What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-01-29 compared with 2024-01-31 · 98 added, 146 removed, 251 unchanged (49% of the section changed)

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These solutions also enable shorter design cycles, significant design flexibility and low system-level cost across a range of markets.

Our customers include electronics distributors, module makers, OEMs and ODMs, which incorporate our products in a wide range of electronic devices.

Our customers primarily include electronics distributors, module makers, OEMs and ODMs, which incorporate our products in a wide range of electronic devices.

Examples of such devices include radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

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as well as power management and interface products used in these and many other markets.

In the year ended December 31, 2023, net revenue was $693.3 million, which was derived in part from sales of RF receivers and RF receiver SoC and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications.

Our ability to achieve revenue growth in the future will depend, among other factors, on our ability to further penetrate existing markets;

our ability to expand our target addressable markets by developing new and innovative products;

changes in government trade policies;

and our ability to obtain design wins with device manufacturers, in particular manufacturers of data modems, and gateways for the broadband service provider, storage networking market, cable infrastructure market, industrial and automotive markets, and optical module and telecommunications infrastructure markets.

Products shipped to Asia accounted for 75%, 82% and 83% of net revenue during the years ended 2023, 2022 and 2021, respectively, including 37%, 43% and 40%, respectively, from products shipped to Hong Kong and 11%, 16% and 12%, respectively, from products shipped to mainland China and 13% from products shipped to Vietnam in 2021.

In addition, we generate revenue from certain intellectual property sale agreements.

In the year ended December 31, 2024, net revenue was $360.5 million, which was derived in part from sales of RF receivers and RF receiver SoC and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications, and from revenue from intellectual property sale agreements.

We have experienced slower than expected recovery in sales across all of our end markets.

This is primarily driven by excess inventory in the channels as well as slower demand in regions such as China.

Geopolitical tensions and changing trade policies continue to influence the semiconductor industry.

We continue to develop and innovate with new products for new solutions in advanced semiconductor process nodes such as 16nm and 5nm and beyond, while addressing opportunities capturing and processing high quality broadband communications and high-speed optical interconnect signals.

Products shipped to Asia accounted for 75%, 75% and 82% of net revenue during the years ended 2024, 2023 and 2022, respectively, including 41%, 37% and 43%, respectively, from products shipped to Hong Kong and less than 10%, 11% and 16%, respectively, from products shipped to mainland China.

Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia.

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To date, all of our sales have been denominated in United States dollars.

A significant portion of our net revenue has historically been generated by a limited number of customers.

Sales to customers comprise both direct sales to customers and indirect sales through distributors.

A significant portion of our net revenue has historically been generated by a limited number of customers through sales of our products, as well as consideration under intellectual property sale agreements.

Sales of products to customers comprise both direct sales to customers and indirect sales through distributors.

In the year ended December 31, 2024, one customer accounted for 12% of our net revenue, and our ten largest customers collectively accounted for 60% of our net revenue, of which distributor customers accounted for 30% of our net revenue.

In the year ended December 31, 2022, two of our customers accounted for 31% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers comprised 18% of our net revenue.

In the year ended December 31, 2023, one of our customers accounted for 10% of our net revenue, and our ten largest customers collectively accounted for 54% of our net revenue, of which distributor customers comprised 18% of our net revenue.

In the year ended December 31, 2022, two of our direct customers accounted for 31% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers comprised 27% of our net revenue.

For certain customers, we sell multiple products into disparate end user applications such as cable modems and broadband gateways.

For certain customers, we sell multiple products into disparate end user applications such as PON ODUs, Wi-Fi routers, broadband gateways and cable modems.

Our business depends on winning competitive bid selection processes, known as design wins, to develop integrated circuits for use in our customers’ products.

These selection processes are typically lengthy, and as a result, our sales cycles will vary based on the specific market served, whether the design win is with an existing or a new customer and whether our product being designed in our customer’s device is a first generation or subsequent generation product.

Our customers’ products can be complex and, if our engagement results in a design win, can require significant time to define, design and result in volume production.

Our customers’ products can be complex and, if our engagement results in a design win, can require significant time to move into volume production.

Because the sales cycle for our products is long, we can incur significant design and development expenditures in circumstances where we do not ultimately recognize any revenue.

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Product life cycles in our target markets will vary by application.

For example, in the broadband data modem and gateway sectors, a design-in can have a product life cycle of 24 to 60 months.

In the industrial and wired and wireless infrastructure markets, a design-in can have a product life cycle of 24 to 84 months and beyond.

Impact of Global Economic Uncertainty and Inventory Build

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we expect to experience continued decline in our sales and revenues in the first quarter of 2024.

In particular, we believe an economic slowdown and inventory oversupply in the channel could 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.

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

As supplier lead times continue to stabilize, 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 channel inventory will continue to decline thereafter.

For example, in the broadband data modem and gateway sectors, a design can have a product life cycle of 24 to 60 months.

In the industrial and wired and wireless infrastructure markets, a design can have a product life cycle of 24 to 84 months and beyond.

Terminated Silicon Motion Merger

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The second amended and restated commitment letter dated October 24, 2022 with Wells Fargo Bank, N.A., or Wells Fargo Bank, and other lenders, and related financing commitments for the previously pending (now terminated) merger were also terminated upon termination of the Merger Agreement.

As a result of the termination of the financing, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million, which is included in other income (expense), net in the year ended December 31, 2023.

Acquisition of Company Y

On January 17, 2023, the Company completed its acquisition of a business, or Company Y, pursuant to a Purchase and Sale Agreement, or the Purchase Agreement.

The transaction consideration included $9.8 million in cash.

In addition, Company Y stockholders may receive up to an additional $2.6 million in potential contingent consideration, subject to the acquired business satisfying certain personnel objectives by June 17, 2024.

Company Y is headquartered in Bangalore, India and operates as a provider of engineering design services.

As a result of the termination of the financing, in August 2023, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million, which is included in other income (expense), net in the year ended December 31, 2023.

Workforce Reductions

During the year ended December 31, 2023, we entered into two plans of restructuring to reduce our workforce, or the Workforce Reductions.

The Workforce Reductions are intended to align our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support the long-term business strategy by reducing our operating expenses.

As a result of the Workforce Reductions, in the year ended December 31, 2023, we incurred $19.8 million in restructuring costs primarily related to severance costs and related expenses, and estimate that we will incur approximately $30 million to $40 million in restructuring costs in 2024 upon notice to the remaining affected employees of the Workforce Reductions.

Approximately two-thirds of the cost is estimated to be statutory severance benefits in the jurisdictions in which the terminated employees were employed and a significant amount of the remaining one-third of the cost represents non-cash charges related to exiting facilities and writing off of related assets.

The estimate of costs that we expect to incur, and the timing thereof, are subject to a number of assumptions and actual results may differ.

We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Workforce Reductions.

We expect to complete informing affected employees of the Workforce Reductions by the end of the first quarter of 2024.

During the year ended December 31, 2024, we completed plans of restructuring to reduce our workforce, or the Workforce Reductions.

The Workforce Reductions aligned our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support our long-term business strategy by reducing our operating expenses.

As a result of the Workforce Reductions, in the year ended December 31, 2024 and 2023, we incurred $53.4 million and $19.8 million in restructuring costs.

Refer to Note 4 in our consolidated financial statements included elsewhere in this report for more details regarding the Workforce Reductions.

Critical Accounting Estimates

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We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.

different results can occur as circumstances change and additional information becomes known.

We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies.

Materially different results can occur as circumstances change and additional information becomes known.

We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting estimates.

Accordingly, these are the estimates we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

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historical return rates, may impact our consolidated financial results in periods subsequent to recording those estimates, and such amounts are disclosed in our consolidated financial statements.

Other than our estimates of sell-through activity and customer return rates, there are no assumptions inherent in our estimates in the valuation of price adjustments and returns that would result in sensitivity of reported amounts to such assumptions.

Other than our estimates of sell-through activity and customer return rates, there are no assumptions inherent in our estimates in the valuation of price adjustments and returns that would result in

sensitivity of reported amounts to such assumptions.

During the years ended December 31, 2024, 2023 and 2022 we have not recorded any material adjustments to such estimates.

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The following describes the line items set forth in our consolidated statements of operations.

Net revenue is generated from sales of radio-frequency, analog, digital, and mixed-signal integrated circuits for access and connectivity, wired and wireless infrastructure, and industrial and multi-market applications.

A discussion of changes in our results of operations during the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on January 31, 2024, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

A significant portion of our sales are to distributors, who then resell our products.

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Research and Development.

Research and development expense includes personnel-related expenses, including stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense, and allocated occupancy costs.

Research and development expense includes personnel-related expenses, including benefits and stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense, and allocated occupancy costs, partially offset by income from joint R&D projects and/or governmental R&D grants, if any.

Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

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Restructuring charges consist of severance, lease and leasehold impairment charges, and other charges related to restructuring plans.

Loss on Extinguishment of Debt.

Loss on extinguishment of debt consists of the charge-off of remaining unamortized debt discount and issuance cost on debt we repaid early with a majority of the proceeds from a new term loan.

Interest and Other Income (Expense), Net.

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Interest expense consists of interest accrued on debt and amortization of discounts on debt and other liabilities.

Other income (expense) generally consists of income (expense) generated from non-operating transactions, including a ticking fee paid to lenders following the termination of the Silicon Motion merger, net gains (losses) from sales or impairment of investments and/or income or losses from investments, if any, including unrealized holding gains (losses) from certain investments required to be marked to market value, if any, and a gain from partial curtailment of employee defined benefit obligations.

Income tax provision.

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Year Ended December 31,

2023 2022 2021

Net revenue 100 % 100 %

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Total operating expenses 116 61

Income (loss) from operations (6) 16 7

Loss from operations (62) (6)

Interest income 2 1

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Total other income (expense), net (4) (4)

Income (loss) before income taxes (9) 16 5

Loss before income taxes (66) (9)

Income tax provision 2 1

Net income (loss) (11) % 11 % 5 %

Net loss (68) % (11) %

Year Ended December 31,

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Total net revenue $ 360,528 $ 693,263 $ (332,735) (48) %

Net revenue decreased $427.0 million to $693.3 million for the year ended December 31, 2023, as compared to $1.1 billion for the year ended December 31, 2022 primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in the prior year.

As supply shortages eased, the upward pricing pressure eased and was a modest component of revenue growth in the year.

Broadband net revenue decreased by $289.7 million, driven by decreases in the volume of broadband SOC shipments in this category.

Connectivity revenue decreased $165.7 million due to decreased volume of shipments of certain products primarily associated with residential broadband market decline.

The increase in infrastructure revenues of $40.8 million was primarily driven by an increase in the volume of wireless backhaul shipments.

Industrial and multi-market revenue decreased $12.4 million due to a $22.3 million decrease driven by decreased volume of shipments of high-performance analog products, partially offset by a $9.9 million increase driven by increased volume of shipments of component products.

Net revenue increased $227.9 million to $1.1 billion for the year ended December 31, 2022, as compared to $892.4 million for the year ended December 31, 2021.

Broadband net revenue increased $0.8 million, substantially driven by price increases on our broadband SOC products within this category, which was partially offset by modest decreases in the volume of shipments in this category.

Connectivity revenue increased $154.6 million due to an increased volume of shipments of products toward the latter part of 2022 as our supply improved opening up new opportunities to address the third party router market and was supplemented by some price increases on connectivity products.

More than 50% of the revenue increase was driven by increased revenue from the introduction of our new Wi-Fi 6 product late in 2021.

The increase in infrastructure revenues of $16.9 million was driven by an increase in shipments in the wireless infrastructure market.

Industrial and multi-market revenue increased $55.6 million due to increased demand for our power and interface products and increased prices on products within this category.

This end market also had some modest declines from products that entered end-of-life categorization.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry.

Net revenue decreased $332.7 million to $360.5 million for the year ended December 31, 2024, as compared to $0.7 billion for the year ended December 31, 2023, as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022.

Broadband net revenue decreased by $86.7 million, driven by decreases in the volume of broadband SOC shipments in this category, partially offset by revenue from certain intellectual property sale agreements and increases from reversals of unclaimed rebates due to expiration of rebate pricing.

Connectivity revenue decreased $82.5 million due to decreased volume of shipments of certain products associated with residential broadband market decline, partially offset by revenue from certain intellectual property sale agreements.

The decrease in infrastructure revenues of $63.2 million was driven by decreases in the volume of wireless backhaul shipments, and high performance analog shipments, partially offset by improvement in shipments of from high-speed interconnect products, and revenues from certain intellectual property sale agreements.

Industrial and multi-market revenue decreased $100.4 million driven by a decreased volume of shipments of component and high-performance analog products.

Price changes did not have a material impact to revenues period over period.

Cost of Net Revenue and Gross Profit

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Cost of net revenue decreased $141.9 million to $165.7 million for the year ended December 31, 2024, as compared to $307.6 million for the year ended December 31, 2023.

The decrease was driven by a decreased volume of shipments of broadband SOC and certain connectivity products as a result of macroeconomic conditions impacting customer demand for such products.

Gross profit percentage decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to reduced absorption of intangible amortization, partially offset by improvement from product mix.

Product mix included higher margin backhaul product contributions relative to total revenues in 2023 as compared to 2022.

Cost of net revenue increased $73.9 million to $470.5 million for the year ended December 31, 2022, as compared to $396.6 million for the year ended December 31, 2021.

The increase was driven by an increased volume of shipments of certain connectivity products toward the latter part of 2022 as our supply improved and increased costs on inventory purchased from suppliers as a result of supply chain constraints, and was partially offset by decreases in the volume of shipments of broadband products.

Gross profit percentage improved for the year ended December 31, 2022, as compared to the year ended December 31, 2021, driven by improved mix of higher margin new products, higher margin infrastructure and industrial and multi-market product contributions, and improved margins from price increases that were passed along on certain products within our broadband, connectivity, and industrial and multi-market categories during the year, and improved absorption of amortization of intangible assets.

We currently expect that gross profit percentage will fluctuate in the future, from period-to-period, based on changes in product mix, average selling prices, and average manufacturing costs.

The decrease was driven by a decreased volume of shipments of our products as a result of macroeconomic conditions impacting customer demand for such products as described above under “Net Revenue”.

Gross profit percentage declined for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to reduced absorption of intangible amortization and fixed costs.

Research and Development

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Research and development, or R&D, expense decreased $44.3 million to $225.2 million for the year ended December 31, 2024 from $269.5 million in the year ended December 31, 2023.

The decrease was driven by decreases in bonuses of $21.9 million, payroll and benefits expense of $9.4 million, and consulting expense of $9.2 million, partially offset by the impact of decrease in income from joint R&D projects and governmental R&D grants offsetting our R&D expense of $11.3 million and an increase stock based compensation expense of $3.6 million.

The decrease in bonuses is attributable to a decrease in financial

performance and decreased headcount from the workforce reductions during 2023.

The decrease in payroll and benefits expense is also due to the workforce reductions.

The amount of income from joint R&D projects and governmental R&D grants varies from year to year depending on demand for such projects and availability of governmental R&D programs.

R&D expense increased $18.0 million to $296.4 million for the year ended December 31, 2022 from $278.4 million in the year ended December 31, 2021.

The increase was driven by increases in payroll and employee benefit expenses of $21.8 million, stock-based compensation and bonus expenses of $11.2 million, CAD design tools and other software license expenses of $5.8 million, consulting expenses of $3.1 million, and various other expenses of $6.1 million.

This increase was partially offset by an increase in income from joint R&D projects and governmental R&D grants of $25.6 million and decrease in prototype expenses of $4.6 million.

The increased expenses were due primarily to increased headcount in 2022.

The amount of income from joint R&D projects and governmental grants varies from year to year depending on demand for such projects and availability of governmental R&D programs.

We are closely managing our R&D expenses to meet evolving demand and are in the process of completing a workforce reduction which is anticipated to reduce R&D expense in the first quarter of 2024;

The decrease was driven by decreases in payroll and benefits expense of $24.2 million, CAD design tools and other software license expense of $8.6 million, stock based compensation of $5.4 million, prototype expense of $5.0 million, bonuses of $4.5 million, consulting expense of $4.1 million, depreciation expense of $1.5 million and occupancy expenses of $1.0 million.

These decreases were partially offset by a decrease in income from joint R&D and governmental grants of $10.9 million offset against R&D expense.

The decrease in payroll and benefits expense, stock-based compensation, and bonuses are attributable to the Workforce Reductions and cost reduction measures.

The decreases in CAD design tool, consulting and prototype expenses are due to timing of project completion.

The decrease in depreciation expense is from acquired assets becoming fully amortized as they reached the end of their useful lives.

The decrease in income from joint R&D projects and governmental grants is due to timing of governmental R&D grants and termination of certain programs during the first and third quarters of 2024 as a result of the Workforce Reductions.

The amount of income from research and development funded by others also varies from period to period depending on availability of such funding, including governmental grants.

We are reducing our research and development spending, including via our Workforce Reductions, to meet evolving demand;

however, we expect our research and development expenses to increase in future years as we develop products to drive future growth.

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% of net revenue 38 % 19 %

Selling, general and administrative expense decreased $35.9 million to $132.2 million for the year ended December 31, 2023, as compared to $168.0 million for the year ended December 31, 2022.

The decrease was a result of decreases in stock-based compensation expenses of $30.1 million, amortization of intangibles of $9.0 million, bonuses of $7.8 million, and supplies and small tools of $1.6 million, partially offset by increases in payroll and other benefits expense of $7.4 million and legal fees of $4.9 million.

The decrease in stock based compensation expense and bonuses is attributable to the payouts for the 2022 period including additional grants to certain employees and a decrease in financial performance impacting the amounts of stock based compensation recognized for performance-based restricted stock units and amounts of bonuses.

The decrease in intangible amortization expense is from acquired assets becoming fully amortized as they reach the end of their useful lives.

The increase in payroll and other benefits is from increase in headcount in certain administrative functions.

The increase in legal fees is due to various legal proceedings including those following the termination of our merger with Silicon Motion, the Comcast litigation, and in settlement of the Bell Semiconductor litigation earlier in the year.

Selling, general and administrative expense increased $6.2 million to $138.3 million for the year ended December 31, 2024, as compared to $132.2 million for the year ended December 31, 2023.

The increase was a result of increases in stock-based compensation expenses of $11.3 million, professional fees of $7.6 million, other expenses of $3.5 million, payroll and benefits of $3.3 million, and various other expenses of $3.3 million, partially offset by a decrease in intangible amortization expense of $11.7 million.

The increase in professional fees was due to an increase in acquisition and integration costs of $6.8 million related to our previously pending (now terminated) merger with Silicon Motion.

The increase in stock-based compensation expenses and payroll employee benefits expenses and the remaining other expenses were mainly due to increased headcount and spending due to higher product demands from customers.

Improved financial performance in 2022 and additional grants to employees of stock-based awards also contributed to the increase in stock-based compensation expense.

We are closely managing our selling, general and administrative expenses;

The increase was a result of increase in stock based compensation of $16.4 million, partially offset by decreases in payroll and other benefits expense of $6.2 million, bonuses of $1.7 million, commission expense of $1.1 million, and depreciation and amortization of $1.0 million.

The increase in stock-based compensation expense is a result of incremental grants made to executives and employees for retention purposes.

The decreases in payroll and other benefits and bonuses are attributable to the Workforce Reductions and other cost reduction measures.

The decrease in commissions expense is due to decreased revenues.

The decrease in depreciation and amortization is from assets becoming fully amortized as they reached the end of their useful lives.

We are reducing our selling, general and administrative expenses, including via our Workforce Reductions;

however, we expect selling, general and administrative expenses to increase in future years when we return to growing our sales and marketing organization to expand into existing and new markets.

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(dollars in thousands)

Impairment losses $ 2,438 $ 2,811 $ — $ (373) $ 2,811 (13)% N/A

Impairment losses $ 1,237 $ 2,438 $ (1,201) (49)%

% of net revenue — % — %

Impairment losses in the year ended December 31, 2023 related to abandonment of certain acquired licensing agreements.

Impairment losses in the year ended December 31, 2022 also related to abandonment of certain acquired licensing agreements.

Impairment losses in the year ended December 31, 2024 related to abandonment of certain intellectual property licenses.

Impairment losses in the year ended December 31, 2023 also related to abandonment of certain intellectual property licenses.

Restructuring Charges

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Restructuring charges increased $17.5 million to $19.8 million for the year ended December 31, 2023, compared to $2.3 million for the year ended December 31, 2022.

Restructuring charges for the year ended December 31, 2023 included $17.9 million in employee severance-related charges related to reductions in our workforce and $1.8 million in other charges driven by the abandonment of certain computer-assisted design software licenses used by the terminated workforce.

Approximately two-thirds of the employee severance-related charges are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed, with the remainder representing standard severance benefits.

Restructuring charges in the year ended December 31, 2022 included $1.8 million in employee severance-related charges and $0.5 million of lease-related charges, which is comprised of impairment of leased right-of-use assets from partial abandonment of a facility.

Restructuring charges in the year ended December 31, 2021 included $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which consisted of impairment of leased right-of-use assets and leasehold improvements.

Restructuring charges for the year ended December 31, 2024 included $28.9 million in employee severance-related charges, $17.2 million in charges under contracts associated with cancelled projects and related impairment of assets, and $7.2 million in charges related to reduction of space leased for office facilities.

A large portion of the employee severance-related charges are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed, with the remainder representing standard severance benefits.

Restructuring charges in the year ended December 31, 2023 included $17.9 million in employee severance-related charges and $1.8 million in other charges driven by the abandonment of certain computer-assisted design software licenses used by the terminated workforce.

Approximately two-thirds of the employee severance-related charges in 2023 were estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed, with the remainder representing standard severance benefits.

Interest and Other Income (Expense )

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Interest and other income (expense), net changed by $10.2 million to a net expense of $15.4 million in the year ended December 31, 2024 from a net expense of $25.6 million for the year ended December 31, 2023.

The change in interest and other income (expense), net was primarily due to a $24.4 million change in other income (expense), net, from income of $3.5 million in the 2022 period to expense of $20.9 million in the 2023 period plus an increase in interest expense of $0.9 million, partially offset by the impact of a $5.8 million increase in interest income.

The $24.4 million change in other income (expense), net primarily related to a loan ticking fee of approximately $18.3 million paid to lenders following the termination of the Silicon Motion merger, $4.3 million impact from foreign currency fluctuations, $2.8 million impact of realized and unrealized holding losses recognized on equity securities that were sold at the end of 2023 that were previously marked to market value in other income (expense), net, and partially offset by a gain of $1.0 million related to partial curtailment of defined benefit pension obligations.

The $0.9 million increase in interest

expense is due to higher interest rates on our outstanding debt in 2023.

The $5.8 million increase in interest income is due to higher interest rates on our interest-bearing cash equivalents.

Interest and other income (expense), net changed by $6.1 million to a net expense of $6.0 million in the year ended December 31, 2022 from a net expense of $12.2 million for the year ended December 31, 2021.

The change in interest and other income (expense), net was due to the positive impact of a non-recurring gain on sale of privately held investments of $3.4 million and a decrease in interest expense of $3.2 million associated with a lower outstanding principal balance of debt, partially offset by unrealized losses on investments and impacts from foreign currency exchange rate fluctuations.

Interest and other income (expense), net for the year ended December 31, 2023 included a loan ticking fee of approximately $18.3 million paid to lenders following the termination of the Silicon Motion merger, partially offset by $1.0 million gain related to partial curtailment of defined benefit pension obligations which did not recur in the 2024 period.

Currency exchange yielded gains of $1.3 million in the 2024 period compared to $2.5 million of losses in the 2023 period, or a positive impact of $3.7 million, and investment gains were $0.5 million compared to investment losses of $0.6 million, or a positive impact of $1.2 million.

The positive impacts pertaining to these items were partially offset by negative impacts from the impairment of privately held investments and notes receivable of $12.3 million.

The investments were impaired due to insolvency of the underlying business.

Income Tax Provision (Benefit)

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% of pre-tax income (loss) (3) % (15) %

The income tax provision for the year ended December 31, 2023 was $9.3 million compared to an income tax provision of $49.2 million for the year ended December 31, 2022, and an income tax provision of $5.9 million for the year ended December 31, 2021.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the year ended December 31, 2023 resulted primarily from the mix of pre-tax income among jurisdictions, permanent tax items including tax credits and a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, and release of uncertain tax positions under ASC 740-10.

The permanent tax item related to global intangible low-taxed income, or GILTI, also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

The income tax provision for the year ended December 31, 2024 was $6.5 million compared to an income tax provision of $9.3 million for the year ended December 31, 2023.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the year ended December 31, 2022 resulted primarily from the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal research and development credits.

federal statutory rate for the year ended December 31, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including tax credits, stock based compensation, tax deficiencies related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and the recognition of a valuation allowance on Singapore deferred tax assets.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the year ended December 31, 2021 resulted primarily from a tax on GILTI, and non-deductible foreign stock-based compensation, offset by a benefit related to research and development tax credits, foreign earnings taxed at rates other than the federal statutory rate and the effect of a release of valuation allowance against certain Singapore deferred tax assets pertaining to usage of net operating losses.

The permanent tax item related to global intangible low-taxed income, or GILTI, also reflects the then recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

We continue to maintain a valuation allowance to offset state and certain federal and foreign deferred tax assets, as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines.

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We also receive a reduced withholding tax rate on certain intercompany royalty payments made by our Singapore subsidiary during the incentive period.

We recorded a tax provision in the year ended December 31, 2023 and year ended December 31, 2022 at the incentive rate.

In the year ended December 31, 2021, due to our Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on our income tax provision.

The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore

over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

We recorded income taxes in the years ended December 31, 2024 and 2023 at the incentive rate.

The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve

compliance related to that incentive period.

We currently believe that we will be able to satisfy these conditions without material risk.

We will continue to monitor updates to our business along with guidance issued with respect to both Acts to determine whether any adjustments are needed to our consolidated tax provision in future periods.

Liquidity and Capital Resources

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However, on July 26, 2023, we terminated the Merger Agreement and were relieved of our obligations to close.

We also use cash to pay down outstanding debt, repurchase our common stock under our stock repurchase plan, and from time to time, make investments.

As of December 31, 2023, $125.0 million of principal was outstanding under a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of December 31, 2023.

From time to time, we may also use cash to pay down outstanding debt and/or make investments.

As of December 31, 2024, $125.0 million of principal was outstanding under a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available, subject to the terms and conditions of the agreement, a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of December 31, 2024.

The proceeds of the revolving facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

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We could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate.

While we had been mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and affect our ability to service the indebtedness.

Please refer to the Risk Factor entitled “ As of September 30, 2023, 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 interest 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 their interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business ” for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

Our future capital requirements will depend on many factors, including changes in revenue, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products, any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement and any other potential material investments in, or acquisitions of, complementary businesses, services or technologies.

While we had been mitigating the impact of high interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and affect our ability to service the indebtedness.

Please refer to the Risk Factor entitled “ As of December 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 high 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, high 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 ” for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

Our future capital requirements will depend on many factors, including changes in revenue, the expansion or contraction of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products, any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement and any other potential material investments in, or acquisitions of, complementary businesses, services or technologies.

Additional funds may not be available on terms favorable to us or at all.

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Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of intangible assets, impairment of leased right-of-use assets and related leasehold improvements and unrealized holding or realized gains or losses on marketable

equity securities.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as, but not limited to, amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of assets, and gain on extinguishment of lease liabilities.

Cash used to fund capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows.

Cash proceeds from issuance of common stock and debt and cash used to pay down outstanding debt or repurchase common stock are included in financing activities in our consolidated statements of cash flows.

Cash paid to satisfy minimum tax

withholdings on behalf of employees for restricted stock units and cash proceeds from issuance of common stock and debt and cash used to pay down outstanding debt, if any, are included in financing activities in our consolidated statements of cash flows.

As of December 31, 2024, our material cash requirements include long-term debt, non-cancelable operating leases, inventory purchase obligations and other obligations, which primarily consist of contractual payments due for computer-aided design software, as follows:

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The future payments related to uncertain tax positions recorded as other long-term liabilities have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers, and on occasion, proceeds that we receive under certain intellectual property sale agreements.

Aside from the amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period depending on the payment cycles of our major distributor customers, and relative linearity of shipments period-to-period.

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The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of December 31, 2024.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted LIBOR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted LIBOR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%.

of 1.25% or (ii) an adjusted LIBOR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%.

Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00%, or (ii) an adjusted LIBOR rate (as calculated above) plus an applicable margin of 1.00%.

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Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement amortizes in equal quarterly installments equal to 0.25% of the original principal amount, with the balance payable at maturity on June 23, 2028.

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

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

The following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

Year Ended December 31,

2023 2022 2021

(in thousands)

Net cash provided by operating activities $ 43,372 $ 388,726 $ 168,233

Net cash provided by (used in) operating activities $ (45,295) $ 43,372

Net cash used in investing activities (23,446) (15,935)

Net cash used in financing activities (26,356) (240,401) (91,903)

Net cash provided by (used in) financing activities 1,286 (26,356)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,298) (1,082)

Increase (decrease) in cash, cash equivalents and restricted cash $ (1) $ 56,619 $ (18,296)

Decrease in cash, cash equivalents and restricted cash $ (68,753) $ (1)

Cash Flows from Operating Activities

In the year ended December 31, 2023, net cash provided by operating activities was $43.4 million, compared to net cash provided by operating activities of $388.7 million for the year ended December 31, 2022.

The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of broadband SOC and certain connectivity products as a result of macroeconomic conditions impacting customer demand for such products (as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in our working capital, which decreased $101.4 million, in particular, in 2023 we made $104.2 million in payments against our price protection liability and $11.8 million in severance and related payments from our workforce reductions.

In the year ended December 31, 2022, net cash provided by operating activities was $388.7 million, compared to net cash flow provided by operating activities of $168.2 million for the year ended December 31, 2021.

The increase in operating cash flows was driven by an increase in revenue from various factors as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in working capital, which increased $110.3 million, in particular in 2022, the price protection liability increased by $113.3 million in 2022, due to a significant increase in revenues from customers with price protection rights and a delay in the timing of payments and certain price protection claims submitted by customers since certain claims are not made until after a customer has utilized a complete bundle of products.

Such delay was caused by the supply chain shortages in the industry over an 18-month period beginning in 2021 and extending into 2022.

In the year ended December 31, 2024, net cash used in operating activities was $45.3 million, compared to net cash provided by operating activities of $43.4 million for the year ended December 31, 2023.

The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of our products as a result of macroeconomic conditions impacting customer demand for our products (as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in our working capital, which increased $68.4 million, in particular, in 2024, we collected accounts receivable of $177.6 million, which was partially offset by payments against our price protection liability of $44.6 million and severance and other payments from the Workforce Reductions of $34.5 million.

Cash Flows from Investing Activities

Our use of cash in investing activities declined, as we moved from heavier investing in infrastructure, securities and private companies in 2022 to lighter investment activity in 2023.

Net cash used in investing activities was $15.9 million for the year ended December 31, 2023 and included purchases of property and equipment of $13.5 million, payments to acquire Company Y of $9.8 million, purchases of intangible assets of $6.4 million, and payments of contingent consideration related to our acquisition of Company X of $3.0 million.

Net cash used in investing activities was $91.8 million for the year ended December 31, 2022 and consisted of purchases of property and equipment of $41.3 million, purchases of investments of $29.3 million, purchases of intangible assets of $11.2 million and proceeds loaned to a supplier under notes receivable of $10.0 million.

Our use of cash in investing activities increased, as we increased investments in property equipment, including production masks.

Net cash used in investing activities was $23.4 million for the year ended December 31, 2024 and consisted of purchases of property and equipment of $17.7 million and purchases of intangible assets of $5.8 million.

Net cash used in investing activities was $15.9 million for the year ended December 31, 2023.

Cash Flows from Financing Activities

Our use of cash in financing activities declined, as we moved from early paydown of debt to mitigate rising interest rates in 2022 to cash conservation in 2023 following the general slowdown in the market environment.

Net cash used in financing activities was $26.4 million for the year ended December 31, 2023.

Net cash used in financing activities consisted of payment of a ticking fee to lenders of $18.3 million associated with the termination of our debt commitment associated with the terminated Silicon Motion merger and repayments of minimum tax withholding paid on behalf of employees for restricted stock units of $12.6 million, partially offset by cash inflows from net proceeds from the issuance of common stock upon exercise of stock options of $4.6 million.

We continued cash conservation in 2024 following the general slowdown in the market environment.

Net cash provided by financing activities was $1.3 million for the year ended December 31, 2024.

Net cash provided by financing activities consisted of net proceeds from the issuance of common stock upon exercise of stock options of $4.1 million partially offset by cash outflows of repayments of minimum tax withholding paid on behalf of employees for restricted stock units of $2.8 million.

Net cash used in financing activities was $26.4 million for the year ended December 31, 2023.

Net cash used in financing activities consisted of repayments of debt of $185.0 million, common stock repurchases of $31.5 million, and minimum tax withholding paid on behalf of employees for restricted stock units of $28.9 million, partially offset by cash inflows from net proceeds from the issuance of common stock upon exercise of stock options of $5.0 million.

Warranties and Indemnifications

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

What changed 10-K

Item 7. Management’s Discussion and Analysis