Ultra Clean Holdings, Inc. 10-Q

ITEM 2. Management’s Discussion And Analysis of Financial Condition And Results Of Operations You should read the following discussion of our financial condition and results of operations in conjunction with the Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on February 25, 2025. This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding our expectations, beliefs, intentions, strategies, future operations, future financial position, future revenue, projected expenses, gross margins and plans and objectives of management. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “continue,” “objective,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and involve known risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on February 25, 2025. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Overview Ultra Clean Holdings, Inc., (“UCT”, the “Company” or “We”) is a leading developer and supplier of critical subsystems, components, parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. We report results for two segments: Products and Services. Our Products segment primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. Products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules as well as other high-level assemblies. Our Services segment provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication equipment (“WFE”) markets. We ship a majority of our products and provide most of our services to U.S. registered customers with both domestic and international locations. In addition to U.S. manufacturing and service operations, we manufacture products and provide parts cleaning and other related services in our Asia Pacific, Europe and Middle East (“EMEA”) facilities to support local and U.S. based customers. We conduct our operating activities primarily through our subsidiaries. Over the long term, we believe the semiconductor market we serve will continue to grow due to multi-year industry demand from a broad range of drivers, such as new process architecture (e.g. gate all around) and memory devices (e.g. high bandwidth memory) necessary for cloud, artificial intelligence (“AI”) and machine learning (“ML”) applications. We also believe that semiconductor original equipment manufacturers (“OEM”) are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, our Services business is benefiting as device manufacturers rely on precision cleaning and coating to achieve ever more advanced devices. Critical Accounting Estimates Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Condensed Consolidated Financial Statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations, contingent earn-out liabilities and goodwill, intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each. - 25 - Table of Contents There have been no significant changes to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K subsequent to December 27, 2024. For further information on our critical and other significant accounting policies and estimates, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, as filed with the SEC. Goodwill As discussed in Note 4, Goodwill and Intangible Assets Goodwill to our condensed consolidated financial statements, we performed a quantitative goodwill impairment assessment in the second quarter of 2025, which resulted in goodwill impairment charges of $151.1 million related to the Fluid Solutions and Services reporting units. The fair value estimate of each reporting unit was derived from an income approach. Under the income approach, we estimated the fair value of the reporting unit based on the present value of estimated future cash flows. We prepared cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration historical performance and the current macroeconomic, industry, and market conditions. We based the discount rate on the weighted-average cost of capital considering company-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows. Revenue growth rates, operating margins, and the discount rate applied were significant assumptions used to determine the fair value of each reporting unit. The concluded fair value of our reporting units was reconciled to our market capitalization. The excess of the concluded fair value over our market capitalization represents an implied control premium, which we reviewed for reasonableness by comparison to observed transaction premiums and consideration of specific attributes of the Company. If the actual results are not consistent with the assumptions and judgments we have made in determining the fair value of our reporting units, we may record additional impairment losses. The fair values of the Core Products and the Fluid Delivery Systems reporting units, both of which are part of the Products segment, were each substantially in excess of their respective carrying values. Results of Operations Fiscal Year Our fiscal year is the 52- or 53-week period ending on the Friday nearest December 31. Fiscal year 2025 is a 52-week period ending December 26, 2025 and fiscal year 2024 was a 52-week ended December 27, 2024. The fiscal quarters ended September 26, 2025 and September 27, 2024 were both 13-week periods. Discussion of Results of Operations for the Three and Nine months ended September 26, 2025 compared to the Three and Nine months ended September 27, 2024 Revenues Three Months Ended Nine Months Ended Revenues by Segment (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Products $ 445.0 $ 479.0 (7.1) % $ 1,356.9 $ 1,350.2 0.5 % Services 65.0 61.4 5.9 % 190.4 184.1 3.4 % Total revenues $ 510.0 $ 540.4 (5.6) % $ 1,547.3 $ 1,534.3 0.8 % Products as a percentage of total revenues 87.3 % 88.6 % 87.7 % 88.0 % Services as a percentage of total revenues 12.7 % 11.4 % 12.3 % 12.0 % For the three-month period ended September 26, 2025, Products revenue decreased compared to the same period in the prior year. The decrease was primarily driven by lower customer demand, reflecting a temporary slowdown in customer purchasing activity in response to short-term market conditions. For the nine-month period ended September 26, 2025, Products revenue was flat compared to the same period in the prior year, reflecting the broadly consistent year over year state of the semiconductor industry. Service revenues for the three and nine-month periods ended September 26, 2025, increased compared to the same periods in the prior year, primarily driven by higher demand across its customer base. - 26 - Table of Contents Three Months Ended Nine Months Ended Revenues by Geography (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change United States $ 120.6 $ 145.6 (17.2) % $ 378.2 $ 432.7 (12.6) % International 389.4 394.8 (1.4) % 1,169.1 1,101.6 6.1 % Total revenues $ 510.0 $ 540.4 (5.6) % $ 1,547.3 $ 1,534.3 0.8 % United States as a percentage of total revenues 23.6 % 26.9 % 24.4 % 28.2 % International as a percentage of total revenues 76.4 % 73.1 % 75.6 % 71.8 % Revenues by geographic area are categorized based on the customer’s location to which the products were shipped or services were performed. For the three and nine months ended September 26, 2025, U.S. revenues decreased compared to the same periods in the prior year, primarily due to a shift of product revenues from U.S. to international locations. As a result, international revenues as a percentage of total revenues increased compared to the same periods in the prior year. Cost of Revenues Three Months Ended Nine Months Ended Cost of revenues by Segment (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Products $ 380.4 $ 403.3 (5.7) % $ 1,163.9 $ 1,141.2 2.0 % Services 47.4 43.7 8.5 % 137.8 128.6 7.2 % Total Cost of revenues $ 427.8 $ 447.0 (4.3) % $ 1,301.7 $ 1,269.8 2.5 % Products cost as a percentage of total Products revenues 85.5 % 84.2 % 85.8 % 84.5 % Services cost as a percentage of total Services revenues 72.9 % 71.2 % 72.4 % 69.9 % Cost of Products revenues consists of purchased materials, direct labor and manufacturing overhead. For the three-month period ended September 26, 2025, Cost of Products revenues decreased by $22.9 million compared to the same period in the prior year. The decrease was primarily driven by lower sales volumes, which led to a $23.3 million reduction in material costs, partially offset by higher restructuring-related costs and increased tariffs and duties. For the nine-month period ended September 26, 2025, Cost of Products revenues increased by $22.7 million compared to the same period in the prior year. Although product revenues were relatively flat, the increase in cost was primarily due to changes in product mix, which led to a $10.8 million increase in material costs. The remaining increase was attributable to higher overhead costs associated with increased production activity, as well as restructuring activities, tariffs and duties. Services Cost of revenues consists of direct labor, overhead, and materials such as chemicals, gases and consumables. For the three and nine-month periods ended September 26, 2025, Services Cost of revenues increased by $3.7 million and $9.2 million, respectively, compared to the same periods in the prior year. The increase for the three-month period was driven by higher sales, which resulted in increased headcount, overtime, and employee-related expenses at a specific location, as well as higher restructuring-related activities. The increase for the nine-month period was driven by a higher volume of service orders, and increases in headcount, overtime and employee-related expenses for a specific location, resulting in a $5.8 million in additional costs, as well as higher overhead costs and restructuring-related activities. - 27 - Table of Contents Gross Margin Three Months Ended Nine Months Ended Gross Profit by Segment (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Products $ 64.6 $ 75.7 (14.7) % $ 193.0 $ 209.0 (7.7) % Services 17.6 17.7 (0.6) % 52.6 55.5 (5.2) % Gross profit $ 82.2 $ 93.4 (12.0) % $ 245.6 $ 264.5 (7.1) % Gross Margin by Segment Products 14.5 % 15.8 % 14.2 % 15.5 % Services 27.1 % 28.8 % 27.6 % 30.1 % Total Company 16.1 % 17.3 % 15.9 % 17.2 % Gross profit and gross margins fluctuate with revenue levels, product mix, material costs, and labor costs. Products gross profit and gross margin decreased for the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year, primarily due to higher employee and restructuring-related costs, as well as increased duties and tariffs. Services gross profit and gross margin decreased for the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year, primarily due to higher cost of revenues driven by increased labor and compensation-related costs at a specific location. Operating Margin Three Months Ended Nine Months Ended Operating Profit by Segment (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Products $ 7.9 $ 22.4 (64.7) % $ (52.8) $ 55.9 (194.5) % Services 2.7 2.8 (3.6) % (65.5) 9.4 (796.8) % Operating profit $ 10.6 $ 25.2 (57.9) % $ (118.3) $ 65.3 (281.2) % Operating Margin by Segment Products 1.8 % 4.7 % (3.9 %) 4.1 % Services 4.2 % 4.6 % (34.4 %) 5.1 % Total Company 2.1 % 4.7 % (7.6 %) 4.3 % Operating profit and operating margin for both Products and Services decreased for the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year. The decline for the for the three-month period was due to higher employee-related expenses, including costs associated with involuntary separations and a voluntary retirement program, each a part of the Company’s ongoing restructuring efforts, as well as increases in duties and tariffs. The decline for the for the nine-month period was primarily driven by the goodwill impairment recorded in the second quarter of fiscal year 2025, and increases in stock-based compensation and severance costs due to restructuring activities, including both involuntary separations and a voluntary retirement program. Research and Development Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Research and development $ 7.8 $ 7.1 9.9 % $ 23.2 $ 21.2 9.4 % Research and development as a percentage of total revenues 1.5 % 1.3 % 1.5 % 1.4 % Research and development expenses increased for both the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year. The increase in the current period was primarily driven by higher employee-related expenses, including costs associated with involuntary separations and a voluntary retirement program, each a part of the Company’s ongoing restructuring efforts. - 28 - Table of Contents Sales and Marketing Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Sales and marketing $ 15.1 $ 14.4 4.9 % $ 45.5 $ 42.9 6.1 % Sales and marketing as a percentage of total revenues 3.0 % 2.7 % 2.9 % 2.8 % Sales and marketing expenses increased for both the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year. The increase was primarily driven by higher restructuring-related costs, including expenses associated with involuntary separations and a voluntary retirement program. General and Administrative Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change General and administrative $ 48.7 $ 46.7 4.3 % $ 144.1 $ 135.1 6.7 % General and administrative as a percentage of total revenues 9.5 % 8.6 % 9.3 % 8.8 % General and administrative expenses increased $2.0 million and $9.0 million in the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year. The increase in the three-month period ended September 26, 2025 was primarily driven by an increase severance payments due to restructuring activities, including both involuntary separations and a voluntary retirement program. The increase in the nine-month period ended September 26, 2025 was primarily driven by increase in stock-based compensation, a separation payment made to the prior CEO, and increased restructuring activities, including both involuntary separations and a voluntary retirement program. Impairment of Goodwill Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Impairment of Goodwill $ — $ — n/m $ 151.1 $ — n/m Impairment of goodwill represents a non-cash charge of $151.1 million recorded in the second quarter of 2025, as the fair values of our Fluid Solutions and Services reporting units were determined to be below their carrying amounts. No impairment charges were recorded for the three-month period ended September 26, 2025. Refer to Note 4, Goodwill and Intangible Assets to the condensed consolidated financial statements for more information. Interest and Other Expense, net Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Interest income $ 1.1 $ 1.1 — % $ 3.0 $ 3.9 (23.1) % Interest expense $ (9.9) $ (12.0) (17.5) % $ (29.9) $ (35.8) (16.5) % Other income (expense), net $ (1.2) $ (4.1) (70.7) % $ (2.5) $ 9.3 (126.9) % Interest income decreased in the nine-month period ended September 26, 2025 compared to the same period in the prior year due to lower interest earning balances. Interest expense decreased for the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year primarily due to lower interest rates and reduced amortization of debt issuance costs. Other income (expense), net, for the three-month period ended September 26, 2025 was primarily comprised of $1.1 million debt modification related costs. In the prior period, the Company recognized an $0.8 million loss related to the fair value adjustment of the contingent earn-out from the HIS acquisition, as well as unrealized foreign exchange losses of $3.5 million. - 29 - Table of Contents Other income (expense), net, for the nine-month period was primarily comprised of unrealized foreign exchange losses of $3.4 million and $1.0 million debt modification related costs offset by government grants received of $2.2 million. In the prior period, the Company recognized a $22.0 million gain related to the fair value adjustment of the contingent earn-out from the HIS acquisition which was partially offset by unrealized foreign exchange losses of $8.7 million and debt modification costs of $3.6 million. Provision for Income Taxes Three Months Ended Nine Months Ended (Dollars in millions) September 26, 2025 September 27, 2024 Percent Change September 26, 2025 September 27, 2024 Percent Change Provision for income taxes $ 8.7 $ 9.9 (12.1) % $ 23.3 $ 28.2 (17.4) % Effective tax rate 1450.0 % 97.1 % -15.8 % 66.0 % The decrease in the provision for income taxes for the three and nine-month periods ended September 26, 2025 compared to the same periods in the prior year is primarily attributable to the changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full valuation allowances on deferred tax assets. The tax provision for the three and nine months ended September 26, 2025, includes the impact of a change in the Company’s assertion that earnings from fiscal 2023 and going forward in one of its subsidiaries in China are no longer permanently reinvested. As a result, the Company recorded a discrete tax expense of $3.4 million in the second quarter of 2025. The Company will also record deferred taxes on the undistributed current and future year earnings of this China subsidiary. Company management continuously evaluates the need for a valuation allowance on its deferred tax assets and, as of September 26, 2025, concluded that a full valuation allowance on its U.S. federal, state and certain of its foreign deferred tax assets remained appropriate. Liquidity and Capital Resources Cash and cash Equivalents The following table summarizes our cash and cash equivalents: (In millions) September 26, 2025 December 27, 2024 Increase Total cash and cash equivalents $ 314.1 $ 313.9 $ 0.2 The following table summarizes the Condensed Consolidated Statements of Cash Flow information: Nine Months Ended (In millions) September 26, 2025 September 27, 2024 Operating activities $ 57.5 $ 47.9 Investing activities (37.0) (46.2) Financing activities (22.3) 8.8 Effects of exchange rate changes on cash and cash equivalents 2.0 0.7 Net increase in cash and cash equivalents $ 0.2 $ 11.2 Our primary cash inflows and outflows were as follows: • For the nine-month period ended September 26, 2025, we generated cash from operating activities of $57.5 million compared to $47.9 million for the same period in the prior year. The $9.6 million increase in net cash provided by operating activities was primarily driven by a $20.2 million favorable change in net working capital. • The major contributors in net changes in operating assets and liabilities for the nine-month period ended September 26, 2025 were as follows: ◦ Accounts receivable decreased $41.6 million primarily due to the timing of shipments and collections, as well as the sale of accounts receivable through factoring arrangements. Operating lease assets and liabilities decreased $10.2 million, reflecting lease payments and amortization. Prepaid expenses and - 30 - Table of Contents other current assets increased by $6.3 million due to advance payments and prepayments related to various expenses. ◦ Accounts payable decreased $22.8 million, other liabilities by $4.6 million, and income tax payable by $12.1 million, as a result of elevated prepayment activity. • Net cash used in investing activities during the nine-month periods ended September 26, 2025 and September 27, 2024 consisted primarily of $40.2 million and $46.2 million purchases of property, plant and equipment, respectively. During the nine months ended September 26, 2025, we received an asset-related government grant amounting to $2.9 million. • During the nine month period ended September 26, 2025, cash used in financing activities was $22.3 million compared to $8.8 million cash provided in the same period in the prior year. The $31.1 million increase in net cash used by financing activities was primarily due to $23.5 million net cash proceeds from bank borrowings related to the debt modification in the prior period. We believe we have sufficient capital to fund our working capital needs, satisfy our debt obligations, maintain our existing capital equipment, purchase new capital equipment and make strategic acquisitions from time to time. As of September 26, 2025, we had cash and cash equivalents of $314.1 million compared to $313.9 million as of December 27, 2024. Our cash and cash equivalents, cash generated from operations, and amounts available under our revolving line of credit described below were our principal sources of liquidity as of September 26, 2025. In the second quarter of 2025, we entered into a factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We utilize this factoring arrangement as part of our financing for working capital. For the three and nine-months ended September 26, 2025, we sold accounts receivable totaling $21.5 million and $39.3 million, respectively, under this arrangement. In addition, Fluid Solutions has an existing factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement. For the nine-month period ended September 26, 2025, we sold accounts receivable totaling $11.6 million under this arrangement, and no accounts receivable were sold during the three month period ended September 26, 2025. We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months. The adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth, the size and number of any acquisitions, the state of the worldwide economy, our ability to meet our financial covenants with our credit facility, the cyclical expansion or contraction of the semiconductor capital equipment industry and the other industries we serve and capital expenditures required to meet possible increased demand for our products. In order to expand our business or acquire additional complementary businesses or technologies, we may need to raise additional funds through equity or debt financing. If required, additional financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, our stockholders’ equity interest will be diluted and these securities might have rights, preferences and privileges senior to those of our current stockholders. We may also require the consent of our new lenders to raise additional funds through equity or debt financing. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us. As of September 26, 2025, we have cash of approximately $250.3 million in our foreign subsidiaries. It is not practicable to determine the tax liability that might be incurred if the undistributed earnings of these foreign subsidiaries were to be distributed. It is the Company’s practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those operations, except for certain of its subsidiaries based in Singapore and China. There is no expected Singapore or U.S. tax liability on a distribution of the Singapore earnings. However, the Company has accrued taxes on a portion of the undistributed earnings of the China subsidiary in its financial statements as of September 26, 2025. - 31 - Table of Contents Borrowing Arrangements The following table summarizes our borrowings: September 26, 2025 (Dollars in millions) Amount Weighted- Average Interest Rate U.S. Term Loan $ 481.5 7.5 % Debt issuance costs (5.1) $ 476.4 At September 26, 2025, the Company had an outstanding amount under the Term Loan of $481.5 million, gross of unamortized debt issuance costs of $5.1 million. As of September 26, 2025, the interest rate on the outstanding Term Loan was 6.9%. As of September 26, 2025, the Company had $146.6 million, net of $3.4 million of outstanding letters of credit, available under this revolving credit facility. As of September 26, 2025, the Company was in compliance with the financial covenants contained within the Amended Credit Agreement. The Company maintains credit agreements with a local bank in Czechia and with a financial institution in Israel, which provide for revolving credit facilities of up to 7.0 million euros (approximately $8.2 million) and $5.0 million, respectively. As of September 26, 2025, there were no borrowings outstanding under these facilities. As of September 26, 2025, the Company’s total bank debt was $476.4 million, net of unamortized debt issuance costs of $5.1 million. As of September 26, 2025, the Company had $146.6 million, $5.0 million, and 5.5 million euros (approximately $6.4 million) available to draw from its credit facilities in the U.S., Israel and Czechia, respectively. See Note 6 - Borrowing Arrangements, of our Condensed Consolidated Financial Statements, included in Part 1 of this Form-10Q for additional information. Capital Expenditures Capital expenditures were $40.2 million during the nine months ended September 26, 2025 and were primarily attributable to the capital invested in our manufacturing facilities worldwide. The Company anticipates that capital expenditures for the remainder of 2025 will be financed primarily through cash flow generated from operations and cash on hand. Contractual Obligations The Company had commitments to various third parties to purchase inventories totaling approximately $463.0 million as of September 26, 2025. In conjunction with the sale of our products in the ordinary course of business, we provide standard indemnification against certain liabilities to our customers, which may include claims of losses by their own customers resulting out of property damages, bodily injuries or deaths, or infringement of intellectual property rights by our products. Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped. As of September 26, 2025, we have not incurred any significant costs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal. - 32 - Table of Contents