What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-04 compared with 2024-02-20 · 58 added, 98 removed, 168 unchanged (48% of the section changed)

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Fiscal 2024, 2023, and 2022 had 52 weeks.

Fiscal 2023, 2022 and 2021 ended on December 30, 2023, December 31, 2022 and January 1, 2022, respectively.

Fiscal 2024, 2023, and 2022 ended on December 28, 2024, December 30, 2023 and December 31, 2022, respectively.

Impact of Macroeconomic Conditions

The current global economic environment is experiencing inflationary pressure, relatively high interest rates, and geopolitical tension.

We have experienced a decline in revenues, as our customers have slowed purchases to reduce existing inventories in a softening market.

The extent of the impact of these macroeconomic conditions on our operational and financial performance will depend on future developments, including the duration and severity of any economic downturn, the impact to the business of our suppliers and/or customers, and other items identified under “Risk Factors” above, all of which are uncertain and cannot be predicted.

An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.

In recent years, the global economic environment has experienced inflationary pressure, high interest rates, and geopolitical tension, and we have experienced declines in revenues as our customers slowed purchases to reduce existing inventories in a softening market.

While certain conditions improved during fiscal 2024, including deceleration of inflation and lowering of interest rates in certain geographies, there continues to be uncertainty regarding overall macroeconomic conditions, including increased geopolitical tensions, risk of recessions, and the effects of potential trade policies including tariffs.

Although we saw sequential improvements in revenues over the course of fiscal 2024, the extent of the continued impact, or any new impact, of macroeconomic conditions on our operational and financial performance will depend on future developments, their impact to the business of our suppliers and/or customers, and other items identified under “Risk Factors” above, all of which are uncertain and cannot be predicted.

Any extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

We are a leader in secure, intelligent wireless technology for a more connected world.

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However, rapid changes in our markets and across our product areas make it difficult for us to accurately estimate the impact of seasonal factors on our business.

Current Period Highlights of Continuing Operations

Current Period Highlights

Revenues decreased $197.9 million in fiscal 2024 compared to fiscal 2023 due to decreased revenues from both our Industrial & Commercial products and Home & Life products.

Gross margin decreased to 58.9% in fiscal 2023 compared to 62.7% in fiscal 2022 primarily due to variations in the price and costs of our products and variations in product mix.

Operating expenses decreased $38.6 million in fiscal 2023 compared to fiscal 2022 due primarily to temporary cost containment measures taken in the third and fourth quarters of fiscal 2023, including the elimination of certain bonuses and certain other variable compensation, a reduction in the use of contract employees, and the suspension of all non-essential travel.

Operating expenses also decreased due to reduced stock-based compensation from the expense reversal to adjust the estimated levels of achievement related to unvested performance stock units.

In the fourth quarter of fiscal 2023, we implemented a workforce reduction of approximately 10% of our employees.

We incurred total employee separation costs of $9.1 million.

Operating loss in fiscal 2023 was $24.2 million compared to operating income of $119.3 million in fiscal 2022.

Gross margin decreased to 53.4% in fiscal 2024 compared to 58.9% in fiscal 2023 primarily due to variations in customer and product mix.

Operating expenses decreased $7.1 million in fiscal 2024 compared to fiscal 2023 due primarily to continued efforts to contain costs.

Operating loss in fiscal 2024 was $165.5 million compared to operating loss of $24.2 million in fiscal 2023.

Refer to “Results of Operations” below for further discussion.

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Inventory was $105.6 million at December 28, 2024, representing 125 days of inventory (“DOI”).

During the second quarter of 2023, we paid $535.0 million in cash and issued 0.9 million shares of common stock in connection with the extinguishment of the remaining principal of our 2025 convertible senior notes.

In the third quarter of 2023, we repaid $35.0 million in borrowings under our revolving credit facility.

In fiscal 2023, we acquired 1.5 million shares of our common stock for $212.9 million.

We have continued to diversify our product portfolio and introduce new products and solutions with added functionality and integration.

In fiscal 2023, we introduced a new BB5 family of 8-bit microcontroller units optimized for price and performance, a dual-band SoC designed for long-range networks and protocols like Amazon Sidewalk, Wi-SUN®, and other proprietary protocols, and new integrated Bluetooth® SoC and MCU families that offer IoT device designers energy efficiency, high performance and trusted security for the smallest form factor IoT devices.

We plan to continue introducing products that expand the capabilities we offer in order to serve both current and emerging applications, enabling us to address new markets and expand our total available market opportunity.

During fiscal 2024, 2023, and 2022, we had no customer that represented more than 10% of our revenues.

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An end customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer to the end customer.

Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, represented 34% and 15% of our revenues during fiscal 2023 and 33% and 17% during fiscal 2022, respectively.

Three of our distributors, Arrow Electronics, Edom Technology and Sekorm, represented 28%, 18% and 12% of our revenues during fiscal 2021, respectively.

Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to the end customer as our customer.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, represented 27% and 16% of our revenues during fiscal 2024, 34% and 15% during fiscal 2023, and 33% and 17% during fiscal 2022, respectively.

The percentage of our revenues derived from outside of the United States was 90% in fiscal 2024, 88% in fiscal 2023 and 83% in fiscal 2022.

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Interest Expense.

Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes and credit facility.

Interest expense on our convertible senior notes included contractual interest, amortization of debt issuance costs, and for periods prior to fiscal 2022, amortization of the debt discount.

Provision (Benefit) for Income Taxes.

Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes that were previously outstanding and our credit facility.

Interest expense on our convertible senior notes included contractual interest and amortization of debt issuance costs.

Provision for Income Taxes.

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Equity-method Earnings (Loss).

Equity-method earnings (loss) represents income or loss on our equity-method investment.

Income from discontinued operations, net of income taxes.

Income from discontinued operations, net of income taxes includes the results of operations of our former infrastructure and automotive business.

The following table sets forth our Consolidated Statements of Operations data as a percentage of revenues for the periods indicated:

2024 2023 2022

Revenues 100.0 % 100.0 % 100.0 %

Cost of revenues 46.6 41.1 37.3

Gross profit 53.4 58.9 62.7

Operating expenses:

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Interest expense (0.2) (0.7) (0.6)

Income (loss) from continuing operations before income taxes

Income (loss) before income taxes (26.5) (1.3) 12.4

Provision for income taxes 6.2 1.0 3.8

Equity-method earnings (loss) — (2.0) 0.3

Income (loss) from continuing operations

Income from discontinued operations, net of income taxes

Net income (loss) (32.7) % (4.4) % 8.9 %

Comparison of Fiscal 2024 to Fiscal 2023

(in millions)

(in millions) 2024 2023 Change % Change

Industrial & Commercial $ 338.5 $ 496.6 $ (158.1) (31.8) %

Home & Life 245.9 285.7 (39.8) (13.9) %

$ 584.4 $ 782.3 $ (197.9) (25.3) %

The decrease in revenues in fiscal 2024 was due to decreased revenues of $158.1 million from our Industrial & Commercial products and $39.8 million from our Home & Life products.

Unit volumes of our products decreased while average selling prices increased compared to fiscal 2022.

The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, pricing decisions and other factors.

Unit volumes and average selling prices of our products decreased compared to fiscal 2023.

The weakness in the overall demand environment for our customers’ products we experienced in the second half of fiscal 2023 continued into fiscal 2024 as customers sought to reduce inventory levels that had become elevated as a result of the supply chain disruptions during fiscal 2021 and 2022.

The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, customer mix, pricing decisions, and other factors.

In general, as our products become more mature, we expect to experience decreases in average selling prices.

The overall demand environment for our customers’ products is generally weak.

Customers are also seeking to reduce inventory levels relative to the amounts they held during the recent period of widespread supply chain disruptions.

As a result, the current demand environment for our products is experiencing high volatility and general weakness, with customers more frequently requesting cancellations, changes to delivery dates, and price and payment term concessions.

(in millions)

Gross profit decreased in fiscal 2023 due primarily to decreased product sales across both of our product groups.

Gross margin decreased primarily due to an increase in cost related to product mix.

(in millions) 2024 2023 Change

Gross profit $ 312.2 $ 460.6 $ (148.4)

Gross margin 53.4 % 58.9 % (5.5) %

Gross profit decreased in fiscal 2024 due primarily as a result of a decrease in revenues in the period.

Gross margin decreased primarily due to variations in customer and product mix, with the percentage of revenues attributed to direct customers increasing as compared to revenue from distributors in fiscal 2024.

We may experience variations in the average selling prices of certain of our products.

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Research and Development

(in millions)

(in millions) 2024 2023 Change % Change

Research and development $ 332.2 $ 337.7 $ (5.5) (1.6) %

Percent of revenue 56.9 % 43.2 %

The increase in research and development expense in fiscal 2023 was primarily due to an increase of $6.3 million for personnel-related expenses and an increase of $5.9 million for IT-related costs.

Within personnel-related expenses, increases of $15.0 million in salary expense, $2.4 million in stock compensation, and $7.2 million in termination benefits primarily from the workforce reduction in the fourth quarter were partially offset by a $21.8 million decrease in bonus and variable compensation from lower attainment and the cost containment efforts in the third and fourth quarters.

Other decreases to research and development expense in fiscal 2023 were $4.5 million for new product introduction costs and $3.7 million for the amortization of intangible assets.

The decrease in research and development expense in fiscal 2024 was primarily due to a decrease of $7.2 million for personnel-related expenses as a result of our workforce reductions implemented in the fourth quarter of fiscal 2023.

Other decreases to research and development expense in fiscal 2024 were $2.3 million for the amortization of intangible assets, $2.0 million for technical services, and $1.4 million for IT-related costs, partially offset by an increase of $7.8 million in software expense.

The increase in research and development expense as a percent of revenues in fiscal 2024 was due to our decreased revenues.

We expect that research and development expense will remain relatively stable in absolute dollars in the first quarter of 2024 compared to the fourth quarter of 2023.

Selling, General and Administrative

(in millions)

(in millions) 2024 2023 Change % Change

Selling, general and administrative $ 145.5 $ 147.0 $ (1.5) (1.0) %

Percent of revenue 24.9 % 18.8 %

The decrease in selling, general and administrative expense in fiscal 2023 was primarily due to a $35.4 million decrease to personnel-related costs, which included a $20.7 million decrease in certain bonus and variable compensation as a result of the cost containment efforts in the third and fourth quarters and a $14.7 million reduction in stock compensation driven by a decline in expected achievement for certain performance-based awards.

Additionally, amortization of intangible assets decreased by $5.0 million and outside services decreased by $5.1 million, partially offset by an increase in IT-related costs of $1.3 million.

The decrease in selling, general and administrative expense in fiscal 2024 was primarily due to a $2.0 million decrease in outside services, a $1.4 million decrease in IT-related costs, and a $0.8 million decrease in occupancy costs, partially offset by a $2.9 million increase in personnel-related costs.

The increase in selling, general and administrative expense as a percent of revenues in fiscal 2024 was due to our decreased revenues.

We expect that selling, general and administrative expense will increase in absolute dollars in the first quarter of 2024 compared to the fourth quarter of 2023.

Interest Income and Other, Net

Interest income and other, net in fiscal 2024 was $12.0 million compared to $19.2 million in fiscal 2023.

The increase in interest income and other, net in fiscal 2023 was primarily due to increased interest income earned as a result of higher market interest rates.

The decrease in interest income and other, net in fiscal 2024 was primarily due to lower interest-bearing investment balances as a result of the sale of investments to fund the settlement of our 2025 convertible senior notes in the second quarter of fiscal 2023, stock repurchases in the first three quarters of fiscal 2023, and repayment of borrowing from our credit facility in the third quarter of fiscal 2023.

Interest Expense

Interest expense in fiscal 2024 was $1.3 million compared to $5.6 million in fiscal 2023.

The decrease was primarily due to the settlement of our 2025 convertible senior notes in the second quarter of fiscal 2023.

Provision for Income Taxes

(in millions)

(in millions) 2024 2023 Change

Provision for income taxes $ 36.2 $ 7.9 $ 28.3

Effective tax rate (23.4) % (29.9) %

The decrease in the provision for income taxes for fiscal 2023 was primarily due to decreases in pre-tax book income and global intangible low-taxed income inclusions as compared to fiscal 2022.

Equity-method Earnings (Loss)

Equity-method loss in fiscal 2023 was $16.0 million compared to earnings of $3.4 million in fiscal 2022.

The decrease in equity-method earnings in fiscal 2023 was due primarily to the loss recognized on the sale of an equity-method investment.

Business Outlook

The following represents our business outlook for the first quarter of fiscal 2024.

Income Statement Item

$100 million to $110 million

Operating expenses

Diluted loss per share

$(1.89) to $(2.05)

The increase in the provision for income taxes for fiscal 2024 as compared to fiscal 2023 was primarily due to the establishment of a valuation allowance against the majority of our U.S.

and Singapore deferred tax assets during the second quarter of fiscal 2024.

There is a need for a valuation allowance in the U.S.

and Singapore due to a forecasted three-year cumulative pre-tax loss for the current and two preceding years in conjunction with the recent downturn in the semiconductor industry.

We intend to maintain the valuation allowance until sufficient future sources of taxable income are forecasted to realize the benefit of the deferred tax assets.

Equity-method Loss

Equity-method loss in fiscal 2023 was $16.0 million.

Our equity-method investment was sold in the fourth quarter of fiscal 2023.

Liquidity and Capital Resources

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The remaining balance was held by our foreign subsidiaries.

Our cash equivalents and short-term investments consisted of government debt securities, which include agency bonds, municipal bonds, and U.S.

Our cash equivalents and short-term investments consisted of government debt securities, which include U.S.

government securities;

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Operating Activities

Net cash used in operating activities was $30.3 million during fiscal 2023, compared to net cash provided by operating activities of $141.3 million during fiscal 2022.

Operating cash flows during fiscal 2023 reflect our net loss of $34.5 million, adjustments of $104.4 million for depreciation, amortization, stock-based compensation, equity-method losses and deferred income taxes, and a net cash outflow of $100.3 million due to changes in our operating assets and liabilities.

Accounts receivable decreased to $29.3 million at December 30, 2023 from $71.4 million at December 31, 2022.

The decrease in accounts receivable resulted primarily from a decrease in shipments during the last quarter of fiscal 2023 compared to the last quarter of fiscal 2022.

Net cash used in operating activities was $13.9 million during fiscal 2024, compared to net cash used in operating activities of $30.3 million during fiscal 2023.

Operating cash flows during fiscal 2024 reflect our net loss of $191.0 million, adjustments of $139.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $37.5 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $54.5 million at December 28, 2024 from $29.3 million at December 30, 2023.

The increase in accounts receivable resulted primarily from an increase in shipments during the last quarter of fiscal 2024 compared to the last quarter of fiscal 2023.

Our DSO was 29 days at December 28, 2024 and 30 days at December 30, 2023.

Inventory increased to $194.3 million at December 30, 2023 from $100.4 million at December 31, 2022.

Inventory decreased to $105.6 million at December 28, 2024 from $194.3 million at December 30, 2023, due to an intentional reduction of inventory holding levels in response to reduced demand.

Our inventory levels will vary based on the availability of supply and the impact of variations between forecasted demand used for purchasing inventory and actual demand.

Inventory has increased in part due to us investing in building inventory to minimize potential supply disruptions and meet forecasted future demand.

Our DOI was 125 days at December 28, 2024 and 407 days at December 30, 2023.

the increase is in part due to the lower cost of sales combined with higher inventory levels during the last quarter of fiscal 2023 compared to the last quarter of fiscal 2022.

Investing Activities

Net cash provided by investing activities was $113.1 million during fiscal 2024, compared to $469.8 million during fiscal 2023.

The increase in cash inflows was principally due to cash provided by net purchases, sales, and maturities of marketable securities of $492.6 million in fiscal 2023.

The decrease in cash inflows was principally due to a decrease in cash provided by net purchases, sales, and maturities of marketable securities of $380.1 million in fiscal 2024.

Financing Activities

Net cash used in financing activities was $45.1 million during fiscal 2024, compared to $711.9 million during fiscal 2023.

The decrease in cash outflows was principally due to a decrease of $666.3 million for repurchases of our common stock, partially offset by an increase of $571.1 million in payments on debt in fiscal 2023.

Discontinued Operations

Net cash used in discontinued operations was zero during fiscal 2023, compared to net cash used of $69.5 million during fiscal 2022 related to income tax payments.

The decrease in cash outflows was principally due to $571.2 million in debt repayments and $217.1 million for repurchases of common stock, partially offset by $80.0 million in proceeds from our revolving line of credit, in fiscal 2023.

As of December 28, 2024, we had a $400 million revolving credit facility.

We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to the greater of an aggregate of $250 million and 100% of EBITDA, plus an amount that would not cause a secured net leverage ratio to exceed 3.50 to 1.00, subject to certain conditions.

In June 2023, we borrowed $80 million under the revolving credit facility.

In the third quarter, we repaid $35.0 million in borrowings under our revolving credit facility.

As of December 30, 2023, the outstanding balance in the revolving credit facility is $45.0 million.

In June 2023, we paid $535.0 million in cash and issued 0.9 million shares of common stock in connection with the settlement of our 2025 convertible senior notes.

As of December 28, 2024, no amounts were outstanding on the revolving credit facility.

We were granted a waiver of compliance for the minimum interest coverage ratio through March 29, 2025.

In the event we are not able to achieve compliance by the end of the waiver period, we may need to amend the covenant or obtain an additional waiver in order to access the revolving credit facility.

Capital Requirements

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In the event that actual demand is lower, or market conditions are worse than originally projected, additional inventory write-downs may be required.

Impairment of goodwill and other long-lived assets – We review long-lived assets which are held and used, including fixed assets and purchased intangible assets, for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its expected useful life and are significantly impacted by estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast.

If the asset is considered to be impaired, we record an impairment charge equal to the amount by which the carrying value of the asset exceeds its fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

We test our goodwill for impairment annually as of the first day of our fourth fiscal quarter and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired.

We assess goodwill for impairment by comparing the fair value of a reporting unit to its carrying amount.

In determining fair value, several valuation methodologies are allowed, although quoted market prices are the best evidence of fair value.

If the fair value of the reporting unit is less than its carrying amount, we recognize an impairment loss equal to that excess amount.

Acquired intangible assets – When we acquire a business, a portion of the purchase price is typically allocated to identifiable intangible assets, such as acquired technology and customer relationships.

Fair value of these assets is determined primarily using the income approach, which requires us to project future cash flows and apply an appropriate discount rate.

We amortize intangible assets with finite lives over their expected useful lives.

Our estimates are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable.

Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.

Incorrect estimates could result in future impairment charges, and those charges could be material to our results of operations.

Revenue recognition – We recognize revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

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We may adjust assumptions used to estimate consideration periodically based on analysis of prior estimates.

Stock-based compensation – We recognize the fair-value of stock-based compensation transactions in the Consolidated Statements of Operations.

The fair value of our full-value stock awards (with the exception of market-based performance awards) equals the fair market value of our stock on the date of grant.

The fair value of our market-based performance awards is estimated at the date of grant using a Monte-Carlo simulation.

The fair value of our stock option and employee stock purchase plan grants is estimated at the date of grant using the Black-Scholes option pricing model.

In addition, we are required to estimate the expected forfeiture rate of our stock grants and only recognize the expense for those shares expected to vest.

If our actual experience differs significantly from the assumptions used to compute our stock-based compensation cost, or if different assumptions had been used, we may have recorded too much or too little stock-based compensation cost.

See Note 15, Stock-Based Compensation , to the Consolidated Financial Statements for additional information.

Income taxes – We are required to calculate income taxes in each of the jurisdictions in which we operate.

1 unchanged sentence

These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

Evaluating the need for a valuation allowance for deferred tax assets requires analysis of all positive and negative evidence available, including recent earnings history and taxable income in recent years, reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies to determine whether all or some portion of the deferred tax assets will not be realized.

We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In assessing the need for a valuation allowance, we are required to estimate the amount of expected future taxable income.

Judgment is inherent in this process, and differences between the estimated and actual taxable income could result in a material impact on our Consolidated Financial Statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis