What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-02 · 69 added, 126 removed, 156 unchanged (56% of the section changed)

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These tools and services include our PI Expert™ design software, which we offer free of charge, and our transformer-sample service.

In 2022 we launched PowerPros ℠ , a live online video support service that enables power-supply designers to talk directly with members of our applications engineering team 24 hours a day, six days a week, anywhere in the world.

Our market-penetration strategy also includes capitalizing on the importance of energy efficiency and renewable energy in the power conversion market.

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Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (SAM) opportunity of approximately $1.5 billion.

Since that time we have expanded our SAM to more than $4 billion through a variety of means.

Since that time we have expanded our SAM to approximately $4 billion through a variety of means.

These include the introduction of products that enable us to address higher-power AC-DC applications (such as our Hiper™ product families), the introduction of LED-driver products, and our entry into the gate-driver market through the acquisition of CT-Concept Technologie AG in 2012.

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Customers typically may cancel or reschedule orders on short notice without significant penalty and, conversely, often place orders with very short lead times to delivery.

Also, external factors such as global economic conditions, such as the current growing inflation, higher interest rates and potential recession and supply-chain dynamics can cause our operating results to be volatile.

In particular, the severe economic disruption caused by the global novel coronavirus pandemic (COVID-19) may affect the supply of and demand for our products and make our results more difficult to forecast.

Also, external factors such as supply-chain dynamics, the COVID-19 pandemic and macroeconomic conditions including inflation, fluctuations in interest and exchange rates and bank failures, have caused and can continue to cause our operating results to be volatile.

Furthermore, because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours.

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Recent Results

Our net revenues were $160.2 million and $176.8 million for the three months ended September 30, 2022 and 2021, respectively, and $526.4 million and $530.6 million for the nine months ended September 30, 2022 and 2021, respectively.

We believe that demand for our products has been negatively affected by an array of macroeconomic and geopolitical factors including reduced consumer spending in response to inflation, a shift in consumer spending toward travel and services, the conflict in Ukraine, the weaker housing market, particularly in China, and restrictions on economic activity in China aimed at controlling the spread of COVID-19.

The decrease in revenues for the three-month period was driven by the communications, consumer and computer end markets, reflecting weaker demand for cellphones, computers and appliances;

the decreases in these markets were partially offset by increased sales into the industrial end-market reflecting growth across a broad range of industrial applications such as wind-power systems, electronic utility meters, battery-operated tools and broad-based industrial applications.

The decrease in revenues for the nine-month period was driven by lower sales into the communications end-market reflecting weaker demand from customers serving the cellphone market;

the decrease in the communications end-market was partially offset by increased sales in the other markets, primarily the industrial end-market, reflecting growth across a broad range of industrial applications such as wind-power systems and broad-based industrial applications.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 72% and 75% of net revenues in the three and nine months ended September 30, 2022, respectively, and 76% and 79% in the corresponding periods of 2021, respectively.

International sales accounted for 95% and 96% of our net revenues in the three and nine months ended September 30, 2022, respectively, and 97% and 98% in the corresponding periods of 2021, respectively.

Our gross margin was 57.4% and 51.9% in the three months ended September 30, 2022 and 2021, respectively, and 56.9% and 50.4% in the nine months ended September 30, 2022 and 2021, respectively.

Our gross margin increased primarily due to favorable end-market mix, with a greater percentage of revenues coming from higher-margin end markets, as well as manufacturing efficiencies.

Total operating expenses were $43.7 million and $46.1 million in the three months ended September 30, 2022 and 2021, respectively, and $140.0 million and $136.7 million for the nine months ended September 30, 2022 and 2021, respectively.

The decrease in operating expenses for the three months ended September 30, 2022 was due primarily to lower stock-based compensation expense partially offset by higher salary and related expenses driven by increased headcount and product development expenses.

The increase in operating expenses for the nine months ended September 30, 2022 was due primarily to our litigation settlement with Opticurrent LLC, higher salary and related expenses driven by increased headcount, and product development expenses, partially offset by lower stock-based compensation expense and receipt of a distribution from the bankruptcy liquidation of SemiSouth Laboratories, Inc., of which we were a creditor as a result of investments made in SemiSouth in 2011.

COVID-19 Pandemic

The COVID-19 pandemic has disrupted everyday life and markets worldwide, and governments around the world have imposed restrictions aimed at controlling the spread of the virus, including shelter-in-place orders, travel restrictions, business shutdowns and border closures.

Beginning March 16, 2020 our San Jose headquarters location was subject to a shelter-in-place order, under which most of our employees were required to work from home;

other locations around the world have also been subject to such restrictions.

A large percentage of our employees continued to work remotely throughout 2021 and into 2022.

However, following the relaxation of local regulations and taking into account the high vaccination rate among our employees, our San Jose headquarters reopened on April 4, 2022 with employees returning to the office.

Our employee health and well-being are top priorities;

we continue to monitor the situation and will adjust working conditions again should the need arise.

While we have been able to conduct our day-to-day operations effectively in spite of the restrictions caused by the pandemic, the pandemic has caused disruptions in our supply chain.

While our supply of wafers from our foundry partners has not been interrupted, government-mandated closures in China, Malaysia, Sri Lanka and the Philippines have caused temporary shutdowns at our assembly and test sub-contractors at various times.

These disruptions have not materially affected our results due to a variety of mitigation measures including higher-than-normal inventories of wafers and finished goods in the early stages of the pandemic, safety stocks of certain key inputs and multiple sources for components for most of our products.

Although there are signs of improvement in the US and many areas around the world, the potential for disruptions caused by ongoing mitigation efforts remains a risk for our supply chain and the results

of our business;

for instance, we believe that recent lockdowns in China have had a negative impact on demand for our products.

While the continuing pandemic brings a greater-than-normal level of uncertainty with respect to the supply of and demand for our products, we believe our business is fundamentally sound with strong, long-term growth prospects.

We have increased headcount and intend to continue investing in research and development and other functions necessary to support our future growth.

We also intend to continue our cash dividend and stock-repurchase programs;

however, if the economy deteriorates or our business outlook changes, our board of directors may choose to suspend or alter these programs at its discretion.

For additional discussion regarding COVID-19 business risks refer to Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our net revenues were $106.3 million and $182.1 million for the three months ended March 31, 2023 and 2022, respectively.

Revenues from all end markets decreased substantially compared to the prior year period.

We believe that demand for our products has been negatively affected by an array of macroeconomic and geopolitical factors including reduced consumer spending in response to inflation and higher interest rates, softer housing markets, restrictions on economic activity in China driven by the COVID-19 pandemic, and a shift in consumer spending toward travel and services following a period of elevated spending on goods during the pandemic.

The reduction in revenues also reflects a cyclical downturn in the semiconductor industry;

such downturns are commonly experienced in our industry following periods of strong growth during which supply-chain participants accumulate inventories, which must then be worked down when demand slows.

Our top ten customers, including distributors that resell to original equipment manufacturers, or OEMs, and merchant power supply manufacturers, accounted for 78% and 77% of net revenues in the three months ended March 31, 2023 and 2022, respectively.

International sales accounted for 98% and 96% of our net revenues in the three months ended March 31, 2023 and 2022, respectively.

Our gross margin was 50.8% and 55.3% in the three months ended March 31, 2023 and 2022, respectively.

The decrease was primarily due to unfavorable end-market mix and lower manufacturing volume, which increased our unit cost.

Total operating expenses were $48.2 million and $49.6 million in the three months ended March 31, 2023 and 2022, respectively.

The decrease of $1.4 million in operating expenses for the three months ended March 31, 2023 was due primarily to lower stock-based compensation expense related to performance based awards and lower patent litigation expense;

these decreases were partially offset by increased salary and related expenses driven by increased headcount, as well as increased travel expenses.

Critical Accounting Policies and Estimates

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Three Months Ended

Nine Months Ended

September 30,

Cost of revenues

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General and administrative

Other operating expenses

Total operating expenses

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Provision for income taxes

Comparison of the three and nine months ended September 30, 2022 and 2021

Comparison of the three months ended March 31, 2023 and 2022

Net revenues.

Net revenues consist of revenues from product sales, which are calculated net of returns and allowances.

Net revenues for the three and nine months ended September 30, 2022 were $160.2 million and $526.4 million, respectively, and $176.8 million and $530.6 million for the corresponding periods of 2021, respectively.

services, the conflict in Ukraine, the weaker housing market, particularly in China, and restrictions on economic activity in China aimed at controlling the spread of COVID-19.

The decrease in revenues for the three-month period was driven by the communications, consumer and computer end markets, reflecting weaker demand for cellphones, computers and appliances;

The decrease in revenues for the nine-month period was driven by lower sales into the communications end-market reflecting weaker demand from customers serving the cellphone market;

Our revenue mix by end market for the three and nine months ended September 30, 2022 and 2021 was as follows:

Net revenues for the three months ended March 31, 2023 and 2022 were $106.3 million and $182.1 million, respectively.

Revenues from all end markets decreased substantially compared to the prior-year period.

We believe that demand for our products has been negatively affected by an array of macroeconomic and geopolitical factors including reduced consumer spending in response to inflation and higher interest rates, softer housing markets, restrictions on economic activity in China driven by the COVID-19 pandemic, and a shift in consumer spending toward travel and services following a period of elevated spending on goods during the pandemic.

The reduction in revenues also reflects a cyclical downturn in the semiconductor industry;

Our revenue mix by end market for the three months ended March 31, 2023 and 2022 was as follows:

Three Months Ended

Nine Months Ended

September 30,

Communications

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $151.8 million and $503.5 million in the three and nine months ended September 30, 2022, respectively, and $171.7 million and $517.7 million, in the corresponding periods of 2021, respectively.

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $103.8 million and $175.2 million in the three months ended March 31, 2023 and 2022, respectively.

Although power converters using our products are distributed to end markets worldwide, most are manufactured in Asia.

As a result, sales to this region represented 68% and 75% of our net revenues in the three and nine months ended September 30, 2022, respectively, and 80% and 83% in the corresponding periods of 2021, respectively.

As a result, sales to this region represented 80% and 83% of our net revenues in the three months ended March 31, 2023 and 2022.

We expect international sales, and sales to the Asia region in particular, to continue to account for a large portion of our net revenues in the future.

Sales to distributors accounted for 65% and 71% in the three and nine months ended September 30, 2022, respectively, and 72% and 75% in the corresponding periods of 2021, respectively.

Sales to distributors accounted for 63% and 75% in the three months ended March 31, 2023 and 2022, respectively.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

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Three Months Ended

Nine Months Ended

September 30,

Honestar Technologies Co., Ltd.

Salcomp Group

Honestar Technologies Co., Ltd.

*Total customer revenue was less than 10% of net revenues.

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Gross margin is gross profit divided by net revenues.

The table below compares gross profit and gross margin for the three and nine months ended September 30, 2022 and 2021:

The table below compares gross profit and gross margin for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Our gross margin increased primarily due to favorable end-market mix, with a greater percentage of revenues coming from higher-margin end markets, as well as manufacturing efficiencies.

Our gross margin decreased due primarily to unfavorable end-market mix and lower manufacturing volume, which increased our unit cost.

Research and development expenses.

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We also record R&D expenses for prototype wafers related to new products until such products are released to production.

The table below compares R&D expenses for the three and nine months ended September 30, 2022 and 2021:

The table below compares R&D expenses for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Headcount (at period end)

R&D expenses increased for the three and nine months ended September 30, 2022, as compared to the corresponding periods of 2021, primarily due to higher salary and related expenses driven by increased headcount and increased product development expenses.

R&D expenses increased for the three months ended March 31, 2023, as compared to the corresponding period of 2022, primarily due to increased product development costs and equipment related expenses.

These increases were partially offset by reduced stock-based compensation expense related to performance-based awards.

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Sales and marketing (“S&M”) expenses consist primarily of employee-related expenses, including stock-based compensation, commissions to sales representatives, amortization of intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.

The table below compares S&M expenses for the three and nine months ended September 30, 2022 and 2021:

The table below compares S&M expenses for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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Headcount (at period end)

S&M expenses decreased in the three months ended September 30, 2022, due to reduced stock-based compensation expense related to performance-based awards, lower commissions and lower amortization of acquired intangibles as certain intangible assets are now fully amortized;

these factors were partially offset by higher salary expense stemming from higher headcount, as well as increased travel and tradeshow related expenses.

S&M expenses increased in the nine months ended September 30, 2022, as compared to the corresponding period of 2021, due to higher salary and related expenses stemming from higher headcount and increased travel and tradeshow related expenses partially offset by reduced stock-based compensation expense related to performance-based awards, lower commissions and lower amortization of acquired intangibles.

S&M expenses decreased in the three months ended March 31, 2023, as compared to the corresponding period of 2022, due to lower stock-based compensation expenses, sales commissions and amortization of acquired intangibles.

These reductions were partially offset by increased salary and related expenses driven by increased headcount, as well as increased travel expenses.

General and administrative expenses.

General and administrative (“G&A”) expenses consist primarily of employee-related expenses, including stock-based compensation expenses, for administration, finance, human resources and general management, as well as consulting, professional services, legal and audit expenses.

The table below compares G&A expenses for the three and nine months ended September 30, 2022 and 2021:

The table below compares G&A expenses for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Headcount (at period end)

G&A expenses decreased for the three and nine months ended September 30, 2022 as compared to the corresponding periods of 2021, due to lower stock-based compensation expense related to performance-based awards, partially offset by higher expenses for professional and legal services.

Other operating expenses, net.

Other operating expenses, net were $1.1 million in the nine months ended September 30, 2022 .

This amount consisted of a $2.9 million expense stemming from the settlement of our litigation with Opticurrent LLC (refer to Note 12, Legal Proceedings and Contingencies , in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q), partially offset by receipt of a $1.7 million distribution related to SemiSouth Laboratories, Inc.’s bankruptcy liquidation of which we were a creditor as a result of investments made in SemiSouth in 2011.

G&A expenses decreased for the three months ended March 31, 2023 as compared to the corresponding period of 2022, due to lower stock-based compensation expense related to performance-based awards, recovery of bad debt and decreased patent litigation expenses;

these reductions were partially offset by increased salary and related expenses driven by increased headcount, as well as increased professional services.

Other income .

Other income consists primarily of interest income earned on cash and cash equivalents, marketable securities and other investments, and the impact of foreign exchange gains or losses.

The table below compares other income for the three and nine months ended September 30, 2022 and 2021:

The table below compares other income for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Other income increased for the three and nine months ended September 30, 2022 as compared to the corresponding periods of 2021, primarily due to higher interest income and gains on foreign currency exchange.

Other income increased for the three months ended March 31, 2023 as compared to the corresponding period of 2022, primarily due to higher interest income.

Provision for income taxes .

Provision for income taxes represents federal, state and foreign taxes.

The table below compares income-tax expense for the three and nine months ended September 30, 2022 and 2021:

The table below compares income-tax expense for the three months ended March 31, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

Our effective tax rates for the three and nine months ended September 30, 2022 were 6.9% and 8.5%, respectively, and 8.2% and 6.1% for the corresponding periods of 2021, respectively.

Our effective tax rates for the three months ended March 31, 2023 and 2022 were 8.0% and 10.4%, respectively.

The effective tax rate in these periods was lower than the statutory federal income-tax rate of 21% due to the geographic distribution of our world-wide earnings in lower-tax jurisdictions and the impact of federal research tax credits.

Additionally, in the three months ended September 30, 2022 and 2021, our effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments.

In the nine months ended September 30, 2022 and 2021, our effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and recognition of excess tax benefits related to share-based payments.

These benefits were partially offset by U.S.

Additionally, in the three months ended March 31, 2023, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit.

This benefit was partially offset by U.S.

tax on foreign income, known as global intangible low-taxed income.

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Liquidity and Capital Resources

As of September 30, 2022, we had $363.2 million in cash, cash equivalents and short-term marketable securities, a decrease of $167.1 million from $530.4 million as of December 31, 2021.

As of September 30, 2022, we had working capital, defined as current assets less current liabilities, of $453.2 million, a decrease of approximately $161.3 million from $614.5 million as of December 31, 2021.

As of March 31, 2023, we had $358.6 million in cash, cash equivalents and short-term marketable securities, an increase of $4.8 million from $353.8 million as of December 31, 2022.

As of March 31, 2023, we had working capital, defined as current assets less current liabilities, of $476.1 million, an increase of approximately $9.4 million from $466.7 million as of December 31, 2022.

We have a Credit Agreement with Wells Fargo Bank, National Association (the "Credit Agreement") that provides us with a $75.0 million revolving line of credit to use for general corporate purposes with a $20.0 million sub-limit for the issuance of standby and trade letters of credit.

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all advances under the revolving line of credit will become due on such date, or earlier in the event of a default.

No advances were outstanding under the agreement as of September 30, 2022.

No advances were outstanding under the agreement as of March 31, 2023.

Cash From Operating Activities

Operating activities generated $191.2 million of cash in the nine months ended September 30, 2022.

Operating activities generated $16.6 million of cash in the three months ended March 31, 2023.

Net income for this period was $6.9 million;

we also incurred depreciation, non-cash stock-based compensation expense,

amortization of premiums on marketable securities and amortization of intangibles of $26.1 million, $15.7 million, $2.6 million and $1.9 million, respectively.

Sources of cash also included a $24.6 million decrease in accounts receivable due to decreased customer shipments and $8.4 million decrease in prepaid expenses and other assets.

These sources of cash were partially offset by a $20.8 million increase in inventories due to softening demand during the year, a $5.9 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $3.9 million decrease in taxes payable and accrued liabilities.

Operating activities generated $183.7 million of cash in the nine months ended September 30, 2021.

we also incurred depreciation, non-cash stock-based compensation expense, amortization of intangibles and amortization premiums on marketable securities of $9.0 million, $7.4 million, $0.5 million and $0.4 million, respectively.

Sources of cash also included a $2.9 million increase in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $0.7 million decrease in accounts receivable due to decreased customer shipments.

These sources of cash were partially offset by a $2.3 million decrease in prepaid expenses and other assets, a $7.0 million increase in inventories due to lower demand during the quarter and a $0.7 million decrease in taxes payable and accrued liabilities.

Operating activities generated $74.6 million of cash in the three months ended March 31, 2022.

Net income for this period was $46.2 million;

we also incurred non-cash stock-based compensation expense, depreciation, amortization of intangibles and loss on disposal of property and equipment of $27.3 million, $23.4 million, $2.7 million and $2.2 million, respectively.

Sources of cash also included an $11.1 million decrease in inventory reflecting strong demand for the period and a $6.6 million increase in accounts payable (excluding payables related to property and equipment) due to the timing of payments.

These sources of cash were partially offset by a $6.2 million decrease in taxes payable and accrued liabilities, a $5.0 million increase in prepaid expenses and other assets, primarily due to prepaid income taxes, and a $3.0 million increase in accounts receivable due to increased customer shipments.

we also incurred non-cash stock-based compensation expense, depreciation and intangibles amortization of $9.0 million, $8.4 million and $0.7 million, respectively.

Sources of cash also included a $10.7 million decrease in accounts receivable due to timing of collections, a $3.4 million increase in taxes payable and accrued liabilities and a $1.6 million decrease in prepaid expenses and other assets.

These sources of cash were partially offset by a $3.8 million increase in inventories, a $1.7 million decrease in accounts payable (excluding payables related to property and equipment).

Cash From Investing Activities

Our investing activities in the nine months ended September 30, 2022 generated $101.5 million of cash, primarily consisting of $133.8 million from sales and maturities of marketable securities, net of purchases, and by proceeds of $1.2 million from the sale of an office building, partially offset by $33.4 million for purchases of property and equipment, primarily production-related machinery and equipment.

Our investing activities in the nine months ended September 30, 2021 resulted in a $128.1 million net use of cash, primarily consisting of $97.9 million for the purchase of marketable securities, net of sales and maturities, and $30.3 million for purchases of property and equipment, primarily production-related machinery and equipment as well as construction of a new office building in Switzerland.

Our investing activities in the three months ended March 31, 2023 resulted in a $18.3 million use of cash, primarily consisting of $14.2 million used for purchases of marketable securities net of proceeds from maturities, and $4.1 million used for purchases of property and equipment, primarily production-related machinery and equipment.

Our investing activities in the three months ended March 31, 2022 generated $80.2 million of cash, primarily consisting of $93.7 million from sales and maturities of marketable securities, net of purchases, offset by $14.7 million for purchases of property and equipment, primarily production-related machinery and equipment, partially offset by proceeds of $1.2 million from the sale of an office building.

Cash From Financing Activities

Our financing activities in the nine months ended September 30, 2022 resulted in a $317.4 million net use of cash, consisting of $292.3 million for the repurchase of our common stock and $31.2 million for the payment of dividends to stockholders, partially offset by $6.2 million from the issuance of shares through our employee stock purchase plan.

Our financing activities in the nine months ended September 30, 2021 resulted in a $52.0 million net use of cash, consisting of $36.2 million for the repurchase of our common stock and $23.6 million for the payment of dividends to stockholders, partially offset by $7.7 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

In January 2021, our board of directors raised the quarterly cash dividend by an additional $0.02 per share with the declaration of four cash dividends of $0.13 per share to be paid to stockholders of record at the end of each quarter in 2021.

In October 2021, our board of directors raised the quarterly cash dividend again with the declaration of five cash dividends of $0.15 per share (in lieu of the $0.13 per share announced in January 2021) to be paid to stockholders of record at the end of the fourth quarter in 2021 and at the end of each quarter in 2022.

In January 2022, our board of directors raised the quarterly cash dividend by an additional $0.03 per share with the declaration of four cash dividends of $0.18 per share (in lieu of the $0.15 per share announced in October 2021) to be paid to stockholders of record at the end of each quarter in 2022.

A dividend payout of $10.7 million, $10.3 million and $10.3 million occurred on March 31, 2022, June 30, 2022 and September 30, 2022, respectively.

The declaration of any future cash dividend is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interests of our stockholders.

Our financing activities in the three months ended March 31, 2023 resulted in a $9.5 million net use of cash, consisting of $1.7 million for the repurchase of our common stock and $10.9 million for the payment of dividends to stockholders, partially offset by $3.1 million from the issuance of shares through our employee stock purchase plan.

Our financing activities in the three months ended March 31, 2022 resulted in a $142.3 million net use of cash, consisting of $134.7 million for the repurchase of our common stock and $10.7 million for the payment of dividends to stockholders, partially offset by $3.1 million from the issuance of common stock from the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.

In January 2022, our board of directors declared dividends of $0.18 per share to be paid to stockholders of record at the end of each quarter in 2022.

In February 2023, our board of directors declared dividends of $0.19 per share to be paid to stockholders of record at the end of each quarter in 2023.

A dividend payout of $10.9 million occurred on March 31, 2023.

The declaration of any future cash dividend is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital

requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interests of our stockholders.

Stock Repurchases

As of December 31, 2022, we had $81.3 million remaining under our stock-repurchase program .

In January, February and April 2022, our board of directors authorized the use of an additional $100 million, $50 million and $75 million, respectively, for the repurchase of our common stock, with repurchases to be executed according to pre-

defined price/volume guidelines.

In the nine months ended September 30, 2022 , we repurchased 3.5 million shares of our common stock for $292.3 million, leaving no funds authorized as of September 30, 2022.

In October 2022, our board of directors authorized the use of an additional $100 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the three months ended March 31, 2023, we repurchased 23,000 shares of our common stock for $1.7 million, leaving $79.6 million remaining on the repurchase authorization as of March 31, 2023.

Authorization of future repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors;

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Contractual Commitments

As of September 30, 2022 we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $22.9 million.

As of March 31, 2023 we had a contractual obligation related to income tax, which consisted primarily of unrecognized tax benefits of approximately $23.4 million.

A portion of the tax obligation is classified as long-term income taxes payable and a portion is recorded in deferred tax assets in our condensed consolidated balance sheet.

As of September 30, 2022, there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2021.

As of March 31, 2023, there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2022.

Other Information

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federal taxes.

Accordingly, as of September 30, 2022, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring additional U.S.

Accordingly, as of March 31, 2023, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring additional U.S.

federal income taxes.

If our operating results deteriorate in future periods, either as a result of a decrease in customer demand or pricing pressures from our customers or our competitors, or for other reasons, our ability to generate positive cash flow from operations may be jeopardized.

If our operating results deteriorate in future periods, either as a result of a decrease in customer demand, pricing and/or cost pressures, or for other reasons, our ability to generate positive cash flow from operations may be jeopardized.

In that case, we may be forced to use our cash, cash equivalents and short-term investments, use our current financing or seek additional financing from third parties to fund our operations.

We believe that cash generated from operations, together with existing sources of liquidity, will satisfy our projected working capital and other cash requirements for at least the next 12 months.

We believe that cash generated from operations, together with existing sources of liquidity, will satisfy our projected working capital and other cash requirements for at least the next 12 months, and we anticipate that we will continue to be able to fund liquidity requirements through cash provided by our operations for the foreseeable future.

However, we may experience reduced cash flow from operations as a result of the cyclical nature of our business along with other macroeconomic and geopolitical factors.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis