What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-10-14 compared with 2021-10-25 · 134 added, 115 removed, 702 unchanged (26% of the section changed)

10 unchanged sentences

• The effects of the COVID-19 outbreak could adversely affect our business, results of operations and financial condition.

We have identified a material weakness in our internal control over financial reporting.

• Our efforts to adapt to our work environment to the COVID-19 pandemic may be unsuccessful.

• Changing worldwide economic conditions could adversely affect our operating results and financial condition.

• Our operating results fluctuate from quarter to quarter, which make them difficult to predict.

14 unchanged sentences

• We are subject to a number of procurement laws and regulations.

Contracts with the U.S.

government may be terminated, cancelled of modified.

• Contracts with the United States Government may be terminated, cancelled or modified.

• Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us.

6 unchanged sentences

• We may make future acquisitions and/or alliances, which involve numerous risks.

We may fail to realize the anticipated benefits of our recent acquisition of Cree’s LED business.

• We may fail to realize the anticipated benefits of recent acquisitions.

• We rely on third parties to sell a portion of our products and services.

5 unchanged sentences

• We could incur substantial costs or liabilities as a result of violations of environmental laws.

Our worldwide operations may be disrupted by operational issues, natural disasters or other events.

Risks Relating to Our International Operations

• Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control, including the effects of climate change, natural disasters, man made disasters or other events, as well as societal and governmental responses to such events.

• Hostilities in Ukraine may exacerbate certain risks we face.

Risks Related to Our International Operations

• Our business is subject to the risks generally associated with international business operations.

• We depend on Brazil markets for a significant portion of our sales.

Our success in part depends on incentives in Brazilian laws for local manufacturing of electronics products.

• Our success in part depends on incentives in Brazilian laws for local manufacturing of electronics.

The elimination of or a reduction in the incentives for local manufacturing, or our inability to secure the benefits of these regulations, could significantly reduce our profitability for products in Brazil.

8 unchanged sentences

• Our indebtedness could impair our financial condition and harm our ability to operate our business.

Certain of our credit agreements may limit our flexibility in operating our business.

Provisions in the 2026 Notes and Indenture (defined below) could delay or prevent an otherwise beneficial takeover of us.

• Our credit agreements may limit our flexibility in operating our business.

• Provisions in the 2026 Notes and the Indenture could delay or prevent an otherwise beneficial takeover of us.

• Our capped call transactions may affect the value of our publicly traded debt and ordinary shares.

Risks Relating to Investments in Cayman Islands Companies

Risks Related to Investments in Cayman Islands Companies

• We are a Cayman Islands company and, because the rights of shareholders under Cayman Islands law differ from those under U.S.

17 unchanged sentences

The COVID-19 pandemic has resulted in substantial loss of life, economic disruption and government intervention worldwide.

As a result, we experienced reduced sales volumes of certain product lines since early calendar 2020.

As a result, we have experienced fluctuating sales volumes of certain product lines since early calendar 2020.

It also disrupted our product development, marketing and corporate development activities.

Our recently acquired LED Business experienced similar impacts from the pandemic from early in calendar 2020.

If these conditions continue, or if we have an outbreak in any of our facilities, such reduced sales volumes may continue or worsen and we may, among other issues, experience, in any or all product lines, delays in product development, a decreased ability to support our customers, disruptions in sales and manufacturing activities and overall reduced productivity, each of which could have a negative impact on our ability to meet customer commitments and on our revenue and profitability.

If these conditions continue, or if we have an outbreak in or closure of any of our facilities, such reduced sales volumes may continue or worsen and we may, among other issues, experience, in any or all product lines, delays in product development, a decreased ability to support our customers, disruptions in sales and manufacturing activities and overall reduced productivity, each of which could have a negative impact on our ability to meet customer commitments and on our revenue and profitability.

There can be no assurance that negative impacts resulting from the wide-ranging effects of COVID-19 will be offset by increased sales in subsequent periods.

While initially we did not experience a major disruption in our supply chain as a result of the COVID-19 pandemic, the reduction of investment in new capacity due to the pandemic, coupled with strong demand to expand delivery and logistics, internet and cloud services as well as a rebound in economic conditions and general demand at a pace faster than expected has resulted in significant supply shortages that may impact our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products.

While initially we did not experience a major disruption in our supply chain as a result of the COVID-19 pandemic, the reduction of investment in new capacity due to the pandemic, coupled with strong demand to expand delivery and logistics, internet and cloud services as well as a rebound in economic conditions and general demand at a pace faster than expected has resulted in significant supply shortages that have affected our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products.

We may not be able to pass on these rising costs to our customers which could result in a negative impact to our results of operations.

3 unchanged sentences

The impact of the effects of COVID-19 on our business may worsen in the future.

We source our materials from parts of the world that have been affected by the virus, and if the impacts of the pandemic worsen in any of these geographies, it could have an adverse impact on our supply chain and our ability to get the materials we need to build our products.

We source our materials from parts of the world that have been significantly affected by the virus, and if the impacts of the pandemic worsen in any of these geographies, it could have an adverse impact on our supply chain and our ability to get the materials we need to build our products.

Renewed or expanded government shutdown orders or stay-at-home directives or individual decisions to reduce work and commercial activities, or an outbreak among or quarantine of the employees in any of our facilities, could cause significant interruptions to, or temporary closures of, our operations.

Since a large percentage of our production is done in a small number of facilities, a disruption to operations in any one facility could have a material impact on our business.

In addition, COVID-19 has in the short-term, and, together with other disease outbreaks, may over the longer term, adversely affect the economies and financial markets within many countries and regions, including in the United States, Brazil, Asia and Europe, which are the primary geographic areas in which we conduct business, resulting in a significant economic downturn.

Since a large percentage of our production is done in a small number of facilities, a disruption to operations in any one facility could have a significant and material impact on our business.

In addition, COVID-19 has in the short-term, and, together with other disease outbreaks, may over the longer term, adversely affect the economies and financial markets within many countries, such as the United States, Brazil and China, and regions, including Asia and Europe, which are the primary geographic areas in which we conduct business, resulting in a significant economic downturn in these countries and regions.

To the extent the COVID-19 pandemic or the related global business and economic environment adversely affect our business and financial results, it may also have the effect of heightening or exacerbating many of the other risks described in these Risk Factors.

We are unable to accurately predict the impact that COVID-19 will have in future periods due to various uncertainties and future developments, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, the occurrence of other epidemics, the imposition of related public health measures and travel and business restrictions or other actions that may be taken by governmental authorities in an effort to contain or treat the virus, all of which, together with the disruptions and other factors discussed above , could have a material adverse effect on our customer relationships, operating results, cash flows and financial condition and have a negative impact on our share price.

We have identified a material weakness in our internal control over financial reporting.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

In connection with an out-of-period adjustment identified in our second quarter of 2021, our management identified a material weakness in the design of internal controls that are meant to provide reasonable assurance that the timely accounting for import taxes, including the related financial statement disclosures, was recorded in accordance with accounting principles generally accepted in the United States of America.

While the identified material weakness has been remediated, we cannot provide assurance that we will not identify additional material weaknesses in future periods or that we will be successful in remediating any future significant deficiencies or material weaknesses in internal control over financial reporting.

Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud.

Our failure to implement and maintain effective internal control over financial reporting could adversely impact our ability to report our financial results accurately and on a timely basis, which could result in errors in our consolidated financial statements and/or result in a restatement of our consolidated financial statements.

These activities could cause us to fail to meet our reporting obligations and could cause a decline in the trading price of our ordinary shares.

If our financial statements are not accurate, investors may not have a complete understanding of our operations.

We may also incur significant costs and diversion of management resources in an effort to enhance our controls and procedures.

Any such diversion of management’s attention from other business concerns could harm our results of operations.

In addition, we could become subject to shareholder lawsuits or investigations by the stock exchange on which our ordinary shares are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

We are unable to accurately predict the impact that COVID-19 will have in future periods due to

various uncertainties and future developments, including the evolution and severity of the disease, the occurrence of other epidemics, the imposition of related public health measures and travel and business restrictions or other actions that may be taken by governmental authorities in an effort to contain or treat the virus, all of which, together with the disruptions and other factors discussed above, could have a material adverse effect on our customer relationships, operating results, cash flows and financial condition and have a negative impact on our share price.

Our efforts to adapt our work environment to the COVID-19 pandemic may be unsuccessful.

While the COVID-19 pandemic persists, we have begun to adopt and roll out return to office plans for our workforce.

We believe that there are costs to remote work in terms of productivity, innovation and community that have adversely affected our business during the pandemic.

At the same time, we also believe that certain of our employees have benefited from the ability to work remotely and may be resistant to calls to return to work.

To the extent plans we adopt are more restrictive than those of others in our industry, our ability to attract and retain talent may be materially and adversely affected.

In addition, if we do not solidify our plans in a manner that is considered timely by our employees, the resulting uncertainty may also adversely affect retention.

Changing worldwide economic conditions could adversely affect our operating results and financial condition.

and global economies are facing growing inflation, higher interest rates and potential recession.

Adverse changes in economic conditions could harm our operating results and financial conditions in a variety of ways.

For example, regional or global economic downturns could adversely affect demand for our products, which could adversely affect our revenue and potentially result in write-offs of excess or obsolete inventory.

Inflation could also drive increases in our costs of revenue and operations, which we may not be able to successfully pass along to our customers.

Higher interest rates could result in increased cash usage to service our variable rate indebtedness and increase the cost to us of refinancing our indebtedness.

Our operating results fluctuate from quarter to quarter, which make them difficult to predict.

16 unchanged sentences

Our business has in the past experienced quarterly and annual operating losses.

For example, in 2020, we had a net loss of $1.1 million and have had losses in two of the last five years.

Our ability to maintain profitability depends in part on revenue growth from, among other things, increased demand for our memory solutions, products and related service offerings in our current markets including Brazil, growth in our IPS business including the performance of our acquired companies, as well as our ability to expand into new markets, such as LED solutions.

For example, in 2020, we had a net loss of $1.1 million.

Our ability to maintain profitability depends in part on revenue growth from, among other things, increased demand for our memory solutions, products and related service offerings in our current markets including Brazil, growth in our IPS and LED businesses, the performance of our acquired companies as well as our ability to expand into new markets.

We may not be successful in achieving the revenue and revenue growth necessary to maintain profitability.

Moreover, as we continue to expend substantial funds for research and development projects, enhancements to sales and marketing efforts, integration of acquisitions and to otherwise operate our business, we cannot assure you that we will achieve or maintain profitability on an annual or quarterly basis even if our revenue does grow.

Moreover, as we continue to expend substantial funds for research and development projects, enhancements to sales and marketing

efforts, integration of acquisitions and to otherwise operate our business, we cannot assure you that we will achieve or maintain profitability on an annual or quarterly basis even if our revenue does grow.

We compete in historically cyclical markets.

29 unchanged sentences

Our price increases may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold.

government increases or implements additional tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the resulting trade barriers could have a significant adverse impact on our suppliers, our customers and on our business.

If the United States Government increases or implements additional tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the resulting trade barriers could have a significant adverse impact on our suppliers, our customers and on our business.

We are not able to predict future trade policy of the United States or of any foreign countries in which we operate or purchase goods, or the terms of any renegotiated trade agreements or their impact on our business.

The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S.

The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence of a trade

war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S.

economies, which in turn could have a material adverse effect on our business, operating results and financial condition.

2 unchanged sentences

In 2022, 2021 and 2020, sales to our ten largest end customers (including sales to contract manufacturers or original design manufacturers (“ODMs”) at the direction of such end customers) accounted for 65%, 65% and 66% of net sales, respectively.

In 2021, 2020 and 2019, we had two, two and three customers, respectively, account individually for over 10% of our net sales.

In addition, as of August 27, 2021, three customers accounted for 16%, 10% and 10% respectively, of accounts receivable.

In each of 2022, 2021 and 2020, we had two customers account individually for over 10% of our net sales, though the two specific customers were not the same in all three periods.

In addition, as of August 26, 2022, two customers accounted for 22% and 17% respectively, of accounts receivable.

In some cases, our customers also compete with us and/or are our major suppliers.

26 unchanged sentences

In most cases we do not obtain long-term purchase orders or commitments from our customers, but instead we work with our customers to develop non-binding estimates or forecasts of future requirements.

Utilizing these non-binding estimates or forecasts, we make significant decisions based on our estimates of customer requirements including determining the levels of business that we will seek and accept, production scheduling, component purchasing and procurement commitments, inventory levels, personnel and production facility needs and other resource requirements.

Utilizing these non-binding estimates or forecasts, we make significant decisions based on our estimates of customer requirements including determining the levels of business that we will seek and accept, production scheduling, component purchasing and procurement commitments, inventory levels, product development or customization, personnel and production facility needs and other resource requirements.

Customers may cancel, reduce or delay orders that were either previously made or anticipated, often with little or no notice to us, and generally without penalty, which can result in us having underutilized resources or excess materials.

20 unchanged sentences

Generally, our customers are not obligated to purchase our products even if we achieve a design win.

If we are unable to achieve design wins or if our customers’ systems incorporating our products are not commercially successful, it could have a material adverse effect on our business, results of operations and financial condition.

are unable to achieve design wins or if our customers’ systems incorporating our products are not commercially successful, it could have a material adverse effect on our business, results of operations and financial condition.

In addition, because the qualification process is both product-specific and platform-specific, our existing customers sometimes require us to requalify our products, or to qualify our new products, for use in new platforms or applications, which can be time-consuming and cause reductions in our net sales during the design and qualification period.

13 unchanged sentences

We are dependent upon a small number of sole or limited source suppliers for certain materials, including certain critical components or subsystems, we use in manufacturing our products.

For example, we rely on four suppliers for a significant portion of our raw materials, some of which relate to our SMART Supply Chain Services and are accounted for on an agent basis.

Purchases from these suppliers in 2021, 2020 and 2019 were $1.3 billion, $1.0 billion and $1.2 billion, respectively.

Purchases from our three largest suppliers in 2022, 2021 and 2020 were $1.5 billion, $1.1 billion and $0.9 billion, respectively.

As of August 26, 2022, accounts payable and accrued expenses included $170.1 million for amounts owed to these suppliers.

39 unchanged sentences

With respect to a portion of our business, we must comply with and are affected by laws and regulations relating to the award, administration and performance of government contracts in the United States and other countries.

Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business.

contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business.

A violation of specific laws and regulations by us, our employees, others working on our behalf, a supplier or a venture partner, could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or services and civil or criminal investigations or proceedings.

3 unchanged sentences

Similar government oversight exists in most other countries where we conduct business.

Contracts with the U.S.

government may be terminated, cancelled of modified.

Certain of the U.S.

government programs in which we participate as a contractor or subcontractor may extend for several years and include one or more base years and one or more option years.

Contracts with the United States Government may be terminated, cancelled or modified.

Certain of the United States Government programs in which we participate as a contractor or subcontractor may extend for several years and include one or more base years and one or more option years.

Under some contracts, the government generally has the right not to exercise options to extend or expand our contracts and may otherwise terminate, cancel, modify or curtail our contracts at its convenience.

20 unchanged sentences

The risk of such attacks includes attempted breaches not only of our own products, services and systems, but also those of customers, contractors, business partners, vendors and other third parties.

Our products, services and systems may be used in critical company, customer, government or other third-party operations, or involve the storage, processing and transmission of sensitive data, including valuable intellectual property, classified information, other proprietary or confidential data, regulated data and personal information of employees, customers and others.

customers and others.

Successful breaches, employee malfeasance or human or technological error could result in, for example, unauthorized access to, disclosure, modification, misuse, loss or destruction of company, customer, government or other third party data or systems;

9 unchanged sentences

We are subject to laws, rules and regulations in the United States and other countries relating to the collection, use, transmission, processing and security of user and other data.

Our ability to execute transactions and to possess, process, transmit and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that, among other things, may require us to notify regulators and customers, employees or other individuals of a data security breach, including in the EU and the European Economic Area where the General Data Protection Regulation (“GDPR”) took effect in May 2018, in Brazil where the LGPD data privacy laws took effect in August 2021, and in the United States where the California Consumer Privacy Act (“CCPA”) recently became law and the California Privacy Rights Act (“CPRA”), Virginia Consumer Data Protection Act (“VCDPA”) and the Colorado Privacy Act (“CPA”) will come into effect in 2023.

Our ability to execute transactions and to possess, process, transmit and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that, among other things, may require us to notify regulators and customers, employees or other individuals of a data security breach, including in the EU and the European Economic Area where the General Data Protection Regulation (“GDPR”) took effect in May 2018, in Brazil where the Lei Geral de Proteção de Dados (“LGPD”) data privacy laws took effect in August 2021, and in the United States where the California Consumer Privacy Act (“CCPA”) recently became law and the California Privacy Rights Act (“CPRA”), Virginia Consumer Data Protection Act (“VCDPA”) and the Colorado Privacy Act (“CPA”) will come into effect in 2023.

Additional U.S.

9 unchanged sentences

We could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could further implicate aspects of our proprietary code.

These claims could result in litigation and could require us to make our software source code freely available to the public, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement, which may be costly and time-consuming.

These claims could result in litigation and could require us to make our software source code freely available to the public, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid an undesirable open source license or infringement, which may be costly and time-consuming.

In addition to risks related to open source license requirements, usage of open source software can lead to greater risks than use of third-party commercial software.

Increased risks arise in part because open source licensors generally do not provide updates, warranties, support, indemnities or other contractual protections regarding infringement claims or the quality of the code, including with respect to security vulnerabilities where open source software may be more susceptible.

These third-party open source providers could experience service outages, data loss, privacy breaches, cyber-attacks, ransomware and other events relating to the applications and services they provide that could diminish the utility of these services, which could harm our business as a result.

These third-party open source providers could experience service outages, data loss, privacy breaches, cyberattacks, ransomware and other events relating to the applications and services they provide that could diminish the utility of these

services, which could harm our business as a result.

To the extent that IPS offerings depend upon the successful operation and continued updates and support of the open source software it uses, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of IPS offerings, delay the release of new product solutions, result in a failure of our offerings and injure our reputation.

37 unchanged sentences

If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, as well as impose financial and operating covenants that could restrict the operations of our business.

In a rising interest rate environment, debt financing will become more expensive and may have higher transactional and servicing costs.

In addition, our existing indebtedness may limit our ability to obtain additional financing in the future, as discussed in greater detail below under “Risks Relating to Our Debt – Our indebtedness could impair our financial condition and harm our ability to operate our business.”

In 2022, 2021 and 2020, we spent $38.2 million, $47.6 million and $32.4 million, respectively, on capital expenditures, which we used, among other things, to expand manufacturing and test capacity as well as research and development.

In the third quarter of 2021, we closed our acquisition of the Cree’s LED business.

In the third quarter of 2021, we closed our acquisition of Cree’s LED business.

The consideration for this acquisition consisted of approximately $200 million in the form of cash and an unsecured promissory note, plus an earn-out of up to $125 million based on the revenue and gross profit performance of the LED business in the four fiscal quarters of Cree following the closing.

In addition, in 2019, we spent an aggregate of approximately $76 million to acquire SMART EC and SMART Wireless, and in 2018, we spent approximately $45 million to acquire Penguin Computing.

Just after the end of our fiscal year 2022, we closed our acquisition of Stratus Technologies, Inc.

The consideration for this acquisition consisted of approximately $225 million in cash, plus an earn-out of up to $50 million based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing of the acquisition.

We plan to continue exploring additional acquisition opportunities in the future.

3 unchanged sentences

We may make future acquisitions and/or alliances, which involve numerous risks.

As part of our business and growth strategy, we have in the past and may in the future acquire or make significant investments in businesses, products or technologies, such as our acquisitions of Cree’s LED Business, SMART EC, SMART Wireless and Penguin Computing.

As part of our business and growth strategy, we have in the past and may in the future acquire or make significant investments in businesses, products or technologies, such as our acquisitions of Stratus Technologies, Cree’s LED Business, SMART EC, SMART Wireless and Penguin Computing.

Any acquisitions or investments would expose us to the risks commonly encountered in acquisitions of businesses or technologies.

4 unchanged sentences

• adverse effects on existing business relationships with suppliers and customers;

the risk that suppliers (such as Cree, Inc.) or customers of an acquired business are unable or unwilling to do business with us following the acquisition;

• the risk that suppliers (such as Wolfspeed, Inc.) or customers of an acquired business are unable or unwilling to do business with us following the acquisition;

• risks associated with entering markets in which we have little or no prior experience, such as the market for LED products that we entered following our acquisition of Cree’s LED Business and markets with complex government regulations;

10 unchanged sentences

We could lose our entire investment in these companies.

We may fail to realize the anticipated benefits of our recent acquisition of Cree’s LED business.

We closed on the acquisition of Cree’s LED business in March 2021 and consequently have only included it in our operations for two full quarters to date.

As we continue to integrate the LED business into our operations and portfolio, our ability to realize some or all of the anticipated benefits of the acquisition may be impacted by the following:

difficulties in the assimilation and successful integration of the operations, sales functions, technologies, products, personnel and development capabilities of our LED business;

failure to maintain and expand our existing customer base of our LED business;

difficulties in leveraging the LED business research and development and product development capabilities to expand our products portfolio;

our failure to protect and expand the LED business expansive intellectual product and patent portfolio;

We may fail to realize the anticipated benefits of recent acquisitions.

We closed on the acquisition of Cree’s LED business in March 2021 and the acquisition of Stratus Technologies just after the end of our most recent fiscal year in August 2022.

As we continue to integrate these businesses into our operations and portfolio, our ability to realize some or all of the anticipated benefits of the acquisition may be impacted by the following:

• difficulties in the assimilation and successful integration of the operations, sales functions, technologies, products, personnel and development capabilities;

• failure to maintain and expand the customer bases of our acquired businesses;

• difficulties in leveraging the LED and/or Stratus research and development and product development capabilities to expand our products portfolio;

• our failure to protect and expand their intellectual property and patent portfolios;

• unanticipated costs, including write-offs of tangible assets as well as goodwill or other intangible assets, litigation or other contingent liabilities associated with the acquisition;

2 unchanged sentences

• risks associated with entering markets in which we have little or no prior experience and markets with complex government regulations;

loss of key employees of the acquired LED business.

Any of these risks or other risks arising from the integration of Cree’s LED business into our operations could have a material adverse effect on our business, financial condition or results of operations and could cause the impact of the acquisition of CreeLED to be dilutive to our company.

• loss of key employees of the acquired businesses.

Any of these risks or other risks arising from the integration of Stratus or Cree’s LED business into our operations could have a material adverse effect on our business, financial condition or results of operations and could cause the impact of one or both of the acquisitions to be dilutive to our company.

We rely on third parties to sell a portion of our products and services.

3 unchanged sentences

Our third-party sales representatives and distributors may terminate their relationships with us at any time on short or no notice.

Our future performance may also depend, in part, on our ability to attract and retain additional third-party sales representatives and distributors that will be able to market and support our products effectively, especially in markets in which we have not previously sold our products.

Our future performance may also depend, in part, on our ability to attract and retain additional third-party sales representatives and distributors that will be

able to market and support our products effectively, especially in markets in which we have not previously sold our products.

If we cannot retain our current third-party sales representatives and distributors or recruit additional or replacement third-party sales representatives and distributors or if these sales representatives or distributors are not effective, it could have a material adverse effect on our business, results of operations and financial condition.

27 unchanged sentences

From time to time, third parties may claim that we are infringing upon technology to which they have proprietary rights and that we require a license to manufacture and/or sell certain of our products.

If we are unable to supply certain products at competitive prices due to royalty payments we are required to make or at all because we were unable to secure a required license, our customers might make claims against us, cancel orders or seek other suppliers to replace us, all of which could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to supply certain products at competitive prices due to royalty payments we are required to make or at all because we were unable to secure a required

license, our customers might make claims against us, cancel orders or seek other suppliers to replace us, all of which could have a material adverse effect on our business, results of operations and financial condition.

Changes in tax laws or potential adjustments by tax authorities in key jurisdictions could materially increase our tax expense.

11 unchanged sentences

While we enjoy beneficial tax treatment in certain foreign jurisdictions, most notably Brazil and Malaysia, we are subject to meeting specific conditions in order to receive the beneficial treatment, and such beneficial treatment is subject to change.

For instance, in Brazil, the phase out of certain financial credits is planned for January 2022, and pending legislation contemplates an increase in the withholding taxes applicable to dividends paid from Brazil.

Additionally, we regularly assess the likelihood of outcomes resulting from tax examinations in the United States and abroad to determine the adequacy of our provision for taxes and have reserved for potential adjustments that may result from current examinations.

2 unchanged sentences

Any significant variance in the results of an examination as compared to our estimates, any failure to continue to receive any beneficial tax treatment in any of our foreign locations or any increase in our future effective tax rates due to any of the factors set forth above or otherwise could reduce net income and have a material adverse effect on our business, results of operations and financial condition.

Our ability to use our net operating loss carryforwards are limited.

Our ability to use our net operating loss carryforwards is limited.

As of August 26, 2022, we had U.S.

federal and state net operating loss carryforwards of $86.9 million and $47.7 million, respectively.

The federal net operating loss carryforwards will expire, if not utilized, in 2026 through 2038, and the state net operating loss carryforwards will expire in 2023 through 2039, both in varying amounts, if not utilized.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change taxable income may be limited.

Federal net operating loss carryforwards of $71.2 million will expire in fiscal 2028 through fiscal 2038, if not utilized, and the remaining $15.7 million is indefinite lived.

The state net operating loss carryforwards will expire in fiscal 2024 through fiscal 2040.

In addition, we have U.S.

federal and state research and development credit carryforwards of approximately $7.4 million and $1.1 million, respectively, and $1.4 million of foreign tax credit carryforward.

Federal and state carryforwards prior to fiscal 2018 are subject to an annual limitation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (“Code”).

Further, under Section 382 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards to offset its post-change taxable income may be limited.

In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain “5-percent shareholders” (including groups of shareholders) that exceeds 50 percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

Our net operating loss carryforwards are subject to limitations per Section 382 of the Code.

Our net operating loss and tax credit carryforwards prior to 2018 are subject to limitations per Section 382 of the Code.

We have experienced ownership changes in the past, and we may experience ownership changes in the future as a result of future transactions in our ordinary shares, some changes of which may be outside our control.

As a result, our ability to use our pre-change net operating loss carryforwards to offset post-change U.S.

As a result, our ability to use our pre-change net operating loss and tax credit carryforwards to offset post-change U.S.

federal and state taxable income may be subject to additional limitations.

12 unchanged sentences

The occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

Our worldwide operations may be disrupted by operational issues, natural disasters or other events.

Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control, including the effects of climate change, natural disasters, man made disasters or other events, as well as societal and governmental responses to such events.

Our operations in different parts of the world could be subject to natural disasters, including earthquakes, monsoons, cyclones and floods.

5 unchanged sentences

Since a large percentage of our production is done in a small number of facilities, a disruption to operations could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to Our International Operations

Hostilities in Ukraine may exacerbate certain risks we face.

Russia’s invasion of Ukraine in February 2022 and the global response, including the imposition of sanctions by the United States and other countries, could create or exacerbate risks facing our business.

We have evaluated our operations, vendor contracts and customer arrangements, and at present we do not expect the hostilities to directly have a material and adverse effect on our financial condition or results of operations.

However, if the hostilities persist, escalate or expand, risks we have identified in this report may be exacerbated.

For example, if our supply or customer arrangements are disrupted due to expanded sanctions, involvement of countries where we have operations or relationships or rising energy prices, our business could be materially disrupted.

Further, the use of state-sponsored cyberattacks could expand as part of the conflict, which could adversely affect our ability to maintain or enhance our cybersecurity and data protection measures.

Risks Related to Our International Operations

Our business is subject to the risks generally associated with international business operations.

2 unchanged sentences

As a result, our business is and will continue to be subject to the risks generally associated with international business operations in Brazil, Malaysia, China, Taiwan, India and other foreign countries, including:

compliance with numerous changing, and sometimes conflicting legal regimes on matters as diverse as tax, anticorruption, import/export controls and quotas, local manufacturing requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data privacy, employment regulations and labor relations;

• compliance with numerous changing, and sometimes conflicting legal regimes on matters as diverse as tax, anticorruption, import/export controls and quotas, local manufacturing requirements, trade restrictions, tariffs,

taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data privacy, employment regulations and labor relations;

• changes in social, political and economic conditions;

9 unchanged sentences

• changes or instability in local labor conditions, including strikes, work stoppages, protests and changes in employment regulations, increases in wages and the conditions of collective bargaining agreements;

• compliance with travel restrictions, stay-at-home or work location conditions or other government or voluntary restrictions relating to the COVID-19 pandemic;

• difficulties recruiting, employing and retaining qualified personnel to manage and oversee our local operations, sales and other activities;

15 unchanged sentences

Any of these circumstances could have a material adverse effect on our business, results of operations and financial condition.

Our success in part depends on incentives in Brazilian laws for local manufacturing of electronics products.

Our success in part depends on incentives in Brazilian laws for local manufacturing of electronics.

8 unchanged sentences

Effective April 2020, the reduction of the federal tax rates to zero percent for sales of qualified PADIS products was replaced by financial credits, calculated based on annual investments in research and development limited to 13.1% of the total incentivized revenues, which can be used to pay federal taxes.

While the reduction of the income tax rate is valid for 12 years as of the approval of the PADIS qualification on a product basis (effective for SGH through 2033), the remaining PADIS benefits are expected to expire in January 2022.

We also participate in a third, more general multi-sector policy, “Lei do Bem,” which is designed to stimulate investment in innovation.

5 unchanged sentences

Our interpretations and conclusions regarding these tax incentives are not binding on any taxing authority.

Additionally, we have been in the past and may in the future be subject to tax assessments by the relevant authorities in the jurisdictions in which we operate, including Brazil, and we have been in the past and may in the future be involved in legal disputes with regulatory or governmental authorities relating to these assessments.

Additionally, we have been in the past and may in the future be subject to tax assessments by the relevant authorities in the jurisdictions in which we operate and we have been in the past and may in the future be involved in legal disputes with regulatory or governmental authorities relating to these assessments.

If our assumptions about, or interpretation or implementation of, tax and other laws are incorrect;

9 unchanged sentences

Volatility of currencies in countries where we conduct business, most notably the U.S.

dollar, Chinese renminbi, Brazilian real, Malaysia ringgit, Japanese yen, European Union euro, British pound, South Korean won, New Taiwan dollar, Hong Kong dollar and Indian rupee have had and may in the future have an effect on our revenue or operating results.

dollar, Chinese renminbi, Brazilian real, Malaysian ringgit, Japanese yen, Euro, British pound, South Korean won, New Taiwan dollar, Hong Kong dollar and Indian rupee have had and may in the future have an effect on our liquidity and operating results.

Gains and losses on the conversion to U.S.

dollars of such revenue and of other associated monetary assets and liabilities, as well as profits and losses incurred in certain countries, may contribute to fluctuations in the value of our assets and our results of operations.

dollars of the associated monetary assets and liabilities, as well as profits and losses incurred in certain countries, may contribute to fluctuations in the value of our assets and our results of operations.

We also have costs and expenses that are denominated in foreign currencies, and decreases in the value of the U.S.

dollar could result in increases in such costs that could have a significant negative impact on our results of operations.

dollar could result in increases in such costs that could have a

significant negative impact on our results of operations.

In addition, fluctuating values between the U.S.

dollar and other currencies can result in currency gains which are used in the computation of foreign taxes and can increase foreign taxable income.

In 2019, we began using foreign exchange forward contracts in Brazil to mitigate foreign currency exchange rate risk associated with foreign currency-denominated assets and liabilities, primarily third party payables.

In 2019, we began using foreign exchange forward contracts in Brazil to mitigate foreign currency exchange rate risk associated with foreign currency-denominated liabilities, primarily third party payables.

These measures, however, may not effectively address currency exchange risk.

1 unchanged sentence

If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries.

We conduct all of our operations through subsidiaries and are dependent on dividends or other intercompany transfers of funds from our subsidiaries to meet our obligations and pay intercompany dividends.

We conduct all of our operations through subsidiaries and are dependent on dividends or other intercompany transfers of funds from our subsidiaries to meet our obligations.

If enacted, restrictions on intercompany dividends or other distributions in certain jurisdictions could have a material adverse effect on our ability to transfer funds from certain subsidiaries.

4 unchanged sentences

High rates of inflation in the future would adversely affect our business, results of operations and financial condition.

In the past, Brazil has experienced extremely high rates of inflation.

Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazil economy generally.

In the past, Brazil has experienced extremely high rates of inflation, and in the future, we may experience substantial inflation or deflation in Brazil or elsewhere.

Inflation and some of the measures taken by governments in response to inflation can have significant negative effects on the economy generally.

If Brazil or other countries where we operate experience substantial inflation or deflation in the future, our business may be adversely affected.

11 unchanged sentences

The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government.

Any rights we may have to specific performance, or to seek an injunction under Chinese law, in either of these cases, may be limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring.

Any rights we may have to specific performance, or to seek an injunction under Chinese law, in either of these cases, may be limited, and without a means of

recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring.

The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

10 unchanged sentences

This, to a certain extent, is subject to prevailing economic and competitive conditions, including general conditions prevailing in the financial markets and global economy, and to certain financial, business, regulatory and other factors beyond our control, including the risks described herein.

Our business may not generate sufficient cash flows from operations, and future borrowings may not be available to us under our debt arrangements, including our Amended Credit Agreement and ABL Credit Agreement (as defined below), in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.

Our business may not generate sufficient cash flows from operations, and future borrowings may not be available to us under our debt arrangements, including our Amended Credit Facility (as defined below), in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.

In addition, certain of our debt is subject to terms that may require the use of significant cash in the future under certain circumstances.

8 unchanged sentences

We may not be able to restructure or refinance any of our debt on commercially reasonable terms, or at all, which could cause us to default on our debt obligations and impair our liquidity, which in turn could cause the acceleration of other indebtedness under certain of our debt agreements which could exacerbate our liquidity problems.

Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

Any refinancing of our indebtedness will likely be at higher interest rates in the current environment and may require us to comply with more onerous covenants that could further restrict our business operations.

If we are not able to refinance or restructure our debt obligations before they become due, this could cause us to default on our debt obligations and impair our liquidity.

1 unchanged sentence

These alternative measures may not be available to us, may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in substantial liquidity problems.

Our Amended Credit Agreement restricts our ability to dispose of our assets and use the proceeds from the disposition.

Our Amended Credit Facility restricts our ability to dispose of our assets and use the proceeds from the disposition.

We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due.

Any of these circumstances could have a material adverse effect on our business, results of operations and financial condition.

O ur credit agreements may limit our flexibility in operating our business.

We and certain of our subsidiaries are party to credit agreements, as described in more detail in “Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.” These or future credit agreements may contain restrictive covenants that limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our other indebtedness.

For instance, the covenants in our Amended Credit Agreement limit the ability of the applicable loan subsidiaries to, among other things:

Our credit agreements may limit our flexibility in operating our business.

We and certain of our subsidiaries are party to the credit agreements, as described in more detail in “Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt” and “Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Subsequent Events.” These or future credit agreements may contain restrictive covenants that limit our ability to engage in specified transactions and prohibit us from voluntarily prepaying certain of our other indebtedness.

For instance, the covenants in our Amended Credit Facility limit the ability of the applicable loan subsidiaries to, among other things:

• incur additional indebtedness;

pay dividends on, or repurchase or make distributions in respect of, our capital stock or make other restricted payments;

make certain investments, including limitations on capital expenditures and acquisitions;

sell or transfer assets;

enter into or effect sale leaseback transactions;

enter into swap agreements;

prepay, repurchase, redeem, otherwise defease or amend the terms of any subordinated indebtedness;

change fiscal periods;

create liens;

acquire companies;

enter into contractual obligations that restrict our ability to grant liens on assets or capital stock;

change the character of our business;

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

enter into certain transactions with affiliates.

Under the Amended Credit Agreement, in certain circumstances we also are required to satisfy and maintain specified financial ratios if we have outstanding debt under the revolver.

• create liens on assets;

• engage in mergers or consolidations;

• sell assets;

• pay dividends, make distributions or repurchase capital stock;

• make investments, loans or advances;

• repay or repurchase certain subordinated debt (except as scheduled or at maturity);

• create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries;

• make certain acquisitions;

• engage in certain transactions with affiliates;

• amend material agreements governing our subordinated debt and fundamentally change our business.

Under the Amended Credit Facility, in certain circumstances we also are required to satisfy and maintain specified financial ratios if we have outstanding debt under the revolver.

Our ability to meet those financial ratios could be affected by events beyond our control, and there can be no assurance that we will meet those ratios.

The failure to comply with any of these covenants would cause a default under the relevant credit agreement.

A default, if not waived, could result in acceleration of the outstanding indebtedness under the Amended Credit Agreement as well as under the 2026 Notes, in which case such indebtedness would become immediately due and payable.

A default, if not waived, could result in acceleration of the outstanding indebtedness under the Amended Credit Facility as well as under the 2026 Notes, in which case such indebtedness would become immediately due and payable.

If any default occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it.

14 unchanged sentences

Any of these activities could adversely affect the trading price of our ordinary shares or the 2026 Notes.

Risks Relating to Investments in Cayman Islands Companies

Risks Related to Investments in Cayman Islands Companies

We are a Cayman Islands company and, because the rights of shareholders under Cayman Islands law differ from those under U.S.

43 unchanged sentences

inventory valuation;

impairment of long-lived assets, including property and equipment, goodwill and identified intangible assets;

revenue recognition;

and share-based compensation.

impairment of long-lived assets, including property and equipment;

goodwill and identified intangible assets;

revenue recognition and share-based compensation.

If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations may be adversely affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our ordinary shares.

3 unchanged sentences

Under our amended and restated memorandum and articles of association, we are authorized to issue up to 200 million ordinary shares, of which 48.6 million ordinary shares were outstanding as of August 26, 2022.

In addition, certain of our existing shareholders and holders of options , restricted share unit awards or performance-based awards, in the event they become exercisable, have the right to demand that we file a registration statement covering the offer and sale of their ordinary shares and shares issuable under such options and awards under the Securities Ac t a nd to require us to include their securities on a registration statement filed by us.

In addition, certain of our existing shareholders and holders of options, restricted share unit awards or performance-based awards, in the event they become exercisable, have the right to demand that we file a registration statement covering the offer and sale of their ordinary shares and shares issuable under such options and awards under the Securities Act and to require us to include their securities on a registration statement filed by us.

If we file a registration statement in the future for the purpose of selling additional ordinary shares to raise capital and are required to include ordinary shares held by these shareholders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired.

25 unchanged sentences

• changes in technology or customer product needs;

strategic ac tions taken by our competitors;

• strategic actions taken by our competitors;

• market acceptance of our products;

4 unchanged sentences

In addition, if product demand decreases or we fail to forecast demand accurately, we could be required to write-off inventory or record underutilization charges, which would have a negative impact on our profitability.

If product demand increases more or faster than anticipated, we may not be able to add manufacturing or assembly and test capacity fast enough to meet market demand.

If product demand increases more or faster than anticipated, we may not be able to add

manufacturing or assembly and test capacity fast enough to meet market demand.

These changes in demand for our products, and changes in our customers’ product needs, could have a variety of negative effects on our competitive position and our financial results, and, in certain cases, may reduce our net sales, increase our costs, lower our profit margins or require us to recognize impairments of our assets.

24 unchanged sentences

If any governmental sanctions were to be imposed, or if we were not to prevail in any civil action or criminal proceeding, our business, results of operations and financial condition could be materially adversely affected.

In addition, responding to any litigation or action would likely result in a significant diversion of management’s attention and resources and a significant increase in professional fees.

In addition, responding to

any litigation or action would likely result in a significant diversion of management’s attention and resources and a significant increase in professional fees.

Our success depends on our ability to attract, retain and motivate highly skilled employees.

19 unchanged sentences

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 1A. Risk Factors