What changed in this filing

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Item 1A. Risk Factors

2024-07-24 compared with 2024-04-24 · 175 added, 162 removed, 885 unchanged (28% of the section changed)

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The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

• Our business, financial condition and results of operations could continue to be adversely affected by military conflicts, geopolitical and economic tensions among or with countries in which we conduct business, including between the United States and China, Israel (and its conflict with Iran), and among other countries.

For example, as more entities are added to restricted export control lists, or as semiconductor technology exports to other countries are further controlled, our need to seek authorization from the U.S.

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• We also are subject to risks associated with international geopolitical and military conflicts.

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• Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products.

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• We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from major customers has had and could continue to have a material adverse effect on our revenue and operating results.

• Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

• Any legal proceedings or claims against us or potential violations of applicable regulations could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

• We have been and may in the future be subject to information technology failures, including security breaches, cyber-attacks, design defects or system failures, that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.

• Average selling prices of our products have and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

• Average selling prices of our products have previously decreased and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

• If we fail to penetrate new applications and markets, our revenue, revenue growth rate, if any, and financial condition could be materially and adversely affected.

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• The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the market acceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.

• Our operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

• Our revenue and operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

• If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

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• We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, and cybersecurity.

Our inability to comply with such obligations may negatively impact our business.

• Our products must conform to industry standards in order to be accepted by end users in our markets.

• We may, from time to time, make additional business acquisitions or investments, which involve significant risks.

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Risks Relating to Intellectual Property

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• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

• Any future decisions to reduce or discontinue purchasing our common stock, after we resume such purchasing, pursuant to our stock repurchase programs could cause the market price for our common stock to decline.

Risks Relating to our Terminated Merger with Silicon Motion

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On October 5, 2023, Silicon Motion filed a Notice of Arbitration with the Singapore International Arbitration Centre alleging that we breached the Merger Agreement.

Additionally, on August 31, 2023, a Silicon Motion stockholder filed a class action complaint against us and certain of our current officers alleging that we materially misrepresented the likelihood the merger would close, and a similar individual action was filed by a different Silicon Motion stockholder on June 13, 2024.

Other potential plaintiffs may file additional lawsuits related to the previously contemplated merger.

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We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness would adversely affect our operating results and cash-

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flows as we satisfy our underlying interest and principal payment obligations.

Issuing additional shares of our common stock, if material, will result in dilution of existing shares outstanding.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness would adversely affect our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations.

Issuing additional shares of our common stock, if

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material, will result in dilution of existing shares outstanding.

Any loan agreement is also expected to contain financial and operational covenants that would adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

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Issuing additional shares of common stock, if material, would result in dilution of existing shares outstanding.

In addition, our current credit agreement, and any new loan agreements, contain and would likely contain financial and operational covenants that may adversely affect our ability to engage in certain activities, including certain financing and acquisition transactions, stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

In addition, our current credit agreement, and any new loan agreements, contain and would likely contain financial and operational covenants that may adversely affect our ability to engage in certain activities, including certain financing and acquisition transactions, any future stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

Such financial and operational covenants include compliance with a secured net leverage ratio test.

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• rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products as well as the business of our distributors;

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• we could be subject to substantial variable interest rate risk because our interest rate under term loans typically varies based on a fixed margin over an indexed rate (such as for the Initial Term Loan under the June 23, 2021 Credit Agreement) or an adjusted base rate.

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Agreement) or an adjusted base rate.

If interest rates were to continue to increase substantially, and we incur additional indebtedness, it would adversely affect our operating results and could affect our ability to service the indebtedness;

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Many of our competitors have substantially greater financial and other resources with which to withstand similar adverse economic or market conditions in the future.

Moreover, the competitive landscape is changing as a result of intense

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consolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaborate with each other, which could result in significant changes to the competitive landscape.

In addition, changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell our products to certain customers and adversely affect our ability to compete successfully.

Moreover, the competitive landscape is changing as a result of intense consolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaborate with each other, which could result in significant changes to the competitive

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In addition, changes in government trade policies, including the imposition of tariffs and export restrictions, as well as actions by government agencies, could limit our ability to sell our products to certain customers and adversely affect our ability to compete successfully.

These developments may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets.

See the risk factors “We also are subject to risks associated with international geopolitical and military conflicts ” and “We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology or if such authorizations are revoked.

In addition, we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations ” below.

Global economic conditions, including factors such as high inflation or a potential recession, could continue to adversely affect our business, financial condition, and results of operations.

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we have experienced and could continue to experience a decline in our sales and revenues in the future.

In particular, we believe an economic slowdown and inventory oversupply will continue to add to volatility in managing the business.

In addition, inventory oversupply could potentially lead to more inventory write-downs, including charges for any excess or obsolete inventory which could negatively impact our gross margins.

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we have experienced and could continue to experience volatility in our sales and revenues in the future.

Inventory oversupply could potentially lead to more inventory write-downs, including charges for any excess or obsolete inventory which could negatively impact our gross margins.

Our products are incorporated in numerous consumer devices, and demand for such products is ultimately driven by consumer demand for products such as televisions, personal computers, automobiles, and cable modems.

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If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

This unpredictability has and could continue to cause our customers to delay or reduce their capital expenditures and spending on our products, which would delay and lengthen sales cycles and negatively affect the overall demand for our products.

This unpredictability has and could continue to cause our customers to delay or reduce their capital expenditures and spending on our products, which delays and lengthens sales cycles and negatively affects the overall demand for our products.

Worsening economic instability could continue to result in a cancellation of such orders or otherwise adversely affect spending for information technology and limit our ability to forecast future demand for our products, which could reduce expected revenues or result in a write-down of any excess or obsolete inventory.

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None of our third-party foundry or assembly

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contractors has provided assurances that adequate capacity will be available to us in the future.

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The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

Our net revenue decreased from $248.4 million in the three months ended March 31, 2023, to $95.3 million in the three months ended March 31, 2024, and the decline in net revenue could continue in future periods.

Our net revenue decreased from $432.4 million in the six months ended June 30, 2023, to $187.3 million in the six months ended June 30, 2024, and the decline in net revenue could continue in future periods.

Among other factors, the decrease is as a result of macroeconomic conditions impacting customer demand;

for example, the broadband market which has experienced slower than expected recovery.

Prior to 2023, our net revenues grew to $1.1 billion for the year ended December 31, 2022.

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Further, the impact of excess inventory in the channel has continued to influence our customers’ expected demand for some of our products.

In addition, in the first quarter of 2024, we completed notifications to remaining affected employees regarding the Workforce Reductions to align our operational needs with the changes in macroeconomic conditions and the demand environment.

In addition, in the first half of 2024, we completed notifications to remaining affected employees regarding the 2023 Workforce Reductions, and in July 2024, we are initiating the 2024 Workforce Reduction.

We may not realize, in full or in part, the anticipated benefits, savings and improvements from the reduction of our workforce if our revenue continues to decline.

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You should not rely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance.

Please refer to the Risk Factor entitled “ Our operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price ” for a discussion of factors contributing to variances in our operating results or rates of growth, if any.

Please refer to the Risk Factor entitled “ Our revenue and operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price ” for a discussion of factors contributing to variances in our operating results or rates of growth, if any.

If we are unable to resume adequate revenue growth and manage our operating expenses, our financial results could suffer and our stock price could decline.

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If we are unable to resume and manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products and we may fail to satisfy customer requirements, maintain product quality, execute our business plan, or respond to competitive pressures.

Our business, financial condition and results of operations could continue to be adversely affected by military conflicts, geopolitical and economic tensions among or with countries in which we conduct business, including between the United States and China, Israel (and its conflict with Iran), and among other countries.

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We sell our products throughout the world.

Products shipped to Asia accounted for 59% of our net revenue in the three months ended March 31, 2024.

In addition, as of March 31, 2024, approximately 77% of our employees are located outside of the United States.

Products shipped to Asia accounted for 68% of our net revenue in the six months ended June 30, 2024.

In addition, as of June 30, 2024, approximately 77% of our employees are located outside of the United States.

The majority of our products are manufactured, assembled and tested in Asia, and our major distributors are located in Asia.

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These factors include:

• changes in political, regulatory, legal or economic conditions;

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• geopolitical conflicts and tensions, especially as between the United States and China, that could destabilize trading relationships and economic activity;

• changes in political, regulatory, legal or economic conditions, including as a result of the upcoming U.S.

presidential election;

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• geopolitical conflicts and tensions, especially between the United States and China, that could destabilize trading relationships and economic activity;

• restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protection measures, including export controls and restrictions, duties and quotas and customs duties and tariffs;

• disruptions of capital and trading markets;

• changes in import and/or export control restrictions and regulations by governments, such as changes to licensing requirements or other anti-diversion enforcement measures, as a result of ongoing armed conflict and geopolitical tensions among the United States, China, Russia, Ukraine, Iran, Israel and other countries;

presidential election;

• transportation delays;

• civil disturbances or political instability;

• other unpredictable geopolitical turmoil, including terrorism, war or political or military coups, including the current conflict in Israel and continued escalation of Israel’s conflict with Iran;

• differing employment practices and labor standards;

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We also are subject to risks associated with international geopolitical and military conflicts.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the military conflict in Israel, including the recent escalation in its conflict with Iran, the Russia-Ukraine conflict, and increased political tensions in Russia, Europe, the Middle East and Asia.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the military conflict in Israel, including the escalation in its conflicts with Iran and Lebanon, the Russia-Ukraine conflict, and increased political tensions in Russia, Europe, the Middle East and Asia.

Currently, significant uncertainty surrounds the future trade relationships among the United States, China, and Russia.

government continues to make significant changes in U.S.

trade policies that could negatively affect our business.

trade policies that could negatively affect our business, and there may be further changes in U.S.

trade policy if there is a change in administration as a result of the upcoming U.S.

presidential election.

Additionally, policies made by other countries, such as China and Russia or their allies, could also negatively impact our business.

In a number of cases, compliance with these policies has required us to take actions adverse to our business.

Beginning in May 2019, we ceased normal business operations with entities affiliated with Huawei Technologies Co., Ltd., and certain other entities following an amendment to the EAR which added these entities to the Entity List for acting contrary to the national security or foreign policy of the United States.

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contrary to the national security or foreign policy of the United States.

We obtained export licenses for certain transactions with these entities.

As noted above, export licenses can be revoked or BIS could choose not to renew such licenses, which would halt the currently-approved licensed activities.

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As noted above, such export licenses can be revoked or BIS could choose not to renew such licenses and we have been required by BIS to pause, delay or halt licensed activities under such licenses at certain times and could continue to do so in the future, which negatively impacts our revenue.

Also, as described in more detail in the risk factor, “ We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology related to the development or production of our products or if such authorizations are revoked, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations ”, Semiconductor Manufacturing International Corporation, or SMIC, was added to the BIS Entity list in December 2020.

In September 2020, we further restricted business operations with additional entities affiliated with Huawei when the BIS again amended the EAR to add such entities to the Entity List.

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The BIS continues to add many new entities to the Entity List and Unverified List.

As noted above, our ability to sell or distribute products or technology will be limited if BIS further amends the EAR to add restrictions against parties who are or may be our customers.

As noted above and in the risk factor,

“ Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs

could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own

Increased tariffs or the imposition of other barriers to international trade could decrease demand and have a

material adverse effect on our revenues and operating results ” below, our ability to manufacture, sell or distribute products or technology will be limited if BIS further amends the EAR to add restrictions against parties who are or may be our customers.

We are required to obtain special licenses to conduct business with entities on the Entity List and to conduct additional diligence and recordkeeping, including obtaining user statements from entities on the Unverified List.

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We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, which products may be subject to such actions or what actions may be taken by other countries in retaliation.

In addition, there may be further changes in U.S.

trade policy if there is a change in administration as a result of the upcoming U.S.

presidential election.

In response to the United States tightening export controls on China, China has instituted restrictions of its own that affect U.S.

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Such developments could include restriction on the export of products from Taiwan to China and/or restriction on the import of Taiwanese-origin products into China.

We believe direct impacts of the economic sanctions against Russia and the military conflict in Ukraine are currently limited to volatility in the prices of metals used by our outsourced semiconductor assembly and test, or OSAT, supply chain, in particular around the supply of palladium, for which Russia is the top producer in the world, as well as increased fuel costs, which has global impact on transportation costs, including the shipping and delivery of our products.

We believe direct impacts of the U.S.

and European economic sanctions against Russia and the military conflict in Ukraine are currently limited to volatility in the prices of metals used by our outsourced semiconductor assembly and test, or OSAT, supply chain, in particular around the supply of palladium, for which Russia is the top producer in the world, as well as increased fuel costs, which has global impact on transportation costs, including the shipping and delivery of our products.

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However, the magnitude of such price volatility on our business and its duration is uncertain and cannot be reasonably estimated at this time.

We currently do not sell product in Russia, or sell product to distributors for resale in Russia.

The ongoing military conflict in Israel, and the recent escalation in Israel’s conflict with Iran, has resulted in our employees located in Israel having to perform military service and/or being negatively impacted by violence or political instability, which could interrupt business and increase costs associated with relocating employees, engaging with alternative third-party contractors or hiring additional employees outside of Israel.

The ongoing military conflict in Israel, and the recent escalation in Israel’s conflicts with Iran and Lebanon, have resulted in our employees located in Israel having to perform military service and/or being negatively impacted by violence or political instability, which could interrupt business and increase costs associated with relocating employees, engaging with alternative third-party contractors or hiring additional employees outside of Israel.

The United States has also imposed additional sanctions on Iran in response to attacks on Israel by Iran.

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Loss of a key distributor or customer under similar circumstances could have a material adverse effect on our business, revenues and operating results.

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Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products.

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In response, many of those trading partners, including China, have imposed or proposed new or higher tariffs on American products.

We have experienced weakening demand in China, and continuing changes in government trade policies create a heightened risk of further increased tariffs that impose barriers to international trade and could further decrease international demand.

We have experienced weakening demand in China, and continuing changes in government trade policies (including as a result of any change in administration due to the upcoming U.S.

presidential election) create a heightened risk of further increased tariffs that impose barriers to international trade and could further decrease international demand.

Our business and operating results are substantially dependent on international trade.

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We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology related to the development or production of our products or if such authorizations are revoked, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.

Certain of our products and technologies are subject to export and/or import controls imposed by countries in which we do business, including the United States Export Administration Regulations, or EAR, administered by the U.S.

Department of Commerce’s Bureau of Industry and Security, or BIS.

Certain of our products and technologies are subject to the EAR, which may require a license authorization from BIS prior to the shipment or sharing of certain products and technologies with certain end users or destinations.

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The addition of new entities to restricted party lists can further increase the scope of export restrictions applicable to our business.

The United States has also announced measures intended to further restrict the export of certain advanced semiconductor products and technology, as well as products that incorporate those advanced semiconductor products, to the People’s Republic of China, or China, and/or certain companies located in China due to national security and human rights concerns, including the imposition of new license requirements for certain semiconductor technologies.

The United States has also announced measures intended to further restrict the export of certain advanced semiconductor products and technology, as well as products

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that incorporate those advanced semiconductor products, to the People’s Republic of China, or China, and/or certain companies located in China due to national security and human rights concerns, including the imposition of new license requirements for certain semiconductor technologies.

Failure to obtain required export licenses for our products or the placement of one or more of our customers on any restricted parties lists could significantly reduce our revenue and harm our business.

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Obtaining export licenses can be difficult, costly and time-consuming and we may not always be successful in obtaining necessary export licenses.

Our failure to obtain required import or export approval for our products may adversely affect our business, and other limitations imposed on our ability to export or sell our products may also harm our international and domestic revenue.

In addition, it is possible that BIS can revoke licenses that have been granted or decline to re-issue such licenses upon their expiration.

Obtaining export licenses can be difficult, costly and time-consuming and we may not always be successful in obtaining necessary export licenses due to reasons beyond our control.

Our inability to obtain required import or export approval for our products may adversely affect our business, and other limitations imposed on our ability to export or sell our products may also harm our international and domestic revenue.

In addition, it is possible that BIS can revoke licenses that have been granted or decline to re-issue such licenses upon their expiration or in the event modifications are required to a previously-issued license.

Although our policies, procedures, and controls are designed to detect and prevent potential violations and maintain ongoing compliance with applicable export controls laws, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations.

For example, our products could be diverted to bad actors.

In addition, if our customers or business partners fail to comply with applicable regulations and laws, we may be subject to liability and may be required to suspend sales or take other action which could damage our reputation and negatively impact our results of operations.

If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions.

For example, our products could be diverted to bad actors by third parties.

In addition, if our customers or business partners fail to comply with applicable regulations and laws or to timely notify us of material changes to the licenses, we may be subject to liability and may be required to suspend sales or take other action which could damage our reputation and negatively impact our results of operations.

If we violate or fail to comply with any of these requirements, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions.

The absence of comparable restrictions imposed on competitors based in other countries may adversely affect our competitive position.

To the extent that we do business with parties on the Entity List under approved export licenses, our business could be affected if the government delays, denies, or otherwise does not grant or renew required licenses.

We currently have licenses from BIS that permit certain of our transactions with two restricted parties, but those licenses may be revoked at any time or denied for renewal when the license expires.

One of our third-party foundry partners, Semiconductor Manufacturing International Corporation, or SMIC, was added to the BIS Entity list in December 2020.

As a result of that Entity List listing, we must obtain export licenses from BIS for the export or reexport to SMIC of any technology for the development or production (fabrication) of our products.

As a result of that Entity List listing, we have been required to obtain export licenses from BIS for the export or reexport to SMIC of any technology for the development or production (fabrication) of our products.

Although we have obtained export licenses in order to have SMIC manufacture certain products for us, those export licenses could be revoked at any time.

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On June 8, 2023, BIS closed out its review of our voluntary self-disclosure without monetary or other penalties and with the issuance of a “warning letter.”

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We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of our major customers has had and could continue to have a material adverse effect on our revenue and operating results.

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The recipients of such intellectual property are also referred to as the Company’s customers.

In the three months ended March 31, 2024, two customers accounted for 36% of our net revenue, and our ten largest customers collectively accounted for 75% of our net revenue, of which distributor customers accounted for 19% of our net revenue.

In the three months ended March 31, 2024, we have continued to experience a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

In the six months ended June 30, 2024, two customers accounted for 22% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers accounted for 21% of our net revenue.

In the six months ended June 30, 2024, we have continued to experience a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

We expect that our operating results for the foreseeable future will continue to show a substantial percentage of sales dependent on a relatively small number of customers.

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• service provider and OEM consolidation across cable, satellite, and fiber markets could result in significant changes to our customers’ technology development and deployment priorities and roadmaps, which could affect our ability to forecast demand accurately and could lead to increased volatility in our business;

• technological changes in our markets could lead to substantial volatility in our revenues based on product transitions, and particularly in our broadband markets, we face risks based on changes in the way consumers are accessing and using broadband and cable services, which could affect operator demand for our products;

• any decrease in revenue generated by the recipient of intellectual property under certain intellectual property sale agreements, including due to any inability to enforce our intellectual property rights as described in the section “Risks Relating to Intellectual Property” under the risk factor “ We utilize a significant amount of intellectual property in our business.

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Moreover, it is possible that our customers may develop their own products or adopt a competitor’s solution for products that they currently buy from us.

When this occurs, our sales have previously and could in the future decline and/or our market share has previously and may in the future be reduced or smaller than anticipated and our business, financial condition and results of operations could be materially and adversely affected.

When this occurs, our sales could decline and/or our market share could be reduced.

Our relationship with customers has been and could continue to be impaired by our sale of patents.

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The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers could seriously impact our revenue and materially and adversely affect our results of operations.

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A significant portion of our revenues are from sales of product to distributors, who then resell our product.

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The loss of certain distributors could have a material adverse effect on our business and results of operations, and price reductions associated with their inventories of our products could have a material adverse effect on our operating results in the event of a dramatic decline in selling prices for these products.

In addition, the current situation relating to trade with China and governmental and regulatory concerns relating to specific Chinese companies continue to remain fluid and unpredictable.

Products shipped to mainland China accounted for less than 10% of our net revenue during the three months ended March 31, 2024, compared to 16% during the three months ended March 31, 2023.

and other governments such as China and Russia ”, and by tariffs and other trade barriers that may be implemented by governmental authorities.

Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

In addition to the legal proceedings referenced in Part II, Item 1 - Legal Proceedings of this report, we are subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, customer claims, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings and we may not be successful in such proceedings.

In addition, the current situation relating to trade with China and governmental and regulatory concerns relating to specific Chinese companies continue to remain fluid and unpredictable and may further change as a result of any change in administration from the upcoming U.S.

presidential election.

Products shipped to mainland China accounted for less than 10% of our net revenue during the six months ended June 30, 2024, compared to 14% during the six months ended June 30, 2023.

Our current and future operating results could be materially and adversely affected by limitations on our ability to sell to one or more Chinese customers, as described in the section “Risks Related to Our Business” under the risk factors “We are also subject to risks associated with international geopolitical and military conflict” and “We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology related to the development or production of our products or if such authorization are revoked, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations” , and by tariffs and other trade barriers that have or may be implemented by governmental authorities.

Any legal proceedings or claims against us or potential violations of applicable regulations could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

In addition to the legal proceedings referenced in Part II, Item 1 (Legal Proceedings) of this report, we are subject to legal proceedings, claims, and/or inquiries that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, customer claims, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings regarding potential violations of applicable law, and we may not be successful in resolving such proceedings or inquiries.

In addition, we have implemented a reduction in force and the attendant layoffs has resulted and could result in the risk of claims being made by or on behalf of affected employees.

Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices.

In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations.

Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements.

In addition, the expense of litigation or responding to inquiries and the timing of such expenses from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations.

Because of the potential risks, expenses, and uncertainties of litigation or government proceedings, we may, from time to time, resolve disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements.

Any of the foregoing could adversely affect our business, financial condition, and results of operations.

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Businesses we acquire may increase the scope and complexity of our information technology systems, and this may increase our risk exposure to cyber-attack when there are difficulties integrating diverse legacy systems that support operations for the acquired businesses.

Our information technology infrastructure also includes products and services provided by third parties, and these providers can experience breaches of their systems and products, or provide inadequate updates or support, which can impact the security of our systems and our proprietary or confidential information.

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Our information technology infrastructure also includes products and services provided

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by third parties, and these providers can experience breaches of their systems and products, or provide inadequate updates or support, which can impact the security of our systems and our proprietary or confidential information.

A cybersecurity incident or other compromise of our information technology systems could result in unauthorized publication or misuse of confidential business or proprietary information belonging to us, a customer, supplier, employee or other third party, including personal data, result in violations of privacy or other laws, expose us to a risk of litigation, cause us to incur direct losses if attackers initiate wire transfers or access our bank or investment accounts, or damage our reputation.

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Any of these results could adversely affect our business, operations and financial results, potentially in a material manner.

Average selling prices of our products have and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

Average selling prices of our products have previously decreased and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

We have and may in the future experience substantial period-to-period fluctuations in our operating results due to erosion of our average selling prices.

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Our inability to do so would cause our revenue and gross margins to decline.

In addition, under certain of our agreements with key distributors, we provide protection for reductions in selling prices of the distributors’ inventory, which could have a material adverse effect on our operating results if the selling prices for those products fell dramatically.

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In addition, under certain of our agreements with key distributors,

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we provide protection for reductions in selling prices of the distributors’ inventory, which could have a material adverse effect on our operating results if the selling prices for those products fell dramatically.

If we fail to penetrate new applications and markets, our revenue, revenue growth rate, if any, and financial condition could be materially and adversely affected.

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A significant portion of our revenue is attributable to demand for our products in markets for broadband solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

For the three months ended March 31, 2024 and 2023, revenue directly attributable to broadband applications accounted for approximately 35% and 33% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $48.6 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, and the decline in revenue could continue in future periods.

Delays in the development of, or unexpected developments in, the broadband markets, including international macroeconomic headwinds, could have an adverse effect on order activity by OEMs in these markets and, as a result, on our business, revenue, operating results and financial condition.

For the six months ended June 30, 2024 and 2023, revenue directly attributable to broadband applications accounted for approximately 29% and 31% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $80.3 million for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, and negative impact to our revenues is expected to continue in the second half of 2024 and possibly beyond due to slower than expected recovery in this market.

Delays in the development of, or unexpected developments in, the broadband markets, including international macroeconomic headwinds, has had and is expected to continue to have an adverse effect on order activity by OEMs in these markets for the second half of 2024 and possibly thereafter and, as a result, on our business, revenue, operating results and financial condition.

In addition, consolidation trends among Pay-TV and broadband operators may continue, which could delay or lead to cancellations of major spending programs and have a material adverse effect on our future operating results and financial condition.

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We may be unable to make the substantial and productive research and development investments that are required to remain competitive in our business.

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Many of our products originated with our research and development efforts, which we believe have provided us with a significant competitive advantage.

For three months ended March 31, 2024, and 2023, our research and development expense was $64.8 million and $67.3 million, respectively.

For six months ended June 30, 2024, and 2023, our research and development expense was $121.3 million and $137.9 million, respectively.

While we are closely monitoring our current research and development expenses, we expect our research and development expenses to increase in future years when we return to expanding our product portfolio and enhancing existing products.

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Further, our business liability insurance may be inadequate, may not cover the claims, and future coverage may be unavailable on acceptable terms, which could adversely impact our financial results.

Our operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

Our revenue and operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future.

For example, our revenue declined from $248.4 million for the three months ended March 31, 2023, to $95.3 million for the three months ended March 31, 2024 and revenue could continue to decline.

For example, our revenue declined from $432.4 million for the six months ended June 30, 2023, to $187.3 million for the six months ended June 30, 2024 and revenue could continue to decline.

These fluctuations may occur on a quarterly and on an annual basis and are due to a number of factors, many of which are beyond our control.

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• seasonality or cyclical fluctuations in our markets;

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• overall demand volatility for semiconductor solutions across a diverse range of communications, industrial and multi-market applications;

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• the effects of competitive pricing pressures, including decreases in average selling prices of our products.

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For example, we often experience flat to declining revenue in the first quarter of each fiscal year and increasing revenue in the second quarter of each fiscal year.

Our historical growth may have reduced the impact of seasonal or cyclical factors that might have influenced our business to date.

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If our growth rate continues to slow, seasonal or cyclical variations in our operations may become more pronounced over time and may materially affect our business, financial condition, results of operations and prospects.

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however, we cannot provide any assurances that we will accurately predict the direction in which our markets will evolve or that we will be able to develop, market, or sell new products that respond to such changes successfully or in a timely manner, if at all.

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We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results could continue to negatively affect our inventory levels, sales and operating results.

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Also, as customer lead times continue to improve, we have seen and expect to continue to see a more normalized demand-planning horizon.

While we expect inventory to remain elevated in the near term, we expect that channel inventory will continue to decline thereafter.

Moreover, because our target markets are relatively new, many of our customers have difficulty accurately forecasting their product requirements and estimating the timing of their new product introductions, which ultimately affects their demand for our products.

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In addition, the rapid pace of innovation in our industry could render significant portions of our inventory obsolete.

Excess or obsolete inventory levels could result in unexpected expenses or increases in our reserves that could adversely affect our business, operating results and financial condition.

Excess or obsolete inventory levels has resulted and continue to result in unexpected expenses or increases in our reserves that could adversely affect our business, operating results and financial condition.

Conversely, if we were to underestimate customer demand or if sufficient manufacturing capacity were unavailable, we could forego revenue opportunities, potentially lose market share and damage our customer relationships.

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Our limited operating experience in new markets or potential markets we may enter, combined with the rapidly evolving nature of our markets in general, substantial uncertainty concerning how these markets may develop and other factors beyond our control reduces our ability to accurately forecast quarterly or annual revenue.

If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.

If our revenue does not increase particularly in new markets, we could continue to incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in current or future revenue.

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

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If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of this product to the customer may be precluded or delayed, which may result in a decrease in our revenue and cause our business to suffer.

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Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures.

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Although our policies, procedures, and controls are designed to detect and prevent potential violations and maintain ongoing compliance with applicable laws, we cannot assure you that we have been or will be at all times in compliance with such laws and regulations.

The costs of complying with these laws (including the costs of any investigations, remediation, auditing and monitoring) could adversely affect our current or future business.

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As indicated elsewhere in this report, we do a substantial portion of our business in Asia and particularly in China.

Since October 2022, the United States has taken steps to restrict the export of certain advanced semiconductor products and technology to the People’s Republic of China as well as a number of specific Chinese companies, due to national security and human rights concerns.

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As indicated elsewhere in this report, we do a substantial portion of our business in Asia, including in Hong Kong, a special administrative region of the People’s Republic of China, or China.

Since October 2022, the United States has taken steps to restrict the export of certain advanced semiconductor products and technology to China as well as a number of specific Chinese companies, due to national security and human rights concerns.

There has also been a substantial focus by regulators in the United States and Europe on the business practices of certain major Chinese technology companies.

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Although the March 2023 voluntary self-disclosure to BIS resulted in a warning letter, we could incur increased administrative and legal costs in order to remediate any potential compliance gaps or violations, to respond to any inquiries, or in connection with the preparation and submission of any voluntary self-disclosures to the government agencies, as appropriate.

Any failure to comply with applicable laws could adversely affect our business and operating results.

Any failure to comply with applicable laws or regulatory approvals could adversely affect our business and operating results.

We have implemented policies and procedures, including adoption of an anti-corruption policy and procedures with respect to applicable export control laws, but there can be no assurance that our policies and procedures will prove effective.

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Our future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing and finance teams, and especially our design and technical staff.

In March and October 2023, we initiated reductions of our workforce to align our operational needs with the changes in macroeconomic conditions and the demand environment.

In March and October 2023, we initiated the 2023 Workforce Reductions, and in July 2024, we are initiating the 2024 Workforce Reduction to align our operational needs with the changes in macroeconomic conditions and the demand environment.

These workforce reductions may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our employees who were not affected by the reduction in workforce to seek alternate employment.

Employees whose positions were eliminated or those who determine to seek alternate employment may seek employment with our competitors.

Employees whose positions were eliminated or those who determine to seek alternate employment may seek employment with our

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In addition, our reduction in workforce may adversely impact our ability to implement our business strategy and respond rapidly to any new product, growth or revenue opportunities.

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Additionally, reductions in workforce may make it more difficult to recruit and retain new employees.

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In addition, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the stock-based compensation they are to receive in connection with their employment.

We have experienced fluctuations, including declines, in the market price of our stock and reductions in force which could adversely affect our ability to attract, motivate or retain key employees.

In addition, our future performance also depends on the continued services and continuing contributions of our senior management to execute our business plan and to identify and pursue new opportunities and product innovations.

We have experienced declines in the market price of our stock and reductions in force which could adversely affect our ability to attract, motivate or retain key employees.

In addition, our future performance also depends on the ability of our senior management to execute our business plan and to identify and pursue new opportunities and product innovations.

Our employment arrangements with our employees do not generally require that they continue to work for us for any specified period, and therefore, they could terminate their employment with us at any time.

The loss of the services of one or more of our key employees, especially our management and key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical and other personnel, could have a material adverse effect on our business, financial condition and results of operations.

The loss of the services of one or more of our key employees, especially our management and key design and technical personnel, or our inability to retain, attract and motivate our management and qualified design and technical and other personnel, could have a material adverse effect on our business, financial condition and results of operations.

Our future success also depends on the continued contributions of our senior management team and other key personnel.

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In addition, we have not entered into non-compete agreements with members of our senior management team or other key personnel, except in limited circumstances (e.g., in connection with the acquisition of other companies).

We are fortunate that many members of our senior management team have long tenures with us, but from time to time we also have been required to recruit new members of senior management.

We are fortunate that certain members of our senior management team have long tenures with us, but recently we also have been required to recruit new members of senior management.

With respect to recruitment and retention of senior management, we need to ensure that our compensation programs provide sufficient recruitment and retention incentives as well as incentives to achieve our long-term strategic business and financial objectives.

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The loss of any member of our senior management team or other key personnel could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.

As of March 31, 2024, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

As of June 30, 2024, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

Such indebtedness adversely affects our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors ’ business.

As of March 31, 2024, our aggregate indebtedness was $125.0 million from an initial secured term B loan facility, or the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for a revolving credit facility of up to $100.0 million, or the Revolving Facility, which remains undrawn as of March 31, 2024.

As of June 30, 2024, our aggregate indebtedness was $125.0 million from an initial secured term B loan facility, or the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for a revolving credit facility of up to $100.0 million, or the Revolving Facility, which remains undrawn as of June 30, 2024.

The credit agreement also permits us to request incremental loans in an aggregate principal amount not to exceed the sum of an amount equal to the greater of (x) $175.0 million and (y) 100% of “Consolidated EBITDA” (as defined in such agreement), plus the amount of certain voluntary prepayments, plus an unlimited amount that is subject to pro forma compliance with certain first lien net leverage ratio, secured net leverage ratio and total net leverage ratio tests.

The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

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The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest at either an Adjusted Term SOFR plus a fixed applicable margin of 2.25% or an Adjusted Base Rate plus a fixed applicable margin of 1.25%, at our option.

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Subject to customary cure rights, any default would permit the holders of the indebtedness to accelerate repayment of this debt and could cause defaults under other indebtedness that we have, any of which could have a material adverse effect on the trading price of our common stock.

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We and our subsidiaries may, subject to any limitations in the terms of our existing loan facilities, incur additional debt, secure existing or future debt, recapitalize our debt or take a number of other actions that are not limited by the terms of our term loans that could have the effect of diminishing our ability to make payments under the indebtedness when due.

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We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, and cybersecurity.

We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, and cybersecurity, and any inability of us to comply with such obligations may negatively impact our business.

The legislative, enforcement policy and regulatory framework for privacy, data protection and cybersecurity issues worldwide is rapidly evolving and complex and is likely to remain uncertain for the foreseeable future.

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The CCPA gives California residents the right to access, delete and opt out of certain sharing of their information, and imposes penalties for failure to comply.

California has adopted a new law, the California Privacy Rights Act of 2020, or CPRA, that substantially expands the CCPA and was effective as of January 1, 2023.

California has adopted a new law, the California Privacy Rights Act of 2020 that substantially expands the CCPA and was effective as of January 1, 2023.

Additionally, other U.S.

states continue to propose privacy-focused legislation.

In 2021, the National People’s Congress passed the Data Security Law of the People’s Republic of China, or the Data Security Law and the Personal Information Protection Law of the People’s Republic of China, or PIPL.

states continue to propose and enact privacy and security-focused legislation.

In addition, governments around the world continue to enact laws relating to privacy and data security.

For example, in 2021, the National People’s Congress passed the Data Security Law of the People’s Republic of China, or the Data Security Law and the Personal Information Protection Law of the People’s Republic of China, or PIPL.

The Data Security Law is the first comprehensive data security legislation in the People’s Republic of China, or China, and aims to regulate a wide range of issues in relation to the collection, storage, processing, use, provision, transaction and publication of any kind of data.

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Because the interpretation and application of many such laws and regulations, remain uncertain and continue to evolve, it is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our data management practices or the features of our products or solutions, and we could face fines, lawsuits, regulatory investigations, and other claims and penalties, and we could be required to fundamentally change our products or our business practices, all of which could have a material adverse effect on our business.

Any inability, or perceived inability, to adequately address privacy and data protection concerns, or to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, even if unfounded, could result in additional cost and liability to us, damage our reputation, inhibit sales and have a material adverse effect on our business, results of operations, and financial condition.

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could result in additional cost and liability to us, damage our reputation, inhibit sales and have a material adverse effect on our business, results of operations, and financial condition.

Our products must conform to industry standards in order to be accepted by end users in our markets.

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Integrating acquired organizations and their products and services, including the integration of completed acquisitions, may be expensive, time-consuming and a strain on our resources and our relationships with employees, customers, distributors and suppliers, and ultimately may not be successful.

The benefits or synergies we may expect from the acquisition of complementary or supplementary businesses may not be realized to the extent or in the time frame we initially anticipate.

The benefits or synergies we may expect from the acquisition of

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complementary or supplementary businesses may not be realized to the extent or in the time frame we initially anticipate.

Some of the risks that may affect our ability to successfully integrate acquired businesses include those associated with:

• failure to successfully further develop the acquired products or technology;

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• conforming the acquired company’s standards, policies, processes, procedures and controls with our operations;

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We may not be able to identify suitable acquisition or investment candidates, or even if we do identify suitable candidates, they may be difficult to finance, expensive to fund and there is no guarantee that we can obtain any necessary antitrust approvals or complete such transactions on terms that are favorable to us.

We have in the past been and may in the future be party to ligation related to acquisitions.

We have in the past been, are currently, and may in the future be party to litigation related to acquisitions.

Any adverse determination in litigation resulting from acquisitions could have a material adverse effect on our business and operating results.

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Third parties have in the past and may in the future assert against us and our customers and distributors their patent and other intellectual property rights to technologies that are important to our business.

For example, we were recently involved in a litigation with Bell Semiconductor, which has since been settled pursuant to a Settlement and Patent License Agreement.

For example, we were involved in a litigation with Bell Semiconductor, which has since been settled pursuant to a Settlement and Patent License Agreement.

In addition, from time to time, we receive correspondence from competitors and other third parties seeking to engage us in discussions concerning potential claims against us, and we receive correspondence from customers seeking indemnification for potential claims related to infringement claims asserted against down-stream users of our products.

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Claims of this sort also could harm our relationships with our customers or distributors and might deter future customers from doing business with us.

In order to maintain our relationships with existing customers and secure business from new customers, we have been required from time to time to provide additional assurances beyond our standard terms.

In order to maintain our relationships with existing customers and secure business from new customers, we

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have been required from time to time to provide additional assurances beyond our standard terms.

If any of our current or future proceedings result in an adverse outcome, we could be required to:

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• pay substantial damages, indemnification expenses and attorneys’ fees;

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• expend significant resources to develop non-infringing products, processes or technology;

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• we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect consideration that we are entitled to under certain intellectual property sale agreements;

• our ability to monetize our portfolio through divestiture and/or exclusive licensing transactions may be impacted by conduct of counterparties to any such transactions, and we may face liability arising from our monetization efforts.

• our ability to monetize our portfolio through divestiture and/or exclusive licensing transactions will not be impacted by conduct of counterparties to any such transactions, and we will not face liability arising from our monetization efforts.

In addition, our competitors or others may design around our protected patents or technologies.

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If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

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Monitoring unauthorized use of our intellectual property is difficult and costly.

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Moreover, if we are required to commence litigation, whether as a plaintiff or defendant as has occurred in the past, not only will this be time-consuming, but we will also be forced to incur significant costs and divert our attention and efforts of our employees, which could, in turn, result in lower revenue and higher expenses.

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We also rely on customary contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measures to protect our trade secrets.

We cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of such contracts.

For example, as described in Part II, Item 1 — Legal Proceedings – Comcast Litigation, Comcast shared our proprietary designs with our direct competitor.

For example, as described in Part II, Item 1 (Legal Proceedings), Comcast shared our proprietary designs with our direct competitor.

Comcast then worked with our competitor to develop the FDX-amplifier technology.

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We face risks related to security vulnerabilities in our products.

We regularly are subject to security vulnerabilities with respect to our products as well as intellectual property that we purchase or license from third parties for use in our products.

Our products are used in application areas that create new or increased cybersecurity and privacy risks, including applications that gather and process large amounts of data, such as the cloud or Internet of Things, and critical infrastructure, payment card applications, and automotive applications.

We regularly become aware of security vulnerabilities with respect to our products as well as intellectual property that we purchase or license from third parties for use in our products.

Our products are used in application areas that create new or increased cybersecurity and privacy risks, including applications that gather and process large amounts of data, such as the cloud, Internet of Things, or artificial intelligence, and critical infrastructure, payment card applications, and automotive applications.

Security features in our products cannot make our products entirely secure, and security vulnerabilities identified in our products have resulted in, and are expected to continue to result in, attempts by third parties to identify and exploit additional vulnerabilities.

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We and such third parties make prioritization decisions about which vulnerabilities to address, which can delay, limit, or prevent development or deployment of a mitigation and harm our reputation.

Subsequent events or new information can develop that changes our assessment of the impact of a security vulnerability, which can cause certain claims or customer satisfaction considerations, as well as result in litigation or regulatory inquiries or actions over these matters.

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Subsequent events or new information can develop that changes our assessment of the

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impact of a security vulnerability, which can cause certain claims or customer satisfaction considerations, as well as result in litigation or regulatory inquiries or actions over these matters.

Security vulnerabilities and/or mitigation techniques can result in adverse performance or power effects, reboots, system instability or unavailability, loss of functionality, non-compliance with standards, data loss or corruption, unpredictable system behavior, decisions by customers, regulators and end users to limit or change the applications in which they use our products or product features, and/or the misappropriation of data by third parties.

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We do not have long-term supply contracts with most of our contract manufacturers or suppliers, and any disruption in our supply of products or materials could have a material adverse effect on our business, revenue and operating results.

Currently we do not have long-term supply contracts with most of our other third-party vendors, including but, not limited to ASE, TSMC, and UMC.

Currently we do not have long-term supply contracts with most of our other third-party vendors, including but, not limited to Advanced Semiconductor Engineering, or ASE, TSMC, and United Microelectronics Corporation, or UMC.

While certain products are supplied to us by Intel on a turnkey basis under the terms of a supply agreement with an initial term of five years, Intel can terminate the agreement under certain circumstances.

If Intel terminates such supply agreement, the costs of certain products supplied to us by Intel could be negatively impacted, which could reduce our margins on such products.

We make substantially all of our purchases on a purchase order basis, and our contract manufacturers are not required to supply us products for any specific period or in any specific quantity.

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None of our third-party contractors has provided any assurance to us that adequate capacity will be available to us within the time required to meet additional demand for our products.

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We do not have our own manufacturing facilities and rely on a limited number of third parties to manufacture, assemble, and test our products.

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As a result, we rely on third-party foundry wafer fabrication, including sole sourcing for many components or products.

Currently, a large portion of our products are manufactured by Advanced Semiconductor Engineering, or ASE, TSMC, and United Microelectronics Corporation, or UMC, at foundries located in Taiwan, Singapore, and China.

Currently, a large portion of our products are manufactured by ASE, TSMC, and UMC, at foundries located in Taiwan, Singapore, and China.

We also use third-party contractors for all of our assembly and test operations.

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• potential increases in prices;

• our use of foundry partners who are currently subject to BIS restrictions, to manufacture certain of our products may be impaired if one or more of the following were to occur:

• our use of foundry partners who are currently subject to BIS restrictions, such as SMIC, to manufacture certain of our products may be impaired if one or more of the following were to occur:

(1) we are unable to obtain U.S.

export licenses authorizing its interactions and technology exchanges with these foundry partners, or (2) if BIS increases export control restrictions to Chinese foundries without the ability for us to obtain a U.S.

export licenses authorizing its interactions and technology exchanges with these foundry partners or if there are delays in obtaining such licenses, or (2) if BIS increases export control restrictions to Chinese foundries without the ability for us to obtain a U.S.

export license, or (3) U.S.

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In addition, if these third parties fail to deliver quality products and components on time and at reasonable prices, we could have difficulties fulfilling our customer orders, our net revenue could decline and our business, financial condition and results of operations would be adversely affected.

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Additionally, our product shipment and manufacturing capacity may be similarly reduced or eliminated at one or more facilities due to the fact that the majority of our fabrication and assembly and test contractors are all located in the Pacific Rim region, principally in China, Taiwan, and Singapore.

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We currently sell a significant portion of our products to customers through our distributors, who maintain their own inventories of our products.

Sales to distributors accounted for approximately 36%, and 43% of our net revenue in the three months ended March 31, 2024, and 2023, respectively.

Sales to distributors accounted for approximately 45%, and 47% of our net revenue in the six months ended June 30, 2024, and 2023, respectively.

Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor is invoiced, generally with 30 to 60 day terms.

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Additionally, we incorporate third-party technology into and with some of our products, and we may do so in future products.

The operation of our products could be impaired if errors occur in the third-party technology we use.

It may be more difficult for us to correct any errors in a timely manner if at all because the development and maintenance of the technology is

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not within our control.

The operation of our products could be impaired if errors occur in the third-party technology we use, including as a result of information technology failures from cyber-attacks on or security breaches of third parties.

It may be more difficult for

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us to correct any errors in a timely manner if at all because the development and maintenance of the technology is not within our control.

There can be no assurance that these third parties will continue to make their technology, or improvements to the technology, available to us, or that they will continue to support and maintain their technology.

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The trading price of our common stock is highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

For example, in the three months ended March 31, 2024, the trading price of our common stock ranged from a low of $16.91 to a high of $24.05.

For example, in the six months ended June 30, 2024, the trading price of our common stock ranged from a low of $16.20 to a high of $24.99.

These factors include those discussed in this “Risk Factors” section of this report and others such as:

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• changes in laws or regulations applicable to our products, including export controls;

• geopolitical changes impacting our business, including with respect to China and Taiwan;

• geopolitical changes impacting our business and markets, including with respect to China and Taiwan and the upcoming U.S.

presidential election;

• actual or anticipated changes in our growth rate relative to our competitors;

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• sales of our common stock by us or our stockholders;

• general economic and market conditions, including the impacts from sanctions against Russia and the military conflicts in Ukraine and Israel, increased inflationary pressures, and interest rate changes.

• general economic and market conditions, including the impacts from sanctions against Russia and the military conflicts in Ukraine and among Israel, Iran and Lebanon, increased inflationary pressures, and interest rate changes.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected the market prices of equity securities of many companies, including us.

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These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our common stock.

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In the past, companies that have experienced volatility in the market price of their stock are attractive to momentum, hedge, day-trading, or activist investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction, and have also been subject to securities class action litigation.

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• require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.

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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally restricts a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

We have adopted a stock repurchase program to repurchase shares of our common stock;

however, any future decisions to reduce or discontinue purchasing our common stock, after we resume such purchasing, pursuant to our stock repurchase programs could cause the market price for our common stock to decline.

Our share repurchase program has been temporarily suspended since July 2022 due to our previously pending (now terminated) merger with Silicon Motion.

Although our Board of Directors has authorized a stock repurchase program, any determination to resume our stock repurchase program and execute our stock repurchase program will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, and other factors, as well as our Board of Director’s continuing determination that the repurchase program are in the best interests of our stockholders and is in compliance with all laws and agreements applicable to the repurchase program.

Our stock repurchase program does not obligate us to acquire any common stock.

If we fail to meet any expectations related to stock repurchases, the market price of our common stock could decline, and could have a material adverse impact on investor confidence.

Additionally, price volatility of our common stock over a given period may cause the average price at which we repurchase our common stock to exceed the stock’s market price at a given point in time.

We may further increase or decrease the amount of repurchases of our common stock in the future.

Any reduction or discontinuance by us of repurchases of our common stock, after we resume such repurchases, pursuant to our current stock repurchase program could cause the market price of our common stock to decline.

Moreover, in the event repurchases of our common stock are reduced or discontinued, our failure or inability to resume repurchasing common stock at historical levels could result in a lower market valuation of our common stock.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

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Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

As of March 31, 2024, we had approximately 83.1 million shares of common stock outstanding.

As of June 30, 2024, we had approximately 83.9 million shares of common stock outstanding.

All shares of our common stock are freely tradable without restrictions or further registration under the Securities Act unless held by our “affiliates,” as that term is defined under Rule 144 of the Securities Act.

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If we issue additional shares of our common stock to settle bonus awards in the future, such shares may be freely sold in the public market immediately following the issuance of such shares, subject to the applicable conditions of Rule 144 and our insider trading policy, and the issuance of such shares may have a material adverse effect on our share price once they are issued.

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We do not intend to pay dividends for the foreseeable future.

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Our corporate headquarters is located in Southern California.

Our operations and financial condition could be seriously harmed in the event of a major earthquake, fire, flooding, drought, or other natural disasters in Taiwan or the Pacific Rim region, or political unrest, war, labor strikes, work stoppages or public health crises, such as the outbreak of COVID-19, or other natural or man-made disaster in countries where our contractors’ facilities are located.

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countries where our contractors’ facilities are located.

Such catastrophes could result in the disruption of our product shipments, foundry, assembly, or test capacity.

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Any such impairment charges relating to goodwill or other intangible assets could have a material impact on our operating results in future periods, and the announcement of a material impairment could have a material adverse effect on the trading price and trading volume of our common stock.

As of March 31, 2024, our balance sheet reflected goodwill of $318.6 million and other intangible assets of $64.9 million.

As of June 30, 2024, our balance sheet reflected goodwill of $318.6 million and other intangible assets of $61.8 million.

Consequently, we could recognize material impairment charges in the future.

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Unanticipated changes in our tax rates or unanticipated tax obligations could affect our future results.

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Any such changes may also result in the taxes we previously paid being subject to change.

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Our income tax provision is subject to volatility and our ability to use our deferred tax assets to offset future taxable income may be limited since we are subject to tax examinations, which may adversely impact our future effective tax rate and operating results.

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On a periodic basis we evaluate our deferred tax assets for realizability.

Based upon our review of all positive and negative evidence, as of March 31, 2024, we continue to have a valuation allowance on state deferred tax assets, certain federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where we have cumulative losses or otherwise are not expected to utilize certain tax attributes.

Based upon our review of all positive and negative evidence, as of June 30, 2024, we continue to have a valuation allowance on state deferred tax assets, certain federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where we have cumulative losses or otherwise are not expected to utilize certain tax attributes.

The impact of releasing some or all of such valuation allowance in a future period could be material in the period in which such release occurs.

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Any future changes in the deferred tax asset realizability assertion may require a valuation allowance to reduce our deferred tax assets, which would increase our tax expense in the period the allowance is recognized and affect our results of operations.

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Our corporate income tax liability could materially increase if tax incentives we have negotiated in Singapore cease to be effective or applicable or if we are challenged on our use of such incentives.

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We are subject to rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our management’s report on, and assessment of the effectiveness of, our internal controls over financial reporting.

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If we fail to maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404.

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Recent Repurchases of Equity Securities

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DEFAULTS UPON SENIOR SECURITIES

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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