What changed in this filing

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Item 1A. Risk Factors

2024-02-16 compared with 2023-02-22 · 78 added, 81 removed, 331 unchanged (32% of the section changed)

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Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions.

If we fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand.

fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand.

Adverse market conditions relative to our products may result in:

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● disruptions in our supply chain;

● higher operating costs, caused by matters such as rising inflation and interest rates in various regions, which the Company is currently experiencing;

● higher operating costs, caused by matters such as rising inflation and interest rates in various regions, which the Company experienced in 2023 and may continue to do so in the future;

● an increase in uncollectable amounts due from our customers resulting in increased reserves for doubtful accounts and write-offs of accounts receivable.

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Our performance may be adversely affected if we are unable to accurately predict evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and technologies.

The semiconductor industry, characterized by a high frequency and complexity of technology transitions and inflections (commonly referred to as “Moore’s Law”), poses unique risks and challenges.

Our ability to successfully compete in this market will depend on our ability to address and manage a number of industry-specific risks, including and without limitation to the following:

The semiconductor industry, characterized by a high frequency and complexity of technology transitions and inflections, poses unique risks and challenges.

Our ability to successfully compete in this market will depend on our ability to address and manage a number of industry-specific risks, including without limitation the following:

● the heightened cost of research and development, associated with matters such as shrinking geometries, complex device structures, multiple applications and process steps, and the use of new materials;

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Unexpected product performance issues could result in significant costs and damages, including increased service and warranty expenses, the need to provide product replacements or modifications, reimbursement for damages caused by our products, product recalls, related litigation, product write-offs, and disposal costs.

Product defects could also result in personal injury or property damage, claims for which may exceed our existing insurance coverages.

These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our business, financial condition, and results of operations.

Product defects could also result in personal injury or property damage, claims for which may exceed our existing insurance coverages (as may other claims, notwithstanding our efforts to maintain a program of insurance coverage for a variety of property, casualty and other risks).

These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our business.

In addition, our success is also subject to the risk of future disruptive technologies, including machine learning and artificial intelligence (“AI”).

While such technologies offer significant opportunities, they also pose complex and novel risks, including operational risks (such as factual errors or inaccuracies in work product developed using AI), the unintended release of proprietary information, costs of compliance associated with evolving AI laws, regulations and standards, privacy concerns with respect to data dissemination, risks related to intellectual property rights (with respect to both the inputs to the program and ownership rights to AI work product), and risks related to AI’s impact on the workforce.

While it is not possible at this point to accurately identify or predict all of the risks related to the use of AI technologies, our failure to properly anticipate and timely respond to AI-related developments could adversely affect our business, financial condition, and results of operations.

Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility.

The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as tablets, smartphones, laptops and wearable devices.

The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as smartphones, laptops, tablets and wearable devices.

In addition, as a result of the growing automotive semiconductor market, semiconductor demand is also heavily influenced by the demand for automobiles.

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Alternatively, changes that result in sudden increases in demand for consumer electronic products and automobiles may result in a shortage of parts and materials needed to manufacture our products, and attendant shipping delays (both to us and to our customers) and/or the cancellation of orders placed by our customers.

The effects of the COVID-19 pandemic have strained and have negatively impacted our businesses and operations, and the duration and extent to which COVID-19 may impact our future results of operations and overall financial performance remains uncertain.

The outbreak and continuing spread of COVID-19 and its variants have resulted in a substantial curtailment of business activities worldwide and has caused and is likely to continue to cause weakened economic conditions, both domestically and abroad, including in markets in Asia and Europe from which we derive the majority of our revenue.

Government restrictions (such as the China government lockdowns in 2022 of Shenzhen and Shanghai), quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of business closures and other slowdowns.

These slowdowns have adversely impacted and will likely continue to adversely impact Veeco directly, as well as our customers, suppliers and other partners.

Although there has been recent improvement in the global economy since the most severe effects of COVID-19, many macroeconomic variables remain dynamic.

While all of our global sites are currently operational, any local pandemic

outbreaks could require us to temporarily curtail production levels or temporarily cease operations based on government mandates.

Furthermore, the COVID-19 conditions have adversely impacted, and may continue to adversely impact, our ability to timely source critical parts and materials and to provide on-site services to our customers.

Supply chain shortages, which have been and may continue to be exacerbated by shipping delays caused by transportation interruptions (associated with matters such as reduced availability of air transport, port closures, and increased border controls), could require us to purchase excess inventory with longer lead times, which could increase inventory obsolescence risk while negatively impacting our working capital.

Shortages of critical parts have strained and may continue to strain our manufacturing capacity, threatening to adversely impact our ability to meet customer needs, which may negatively impact our revenues, results of operations and financial condition.

While we have been able to successfully mitigate these risks thus far, without material negative impact to our financial performance, our continued ability to do so remains uncertain.

In addition, the conditions caused by COVID-19 could adversely affect our customers’ ability or willingness to purchase our products or services or otherwise delay prospective customers’ purchasing decisions.

These conditions may delay the provisioning of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall financial performance.

In addition, adverse impacts on the creditworthiness of our customers and other counterparties may negatively affect their ability to pay amounts owed to us, which could materially and adversely affect our results of operations and financial condition.

The COVID-19 pandemic has resulted in significant disruption of global financial markets and could negatively impact our stock price, our access to capital, and our business and results of operations in the near and long-term.

We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries .

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Management changes at key customer accounts could result in a loss of future sales due to vendor preferences or other reasons and may introduce new challenges in managing customer relationships.

If a principal customer discontinues its relationship with us or suffers economic setbacks, our business, financial condition, and operating results could be materially and adversely affected.

If these principal customers discontinue their relationship with us or suffer economic setbacks, our business, financial condition, and operating results could be materially and adversely affected.

Our ability to increase sales in the future will depend in part upon our ability to obtain orders from new customers and we cannot be certain that we will be successful in these efforts.

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Our customer base is also highly concentrated in terms of geography, and the majority of our sales are to customers located in a limited number of countries.

Dependence upon sales emanating from a limited number of regions increases our risk of exposure to local difficulties and challenges, such as those associated with regional economic downturns, political instability, trade wars and other trade disruptions, fluctuating currency exchange rates, natural disasters, social unrest, pandemics, terrorism, and acts of war.

Our reliance upon customer demand arising primarily from a limited number of countries could materially and adversely impact our future results of operations.

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Alternatively, during periods of rapid growth, we must be able to acquire and develop sufficient manufacturing capacity to meet customer demand and attract, hire, assimilate, and retain a sufficient number of qualified people.

Our net sales and operating results may be negatively affected if we fail to predict and effectively respond.

Our net sales and operating results may be negatively affected if we fail to accurately predict and effectively respond.

Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer demand.

The success of our business depends in part on our ability to accurately forecast and supply equipment and services that meet the rapidly changing technical and volume requirements of our customers.

The success of our business depends in part on our ability to accurately forecast and supply equipment and services that

meet the rapidly changing technical and volume requirements of our customers.

To meet these demands, we depend on the timely delivery of parts, components, and subassemblies from our suppliers.

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● information technology or infrastructure failures;

● natural disasters such as earthquakes, tsunamis, fires, floods, or storms;

● other causes such as regional or global economic downturns or recessions, international trade disruptions, pandemics, political instability, terrorism, or acts of war, which could result in delayed deliveries, manufacturing inefficiencies, increased costs, or order cancellations.

● natural disasters and other events beyond our control, such as earthquakes, tsunamis, fires, floods, storms, power outages and potential impacts of climate change;

● other causes such as regional or global economic downturns or recessions, international trade disruptions, pandemics such as COVID-19, political instability, terrorism, or acts of war, which could result in delayed deliveries, manufacturing inefficiencies, increased costs, or order cancellations.

In addition, in the event of an unanticipated increase in demand for our products, our need to rapidly increase our business and manufacturing capacity may be limited by our working capital constraints and those of our suppliers, which may cause or exacerbate interruptions in our manufacturing and supply chain operations.

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Disputes and possibly litigation involving third party providers could result and we could suffer damage to our reputation.

Dependence on contract manufacturing and outsourcing may also adversely affect our ability to bring new products to market.

Dependence on outsourcing may also adversely affect our ability to bring new products to market.

Although we attempt to select reputable providers, one or more of these providers could fail to perform as we expect.

If we do not effectively manage our outsourcing efforts or if third party providers do not perform as anticipated, we may not realize the benefits of productivity improvements and we may experience operational difficulties, increased costs, manufacturing and installation interruptions or delays, inefficiencies in the structure and operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations.

installation interruptions or delays, inefficiencies in the structure and operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations.

The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly .

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Once qualified, the ramp to volume production can take an additional extended period of time, often twelve to twenty-four months.

During these periods, little to no revenue will be recognized by us, while we will continue to incur research and

development costs.

During these periods, little to no revenue will be recognized by us, while we will continue to incur research and development costs.

Despite our efforts, our products may never be qualified and may never achieve design-tool-of-record (“DTOR”) or production-tool-of-record (“PTOR”) status, and our financial condition and results of operations may be materially and adversely affected.

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We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures.

We have completed several significant acquisitions and investments in the past, including our recent acquisition of Epiluvac AB, and we will consider new opportunities in the future.

Acquisitions and investments involve numerous risks, many of which are unpredictable and beyond our control, including the following:

● the failure to realize expected synergies and difficulties and costs, including the diversion of management’s attention, in integrating the personnel, operations, technologies, and products of acquired companies;

● the inability to complete proposed transactions as anticipated, resulting in obligations to pay professional and other expenses, including any applicable termination fees;

We have completed several significant acquisitions and investments in the past (including our recent acquisition of Epiluvac AB, a producer of SiC-based products and technology), and we will consider new opportunities in the future.

Acquisitions,

investments and other business combinations involve numerous risks, many of which are unpredictable and beyond our control, including the following:

● the failure of the transaction to advance our business strategies and the failure of its anticipated benefits to materialize;

● difficulties and costs, including the diversion of management’s attention, in integrating new personnel, operations, technologies, and products;

● the inability to complete the proposed transaction in a timely manner, if at all, due to our inability to obtain required government or other approvals without burdensome conditions, or due to other reasons, resulting in obligations to pay professional and other expenses, including any applicable termination fees;

● unknown, underestimated, and undisclosed commitments or liabilities;

● increased amortization expenses relating to intangible assets;

● other adverse effects on our business, including the potential impairment and write-down of amounts capitalized as intangible assets and goodwill as part of the acquisition, as a result of such matters as technological advancements or worse-than-expected performance by the acquired company.

● other adverse effects on our business, including the potential impairment and write-down of amounts capitalized as intangible assets and goodwill as part of the transaction, as a result of such matters as technological advancements or worse-than-expected performance by an acquired company.

If we issue equity securities to pay for an acquisition or investment, the ownership percentage of our then-current shareholders would be reduced and the value of the shares held by these shareholders could be diluted, which could adversely affect the price of our stock.

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Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to a buyer regarding the businesses) and to ongoing obligations to support the businesses following such divestitures, any and all of which could adversely affect our financial condition and results of operations.

As a general principle, we seek to invest our capital in areas that we believe best align with our business strategy and will help optimize future returns.

Our capital investments may not generate the expected returns or hoped-for results.

We may not be able to obtain necessary grants, investment tax credits, or other governmental incentives, including funding through the U.S.

CHIPS and Science Act of 2022.

Significant judgment is required when assessing and selecting capital investments, and we could invest in projects that are ultimately less profitable than other projects which we do not select, ultimately harming our business, results of operations and financial condition.

Risks Associated with Operating a Global Business

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A majority of our sales are to customers, and significant elements of our supply chain are from suppliers, who are located outside of the United States, which we expect to continue.

Our percentage revenue from the sale of products and the provision of services to non-U.S.

customers was 76%, 69% and 62% for fiscal years 2023, 2022 and 2021, respectively.

sales and operations are subject to risks inherent in conducting business outside the United States, many of which are beyond our control including:

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● different customs and ways of doing business.

Global conditions and other factors, such as the COVID-19 pandemic, the current conflict in Ukraine, and attendant transportation and freight cost challenges, have resulted in, and may continue to result in, a shortage of parts, materials and services needed to manufacture and timely deliver our products.

These conditions have negatively impacted our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand.

Parts shortages have required, and may continue to require, that we plan ahead further than usual, and increase our purchase commitments to secure critical components in a timely manner.

To date, our operations have not been materially adversely affected by global conflicts including Russia’s invasion of Ukraine, the current Israel/Palestine conflict, or the recent attacks on merchant ships in the Red Sea.

However, further escalation of these or other conflicts could result in, among other negative consequences, a disruption to the global economy and supply chain leading to a shortage of parts, materials and services needed to manufacture and timely deliver our products (and we note that the Ukraine-Russia geographic region is a significance source of critical raw materials, including neon and palladium, used for semiconductor manufacturing).

Any such shortages could negatively impact our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand.

Parts shortages may and have required, and may continue to require, that we plan ahead further than usual, and increase our purchase commitments to secure critical components in a timely manner.

These challenges, together with other challenges associated with operating an international business, may adversely affect our ability to recognize revenue, our gross margins on the revenue we do recognize, and our other operating results.

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and China have adversely affected, and may continue to adversely affect, our business, results of operations, and financial condition.

government has implemented, and may continue to implement, several changes in trade policy which have adversely affected and could continue to adversely affect the Company’s ability to sell and service its products to and for customers located in China and in certain other countries.

government has implemented, and may continue to implement, changes in trade policy which have adversely affected and could continue to adversely affect the Company’s ability to sell and service its products to and for customers located in China and in certain other countries.

On October 7, 2022, the U.S.

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Previous changes in trade policy by BIS have included, without limitation, the elimination of license exception CIV, the implementation of new regulations governing the sale of equipment to defined “Military End Users” and for defined “Military End Uses”, the addition of several companies to the U.S.

Commerce Department’s Unverified List and Entity List (including Semiconductor Manufacturing International Corporation and certain related entities), and the expansion of the

“foreign direct product rule” to restrict the sale of certain products if Huawei Technologies Co., Ltd.

Commerce Department’s Unverified List and Entity List (including Semiconductor Manufacturing International Corporation and certain related entities), and the expansion of the “foreign direct product rule” to restrict the sale of certain products if Huawei Technologies Co., Ltd.

or its affiliates are parties to a transaction involving the products.

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In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its domestic industries, including some of our competitors.

We face increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance China’s stated national policy objectives.

and foreign government regulation impeding the production of advanced node chips).

In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies.

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Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments.

Currently, our laser annealing, MOCVD, MBE and certain other systems and products are controlled for export under the EAR.

Currently, our laser annealing, MOCVD, MBE, SiC and certain other systems and products are controlled for export under the EAR.

Licenses or proper license exceptions may be required for the shipment of our products to certain customers or countries.

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Non-compliance with the EAR or other applicable export regulations could result in a wide range of penalties including the denial of export privileges, fines, criminal penalties, and the seizure of commodities.

In the event that an export regulatory body determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export capabilities could be restricted, which could have a material adverse impact on our business.

We are exposed to various risks associated with global regulatory requirements.

As a public company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions, and the rules and regulations of various governing bodies, which may differ among jurisdictions.

required to comply with legal and regulatory requirements pertaining to such matters as data privacy (including the European Union General Data Protection Regulation and similar laws), anti-corruption (such as the Foreign Corrupt Practices Act and other local laws prohibiting improper payments to governmental officials), labor laws, immigration, customs, trade, taxes, corporate governance, conflict minerals, and antitrust regulations, among others.

We are required to comply with legal and regulatory requirements pertaining to such matters as data privacy (including the European Union General Data Protection Regulation and similar laws), anti-corruption (such as the Foreign Corrupt Practices Act and other local laws prohibiting improper payments to governmental officials), labor laws, immigration, customs, trade, taxes, corporate governance, conflict minerals, and antitrust regulations, among others.

In addition, we are required to comply with laws and regulations pertaining to carbon emissions, and other regulatory requirements addressing climate change concerns.

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In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information.

These risks have been exacerbated by an increase in employees working from home, ongoing geopolitical tensions and conflicts, and by the possible use of artificial intelligence (“AI”) to directly attack information systems with greater speed and efficiency than human bad actors.

We have experienced, and our third-party providers have experienced, cybersecurity attacks, some of which have been, and may continue to be, successful.

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Policing unauthorized use of our products and technologies is difficult and time consuming and the laws of other countries may not protect our proprietary rights as fully or as readily as U.S.

Given these limitations, our success

will depend in part upon our ability to innovate ahead of our competitors.

Given these limitations, our success will depend in part upon our ability to innovate ahead of our competitors.

In addition, our outsourcing efforts require that we share certain portions of our technology with our outsourcing partners, which poses additional risks of infringement and trade secret misappropriation.

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Similar exposure could result in the event that former employees seek to compete with us through their unauthorized use of our intellectual property and proprietary information.

We cannot be certain that the protective steps and measures we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, nor can we be certain that applicable intellectual property laws, regulations, and policies will not be changed in a manner detrimental to the sale or use of our products.

Litigation has been required in the past, is currently ongoing, and may be required in the future, to enforce our intellectual property rights, protect our trade secrets, and to determine the validity and scope of proprietary rights of others.

We cannot be certain that

the protective steps and measures we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, nor can we be certain that applicable intellectual property laws, regulations, and policies will not be changed in a manner detrimental to the sale or use of our products.

Litigation has been required in the past, and may be required in the future, to enforce our intellectual property rights, protect our trade secrets, and to determine the validity and scope of proprietary rights of others.

As a result of any such litigation, we could lose our ability to enforce one or more patents, incur substantial costs, and jeopardize relationships with current or prospective customers or suppliers.

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In the event of a downturn, many of our customers may delay or reduce their purchases of our products and services.

If negative conditions in the credit markets, including continued increases in interest rates, prevent our customers from obtaining credit or necessary financing, product orders in these channels may decrease, which could result in lower revenue.

If negative conditions in the credit markets, including a recommencement of increases in interest rates, prevent our customers from obtaining credit or necessary financing, product orders in these channels may decrease, which could result in lower revenue.

In addition, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, and attendant pricing pressures.

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We are exposed to foreign currency exchange rate risks that are inherent in our anticipated sales, purchase commitments, and assets and liabilities that are denominated in currencies other than the U.S.

Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to

mitigate the impact of our exchange rate exposure.

Although we attempt to mitigate our exposure to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to mitigate the impact of our exchange rate exposure.

Failure to sufficiently hedge or otherwise manage foreign currency risks properly could materially and adversely affect our financial condition, results of operations, and liquidity.

We may be required to take impairment charges on assets.

We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis whenever certain events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value below its carrying amount.

overall industry, that would more likely than not reduce the fair value below its carrying amount.

As part of our long term strategy, we may pursue future acquisitions of, or investments in, other companies or assets which could potentially increase our assets.

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In addition, varying interpretations of accounting pronouncements or taxation practices, and the questioning of our current or past practices, may adversely affect our reported financial results.

Beginning in 2022, the U.S.

Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for research performed in the U.S.

and fifteen years for research performed outside the U.S.

Additionally, on August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law.

The IRA includes a new 15% corporate alternative minimum tax on corporations whose average annual adjusted financial statement income during the most recently completed three-year period exceeds $1 billion and a 1% excise tax on stock repurchases made by certain publicly traded U.S.

corporations, and is effective for tax years beginning after December 31, 2022.

Finally, recommendations made by the Organization for Economic Cooperation and Development’s (the “OECD”) Base Erosion and Profit Shifting project have the potential to lead to changes in tax laws in numerous countries and could increase our tax obligations in countries where we do business.

The OECD has released several components of its comprehensive plan to create an agreed set of international rules for addressing base erosion and profit shifting, and governmental authorities from various jurisdictions (including the United States) continue to discuss potential legislation and other reforms, including proposals for global minimum tax rates.

Any of these developments or changes in federal or international tax laws, rules, practices or rates (including future changes or modifications to existing practices) could have an adverse material impact on our ability to utilize our deferred tax attributes, our effective tax rate and results of operations including cash flows and financial position.

The “Tax Relief for American Families and Workers Act of 2024” is currently under Senate consideration.

The passage of this bill as proposed would have a material impact to our income tax provision, specifically due to the immediate expensing of Sec 174 R&D expenses, which will lower our Foreign-Derived Intangible Income (“FDII”) deductions and thus increase our effective tax rate.

Additionally, recommendations made pursuant to the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project have led to changes in tax laws in numerous countries and could increase our tax obligations in countries where we do business.

As part of BEPS 2.0, the OECD has focused on ensuring multinational businesses with consolidated global revenues in excess of 750 million euros pay their tax in the 'right place' (Pillar 1) and at least at a 'minimum rate' (Pillar 2), including ensuring that multinational enterprises are paying tax at an effective rate of 15% or higher in every jurisdiction in which they operate, regardless of the local headline tax rate or the impact of local tax reliefs.

We may be subject to the Pillar Two requirements in the future should our global revenues exceed the Pillar Two thresholds.

While we do not currently expect Pillar Two to have a material impact on our effective tax rate, we are in the process of assessing and monitoring potential impacts and developments.

These and other developments or changes in federal or international tax laws, rules, practices or rates (including future changes or modifications to existing practices) could have an adverse material impact on our ability to utilize our deferred tax attributes, our effective tax rate and results of operations including cash flows and financial position.

In addition, as of each reporting date, we evaluate the realizability of our deferred tax assets which may result in the recognition and/or release of a valuation allowance.

In 2022, we recognized a net decrease of $104.9 million of our valuation allowance, primarily related to the reversal of valuation allowances on domestic deferred tax assets.

Any changes in the valuation allowance will have a direct impact on our effective tax rate.

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Furthermore, we are regularly audited by various tax authorities, and these audits may result in increased tax provisions which could negatively affect our operating results in the periods in which such determinations are made or changes occur.

Our current debt facilities, including our 2.70% Convertible Senior Notes due 2023 (the “2023 Notes”), our 3.50% Convertible Senior Notes due 2025 (the “2025 Notes”), or our 3.75% Convertible Senior Notes due 2027 (the “2027 Notes”) (the 2023 Notes, 2025 Notes, and 2027 Notes, together, the “Notes”), and our revolving credit facility (the “Credit Facility”), may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change.

Our current debt facilities may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change.

As of December 31, 2023, we had $26.5 million in principal amounts outstanding in 2025 Notes, $25.0 million in principal amounts outstanding in 2027 Notes, and $230.0 million in principal amounts outstanding in 2029 Notes

The 2023 Notes matured on January 15, 2023 and were paid in cash and settled at that time.

In addition, as of December 31, 2022, we had an undrawn senior secured revolving credit facility in an aggregate principal amount of $150.0 million, including a $15.0 million letter of credit sublimit.

These debt facilities contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us, or obtaining additional financing.

(together, the “Notes”).

In addition, as of December 31, 2023, we had an undrawn senior secured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $150.0 million, including a $15.0 million letter of credit sublimit.

These debt facilities (collectively, the “Debt Facilities”), contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us.

Our ability to comply with some of these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control such as prevailing economic conditions.

In addition, our failure to comply with these covenants could result in a default under the Notes or Credit Facility, which could accelerate the debt.

In addition, our failure to comply with these covenants could result in a default under the Debt Facilities, which could accelerate the debt.

If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operation.

In addition, our ability to repurchase or to pay cash upon conversion of the Notes, or maturity of the Credit Facility, may be limited by law, by regulatory authority or by agreements governing our indebtedness that exist at the time of repurchase, conversion, or maturity.

Our failure to settle the debt as required would constitute a default under the applicable debt facility and could also lead to a default under the other debt facilities.

Our failure to settle the debt as required would constitute a default under the applicable debt facility and may lead to a default under the other debt facilities.

If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness.

Finally, holders of the Notes will have the right to require us to repurchase all or any portion of their Notes upon the occurrence of a fundamental change before the maturity date.

Additionally, in the event the conditional conversion features of the 2023 Notes, 2025 Notes, and 2027 Notes are triggered (as is currently the case for the 2027 Notes through March 31, 2023), holders of Notes will be entitled to convert the Notes at any time during specified periods at their option.

Additionally, in the event the conditional conversion features of the Notes are triggered (as is currently the case for the 2027 Notes through March 31, 2024), holders of Notes will be entitled to convert the Notes at any time during specified periods at their option.

If one or more holders elect to convert the Notes, or if a fundamental change occurs before maturity, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted, which could adversely impact our liquidity.

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As of December 31, 2023, we had U.S.

federal foreign tax credits carryforwards of approximately $8.7 million expiring in 2027, and R&D credits carryforwards of approximately $36.5 million expiring in varying amounts between 2023 and

If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the federal credits carry forward limitation under Section 383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by foreign tax credits and R&D credits generated prior to the change in ownership.

If an ownership change were to occur, we may be unable to use a significant portion of our foreign tax credits and R&D credit carryforwards to offset future tax liabilities.

federal R&D credits carryforwards of approximately $34.9 million expiring in varying amounts between 2030 and 2043.

If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the federal credits carry forward limitation under Section 383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by R&D credits generated prior to the change in ownership.

If an ownership change were to occur, we may be unable to use a significant portion of our R&D credit carryforwards to offset future tax liabilities.

The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when determining the cumulative change in our ownership for Section 382 purposes.

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The trading price of our common shares has fluctuated significantly and could decline independent of the overall market, and shareholders could lose all or a substantial part of their investment.

For example, in 2023 our stock price ranged from a closing high of $31.65 to a closing low of $17.81.

The market price of our common shares could continue to fluctuate in response to several factors, including among others:

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● our failure to successfully implement cost reduction initiatives and restructuring activities, if and when required;

● delays or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002;

● our failure to maintain an effective system of disclosure controls and internal control over financial reporting, which may result in our inability to timely and accurately report our financial results or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002;

● the commencement of, and rulings on, litigation and legal proceedings;

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We are subject to environmental, health, and safety regulations in connection with our business operations, including but not limited to regulations relating to the development, manufacture and use of our products, recycling and disposal of related materials, and the operation and use of our facilities and real property.

Failure or inability to comply with existing or future environmental, health and safety regulations, including those relating to carbon emissions and climate change, could result in significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations.

Failure or inability to comply with existing or future environmental, health and safety regulations – including, for example, those relating to carbon emissions, climate change, and the use and sale of products containing per- and polyfluoroalkyl substances (“PFAS”) -- could result in significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, changes in environmental laws and regulations, including those relating to greenhouse gas emissions and other climate change matters, could require us (and/or our key suppliers, contract manufacturers and other partners) to install new equipment, alter operations to incorporate new technologies, or implement new processes, among other measures, which may cause us to incur significant costs and divert management attention.

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Third-party rating agencies have also established standards for a range of ESG-related factors, which may be inconsistent and are subject to change.

These expectations and stakeholder requirements may impact the attractiveness of our business, the manner in which we do business, our reputation, the costs of doing business, and the willingness of our stakeholders to engage with, invest in, or

We may be further impacted by the adoption of ESG-related regulation and legislation in the jurisdictions in which we do business, which could result in increased compliance, operational, and other costs.

We may be further impacted by the adoption of ESG-related regulation and legislation in the jurisdictions in which we do business – including, for example, the SEC’s proposed rule published in March of 2022 which would require companies to include significantly enhanced climate-related disclosures in their Reports on Form 10-K -- which could result in increased compliance, operational, and other costs.

From time to time the Company communicates its strategies, commitments and targets relating to ESG matters.

These strategies, commitments and targets reflect our current plans and aspirations, and we may be unable to achieve them.

In addition, the standards for measuring and reporting sustainability metrics may change over time and could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.

addition, the standards for measuring and reporting sustainability metrics may change over time and could result in significant revisions to our strategies, commitments and targets, or our ability to achieve them.

Any failure to satisfy or achieve ESG-related requirements or targets could adversely impact the demand for our products, subject us to significant costs and liabilities, cause our stock price to decline, and result in reputational harm.

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Such activities could interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt our operations, and divert the attention of management and our employees.

Unresolved Staff Comments

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