What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-07 · 126 added, 91 removed, 194 unchanged (53% of the section changed)

8 unchanged sentences

We have no obligation to update any of these statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements, including risks related to general market trends, the benefits of acquisitions and investments, our supply chain, uncertainties related to global, regional or national public health-related crises and the impact of our responses to them, the interpretation and impacts of changes in export controls and other trade barriers, military conflicts, political volatility and similar factors, our ability to execute our business strategy and other risks discussed in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended

December 30, 2023 and in this Quarterly Report on Form 10-Q.

You should carefully consider the numerous risks and uncertainties described under these sections.

8 unchanged sentences

Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, thermal systems and cryogenic systems are included in the Systems segment.

We generated net income of $21.8 million in the first three months of fiscal 2024 as compared to $1.3 million in the first three months of fiscal 2023.

We generated net income of $41.2 million in the first six months of fiscal 2024 as compared to $2.2 million in the first six months of fiscal 2023.

On February 26, 2024, we completed the sale of our China operations and established an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”).

As a result of the China Transaction, we received estimated net consideration of $21.1 million and the China Transaction resulted in an estimated gain of $20.0 million, subject to customary adjustments for changes in net working capital and similar items.

The increase in net income in the first three months of fiscal 2024 compared to the first three months of fiscal 2023 was primarily due to the $20.0 million estimated gain recognized from the China Transaction.

Apart from this gain, the semiconductor industry weakness that began in the third quarter of fiscal 2022 continued into fiscal 2024, impacting most markets within our Probe Cards segment.

Furthermore, due to the sale of our FRT Metrology business in the fourth quarter of fiscal 2023, our Systems segment revenues were impacted due to the decreased metrology system sales.

As a result of the China Transaction, we received net consideration of $21.4 million and the China Transaction resulted in a gain of $20.3 million.

The increase in net income in the first six months of fiscal 2024 compared to the first six months of fiscal 2023 was due to two factors.

Certain areas of the semiconductor industry strengthened in the second quarter of fiscal 2024, increasing demand in most markets within our Probe Cards segment, particularly with demand for high bandwidth memory (“HBM”) chips utilized in generative artificial intelligence applications, seasonal ramp of new mobile application processor designs, and demand for client PC and server microprocessor designs.

While we experienced growth in total revenues during the first six months of fiscal 2024, our Systems segment revenues were negatively impacted due to the absence of metrology system sales during the first six months of fiscal 2024 as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023.

Additionally, the increase in net income was attributable to the $20.3 million gain recognized from the China Transaction.

Critical Accounting Estimates

1 unchanged sentence

Actual results in these areas could differ from management’s estimates.

During the three months ended March 30, 2024, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 30, 2023.

During the six months ended June 29, 2024, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 30, 2023.

Results of Operations

The following table sets forth our operating results as a percentage of revenues for the periods indicated:

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

6 unchanged sentences

Gain on sale of business 0.2 — 5.6 —

Operating income 12.6 0.1

Operating income (loss) 9.0 (0.8) 10.7 (0.4)

Interest income, net 1.7 0.9 1.8 0.9

1 unchanged sentence

Income before income taxes 10.9 0.4 12.7 0.6

Provision for income taxes 1.9 —

Provision (benefit) for income taxes 1.1 (0.1) 1.5 (0.1)

Net income 9.8 % 0.5 % 11.2 % 0.7 %

Revenues by Segment and Market

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

(In thousands)

4 unchanged sentences

As a result, metrology systems revenue will not recur in future periods.

We generated no metrology systems revenue during the three months ended March 30, 2024, compared to $4.1 million during the three months ended April 1, 2023.

We generated no metrology systems revenue during the three and six months ended June 29, 2024, compared to $4.5 million and $8.6 million, during the three and six months ended July 1, 2023, respectively.

Three Months Ended

2024 % of Revenues April 1,

2024 % of Revenues July 1,

2023 % of Revenues $ Change % Change

7 unchanged sentences

Total revenues $ 197,474 100.0 % $ 155,916 100.0 % $ 41,558 26.7 %

Six Months Ended

2024 % of Revenues July 1,

2023 % of Revenues $ Change % Change

(Dollars in thousands)

Probe Cards Markets:

Foundry & Logic $ 190,428 52.0 % $ 183,529 56.7 % $ 6,899 3.8 %

DRAM 103,938 28.4 50,354 15.6 53,584 106.4

Flash 9,127 2.5 8,748 2.7 379 4.3

Systems Market:

62,706 17.1 80,733 25.0 (18,027) (22.3)

Total revenues $ 366,199 100.0 % $ 323,364 100.0 % $ 42,835 13.2 %

(1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business.

As a result, metrology systems revenue will not recur in future periods.

We generated no metrology systems revenue during the three months ended March 30, 2024, compared to $4.1 million during the three months ended April 1, 2023.

Foundry & Logic — The decrease in Foundry & Logic product revenue for the three months ended March 30, 2024, compared to the three months ended April 1, 2023, was driven by continued weakness in demand in the semiconductor industry,

especially in the personal computer and mobile sectors, that has resulted in decreased unit sales across the majority of our major customers.

DRAM — The increase in DRAM product revenue for the three months ended March 30, 2024, compared to the three months ended April 1, 2023, was driven by increased demand for high bandwidth memory (“HBM”) chips utilized in generative artificial intelligence applications.

Flash — The decrease in Flash product revenue for the three months ended March 30, 2024, compared to the three months ended April 1, 2023, was driven by lower customer production activity and demand for our products.

Systems — The decrease in Systems market revenue for the three months ended March 30, 2024, compared to the three months ended April 1, 2023, was driven primarily by the absence of sales of our metrology systems from our FRT Metrology business, which was sold in the fourth quarter of fiscal 2023, and decreased sales of cryogenic systems.

The decrease in Systems revenue from sources not associated with metrology systems was $4.0 million, or 11.0%, for the three months ended March 30, 2024, driven primarily by timing of demand for our cryogenic systems.

Foundry & Logic — The increase in Foundry & Logic product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by the seasonal ramp of new mobile application processor designs and stronger probe-card demand for client PC and server microprocessor designs.

DRAM — The increase in DRAM product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by increased demand for HBM chips utilized in generative artificial intelligence applications.

Flash — The increase in Flash product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by increased customer production activity and demand for our products.

Systems — The decrease in Systems market revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by the absence of sales of our metrology systems, and decreased sales of probe stations and cryogenic systems due to timing of demand.

During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business.

The decrease in Systems revenue from sources not associated with metrology systems for the three and six months ended June 29, 2024 was $5.4 million, or 15.0%, and $9.4 million, or 13.0%, respectively.

Revenues by Geographic Region

Three Months Ended

2024 % of Revenues April 1,

2023 % of Revenues

Three Months Ended Six Months Ended

2024 % of Revenues July 1,

2023 % of Revenues June 29,

Revenue July 1,

(Dollars in thousands)

5 unchanged sentences

Japan 7,611 3.9 7,932 5.1 16,153 4.4 18,909 5.8

Singapore 4,758 2.8 5,340 3.2

Malaysia 6,602 3.3 6,677 4.3 8,465 2.3 17,947 5.6

Singapore 4,522 2.3 2,823 1.8 9,280 2.5 8,163 2.5

Rest of the world 3,026 1.4 4,112 2.6 5,766 1.6 8,613 2.6

3 unchanged sentences

subsidiary and requests the products to be shipped to an address in South Korea, this sale will be reflected in the revenue for South Korea rather than the U.S.

Changes in revenue by geographic region for the three months ended March 30, 2024, compared to the three months ended April 1, 2023, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, and product sales mix.

Changes in revenue by geographic region for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, product sales mix, and impacts from trade restrictions.

Specifically, the changes in revenue by geographic region was attributable to the following:

• The increase in revenue for South Korea was driven principally by increased demand for our DRAM products, including HBM.

• The decrease in revenues for Taiwan was driven principally by decreased demand for our Foundry & Logic products.

• The increase in revenues for the United States, and decreases in revenues for China and Malaysia, were driven principally by a single large U.S.-based company with operations in these regions that shifted shipments from these regions to the United States.

We expect the trade restrictions to continue to drive multinational customers to concentrate operations in regions other than China, impacting our geographical mix.

• The decrease in revenues for China was also impacted by lowered demand from a large Chinese DRAM integrated device manufacturer and the impact of expanded export license requirements imposed by the U.S.

• The increase in revenue for South Korea for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023 was driven principally by increased demand for our DRAM probe card products, including those for HBM.

• The increase in revenues for the United States, and decreases in revenues for China and Malaysia, for the six months ended June 29, 2024, compared to the six months ended July 1, 2023 were driven principally by a single large U.S.-based company with operations in these regions that shifted shipments from these regions to the United States.

• The decrease in revenues for China for the six months ended June 29, 2024, compared to the six months ended July 1, 2023, was also impacted by lowered demand caused by expanded export license requirements imposed by the U.S.

government beginning the fourth quarter of fiscal 2022 for exporting advanced U.S.

semiconductor technology to China.

These trade restrictions have caused, and continue to drive, multinational customers to concentrate operations in regions other than China, and lowering overall demand in China, impacting our geographical mix.

Cost of Revenues and Gross Margins

Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead (including equipment costs, related occupancy, and computer services), warranty costs, inventory adjustments (including write-downs for inventory obsolescence), and amortization of certain intangible assets.

Our manufacturing operations rely on a limited number of suppliers to provide key components and materials for our products,

some of which are a sole source.

Our manufacturing operations rely on a limited number of suppliers to provide key components and materials for our products, some of which are a sole source.

We order materials and supplies based on backlog and forecasted customer orders.

3 unchanged sentences

Three Months Ended

2024 April 1,

2023 $ Change % Change

1 unchanged sentence

Gross margin 44.0 % 38.7 %

Six Months Ended

2023 $ Change % Change

Gross profit $ 149,638 $ 121,361 $ 28,277 23.3 %

Gross margin 40.9 % 37.5 %

Our gross profit and gross margin by segment were as follows (dollars in thousands):

Three Months Ended

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

1 unchanged sentence

Gross margin 45.1 % 46.2 % 44.0 % 36.5 % 52.0 % 38.7 %

Probe Cards — For the three months ended March 30, 2024, gross profit and gross margins increased compared to the three months ended April 1, 2023, primarily due to greater revenues and a more favorable absorption of costs on higher production volumes, as well as lower inventory excess and obsolescence reserves.

This was partially offset by an unfavorable product mix resulting from a higher concentration of sales of lower-margin DRAM products, up from 15.6% of Probe Card sales to 33.6% of Probe Card sales, and a lower concentration of Foundry & Logic sales, down from 79.8% of Probe Card sales to 63.5% of Probe Card sales, and higher warranty costs.

Systems — For the three months ended March 30, 2024, gross profit and gross margins decreased compared to the three months ended April 1, 2023, primarily as a result of a less favorable product mix.

Six Months Ended

June 29, 2024 July 1, 2023

Probe Cards Systems Corporate and Other Total Probe Cards Systems Corporate and Other Total

Gross profit $ 126,030 $ 28,683 $ (5,075) $ 149,638 $ 85,735 $ 41,870 $ (6,244) $ 121,361

Gross margin 41.5 % 45.7 % 40.9 % 35.3 % 51.9 % 37.5 %

Probe Cards — For the three and six months ended June 29, 2024, gross profit and gross margins increased compared to the three and six months ended July 1, 2023, primarily due to greater revenues and a more favorable absorption of costs on higher production volumes.

This was partially offset by an unfavorable product mix resulting from a higher concentration of sales of lower-margin DRAM products for the three and six months ended June 29, 2024 compared to the corresponding period in the prior year, up from 26.4% and 20.8% of Probe Card sales to 34.8% and 34.2% of Probe Card sales, and a lower concentration of higher-margin Foundry & Logic sales for the three and six months ended June 29, 2024 when compared to the corresponding period in the prior year, down from 71.1% and 75.6% of Probe Card sales to 62.1% and 62.7% of Probe Card sales.

In general, our DRAM products have lower margins than our Foundry & Logic products.

Systems — For the three and six months ended June 29, 2024, gross profit and gross margins decreased compared to the three and six months ended July 1, 2023, primarily as a result of lower revenues and a less favorable absorption of costs on lower production volumes, and a less favorable product mix.

Corporate and Other — Corporate and Other includes unallocated expenses relating to stock-based compensation expense, amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring charges, net, which are not used in evaluating the results of, or in allocating resources to, our reportable segments.

For the three months ended March 30, 2024, Corporate and Other gross profit increased compared to the three months ended April 1, 2023, primarily from the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

For the three and six months ended June 29, 2024, Corporate and Other gross profit increased compared to the three and six months ended July 1, 2023, primarily from the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

Overall — Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, and material costs.

For the three months ended March 30, 2024, compared to the three months ended April 1, 2023, gross profit and gross margins have increased primarily as a result of more favorable absorption of costs and lower inventory excess and obsolescence reserves, partially offset by an unfavorable product mix, as described above.

For the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, gross profit and gross margins have increased primarily as a result of more favorable absorption of costs and lower inventory excess and obsolescence reserves, partially offset by an unfavorable product mix, as described above.

Cost of revenues included stock-based compensation expense as follows (in thousands):

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

Stock-based compensation $ 1,932 $ 1,515 $ 3,860 $ 3,425

1 unchanged sentence

Three Months Ended

2024 April 1,

2023 $ Change % Change

2 unchanged sentences

% of revenues 16.0 % 18.2 %

Research and development expenses in the three months ended March 30, 2024 increased compared to the corresponding period in the prior year primarily due to increased project material costs and stock-based compensation expense, partially offset by lower employee compensation costs due to decreased headcount.

Six Months Ended

2023 $ Change % Change

(Dollars in thousands)

Research and development $ 60,191 $ 56,585 $ 3,606 6.4 %

% of revenues 16.4 % 17.5 %

Research and development expenses in the three months ended June 29, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, increased general operational costs and stock-based compensation expense.

Research and development expenses in the six months ended June 29, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, increased project material costs and general operational costs.

A detail of the changes is as follows (in thousands):

Three Months Ended March 30, 2024 compared to Three Months Ended April 1, 2023

Three Months Ended June 29, 2024 compared to Three Months Ended July 1, 2023 Six Months Ended June 29, 2024 compared to Six Months Ended July 1, 2023

Employee compensation costs $ 2,938 $ 1,766

Project material costs 1,151

Other general operational costs 341

General operational costs 338 679

Stock-based compensation 251 492

Restructuring charges (221) (291)

Depreciation (73) (182)

Project material costs (9) 1,142

$ 3,224 $ 3,606

Research and development included stock-based compensation expense as follows (in thousands):

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

Stock-based compensation $ 2,614 $ 2,363 $ 5,227 $ 4,735

1 unchanged sentence

Three Months Ended

2024 April 1,

2023 $ Change % Change

2 unchanged sentences

% of revenues 19.2 % 21.3 %

Selling, general and administrative expenses increased in the three months ended March 30, 2024 compared to the corresponding period in the prior year.

The drivers of the increase for the three month period were increased transaction expenses related to the sale of our FRT Metrology business in the fourth quarter of fiscal 2023 and the China Transaction in the first quarter of fiscal 2024, increased stock-based compensation expense from an increase in weighted average fair value of awards outstanding, and increased recruiting costs, partially offset by lower amortization expense from significant intangible assets becoming fully amortized and lower restructuring charges.

Six Months Ended

2023 $ Change % Change

(Dollars in thousands)

Selling, general and administrative $ 70,953 $ 65,997 $ 4,956 7.5 %

% of revenues 19.4 % 20.4 %

Selling, general and administrative expenses increased in the three months ended June 29, 2024 compared to the corresponding period in the prior year.

The drivers of the increase for the three month period were increased employee compensation costs from higher performance-based compensation and increased commissions expense from increased revenues, partially offset by lower amortization expense from significant intangible assets becoming fully amortized.

Selling, general and administrative expenses increased in the six months ended June 29, 2024 compared to the corresponding period in the prior year.

The drivers of the increase for the six month period were increased employee compensation costs from higher performance-based compensation, increased consulting fees from transaction expenses related to the sale of our FRT Metrology business in the fourth quarter of fiscal 2023 and the China Transaction in the first quarter of fiscal 2024, increased stock-based compensation expense from an increase in weighted average fair value of awards outstanding, and increased recruiting costs, partially offset by lower amortization expense from significant intangible assets becoming fully amortized and lower restructuring charges.

A detail of the changes is as follows (in thousands):

Three Months Ended March 30, 2024 compared to Three Months Ended April 1, 2023

Amortization of intangible assets $ (1,355)

Consulting fees 1,177

Three Months Ended June 29, 2024 compared to Three Months Ended July 1, 2023 Six Months Ended June 29, 2024 compared to Six Months Ended July 1, 2023

Employee compensation costs $ 4,732 $ 4,431

Amortization of intangibles (1,360) (2,715)

Commission expenses 782 736

Stock-based compensation 337 1,193

Restructuring charges (826)

Recruiting costs 280 693

Employee compensation costs (376)

General operating expenses (200) 269

Consulting fees 48 1,239

Restructuring charges — (890)

$ 4,619 $ 4,956

Selling, general and administrative included stock-based compensation expense as follows (in thousands):

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

Stock-based compensation $ 5,663 $ 5,326 $ 11,527 $ 10,334

Gain on sale of business

Gain on sale of business represents the gain recognized from the China Transaction of $20.0 million and an adjustment to the gain recognized from the sale of our FRT Metrology business of $0.3 million.

Gain on sale of business of $0.3 million for the three months ended June 29, 2024 represents an adjustment to the gain recognized from the China Transaction.

Gain on sale of business for the six months ended June 29, 2024 represents the gain recognized from the China Transaction of $20.3 million and an adjustment to the gain recognized from the sale of our FRT Metrology business of $0.3 million.

See Note 4, Divestitures , for additional information.

1 unchanged sentence

Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities.

The increase in interest income for the three months ended March 30, 2024 compared with the corresponding period of the prior year, was attributable to an increase in weighted average yields due to the higher interest rate environment and on higher invested balances.

The increase in interest income for the three and six months ended June 29, 2024 compared with the corresponding period of the prior year, was attributable to an increase in weighted average yields due to the higher interest rate environment and on higher invested balances.

Interest expense primarily includes interest on our term loan, interest rate swap derivative contracts, and term loan issuance costs amortization charges.

The interest expense for the three months ended March 30, 2024 decreased compared to the corresponding period of the prior year due to lower outstanding debt.

The interest expense for the three and six months ended June 29, 2024 decreased compared to the corresponding period of the prior year due to lower outstanding debt.

Other Income, Net

2 unchanged sentences

Provision for Income Taxes

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

(In thousands, except percentages)

Provision for income taxes $ 3,198 $ 48

Provision (benefit) for income taxes $ 2,155 $ (208) $ 5,353 $ (160)

Effective tax rate 10.0 % (33.5) % 11.5 % (8.0) %

Provision for income taxes reflects the tax provision on our operations in foreign and U.S.

Provision (benefit) for income taxes reflects the tax provision on our operations in foreign and U.S.

jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income deduction.

1 unchanged sentence

federal, state or foreign tax laws, changes in stock-based compensation expense/benefit, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction.

The increase in our effective tax rate for the three months ended March 30, 2024 compared to the corresponding period in the prior year was primarily driven by higher taxable income with consistent rate impacting items.

The increase in our effective tax rate for the three and six months ended June 29, 2024 compared to the corresponding period in the prior year was primarily driven by higher taxable income during fiscal 2024.

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (“CHIPS Act”) was signed into law on August 9, 2022.

6 unchanged sentences

While it is possible that Congress may defer, modify, or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified, or repealed.

Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final

determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Liquidity and Capital Resources

Capital Resources

Our working capital increased to $457.9 million at March 30, 2024, compared to $442.7 million at December 30, 2023.

Our working capital increased to $481.6 million at June 29, 2024, compared to $442.7 million at December 30, 2023.

Cash and cash equivalents primarily consist of deposits held at banks and money market funds.

2 unchanged sentences

agency securities.

We typically invest in highly rated securities with low probabilities of default.

We typically invest in highly rated

securities with low probabilities of default.

Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.

Our cash, cash equivalents and marketable securities totaled approximately $349.2 million at March 30, 2024, compared to $328.3 million at December 30, 2023.

Our cash, cash equivalents and marketable securities totaled approximately $357.6 million at June 29, 2024, compared to $328.3 million at December 30, 2023.

Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, and the cash we expect to generate from operations, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from:

9 unchanged sentences

The following table sets forth our net cash flows from operating, investing and financing activities:

Three Months Ended

2024 April 1,

Six Months Ended

(In thousands)

4 unchanged sentences

Net cash provided by operating activities consists of net income for the period adjusted for certain non-cash items and changes in certain operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 30, 2024 was attributable to net income of $21.8 million, an increase in net working capital of $9.8 million, and net non-cash income of $1.4 million.

The cash generated from net working capital is related to decreased accounts receivable, net of $6.5 million and increased accounts payable and deferred revenue of $4.9 million and $4.5 million, respectively, partially offset by increased inventories of $4.9 million.

The non-cash income consisted of the $20.3 million gain on sale of business, offset by depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories.

Net cash provided by operating activities for the six months ended June 29, 2024 was attributable to net income of $41.2 million and net non-cash expenses of $15.5 million, partially offset by the increase in net working capital of $1.8 million.

The cash used in net working capital is related to increased inventories of $14.5 million and increased accounts receivable, net, of $10.8 million, largely offset by increased accrued liabilities of $10.2 million, other liabilities of $7.3 million, and deferred revenue of $4.9 million.

The non-cash expenses consisted of depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by the $20.6 million gain on sale of business.

Investing Activities

Net cash used in investing activities for the three months ended March 30, 2024 primarily related to $13.4 million in property, plant and equipment purchases and $11.7 million in net purchases of marketable securities, offset by $21.3 million cash provided by the sale of businesses.

Net cash used in investing activities for the six months ended June 29, 2024 primarily related to $21.8 million in property, plant and equipment purchases and $9.7 million in net purchases of marketable securities, partially offset by $21.6 million cash provided by the sale of businesses.

Financing Activities

Net cash used in financing activities for the three months ended March 30, 2024 primarily related to $17.3 million used to purchase common stock under our stock repurchase program, $1.8 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $4.9 million received from issuances of common stock under our employee stock purchase plan.

Net cash used in financing activities for the six months ended June 29, 2024 primarily related to $20.3 million used to purchase common stock under our stock repurchase program, $3.6 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $4.9 million received from issuances of common stock under our employee stock purchase plan.

On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the “Building Term Loan”).

The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California.

On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate London Interbank Offered Rate (“LIBOR“) with the term Secured Overnight Financing Rate (“SOFR”), with no change to the amount or timing of contractual cash flows.

On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate London Interbank Offered

Rate (“LIBOR“) with the term Secured Overnight Financing Rate (“SOFR”), with no change to the amount or timing of contractual cash flows.

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 1.86% per annum.

Interest payments are payable in monthly installments over a fifteen-year period.

The interest rate at March 30, 2024, before consideration of the interest rate swap discussed in the next paragraph, was 7.19%.

As of March 30, 2024, the balance outstanding pursuant to the Building Term Loan was $14.2 million.

The interest rate at June 29, 2024, before consideration of the interest rate swap discussed in the next paragraph, was 7.19%.

As of June 29, 2024, the balance outstanding pursuant to the Building Term Loan was $13.9 million.

On March 17, 2020, we entered into an interest rate swap agreement to hedge the interest payment on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt.

2 unchanged sentences

After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75%.

As of March 30, 2024, the notional amount of the loan that is subject to this interest rate swap is $14.2 million.

As of June 29, 2024, the notional amount of the loan that is subject to this interest rate swap is $13.9 million.

Stock Repurchase Programs

4 unchanged sentences

During fiscal 2023, we repurchased and retired 32,020 shares of common stock for $1.2 million.

During the three months ended March 30, 2024, we repurchased and retired 411,756 shares of common stock for $17.4 million, and as of March 30, 2024, $56.4 million remained available for future repurchases.

During the six months ended June 29, 2024, we repurchased and retired 483,951 shares of common stock for $20.3 million, and as of June 29, 2024, $53.5 million remained available for future repurchases.

Contractual Obligations and Commitments

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of March 30, 2024:

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of June 29, 2024:

Payments Due In Fiscal Year

7 unchanged sentences

The table above excludes our gross liability for unrecognized tax benefits and our deferred grant.

The gross liability for unrecognized tax benefits was $50.3 million as of March 30, 2024.

The gross liability for unrecognized tax benefits was $50.3 million as of June 29, 2024.

The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated.

The deferred grant was $18.0 million as of March 30, 2024.

The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments.

The deferred grant was $18.0 million as of June 29, 2024, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development.

The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments within California.

Accordingly, the timing of any repayment cannot be estimated.

1 unchanged sentence

Historically, we have not participated in transactions that have generated relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of March 30, 2024, we were not involved in any such off-balance sheet arrangements.

As of June 29, 2024, we were not involved in any such off-balance sheet arrangements.

Recent Accounting Standards

1 unchanged sentence

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