What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-05 · 86 added, 187 removed, 179 unchanged (60% of the section changed)

1 unchanged sentence

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to risks and uncertainties.

The forward-looking statements include statements concerning, among other things, our business strategy, financial and operating results, gross margins, liquidity and capital expenditure requirements and impact of accounting standards.

In some cases, you can identify these statements by forward-looking words, such as “may,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend” and “continue,” the negative or plural of these words and other comparable terminology.

The forward-looking statements include statements concerning, among other things, our business strategy (including the influence of anticipated trends and developments in our business and the markets in which we operate), financial and operating results, gross margins, liquidity, operating expenses, products, projected costs and capital expenditure requirements, research and development programs, sales and marketing initiatives, competition and impact of accounting standards.

In some cases, you can identify these statements by forward-looking words, such as “may,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “continue,” the negative or plural of these words and other comparable terminology.

The forward-looking statements are only predictions based on our current expectations and our projections about future events.

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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.

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 public health-related crises, the interpretation and impacts of changes in export controls, tariffs 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 28, 2024 and in this Quarterly Report on Form 10-Q.

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

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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 $59.9 million in the first nine months of fiscal 2024 as compared to $6.5 million in the first nine months of fiscal 2023.

Beginning in the second quarter of fiscal 2024, certain areas of the semiconductor industry strengthened, 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, 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 nine months of fiscal 2024, our Systems segment revenues were negatively impacted due to the absence of metrology system sales during the first nine 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 partially attributable to the $20.3 million gain recognized from the completion of the sale of our China operations and establishment of an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”).

We generated net income of $6.4 million in the first three months of fiscal 2025 as compared to $21.8 million in the first three months of fiscal 2024.

The decline in net income is mainly attributable to the $20.3 million gain recognized during the first quarter of fiscal 2024 from the sale of our China operations that also established an exclusive distribution and partnership agreement to continue sales and support of our products to that region (the “China Transaction”).

Critical Accounting Estimates

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

During the nine months ended September 28, 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 three months ended March 29, 2025, 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 28, 2024 except for the addition of a policy related to Equity Investments.

Equity Investment

On February 21, 2025, Frontier Investments Co., Ltd (“HoldCo”), a joint holding company in which we hold a 20% share of the equity and an affiliate of MBK Partners holds an 80% share of the equity, through HoldCo’s wholly-owned subsidiary, FM Holdings Co., Ltd., acquired 100% of the shares of FICT Limited (“FICT”) from Advantage Partners Inc.

Our investment of $67.2 million, comprises the funding of our share of the purchase price of $59.6 million, subject to changes in foreign currency fluctuations, and acquisition costs of $7.5 million.

Headquartered in Nagano, Japan, FICT is a provider of semiconductor test and high-performance computing industries with complex multi-layer organic substrates, printed circuit boards, and related leading-edge technologies and services.

This investment is accounted for as an equity method investment and recorded in Equity investment on our Condensed Consolidated Balance Sheets.

We will report our share of the earnings or losses of the HoldCo on a one-quarter lag as its results are not expected to be available in time to be recorded in the concurrent period.

Results of Operations

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

Revenues 100.0 % 100.0 %

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Interest income, net 1.9 1.9

Other income (expense), net (0.3) 0.5 0.1 0.2

Other income, net 0.5 0.3

Income before income taxes 4.4 14.8

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Revenues by Segment and Market

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

(In thousands)

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$ 171,356 $ 168,725

(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 and nine months ended September 28, 2024, compared to $8.0 million and $16.7 million, during the three and nine months ended September 30, 2023, respectively.

Three Months Ended

September 28,

2024 % of Revenues September 30,

2023 % of Revenues $ Change % Change

(Dollars in thousands)

Probe Cards Markets:

Foundry & Logic $ 107,446 51.7 % $ 96,366 56.2 % $ 11,080 11.5 %

DRAM 60,184 28.9 27,478 16.0 32,706 119.0

Flash 4,544 2.2 4,495 2.6 49 1.1

Systems Market:

35,743 17.2 43,236 25.2 (7,493) (17.3)

Total revenues $ 207,917 100.0 % $ 171,575 100.0 % $ 36,342 21.2 %

Nine Months Ended

September 28,

2024 % of Revenues September 30,

2025 % of Revenues March 30,

2024 % of Revenues $ Change % Change

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Total revenues $ 171,356 100.0 % $ 168,725 100.0 % $ 2,631 1.6 %

(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.

Foundry & Logic — The increase in Foundry & Logic product revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by the 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 nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by increased demand for HBM designs utilized in generative artificial intelligence applications and increased demand for commodity DRAM designs, particularly DDR5.

Flash — The increase in Flash product revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by increased customer production activity and demand for our products.

Systems — The decrease in Systems market revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was primarily driven by the absence of metrology systems revenue due to the sale of our FRT Metrology business during the fourth quarter of fiscal 2023.

The fluctuation in Systems revenue from sources not associated with metrology systems for the three and nine months ended September 28, 2024, compared to the three and nine

months ended September 30, 2023, was an increase of $0.6 million, or 1.6%, and a decrease of $8.8 million, or 8.2%, respectively.

The increase for the three months ended September 28, 2024, compared to the three months ended September 30, 2023, was from increased sales of cryogenic systems, partially offset by decreased sales of thermal systems.

The decrease for the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023, was from decreased sales of stations and thermal systems, partially offset by an increase in sales of cryogenic stations.

Foundry & Logic — The decrease in Foundry & Logic product revenue for the three months ended March 29, 2025, compared to the three months ended March 30, 2024, was driven by weaker probe-card demand for client PC and server microprocessor designs.

DRAM — The increase in DRAM product revenue for the three months ended March 29, 2025, compared to the three months ended March 30, 2024, was driven by increased demand for HBM designs utilized in generative artificial intelligence applications as well as increased demand for other non-HBM DRAM designs, particularly DDR5.

Flash — The decrease in Flash product revenue for the three months ended March 29, 2025, compared to the three months ended March 30, 2024, was driven by decreased customer production activity and demand for our products.

Systems — The increase in Systems market revenue for the three months ended March 29, 2025, compared to the three months ended March 30, 2024, was driven by increased sales of probe stations, cryogenic systems, and thermal systems.

Revenues by Geographic Region

Three Months Ended Nine Months Ended

September 28,

2024 % of Revenues September 30,

2023 % of Revenues September 28,

Revenue September 30,

Three Months Ended

2025 % of Revenues March 30,

2024 % of Revenues

(Dollars in thousands)

Taiwan $ 45,362 26.5 % $ 29,877 17.7 %

South Korea 43,171 25.2 50,717 30.1

United States 40,325 23.5 45,766 27.1

Taiwan 47,922 23.0 42,975 25.0 122,612 21.4 112,816 22.8

China 13,615 7.9 15,613 9.3

Europe 7,756 3.7 9,296 5.4 25,420 4.4 29,538 6.0

Japan 10,319 6.0 8,542 5.1

Malaysia 5,280 2.5 5,964 3.5 13,745 2.4 23,911 4.8

Europe 7,781 4.5 8,849 5.2

Singapore 6,249 3.6 4,758 2.8

Malaysia 2,600 1.5 1,863 1.1

Rest of the world 1,934 1.3 2,740 1.6

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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 and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 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 for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 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 the decrease in revenues for Malaysia, for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 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 overall increase in revenues for China for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by increased demand from a large Chinese DRAM integrated device manufacturer.

• Despite the increase in revenues for China previously described, 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 has negatively impacted revenue for that region.

These requirements have restricted our ability to ship products to the region, decreasing demand from domestic China customers.

Additionally, these requirements have caused, and continue to drive, some of our multinational customers to concentrate operations in regions other than China, lowering overall demand for those customers within the region.

Changes in revenue by geographic region for the three months ended March 29, 2025, compared to the three months ended March 30, 2024, were primarily attributable to changes in customer demand, product sales mix, and impacts from trade restrictions.

Cost of Revenues and Gross Margins

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Three Months Ended

September 28,

2024 September 30,

2023 $ Change % Change

Gross profit $ 84,705 $ 69,285 $ 15,420 22.3 %

Gross margin 40.7 % 40.4 %

Nine Months Ended

September 28,

2024 September 30,

2025 March 30,

2024 $ Change % Change

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Three Months Ended

September 28, 2024 September 30, 2023

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

Gross profit $ 72,855 $ 14,838 $ (2,988) $ 84,705 $ 49,383 $ 22,396 $ (2,494) $ 69,285

Gross margin 42.3 % 41.5 % 40.7 % 38.5 % 51.8 % 40.4 %

Nine Months Ended

September 28, 2024 September 30, 2023

March 29, 2025 March 30, 2024

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

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Gross margin 37.8 % 44.5 % 37.7 % 37.2 % 45.3 % 37.2 %

Probe Cards — For the three and nine months ended September 28, 2024, gross profit and gross margins increased compared to the three and nine months ended September 30, 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 with a higher concentration of lower-margin DRAM sales and a lower concentration of higher-margin Foundry & Logic sales.

For the three and nine months ended September 28, 2024 compared to the corresponding period in the prior year, DRAM revenue was up from 21.4% and 21.0% of Probe Card sales to 35.0% and 34.5% of Probe Card sales, and Foundry & Logic revenue was down from 75.1% and 75.4% of Probe Card sales to 62.4% and 62.6% of Probe Card sales.

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

Systems — For the three and nine months ended September 28, 2024, gross profit and gross margins decreased compared to the three and nine months ended September 30, 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, in part related to the divestiture of the FRT Metrology business.

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 September 28, 2024, the Corporate and Other gross loss increased compared to the three months ended September 30, 2023, primarily from the an increase in stock-based compensation expense and restructuring charges that were partially offset due to the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

For the nine months ended September 28, 2024, the Corporate and Other gross loss decreased compared to the nine months ended September 30, 2023, primarily from the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

Probe Cards — For the three months ended March 29, 2025, gross profit and gross margins increased compared to the three months ended March 30, 2024, primarily due to a more favorable product mix.

Systems — For the three months ended March 29, 2025, gross profit increased while gross margins decreased compared to the three months ended March 30, 2024, primarily as a result of greater revenues with a more favorable absorption of costs on higher production volumes, more than offset by an increase in manufacturing spending.

Corporate and Other — Corporate and Other includes unallocated expenses relating to stock-based compensation expense, amortization of intangible assets 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.

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

For the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 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 months ended March 29, 2025, compared to the three months ended March 30, 2024, gross profit and gross margins have increased primarily as a result of greater revenues with a more favorable absorption of costs on higher production volumes, a more favorable product mix, partially offset by an increase in manufacturing spending, as described above.

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

Stock-based compensation $ 2,005 $ 1,928

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Three Months Ended

September 28,

2024 September 30,

2023 $ Change % Change

(Dollars in thousands)

Research and development $ 31,243 $ 31,014 $ 229 0.7 %

% of revenues 15.0 % 18.1 %

Nine Months Ended

September 28,

2024 September 30,

2025 March 30,

2024 $ Change % Change

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% of revenues 16.2 % 17.0 %

Research and development expenses in the three months ended September 28, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation and increased general operational costs, partially offset by lower compensation costs from decreased headcount as a result of 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, lower project material costs, and lower stock-based compensation expense.

Research and development expenses in the nine months ended September 28, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, general operational costs, and increased project material costs, partially offset by lower compensation costs from decreased headcount as a result of 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.

Research and development expenses in the three months ended March 29, 2025 decreased compared to the corresponding period in the prior year primarily due to slightly lower project material costs and general operational costs on higher revenues.

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

Three Months Ended September 28, 2024 compared to Three Months Ended September 30, 2023 Nine Months Ended September 28, 2024 compared to Nine Months Ended September 30, 2023

Employee compensation costs $ 1,082 $ 2,713

Three Months Ended March 29, 2025 compared to Three Months Ended March 30, 2024

Project material costs $ (674)

General operational costs (101)

Employee compensation costs (85)

Stock-based compensation expense 33

Depreciation (82) (264)

$ 229 $ 3,835

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

Stock-based compensation expense

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Three Months Ended

September 28,

2024 September 30,

2023 $ Change % Change

(Dollars in thousands)

Selling, general and administrative $ 35,607 $ 35,564 $ 43 0.1 %

% of revenues 17.1 % 20.7 %

Nine Months Ended

September 28,

2024 September 30,

2025 March 30,

2024 $ Change % Change

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% of revenues 19.5 % 19.6 %

Selling, general and administrative expenses for the three months ended September 28, 2024 compared to the corresponding period in the prior year was effectively flat.

The drivers of the fluctuation for the three month period were increased employee compensation costs from higher performance-based compensation and increased commissions expense from increased revenues, mostly offset by lower stock-based compensation expenses, lower transaction expenses related to the sale of our FRT Metrology business earlier in 2024, and lower general operating expenses.

Selling, general and administrative expenses increased in the nine months ended September 28, 2024 compared to the corresponding period in the prior year.

The drivers of the increase for the nine month period were increased employee compensation costs from higher performance-based compensation, increased commissions expense from increased revenues, increased consulting fees from the China Transaction in the first quarter of fiscal 2024 and increased general operating expenses, partially offset by lower amortization expense from significant intangible assets becoming fully amortized.

Selling, general and administrative expenses increased in total for the three months ended March 29, 2025 compared to the corresponding period in the prior year, but decreased slightly as a percent of revenues.

The drivers of the increase for the three month period were increased restructuring charges from operating efficiency initiatives and increased commissions expense from increased revenues, partially offset by lower general operating expenses from decreased headcount, lower consulting fees from the China Transaction in the first quarter of fiscal 2024 and lower stock-based compensation expense.

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

Three Months Ended September 28, 2024 compared to Three Months Ended September 30, 2023 Nine Months Ended September 28, 2024 compared to Nine Months Ended September 30, 2023

Employee compensation costs $ 2,884 $ 6,546

Stock-based compensation expense (1,967) (774)

Three Months Ended March 29, 2025 compared to Three Months Ended March 30, 2024

Restructuring charges $ 2,677

General operating expenses (1,069)

Consulting fees (958)

Stock-based compensation expense (719)

Commission expenses 524

Amortization of intangibles (249) (2,964)

General operating expenses (449) 394

Employee compensation costs (80)

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

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

Stock-based compensation expense

$ 5,145 $ 5,864

Interest Income (Expense), Net

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Interest Income, Net

Three Months Ended

2025 March 30,

(Dollars in thousands)

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

The increase in interest income for the three and nine months ended September 28, 2024 compared with the corresponding period of the prior year, was attributable to higher invested balances.

The increase in interest income for the three months ended March 29, 2025, compared with the corresponding period of the prior year, was attributable to 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 and nine months ended September 28, 2024 was effectively flat compared to the corresponding periods in the prior year.

The interest expense for the three months ended March 29, 2025 was effectively flat compared to the corresponding periods in the prior year.

This stability is due to our interest rate swap, which fixes the interest rate on our long-term debt.

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Provision for Income Taxes

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

2025 March 30,

(In thousands, except percentages)

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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 decrease in our effective tax rate for the three months ended September 28, 2024 compared to the corresponding period in the prior year was primarily driven by stock-based compensation expense/benefit impacts on the provision for income tax expense.

The increase in our effective tax rate for the nine months ended September 28, 2024 compared to the corresponding period in the prior year was primarily driven by higher taxable U.S.

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.

The CHIPS Act provides for various incentives and tax credits, among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022.

At least a portion of our future capital expenditures and research and development costs is expected to qualify for this credit, which benefits us by allowing us to net the credit received against our costs.

The AMIC credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.

Beginning in 2022, the U.S.

Tax Cuts and Jobs Act of 2017 eliminated the existing option to deduct research and development expenditures and requires taxpayers to amortize such expenditures attributable to domestic and foreign research over five and

fifteen years, respectively, pursuant to IRC Section 174.

While the capitalization requirement has a negative impact on our cash flows, there are offsetting benefits from the enactment of this provision that we have included in our estimated annual effective tax rate.

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.

The increase in our effective tax rate for the three months ended March 29, 2025 compared to the corresponding period in the prior year was primarily driven by effective tax rate impacts the China Transaction had on the prior year.

Liquidity and Capital Resources

Capital Resources

Our working capital increased to $485.6 million at September 28, 2024, compared to $442.7 million at December 30, 2023.

Our working capital decreased to $427.2 million at March 29, 2025, compared to $473.8 million at December 28, 2024.

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

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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 $354.5 million at September 28, 2024, compared to $328.3 million at December 30, 2023.

Our cash, cash equivalents and marketable securities totaled approximately $299.0 million at March 29, 2025, compared to $360.0 million at December 28, 2024.

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:

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

Nine Months Ended

September 28,

2024 September 30,

Three Months Ended

2025 March 30,

(In thousands)

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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 nine months ended September 28, 2024 was attributable to net income of $59.9 million and net non-cash expenses of $32.0 million, partially offset by the increase in net working capital of $10.3 million.

The cash used in net working capital is related to increased accounts receivable, net, of $13.3 million, increased inventories of $7.6 million, decreased accounts payable of $8.8 million, and decreased operating lease liabilities of $5.3 million, largely offset by increased accrued liabilities of $7.4 million, other liabilities of $9.3 million, and deferred revenue of $7.9 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 and deferred income tax benefits.

Net cash provided by operating activities for the three months ended March 29, 2025 was attributable to net income of $6.4 million and net non-cash expenses of $23.7 million, partially offset by the increase in net working capital of $6.6 million.

The cash used in net working capital mainly related to increased inventories of $10.2 million and lowered accrued liabilities of $7.9 million, partially offset by increased accounts payable of $10.5 million and decreased accounts receivable, net, of $6.3 million.

The non-cash expenses consisted of depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories.

Investing Activities

Net cash used in investing activities for the nine months ended September 28, 2024 primarily related to $30.8 million in property, plant and equipment purchases and $15.5 million in net purchases of marketable securities, partially offset by $21.6 million cash provided by the sale of businesses.

Net cash used in investing activities for the three months ended March 29, 2025 primarily related to $67.2 million used to acquire our equity investment in FICT and $18.6 million of property, plant and equipment purchases, partially offset by $1.1 million in net proceeds from the maturities and sales of marketable securities.

Financing Activities

Net cash used in financing activities for the nine months ended September 28, 2024 primarily related to $37.2 million used to purchase common stock under our stock repurchase program, $18.0 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $9.7 million received from issuances of common stock under our employee stock purchase plan.

Net cash used in financing activities for the three months ended March 29, 2025 primarily related to $22.1 million used to purchase common stock under our stock repurchase program, $2.1 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $21.6 million received from issuances of common stock in a private placement and 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”).

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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.

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 0.1145%, plus 1.75% per annum.

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

The interest rate at September 28, 2024, before consideration of the interest rate swap discussed in the next paragraph, was 7.07%.

As of September 28, 2024, the balance outstanding pursuant to the Building Term Loan was $13.6 million.

The interest rate at March 29, 2025, before consideration of the interest rate swap discussed in the next paragraph, was 6.19%.

As of March 29, 2025, the balance outstanding pursuant to the Building Term Loan was $13.1 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.

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

As of September 28, 2024, the notional amount of the loan that is subject to this interest rate swap is $13.6 million.

As of March 29, 2025, the notional amount of the loan that is subject to this interest rate swap is $13.1 million.

Stock Repurchase Programs

On May 20, 2022, our Board of Directors authorized a two-year program to repurchase up to $75.0 million of outstanding common stock to offset potential dilution from issuance of common stock under our stock-based compensation programs.

During fiscal 2022 and fiscal 2023, we repurchased and retired 1,700,893 shares of common stock for $56.4 million and 504,352 shares of common stock for $18.6 million, respectively, utilizing the remaining shares available for repurchase under the program.

On October 30, 2023, our Board of Directors authorized an additional two-year program to repurchase up to $75.0 million of outstanding common stock, with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs.

This share repurchase program will expire on October 30, 2025.

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

During the nine months ended September 28, 2024, we repurchased and retired 889,683 shares of common stock for $37.2 million, and as of September 28, 2024, $36.6 million remained available for future repurchases.

On October 30, 2023, our Board of Directors authorized a two-year program to repurchase up to $75.0 million of outstanding common stock, with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs.

On March 29, 2025, our Board of Directors approved an increase to the repurchase program, authorizing the repurchase of an additional $1.6 million shares.

During fiscal 2024, we repurchased and retired 1,309,635 shares

of common stock for $53.3 million.

During the three months ended March 29, 2025, we repurchased and retired 665,000 shares of common stock for $22.1 million, utilizing the remaining shares available for repurchase under the program.

On April 24, 2025, our Board of Directors authorized an additional program to repurchase up to $75.0 million of outstanding common stock, also with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs.

The share repurchase program will expire on April 24, 2027.

Contractual Obligations and Commitments

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of September 28, 2024:

The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of March 29, 2025:

Payments Due In Fiscal Year

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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 September 28, 2024.

The gross liability for unrecognized tax benefits was $52.1 million as of March 29, 2025.

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 September 28, 2024, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development.

The deferred grant was $18.0 million as of March 29, 2025, 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 over the 5-year term.

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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 September 28, 2024, we were not involved in any such off-balance sheet arrangements.

As of March 29, 2025, we were not involved in any such off-balance sheet arrangements.

Recent Accounting Standards

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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