What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-08-05 · 71 added, 76 removed, 164 unchanged (47% of the section changed)

6 unchanged sentences

Fiscal 2024 had 52 weeks.

Our second quarter of fiscal 2025 ended July 5, 2025 and our second quarter of fiscal 2024 ended June 29, 2024.

Our third quarter of fiscal 2025 ended October 4, 2025 and our third quarter of fiscal 2024 ended September 28, 2024.

Impact of Macroeconomic Conditions

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Current Period Highlights

Revenues increased $47.5 million in the recent quarter compared to the second quarter of fiscal 2024 due to increased revenues from our Home & Life products and our Industrial & Commercial products.

Revenues increased $39.6 million in the recent quarter compared to the third quarter of fiscal 2024 due to increased revenues from our Home & Life products and our Industrial & Commercial products.

Gross profit increased $28.7 million during the same period primarily as a result of the increase in revenues.

Gross margin increased to 56.1% in the recent quarter compared to 52.7% in the second quarter of fiscal 2024 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $6.4 million in the recent quarter compared to the second quarter of fiscal 2024 primarily due to higher personnel-related costs.

Operating loss in the recent quarter was $22.9 million compared to operating loss of $48.0 million in the second quarter of fiscal 2024.

Gross margin increased to 57.8% in the recent quarter compared to 54.3% in the third quarter of fiscal 2024 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $11.3 million in the recent quarter compared to the third quarter of fiscal 2024 primarily due to higher personnel-related costs.

Operating loss in the recent quarter was $12.3 million compared to operating loss of $29.7 million in the third quarter of fiscal 2024.

Refer to “Results of Operations” below for further discussion.

We ended the second quarter of fiscal 2025 with $415.5 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $53.0 million during the current year six-month period.

Accounts receivable were $56.5 million at July 5, 2025, representing 26 days sales outstanding (“DSO”).

Inventory was $80.9 million at July 5, 2025, representing 86 days of inventory (“DOI”).

During the six months ended July 5, 2025, we had no customer that represented more than 10% of our revenues.

We ended the third quarter of fiscal 2025 with $439.0 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $87.4 million during the current year nine-month period.

Accounts receivable were $67.3 million at October 4, 2025, representing 29 days sales outstanding (“DSO”).

Inventory was $82.2 million at October 4, 2025, representing 85 days of inventory (“DOI”).

During the nine months ended October 4, 2025, we had no customer that represented more than 10% of our revenues.

In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and contract manufacturers.

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Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the six months ended July 5, 2025.

The percentage of our revenues derived from outside of the United States was 89% during the six months ended July 5, 2025.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the nine months ended October 4, 2025.

The percentage of our revenues derived from outside of the United States was 89% during the nine months ended October 4, 2025.

All of our revenues to date have been denominated in U.S.

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The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of revenues for the periods indicated:

Three Months Ended Six Months Ended

2025 June 29,

Three Months Ended Nine Months Ended

2025 September 28,

2024 October 4,

2025 September 28,

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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Net loss (4.8) % (17.1) % (10.8) % (40.0) %

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change July 5,

2025 June 29,

Change October 4,

2025 September 28,

2024 Change %

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The increase in revenues in the recent three-month period was due to increased revenues of $21.1 million from our Industrial & Commercial products and increased revenues of $18.5 million from our Home & Life products.

The increase in revenues in the recent six-month period was due to increased revenues of $52.5 million from our Industrial & Commercial products and increased revenues of $66.4 million from our Home & Life products.

Revenues increased in the recent three and six-month periods as a result of increases in unit volumes and average selling prices of our products, as the current demand environment has improved relative to the prior year, which was impacted by customers reducing inventory levels relative to amounts they held during the period of widespread supply chain disruptions.

The increase in revenues in the recent nine-month period was due to increased revenues of $73.6 million from our Industrial & Commercial products and increased revenues of $84.9 million from our Home & Life products.

Revenues increased in the recent three and nine-month periods as a result of increases in unit volumes and average selling prices of our products, as the current demand environment has improved relative to the prior year, which was impacted by customers reducing inventory levels relative to amounts they held during the period of widespread supply chain disruptions.

The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, pricing decisions and other factors.

In general, as our products become more mature, we expect to experience decreases in average selling prices.

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change July 5,

2025 June 29,

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change October 4,

2025 September 28,

Gross profit $ 119.0 $ 90.3 $ 28.7 $ 324.9 $ 222.0 $ 102.9

Gross margin 57.8 % 54.3 % 3.5 % 56.4 % 53.1 % 3.3 %

Gross profit increased during the recent three and six-month period primarily as a result of increases in revenues in the periods.

Gross margin increased as our indirect and overhead expenses decreased as a percentage of revenues in the recent three and six-month period as a result of the increase in revenues.

Gross profit increased during the recent three and nine-month period primarily as a result of increases in revenues in the periods.

Gross margin increased as our indirect and overhead expenses decreased as a percentage of revenues in the recent three and nine-month period as a result of the increase in revenues.

We may experience variations in the average selling prices of certain of our products.

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Research and Development

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change July 5,

2025 June 29,

Change October 4,

2025 September 28,

2024 Change %

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Percent of revenue 42.6 % 50.0 % 45.7 % 59.7 %

Research and development expense in the recent three-month period increased, with an increase of $8.5 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, partially offset by $2.5 million of government incentives, and decreases for amortization of intangible assets and new product introduction and software expense of $2.7 million and $1.3 million respectively.

Research and development expense in the recent six-month period increased $20.6 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, offset by $5.2 million of government incentives and decreases of $3.3 million for amortization of intangible assets and $2.3 million for new product introduction and software expense.

Research and development expense in the recent three-month period increased, with an increase of $10.7 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, partially offset by decreases of $3.1 million for amortization of intangible assets and $2.8 million for new product introduction and software expense.

Research and development expense in the recent nine-month period increased $31.3 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, offset by $6.8 million of government incentives and decreases of $6.5 million for amortization of intangible assets and $5.2 million for new product introduction and software expense.

Selling, General and Administrative

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change July 5,

2025 June 29,

Change October 4,

2025 September 28,

2024 Change %

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The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $6.5 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $0.7 million increase in IT-related costs.

The increase in selling, general and administrative expense in the recent six-month period was primarily due to a $11.8 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $0.8 million increase in outside services.

The increase in selling, general and administrative expense in the recent nine-month period was primarily due to a $18.2 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $1.1 million increase in IT-related costs.

Interest Income and Other, Net

Interest income and other, net for the three and six months ended July 5, 2025 was $3.8 million and $7.6 million respectively, compared to $2.8 million and $5.5 million for the three and six months ended June 29, 2024, respectively.

The increase in interest income and other, net in the recent three and six-month period was primarily due to a higher cash and cash equivalents balance in the current year period as compared to the prior year period.

Interest income and other, net for the three and nine months ended October 4, 2025 was $3.0 million and $10.7 million respectively, compared to $3.5 million and $9.0 million for the three and nine months ended September 28, 2024,

respectively.

The decrease in interest income and other, net in the recent three-month period was primarily due to lower interest rates in the current year period as compared to the prior year period.

The increase in interest income and other, net in the recent nine-month period was primarily due a higher cash and cash equivalents balance in the current year period as compared to the prior year period.

Interest Expense

Interest expense for the three and six months ended July 5, 2025 was $0.3 million and $0.5 million, respectively, compared to $0.3 million and $0.8 million for the three and six months ended June 29, 2024, respectively.

The decrease in the recent six-month period was primarily due to a balance outstanding on the revolving credit facility for a portion of the prior year period.

Interest expense for the three and nine months ended October 4, 2025 was $0.2 million and $0.8 million, respectively, compared to $0.3 million and $1.1 million for the three and nine months ended September 28, 2024, respectively.

The decrease in the recent nine-month period was primarily due to a balance outstanding on the revolving credit facility for a portion of the prior year period.

Provision for Income Taxes

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change July 5,

2025 June 29,

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change October 4,

2025 September 28,

Provision for income taxes $ 0.4 $ 2.0 $ (1.6) $ 4.8 $ 38.3 $ (33.5)

Effective tax rate (4.3) % (7.6) % (8.4) % (29.7) %

The decrease in the provision for income taxes for the three and six months ended July 5, 2025 is primarily due to a decrease in tax expense related to the U.S.

and Singapore valuation allowance in the three and six months ended July 5, 2025 in comparison with the three and six months ended June 29, 2024.

The decrease in the provision for income taxes for the three months ended October 4, 2025 is primarily due to the release of a liability for unrecognized tax benefits in the three months ended October 4, 2025 in comparison with the three months ended September 28, 2024.

The decrease in the provision for income taxes for the nine months ended October 4, 2025 is primarily due to a decrease in tax expense related to the U.S.

and Singapore valuation allowance in the nine months ended October 4, 2025 in comparison with the nine months ended September 28, 2024.

Because of the valuation allowance, we are unable to recognize the full tax benefit of the pre-tax losses incurred in those jurisdictions in the current year.

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We intend to maintain the valuation allowance until our ability to forecast sufficient future sources of taxable income is reestablished.

On July 4, 2025, the U.S.

government enacted tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”).

The OBBBA extends and/or modifies many provisions first enacted via the Tax Cuts and Jobs Act in 2017, as well as introduces new modifications to U.S.

federal tax law.

Some provisions are effective for the 2025 tax year while others will become effective in 2026.

In our initial analysis of the OBBBA, we determined that it decreased our forecasted annual effective tax rate for the current year, primarily due to U.S.

research and experimental expenditures no longer being capitalized within net controlled foreign corporation tested income (formerly known as global intangible low-taxed income or “GILTI”), which the Company has elected to treat as a period cost .

Liquidity and Capital Resources

Our principal sources of liquidity as of July 5, 2025 consisted of $415.5 million in cash, cash equivalents and short-term investments, of which $195.7 million was held by our U.S.

Our principal sources of liquidity as of October 4, 2025 consisted of $439.0 million in cash, cash equivalents and short-term investments, of which $220.8 million was held by our U.S.

The remaining balance was held by our foreign subsidiaries.

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Operating Activities

Net cash provided by operating activities was $53.0 million during the six months ended July 5, 2025, compared to net cash used of $55.7 million during the six months ended June 29, 2024.

Operating cash flows during the six months ended July 5, 2025 reflect our net loss of $52.3 million, adjustments of $62.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $42.7 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $56.5 million at July 5, 2025 from $54.5 million at December 28, 2024.

Net cash provided by operating activities was $87.4 million during the nine months ended October 4, 2025, compared to net cash used of $24.0 million during the nine months ended September 28, 2024.

Operating cash flows during the nine months ended October 4, 2025 reflect our net loss of $62.2 million, adjustments of $91.5 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $58.1 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $67.3 million at October 4, 2025 from $54.5 million at December 28, 2024.

The increase in accounts receivable resulted primarily from normal variations in the timing of collections and billings.

Our DSO decreased to 26 days at July 5, 2025 from 29 days at December 28, 2024.

Inventory decreased to $80.9 million at July 5, 2025 from $105.6 million at December 28, 2024.

Our DSO was 29 days at October 4, 2025 and December 28, 2024.

Inventory decreased to $82.2 million at October 4, 2025 from $105.6 million at December 28, 2024.

Our inventory levels will vary based on the availability of supply and the impact of variations between forecasted demand used for purchasing inventory and actual demand.

Our DOI was 86 days at July 5, 2025 and 125 days at December 28, 2024.

Our DOI was 85 days at October 4, 2025 and 125 days at December 28, 2024.

Investing Activities

Net cash used in investing activities was $14.1 million during the six months ended July 5, 2025, compared to net cash provided of $121.1 million during the six months ended June 29, 2024.

Net cash used in investing activities was $20.8 million during the nine months ended October 4, 2025, compared to net cash provided of $151.3 million during the nine months ended September 28, 2024.

The decrease in cash inflows was principally due to a decrease in cash provided by net purchases, sales, and maturities of marketable securities of $143.6 million in the current period, and proceeds received in the prior year of $12.4 million for the sale of an equity investment.

Purchases of property and equipment increased $8.0 million during the six months ended July 5, 2025 compared to the six months ended June 29, 2024.

Purchases of property and equipment increased $12.2 million during the nine months ended October 4, 2025 compared to the nine months ended September 28, 2024.

Financing Activities

Net cash used in financing activities was $6.1 million during the six months ended July 5, 2025, compared to $52.1 million during the six months ended June 29, 2024.

Net cash used in financing activities was $6.8 million during the nine months ended October 4, 2025, compared to $51.7 million during the nine months ended September 28, 2024.

The decrease in cash outflows was principally due to a $45.0 million repayment of borrowings under the revolving credit facility in the prior year period.

As of July 5, 2025, we had a $400 million revolving credit facility.

As of October 4, 2025, we had a $400 million revolving credit facility.

We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to the greater of an aggregate of $250 million and 100% of EBITDA, plus an amount that would not cause a secured net leverage ratio to exceed 3.50 to 1.00, subject to certain conditions.

The credit facility contains various conditions, covenants, and representations with which we must be in compliance in order to borrow funds, including financial covenants that we must maintain a consolidated net leverage ratio (funded indebtedness less cash and cash equivalents up to $750 million and divided by EBITDA) of no more than 4.25 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

We were granted a waiver of compliance for the minimum interest coverage ratio through October 4, 2025.

As of July 5, 2025, we were in compliance with all of the covenants and no amounts were outstanding on the revolving credit facility.

As of October 4, 2025, we were in compliance with all of the covenants and no amounts were outstanding on the revolving credit facility.

Capital Requirements

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interest rates.

A 100 basis point decline in yield on our investment portfolio holdings as of July 5, 2025 would decrease our future annual interest income by approximately $3.4 million.

A 100 basis point decline in yield on our investment portfolio holdings as of October 4, 2025 would decrease our future annual interest income by approximately $3.4 million.

We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

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The interest rate on the credit facility consists of a variable-rate of interest and an applicable margin.

While we have drawn

from the credit facility in the past, we have no borrowings as of July 5, 2025.

While we have drawn from the credit facility in the past, we have no borrowings as of October 4, 2025.

If we borrow from the credit facility in the future, we will again be exposed to interest rate fluctuations.

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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