What changed in this filing

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Item 1A. Risk Factors

2022-08-26 compared with 2022-05-27 · 133 added, 116 removed, 629 unchanged (28% of the section changed)

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• risks related to the extension of lead time due to supply chain disruptions, component shortages that impact the costs and production of our products and kitting process, and constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers;

• risks related to changes in general economic conditions such as economic slowdowns, inflation, stagflation, and recessions or political conditions, such as the tariffs and trade restrictions with China, Russia and other foreign nations, and specific conditions in the end markets we address, including the continuing volatility in the technology sector and semiconductor industry;

• risks related to changes in general economic conditions such as economic slowdowns, inflation, stagflation, rising interest rates, and recessions or political conditions, such as the tariffs and trade restrictions with China, Russia and other foreign nations, and specific conditions in the end markets we address, including the continuing volatility in the technology sector and semiconductor industry and the U.S.

National Science and Technology Council’s designation of semiconductors as a critical and emerging technology;

• risks related to the ability of our customers, particularly in jurisdictions such as China that may be subject to trade restrictions (including the need to obtain export licenses) to develop their own solutions or acquire fully developed solutions from third-parties;

• risks related to cancellations, rescheduling or deferrals of significant customer orders or shipments, as well as the ability of our customers to manage inventory;

• risks related to our ability to successfully integrate and to realize anticipated synergies, on a timely basis or at all, in connection with our acquisitions, divestitures, significant investments or strategic transactions;

• risks related to our ability to successfully integrate and to realize anticipated benefits or synergies, on a timely basis or at all, in connection with our past, current, or any future acquisitions, divestitures, significant investments or strategic transactions;

• risks related to our debt obligations;

• risks related to the effects of any future acquisitions, divestitures or significant investments;

• risks related to the highly competitive nature of the end markets we serve, particularly within the semiconductor and infrastructure industries;

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• risks related to our ability to attract, retain and motivate a highly skilled workforce, especially engineering, managerial, sales and marketing personnel;

• risks related to any current and future litigation and regulatory investigations that could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully maintain and grow our business;

• risks related to any current and future litigation, regulatory investigations, or contractual disputes with customers

contractual disputes with customers that could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully maintain and grow our business;

• risks related to gain or loss of a design win or key customer;

• risks related to seasonality or volatility related to sales into the infrastructure market;

• risks related to seasonality or volatility related to sales into the infrastructure market or other end markets;

• risks related to failures to qualify our products or our suppliers’ manufacturing lines;

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• risks related to failures to protect our intellectual property, particularly outside the United States;

• risks related to the potential impact of a significant natural disasters, or the effects of climate change (such as drought, flooding, wildfires, increased storm severity and sea level rise), particularly in certain regions in which we operate or own buildings, such as Santa Clara, California, and where our third party suppliers operate, such as Taiwan and elsewhere in the Pacific Rim;

• risks related to the potential impact of a significant events or natural disasters, or the effects of climate change (such as droughts, flooding, wildfires, increased storm severity, sea level rise, and power outages), particularly in certain regions in which we operate or own buildings, such as Santa Clara, California, and where our third-party manufacturing partners or suppliers operate, such as Taiwan and elsewhere in the Pacific Rim;

• risks related to our Environmental, Social and Governance (ESG) programs;

• risks related to severe financial hardship or bankruptcy of one or more of our major customers;

• risks related to failures of our customers to agree to pay for NRE (non-recurring engineering) costs or failure to pay enough to cover the costs we incur in connection with NREs.

• risks related to severe financial hardship or bankruptcy or other attrition of one or more of our major customers, particularly as our major customers comprise an increasing percentage of our revenue;

• risks related to failures of our customers to agree to pay for NRE (non-recurring engineering) costs, failure to pay enough to cover the costs we incur in connection with NREs, or non-payment of previously agreed NRE costs due to us.

Our quarterly results of operations have fluctuated in the past and could do so in the future.

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Our business has been, and will continue to be, adversely impacted by the effects of the COVID-19 pandemic.

In addition to global macroeconomic effects, the COVID-19 pandemic and related adverse public health measures have caused disruption to our global operations and sales.

Our third-party manufacturers, suppliers, third-party distributors, sub-contractors and customers have been, and are expected to continue to be, disrupted by worker absenteeism, quarantines and restrictions on their employees’ ability to work;

In addition to global and domestic macroeconomic effects, the COVID-19 pandemic and related adverse public health measures have caused disruption to our global operations and sales.

Our third-party manufacturing partners, suppliers, distributors, sub-contractors and customers have been, and are expected to continue to be, disrupted by worker absenteeism, quarantines and restrictions on their employees’ ability to work;

office and factory closures;

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and other travel or health-related restrictions.

Depending on the magnitude of such effects on our manufacturing, assembling, and testing activities or the operations of our suppliers, third-party distributors, sub-contractors and customers, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.

For example, we were impacted by COVID outbreaks in Asia during the first quarter of fiscal 2023 that resulted in closed factories, clogged ports and a shortage of workers as officials imposed lockdowns and mass testing requirements.

Depending on the magnitude of such effects on our manufacturing, assembling, testing, and packaging activities or the operations of our manufacturing partners, suppliers, distributors, sub-contractors and customers, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.

For example, we were impacted by COVID outbreaks in Asia during the first half of fiscal 2023 that resulted in closed factories, clogged ports and a shortage of workers as officials imposed lockdowns and mass testing requirements.

In addition to operational and customer impacts, the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on the economies and financial markets of many countries including an economic downturn, which has affected and may in the future affect demand for our products and impact our operating results in both the near and long term.

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See the Risk Factor entitled “ We rely on our customers to design our products into their systems, and the nature of the design process requires us to incur expenses prior to customer commitments to use our products or recognizing revenues associated with those expenses which may adversely affect our financial results.

” In addition, work from home, quarantines, self-isolations, home schooling, continuing macroeconomic related uncertainty or caring for family members may result in heavy psychological, emotional or financial burdens for some of our employees, which may impact their productivity and morale and may lead to higher employee absences and higher attrition rates.

” In addition, work from home, quarantines, self-isolations, continuing macroeconomic related uncertainty or caring for family members may result in heavy psychological, emotional or financial burdens for some of our employees, which may impact their productivity and morale and may lead to higher employee absences and higher attrition rates.

Moreover , many of our employees have expressed a preference to continue to work from home two to three days a week post-pandemic.

In response, we adopted a hybrid work policy for our employees, where employees split their time between home and the office.

See the Risk Factor entitled “ We depend on highly skilled personnel to support our business operations.

If we are unable to retain and motivate our current personnel or attract additional qualified personnel, our ability to develop and successfully market our products could be harmed .” We may become subject to claims or lawsuits by employees, customers, suppliers or other parties regarding actions we take in our operations in response to the COVID-19 pandemic including our vaccination policies.

Our efforts to manage these impacts may be unsuccessful, and the ultimate impact of the COVID-19 pandemic also depends on factors beyond our knowledge or control, including the duration, severity and geographic scope of the COVID-19 pandemic, the availability, widespread distribution, and use of safe and effective vaccines and the actions taken to contain its spread and mitigate its public health and economic effects.

Due to the uncertainty regarding the severity and duration of the COVID-19 pandemic and related public health measures and macroeconomic impacts, at this time we are unable to predict the full impact of the COVID-19 pandemic on our business, financial condition, operating results and cash flows.

If we are unable to retain and motivate our current personnel or attract additional qualified personnel, our ability to develop and successfully market our products could be harmed .”

We may become subject to claims or lawsuits by employees, customers, suppliers or other parties regarding actions we take in our operations in response to the COVID-19 pandemic including our vaccination policies.

Our ongoing efforts to manage these impacts may be unsuccessful, and the ultimate impact of the COVID-19 pandemic also depends on factors beyond our knowledge or control, including the duration, severity and geographic scope of the COVID-19 pandemic, the availability, widespread distribution, and use of safe and effective vaccines or treatments and the actions taken to contain its spread and mitigate its public health and economic effects.

Due to the continued uncertainty regarding the severity and duration of the COVID-19 pandemic and related public health measures and macroeconomic impacts, at this time we are unable to predict the full impact of the COVID-19 pandemic on our business, financial condition, operating results and cash flows.

In addition, the impacts of the COVID-19 pandemic will be exacerbated the longer the pandemic continues.

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These efforts may adversely affect our financial results.

Recent, current and potential future acquisitions, strategic investments, divestitures, mergers or joint ventures may subject us to significant risks, any of which could harm our business.

Our long-term strategy has included in the past, as discussed below, and may continue to include in the future identifying and acquiring, investing in or merging with suitable candidates on acceptable terms, or divesting of certain business lines or activities.

Recent, current and potential future acquisitions, strategic investments, divestitures, mergers or joint ventures subject us to significant risks, any of which could harm our business.

Our long-term strategy has included in the past and may continue to include in the future identifying and acquiring, investing in or merging with suitable candidates on acceptable terms, or divesting of certain business lines or activities.

In particular, over time, we may acquire, make investments in, or merge with providers of product offerings that complement our business or may terminate such activities.

• On April 20, 2021, we completed the acquisition of Inphi;

• On October 5, 2021, we completed the acquisition of Innovium

Mergers, acquisitions and divestitures include a number of risks and present financial, managerial and operational challenges.

Given that our resources are limited, our decision to pursue a transaction has opportunity costs;

accordingly, if we pursue a particular transaction, we may need to forgo the prospect of entering into other transactions that could help us achieve our strategic objectives.

Given that our resources are limited, any decision to pursue a transaction has opportunity costs;

accordingly, if we pursue a particular transaction, we may need to forgo the prospect of entering into other transactions or making other capital allocation decisions that could help us achieve our strategic objectives.

Any acquired business, technology, service or product could significantly underperform relative to our expectations.

Our acquisitions may not further our business strategy as we expected, we may not integrate an acquired company or technology as successfully as we expected, we may impose our business practices that adversely impact the acquired business or we may overpay for, or otherwise not realize the expected return on our investments, each or all of which could adversely affect our business or operating results and potentially cause impairment to assets that we recorded as a part of an acquisition including intangible assets and goodwill.

In addition, the use of our stock to finance an acquisition, such as our acquisition of Innovium, will result in an increase in the number of outstanding stock and will reduce the ownership percentage of each of our outstanding stockholders.

In addition, the use of our stock to finance an acquisition, such as our acquisition of Innovium in October 2021, will result in an increase in the number of outstanding shares of stock and reduce the ownership percentage of each of our outstanding stockholders.

When we decide to sell assets or a business, we may have difficulty selling on acceptable terms in a timely manner or at all.

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If we fail to complete a transaction, we may nonetheless have incurred significant expenses in connection with such transaction.

Failure to complete a pending transaction may result in negative publicity and a negative perception of us in the investment community.

Failure to complete a transaction may result in negative publicity and a negative perception of us among the investment community.

For all these reasons, our pursuit of an acquisition, investment, divestiture, merger or joint venture could cause our actual results to differ materially from those anticipated.

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We used a significant portion of our cash and incurred substantial indebtedness in connection with the financing of our acquisition of Inphi, which was completed in fiscal 2022.

Our use of cash to fund our current and future acquisitions has reduced our liquidity and may (i) limit our flexibility in responding to other business opportunities and (ii) increase our vulnerability to adverse economic and industry conditions.

Our use of cash to fund our acquisitions has reduced our liquidity and may (i) limit our flexibility in responding to other business opportunities and (ii) increase our vulnerability to adverse economic and industry conditions.

Furthermore, the financing agreements in connection with our outstanding indebtedness contain negative covenants, limitations on indebtedness, liens, sale and leaseback transactions and mergers and other fundamental changes.

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WE ARE VULNERABLE TO PRODUCT DEVELOPMENT AND MANUFACTURING-RELATED RISKS

We rely on our manufacturing partners for the manufacture, assembly and testing of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested or to be able to fulfill our orders could damage our relationships with our customers, decrease our sales and limit our ability to grow our business.

We do not have our own manufacturing or assembly facilities and have very limited in-house testing facilities.

We rely on our manufacturing partners for the manufacture, assembly, testing and packaging of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested or to be able to fulfill our orders could damage our relationships with our customers, decrease our sales and limit our ability to grow our business.

We do not have our own manufacturing, assembly or packaging facilities and have very limited in-house testing facilities.

Therefore, we currently rely on several third-party manufacturing partners to produce our products.

We also currently rely on several third-party assembly and test subcontractors to assemble, package and test our products.

We also currently rely on several third-party assembly, testing and packaging subcontractors to assemble, package and test our products.

This exposes us to a variety of risks, including the following:

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Most of our products are manufactured by third-party foundries located in Taiwan, and other sources are located in China, Germany, South Korea, Singapore and the United States.

In addition, substantially all of our third-party assembly and testing facilities are located in China, Malaysia, Singapore, Taiwan and Canada.

Because of the geographic concentration of these third-party foundries, as well as our assembly and test subcontractors, we are exposed to the risk that their operations may be disrupted by regional disasters including, for example, droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, or by actual or threatened public health emergencies such as the COVID-19 pandemic, or by political, social or economic instability.

For example, we were impacted by COVID outbreaks in Asia in the first quarter of fiscal 2023 that resulted in closed factories, clogged ports and a shortage of workers as officials imposed lockdowns and mass testing requirements.

In addition, substantially all of our third-party assembly, testing and packaging facilities are located in China, Malaysia, Singapore, Taiwan and Canada.

Because of the geographic concentration of these third-party foundries, as well as our assembly, testing and packaging subcontractors, we are exposed to the risk that their operations may be disrupted by regional events including, for example, droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, severe storms, power outages, or by actual or threatened public health emergencies such as the COVID-19 pandemic, or by political, social or economic instability.

For example, we were impacted by COVID outbreaks in Asia in the first half of fiscal 2023 that resulted in closed factories, clogged ports and a shortage of workers as officials imposed lockdowns and mass testing requirements.

In the case of such an event, our revenue, cost of goods sold and results of operations may be negatively impacted.

In addition, there are limited numbers of alternative foundries and identifying and implementing alternative manufacturing facilities would be time consuming.

In addition, there are very limited numbers of alternative foundries capable of producing advanced technologies and identifying and implementing alternative manufacturing facilities would be time consuming.

As a result, if we needed to implement alternate manufacturing facilities, we could experience significant expenses and delays in product shipments, which could harm our results of operations.

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This reallocation could impair our ability to secure the supply of components that we need.

Moreover, if any of our third-party manufacturing partners or other suppliers are unable to secure the necessary raw materials from their suppliers, lose benefits under material agreements, experience power outages or labor shortages, or, lack sufficient capacity to manufacture our products, encounter financial difficulties or suffer any other disruption or reduction in efficiency, we may encounter supply delays or disruptions, which could harm our business or results of operations.

There are a limited number of foundries and consolidation of the foundries that provide services to us or to the semiconductor industry due to bankruptcy or through business combinations, including mergers, asset acquisitions and strategic partnerships which may adversely impact us.

A foundry or supplier could become unavailable to us if it is acquired by a competitor or a large company that may change the scope of the offerings.

Moreover, if any of our third-party manufacturing partners or other suppliers are unable to secure the necessary raw materials from their suppliers, lose benefits under material agreements, experience water shortages, power outages or labor shortages, or, lack sufficient capacity to manufacture our products, encounter financial difficulties or suffer any other disruption or reduction in efficiency, we may encounter supply delays or disruptions, which could harm our business or results of operations.

There are a very limited number of foundries and consolidation of the foundries that provide services to us or to the semiconductor industry due to bankruptcy or through business combinations, including mergers, asset acquisitions and strategic partnerships which may adversely impact us.

A foundry, supplier or other manufacturing partner could become unavailable to us if it is acquired by a competitor or a large company that may change the scope of the offerings.

For example, Intel Corporation announced in February 2022 of its intent to acquire Tower Semiconductor.

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In particular, as we and others in our industry transition to smaller geometries, our manufacturing partners may be supply constrained or may charge premiums for these advanced technologies, which may harm our business or results of operations.

See also, “ We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

” In addition, a foundry may become unavailable to us as a result of economic or political instability.

Any disruption to our manufacturing or foundry partners could result in a material decline in our revenue, net income and cash flow.

See also, “ We may experience increased actual and opportunity costs as a result of our transition to smaller geometry process technologies.

” In addition, a foundry or supplier may become unavailable to us as a result of economic or political instability.

Any disruption to our manufacturing partners could result in a material decline in our revenue, net income and cash flow.

For example, in response to increased demand from customers for our products, our operations team is continuing to ramp production with our global supply chain partners.

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Accordingly, if one of our foundries is unable to provide us with components as needed, it would be difficult for us to transition the manufacture of our products to other foundries, and we could experience significant delays in securing sufficient supplies of those components.

Any disruption to our manufacturing or foundry partners could result in a material decline in our revenue, net income and cash flow.

In addition, our testing and assembly partners may be single sourced and it may be difficult for us to transition to other partners for these services.

Any disruption to our foundry partners could result in a material decline in our revenue, net income and cash flow.

In addition, our assembly, testing and packaging partners may be single sourced and it may be difficult for us to transition to other manufacturing partners for these services.

In order to secure sufficient capacity when demand is high and to mitigate the risks described in the foregoing paragraph, we have entered into, and in the future may enter into, various arrangements with certain manufacturing partners or other suppliers that could be costly and harm our results of operations, such as nonrefundable deposits with, or loans to, such parties in exchange for capacity commitments, or contracts that commit us to purchase specified quantities of components over extended periods.

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These penalties may be expensive and could harm our financial results.

Supply shortages in the semiconductor industry of multi-layer complex substrates, IC packaging capacity and specific wafer process node constraints have resulted in increased lead times, inability to meet demand, and increased costs since calendar 2020, and these supply constraints are currently expected to continue throughout calendar 2022 .

Supply shortages in the semiconductor industry of multi-layer complex substrates, IC packaging capacity and specific wafer process node constraints have resulted in increased lead times, inability to meet demand, and increased costs and these supply constraints are currently expected to continue throughout fiscal 2023 .

Of these shortages, ABF substrates and specific wafer process nodes are the most constrained at this time and most of these suppliers are located in Japan and Taiwan.

Because of the geographic concentration of these suppliers, we are exposed to the risk that their operations may be disrupted by regional disasters including, for example, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, or by actual or threatened public health emergencies such as the COVID-19 pandemic, or by political, social or economic instability.

In addition, while we don’t expect Russia’s invasion of Ukraine to materially impact us directly, we are unable at this time to predict the impact this conflict will have on the supply chain, global economy and stock markets.

Because of the geographic concentration of these suppliers, we are exposed to the risk that their operations may be disrupted by regional events including droughts, earthquakes (particularly in Taiwan and elsewhere in the Pacific Rim close to fault lines), tsunamis or typhoons, severe storms, power outages, or by actual or threatened public health emergencies such as the COVID-19 pandemic, or by political, social or economic instability.

In addition, while we don’t expect Russia’s invasion of Ukraine to materially impact us directly, due to our limited sales to Russia and Ukraine we are unable at this time to predict the indirect impact this conflict will have on us due to impacts on the supply chain, global and domestic economies, interest rates and stock markets.

Uncertain Yields and Quality

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See also, “ Costs related to defective products could have a material adverse effect on us.

Because we rely on outside manufacturing partners, we may have a reduced ability to directly control product delivery schedules and quality assurance, which could result in product shortages or quality assurance problems that could delay shipments or increase costs.

Because we rely on outside manufacturing partners, we have a reduced ability to directly control product delivery schedules and quality assurance, which has in the past and may in the future result in product shortages or quality assurance problems that delay shipments or increase costs.

Commodity Prices

We are also subject to risk from increasing or fluctuating market prices of certain commodity raw materials, including gold and copper, which are incorporated into our end products or used by our suppliers to manufacture our end products.

Supplies for such commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such commodities (such as inflation or supply chain constraints).

Supplies for such commodities have from time to time become restricted, or general market factors and conditions have in the past affected and may in the future affect pricing of such commodities (such as inflation or supply chain constraints).

We may experience increased actual and opportunity costs as a result of our transition to smaller geometry process technologies.

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We cannot ensure that the partners we use will be able to effectively manage any future transitions.

In addition, there are a very limited number of foundries capable of producing advanced technologies, and identifying and implementing alternative manufacturing facilities would be time consuming.

If we or any of our partners experience significant delays in a future transition or fail to efficiently implement a transition, we could experience reduced manufacturing yields, delays in product deliveries and increased expenses, all of which could harm our relationships with our customers and our results of operations.

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We have no control over the marketing efforts of these third-party customers and can't make any assurances that sales of their products will be successful in current or future years.

In addition, if these customers are bought by our competitors or other third parties, they may terminate agreements related to these custom or semi-custom products or otherwise limit our access to technology necessary for the production of these products.

As a result, there may be no other customers for these products due to their custom or semi-custom nature.

Consequently, we may not fully realize our expectations for custom or semi-custom product revenue and our operating results may be adversely affected.

Additionally, failure of our customers to agree to pay for NRE (non-recurring engineering) costs or failure to pay enough to cover the costs we incur in connection with NREs may harm our financial results.

Additionally, failure of our customers to agree to pay for NRE (non-recurring engineering) costs, failure to pay enough to cover the costs we incur in connection with NREs, or non-payment of previously agreed NRE costs due to us, can harm our financial results.

See also, “Research and Development” under Results of Operations.

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Even if we and our customers introduce new and enhanced products to the market, those products may not achieve market acceptance.

Some of our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which does not assure product sales.

Some of our customers require our products and our third-party manufacturing partners to undergo a lengthy and expensive qualification process which does not assure product sales.

If we are unsuccessful or delayed in qualifying these products with a customer, our business and operating results would suffer.

Prior to purchasing our products, some of our customers require that both our products and our third-party contractors undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability.

Prior to purchasing our products, some of our customers require that both our products and our third-party manufacturing partners undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability.

This qualification process can take several months and qualification of a product by a customer does not assure any sales of the product to that customer.

Even after successful qualification and sales of a product to a customer, a subsequent revision in our third party contractors’ manufacturing process or our selection of a new supplier may require a new qualification process with our customers, which may result in delays and in our holding excess or obsolete inventory.

Even after successful qualification and sales of a product to a customer, a subsequent revision in our third-party manufacturing partners’ process or our selection of a new supplier may require a new qualification process with our customers, which may result in delays and in our holding excess or obsolete inventory.

After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that incorporate our products.

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Costs related to defective products could have a material adverse effect on us.

We make highly complex semiconductor solutions and, accordingly, there is a risk of defects in any of our products.

We make highly complex semiconductor solutions and, accordingly, there is a risk of defects in our products.

Such defects can give rise to the significant costs noted below.

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We also face exposure to potential liability resulting from the fact that our customers typically integrate the semiconductor solutions we sell into numerous consumer products, including automobiles.

We are exposed to product liability claims if our semiconductor solutions.

or the consumer products integrated with our semiconductor solutions (such as automobiles), malfunction and lead to personal injury or death.

We are exposed to product liability claims if our semiconductor solutions or the consumer products integrated with our semiconductor solutions (such as automobiles) malfunction and lead to personal injury or death.

In addition, our customers may issue recalls on their products if they prove to be defective or make compensatory payments in accordance with industry or business practice or in order to maintain good customer relationships.

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For example, addition of companies to the Entity List, which places export restrictions on certain foreign persons or entities by the U.S.

Department of Commerce’s Bureau of Industry and Security, has dampened demand for our products, adding to the already challenging macroeconomic environment.

Department of Commerce’s Bureau of Industry and Security, has dampened demand for our products in China, adding to the already challenging macroeconomic environment.

Due to the U.S.

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tariffs and trade restrictions.

In calendar year 2021, new restrictions were implemented which may further impact our business.

If export restrictions related to Chinese customers are sustained for a long period of time, or increased, or if other export restrictions are imposed, it will have an adverse impact on our revenues and results of operations.

In addition, companies in the semiconductor industry, including us, may be impacted by rules and regulations related to business activities in China, or other locations, due to concerns that semiconductors are necessary for U.S.

national security, manufacturing and critical infrastructure, and compliance with these rules and regulations may adversely affect our revenues and results of operations.

For example, in February 2022, the U.S.

National Science and Technology Council published an updated list of critical and emerging technologies, which includes semiconductors, as part of an ongoing effort to identify advanced technologies that are potentially significant to U.S.

national security, which could result in more stringent export controls or a greater number of our products requiring a license for export to China.

Most of our products are manufactured by third-party foundries located in Taiwan.

As we have a significant amount of sales into China, we may be adversely impacted by export restrictions, labeling requirements or other trade related issues or disputes, or political conflicts between China and Taiwan as these restrictions and requirements could impact or delay the delivery of our products to our customers in China.

We typically sell products to customers in China pursuant to purchase orders rather than long term purchase commitments.

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If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our gross margin.

Conversely, we may have insufficient inventory, which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.

Conversely, we may have insufficient inventory or be unable to obtain the supplies or contract manufacturing capacity to meet that demand which would result in lost revenue opportunities and potential loss of market share as well as damaged customer relationships.

Changes to U.S.

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or foreign international tax, social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business have in the past and could in the future adversely affect our business.

For example, while we don’t expect Russia’s invasion of Ukraine or the related current or future export and other business sanctions on Russia to materially impact us directly due to our limited sales to Russia, we are unable at this time to predict the impact this conflict will have on the Company, the global economy or the stock markets.

For example, while we don’t expect Russia’s invasion of Ukraine or the related current or future export and other business sanctions on Russia to materially impact us directly due to our limited sales to Russia and Ukraine, we are unable at this time to predict the indirect impact this conflict will have on us through impacts to the supply chain, the global and domestic economies, interest rates or stock markets.

The prior U.S.

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See also, “ Adverse changes in the political and economic policies of the U.S.

government in connection with trade with China have reduced the demand for our products and damaged our business” and “Changes in existing taxation benefits, rules or practices may adversely affect our financial results .”

government in connection with trade with China have reduced the demand for our products and damaged our business” and “Changes in existing taxation benefits, tax rules or tax practices may adversely affect our financial results .”

We face additional risks due to the extent of our global operations since a majority of our products, and those of many of our customers, are manufactured and sold outside of the United States.

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Most of our current qualified integrated circuit foundries are located in the same region within Taiwan.

In addition, our primary assembly and test subcontractors are located in the Pacific Rim region.

For example, a substantial amount of our revenue is derived from products manufactured in Taiwan and as a result, disruptions to business in Taiwan, whether political, military or natural disasters will adversely impact our business.

In addition, our primary assembly, testing and packaging subcontractors are located in the Pacific Rim region.

For example, a substantial amount of our revenue is derived from products manufactured in Taiwan and as a result, disruptions to business in Taiwan, whether political, military, natural disasters or other events will adversely impact our business.

In addition, many of our customers are located outside of the United States, primarily in Asia, which further exposes us to foreign risks.

Sales shipped to customers with operations in Asia represented approximately 75% and 80% of our net revenue in the three months ended April 30, 2022 and May 1, 2021, respectively.

Sales shipped to customers with operations in Asia represented approximately 76% and 80% of our net revenue in the three months ended July 30, 2022 and July 31, 2021, respectively.

We also have substantial operations outside of the United States.

We anticipate that our manufacturing, assembly, testing and sales outside of the United States will continue to account for a substantial portion of our operations and revenue in future periods.

We anticipate that our manufacturing, assembly, testing, packaging and sales outside of the United States will continue to account for a substantial portion of our operations and revenue in future periods.

Accordingly, we are subject to risks associated with international operations, including:

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• difficulties in staffing and managing foreign operations;

• natural disasters, including earthquakes, fires, tsunamis and floods;

• natural disasters or other events, including droughts or other water shortages, earthquakes, fires, tsunamis and floods, or power outages;

• trade restrictions, higher tariffs, worsening trade relationship between the United States and China, or changes in cross border taxation, particularly in light of the tariffs imposed by the prior U.S.

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As a result of having global operations, the sudden disruption of the supply chain and/or disruption of the manufacture of our customer’s products caused by events outside of our control has in the past and may in the future impact our results of operations by impairing our ability to timely and efficiently deliver our products.

See also, “ We rely on our manufacturing partners for the manufacture, assembly and testing of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested or to be able to fulfill our orders could damage our relationships with our customers, decrease our sales and limit our ability to grow our business.

See also, “ We rely on our manufacturing partners for the manufacture, assembly, testing and packaging of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested or to be able to fulfill our orders could damage our relationships with our customers, decrease our sales and limit our ability to grow our business.

Moreover, the international nature of our business subjects us to risks associated with the fluctuation of the U.S.

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Decreases in the value of the U.S.

dollar versus currencies in jurisdictions where we have large fixed costs, or where our third-party manufacturers have significant costs, will increase the cost of such operations which could harm our results of operations.

dollar versus currencies in jurisdictions where we have large fixed costs, or where our third-party manufacturing partners have significant costs, will increase the cost of such operations which could harm our results of operations.

CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS

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Markets for our 5G and Cloud products may not develop in the manner or in the time periods we anticipate.

If domestic and global economic conditions worsen, overall spending on our 5G and Cloud products may be reduced, which would adversely impact demand for our products in these markets.

If domestic and global economic conditions continue to worsen, overall spending on our 5G and Cloud products may be reduced, which would adversely impact demand for our products in these markets.

In addition, unfavorable developments with evolving laws and regulations worldwide related to these products and suppliers may limit global adoption, impede our strategy, and negatively impact our long-term expectations in this area.

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• customers, particularly in jurisdictions such as China that may be subject to trade restrictions or tariffs, may develop their own solutions or acquire fully developed solutions from third-parties;

• customers may be subject to severe business disruptions, including, but not limited to, those driven by recessions, financial instability, actual or threatened public health emergencies, such as the COVID-19 pandemic, or other global or regional macroeconomic developments.

• customers may be subject to severe business disruptions, including, but not limited to, those driven by recessions, financial instability, actual or threatened public health emergencies, such as the COVID-19 pandemic, other global or regional macroeconomic developments, or natural disasters.

In addition, there has been a trend toward customer consolidation in the semiconductor industry through business combinations, including mergers, asset acquisitions and strategic partnerships (for example, Western Digital acquired SanDisk in 2017 and Toshiba Corporation sold control of a portion of its semiconductor business in 2018).

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We have a limited ability to predict the timing of a supply chain correction.

As we have a broad product portfolio and diversified products with many different SKUs, significant supply chain disruptions may cause us to have more work-in-process inventories we hold to ensure we have flexibility to support our customers.

If we cannot predict future customer demand or supply chain disruptions, then we may hold excess or obsolete inventory.

Moreover, significant supply chain disruption may negatively impact the timing of our product shipments and revenue shipment linearity which may impact and extend our cash conversion cycle.

In addition, the market share of our customers could be adversely impacted on a long-term basis due to any continued supply chain disruption, which could negatively affect our results of operations.

See also, “ We rely on our manufacturing partners for the manufacture, assembly and testing of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested could damage our relationships with our customers, decrease our sales and limit our ability to grow our business ” for additional information on the impacts of supply chain cross-dependencies on our business.

See also, “ We rely on our manufacturing partners for the manufacture, assembly, testing and packaging of our products, and the failure of any of these third-party vendors to deliver products or otherwise perform as requested could damage our relationships with our customers, decrease our sales and limit our ability to grow our business ” for additional information on the impacts of supply chain cross-dependencies on our business.

If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross margin and adversely affect our financial results.

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In addition, many of our competitors operate and maintain their own fabrication facilities and have longer operating histories, greater name recognition, larger customer bases, and greater sales, marketing and distribution resources than we do.

In addition, the semiconductor industry has experienced increased consolidation over the past several years.

Moreover, the semiconductor industry has experienced increased consolidation over the past several years.

For example, NVIDIA Corporation acquired Mellanox Technologies in April 2020, Infineon acquired Cypress Semiconductors in April 2020, Analog Devices Inc.

acquired Maxim Integrated Products Inc.

in August 2021, Renesas Electronics Corporation acquired Dialog Semiconductor in August 2021, and in February 2022 AMD acquired Xilinx, Inc.

We license technology from Arm Limited that is included in a majority of our products and would be adversely impacted if the pricing for, or availability of, the relevant technology is changed in an adverse manner as a result of similar future transactions.

in August 2021, Renesas Electronics Corporation acquired Dialog Semiconductor in August 2021, AMD acquired Xilinx, Inc.

in February 2022 and Pensando Systems in May 2022.

In addition, MaxLinear, Inc.

announced plans to acquire Silicon Motion in May 2022 and Broadcom announced plans to acquire VMware in May 2022.

In addition, we license technology from Arm Limited that is included in a majority of our products and would be adversely impacted if the pricing for, or availability of, the relevant technology is changed in an adverse manner as a result of similar future transactions.

Consolidation among our competitors has led, and in the future could lead, to a changing competitive landscape, capabilities and market share, which could put us at a competitive disadvantage and harm our results of operations.

Our gross margin and results of operations may be adversely affected in the future by a number of factors, including decreases in average selling prices of products over time and shifts in our product mix as well as the price increase of certain components due to inflation, supply chain constraints, or for other reasons and testing and assembly.

Our gross margin and results of operations may be adversely affected in the future by a number of factors, including decreases in average selling prices of products over time, shifts in our product mix, or price increases of certain components or third-party services due to inflation, supply chain constraints, or for other reasons.

The products we develop and sell are primarily used for high-volume applications.

While prices of our products have increased recently, the prices of our products have historically decreased rapidly.

While prices of our products have increased recently due to inflation and additional costs resulting from securing an increase in supply in the current constrained environment, the prices of our products have historically decreased.

We expect that the average unit selling prices of our products will continue to be subject to significant pricing pressures.

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In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or by our competitors and other factors.

We expect that we will continue to have to reduce prices of existing products in the future.

We expect to continue to have to reduce prices of existing products in the future.

Moreover, because of the wide price differences across the markets we serve, the mix and types of performance capabilities of our products sold may affect the average selling prices of our products and have a substantial impact on our revenue and gross margin.

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Fluctuations in the mix and types of our products may also affect the extent to which we are able to recover the fixed costs and investments associated with a particular product, and as a result may harm our financial results.

Additionally, because we do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities and our costs may even increase, which could also reduce our gross margins.

Our gross margin could also be impacted by increased cost (including those caused by tariffs , inflation or supply chain constraints), loss of cost savings or dilution of savings due to changes in charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either contract manufacturers or suppliers deteriorates as well as excess inventory and inventory holding and obsolescence charges.

Additionally, because we do not operate our own manufacturing, assembly, testing or packaging facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities and our costs may even increase, which could also reduce our gross margins.

Our gross margin could also be impacted by increased cost (including those caused by tariffs , inflation or supply chain constraints), loss of cost savings or dilution of savings due to changes in charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand or if the financial health of either our manufacturers partners or our suppliers deteriorates as well as excess inventory and inventory holding and obsolescence charges.

In addition, we are subject to risks from fluctuating market prices of certain components, which are incorporated into our products or used by our suppliers to manufacture our products.

Supplies of these components may from time to time become restricted, or general market factors and conditions such as inflation or supply chain constraints may affect pricing of such commodities.

Supplies of these components may from time to time become restricted, or general market factors and conditions such as inflation or supply chain constraints have in the past affected and may in the future affect pricing of such commodities.

For example, supply shortages in the semiconductor industry of multi-layer complex substrates, IC packaging capacity and fab constraints have resulted in increased lead times, inability to meet demand, and increased costs.

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In addition, the costs related to this type of business model typically include significant NRE (non-recurring engineering) costs that customers pay based on the completion of milestones.

Our operating margin may decline if our customers do not agree to pay for NREs or if they do not pay enough to cover the costs we incur in connection with NREs.

Our operating margin may decline if our customers do not agree to pay for NREs, if they do not pay enough to cover the costs we incur in connection with NREs, or non-payment of previously agreed NRE costs.

In addition, our operating margin may decline if we are unable to sell products in sufficient volumes to cover the development costs that we have incurred.

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currently has a federal corporate tax rate of 21%.

The Biden Administration has made several corporate income tax proposals, including significant increases to the federal corporate income tax rate, changes to the GILTI regime, and an excise tax on corporate stock repurchases.

These proposals have not passed the Senate.

However, if they are passed and signed into law, these proposals, could cause our overall effective tax rate to increase and could materially affect our financial results, including our earnings and cash flow.

President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) on 16 August 2022 and the CHIPS and Science Act of 2022 on 9 August 2022.

These laws implement new tax provisions and provide for various incentives and tax credits.

The IRA applies to tax years beginning after December 31, 2022 and introduces a 15% corporate alternative minimum tax (CAMT) for corporations whose average annual adjusted financial statement income for any consecutive three-tax-year period preceding the tax year exceeds $1 billion and a 1% excise tax on certain stock repurchases made by publicly traded US corporations after December 31, 2022.

If we are subject to these new taxes under the IRA, it could materially affect our financial results, including our earnings and cash flow.

The Organization for Economic Cooperation and Development (the “OECD”) has been working on a Base Erosion and Profit Shifting Project, and since 2015 has been issuing guidelines and proposals with respect to various aspects of the existing framework under which our tax obligations are determined in the countries in which we do business.

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We are exposed to potential impairment charges on certain assets.

We had approximately $11.5 billion of goodwill and $5.9 billion of acquired intangible assets on our unaudited condensed consolidated balance sheet as of April 30, 2022.

We had approximately $11.6 billion of goodwill and $5.6 billion of acquired intangible assets on our unaudited condensed consolidated balance sheet as of July 30, 2022.

Under generally accepted accounting principles in the United States, we are required to review our intangible assets including goodwill for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

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and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.

For example, during the second quarter of fiscal 2021 ended August 1, 2020, we made changes to the scope of our server processor product line in response to changes in the associated market.

For example, during the second quarter of fiscal 2021, we made changes to the scope of our server processor product line in response to changes in the associated market.

We are transitioning our product offering from standard server processors to the broad server market to focus only on customized server processors for a few targeted customers.

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We rely on a combination of patents, copyrights, trademarks, trade secrets, contractual provisions, confidentiality agreements, licenses and other methods, to protect our proprietary technologies.

We also enter into confidentiality or license agreements with our employees, consultants and business partners, and control access to and distribution of our documentation and other proprietary information.

We also enter into confidentiality or license agreements with our employees, consultants, manufacturing or other business partners, and control access to and distribution of our documentation and other proprietary information.

Notwithstanding these agreements, we have experienced disputes with employees regarding ownership of intellectual property in the past.

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If our patents do not adequately protect our technology, our competitors may be able to offer products similar to ours, which would adversely impact our business and results of operations.

We have implemented security systems with the intent of maintaining the physical security of our facilities and protecting our confidential information including our intellectual property.

In addition, we have implemented security systems with the intent of maintaining the physical security of our facilities and protecting our confidential information including our intellectual property.

Despite our efforts, we may be subject to breach of these security systems and controls which may result in unauthorized access to our facilities and labs and/or unauthorized use or theft of the confidential information and intellectual property we are trying to protect.

See also, “ Cybersecurity risks could adversely affect our business and disrupt our operations.

” If we fail to protect these intellectual property rights, competitors could sell products based on technology that we have developed, which could harm our competitive position and decrease our revenue.

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Although our management systems are designed to maintain compliance, we cannot assure you that we have been or will be at all times in compliance with such laws and regulations.

Our compliance programs rely in part on compliance by our suppliers, vendors and distributors.

Our compliance programs rely in part on compliance by our manufacturing partners, suppliers, vendors and distributors.

To the extent such third parties don’t comply with these obligations our business, operations and reputation may be adversely impacted.

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The National Industrial Security Program requires that a corporation maintaining a facility security clearance be effectively insulated from foreign ownership, control or influence (“FOCI”).

Because we were organized in Bermuda at the time of the acquisition, we entered into agreements with the U.S.

Because we were organized in Bermuda at the time of this acquisition, we entered into agreements with the U.S.

Department of Defense with respect to FOCI mitigation arrangements that relate to our operation of the portion of the business involving facility clearances.

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We paid the cash portion of the consideration for the Inphi acquisition and other fees and expenses required to be paid in connection with the transaction from cash on hand and borrowings.

On the closing date of the Inphi acquisition, the entire principal amount was funded and incurred in respect of the $1.75 billion senior unsecured term loan facility, comprised of a $875.0 million 3-year term loan tranche (the “3-Year Tranche Loan”) and a $875.0 million 5-year term loan tranche (the “5-Year Tranche Loan,” and collectively with the 3-Year Tranche Loan, the “2020 Term Loans”).

The 2020 Term Loans are evidenced by a credit agreement, dated December 7, 2020 (the “2020 Term Loan Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other lenders from time to time party thereto.

As of April 30, 2022, the Company had a balance of $1.6 billion on the term loan facility.

In addition to the 2020 Term Loan Agreement, on December 7, 2020, we entered into a revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other lenders from time to time party thereto (“2020 Revolving Credit Facility” and together with the 2020 Term Loan Agreement, the “Credit Agreements”), which provides for a $750 million revolving credit facility.

As of April 30, 2022, the revolving credit facility was undrawn.

Subsequent to quarter end, on May 3, 2022, the Company drew down $150.0 million on the 2020 Revolving Credit Facility.

The 2024 and 2026 Term Loans are evidenced by a credit agreement, dated December 7, 2020 (the “2024 and 2026 Term Loan Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other lenders from time to time party thereto.

As of July 30, 2022, the Company had a balance of $1.6 billion on the term loan facility.

In addition to the 2024 and 2026 Term Loan Agreement, on December 7, 2020, we entered into a revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other lenders from time to time party thereto (“2020 Revolving Credit Facility” and together with the 2024 and 2026 Term Loan Agreement, the “Credit Agreements”), which provides for a $750.0 million revolving credit facility.

As of July 30, 2022, the 2020 Revolving Credit Facility had an outstanding balance of $70.0 million.

We intend to repay this amount during the third quarter of fiscal 2023.

On April 12, 2021, the Company completed a private offering of (i) $500.0 million aggregate principal amount of 2026 Senior Notes, (ii) $750.0 million aggregate principal amount of 2028 Senior Notes and (iii) $750.0 million aggregate principal amount of 2031 Senior Notes (collectively, the “Senior Notes”).

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(collectively, the “MTG Senior Notes”) for $433.9 million aggregate principal amount of 2023 Senior Notes and $479.5 million aggregate principal amount of 2028 Senior Notes issued by the Company (the “MTI Senior Notes”) (together with the Senior Notes, the “Notes”).

As of April 30, 2022, the Company had $2.0 billion aggregate principal amount of Senior Notes outstanding and $913.2 million in aggregate principal amount of the MTI Senior Notes outstanding and $86.7 million aggregate principal amount of the MTG Senior Notes outstanding.

As of July 30, 2022, the Company had $2.0 billion aggregate principal amount of Senior Notes outstanding and $913.2 million in aggregate principal amount of the MTI Senior Notes outstanding and $86.7 million aggregate principal amount of the MTG Senior Notes outstanding.

On October 8, 2021 and December 16, 2021, the Company completed registered exchange offers for each series of Notes.

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The restrictions, among other things, restrict our ability and our subsidiaries’ ability to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, pay dividends, transfer or sell assets and make restricted payments.

These restrictions are subject to a number of limitations and exceptions set forth in the Credit Agreements and the Notes Indentures governing the Senior Notes.

These restrictions are subject to a number of limitations and exceptions set forth in the Credit Agreements and the Notes Indentures.

Our ability to meet the leverage ratio set forth in the Credit Agreements may be affected by events beyond our control.

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Our failure to repurchase the Notes upon a change of control repurchase event would be an event of default under the Notes Indentures and could cause a cross-default or acceleration under the Credit Agreements and certain future agreements governing our other indebtedness.

The repayment obligations under the Senior Notes may have the effect of discouraging, delaying or preventing a takeover of our company.

The repayment obligations under the Notes may have the effect of discouraging, delaying or preventing a takeover of our company.

If we were required to repurchase the Notes prior to their scheduled maturity, it could have a significant negative impact on our cash and liquidity and could impact our ability to invest financial resources in other strategic initiatives.

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We depend heavily on our technology infrastructure and maintain and rely upon certain critical information systems for the effective operation of our business.

We routinely collect and store sensitive data in our information systems, including intellectual property and other proprietary information about our business and that of our customers, suppliers and business partners.

These information technology systems are subject to damage or interruption from a number of potential sources, including, but not limited to, natural disasters, destructive or inadequate code, malware, power failures, cyber-attacks, internal malfeasance or other events.

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We have implemented processes for systems under our control intended to mitigate risks;

however, we can provide no guarantee that those risk mitigation measures will be effective.

however, we cannot guarantee that those risk mitigation measures will be effective.

The Company has not experienced a material information security breach in the last three years, and as a result, we have not incurred any net expenses from such a breach.

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Since the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures.

The Company’s business also requires it to share confidential information with suppliers and other third parties.

The Company’s business also requires it to share confidential information with manufacturing partners, suppliers and other third parties.

Although the Company takes steps to secure confidential information that is provided to third parties, such measures may not always be effective.

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We believe our future success will depend in large part upon our ability to attract and retain highly skilled, engineering, managerial, sales and marketing personnel.

We typically do not enter into employment agreements with any of our key technical personnel and the loss of such personnel could harm our business, as their knowledge of our business and industry would be extremely difficult to replace.

The competition for qualified technical personnel with significant experience in the design, development, manufacturing, marketing and sales of semiconductor solutions is intense, both in the Silicon Valley where our U.S.

We typically do not enter into employment agreements with any of our key personnel and the loss of such personnel could harm our business, as their knowledge of our business and industry would be extremely difficult to replace.

The competition for qualified personnel with significant experience in the design, development, manufacturing, marketing and sales of semiconductor solutions is intense, both in the Silicon Valley where our U.S.

operations are based and in global markets in which we operate.

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In addition, if we are unable to fulfill our customer commitments in a timely manner we may also lose future business relationships or otherwise experience negative consequences.

Competitors for technical talent increasingly seek to hire our employees, and the increased availability of work-from-home arrangements has both intensified and expanded competition.

We have intensified our efforts to recruit and retain talent.

Competitors for talent increasingly seek to hire our employees, and the increased availability of work-from-home arrangements has both intensified and expanded competition.

As a result, we have intensified our efforts to recruit and retain talent.

These efforts have increased our expenses, resulted in a higher volume of equity issuances, and may not be successful in attracting, retaining, and motivating the workforce necessary to deliver on our strategy.

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In response to the COVID-19 pandemic, we modified our workplace practices globally, which resulted in many of our employees working remotely for extended periods of time.

As a result, many of our employees expressed a preference to continue to work from home two to three days a week post-pandemic.

As a result, many of our employees have expressed a preference to continue to work from home two to three days a week post-pandemic.

In response, we adopted a hybrid work policy for our employees, where employees split their time between home and the office.

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We face risks related to recession, inflation, stagflation and other economic conditions

Customer demand for our products may be impacted by weak economic conditions, inflation, stagflation , recession, equity market volatility or other negative economic factors in the U.S.

Customer demand for our products may be impacted by weak economic conditions, inflation, stagflation , recession, rising interest rates, equity market volatility or other negative economic factors in the U.S.

or other nations.

For example, under these conditions, our customers may delay purchasing decisions or reduce their use of our services.

Further, in the event of a recession our manufacturing partners, suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business.

Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors and might cause us to not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase.

Thus, if general macroeconomic conditions deteriorate, our business and financial results could be materially and adversely affected.

In addition, we are also subject to risk from inflation and increasing market prices of certain components, supplies, and commodity raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products.

These components, supplies and commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such components, supplies and commodities (such as inflation or supply chain constraints).

For example, under these conditions, our customers may cancel orders, delay purchasing decisions or reduce their use of our services.

Further, in the event of a recession or threat of a recession our manufacturing partners, suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business.

Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our manufacturing partners, customers, suppliers and creditors and might cause us to not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase.

Thus, if general macroeconomic conditions continue to deteriorate, our business and financial results could be materially and adversely affected.

These components, supplies and commodities have from time to time become restricted, or general market factors and conditions have in the past and may in the future affect pricing of such components, supplies and commodities (such as inflation or supply chain constraints).

See also, “ Our gross margin and results of operations may be adversely affected in the future by a number of factors, including decreases in average selling prices of products over time, shifts in our product mix, or price increases of certain components or third-party services due to inflation, supply chain constraints, or for other reasons.

There can be no assurance that we will continue to declare cash dividends or effect stock repurchases in any particular amount or at all, and statutory requirements may require us to defer payment of declared dividends or suspend stock repurchases.

In May 2012, we declared our first quarterly cash dividend and in October 2018, we announced that our Board of Directors had authorized a $700.0 million addition to our previously existing $1.0 billion stock repurchase program.

An aggregate of $1.2 billion of shares of stock have been repurchased under that program as of April 30, 2022.

An aggregate of $1.2 billion of shares of stock have been repurchased under that program as of July 30, 2022, including 0.9 million shares of our common stock repurchased for $50.0 million pursuant to a 10b5-1 trading plan.

Future payment of a regular quarterly cash dividend on our common stock and future stock repurchases will be subject to, among other things:

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A reduction in, a delay of, or elimination of our dividend payments or stock repurchases could have a negative effect on our stock price.

As of April 30, 2022, there was $549.5 million remaining available for future stock repurchases of the authorization.

As of July 30, 2022, there was $499.5 million remaining available for future stock repurchases of the authorization.

Our indemnification obligations and limitations of our director and officer liability insurance may have a material adverse effect on our financial condition, results of operations and cash flows.

Under Delaware law, our certificate of incorporation and bylaws and certain indemnification agreements to which we are a party, we have an obligation to indemnify, or we have otherwise agreed to indemnify, certain of our current and former directors and officers with respect to past, current and future investigations and litigation.

Further, in the event the directors and officers are ultimately determined not to be entitled to indemnification, we may not be able to recover any amounts we previously advanced to them.

Further, in the event such directors and officers are ultimately determined not to be entitled to indemnification, we may not be able to recover any amounts we previously advanced to them.

We cannot provide any assurances that any future indemnification claims, including the cost of fees, penalties or other expenses, will not exceed the limits of our insurance policies, that such claims are covered by the terms of our insurance policies or that our insurance carrier will be able to cover our claims.

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Our insurance policies may not be adequate to fully offset losses from covered incidents, and we do not have coverage for certain losses.

For example, there is very limited coverage available with respect to the services provided by our third-party manufacturing partners and assembly and test subcontractors.

In the event of a natural disaster (such as an earthquake or tsunami), political or military turmoil, widespread public health emergencies including pandemics, including the COVID-19 pandemic, or other significant disruptions to their operations, insurance may not adequately protect us from this exposure.

For example, there is very limited coverage available with respect to the services provided by our third-party manufacturing partners and assembly, testing and packaging subcontractors.

In the event of a natural disaster (such as an drought, earthquake or tsunami), political or military turmoil, widespread public health emergencies including pandemics, including the COVID-19 pandemic, power outages or other significant disruptions to their operations, insurance may not adequately protect us from this exposure.

We believe our existing insurance coverage is consistent with common practice, economic considerations and availability considerations.

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

What changed 10-Q

Item 1A. Risk Factors