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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-18 · 161 added, 143 removed, 180 unchanged (63% of the section changed)

5 unchanged sentences

Advanced Energy provides highly engineered, critical, precision power conversion, measurement, and control solutions to our global customers.

We design, manufacture, sell and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment.

We design, manufacture, sell and service precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment.

Many of our products enable customers to reduce or optimize their energy consumption through increased power conversion efficiency, power density, power coupling, and process control across a wide range of applications.

We are organized on a global, functional basis and operate as a single segment of power electronics conversion products.

Within this segment, our products are sold into the Semiconductor Equipment, Industrial and Medical, Data Center Computing, and Telecom and Networking markets.

On June 20, 2024, we acquired Airity Technologies, Inc.

This acquisition added high voltage power conversion technologies and products, broadening our range of targeted applications within the Semiconductor Equipment and Industrial and Medical markets.

Acquisition in Part II, Item 8 “Financial Statements and Supplementary Data.”

Within this segment, our products are sold in the Semiconductor Equipment, Data Center Computing, Industrial and Medical, and Telecom and Networking markets.

Business Environment and Trends

2025 Summary Results and Key Activities

For the year ended December 31, 2024, our revenue was $1,482.0 million, representing a decline of 10.5% as compared to 2023.

The decline was attributable to lower revenue from our Industrial and Medical and Telecom and Networking markets due to customer inventory rebalancing, resulting in a lower demand environment.

These declines were partially offset by higher revenues in the Semiconductor Equipment market, from the 2023 trough level, and growing AI-related demand in the Data Center Computing market.

For more details on the trends in our end markets, see “End Markets Summary and Trends” elsewhere in this Item 7.

In 2024, we reported higher operating expenses of $492.7 million, an increase of $14.0 million primarily attributable to higher stock-based compensation expense, higher research and development (“R&D”) program costs, higher restructuring charges from initiatives focused on optimizing manufacturing and support operations, partially offset by a general workforce reduction to align to our revenue levels.

The restructuring actions should largely be completed in 2026 and are expected to enable a more efficient and cost-effective operating structure.

In the third quarter of 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility.

In connection with the 2024 Plan, we recorded a $29.6 million charge primarily associated with expected employment-related charges and facility exit costs.

Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.”

In the third quarter of 2024, we entered into an amendment to the Credit Agreement to increase the capacity on the Revolving Facility from $200.0 million to $600.0 million.

This amendment was in connection with the concurrent prepayment, using existing cash on hand, of the full $345.0 million outstanding principal balance under our Term Loan Facility.

For the year ended December 31, 2025, our revenue was $1,798.8 million, representing an increase of 21.4% as compared to 2024.

The increase was primarily attributable to more than doubling of revenue from the Data Center Computing market.

For more details on the trends in our end markets, see “End Markets Summary and Trends” below.

In 2025, we increased gross margin and gross profit largely as a result of executing our manufacturing cost improvement program and higher revenue.

We reported higher operating expenses of $509.4 million, an increase of $16.7 million from 2024 primarily attributable to higher research and development program costs, higher compensation costs related to stock-based compensation and annual merit increases, partially offset by lower restructuring charges driven by the timing of our restructuring plan decisions.

Throughout 2025 we managed tariffs affecting AE announced by the U.S.

government and continue to evaluate the impact of any additional tariffs or other trade policy measures on our supply chain or on our customers.

While the tariff impact was not material to our results in 2025, the effects could be material in future periods as any further tariff, export control, trade restrictions, policy measures, and retaliatory responses to the U.S.

trade policy announcements, or any related macroeconomic effects could adversely impact our product demand, production costs, or ability to sell our products and provide services.

During 2025, we continued to execute the 2024 Plan.

Manufacturing operations in Zhongshan ceased during the second quarter of 2025.

Final site closure activities are in progress and are expected to conclude in 2026.

During the second quarter of 2025, we also approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation.

We expect these actions to be substantially complete during 2027 and do not expect to incur significant additional charges.

Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.” We also continued progress on a new factory in Thailand.

During the second quarter of 2025, we terminated our prior credit agreement, dated as of September 10, 2019 (and subsequently amended) and entered into a new credit agreement consisting of a senior unsecured term loan and a senior unsecured revolving facility, both maturing on May 8, 2030.

Long-Term Debt in Part II, Item 8 “ Financial Statements and Supplementary Data ” and Liquidity and Capital Resources below.

During 2024, we continued progress on a new factory near Bangkok, Thailand, which we expect to be operational in 2026.

End Markets Summary and Trends

The demand environment in each of our markets is impacted by macroeconomic conditions, various market trends, customer buying patterns, design wins, and other factors.

Although we are currently experiencing a lower demand environment in certain markets, we continue to believe that the long-term market growth drivers support our long-term strategy, research and development efforts, and capital investments.

However, in the short-term it is unclear how certain macroeconomic conditions, including the effect of higher interest rates impacting end customers’ capital investment, the timing of inventory digestion, and customer buying patterns, will affect customer demand and our revenue.

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”), distributors, and end customers.

Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, and lower power consumption, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications.

The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Semiconductor Equipment Market

The Semiconductor Equipment market appears to be slowly recovering from a cyclical downturn, which bottomed in 2023.

Demand improved in 2024, but a number of external factors continue to limit the market recovery, including unfavorable macroeconomic conditions, prolonged weak demand for consumer electronics, low fab utilization, and U.S.

export restrictions to China.

We continue to believe the long-term growth drivers will support cyclical growth for this market.

Growth drivers include more manufacturing capacity needed to support increasing demand for semiconductor devices, increasing etch and deposition process steps with new technology inflections, and the transition to advanced technology nodes requiring higher content of advanced power solutions per tool.

In addition, we believe our investment in new products can enable market share gains resulting in higher than market growth.

Industrial and Medical Market

Beginning in the second half of 2023, the impact of weaker macroeconomic conditions started to lower demand for our products in the Industrial and Medical market.

In addition, in the previous two years, many customers built inventories of our products following the supply chain disruption and extended lead times.

As lead times normalized in 2024, customers rebalanced their elevated inventory levels resulting in further decline in revenue.

We expect these factors will continue to limit our revenue in the near term but believe that growth will return to this market after customer inventories return to normal levels and end markets recover.

The Semiconductor Equipment market supports and enables the long-term need for production capacity and new process technologies to meet demand for semiconductor devices across many applications driven by megatrends such as artificial intelligence (“AI”), energy efficiency, automobile electrification, and Internet of things.

Our portfolio of power conversion and related products sold into this market includes plasma power, high-voltage power, system power, and adjacent sensing solutions.

Our plasma power solutions are used to create plasma-based etch and deposition processes.

Our semiconductor market products are incorporated into a wide range of applications, including dry etch and strip, deposition, ion implant, inspection and metrology, thermal, epitaxy, and back-end test and packaging.

In 2025, the Semiconductor Equipment market continued to be driven by demand for leading-edge devices in logic and memory used in AI applications, partially offset by lower trailing-edge logic demand due to capacity underutilization, particularly in China, U.S.

export restrictions to China, and the impact of tariffs.

However, end market conditions started to improve in the fourth quarter of 2025.

We expect these improving conditions to continue into 2026 and to accelerate demand for our products in the second half of the year.

Data Center Computing Market

Revenue in the Data Center Computing market was weak in the first quarter of 2024 driven by reduced investments by our hyperscale customers, lower demand for enterprise systems, and the timing of large customer orders.

Starting in the second quarter of 2024, demand rebounded driven by accelerated investments in AI and customers starting to ramp new generations of high power solutions, resulting in revenue growth in 2024.

We expect these factors will continue to support strong demand for the next few quarters.

The Data Center Computing market is being driven by the rapid growth of AI and related investments.

The accelerated power rating of next-generation AI processors and increased density of AI processors in each IT rack have significantly increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Our products are designed into data center server and storage systems and are also used by cloud service providers and their partners in their custom designed server racks and power shelves.

Due to increased investments in AI applications by leading hyperscale customers, along with adoption of our next- generation high-power solutions, our revenue in the Data Center Computing market more than doubled in 2025.

We expect continued investments and adoption of newer, higher power solutions for AI-related applications will continue to support robust demand in 2026.

Industrial and Medical Market

The Industrial and Medical market is fueled by continued investment in complex manufacturing processes, increased adoption of new industrial technologies such as automation and clean energy, and increased breadth and precision requirements of medical devices and life science equipment.

We supply this market with critical, precision power conversion products that deliver precise and highly reliable, low noise and/or differentiated power.

In addition, our sensing, control, and instrumentation products complement our power solutions.

Our products are used in a wide variety of applications, such as advanced material fabrication, medical devices, life science, test and measurement equipment, robotics, industrial production, defense, aerospace, and large-scale lighting applications.

We believe that the Industrial and Medical market began to recover starting in the second quarter of 2025 following a major industry downturn as a result of macroeconomic conditions and supply chain disruptions from prior years.

The positive trend continued in the second half of 2025 as customer inventories approached normalized levels.

We expect this trend to continue in 2026, paced by overall economic conditions.

Telecom and Networking Market

In 2023, improved supply of critical components drove a meaningful increase in revenue, which more than offset weakening market conditions in the Telecom and Networking market.

End demand further weakened during 2024.

In addition, customers rebalanced their elevated inventory levels as lead times normalized, resulting in a further decline in our revenue.

We expect the current market conditions to continue for several quarters.

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

We serve this market by providing application-specific power conversion products to many leading OEMs of wireless infrastructure equipment and computer networking equipment.

End demand in the Telecom and Networking market remained stable in 2025, and we expect current market conditions to continue in 2026, with some potential for improvement driven by AI-related demand.

Results of Continuing Operations

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The following table summarizes our Consolidated Statements of Operations and as a percentage of revenue:

Years Ended December 31,

Change 2024 v.

(in thousands)

Year Ended December 31,

(in millions)

Operating expenses

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Interest expense

Other income (expense), net

Other expense, net

Income from continuing operations, before income tax

Income tax benefit

Income tax provision (benefit)

Income from continuing operations

The following tables summarize net revenue and percentages of revenue by markets:

Years Ended December 31,

Year Ended December 31,

Change 2025 v.

(in thousands)

(in millions)

Semiconductor Equipment

Industrial and Medical

Data Center Computing

Industrial and Medical

Telecom and Networking

Total revenue decreased from the same period in the prior year due primarily to lower end demand and customer inventory rebalancing, resulting in lower demand in our Industrial and Medical and Telecom and Networking markets.

The Semiconductor Equipment market modestly recovered from the cyclical trough in 2023, and revenue in the Data Center Computing market grew as hyperscale customers increased investments in AI.

Revenue by Market

Sales in the Semiconductor Equipment market increased $47.4 million, or 6.0%, to $839.9 million, as compared to $792.5 million in the prior year.

The increase was primarily due to improved demand as we emerge from the cyclical trough in 2023.

Sales in the Industrial and Medical market decreased $158.3 million, or 33.4%, to $316.2 million, as compared to $474.4 million in the prior year.

After a record year in 2023, the decrease was primarily due to lower end demand and customers working down their elevated inventories on shortened lead times following the supply chain disruption.

The increase was primarily due to increased demand for platforms used in leading-edge process tools and incremental revenue generated from new products in this market, partially offset by lower trailing-edge logic demand.

Sales in the Data Center Computing market increased $303.1 million, or 106.7%, to $587.3 million, as compared to $284.2 million in the prior year.

The increase was due to accelerated hyperscale investments in AI and growing adoption of next generation high power solutions.

Sales in the Telecom and Networking market decreased $98.6 million, or 52.5%, to $89.1 million as compared to $187.7 million in the prior year.

The decrease was due to the prior year benefiting from the improved supply of critical components.

This enabled fulfillment of outstanding orders in 2023, which did not continue in 2024.

In addition, we experienced a slow demand environment and inventory rebalancing at many of our customers, which we expect to continue.

The increase was due to growing hyperscale investments in new, AI-driven platforms and growth associated with new design wins secured in 2024.

Sales in the Industrial and Medical market decreased $33.9 million, or 10.7%, to $282.3 million, as compared to $316.2 million in the prior year.

The decrease was primarily due to lower demand as a result of ongoing customer inventory rebalancing and continued slow demand environment in 2025.

Sales in the Telecom and Networking market remained relatively flat compared to the prior year due to fairly stable end demand in this market.

Gross Profit and Gross Margin

Years Ended December 31,

Year Ended December 31,

Change 2025 v.

(in thousands)

The decrease in gross profit was largely due to the decline in revenue, partially offset by reduction in manufacturing expenses.

Gross margin declined mainly due to the impact of lower volume, largely offset by lower manufacturing, material, and other costs of 170 basis points and favorable mix of 150 basis points.

(in millions)

The increase in gross profit was largely due to increase in revenue and manufacturing cost improvements.

Gross margin improved mainly due to the impact of higher volume, and approximately 140 basis points resulting from manufacturing cost reduction programs.

Operating Expenses

The following table summarizes our operating expenses:

Years Ended December 31,

Change 2024 v.

(in thousands)

Year Ended December 31,

(in millions)

Research and development

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Research and development expenses increased $20.6 million to $232.4 million, as compared to $211.8 million in the prior year.

The increase is related to higher stock-based compensation expense as well as higher program and materials costs compared to the prior year.

This was partially offset by lower variable compensation.

The increase is related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher engineering program and materials costs.

Selling, General and Administrative

Selling, general and administrative expenses increased $17.8 million to $242.4 million, as compared to $224.6 million in the prior year.

The increase is primarily driven by higher stock-based compensation expense, partially offset by actions taken to control costs, including headcount reduction and lower variable compensation.

The increase is mainly due to higher compensation costs, related to stock-based compensation and annual merit increases.

Amortization of Intangible Assets

Amortization expense decreased $3.9 million to $22.1 million, as compared to $26.0 million in the prior year.

Certain intangible assets reached the end of their estimated useful life in the current year.

This was partially offset by amortization of intangible assets acquired in the Airity acquisition.

The decrease is primarily due to certain intangible assets reaching the end of their estimated useful life.

This was partially offset by amortization of intangible assets acquired in the Airity acquisition in 2024.

For additional information, see Note 2.

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Restructuring, Asset Impairments and Other Charges

In the third quarter of 2024, we approved further manufacturing consolidation initiatives, including the closure of our Zhongshan, China manufacturing facility.

In connection with the 2024 Plan, we recorded a $29.6 million charge primarily associated with expected employment-related charges and facility exit costs.

The amounts incurred as a result of the approved actions are estimates and actual results may differ, which could result in incremental restructuring charges in future periods.

We anticipate the 2024 Plan will be substantially completed by the end of second quarter of 2025, with final activities expected to conclude in 2026.

Restructuring, asset impairment and other charges decreased $17.8 million to $12.5 million, as compared to $30.3 million in the prior year, primarily driven by the timing of our restructuring plan decisions.

During the second quarter of 2025, we approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation.

We expect these actions to be substantially complete during 2027 and do not expect to incur significant additional charges.

For additional information about this and prior-year restructuring plans, see Note 11.

Restructuring, Asset Impairments, and Other Charges in Part II, Item 8 “Financial Statements and Supplementary Data.”

Interest Income, Interest Expense, and Other Income (Expense), net

We experienced an increase in interest income on higher cash balances, due in part to proceeds from the issuance of the Convertible Notes in the third quarter of 2023, our ability to concentrate cash in investment accounts, and higher short term market interest rates.

Interest expense increased due to interest associated with the Convertible Notes and a higher interest rate on the portion of our Term Loan Facility subject to a variable interest rate.

We prepaid in full the Term Loan Facility on September 9, 2024, and the interest rate swap contracts expired on September 10, 2024.

Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

Interest Income, Interest Expense, and Other Expense, Net

We experienced a decrease in interest income and expense caused by lower cash and debt balances as a result of using cash on hand to fully prepay our prior senior unsecured term loan facility in the prior year.

Other expense, net was $9.2 million in 2025, as compared to $2.0 million of expense in the prior year.

Other expense, net consists primarily of foreign exchange gains and losses and other miscellaneous items.

We had unrealized foreign exchange losses during the year 2024 compared to unrealized gains in the prior year.

Additionally, in 2024, we incurred costs associated with foreign currency translation adjustments related to liquidated foreign operations and debt discount and fees associated with our Term Loan Facility prepayment.

There were no such costs during the same periods in the prior year.

During 2025, we recorded a $9.7 million increase in unrealized foreign exchange losses, while the prior year included $3.0 million of expense related to nonrecurring foreign currency translation adjustments.

These prior-year adjustments related to the liquidation of certain foreign operations as well as the write-off of debt discount fees associated with the early repayment of our prior senior unsecured term loan facility.

Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding our debt.

Income Tax Benefit

The following table summarizes tax benefit and the effective tax rate for our income from continuing operations:

Income Tax Provision (Benefit)

The following table summarizes tax provision (benefit) and the effective tax rate for our income from continuing operations:

Years Ended December 31,

(in thousands)

(in millions)

Income from continuing operations, before income tax

Income tax benefit

Income tax provision (benefit)

Effective tax rate

Our effective tax rates differ from the U.S.

federal statutory rate of 21% for the years ended December 31, 2024 and 2023, primarily due to the intercompany transfer of intellectual property among certain of our subsidiaries in 2024 and a valuation allowance release in 2023.

federal statutory rate of 21% for the years ended December 31, 2025 and 2024, primarily due to valuation allowance releases partially offset by the impact of non-US tax law changes in 2025, and the intercompany transfer of intellectual property among certain of our subsidiaries in 2024.

Additionally, both 2025 and 2024 included the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S.

tax on foreign operations.

tax on foreign operations and the net effect of Pillar II top-up taxes.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income.

We carefully monitor these factors and adjust our effective income tax rate accordingly.

As of January 1, 2024, the Pillar II minimum global effective tax rate of 15% enacted by the Organization for Economic Cooperation and Development (“OECD”) was effectuated.

More than 140 countries agreed to enact the Pillar II global minimum tax.

However, the timing of the implementation for each country varies.

For the year ended December 31, 2024, we included an estimate of global minimum tax liability as a result of those countries where we conduct business that have adopted Pillar II.

As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential impact in the countries in which we operate.

The impact of these changes may have a material impact on our cash tax expense and tax rate.

As of December 31, 2025, certain countries in which the Company operates have implemented or are in the process of implementing the Pillar II minimum global effective tax rate regime as put forth by the Organization for Economic Cooperation and Development (“OECD”).

Specifically, the OECD released prospective “Side-by-Side” guidance in early 2026 which is generally beneficial to U.S.

parented organizations, but will require adoption by member countries to implement.

As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential cash tax expense and tax rate impact in the countries in which we operate.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States.

The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for the year ended December 31, 2025.

Non-GAAP Results

Management uses non-GAAP operating income and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations.

Management uses non-GAAP net income, non-GAAP operating income, and non-GAAP earnings per share (“EPS”) to evaluate business performance without the impacts of certain non-cash charges and other charges which are not part of our usual operations.

We use these non-GAAP measures to assess performance against business objectives, and make business decisions, including developing budgets and forecasting future periods.

In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements.

In addition, management’s incentive plans include certain of these non-GAAP measures as criteria for achievements.

These non-GAAP measures are not prepared in accordance with U.S.

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The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses.

In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, and restructuring expenses, as they are not indicative of future performance.

In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance.

The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.

Finally, non-GAAP results exclude one-time tax benefits and losses associated with changes in our legal entity structure or ownership of certain assets.

Reconciliation of non-GAAP measure

Operating expenses and operating income from continuing

Non-GAAP results also exclude non-recurring discrete tax expenses or benefits.

Finally, non-GAAP diluted weighted-average common shares are adjusted to reflect the dilutive impact of our convertible notes based on the higher note hedge strike price instead of the initial conversion price.

Reconciliation of non-GAAP measures

Non-GAAP gross profit, gross margin, operating expenses,

Years Ended December 31,

operations, excluding certain items

(in thousands)

operating income, and operating margin

(in millions)

Gross profit from continuing operations, as reported

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Stock-based compensation

Facility expansion, relocation costs and other

Acquisition-related costs

Facility, infrastructure, and other transition costs

Non-GAAP gross profit

GAAP gross margin

Non-GAAP gross margin

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Acquisition-related costs

Facility expansion, relocation costs and other

Facility, infrastructure, and other transition costs

Restructuring, asset impairments, and other charges

1 unchanged sentence

Non-GAAP operating income

Operating income, as reported

Adjustments to gross profit

Adjustments to operating expenses

Non-GAAP operating income

Income from continuing operations, as reported

GAAP operating margin

Non-GAAP operating margin

1 unchanged sentence

Years Ended December 31,

Income from continuing operations, excluding certain items

(in thousands)

Income from continuing operations, less non-controlling interest, net of income tax

Non-GAAP income, net of income tax

(in millions)

Income from continuing operations, net of income tax

Amortization of intangible assets

Acquisition-related costs

Facility expansion, relocation costs, and other

Facility, infrastructure, and other transition costs

Restructuring, asset impairments, and other charges

Unrealized foreign currency gain

Other costs included in other income (expense), net

Unrealized foreign currency loss (gain)

Other costs included in other expense, net

Stock-based compensation

Tax effect of non-GAAP adjustments, including certain discrete tax benefits

Non-GAAP income, net of income tax, excluding stock-based compensation

Stock-based compensation, net of tax

Non-GAAP income, net of income tax

Reconciliation of non-GAAP measure

Years Ended December 31,

Weighted-average common shares

(in thousands)

Non-GAAP diluted weighted-average common shares

(in millions)

Diluted weighted-average common shares outstanding

Dilutive effect of convertible notes

Non-GAAP diluted weighted-average common shares outstanding

Reconciliation of non-GAAP measure

Years Ended December 31,

Per share earnings excluding certain items

Year Ended December 31,

Non-GAAP earnings per share

Diluted earnings per share from continuing operations, as reported

1 unchanged sentence

Non-GAAP earnings per share

Reconciliation of non-GAAP measure

Year Ended December 31,

Non-GAAP provision for income taxes

(in millions)

Provision (benefit) for income taxes, as reported

Non-GAAP items and other discrete tax items excluding stock-based compensation

Tax effect of stock-based compensation

Non-GAAP provision for income taxes

Reconciliation of non-GAAP measure

Year Ended December 31,

Non-GAAP income before income taxes

(in millions)

Income from continuing operations, before income tax

Amortization of intangible assets

Stock-based compensation

Acquisition-related costs

Facility, infrastructure, and other transition costs

Restructuring, asset impairments, and other charges

Unrealized foreign currency loss (gain)

Other costs included in other expense, net

Non-GAAP income before income taxes

Effective tax rate, as reported

Non-GAAP effective tax rate

Liquidity and Capital Resources

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Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data”).

As of December 31, 2024, our cash and cash equivalents totaled $722.1 million, and our available funding under our Revolving Facility is $600.0 million.

As of December 31, 2025, our cash and cash equivalents totaled $791.2 million, and our available funding under our undrawn Revolving Facility is $600.0 million.

Additionally, we generated $234.7 million of cash flow from continuing operations in 2025.

We believe our sources of liquidity will be adequate to meet anticipated debt service, share repurchase programs, and dividends.

We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected revenue and demand.

Our capital expenditures are primarily directed towards manufacturing and operations and can materially influence our available cash for other initiatives.

In the recent year, our capital expenditures increased as we are investing in our factories to expand capacity and in our new ERP system.

In addition, we may seek additional debt or equity financing from time to time;

however, such additional financing may not be available on acceptable terms, if at all.

On September 9, 2024, we used existing cash on hand to prepay the full $345.0 million outstanding principal balance under our Term Loan Facility.

On the same date, we entered into an additional amendment to the Credit Agreement to increase the capacity on the Revolving Facility from $200.0 million to $600.0 million.

Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding the Credit Agreement.

As of December 31, 2025, our only outstanding debt is the $575.0 million Convertible Notes, which mature on September 15, 2028 and carry a 2.5% interest rate.

The interest rate swap contracts previously entered into related to the Term Loan Facility expired on September 10, 2024.

As of December 31, 2025, our common stock traded above the conversion price for at least 20 trading days during a 30 consecutive trading-day period, which resulted in the Convertible Notes becoming convertible at the option of the holders.

Accordingly, the Convertible Notes balance was reclassified from long-term to current debt as of December 31, 2025.

Exclusive of any early conversion elections by the convertible noteholders, there are no scheduled debt maturities until 2028.

Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data” for information regarding the Convertible Notes.

Should we have future borrowings under our Term Loan Facility or Revolving Facility, those borrowings would be subject to a variable rate.

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Any requested increase is subject to lender approval.

For more information see Note 18.

Long-Term Debt in Part II, Item 8 “Financial Statements and Supplementary Data.”

During 2025, we paid quarterly cash dividends of $0.10 per share, totaling $15.6 million.

We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although 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.

We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend 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.

Share Repurchases

To repurchase shares of our common stock, we periodically enter into share repurchase agreements.

The following table summarizes these repurchases:

Years Ended December 31,

(in thousands, except per share amounts)

Amount paid or accrued to repurchase shares

Number of shares repurchased

Average repurchase price per share

During the year we repurchased $30.4 million of shares and during 2024, we repurchased $1.8 million of shares.

At December 31, 2025, the remaining amount authorized by the Board for future share repurchases was $166.9 million with no time limitation.

A summary of our cash from operating, investing, and financing activities was as follows:

Years Ended December 31,

(in thousands)

Year Ended December 31,

(in millions)

Net cash from operating activities from continuing operations

2 unchanged sentences

Net cash used in investing activities

Net cash (used in) from financing activities

Net cash used in financing activities

Effect of currency translation on cash and cash equivalents

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Net Cash From Operating Activities

Net cash from operating activities from continuing operations was $132.9 million, a decrease of $80.0 million, compared to $212.9 million in the prior year.

The decrease was primarily due to lower net income from continuing operations, primarily due to a decline in revenue.

Additionally, during the current year, we had a significant use of cash for inventories due to a strategic inventory buildup.

In addition, we had net cash usage related to accounts payable, accrued expenses, restructuring payments, and other liabilities.

Net cash from operating activities from continuing operations was $234.7 million, an increase of $101.7 million, compared to $133.0 million in the prior year.

The increase was primarily due to higher net income from continuing operations driven by growth in the Data Center Computing and Semiconductor Equipment markets.

Additionally, we had unfavorable changes in working capital from accounts receivable, inventories, and other assets which was partially offset by timing of payments.

Net Cash From Investing Activities

Net cash used in investing activities in 2025 was $109.8 million, an increase of $36.2 million, compared to $73.6 million in the prior year.

The increase was primarily due to our acquisition of Airity for $13.8 million and continued capital investments in our Mexico and Thailand manufacturing facilities.

The increase was primarily due to an increase of $50.6 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, our new ERP system, and investments in other capabilities across multiple sites.

Net Cash From Financing Activities

Net cash used in financing activities in 2024 was $377.1 million, compared to a cash inflow of $445.7 million in the prior year.

In 2024, we used existing cash on hand to make payments towards our Term Loan Facility for $355.0 million, including $10.0 million in principal payment made in the first half of the year and the September prepayment of the remaining $345.0 million outstanding principal balance, and repurchased common stock for $1.8 million.

We do not have any scheduled debt maturities in the next twelve months.

During 2023, we received $561.1 million net proceeds from the issuance of long-term debt from our Convertible Note.

In conjunction with the Convertible Note issuance, we also received $74.9 million proceeds from sale of warrants and made a $115.0 million payment for purchase of note hedges.

We also repurchased $40.1 million of our common stock.

Net cash used in financing activities in 2025 was $56.1 million, compared to a cash outflow of $377.1 million in the prior year.

In 2024, we used existing cash on hand to make payments towards our prior senior unsecured term loan facility for $355.0 million, including $10.0 million in principal payment made in the first half of the year and the September prepayment of the remaining $345.0 million outstanding principal balance, and repurchased common stock for $1.8 million.

In 2025, we repurchased $30.2 million of our common stock.

Critical Accounting Estimates

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What changed 10-K

Item 7. Management’s Discussion and Analysis