What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-31 · 69 added, 69 removed, 105 unchanged (57% of the section changed)

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(10) the inability to protect our proprietary technology and intellectual property;

(11) the inability to manage direct and indirect disruptions to our supply chain, which could cause delays in obtaining components for our products at reasonable prices;

(12) the failure to manufacture and deliver products in a timely manner;

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This results in a broad base of potential customers across a variety of industries, including logistics, automotive, consumer electronics, semiconductor, and packaging.

Revenue for the second quarter of 2025 totaled $249,093,000, representing an increase of 4% over the second quarter of 2024 primarily due to strong growth in logistics and improved trends in broader factory automation markets, partially offset by continued weakness in the automotive industry.

Gross margin as a percentage of revenue was 67% for the second quarter of 2025 as compared to 70% for the second quarter of 2024, primarily due to less favorable industry mix.

Operating expenses for the second quarter of 2025 decreased 3% from the second quarter of 2024, principally due to disciplined cost management.

Operating income increased to 17% of revenue for the second quarter of 2025 as compared to 16% of revenue for the second quarter of 2024 due to revenue growth and lower operating expenses.

Net income increased to 16% of revenue, or $0.24 per diluted share, for the second quarter of 2025, as compared to 15% of revenue, or $0.21 per diluted share, for the second quarter of 2024.

Revenue for the third quarter of 2025 totaled $276,892,000, representing an increase of 18% over the third quarter of 2024 primarily due to higher revenue in the logistics and consumer electronics industries, as well as one-time revenue related to a strategic channel partnership in the medical lab automation industry.

Gross margin as a percentage of revenue was 68% for the third quarters of both 2025 and 2024.

Operating expenses for the third quarter of 2025 increased 1% from the third quarter of 2024, as higher incentive compensation accruals due to stronger business performance, the unfavorable impact of foreign exchange rates, and reorganization charges incurred to further drive efficiencies across the organization were partially offset by savings from cost management.

Operating income increased to 21% of revenue for the third quarter of 2025 as compared to 13% of revenue for the third quarter of 2024 due to the leverage achieved from revenue growth on relatively flat operating expenses.

Net income decreased to 6% of revenue, or $0.10 per diluted share, for the third quarter of 2025, as compared to 13% of revenue, or $0.17 per diluted share, for the third quarter of 2024, primarily due to a $33 million discrete tax expense accrued in connection with the enactment of United States tax legislation known as the One Big Beautiful Bill Act ("OBBBA") in the third quarter of 2025 (refer to Note 11 to the Consolidated Financial Statements).

Results of Operations

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GAAP") and should be considered in addition to, and not a substitute for, results prepared in accordance with U.S.

Revenue increased by $9,801,000, or 4%, for the three-month period and increased $15,040,000, or 3%, for the six-month period as compared to the same periods in 2024.

Strong growth in logistics and improved trends in broader factory automation markets was partially offset by continued weakness in the automotive industry.

Although not material to total revenue or any geographic trend, revenue from customers in the semiconductor industry declined modestly for the three-month period but still showed growth for the six-month period.

The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

Revenue increased by $42,150,000, or 18%, for the three-month period and increased $57,190,000, or 8%, for the nine-month period as compared to the same periods in 2024.

The increase was primarily due to higher revenue in the logistics and consumer electronics industries.

Additionally, in the third quarter of 2025, the Company recognized $13 million of one-time revenue related to a strategic channel partnership in the medical lab automation industry upon the transfer of software access and inventories to this partner.

In the third quarter of 2024, the Company recorded an additional month of Moritex revenue of approximately $5 million to eliminate the one-month lag in consolidating Moritex financial results that had been in place during the integration of this acquisition.

The Company acquired Moritex Corporation, a Japanese provider of optics components, in October 2023.

This effect did not repeat in the third quarter of 2025, but was offset by the favorable impact of foreign currency exchange rate changes.

The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month and nine-month periods ended September 28, 2025 and September 29, 2024.

Three-months Ended Nine-months Ended

September 28, 2025 September 29, 2024 $ Change % Change September 28, 2025 September 29, 2024 $ Change % Change

(unaudited) (unaudited)

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Changes in revenue from a geographic perspective were as follows:

• Revenue from customers based in the Americas increased by 8% for the three-month period and increased by 14% for the six-month period as compared to the same periods in 2024.

Strong growth in logistics and improved trends in the consumer electronics and packaging industries was partially offset by continued weakness in the automotive industry.

• Revenue from customers based in Europe increased by 17% for the three-month period and increased by 6% for the six-month period as compared to the same periods in 2024.

The increase was due primarily to

procurement changes made by consumer electronics customers to shift their purchases from entities based in China to Europe.

Improved trends in the packaging industry also contributed to the increase in revenue.

These increases were largely offset by weakness in the automotive industry for the six-month period.

• Revenue from customers based in Greater China decreased by 17% for the three-month period and decreased by 15% for the six-month period as compared to the same periods in 2024.

The decrease was primarily due to the procurement change in Europe mentioned above, as well as shifts in business from consumer electronics customers from China to the Other Asia region.

Outside of the procurement change, revenue from the Greater China region decreased slightly over the same periods in the prior year.

• Revenue from customers based in other countries in Asia increased by 6% for the three-month period and decreased by 3% for the six-month period as compared to the same periods in 2024.

Other Asia regions benefited from the shift in consumer electronics business out of China noted above, offset by continued weakness in the automotive industry.

The following table sets forth our gross profit (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

• Revenue from customers based in the Americas increased by 27% for the three-month period and increased by 18% for the nine-month period as compared to the same periods in 2024.

The increase was primarily due to strong growth in logistics and one-time revenue from our new strategic channel partnership mentioned above, which primarily impacted the Americas region.

• Revenue from customers based in Europe increased by 30% for the three-month period and increased by 14% for the nine-month period as compared to the same periods in 2024.

The increase was primarily due to procurement changes made by consumer electronics customers to shift their purchases from entities based in China to Europe.

Improved trends in the packaging industry, the favorable impact of foreign currency exchange rates, and one-time revenue from our new strategic channel partnership also contributed to the increase in revenue for both the three-month and nine-month periods.

These increases were partially offset by weakness in the automotive industry.

• Revenue from customers based in Greater China increased by 10% for the three-month period and decreased by 6% for the nine-month period as compared to the same periods in 2024.

The procurement change in Europe mentioned above, as well as shifts in business from consumer electronics customers from China to the Other Asia region, negatively impacted results for both the three-month and nine-month periods.

However, for the three-month period, these negative impacts were offset by both increased demand within the consumer electronics industry, as well as a timing shift in large customer deployments from the second quarter into the third quarter of 2025.

For these reasons, outside of the procurement change, revenue from Greater China increased year-over-year for both periods.

• Revenue from customers based in other countries in Asia decreased by 4% for the three-month period and decreased by 3% for the nine-month period as compared to the same periods in 2024.

Although Other Asia regions benefited from the shift in consumer electronics business out of China noted above, this benefit was offset by the impact of recording an additional month of Moritex revenue in 2024 mentioned previously.

The following table sets forth our gross profit (in thousands) for the three-month and nine-month periods ended September 28, 2025 and September 29, 2024.

Three-months Ended Nine-months Ended

September 28, 2025 September 29, 2024 $ Change % Change September 28, 2025 September 29, 2024 $ Change % Change

(unaudited) (unaudited)

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Percentage of total revenue 68 % 68 % 67 % 68 %

Gross margin was 67% for both the three-month and six-month periods in 2025 as compared to 70% and 69% for the same periods in 2024, respectively.

The decrease was primarily due to less favorable industry mix, and, to a lesser extent, the impact from tariffs.

Gross margin was 68% and 67% for the three-month and nine-month periods in 2025, respectively, as compared to 68% for both periods in 2024.

The decrease for the nine-month period was primarily due to less favorable industry mix, and to a lesser extent, the impact from tariffs, partially offset by a relatively higher margin from the one-time revenue from our new strategic channel partnership mentioned above.

Operating Expenses

The following table sets forth our operating expenses (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

The following table sets forth our operating expenses (in thousands) for the three-month and nine-month periods ended September 28, 2025 and September 29, 2024.

Three-months Ended Nine-months Ended

September 28, 2025 September 29, 2024 $ Change % Change September 28, 2025 September 29, 2024 $ Change % Change

(unaudited) (unaudited)

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Research, Development, and Engineering Expenses

Research, development, and engineering (RD&E) expenses decreased by $1,860,000, or 5%, for the three-month period and decreased by $4,238,000, or 6%, for the six-month period as compared to the same periods in 2024.

The decrease was primarily due to disciplined cost management, including a reduction in RD&E headcount.

RD&E expenses as a percentage of revenue were 13% and 15% for the three-month and six-month periods in 2025, respectively, as compared to 15% and 16% for the same periods in 2024, respectively.

Research, development, and engineering (RD&E) expenses remained relatively flat for the three-month period and decreased by $4,367,000, or 4%, for the nine-month period as compared to the same periods in 2024.

The decrease was primarily due to cost management, including a reduction in RD&E headcount, and the impact of recording an additional month of Moritex expenses in 2024 mentioned previously, partially offset by higher incentive compensation accruals and the unfavorable impact of foreign currency exchange rates.

RD&E expenses as a percentage of revenue were 13% and 14% for the three-month and nine-month periods in 2025, respectively, as compared to 15% and 16% for the same periods in 2024, respectively.

We believe that a continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers.

In addition, we consider our ability to accelerate the time to market for new products to be critical to our revenue growth and competitive position.

These percentages are impacted by revenue levels and investment cycles.

Having moved towards unified software architecture across various products lines over the last years, however, enabled us to deliver innovation with less RD&E expenses as a percentage of revenue.

These percentages are additionally impacted by revenue levels and investment cycles.

Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses decreased by $1,839,000, or 2%, and $8,963,000, or 5%, respectively, for the three-month and six-month periods in 2025 as compared to the same periods in 2024.

The decrease was due to disciplined cost management, including a reduction in SG&A headcount.

Lower stock-based compensation expense due to higher credits resulting from the annual true-up of forfeiture rate assumptions in the first quarter also contributed to the decrease in SG&A expenses for the six-month period.

These decreases were partially offset by higher incentive compensation accruals.

Selling, general, and administrative (SG&A) expenses increased by $1,819,000, or 2%, and decreased by $7,144,000, or 3%, respectively, for the three-month and nine-month periods in 2025 as compared to the same periods in 2024.

Savings from cost management, including a reduction in SG&A headcount, lower stock-based compensation expenses, and the impact of recording an additional month of Moritex expenses in 2024 mentioned previously were offset by higher incentive compensation accruals, the unfavorable impact of foreign currency exchange rates, and reorganization charges.

For the three-month period, the higher incentive compensation accruals, foreign currency impact, and reorganization charges offset the savings.

Non-operating Income (Expense)

The following table sets forth our non-operating income (expense) (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

The following table sets forth our non-operating income (expense) (in thousands) for the three-month and nine-month periods ended September 28, 2025 and September 29, 2024.

Three-months Ended Nine-months Ended

September 28, 2025 September 29, 2024 $ Change % Change September 28, 2025 September 29, 2024 $ Change % Change

(unaudited) (unaudited)

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Total non-operating income (expense) $ 5,098 $ 4,991 $ 107 2 % $ 11,433 $ 11,464 $ (31) — %

The Company recorded foreign currency losses of $1,503,000 and $3,956,000 for the three-month and six-month periods in 2025, respectively, and $181,000 and $135,000 for the same periods in 2024, respectively.

The Company recorded foreign currency gains of $840,000 and losses of $3,116,000 for the three-month and nine-month periods in 2025, respectively, and gains of $1,221,000 and $1,086,000 for the same periods in 2024, respectively.

Foreign currency gains and losses in each period resulted primarily from the revaluation and settlement of assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is the U.S.

Dollar, or its subsidiaries.

Investment income increased by $924,000, or 30%, for the three-month period and increased by $1,794,000, or 29%, for the six-month period as compared to the same periods in 2024 due primarily to higher yields on the Company's portfolio of debt securities.

Other income for the second quarter of 2025 included a one-time Employee Retention Credit from the U.S.

Investment income increased by $636,000, or 18%, for the three-month period and increased by $2,430,000, or 25%, for the nine-month period as compared to the same periods in 2024 due primarily to higher yields on the Company's portfolio of debt securities.

Other income for the nine-month period included a one-time Employee Retention Credit from the U.S.

Internal Revenue Service to refund payroll taxes paid during the COVID-19 pandemic.

Income Tax Expense

The following table sets forth income tax information (in thousands) for the three-month and six-month periods ended June 29, 2025 and June 30, 2024.

Three-months Ended Six-months Ended

June 29, 2025 June 30, 2024 $ Change % Change June 29, 2025 June 30, 2024 $ Change % Change

The following table sets forth income tax information (in thousands) for the three-month and nine-month periods ended September 28, 2025 and September 29, 2024.

Three-months Ended Nine-months Ended

September 28, 2025 September 29, 2024 $ Change % Change September 28, 2025 September 29, 2024 $ Change % Change

(unaudited) (unaudited)

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Effective income tax rate 72 % 19 % 41 % 19 %

The Company’s effective tax rate was 16% and 15% for the three-month and six-month periods in 2025, respectively, and 13% and 18% for the same periods in 2024, respectively.

The Company recorded net discrete tax benefits of $211,000 and $518,000 for the three-month and six-month periods in 2025, respectively, compared to a net discrete tax benefit of $463,000 for the three-month period in 2024 and a net discrete tax expense of $2,622,000 for the six-month period in 2024.

Excluding the impact of discrete tax items, the Company's effective tax rate was 16% for both the three-month and six-month periods in 2025 compared to 14% for the same periods in 2024.

The increase was due to more of the Company's profits taxed in relatively higher tax rate jurisdictions.

The Company’s effective tax rate was 72% and 41% for the three-month and nine-month periods in 2025, respectively, and 19% for the same periods in 2024, respectively.

The Company recorded a net discrete tax expense of $33,650,000 and $33,132,000 for the three-month and nine-month periods in 2025, respectively, compared to a net discrete tax expense of $889,000 and $3,511,000 for the three-month and nine-month periods in 2024.

On July 4, 2025, tax legislation known as the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States.

OBBBA modifies certain international tax provisions such as the tax on Global Intangible Low Taxed Income ("GILTI") and renames GILTI as Net CFC Tested Income ("NCTI").

The Company records NCTI taxes on a deferred basis.

The Company is in the early stages of evaluating the impact of U.S.

tax law changes introduced by OBBBA on our consolidated financial statements and disclosures.

As of the date of this filing, we expect OBBBA to materially increase our deferred tax liability and income tax expense in the third quarter of 2025, while also providing a cash tax benefit estimated between $12 million and $15 million for the full year.

A full quantitative estimate of all specific financial impacts cannot be reasonably determined at this time due to the complexity of the changes in OBBBA and the need for further analysis.

The Company records NCTI taxes on a deferred basis, and as a result of OBBBA's enactment, accrued a discrete tax expense of approximately $33,265,000 to increase its deferred tax liability during the third quarter of 2025, increasing the Company's effective tax rate significantly.

The legislation is expected to result in a full-year cash tax benefit estimated between $12 million and $15 million, primarily driven by the Company's ability to immediately expense research and development costs.

However, this benefit does not directly impact the Company's effective tax rate.

Excluding the impact of discrete tax items, the Company's effective tax rate was 18% and 17% for the three-month and nine-month periods in 2025, respectively, compared to 17% and 15% for the same periods in 2024, respectively.

The year-over-year increases were due to more of the Company's profits taxed in relatively higher tax rate jurisdictions.

Liquidity and Capital Resources

The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and resulted in an accumulated cash and investment balance of $552,551,000 as of June 29, 2025.

The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments to maintain liquidity and safety of its investment portfolio.

Operating Activities

Net cash provided by operating activities totaled $83,127,000 for the six-month period in 2025 as compared to $41,406,000 in the same period of 2024.

Disciplined cost management and a reduction in inventories primarily drove the increase in operating cash flow from the prior year.

In the second quarter of 2025, the Company made the final payment totaling $15,503,000 related to a one-time transition tax on unrepatriated foreign earnings arising from the Tax Cuts and Jobs Act of 2017.

Net cash provided by operating activities totaled $170,612,000 for the nine-month period in 2025 as compared to $97,677,000 in the same period of 2024.

The increase in operating cash flow from the prior year was primarily driven by stronger business performance.

Investing Activities

Net cash provided by investing activities totaled $29,121,000 for the six-month period in 2025.

Investing activities included capital expenditures that totaled $4,695,000 and consisted primarily of continued investments in business systems, manufacturing equipment related to new product introductions, and building and leasehold improvements.

Net cash provided by investing activities totaled $47,624,000 for the nine-month period in 2025.

Investing activities included capital expenditures that totaled $6,147,000 and consisted primarily of continued investments in business systems, test equipment related to new product introductions, and building and leasehold improvements.

Financing Activities

Net cash used in financing activities totaled $131,626,000 for the six-month period in 2025.

Net cash used in financing activities totaled $169,197,000 for the nine-month period in 2025.

In March 2022, the Company's Board of Directors (the "Board") authorized a program providing for the repurchase of $500,000,000 of the Company's common stock (the "Program").

Under the Program, in addition to repurchases made in other periods, the Company repurchased 3,047,000 shares at a total cost of $102,233,000 during the six-month period in 2025.

As of June 29, 2025, the remaining balance of the Program was $164,020,000.

Under the Program, in addition to repurchases made in other periods, the Company repurchased 3,594,000 shares at a total cost of $126,233,000 during the nine-month period in 2025.

As of September 28, 2025, the remaining balance of the Program was $140,020,000.

The Company may repurchase shares under the Program in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements.

The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

The Board declared and paid cash dividends of $0.08 per share for the first and second quarters of 2025, totaling $26,981,000.

The Board declared and paid cash dividends of $0.08 per share for the first, second, and third quarters of 2025, totaling $40,424,000.

Future dividends will be declared at the discretion of the Board and will depend on such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

Future Cash Requirements

As of June 29, 2025, the Company had inventory purchase commitments of $50,682,000, with the majority payable within twelve months, and lease payment obligations of $124,195,000, with $16,653,000 payable within twelve months.

As of September 28, 2025, the Company had inventory purchase commitments of $42,597,000, with the majority payable within twelve months, and lease payment obligations of $112,656,000, with $16,024,000 payable within twelve months.

We believe that the Company's existing cash and investment balances, together with cash flow from operations, will be sufficient to meet its operating, investing, and financing activities for the next twelve months.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis