 December 31, 2024 2023 Reported as: Cash and cash equivalents $ 691,816 $ 527,843 Short-term investments 171,130 580,633 Investment within other long-term assets 148 567 Total $ 863,094 $ 1,109,043 The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of December 31, 2024 (in thousands): Amortized Cost Fair Value Due in less than 1 year $ 171,197 $ 171,130 Due in 1 - 5 years - - Due in greater than 5 years 150 148 Total $ 171,347 $ 171,278 Gross realized gains and losses were not material for the periods presented. The following tables summarize the unrealized gain and loss positions related to the available-for sale investments (in thousands): December 31, 2024 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Money market funds $ 11,867 $ - $ - $ 11,867 Certificates of deposit 164,418 - - 164,418 Corporate debt securities 6,779 - ( 67 ) 6,712 Auction-rate securities backed by student-loan notes 150 - ( 2 ) 148 Total $ 183,214 $ - $ ( 69 ) $ 183,145 December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Money market funds $ 135,514 $ - $ - $ 135,514 Certificates of deposit 127,123 - - 127,123 Corporate debt securities 96,636 4 ( 1,539 ) 95,101 U.S. treasuries and government agency bonds 358,177 327 ( 95 ) 358,409 Auction-rate securities backed by student-loan notes 574 - ( 7 ) 567 Total $ 718,024 $ 331 $ ( 1,641 ) $ 716,714 56 Table of Contents The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than 12 months and for greater than 12 months (in thousands): December 31, 2024 Less than 12 Months Greater than 12 Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate debt securities $ - $ - $ 6,712 $ ( 67 ) $ 6,712 $ ( 67 ) U.S. treasuries and government agency bonds - - - - - - Auction-rate securities backed by student-loan notes - - 148 ( 2 ) 148 ( 2 ) Total $ - $ - $ 6,860 $ ( 69 ) $ 6,860 $ ( 69 ) December 31, 2023 Less than 12 Months Greater than 12 Months Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate debt securities $ 20,792 $ ( 19 ) $ 70,806 $ ( 1,520 ) $ 91,598 $ ( 1,539 ) U.S. treasuries and government agency bonds 97,599 ( 95 ) - - 97,599 ( 95 ) Auction-rate securities backed by student-loan notes - - 567 ( 7 ) 567 ( 7 ) Total $ 118,391 $ ( 114 ) $ 71,373 $ ( 1,527 ) $ 189,764 $ ( 1,641 ) An impairment exists when the fair value of an investment is less than its amortized cost basis. As of December 31, 2024 and 2023, the Company did not consider the impairment of its investments to be a result of credit losses. The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. When evaluating a debt security for impairment, management reviews factors such as the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis, the extent to which the fair value of the security is less than its cost, the financial condition of the issuer and the credit quality of the investment. Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Consolidated Balance Sheets to the amounts reported on the Consolidated Statements of Cash Flows (in thousands): December 31, 2024 2023 Cash and cash equivalents $ 691,816 $ 527,843 Restricted cash included in other current assets - 33,204 Restricted cash included in other long-term assets 125 134 Total cash, cash equivalents and restricted cash reported on the Consolidated Statements of Cash Flows $ 691,941 $ 561,181 As of December 31, 2023, restricted cash included in other current assets was related to preliminary purchase consideration held in a trust account in connection with the Company’s acquisition of Axign. 57 Table of Contents 5. FAIR VALUE MEASUREMENTS Fair Value Hierarchy The Company has estimated the fair value of its financial assets by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: ● Level 1—includes instruments with quoted prices in active markets for identical assets. ● Level 2—includes instruments for which the valuations are based upon quoted market prices in active markets involving similar assets or inputs other than quoted prices that are observable for the assets. The market inputs used to value these instruments generally consist of market yields, recently executed transactions, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third-party sources used to determine a daily market value. ● Level 3—includes instruments for which the valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Financial Assets Measured at Fair Value on a Recurring Basis The following table details the fair value of the financial assets measured on a recurring basis (in thousands): December 31, 2024 Total Level 1 Level 2 Level 3 Money market funds $ 11,867 $ 11,867 $ - $ - Certificates of deposit 164,418 - 164,418 - Corporate debt securities 6,712 - 6,712 - Auction-rate securities backed by student-loan notes 148 - - 148 Mutual funds and money market funds under deferred compensation plan 65,337 65,337 - - Total $ 248,482 $ 77,204 $ 171,130 $ 148 December 31, 2023 Total Level 1 Level 2 Level 3 Money market funds $ 135,514 $ 135,514 $ - $ - Certificates of deposit 127,123 - 127,123 - Corporate debt securities 95,101 - 95,101 - U.S. treasuries and government agency bonds 358,409 - 358,409 - Auction-rate securities backed by student-loan notes 567 - - 567 Mutual funds and money market funds under deferred compensation plan 54,836 54,836 - - Total $ 771,550 $ 190,350 $ 580,633 $ 567 Redemptions and changes in the fair value of the auction-rate securities classified as Level 3 assets were not material for the periods presented. 58 Table of Contents 6. BALANCE SHEET COMPONENTS Inventories Inventories consist of the following (in thousands): December 31, 2024 2023 Raw materials $ 91,851 $ 118,917 Work in process 169,982 112,750 Finished goods 157,778 152,035 Total $ 419,611 $ 383,702 Other Current Assets Other current assets consist of the following (in thousands): December 31, 2024 2023 Other receivables (1) $ 60,000 $ 50,000 Prepaid expenses 36,083 28,964 RSU tax withholding proceeds receivable 10 20,141 Restricted cash (2) - 33,204 Other 13,885 15,154 Total $ 109,978 $ 147,463 (1) Other receivables relate to a deposit made to a supplier under a long-term wafer supply agreement. See Note 13 for details about the supply agreement. (2) The restricted cash as of December 31, 2023 was related to preliminary purchase consideration held in a trust account in connection with the Company’s acquisition of Axign. Property and Equipment, Net Property and equipment, net, consist of the following (in thousands): December 31, 2024 2023 Land $ 50,681 $ 48,490 Production equipment and software 340,691 270,390 Buildings and improvements 224,490 205,132 Transportation equipment 72,044 28,641 Leasehold improvements 18,301 17,052 Furniture and fixtures 13,472 11,711 Construction in progress 27,477 16,980 Property and equipment, gross 747,156 598,396 Less: accumulated depreciation and amortization ( 252,211 ) ( 229,444 ) Total $ 494,945 $ 368,952 Depreciation and amortization expense on property and equipment was $ 35.1 million, $ 40.0 million and $ 36.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Other Long-Term Assets Other long-term assets consist of the following (in thousands): December 31, 2024 2023 Deferred compensation plan assets $ 92,586 $ 78,381 Prepaid wafer purchases (1) 60,000 120,000 Operating lease ROU and related assets (2) 34,198 8,355 Other 7,593 4,541 Total $ 194,377 $ 211,277 (1) Prepaid wafer purchases relate to a deposit made to a supplier under a long-term wafer supply agreement. See Note 13 for details about the supply agreement. (2) The operating lease ROU and related assets as of December 31, 2024 includes a fair value measurement related to favorable market terms on a facility lease. 59 Table of Contents Other Accrued Liabilities Other accrued liabilities consist of the following (in thousands): December 31, 2024 2023 Dividends and dividend equivalents $ 60,622 $ 57,697 Stock rotation and sales returns 20,799 18,843 Other 46,702 39,251 Total $ 128,123 $ 115,791 Other Long-Term Liabilities Other long-term liabilities consist of the following (in thousands): December 31, 2024 2023 Deferred compensation plan liabilities $ 93,653 $ 80,903 Dividend equivalents 4,943 2,187 Operating lease liabilities 12,974 5,565 Total $ 111,570 $ 88,655 7. LEASES The Company has operating leases primarily for administrative, sales and marketing offices, manufacturing operations and R&D facilities, employee housing units and certain equipment. These leases have remaining lease terms from less than one year to 20 years. Some of these leases include options to renew the lease term for up to five years or on a month-to-month basis. The Company does not have finance lease arrangements. The following table summarizes the balances of operating lease ROU assets and liabilities (in thousands): December 31, Financial Statement Line Item 2024 2023 Operating lease ROU assets Other long-term assets $ 16,915 $ 8,355 Operating lease liabilities Other accrued liabilities $ 2,819 $ 2,303 Other long-term liabilities $ 12,974 $ 5,565 The following tables summarize certain information related to the leases (in thousands, except percentages and years): Year Ended December 31, 2024 2023 2022 Lease costs: Operating lease costs $ 3,903 $ 3,113 $ 2,704 Other 2,840 2,120 1,769 Total lease costs $ 6,743 $ 5,233 $ 4,473 Year Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 4,346 $ 2,954 $ 2,762 ROU assets obtained in exchange for new operating lease liabilities $ 11,940 $ 7,081 $ 1,175 December 31, 2024 2023 Weighted-average remaining lease term (in years) 11.5 4.7 Weighted-average discount rate 5.5 % 4.3 % As of December 31, 2024, the maturities of the lease liabilities were as follows (in thousands): 2025 $ 3,618 2026 2,725 2027 2,292 2028 1,561 2029 1,190 Thereafter 11,461 Total remaining lease payments 22,847 Less: imputed interest ( 7,054 ) Total lease liabilities $ 15,793 As of December 31, 2024, the operating leases that had not yet commenced were not material. 60 Table of Contents 8. STOCK-BASED COMPENSATION 2014 Equity Incentive Plan In April 2013, the Board of Directors adopted the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which the Company’s stockholders approved in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The amended 2014 Plan became effective on November 13, 2014 and provided for the issuance of up to 5.5 million shares. In April 2020, the Board of Directors further amended and restated the amended 2014 Plan (the “Amended and Restated 2014 Plan”), which the Company’s stockholders approved in June 2020. The Amended and Restated 2014 Plan became effective on June 11, 2020 and provides for the issuance of up to 10.5 million shares. The Amended and Restated 2014 Plan will cease being available for new awards on June 11, 2030. As of December 31, 2024, 3.8 million shares remained available for future issuance under the Amended and Restated 2014 Plan. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows (in thousands): Year Ended December 31, 2024 2023 2022 Cost of revenue $ 6,305 $ 4,545 $ 4,721 Research and development 45,626 36,611 35,355 Selling, general and administrative 153,709 108,555 120,916 Total stock-based compensation expense $ 205,640 $ 149,711 $ 160,992 Tax benefit related to stock-based compensation (1) $ 3,040 $ 2,519 $ 2,498 (1) Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods. Equity awards granted to the Company’s executive officers are subject to the tax deduction limitations set by Section 162(m) of the IRC. RSUs The Company’s RSUs include time-based RSUs, PSUs, MSUs, and MPSUs. Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance or market goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with or service to the Company. A summary of RSU activity is presented in the table below (in thousands, except per share amounts): Time-Based RSUs PSUs and MPSUs MSUs Total Number of Shares Weighted-Average Grant Date Fair Value Per Share Number of Shares Weighted-Average Grant Date Fair Value Per Share Number of Shares Weighted-Average Grant Date Fair Value Per Share Number of Shares Weighted-Average Grant Date Fair Value Per Share Outstanding at January 1, 2022 125 $ 235.82 1,166 $ 222.78 1,218 $ 44.59 2,509 $ 136.87 Granted 49 $ 390.89 35 (1 )(2) $ 385.80 917 $ 199.63 1,001 $ 215.63 Vested ( 61 ) $ 193.18 ( 452 ) $ 147.78 ( 324 ) $ 23.57 ( 837 ) $ 103.02 Forfeited ( 7 ) $ 316.00 ( 1 ) $ 377.86 ( 6 ) $ 216.37 ( 14 ) $ 275.47 Outstanding at December 31, 2022 106 $ 327.13 748 $ 275.70 1,805 $ 126.57 2,659 $ 176.50 Granted 51 $ 472.38 281 (1 ) $ 449.38 31 $ 330.95 363 $ 444.86 Vested ( 49 ) $ 296.65 ( 543 ) $ 257.24 ( 319 ) $ 23.57 ( 911 ) $ 177.54 Forfeited ( 6 ) $ 387.61 ( 4 ) $ 315.19 ( 15 ) $ 110.65 ( 25 ) $ 209.23 Outstanding at December 31, 2023 102 $ 411.11 482 $ 397.77 1,502 $ 152.89 2,086 $ 222.04 Granted 33 $ 653.66 369 (1 ) $ 578.36 - $ - 402 $ 584.49 Vested ( 46 ) $ 385.06 ( 169 ) $ 282.62 ( 563 ) $ 68.48 ( 778 ) $ 133.62 Forfeited ( 4 ) $ 482.83 ( 1 ) $ 409.27 ( 1 ) $ 270.15 ( 6 ) $ 432.32 Outstanding at December 31, 2024 85 $ 516.12 681 $ 524.08 938 $ 203.32 1,704 $ 347.01 (1) Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period. (2) Amount included grants and cancellations of the 2022 Executive PSUs as defined under the “2022 PSUs” section. 61 Table of Contents The intrinsic value related to vested RSUs was $ 513.0 million, $ 461.3 million and $ 336.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, the total intrinsic value of all outstanding RSUs was $ 990.0 million, based on the closing stock price of $ 591.70 . As of December 31, 2024, unamortized compensation expense related to all outstanding RSUs was $ 261.0 million with a weighted-average remaining recognition period of approximately two years. There were no cash proceeds from vested PSUs with a purchase price for the year ended December 31, 2024. Cash proceeds from vested PSUs with a purchase price totaled $ 1.1 million and $ 5.4 million for the years ended December 31, 2023, and 2022, respectively. Time-Based RSUs For the years ended December 31, 2024, 2023 and 2022, the Compensation Committee granted 33,000 , 51,000 and 49,000 RSUs, respectively, with service conditions to non-executive employees and non-employee directors. The RSUs generally vest over four years for employees and one year for directors, subject to continued service with the Company. PSUs and MPSUs 2024 PSUs: In February 2024, the Compensation Committee granted 50,000 PSUs to the executive officers, which represent the target number of shares that can be earned based on the degree of achievement of three sets of independent performance goals (“2024 Executive PSUs”). For the first goal, the executive officers can earn up to 300 % of the target number of the 2024 Executive PSUs based on the achievement of the Company’s average three-year (2024 through 2026) revenue growth rate in excess of the analog industry’s average three-year revenue growth rate as published by the Semiconductor Industry Association (the “SIA”). For the second goal, the executive officers can earn 100 % of the target number of the 2024 Executive PSUs if the Company achieves a reduction in 2026 of 25% global combined Scope 1 and Scope 2 greenhouse gas emissions against the 2022 baseline. For the third goal, the executive officers can earn 50 % of the target number of the 2024 Executive PSUs if more than one-third of the Company’s total 2026 revenue in the automotive end market is generated from Electronic Vehicle (“EV”) automakers. In addition, for the third goal, the executive officers can earn 50 % of the target number of the 2024 Executive PSUs if total 2026 revenue from products enabling EV powertrains and EV 48V systems grows to 200% of the 2023 baseline. For the first goal, a percentage of the 2024 Executive PSUs will fully vest on December 31, 2026, depending on the degree to which the pre-determined goal is met during the performance period. The 2024 Executive PSUs related to the second and the third goal will fully vest on December 31, 2026 if the pre-determined goals are met during the performance period. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2024 Executive PSUs is $ 154.3 million. In February 2024, the Compensation Committee granted 11,000 PSUs to certain non-executive employees, which represent the target number of shares that can be earned based on the degree of achievement of the Company’s 2025 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two-year (2024 and 2025) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA (“2024 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200 % or 300 % of the target number of the 2024 Non-Executive PSUs, depending on the job classification of the employee. 50 % of the 2024 Non-Executive PSUs will vest in the first quarter of 2026 depending on the degree to which the pre-determined goals are met during the performance period. The remaining 2024 Non-Executive PSUs will vest over the following two years on a quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2024 Non-Executive PSUs is $ 17.6 million. The 2024 Executive PSUs and the 2024 Non-Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $ 30 per share upon vesting of the shares. The $30 purchase price requirement is deemed satisfied and waived if the Company’s stock price on the last trading day of the associated performance period is $30 higher than the grant date stock price of $ 632.98 . The Company determined the grant date fair value of the 2024 Executive PSUs and the 2024 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 632.98 , simulation term of three years, expected volatility of 49.4 %, risk-free interest rate of 4.1 %, and expected dividend yield of 0.8 %. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions. 62 Table of Contents 2023 PSUs: In February 2023, the Compensation Committee granted 69,000 PSUs to the executive officers, which represent the target number of shares that can be earned based on the degree of achievement of two sets of performance goals (“2023 Executive PSUs”). For the first goal, the executive officers can earn up to 300 % of the target number of the 2023 Executive PSUs based on the achievement of the Company’s average three-year (2023 through 2025) revenue growth rate in excess of the analog industry’s average three-year revenue growth rate as published by the SIA. For the second goal, the executive officers can earn up to an additional 200 % of the target number of the 2023 Executive PSUs if the Company secures additional manufacturing capacity outside China during the three-year performance period. For both goals, a percentage of the 2023 Executive PSUs will fully vest on December 31, 2025, depending on the degree to which the pre-determined goals are met during the performance periods. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2023 Executive PSUs is $ 156.2 million. In February 2023, the Compensation Committee granted 13,000 PSUs to certain non-executive employees, which represented the target number of shares that could be earned based on the degree of achievement of the Company’s 2024 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two-year (2023 and 2024) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA (“2023 Non-Executive PSUs”). The maximum number of shares that an employee could earn was either 200 % or 300 % of the target number of the 2023 Non-Executive PSUs, depending on the job classification of the employee. Based on the actual revenue achievement at the end of the performance period, a total of 23,000 shares were awarded to the non-executive employees. 50 % of the 2023 Non-Executive PSUs will vest in the first quarter of 2025. The remaining 2023 Non-Executive PSUs vest over the following two years on an annual or quarterly basis. Based on the actual achievement of the performance goals, the total stock-based compensation cost for the 2023 Non-Executive PSUs is $ 10.4 million. The 2023 Executive PSUs and the 2023 Non-Executive PSUs contained a purchase price feature, which required the employees to pay the Company $ 30 per share upon vesting of the shares. The $30 purchase price requirement is deemed satisfied and waived if the Company’s stock price on the last trading day of the performance period is $30 higher than the grant date stock price of $ 467.62 . This market condition was achieved for the 2023 Non-Executive PSUs. The Company determined the grant date fair value of the 2023 Executive PSUs and the 2023 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 467.62 , simulation term of four years, expected volatility of 51.0 %, risk-free interest rate of 3.9 %, and expected dividend yield of 0.9 %. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions. 2022 PSUs: In February 2022, the Compensation Committee granted 81,000 PSUs to the executive officers, which represented the target number of shares that could be earned subject to the achievement of two sets of performance goals (“2022 Executive PSUs”). For the first goal, the executive officers could earn up to 300 % of the target number of the 2022 Executive PSUs based on the achievement of the Company’s average two-year (2022 and 2023) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA. 50 % of the 2022 Executive PSUs would vest in the first quarter of 2024 if the pre-determined revenue goal was met during the performance period. The remaining 2022 Executive PSUs would vest over the following two years on a quarterly basis. For the second goal, the executive officers could earn up to an additional 200 % of the target number of the 2022 Executive PSUs if the Company secured additional wafer capacity during a three-year performance period. The 2022 Executive PSUs related to the second goal would fully vest in the first quarter of 2025 if the pre-determined goal was met during the performance period. In addition, all vested shares related to the second goal would be subject to a post-vesting sales restriction period of one year. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2022 Executive PSUs would be $ 142.7 million. The 2022 Executive PSUs were subsequently cancelled by the Board of Directors in October 2022. See the “2022 MSUs” section for further details. In February 2022, the Compensation Committee granted 14,000 PSUs to certain non-executive employees, which represented the target number of shares that could be earned subject to the achievement of the Company’s 2023 revenue goals for certain regions or product line divisions, or based on the achievement of the Company’s average two-year (2022 and 2023) revenue growth rate compared against the analog industry’s average two -year revenue growth rate as published by the SIA (“2022 Non-Executive PSUs”). The maximum number of shares that an employee could earn was either 200 % or 300 % of the target number of the 2022 Non-Executive PSUs, depending on the job classification of the employee. Based on the actual revenue achievement at the end of the performance period, a total of 29,000 shares were awarded to the non-executive employees. 50 % of the 2022 Non-Executive PSUs vested in the first quarter of 2024. The remaining 2022 Non-Executive PSUs vest over the following two years on an annual or quarterly basis. Based on the actual achievement of the performance goals, the total stock-based compensation cost for the 2022 Non-Executive PSUs is $ 10.9 million. 63 Table of Contents The 2022 Executive PSUs and the 2022 Non-Executive PSUs contained a purchase price feature, which required the employees to pay the Company $ 30 per share upon vesting of the shares. The $30 purchase price requirement was deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time during 2022 and 2023 was $30 higher than the grant date stock price of $ 393.16 . This market condition was achieved in the first quarter of 2022. The Company determined the grant date fair value of the 2022 Executive PSUs for the first goal and the 2022 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 393.16 , simulation term of four years, expected volatility of 44.6 %, risk-free interest rate of 1.5 %, and expected dividend yield of 0.8 %. In addition, for the 2022 Executive PSUs related to the second goal, the fair value was determined based on the closing stock price at the end of each reporting period, adjusted for accrued dividends and an illiquidity discount of 10.3 % to account for the post-vesting sales restrictions. 2021 PSUs: In February 2021, the Compensation Committee granted 80,000 PSUs to the executive officers, which represented the target number of shares that could be earned subject to the achievement of two sets of performance goals (“2021 Executive PSUs”). For the first goal, the executive officers could earn up to 300 % of the target number of the 2021 Executive PSUs based on the achievement of the Company’s average two -year (2021 and 2022) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA. Based on the actual revenue achievement at the end of the performance period, a total of 240,000 shares were awarded to the executive officers. 50 % of the 2021 Executive PSUs vested in the first quarter of 2023. The remaining 2021 Executive PSUs vest over the following two years on a quarterly basis. For the second goal, the executive officers could earn an additional 100% of the target number of the 2021 Executive PSUs subject to the achievement of three environmental objectives under the Company’s ESG initiatives with a performance period through December 31, 2023. As of December 31, 2023, all three environmental objectives were achieved and a total of 80,000 shares were awarded to the executive officers. The 2021 Executive PSUs related to the ESG goal fully vested upon achievement of the objectives. All vested shares related to the ESG goal were subject to a post-vesting sales restriction period of one year. Based on the actual achievement of the performance goals, the total stock-based compensation cost for the 2021 Executive PSUs is $ 114.4 million. In February 2021, the Compensation Committee granted 14,000 PSUs to certain non-executive employees, which represented the target number of shares that could be earned subject to the achievement of the Company’s 2022 revenue goals for certain regions or product line divisions, or based on the achievement of the Company’s average two-year (2021 and 2022) revenue growth rate compared against the analog industry’s average two -year revenue growth rate as published by the SIA (“2021 Non-Executive PSUs”). The maximum number of shares that an employee could earn was either 200 % or 300 % of the target number of the 2021 Non-Executive PSUs, depending on the job classification of the employee. Based on the actual revenue achievement at the end of the performance period, a total of 33,000 shares were awarded to the non-executive employees. 50 % of the 2021 Non-Executive PSUs vested in the first quarter of 2023. The remaining 2021 Non-Executive PSUs vest over the following two years on an annual or quarterly basis. Based on the actual achievement of the performance goals, the total stock-based compensation cost for the 2021 Non-Executive PSUs is $ 11.8 million. The 2021 Executive PSUs and the 2021 Non-Executive PSUs contained a purchase price feature, which required the employees to pay the Company $ 30 per share upon vesting of the shares. The $30 purchase price requirement was deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time between the grant date and December 31, 2022 was $30 higher than the grant date stock price of $ 374.57 . This market condition was achieved in the third quarter of 2021. The Company determined the grant date fair value of the 2021 Executive PSUs and the 2021 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 374.57 , simulation term of 4.0 years, expected volatility of 41.4 %, risk-free interest rate of 0.3 %, and expected dividend yield of 0.6 %. In addition, the grant date fair value for the 2021 Executive PSUs subject to the ESG goal included an illiquidity discount of 9.8 % to account for the post-vesting sales restrictions. MSUs 2022 MSUs: In October 2022, the Compensation Committee cancelled the 2022 Executive PSUs and granted 159,000 MSUs to the executive officers as replacement awards, which represented the target number of shares that could be earned subject to the achievement of both stock price targets and stock performance compared to the companies comprising the Philadelphia Semiconductor Sector Index (“Peer Group”) over a three -year performance period from October 25, 2022 to October 25, 2025 (“2022 Executive MSUs”). The maximum number of shares that an executive officer could earn was 500 % of the target number of the 2022 Executive MSUs if: (1) the Company achieved five stock price targets ranging from $ 455 to $ 591 at any time during the performance period, and (2) the Company’s total stockholder return ranked in the 50th percentile or above relative to the Peer Group at the end of the performance period. As of December 31, 2024, all price targets have been achieved. Upon achievement of the performance conditions, the 2022 Executive MSUs will fully vest on October 25, 2025. Under modification accounting, the total stock-based compensation cost was $ 119.2 million, which was subsequently updated to $ 124.3 million due to a change of application of accounting methodology. The total stock-based compensation cost of $ 124.3 million included the unamortized expense of $ 102.8 million related to 2022 Executive PSUs on the modification date and the incremental cost of $ 21.5 million related to the 2022 Executive MSUs as a result of the modification. The Company determined the grant date fair value of the 2022 Executive MSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 342.16 , simulation term of three years, expected volatility of 54.0 %, risk-free interest rate of 4.4 %, and an expected dividend yield of 0.9 %. There was no illiquidity discount because the awards did not contain any post-vesting sales restrictions. In February 2022, the Compensation Committee granted 24,000 MSUs to certain non-executive employees, which represented the target number of shares that could be earned upon achievement of stock price targets (“2022 Non-Executive MSUs”). The maximum number of shares that an employee could earn was 500 % of the target number of the 2022 Non-Executive MSUs if the Company achieved five stock price targets ranging from $ 472 to $ 590 during a performance period from February 3, 2022 to February 3, 2025. As of December 31, 2023, the Company had achieved all stock price targets. Accordingly, the non-executive employees were awarded a total of 113,000 shares. The 2022 Non-Executive MSUs will vest in equal amounts on each of the first, second and third anniversaries of February 3, 2025. The total stock-based compensation cost for the 2022 Non-Executive MSUs is $ 29.8 million. 64 Table of Contents The Company determined the grant date fair value of the 2022 Non-Executive MSUs using a Monte Carlo simulation model with the following assumptions: stock price of $ 393.16 , simulation term of six years, expected volatility of 39.0 %, risk-free interest rate of 1.7 %, and expected dividend yield of 0.8 %. 9. STOCKHOLDERS’ EQUITY Cash Dividend Program The Company has a dividend program approved by its Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. Based on the Company’s historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. The Board of Directors declared the following cash dividends (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Dividend declared per share $ 5.00 $ 4.00 $ 3.00 Total amount $ 242,459 $ 190,642 $ 140,337 As of December 31, 2024 and 2023, accrued dividends totaled $ 59.8 million and $ 47.9 million, respectively. The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the Company’s stockholders. The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from certain foreign subsidiaries. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested. Cash Dividend Equivalent Rights The Company’s RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. As of December 31, 2024 and 2023 , accrued dividend equivalents totaled $ 5.8 million and $ 11.9 million, respectively. Stock Repurchase Program In October 2023, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $ 640.0 million of its common stock through October 29, 2026. Shares were retired upon repurchase. The Company repurchased approximately 1.0 million and 7,000 shares of its common stock for an aggregate purchase price of $ 636.2 million and $ 3.7 million during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the authorized amount under this program was utilized. The U.S. Inflation Reduction Act of 2022 (the “IRA”) requires a 1% excise tax of the value of certain stock repurchases in excess of stock issued for employee compensation made after December 31, 2022, which was not material for the years ended December 31, 2024 and 2023, respectively. 65 Table of Contents 10. OTHER INCOME (EXPENSE), NET The components of other income (expense), net, were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Interest income $ 27,093 $ 23,363 $ 14,369 Amortization of discount (premium) on available-for-sale securities, net 20,145 5,277 ( 4,375 ) Gain (loss) on deferred compensation plan investments 9,400 8,505 ( 6,600 ) Charitable contributions ( 23,742 ) ( 14,850 ) ( 5,900 ) Gain on sale of equity investment - 1,424 - Other 658 386 658 Total $ 33,554 $ 24,105 $ ( 1,848 ) 11. NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Numerator: Net income $ 1,786,700 $ 427,374 $ 437,672 Denominator: Weighted-average outstanding shares—basic 48,599 47,610 46,727 Effect of dilutive securities 236 1,161 1,631 Weighted-average outstanding shares—diluted 48,835 48,771 48,358 Net income per share: Basic $ 36.76 $ 8.98 $ 9.37 Diluted $ 36.59 $ 8.76 $ 9.05 Anti-dilutive common stock equivalents were not material for the periods presented. 66 Table of Contents 12. INCOME TAXES The components of income before income taxes were as follows (in thousands): Year Ended December 31, 2024 2023 2022 U.S. $ ( 46,263 ) $ ( 15,066 ) $ ( 30,190 ) Foreign 619,175 520,907 555,127 Income before income taxes $ 572,912 $ 505,841 $ 524,937 The components of the income tax expense (benefit), net were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal $ 72,576 $ 61,064 $ 95,176 State 348 4,257 12 Foreign 11,155 5,702 5,019 Deferred: Federal 2,773 ( 1,705 ) ( 8,523 ) State 160 ( 744 ) - Foreign ( 1,300,800 ) 9,893 ( 4,419 ) Income tax expense (benefit), net $ ( 1,213,788 ) $ 78,467 $ 87,265 The effective tax rate differed from the applicable U.S. statutory federal income tax rate as follows: Year Ended December 31, 2024 2023 2022 U.S. statutory federal tax rate 21.0 % 21.0 % 21.0 % Foreign income at lower rates ( 21.4 ) ( 21.9 ) ( 22.8 ) U.S. tax impact of foreign earnings and losses 15.1 14.5 16.3 Changes in valuation allowance 626.6 2.9 0.2 Stock-based compensation 1.9 2.2 2.8 Return to provision true-up adjustment ( 0.1 ) ( 2.0 ) - Tax attributes, net of reserves ( 247.2 ) ( 1.3 ) ( 1.0 ) Effects of intercompany transactions ( 608.5 ) - - Other adjustments 0.7 0.1 0.1 Effective tax rate ( 211.9 )% 15.5 % 16.6 % The prior years’ tax attributes, net of reserves and other adjustments has been disaggregated to conform with the current-year presentation. In 2024, one of the Company’s foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025. A deferred tax benefit of approximately $ 1.3 billion, net of $ 0.1 billion of valuation allowance, was recorded during the year ended December 31, 2024 to reflect the estimated future reductions in cash tax paid in that jurisdiction associated with the incentive. In December 2024, the Company completed an intercompany transaction that resulted in one of its foreign subsidiaries recording a step up in the tax basis of intangible assets of approximately $ 23.2 billion. This resulted in a deferred tax difference between the U.S. GAAP basis and local tax basis of the specified intangibles. The Company does not expect to realize the deferred tax asset for U.S. GAAP purposes; therefore, the Company has recorded a full valuation allowance as of December 31, 2024. In January 2025, the OECD released new Administrative Guidance on the application of the Global Anti-Base Erosion (“GloBE”) Model Rules. The Company will continue to evaluate the impact of this release or of other prospective guidance on its future global tax provision. 67 Table of Contents The components of net deferred tax assets consist of the following (in thousands): December 31, 2024 2023 Deferred tax assets: Tax attributes $ 1,465,666 $ 49,633 Depreciation and amortization 3,465,739 - Stock-based compensation 3,432 3,404 Deferred compensation 11,202 11,126 Other expenses not currently deductible 9,505 7,755 Deferred tax assets, gross 4,955,544 71,918 Valuation allowance ( 3,624,567 ) ( 35,008 ) Deferred tax assets, net of valuation allowance 1,330,977 36,910 Deferred tax liabilities: Depreciation and amortization - ( 6,420 ) Undistributed foreign earnings ( 953 ) ( 817 ) Other expenses currently deductible ( 3,184 ) ( 1,619 ) Deferred tax liabilities ( 4,137 ) ( 8,856 ) Net deferred tax assets $ 1,326,840 $ 28,054 The prior years’ tax credits and net operating loss components of deferred tax assets have been aggregated within the tax attributes line to conform with the current-year presentation. GILTI: The Company accounts for GILTI as a period cost. Valuation Allowance: The Company periodically evaluates its deferred tax assets, including a determination of whether a valuation allowance is necessary, based upon its ability to utilize the assets using a more likely than not analysis. The realizability of the Company’s most significant deferred tax asset is dependent on its ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. As of December 31, 2024 and 2023, the Company has evaluated the realization of its deferred tax assets and recorded a valuation allowance for assets that do not meet the more-likely-than-not recognition threshold. A reconciliation of the beginning and ending balance of valuation allowances was as follows (in thousands): Period Balance at Beginning of Period Additions Reductions Balance at End of Period Year ended December 31, 2022 $ 19,520 $ 1,743 $ ( 942 ) $ 20,321 Year ended December 31, 2023 $ 20,321 $ 15,405 $ ( 718 ) $ 35,008 Year ended December 31, 2024 $ 35,008 $ 3,591,638 $ ( 2,079 ) $ 3,624,567 The additions in 2024 were primarily the result of the step up in tax basis of intangible assets and a tax incentive received by one of our foreign subsidiaries. The Company has evaluated the deferred tax assets generated by each of these events and recorded a valuation allowance for any deferred tax assets that are not realizable on a more-likely-than-not basis. Undistributed Earnings of Subsidiaries: The Company has analyzed its global working capital and cash requirements, and has determined that it plans to repatriate cash from a foreign subsidiary on an ongoing basis to fund its future U.S.-based expenditures, stock repurchases and dividends. For the years ended December 31, 2024 and 2023, the Company repatriated $ 642.0 million and $ 140.0 million from a foreign subsidiary, respectively. No cash was repatriated from the subsidiary during the year ended December 31, 2022. For all other foreign subsidiaries, the Company expects to indefinitely reinvest undistributed earnings to fund their operations and R&D. As of December 31, 2024 and 2023, the undistributed earnings were approximately $ 108.2 million and $ 85.0 million, respectively. An actual repatriation of the undistributed earnings could be subject to additional foreign withholding taxes and U.S. state taxes. The Company expects to be able to take a dividend received deduction to offset any U.S. federal income tax liability on the undistributed earnings. Determination of the unrecognized state and withholding deferred tax liability is not practicable at this time due to the complexities associated with the hypothetical calculation. 68 Table of Contents Other Income Tax Provision Matters As of December 31, 2024, the Company did not have federal net operating loss carryforwards. As of December 31, 2024, the state net operating loss carryforwards for income tax purposes were $ 4.3 million, which will expire beginning in 2030. As of December 31, 2024, the Company has foreign net operating loss carryforwards for income tax purposes of $ 170.0 million, $ 3.7 million of which can be carried forward indefinitely, while $ 166.3 million will expire beginning in 2029. As of December 31, 2024, the Company had no R&D tax credit carryforwards for federal income tax purposes. As of December 31, 2024, the Company has $ 44.7 million for state income tax purposes, which can be carried forward indefinitely. In the event of a change in ownership, as defined under federal and state tax laws, the Company’s net operating loss and tax credit carryforwards could be subject to annual limitations. The annual limitations could result in the expiration of the net operating loss and tax credit carryforwards prior to utilization. As of December 31, 2024, the Company had $ 74.4 million of unrecognized tax benefits, $ 58.9 million of which would affect its effective tax rate if recognized after considering the valuation allowance. As of December 31, 2023, the Company had $ 62.7 million of unrecognized tax benefits, $ 48.9 million of which would affect its effective tax rate if recognized after considering the valuation allowance. A reconciliation of the gross unrecognized tax benefits was as follows (in thousands): Balance as of January 1, 2022 $ 41,521 Increase for tax position of current year 10,965 Increase for tax position of prior year 247 Decrease due to settlement with tax authorities ( 970 ) Decrease due to lapse of statute of limitation ( 2,486 ) Balance as of December 31, 2022 49,277 Increase for tax position of current year 14,108 Increase for tax position of prior year 2,209 Decrease due to settlement with tax authorities ( 1,926 ) Decrease due to lapse of statute of limitation ( 1,008 ) Balance as of December 31, 2023 62,660 Increase for tax position of current year 18,125 Increase for tax position of prior year 2,180 Decrease due to lapse of statute of limitation ( 8,579 ) Balance as of December 31, 2024 $ 74,386 The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision. As of December 31, 2024 and 2023, the Company has $ 6.3 million and $ 5.7 million, respectively, of accrued interest related to uncertain tax positions, which were recorded in income tax liabilities on the Consolidated Balance Sheets.   The Company is not aware of any facts that would materially change the balance of gross unrecognized tax benefits in the next 12 months.   The Company currently has reduced tax rates in its subsidiaries in Chengdu and Hangzhou, China through 2025 and 2024, respectively, for performing R&D activities. In December 2023, the Bermuda CIT Act was enacted and signed into law. The Bermuda CIT Act includes a 15% CIT applicable to Bermuda businesses that are MNE groups with annual revenue of €750M or more beginning in 2025. As the Bermuda CIT Act is not effective until January 1, 2025, and the Company does not expect to realize material taxable income in Bermuda in 2025, no changes to income tax expense related to the Bermuda CIT Act have been recorded as of December 31, 2024. Income Tax Examination The Company is subject to examination of its income tax returns by the IRS and other tax authorities. In general, the tax years for 2007 and forward are open for examination for U.S. federal and state income tax purposes. 69 Table of Contents 13. COMMITMENTS AND CONTINGENCIES Warranty and Indemnification Provisions The changes in warranty reserves were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Balance at beginning of period $ 16,906 $ 24,082 $ 20,989 Warranties issued 3,576 2,929 3,092 Repairs, replacement and refund ( 9,275 ) ( 2,708 ) ( 2,357 ) Changes in liability for pre-existing warranties ( 5,806 ) ( 7,397 ) 2,358 Balance at end of period $ 5,401 $ 16,906 $ 24,082 Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods. The Company provides indemnification agreements to certain direct or indirect customers. The Company agrees to reimburse these parties for any damages, costs and expenses incurred by them as a result of legal actions taken against them by third parties for infringing upon their intellectual property rights as a result of using the Company’s products and technologies. These indemnification provisions are varied in scope and are subject to certain terms, conditions, limitations and exclusions. In addition, the Company has entered into indemnification agreements with its directors and officers. It is not possible to predict the maximum potential amount of future payments under these agreements due to the limited history of indemnification claims and the unique facts and circumstances involved in each particular agreement. There were no indemnification liabilities incurred for the periods presented. However, there can be no assurances that the Company will not incur any financial liabilities in the future as a result of these obligations. Purchase Commitments The Company has outstanding purchase obligations with its suppliers and other parties that require the purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. In May 2022, the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of December 31, 2024, the Company had remaining prepayments under this agreement of $ 60.0 million reported in other long-term assets on the Consolidated Balance Sheets. Total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $60.0 million prepayment, as of December 31, 2024 were as follows (in thousands): 2025 $ 569,637 2026 17,897 2027 29,252 Total $ 616,786 Litigation The Company is a party to actions and proceedings in the ordinary course of business, including challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. The Company has also been subject to litigation initiated by its stockholders. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. As of December 31, 2024 , there were no material pending legal proceedings to which the Company was a party. 70 Table of Contents 14. EMPLOYEE 401(k) PLAN The Company sponsors a 401(k) retirement savings plan for all employees in the U.S. who meet certain eligibility requirements. Participants may contribute up to the amount allowable as a deduction for federal income tax purposes. The Company was not required to contribute, and did not contribute, to the plan for the years ended December 31, 2024, 2023 and 2022. 15. SIGNIFICANT CUSTOMERS The Company sells its products primarily through third-party distributors and value-added resellers. In addition, the Company sells directly to OEMs, ODMs and end customers. The following table summarizes those customers with sales equal to 10% or more of the Company’s total revenue: Year Ended December 31, Customer 2024 2023 2022 Distributor A 31 % 26 % 24 % Distributor B 20 % 19 % 19 % Distributor C * 10 % * * Represents less than 10%. The Company’s agreements with these third-party distributors were made in the ordinary course of business and may be terminated with or without cause by these distributors with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors were terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a short period following any termination of the agreement with a distributor. The following table summarizes those customers with accounts receivable equal to 10% or more of the Company’s total accounts receivable: December 31, Customer 2024 2023 Distributor A 28 % 42 % Distributor B 29 % 13 % Distributor C * 10 % * Represents less than 10%. 71 Table of Contents 16. SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the storage and computing, enterprise data, automotive, industrial, communications and consumer end markets. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Specifically, the CODM uses net income that is reported on the Consolidated Statements of Operations and cash provided by operating activities reported in the Consolidated Statements of Cash Flows to decide whether and how much to reinvest profits into core business operations or to return to stockholders in the form of stock repurchases and dividends. All significant segment expenses have been captured on the face of the Consolidated Statements of Operations. The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations. The following is a summary of revenue by geographic region (in thousands): Year Ended December 31, Country or Region 2024 2023 2022 China $ 1,178,341 $ 934,768 $ 938,946 Taiwan 577,956 307,499 233,040 South Korea 167,899 169,867 189,478 Europe 86,899 132,620 145,584 Southeast Asia 78,765 85,150 95,739 Japan 61,695 93,340 91,048 U.S. 55,235 97,294 99,804 Other 310 534 509 Total $ 2,207,100 $ 1,821,072 $ 1,794,148 The following is a summary of long-lived assets by geographic region (in thousands): December 31, Country 2024 2023 China $ 237,649 $ 184,685 U.S. 171,514 119,430 Taiwan 42,388 39,419 Other 43,394 25,418 Total $ 494,945 $ 368,952 17. ACCUMULATED OTHER COMPREHENSIVE LOSS The following table summarizes the changes in accumulated other comprehensive loss (in thousands): Unrealized Losses on Available-for-Sale Securities Foreign Currency Translation Adjustments Total Balance as of January 1, 2023 $ ( 7,727 ) $ ( 15,350 ) $ ( 23,077 ) Other comprehensive income (loss) before reclassifications 6,896 ( 9,528 ) ( 2,632 ) Amounts reclassified from accumulated other comprehensive income ( 1 ) - ( 1 ) Tax effect ( 1,352 ) - ( 1,352 ) Net current period other comprehensive income (loss) 5,543 ( 9,528 ) ( 3,985 ) Balance as of December 31, 2023 ( 2,184 ) ( 24,878 ) ( 27,062 ) Other comprehensive income (loss) before reclassifications 1,160 ( 22,843 ) ( 21,683 ) Amounts reclassified from accumulated other comprehensive income 82 - 82 Tax effect 152 - 152 Net current period other comprehensive income (loss) 1,394 ( 22,843 ) ( 21,449 ) Balance as of December 31, 2024 $ ( 790 ) $ ( 47,721 ) $ ( 48,511 ) The amounts reclassified from accumulated other comprehensive income were recorded in other income (expense), net, on the Consolidated Statements of Operations. 72 Table of Contents 18. SUBSEQUENT EVENTS OECD Developments In January 2025, the OECD released new Administrative Guidance on the application of the GloBE Model Rules. The Company will continue to evaluate the impact of this release or of other prospective guidance on its future global tax provision. Cash Dividend Increase In February 2025, the Board of Directors approved an increase in quarterly cash dividends from $ 1.25 per share to $ 1.56 per share. Stock Repurchase Program In February 2025 , the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $ 500.0 million of its common stock through February 2028 . Shares are retired upon repurchase. The repurchases, if any, will be funded from available working capital and cash repatriation from its subsidiaries. Stock repurchases under the program may be made through open market repurchases, privately negotiated transactions or other structures in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate. The timing and the number of any repurchased common stock will be determined by the Company’s management based on the evaluation of market conditions, legal requirements, stock price, and other factors. The repurchase program does not obligate the Company to purchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.