What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-06 · 91 added, 127 removed, 149 unchanged (59% of the section changed)

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A large percentage of our products are ICs used in AC-DC power supplies, which convert the high-voltage AC from a wall outlet to the low-voltage DC required by most electronic devices.

Power supplies incorporating our products are used with all manner of electronic products including appliances, computing and networking equipment, mobile phones, electronic utility meters, battery-powered tools, industrial controls, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices.

Power supplies incorporating our products are used with all manner of electronic products including appliances, industrial controls, mobile devices such as smartphones, tablets and notebook computers, electronic utility meters, battery-powered tools, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices.

Variations of our power-supply ICs are used for high-voltage power conversion in electric vehicles (“EVs”).

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We also offer high-voltage gate drivers—either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry—used to operate high-voltage switches such as insulated-gate bipolar transistors (“IGBTs”) and silicon-carbide (“SiC”) MOSFETs.

These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from approximately 100 kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, locomotives, EVs and high-voltage DC transmission systems.

These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from approximately 100 kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, electric locomotives, EVs and high-voltage DC transmission systems.

Our power-conversion products are distinguished by their “system-level” nature;

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Our growth strategy includes the following elements:

● Increase the size of our addressable market.

Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (“SAM”) opportunity of approximately $1.5 billion.

Since then, we have expanded our SAM to approximately $4 billion through a variety of means.

These include the introduction of products that enable us to address higher-power AC-DC applications (such as our Hiper™ product families), the introduction of LED-driver products, and our entry into the gate-driver market In 2018 we introduced our BridgeSwitch™ motor-driver ICs for BLDC motors, and in 2024 we introduced BridgeSwitch-2, extending the addressable power range of our motor-driver products up to about one horsepower.

We have recently introduced a range of products targeting the EV market;

we plan to introduce additional products for EVs in the future and expect automotive applications to become a significant portion of our SAM over time.

Also contributing to our SAM expansion has been the emergence of new applications within the power ranges that our products can address.

For example, applications such as “smart” utility meters, battery-powered lawn equipment and bicycles, and USB power receptacles (often installed alongside traditional AC wall outlets) can incorporate our products.

The increased use of connectivity, LED lighting and other power-consuming electronic features in consumer appliances has also enhanced our SAM.

We have also expanded our SAM through the development of technologies and architectures that increase the value (and therefore the average selling prices) of our products.

For example, our InnoSwitch™ ICs integrate circuitry from the secondary, or low-voltage, side of AC-DC power supplies, whereas earlier product families integrated circuitry only on the primary, or high-voltage side.

Our InnoMux™ IC families provide up to three DC outputs, eliminating the need for additional power-management circuitry in certain end products requiring multiple voltages while significantly increasing efficiency.

● Increase our penetration of the markets we serve.

We currently address AC-DC applications with power outputs up to approximately 500 watts, gate-driver applications ranging from approximately 100 kilowatts up to gigawatts, and motor-drive applications up to approximately one horsepower.

We currently address AC-DC applications with power outputs up to approximately 500 watts, gate-driver applications ranging from 100 kilowatts up to gigawatts, and motor-drive applications up to approximately one horsepower.

Through our research and development efforts, we seek to introduce more advanced products for these markets offering higher levels of integration and performance compared to earlier products.

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In 2022 we launched PowerPros ℠ , a live online video support service that enables power-supply designers to talk directly with members of our applications engineering team 24 hours a day, six days a week, anywhere in the world.

● Leverage the performance benefits of our proprietary gallium-nitride (“GaN”) technology.

In 2019 we began incorporating our proprietary PowiGaN™ gallium-nitride transistors in some of our products, enabling a higher level of energy efficiency than ICs with silicon transistors.

Since then, we have introduced a variety of new products utilizing GaN technology and developed new generations of our GaN technology capable of supporting voltages as high as 1700 volts.

While high-voltage GaN transistors have historically been more costly to produce than comparable silicon transistors, we have achieved cost reductions such that our GaN devices are approaching cost parity with silicon MOSFETs.

We are developing additional products incorporating GaN transistors, which we believe will enable us to address higher-power applications than we address with our current range of products, and further expand our SAM as discussed above.

We expect such applications to include power supplies used in data centers delivering artificial intelligence (AI) services, in communications network infrastructure equipment and in onboard-charging circuitry for EVs, among others.

Additionally, we are developing GaN technologies capable of supporting higher power output than today’s GaN devices, with an aim of developing products to address power-switching modules in EV drivetrains, which currently incorporate SiC and IGBT modules.

In July 2024 we acquired the assets of Odyssey Semiconductor, a developer of so-called vertical GaN technology, in an effort to accelerate our development of higher-power GaN devices.

We believe the development of such technologies will take several years to complete.

● Capitalize on efforts to reduce carbon emissions by providing products that contribute to improved energy efficiency and increased use of renewable energy.

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Also, our gate-driver products are critical components in energy-efficient DC motor drives, solar- and wind-power systems, efficient high-voltage DC transmission systems (including transmission of energy from renewable energy installations to the power grid), and low-emissions transportation applications such as electric locomotives.

● Increase the size of our addressable market.

Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (“SAM”) opportunity of approximately $1.5 billion.

Since then we have expanded our SAM to approximately $4 billion through a variety of means.

In 2016 we introduced the SCALE-iDriver TM family of ICs, broadening the range of gate-driver applications we can address.

In 2018 we introduced our BridgeSwitch™ motor-driver ICs for BLDC motors;

in 2024 we introduced BridgeSwitch-2, which expands our addressable power range of motor-drive applications.

We have introduced a range of automotive-qualified products to address the EV market;

we expect to introduce more such products in the future, and expect automotive applications to become a significant portion of our SAM over time.

Also contributing to our SAM expansion has been the emergence of new applications within the power ranges that our products can address.

The increased use of connectivity, LED lighting and other power-consuming electronic features in consumer appliances has also enhanced our SAM.

We have also expanded our SAM through the development of technologies and architectures that increase the value (and therefore the average selling prices) of our products.

For example, our InnoSwitch™ ICs integrate circuitry from the secondary, or low-voltage, side of AC-DC power supplies,

whereas earlier product families integrated circuitry only on the primary, or high-voltage side.

In 2019 we began incorporating our proprietary GaN transistors in some of our products, enabling a higher level of energy efficiency than ICs with silicon transistors.

Since then, we have introduced a variety of new products utilizing GaN technology, as well as new generations of our GaN technology capable of supporting higher voltages (as high as 1700 volts).

We are currently developing new products incorporating these technologies, which we believe will enable us to address higher-power applications than we address with our current range of products and therefore further expand our SAM.

We intend to continue expanding our SAM in the years ahead through all of the means described above.

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Customers typically may cancel or reschedule orders on short notice without significant penalty and, conversely, often place orders with very short lead times to delivery.

Also, external factors such as supply-chain dynamics, widespread health emergencies like the COVID-19 pandemic, and macroeconomic conditions including inflation, fluctuations in interest and exchange rates and bank failures, have caused and can continue to cause our operating results to be volatile.

Changes in trade policies among the United States and other countries, in particular the escalation of trade tensions and higher tariffs as well as the imposition of other barriers to international trade could reduce demand for end products that incorporate our integrated circuits which could adversely affect our business and operating results.

See also our risk factor under Part II, Item 1A captioned, “ Changes in trade policies among the United States and other countries, in particular the escalation and imposition of new and higher tariffs, could reduce demand for end products that incorporate our integrated circuits, which could have a material adverse effect on our revenues and operating results.

Further, increased tariffs or the imposition of other barriers to international trade could place pressure on our prices as our customers seek to offset the impact of increased tariffs on their own products.

” Also, external factors such as supply-chain dynamics, widespread health emergencies, and macroeconomic conditions including inflation, fluctuations in interest and exchange rates and bank failures, have caused and can continue to cause our operating results to be volatile.

Furthermore, because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours.

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Recent Results

Our net revenues were $115.8 million and $125.5 million in the three months ended September 30, 2024 and 2023, respectively, and $313.7 million and $355.0 million in the nine months ended September 30, 2024 and 2023, respectively.

The decrease in net revenues for the three-month period was driven primarily by lower sales of our products for use in smartphone chargers, reflecting greater use of Chinese-made components in chargers manufactured for Chinese smartphone vendors, as well as increased decoupling of handsets and chargers.

These decreases were partially offset by higher sales into the consumer and computer end-markets reflecting, respectively, the depletion of excess inventories related to the appliance market and the increased use of our products in chargers for notebook computers and other mobile devices.

For the nine-month period ended September 30, 2024, revenues for all but the consumer end-market category decreased compared to the corresponding prior-year period.

In general, we believe that demand for our products has been negatively affected in recent periods by macroeconomic and geopolitical factors including reduced consumer spending and a reduction in home sales in response to inflation and higher interest rates, general economic weakness in China, weaker industrial activity and the conflicts in Ukraine and the Middle East.

We believe these factors have exacerbated the effects of a cyclical downturn in the semiconductor industry;

such downturns are commonly experienced following periods of strong growth during which supply-chain participants tend to accumulate excess inventories.

Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for 78% of net revenues for both the three and nine months ended September 30, 2024, and 83% and 81% in the corresponding periods of 2023.

International sales accounted for 98% of our net revenues for both the three and nine months ended September 30, 2024, and 98% in both the corresponding periods of 2023.

Our gross margin was 55% and 53% for the three months ended September 30, 2024 and 2023, respectively, and 53% and 52% for the corresponding nine-month periods.

The increase in gross margin was primarily due to favorable end-market mix, with a greater percentage of revenues coming from the higher-margin industrial and consumer end-markets, and the favorable impact of the dollar/yen exchange rate on our wafer costs.

Total operating expenses were $51.6 million and $48.2 million for the three months ended September 30, 2024 and 2023, respectively, and $153.5 million and $146.6 million for the nine months ended September 30, 2024 and 2023,

respectively.

The increase in operating expenses for the three- and nine-month periods was primarily due to higher stock-based compensation expense related to performance-based awards, and higher salaries and related expenses driven by higher headcount and annual salary increases.

P artially offsetting these increases for the nine-month period were decreased product-development expenses.

In addition, we recognized a credit in the three months ended September 30, 2024 related to the recovery of bad debt.

Our net revenues were $105.5 million and $91.7 million in the three months ended March 31, 2025 and 2024, respectively.

The increase in net revenues was due to higher sales in all four end-market categories, most significantly in the consumer end-market.

Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for 80% and 77% of net revenues for the three months ended March 31, 2025 and 2024, respectively.

International sales accounted for 99% and 98% of our net revenues for the three months ended March 31, 2025 and 2024, respectively.

Our gross margin was 55% and 52% for the three months ended March 31, 2025 and 2024, respectively.

The increase in gross margin was primarily due to the favorable impact of the dollar/yen exchange rate on our wafer costs and the favorable impact of higher manufacturing volumes on our cost per unit.

Total operating expenses were $51.5 million and $47.3 million for the three months ended March 31, 2025 and 2024, respectively.

The increase in operating expenses for the three-month period was primarily due to increased stock-based compensation expense and employee-related expenses driven by headcount growth and higher costs associated with employee health insurance and other benefits.

These increases were partially offset by a credit recognized in the three months ended March 31, 2025 related to the recovery of bad debt.

Critical Accounting Policies and Estimates

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Three Months Ended

Nine Months Ended

September 30,

Cost of revenues

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Provision for income taxes

Comparison of the three and nine months ended September 30, 2024 and 2023

Comparison of the three months ended March 31, 2025 and 2024

Net revenues.

Net revenues consist of revenues from product sales, which are calculated net of returns and allowances.

Net revenues for the three and nine months ended September 30, 2024 were $115.8 million and $313.7 million, respectively, and $125.5 million and $355.0 million, i n the corresponding periods of 2023 .

These decreases were partially offset by higher sales into the consumer and computer end-markets reflecting, respectively, the depletion of excess inventories related to the appliance market and increased use of our products in chargers for notebook computers and other mobile devices.

For the nine-month period ended September 30, 2024, revenues for all but the consumer end-market category decreased compared to the corresponding prior-year period.

Our revenue mix by end market for the three and nine months ended September 30, 2024 and 2023 was as follows:

Net revenues for the three months ended March 31, 2024 and 2024 were $105.5 million and $91.7 million, respectively.

The increase in net revenues was due to higher sales in all four end-market categories, most significantly in the consumer end-market.

Our revenue mix by end market for the three months ended March 31, 2025 and 2024 was as follows:

Three Months Ended

Nine Months Ended

September 30,

Communications

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $114.1 million and $308.7 million in the three and nine months ended September 30, 2024, respectively, and $123.3 million and $348.1 million in the corresponding periods of 2023.

International sales, consisting of sales outside of the United States of America based on “bill to” customer locations, were $104.2 million and $90.1 million in the three months ended March 31, 2025 and 2024, respectively.

Although power converters using our products are distributed to end markets worldwide, most are manufactured in Asia.

As a result, sales to this region represented 85% and 84% of our net revenues in the three and nine months ended September 30, 2024, respectively, and 84% in both the corresponding periods of 2023.

As a result, sales to this region represented 84% and 81% of our net revenues in the three months ended March 31, 2025 and 2024, respectively.

We expect international sales, and sales to the Asia region in particular, to continue to account for a large portion of our net revenues in the future.

Sales to distributors accounted for 70% of our net revenues in both the three and nine months ended September 30, 2024 and 74% and 67% in the corresponding periods of 2023.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

Sales to distributors accounted for 71% and 72% of our net revenues in the three months ended March 31, 2025 and 2024, respectively, with direct sales to OEMs and merchant power supply manufacturers accounting for the remainder.

The following customers represented 10% or more of our net revenues for the respective periods:

Three Months Ended

Nine Months Ended

September 30,

Honestar Technologies Co., Ltd.

Salcomp Group

* Total customer revenue was less than 10% of net revenues.

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Gross profit is net revenues less cost of revenues.

Our cost of revenues consists primarily of the purchase of wafers from our contracted foundries, the assembly, packaging and testing of our products by sub-contractors, product testing performed in our own facility, overhead associated with the management of our supply chain.

Gross margin is gross profit divided by net revenues.

The following table compares gross profit and gross margin for the three and nine months ended September 30, 2024 and 2023:

The following table compares gross profit and gross margin for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Our gross margin increased primarily due to favorable impact of the dollar/yen exchange rate on our wafer costs and the favorable impact of higher manufacturing volumes on our cost per unit.

Research and development expenses.

Research and development (“R&D”) expenses consist primarily of employee-related expenses, including stock-based compensation, and expensed material and facility costs associated with the development of new technologies and products.

We also record R&D expenses for prototype wafers related to new products until such products are released to production.

The table below compares R&D expenses for the three and nine months ended September 30, 2024 and 2023:

Research and development (“R&D”) expenses consist primarily of employee-related expenses including salaries and stock-based compensation, as well as expensed material and facility costs associated with the development of new processes and products.

We also record R&D expenses for prototype wafers related to new products until the products are released to production.

The following table compares R&D expenses for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Headcount (at period end)

R&D expenses increased for the three and nine months ended September 30, 2024 compared to the corresponding periods of 2023.

The increase for the three-month period was primarily due to higher salaries and related expenses driven by higher headcount and annual salary increases, as well as increased product-development expenses.

The increase for the nine-month period was primarily due to higher stock-based compensation expense related to performance-based awards, as well as higher salaries and related expenses driven by higher headcount and annual salary increases.

These increases were partially offset by decreased product-development expenses .

R&D expenses increased for the three months ended March 31, 2025 compared to the corresponding period of 2024 primarily due to higher employee benefit-related expenses and increased equipment-related expenses.

Sales and marketing expenses.

Sales and marketing (“S&M”) expenses consist primarily of employee-related expenses, including stock-based compensation, commissions to sales representatives, amortization of intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.

The table below compares S&M expenses for the three and nine months ended September 30, 2024 and 2023:

Sales and marketing (“S&M”) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation, and commissions to sales representatives, as well as facilities expenses, including expenses associated with our regional sales and support offices.

The following table below compares S&M expenses for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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Headcount (at period end)

S&M expenses increased for the three and nine months ended September 30, 2024 compared to the corresponding periods of 2023, primarily due to higher stock-based compensation expense related to performance-based awards, as well as higher salaries and related expenses driven by higher headcount and annual salary increases .

S&M expenses increased for the three months ended March 31, 2025 compared to the corresponding period of 2024, primarily due to higher sales commissions and increased employee benefit-related expenses.

General and administrative expenses.

General and administrative (“G&A”) expenses consist primarily of employee-related expenses, including stock-based compensation expense, for administration, finance, human resources and general management, as well as consulting, professional services, legal and audit expenses.

The table below compares G&A expenses for the three and nine months ended September 30, 2024 and 2023:

General and administrative (“G&A”) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation expenses for administration, finance, human resources and general management, as well as consulting, professional services, legal and auditing expenses.

The following table below compares G&A expenses for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Headcount (at period end)

G&A expenses increased for the three and nine months ended September 30, 2024 compared to the corresponding periods of 2023, primarily due to higher stock-based compensation expense related to performance-based awards, as well as higher salaries and related expenses due to annual salary increases.

The increase was partially offset for the three months due to a credit related to the recovery of bad debt.

G&A expenses increased for the three months ended March 31, 2025 compared to the corresponding period of 2024, primarily due to increased stock-based compensation expense related to performance-based awards as well as increased expenses for legal and other professional services.

These increases were partially offset by a credit recognized in the three months ended March 31, 2025 related to the recovery of bad debt.

Other income .

Other income consists primarily of interest income earned on cash and cash equivalents, marketable securities and other investments, and the impact of foreign exchange gains or losses.

The table below compares other income for the three and nine months ended September 30, 2024 and 2023:

The table below compares other income for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Other income decreased for the three months ended September 30, 2024 compared to the corresponding period of 2023, as higher interest income driven by higher rates on investments was offset by the unfavorable impact of foreign exchange rates during the period.

Other income increased for the nine months ended September 30, 2024 compared to the corresponding period of 2023, primarily due to higher interest income.

Other income for the three months ended March 31, 2025 was similar to the corresponding period of 2024.

Provision for income taxes .

Provision for income taxes represents federal, state and foreign taxes.

The table below compares income-tax expense for the three and nine months ended September 30, 2024 and 2023:

The table below compares income-tax expense for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(dollars in millions)

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Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

Our effective tax rates for the three and nine months ended September 30, 2024 were 0.3% and 1.5%, respectively, as compared to 5.1% in both the corresponding periods of 2023.

Our effective tax rates for the three months ended March 31, 2025 and 2024 was 11.1% and 0.5%, respectively.

The effective tax rate in these periods was lower than the statutory federal income-tax rate of 21% due to the geographic distribution of our world-wide earnings in lower-tax jurisdictions and the impact of federal research tax credits.

Additionally, i n the nine months ended September 30, 2024, our effective tax rate was also favorably impacted by the recognition of excess tax benefits related to share-based payments and by discrete items associated with the release of unrecognized tax benefits.

In the three and nine months ended September 30, 2023, our effective tax rate was favorably impacted by a discrete item associated with recognition of excess tax benefits related to share-based payments.

In the nine months ended September 30, 2023, our effective tax rate was also favorably impacted by discrete items associated with the release of unrecognized tax benefits.

In the three months ended March 31, 2025, our effective tax rate was unfavorably impacted by the recognition of share-based payments and foreign income subject to U.S.

In the three months ended March 31, 2024, our effective tax

rate was favorably impacted by the recognition of excess tax benefits related to share-based payments and the release of unrecognized tax benefits and unfavorably impacted by foreign income subject to U.S.

These benefits were partially offset by U.S.

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Liquidity and Capital Resources

As of September 30, 2024, we had $303.8 million in cash, cash equivalents and short-term marketable securities, a decrease of $7.8 million from $311.6 million as of December 31, 2023.

As of September 30, 2024, we had working capital, defined as current assets less current liabilities, of $457.1 million, a decrease of approximately $5.6 million from $462.7 million as of December 31, 2023.

As of March 31, 2025, we had $289.3 million in cash, cash equivalents and short-term marketable securities, a decrease of $10.7 million from $300.0 million as of December 31, 2024.

As of March 31, 2025, we had working capital, defined as current assets less current liabilities, of $444.9 million, a decrease of approximately $13.8 million from $458.7 million as of December 31, 2024.

We have a Credit Agreement with Wells Fargo Bank, National Association (the "Credit Agreement") that provides us with a $75.0 million revolving line of credit to use for general corporate purposes with a $20.0 million sub-limit for the issuance of standby and trade letters of credit.

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The Credit Agreement terminates on June 7, 2026;

any advances under the

revolving line of credit would become due on such date, or earlier in the event of a default.

No advances were outstanding under the agreement as of September 30, 2024.

all advances under the revolving line of credit will become due on such date, or earlier in the event of a default.

As of March 31, 2025, we had no advances outstanding under the Credit Agreement.

Cash from Operating Activities

Operating activities generated $66.5 million of cash in the nine months ended September 30, 2024.

Our operating activities generated $26.4 million of cash in the three months ended March 31, 2025.

Net income for this period was $8.8 million;

we also incurred non-cash stock-based compensation expense, depreciation, increase in deferred tax assets, accretion of discount on marketable securities, and amortization of intangibles of $25.8 million, $25.6 million, $8.7 million, $1.3 million and $1.1 million, respectively.

Sources of cash included a $5.6 million decrease in prepaid expenses and other assets and an increase of $1.9 million in accounts payable.

These sources of cash were partially offset by a $4.5 million increase in inventories and a $1.5 million increase in accounts receivable due to timing of customer payments.

Operating activities generated $49.5 million of cash in the nine months ended September 30, 2023.

we also incurred non-cash stock-based compensation expense, depreciation and an increase in deferred tax assets of $8.7 million, $7.2 million and $2.5 million, respectively.

Sources of cash included a $4.7 million decrease in accounts receivable due to timing of receipts, an increase of $4.0 million in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $3.4 million decrease in prepaid expenses and other assets.

These sources of cash were partially offset by a $3.9 million decrease in taxes payable and accrued liabilities and a $3.5 million increase in inventories.

Operating activities generated $15.9 million of cash in the three months ended March 31, 2024.

Net income for this period was $4.0 million;

we also incurred depreciation, non-cash stock-based compensation expense, increase in deferred tax assets and amortization of intangibles of $26.3 million, $21.0 million, $10.0 million and $1.6 million, respectively.

Sources of cash were partially offset by a $14.8 million increase in inventories reflecting a slowdown in sales driven by factors described above, a $7.2 million increase in accounts receivable, a $5.0 million decrease in taxes payable and accrued liabilities primarily due to timing of customer rebate payments, a $2.9 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $0.8 million increase in prepaid expenses and other assets primarily due to federal income tax prepayments.

we also incurred depreciation, non-cash stock-based compensation expense, increase in deferred tax assets, accretion of discount on marketable securities, and amortization of intangibles of $8.7 million, $6.4 million, $1.3 million, $0.5 million and $0.5 million, respectively.

Sources of cash included a $2.2 million decrease in accounts receivable due to timing of receipts, a $1.3 million increase in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $0.8 million decrease in prepaid expenses and other assets.

These sources of cash were partially offset by a $4.7 million increase in inventories due to lower demand during the quarter and a $1.7 million decrease in taxes payable and accrued liabilities.

Cash from Investing Activities

Our investing activities in the nine months ended September 30, 2024 resulted in a $17.5 million net use of cash, primarily consisting of $14.2 million used for purchases of property and equipment (primarily production-related machinery and equipment) and $9.5 million for the Odyssey acquisition, partially offset by $6.2 million of proceeds from sales and maturities of marketable securities, net of purchases.

Our investing activities in the nine months ended September 30, 2023 resulted in $25.9 million net use of cash, primarily consisting of $11.1 million used for purchases of marketable securities net of proceeds from sales and maturities, and $14.7 million used for purchases of property and equipment, primarily production-related machinery and equipment.

Our investing activities in the three months ended March 31, 2025, generated $4.5 million of cash, primarily consisting of $10.3 million from sales and maturities of marketable securities, net of purchases, offset by $5.7 million for purchases of property and equipment (primarily production-related machinery and equipment).

Our investing activities in the three months ended March 31, 2024 resulted in $0.1 million net use of cash, primarily consisting of $4.3 million used for purchases of property and equipment (primarily production-related machinery and equipment), partially offset by $4.3 million from sales and maturities of marketable securities, net of purchases.

Cash from Financing Activities

Our financing activities in the nine months ended September 30, 2024 resulted in a $54.4 million net use of cash, consisting of $34.1 million for the payment of dividends to stockholders and $26.0 million for the repurchase of our common stock, partially offset by proceeds of $5.7 million from the issuance of shares through our employee stock purchase plan.

Our financing activities in the nine months ended September 30, 2023 resulted in a $34.3 million net use of cash, consisting of $32.7 million for the payment of dividends to stockholders and $7.8 million for the repurchase of our common stock, partially offset by $6.2 million from the issuance of shares through our employee stock purchase plan.

In February 2023, our board of directors declared dividends of $0.19 per share to be paid to stockholders of record at the end of each quarter in 2023.

In October 2023, our board of directors raised the quarterly cash dividend with the declaration of five cash dividends of $0.20 per share to be paid at the end of the fourth quarter of 2023 (in lieu of the previously declared dividend of $0.19 per share) and at the end of each quarter in 2024.

In October 2024, our board of directors raised the quarterly cash dividend again with the declaration of five cash dividends of $0.21 per share to be paid at the end of the fourth quarter of 2024 (in lieu of the previously declared dividend of $0.20 per share) and at the end of each quarter in 2025.

Dividend payouts of $11.4 million occurred on March 28, 2024, June 28, 2024 and September 30, 2024.

The declaration of any future cash dividend is at the discretion of the board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interests of our stockholders.

Our financing activities in the three months ended March 31, 2025 resulted in a $32.3 million net use of cash, consisting of $23.1 million for the repurchase of our common stock and $12.0 million for the payment of dividends to stockholders, partially offset by proceeds of $2.8 million from the issuance of shares through our employee stock purchase plan.

Our financing activities in the three months ended March 31, 2024 resulted in a $23.3 million net use of cash, consisting of $14.6 million for the repurchase of our common stock and $11.4 million for the payment of dividends to stockholders, partially offset by proceeds of $2.7 million from the issuance of shares through our employee stock purchase plan.

In October 2023, our board of directors declared dividends of $0.20 per share to be paid to stockholders of record at the end of each quarter in 2024.

In October 2024, our board of directors raised the cash dividend with the declaration of five cash dividends of $0.21 per share to be paid at the end of the fourth quarter in 2024 (in lieu of the previously declared dividend of $0.20 per share announced in October 2023) and at the end of each quarter in 2025.

A dividend payout of $12.0 million occurred on March 31, 2025.

The declaration of any future cash dividend is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of our stockholders.

Stock Repurchases

Over the years, our board of directors have authorized the use of funds to repurchase shares of our common stock.

As of December 31, 2024, we had $48.1 million remaining under our stock-repurchase program .

We exhausted this authorization in the nine months ended September 30, 2024, purchasing approximately 371,000 shares of our common stock for $26.0 million .

In October 2024, our board of directors authorized the use of $50.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the three months ended March 31, 2025, we repurchased approximately 404,000 shares for $23.1 million, leaving $25.0 million in funds authorized as of March 31, 2025.

In April 2025, we utilized the remaining $25.0 million, repurchasing approximately 560,000 shares of our common stock.

Subsequently, our board of directors authorized the use of an additional $50.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

The program has no expiration date.

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Contractual Commitments

As of September 30, 2024, there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2025, there were no material changes in our contractual commitments from those reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

Other Information

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federal taxes.

Accordingly, as of September 30, 2024, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring additional U.S.

Accordingly, as of March 31, 2025, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring significant U.S.

federal income taxes.

6 unchanged sentences

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