What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-05-05 · 71 added, 63 removed, 151 unchanged (47% of the section changed)

6 unchanged sentences

Fiscal 2025 had 53 weeks with the extra week occurring in the first quarter of the year.

Our first quarter of fiscal 2026 ended April 4, 2026 and our first quarter of fiscal 2025 ended April 5, 2025.

Our second quarter of fiscal 2026 ended July 4, 2026 and our second quarter of fiscal 2025 ended July 5, 2025.

Proposed Merger

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The Merger is expected to close in the first half of 2027, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals.

In connection with the proposed Merger, for the three months ended April 4, 2026 we have incurred $11.2 million of costs, and expect to continue to incur financial advisory, legal, accounting, and other professional fees prior to the completion of the Merger, which could be significant.

In connection with the proposed Merger, for the three and six months ended July 4, 2026 we have incurred $9.6 million and $20.8 million of costs, respectively, and expect to continue to incur financial advisory, legal, accounting, and other related costs prior to the completion of the Merger, which could be significant.

Impact of Macroeconomic Conditions

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and other jurisdictions continues to evolve, and we cannot be certain of the outcome, which could adversely impact demand for our products, costs, customers, suppliers, and general economic conditions.

Continued geopolitical instability, including the ongoing war in Ukraine and the war in Iran and other conflicts in the Middle East, volatility in energy markets and recent increases in oil prices driven by geopolitical conflicts, the risk of inflation, slower GDP growth, or recession, and the weakening U.S.

dollar, have added to the uncertainty.

The extent of the impact of the macroeconomic and geopolitical environment on our operational and financial performance will depend on future developments, which are uncertain, but could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

The extent of the impact of macroeconomic conditions on our operational and financial performance will depend on future developments, their impact to the business of our suppliers and/or customers, and other items identified under “Risk Factors” below, all of which are uncertain and cannot be predicted.

The extent of the impact of the macroeconomic and geopolitical environment on our operational and financial performance will depend on future developments, their impact to the business of our suppliers and/or customers, and other items identified under “Risk Factors” below, all of which are uncertain and cannot be predicted, but could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

See the section entitled “Risk Factors” in Part II, Item 1A of the Form 10-Q for further discussion.

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Each wafer contains numerous die, which are cut from the wafer to create a chip for an IC.

We rely on third parties in Asia to assemble, package, and, in most cases, test these devices and ship these units to our customers.

We rely on third parties in Asia to

assemble, package, and, in most cases, test these devices and ship these units to our customers.

Testing performed by such third parties facilitates faster delivery of products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower costs and increased flexibility of test capacity.

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Current Period Highlights

Revenues increased $35.8 million in the recent quarter compared to the first quarter of fiscal 2025 due to increased revenues from our Industrial & Commercial products and our Home & Life products.

Revenues increased $35.3 million in the recent quarter compared to the second quarter of fiscal 2025 due to increased revenues from our Industrial & Commercial products and our Home & Life products.

Gross profit increased $32.6 million during the same period primarily as a result of the increase in revenues.

Gross margin increased to 59.5% in the recent quarter compared to 55.0% in the first quarter of fiscal 2025 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $14.2 million in the recent quarter compared to the first quarter of fiscal 2025 primarily due to costs related to the Merger.

Operating loss in the recent quarter was $17.1 million compared to operating loss of $32.1 million in the first quarter of fiscal 2025.

Gross margin increased to 61.6% in the recent quarter compared to 56.1% in the second quarter of fiscal 2025 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $20.4 million in the recent quarter compared to the second quarter of fiscal 2025 primarily due to higher personnel-related costs and costs related to the Merger.

Operating loss in the recent quarter was $10.7 million compared to operating loss of $22.9 million in the second quarter of fiscal 2025.

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

We ended the first quarter of fiscal 2026 with $438.9 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $4.9 million during the current year three-month period.

Accounts receivable were $77.1 million at April 4, 2026, representing 33 days sales outstanding (“DSO”).

Inventory was $103.2 million at April 4, 2026, representing 107 days of inventory (“DOI”).

During the three months ended April 4, 2026, we had no customer that represented more than 10% of our revenues.

We ended the second quarter of fiscal 2026 with $397.2 million in cash, cash equivalents, and short-term investments.

Net cash used in operating activities was $9.6 million during the current year six-month period.

Accounts receivable were $79.8 million at July 4, 2026, representing 31 days sales outstanding (“DSO”).

Inventory was $123.3 million at July 4, 2026, representing 127 days of inventory (“DOI”).

During the six months ended July 4, 2026, 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 three months ended April 4, 2026.

The percentage of our revenues derived from outside of the United States was 92% during the three months ended April 4, 2026.

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 4, 2026.

The percentage of our revenues derived from outside of the United States was 90% during the six months ended July 4, 2026.

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

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costs of personnel and equipment associated with manufacturing support, logistics, and quality assurance;

costs of royalties, other intellectual property license costs, and certain acquired intangible assets;

costs of royalties, other intellectual property license costs, and

certain acquired intangible assets;

and an allocated portion of our occupancy costs.

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Selling, General and Administrative.

Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation, as well as an allocated portion of our occupancy costs, sales commissions to independent sales representatives, amortization of intangible assets, professional fees, legal fees, and promotional and marketing expenses.

Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation, as well as costs incurred due to the Merger, an allocated portion of our occupancy costs, sales commissions to independent sales representatives, amortization of intangible assets, professional fees, legal fees, and promotional and marketing expenses.

Interest Income and Other, Net.

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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

2026 April 5,

Three Months Ended Six Months Ended

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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Net loss (4.6) % (11.3) % (6.0) % (14.1) %

Three Months Ended

(in millions) April 4,

2026 April 5,

Three Months Ended Six Months Ended

(in millions) July 4,

2025 Change %

Change July 4,

2025 Change %

Industrial & Commercial $ 135.0 $ 109.8 $ 25.2 23.0 % $ 262.9 $ 205.8 $ 57.1 27.8 %

2 unchanged sentences

The increase in revenues in the recent three-month period was due to increased revenues of $25.2 million from our Industrial & Commercial products and increased revenues of $10.1 million from our Home & Life products.

Revenues increased in the recent three-month periods as a result of increases in unit volumes of our products relative to the prior year.

The increase in revenues in the recent six-month period was due to increased revenues of $57.1 million from our Industrial & Commercial products and increased revenues of $14.0 million from our Home & Life products.

Revenues increased in the recent three and six-month periods as a result of increases in unit volumes of our products relative to the prior year.

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

(in millions) April 4,

2026 April 5,

Three Months Ended Six Months Ended

(in millions) July 4,

2025 Change July 4,

Gross profit $ 140.7 $ 108.1 $ 32.6 $ 267.7 $ 205.9 $ 61.8

Gross margin 61.6 % 56.1 % 5.5 % 60.6 % 55.6 % 5.0 %

Gross profit increased during the recent three-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-month period as a result of the increase in revenues.

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.

Increased product demand and production capacity constraints may affect the costs of our products, and the prices we pay for inventory may increase in future periods which could reduce our gross margins.

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

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Research and Development

Three Months Ended

(in millions) April 4,

2026 April 5,

Three Months Ended Six Months Ended

(in millions) July 4,

2025 Change %

Change July 4,

2025 Change %

Research and development $ 95.0 $ 87.8 $ 7.2 8.2 % $ 183.6 $ 176.0 $ 7.6 4.3 %

Percent of revenue 41.6 % 45.5 % 41.6 % 47.5 %

Research and development expense in the recent three-month period increased, with increases of $1.7 million for new product introduction costs, $1.0 million from lower government incentives, and $0.6 million for IT-related costs, partially offset by a decrease of $3.1 million for amortization of intangible assets.

Research and development expense in the recent three-month period increased, with increases of $3.3 million from costs incurred due to the Merger, $2.7 million from personnel-related costs, and $1.0 million from lower government incentives.

Research and development expense in the recent six-month period increased, with increases of $3.3 million from costs incurred due to the Merger, $2.8 million from personnel-related costs, $2.1 million for new product introduction costs, $2.0 million from lower government incentives, and $0.8 million for IT-related costs, partially offset by a decrease of $4.2 million for amortization of intangible assets.

Selling, General and Administrative

Three Months Ended

(in millions) April 4,

2026 April 5,

Three Months Ended Six Months Ended

(in millions) July 4,

2025 Change %

Change July 4,

2025 Change %

Selling, general and administrative $ 56.3 $ 43.2 $ 13.1 30.3 % $ 111.8 $ 84.8 $ 27.0 31.8 %

Percent of revenue 24.7 % 22.4 % 25.3 % 22.9 %

The increase in selling, general and administrative expense in the recent three-month period was primarily due to $11.2 million from costs incurred due to the Merger, and a $2.9 million increase in personnel-related costs.

The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $6.4 million increase in personnel-related costs and $6.3 million from costs incurred due to the Merger.

The increase in selling, general and administrative expense in the recent six-month period was primarily due to $17.5 million from costs incurred due to the Merger, and a $9.2 million increase in personnel-related costs.

Interest Income and Other, Net

Interest income and other, net for the three months ended April 4, 2026 was $3.6 million, compared to $3.8 million for the three months ended April 5, 2025.

Interest income and other, net for the three and six months ended July 4, 2026 was $2.5 million and $6.1 million, respectively, compared to $3.8 million and $7.6 million, respectively, for the three and six months ended July 5, 2025.

Interest Expense

Interest expense for the three months ended April 4, 2026 was $0.2 million, compared to $0.3 million for the three months ended April 5, 2025.

Interest expense for the three and six months ended July 4, 2026 was $0.3 million and $0.5 million, respectively, compared to $0.3 million and $0.5 million, respectively, for the three and six months ended July 5, 2025.

Provision for Income Taxes

Three Months Ended

(in millions) April 4,

2026 April 5,

Three Months Ended Six Months Ended

(in millions) July 4,

2025 Change July 4,

Provision for income taxes $ 2.2 $ 2.5 $ (0.3) $ 4.4 $ 4.4 $ —

Effective tax rate (25.7) % (13.1) % (19.8) % (9.3) %

The decrease in the effective tax rate for the three months ended April 4, 2026 is primarily due to a decrease in pre-tax book loss, as the impact of permanent items is relatively greater when the pre-tax loss is smaller.

The decrease in the effective tax rate for the three and six months ended July 4, 2026 is primarily due to a decrease in pre-tax book loss, as the impact of permanent items is relatively greater when the pre-tax loss is smaller.

Liquidity and Capital Resources

Our principal sources of liquidity as of April 4, 2026 consisted of $438.9 million in cash, cash equivalents and short-term investments, of which $250.3 million was held by our U.S.

Our principal sources of liquidity as of July 4, 2026 consisted of $397.2 million in cash, cash equivalents and short-term investments, of which $243.8 million was held by our U.S.

The remaining balance was held by our foreign subsidiaries.

Our cash equivalents and short-term investments consisted of government debt securities, which include U.S.

government securities;

time deposits;

and money market funds.

government securities and money market funds.

Operating Activities

Net cash provided by operating activities was $4.9 million during the three months ended April 4, 2026, compared to net cash provided of $48.1 million during the three months ended April 5, 2025.

Operating cash flows during the three months ended April 4, 2026 reflect our net loss of $15.9 million, adjustments of $30.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash outflow of $9.7 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $77.1 million at April 4, 2026 from $64.5 million at January 3, 2026.

Net cash used in operating activities was $9.6 million during the six months ended July 4, 2026, compared to net cash provided of $53.0 million during the six months ended July 5, 2025.

Operating cash flows during the six months ended July 4, 2026 reflect our net loss of $26.5 million, adjustments of $65.1 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash outflow of $48.2 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $79.8 million at July 4, 2026 from $64.5 million at January 3, 2026.

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

Our DSO was 33 days at April 4, 2026 and 28 days at January 3, 2026.

Inventory increased to $103.2 million at April 4, 2026 from $95.6 million at January 3, 2026.

Our DSO was 31 days at July 4, 2026 and 28 days at January 3, 2026.

Inventory increased to $123.3 million at July 4, 2026 from $95.6 million at January 3, 2026.

Inventory has increased in order to minimize potential supply disruptions and meet forecasted future demand.

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 107 days at April 4, 2026 and 113 days at January 3, 2026.

Our DOI was 127 days at July 4, 2026 and 113 days at January 3, 2026.

Investing Activities

Net cash provided by investing activities was $14.9 million during the three months ended April 4, 2026, compared to net cash used of $3.9 million during the three months ended April 5, 2025.

The increase in cash inflows was principally due to an increase in cash provided by net purchases, sales, and maturities of marketable securities of $22.5 million and the receipt of $1.3 million of proceeds from capital-related government incentives in the current period.

Purchases of property and equipment increased $5.0 million during the three months ended April 4, 2026 compared to the three months ended April 5, 2025.

Net cash provided by investing activities was $27.2 million during the six months ended July 4, 2026, compared to net cash used of $14.1 million during the six months ended July 5, 2025.

The increase in cash inflows was principally due to cash proceeds from maturities of marketable securities of $44.1 million compared to a net cash outflow of $0.5 million from purchases, sales, and maturities of marketable securities in the prior year, and the receipt of $5.3 million of proceeds from capital-related government incentives in the current period.

Purchases of property and equipment increased $8.6 million during the six months ended July 4, 2026 compared to the six months ended July 5, 2025.

Financing Activities

Net cash used in financing activities was $1.0 million during the three months ended April 4, 2026, compared to $1.0 million during the three months ended April 5, 2025.

As of April 4, 2026, we had a $400 million revolving credit facility.

Net cash used in financing activities was $19.7 million during the six months ended July 4, 2026, compared to $6.1 million during the six months ended July 5, 2025.

The increase in cash outflows was principally due to an increase in payment of taxes withheld for vested stock awards of $13.7 million.

As of July 4, 2026, 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.

As of April 4, 2026, we were in compliance with all of the covenants and no amounts were outstanding on the revolving credit facility.

As of July 4, 2026, 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 April 4, 2026 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 July 4, 2026 would decrease our future annual interest income by approximately $2.7 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 had no borrowings as of April 4, 2026.

While we have drawn from the credit facility in the past, we had no borrowings as of July 4, 2026.

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

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dollars are recorded in the Condensed Consolidated Statements of Operations.

We may use foreign currency forward contracts to manage exposure to foreign exchange risk.

We may use foreign currency forward contracts to manage exposure to

foreign exchange risk.

Gains and losses on foreign currency forward contracts designated as hedging instruments are recognized in earnings in the same period during which the hedged transaction is recognized.

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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