What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2025-01-31 · 127 added, 118 removed, 267 unchanged (48% of the section changed)

13 unchanged sentences

• Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues;

• Our latest projections regarding the impact of tariffs and our strategies for mitigating such impact;

• Our expectations related to future tax liabilities resulting from future tax legislation;

• Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions, including potential global tariffs, ongoing geopolitical tensions including the conflict between Russia and Ukraine, the instability in the Middle East and the sustainability of recent cease-fire agreements, on our business, operations and financial results.

• Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions, including global tariffs, ongoing geopolitical tensions including the conflict between Russia and Ukraine, the instability in the Middle East and the sustainability of recent cease-fire agreements, on our business, operations and financial results.

Management cautions that forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements.

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• Optical Security and Performance Products (OSP).

During the second quarter of fiscal 2025, the Network and Service Enablement (NSE) business environment began showing signs of stabilization and heading towards a gradual recovery in fiscal 2025, driven by recovering spend from service providers and enterprise customer markets.

OSP performance was marginally impacted by slower demand for 3D sensing products.

We continue to monitor the near-term demand for anti-counterfeiting products as the end customers work down their inventories.

During the third quarter of fiscal 2025, the Network and Service Enablement (NSE) business grew year-over-year driven by recovery and growth across many of our product segments.

OSP performance slightly improved year over year.

We continue to monitor the demand for anti-counterfeiting products and are starting to see a demand supply equilibrium emerge in the anti-counterfeiting business.

Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share (EPS) and cash flow from operations.

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Looking Ahead

As we look forward to the third quarter of fiscal 2025, we are seeing many of our end markets stabilize, which we believe indicates the beginning of a gradual recovery and expect this to continue in the second half of fiscal 2025.

As we look forward to the fourth quarter of fiscal 2025, we continue to see gradual recovery across many of our end markets and expect it to continue despite the evolving macro environment.

Our long-term focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure.

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• Continue productivity improvements in Operations, Research and Development (R&D) and Selling, General and Administrative (SG&A).

In April 2025, the U.S.

administration announced broad-based, updated global tariffs and the situation continues to be dynamic and evolving.

As we operate in this challenging environment, we are focused on continuing to deliver our products and services to our customers.

Given our global business, tariffs will result in additional cost for us and our suppliers.

We are analyzing ways to optimize our operations and supply chain and strategies to reduce the impact from tariffs.

Additionally, we are taking measures to control cost and implementing pricing actions to primarily mitigate the remaining impact.

Financial Highlights

Second quarter fiscal 2025 results included the following notable items:

Third quarter fiscal 2025 results included the following notable items:

• Net revenue of $284.8 million, up $38.8 million or 15.8% year-over-year.

• GAAP operating margin of 8.2%, down 60 bps year-over-year.

• GAAP operating margin of 3.0%, up 780 bps year-over-year.

• Non-GAAP operating margin of 16.7%, up 740 bps year-over-year.

• GAAP net income of $9.1 million, down $1.6 million or 15.0% year-over-year.

• GAAP net income of $19.5 million, up $44.1 million or 179.3% year-over-year.

• Non-GAAP net income of $33.9 million, up $20.7 million or 156.8% year-over-year.

• GAAP diluted EPS of $0.04, down $0.01 or 20.0% year-over-year.

• GAAP diluted EPS of $0.09, up $0.20 or 181.8% year-over-year.

• Non-GAAP diluted EPS of $0.15, up $0.09 or 150.0% year-over-year.

A reconciliation of GAAP financial measures to Non-GAAP financial measures is provided below (in millions, except EPS amounts) :

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin

Three Months Ended Nine Months Ended

March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024

Operating Income Operating Margin Operating (Loss) Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin

GAAP measures $ 8.5 3.0 % $ (11.9) (4.8) % $ 42.2 5.3 % $ 26.5 3.5 %

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Acquisition and integration related charges 13.3 4.7 % 16.0 6.5 % 16.7 2.1 % 16.6 2.2 %

Other charges (benefits) unrelated to core operating performance (1)

Other charges unrelated to core operating performance (1)

0.6 0.2 % 0.4 0.2 % 0.2 — % 1.0 0.1 %

Amortization of inventory step-up 1.7 0.6 % — — % 1.7 0.2 % — — %

Amortization of intangibles 7.3 2.5 % 5.0 2.0 % 16.0 2.0 % 15.4 2.1 %

Restructuring and related charges (benefits) 1.2 0.4 % (0.1) — % 1.2 0.2 % (0.9) (0.2) %

Restructuring and related (benefits) charges (0.3) (0.1) % 0.1 — % 0.9 0.1 % (0.8) (0.1) %

Litigation settlement — — % — — % (1.3) (0.1) % — — %

Total related to Cost of Revenue and Operating Expenses 18.2 6.7 % 11.3 4.4 % 30.6 6.0 % 26.1 5.2 %

Total related to Cost of Revenues and Operating Expenses 39.2 13.7 % 34.9 14.1 % 69.8 8.8 % 61.0 8.2 %

Non-GAAP measures $ 47.7 16.7 % $ 23.0 9.3 % $ 112.0 14.1 % $ 87.5 11.7 %

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted

EPS Net Income Diluted

Three Months Ended Nine Months Ended

March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024

Net Income Diluted EPS Net (Loss) Income Diluted EPS Net Income Diluted

EPS Net (Loss) Income Diluted

GAAP measures $ 19.5 $ 0.09 $ (24.6) $ (0.11) $ 26.8 $ 0.12 $ (4.1) $ (0.02)

Items reconciling GAAP Net Income and EPS to Non-GAAP Net Income and EPS:

Items reconciling GAAP Net Income (Loss) and EPS to Non-GAAP Net Income and EPS:

Stock-based compensation 14.1 0.06 12.8 0.06 40.5 0.18 36.6 0.16

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Acquisition and integration related charges 13.3 0.06 16.0 0.07 16.7 0.08 16.6 0.07

Other charges (benefits) unrelated to core operating performance (1)

Other charges unrelated to core operating performance (1)

0.6 — 0.3 — 0.2 — 1.0 0.01

Amortization of inventory step-up 1.7 0.01 — — 1.7 0.01 — —

Amortization of intangibles 7.3 0.03 5.0 0.02 16.0 0.07 15.4 0.07

Restructuring and related charges (benefits) 1.2 0.01 (0.1) — 1.2 0.01 (0.9) (0.01)

Restructuring and related (benefits) charges (0.3) — 0.1 — 0.9 — (0.8) (0.01)

Litigation settlement — — 0.8 — (1.3) (0.01) (6.3) (0.03)

Non-cash interest expense and other expense 1.3 0.01 1.3 0.01 3.5 0.02 3.7 0.02

Provision for income taxes 1.0 — 0.2 — 1.7 0.01 1.2 0.01

(Benefit from) provision for income taxes (26.1) (0.12) 0.9 0.01 (24.4) (0.11) 2.1 0.01

Total related to Net Income and EPS 14.4 0.06 37.8 0.17 48.9 0.22 60.5 0.27

1 unchanged sentence

Shares used in per share calculation for Non-GAAP EPS 226.9 224.6 225.2 224.1

(1) Included in the six months ended December 28, 2024 is a gain of $0.9 million on the sale of assets previously classified as held for sale and other charges unrelated to core operating performance of $0.5 million.

(1) Included in the nine months ended March 29, 2025 is a gain of $0.9 million on the sale of assets previously classified as held for sale and other charges unrelated to core operating performance of $1.1 million.

Use of Non-GAAP (Adjusted) Financial Measures

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Cost of revenues, costs of research and development and costs of selling, general and administrative:

The Company’s GAAP presentation of operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) changes in fair value of contingent consideration liabilities and (vii) other charges unrelated to our core operating performance comprised mainly of acquisition related transaction costs, integration costs related to acquired entities, litigation and legal settlements and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations.

The Company’s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) amortization expense related to inventory step-up (vii) changes in fair value of contingent consideration liabilities, (viii) acquisition related transaction and integration costs related to acquired entities, (ix) litigation and legal settlements and (x) other charges unrelated to our core operating performance comprised mainly of other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations.

The Company excludes these items in calculating non-GAAP operating margin, non-GAAP net income and non-GAAP EPS.

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The results of operations for the current period are not necessarily indicative of results to be expected for future periods.

The following table summarizes selected Consolidated Statements of Operations items ( in millions, except for percentages ):

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 Change Percent Change December 28, 2024 December 30, 2023 Change Percent Change

The following table summarizes selected Consolidated Statements of Operations items ( in millions ):

Three Months Ended Nine Months Ended

March 29, 2025 March 30, 2024 Change Percent Change March 29, 2025 March 30, 2024 Change Percent Change

Segment net revenue:

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Percentage of net revenue 0.4 % 0.6 % 0.4 % 0.7 %

Restructuring and related charges (benefits) $ 1.2 $ (0.1) $ 1.3 1,300.0 % $ 1.2 $ (0.9) $ 2.1 233.3 %

Restructuring and related (benefits) charges $ (0.3) $ 0.1 $ (0.4) (400.0) % $ 0.9 $ (0.8) $ 1.7 (212.5) %

Percentage of net revenue 0.1 % — % 0.1 % 0.1 %

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Percentage of net revenue 2.6 % 3.1 % 2.8 % 3.1 %

Provision for income taxes $ 9.5 $ 7.6 $ 1.9 25.0 % $ 18.5 $ 16.2 $ 2.3 14.2 %

(Benefit from) provision for income taxes $ (16.3) $ 9.0 $ (25.3) (281.1) % $ 2.2 $ 25.2 $ (23.0) (91.3) %

Percentage of net revenue 5.7 % 3.7 % 0.3 % 3.4 %

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Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit, and operating income consistent with our approach for managing the business.

Three and Six Months Ended December 28, 2024 and December 30, 2023

Net revenue increased by $16.3 million, or 6.4%, during the three months ended December 28, 2024 compared to the same period a year ago.

This increase reflects higher spend by service providers and Network Equipment Manufacturers (NEMs), partially offset by lower anti-counterfeiting revenue.

Net revenue increased by $6.6 million, or 1.3%, during the six months ended December 28, 2024 compared to the same period a year ago.

This increase reflects higher spend by NEMs and avionic customers, partially offset by lower consumer and industrial revenue.

Product revenues increased by $14.8 million, or 7.0%, during the three months ended December 28, 2024 compared to the same period a year ago, driven by revenue increases in our NE segment, partially offset by revenue decreases in our SE and OSP segments.

Product revenues increased by $6.7 million, or 1.6%, during the six months ended December 28, 2024 compared to the same period a year ago, driven by revenue increases in our NE segment, partially offset by revenue decreases in our SE and OSP segments.

Service revenues increased by $1.5 million, or 3.4% during the three months ended December 28, 2024, respectively, compared to the same periods a year ago.

This was driven by a revenue increase in our NE segment, partially offset by a revenue decrease in our SE segment.

Service revenues remained relatively flat during the six months ended December 28, 2024 compared to the same period a year ago, driven by a revenue increase in our NE segment offset by a revenue decrease in our SE segment.

Three and Nine Months Ended March 29, 2025 and March 30, 2024

Net revenue increased by $38.8 million, or 15.8%, during the three months ended March 29, 2025 compared to the same period a year ago.

This increase reflects higher spend by Network Equipment Manufacturers (NEMs), and aerospace and defense customers.

Net revenue increased by $45.4 million, or 6.1%, during the nine months ended March 29, 2025 compared to the same period a year ago.

This increase reflects higher spend by NEMs, aerospace and defense customers and service providers, partially offset by lower wireless and 3D sensing revenues.

Product revenues increased by $34.2 million, or 16.5%, during the three months ended March 29, 2025 compared to the same period a year ago, driven by revenue increases in our all segments.

Product revenues increased by $40.9 million, or 6.6%, during the nine months ended March 29, 2025 compared to the same period a year ago, driven by a revenue increase in our NE segment, partially offset by revenue decreases in our SE and OSP segments.

Service revenues increased by $4.6 million, or 11.9% during the three months ended March 29, 2025, compared to the same period a year ago driven by revenue increases in our NE and SE segments.

Service revenues increased by $4.5 million, or 3.6% during the nine months ended March 29, 2025 compared to the same period a year ago, driven by a revenue increase in our NE segment, partially offset by a revenue decrease in our SE segment.

Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties.

1 unchanged sentence

This may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability, and general financial performance, which could create period-over-period variability in our financial measures and present foreign exchange rate risks.

The recent global tariffs implemented could increase our costs and impact our business.

We cannot predict when or to what extent these uncertainties will be resolved.

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The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue ( in millions ):

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Three Months Ended Nine Months Ended

March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024

United States $ 89.9 31.6 % $ 76.3 31.0 % $ 261.4 32.9 % $ 243.8 32.6 %

7 unchanged sentences

Total net revenue $ 284.8 100.0 % $ 246.0 100.0 % $ 793.8 100.0 % $ 748.4 100.0 %

Net revenue from customers outside the Americas represented 57.1% and 59.8% of net revenue, respectively, during the three and six months ended December 28, 2024.

Net revenue from customers outside the Americas represented 59.5% of net revenue during the three and six months ended December 30, 2023.

Net revenue from customers outside the Americas represented 62.0% and 60.6% of net revenue, respectively, during the three and nine months ended March 29, 2025.

Net revenue from customers outside the Americas represented 64.1% and 61.0% of net revenue, respectively, during the three and nine months ended March 30, 2024.

We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.

Amortization of Acquired Technologies (Cost of revenues)

Amortization of acquired technologies within Cost of revenues decreased $0.1 million or 2.9% and $0.3 million or 4.3% during the three and six months ended December 28, 2024, respectively, compared to the same periods a year ago.

This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2024.

Gross margin increased by 1.2 percentage points during the three months ended December 28, 2024 from 58.2% in the same period a year ago to 59.4% in the current period.

The increase was primarily due to gross margin increase in NE, partially offset by gross margin decrease in SE and OSP, as discussed below in the Operating Segment Information section.

Gross margin increased by 0.1 percentage points during the six months ended December 28, 2024 from 58.2% in the same period a year ago to 58.3% in the current period.

Amortization of acquired technologies within Cost of revenues increased $2.6 million or 74.3% and $2.3 million or 22.1% during the three and nine months ended March 29, 2025, respectively, compared to the same periods a year ago.

This increase is primarily due to the amortization of intangibles acquired through a current year acquisition partially offset by certain intangibles becoming fully amortized.

Gross margin increased by 0.3 percentage points during the three months ended March 29, 2025 from 56.1% in the same period a year ago to 56.4% in the current period.

The increase was primarily due to gross margin increase in NE and OSP, partially offset by gross margin decrease in SE, as discussed below in the Operating Segment Information section.

Gross margin increased by 0.1 percentage points during the nine months ended March 29, 2025 from 57.5% in the same period a year ago to 57.6% in the current period.

The increase was primarily due to gross margin increase in NE and OSP, partially offset by gross margin decrease in SE, as discussed below in the Operating Segment Information section.

As discussed in more detail under “Net Revenue” above, we sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive (increasingly due to Asia-Pacific-based competition), are price sensitive and/or are affected by customer seasonal and mix variant buying patterns.

1 unchanged sentence

Research and Development

R&D expense increased by $2.6 million, or 5.3% during the three months ended December 28, 2024 compared to the same period a year ago.

This increase was primarily due to higher variable expenses.

As a percentage of net revenue, R&D expense decreased by 0.2 percentage points during the three months ended December 28, 2024 compared to the same period a year ago.

R&D expense increased by $2.1 million, or 2.1% during the six months ended December 28, 2024 compared to the same period a year ago.

This increase was primarily due to higher variable expenses.

As a percentage of net revenue, R&D expense increased by 0.1 percentage points during the six months ended December 28, 2024 compared to the same period a year ago.

R&D expense remained flat during the three months ended March 29, 2025 compared to the same period a year ago.

Higher variable expenses and incremental cost from a current year acquisition were offset by a one-time R&D tax credit catch-up.

As a percentage of net revenue, R&D expense decreased by 2.7 percentage points during the three months ended March 29, 2025 compared to the same period a year ago.

R&D expense increased by $2.1 million, or 1.4% during the nine months ended March 29, 2025 compared to the same period a year ago.

This increase was primarily due to higher variable expenses and incremental cost from a current year acquisition offset by a one-time R&D tax credit catch-up.

As a percentage of net revenue, R&D expense decreased by 0.9 percentage points during the nine months ended March 29, 2025 compared to the same period a year ago.

We believe that continuing our investments in R&D is critical to attaining our strategic objectives.

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Selling, General and Administrative

SG&A expense increased by $9.5 million, or 12.7%, during the three months ended December 28, 2024 compared to the same period a year ago.

This increase was primarily due to higher variable expenses, the change in fair value of acquisition-related contingent consideration and acquisition and integration related charges.

As a percentage of net revenue, SG&A expense increased 1.7 percentage points during the three months ended December 28, 2024 compared to the same period a year ago.

SG&A expense increased by $6.4 million, or 4.2%, during the six months ended December 28, 2024 compared to the same period a year ago.

This increase was primarily due to higher variable expenses and acquisition and integration related charges.

As a percentage of net revenue, SG&A expense increased 0.8 percentage points during the six months ended December 28, 2024 compared to the same period a year ago.

SG&A expense increased by $3.1 million, or 3.2%, during the three months ended March 29, 2025 compared to the same period a year ago.

This increase was primarily due to higher variable expenses and the change in fair value of acquisition related contingent consideration, partially offset by lower acquisition and integration related charges.

As a percentage of net revenue, SG&A expense decreased 4.3 percentage points during the three months ended March 29, 2025 compared to the same period a year ago.

SG&A expense increased by $9.5 million, or 3.8%, during the nine months ended March 29, 2025 compared to the same period a year ago.

This increase was primarily due to higher variable expenses, the change in fair value of acquisition related contingent consideration and higher stock-based compensation.

As a percentage of net revenue, SG&A expense decreased 0.7 percentage points during the nine months ended March 29, 2025 compared to the same period a year ago.

Amortization of Intangibles (Operating expenses)

Amortization of intangibles within Operating expenses decreased $0.4 million or 28.6% and $1.4 million or 40.0% during the three and six months ended December 28, 2024, respectively, compared to the same periods a year ago.

These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2024.

Amortization of intangibles within Operating expenses decreased $0.3 million or 20.0% and $1.7 million or 34.0% during the three and nine months ended March 29, 2025, respectively, compared to the same periods a year ago.

These decreases are primarily due to certain intangibles becoming fully amortized partially offset by amortization of intangibles acquired through a current year acquisition.

Restructuring

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During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs.

During the second quarter of fiscal 2025, the headcount impacted by this plan increased by approximately 30 employees.

The Company expects approximately 7% of its global workforce to be affected, impacting all segments and corporate functions.

We estimate annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities initiated under the Fiscal 2024 Plan.

The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of fiscal 2025.

The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of the second quarter of fiscal 2026.

The restructuring and workforce reduction plan initiated in the second quarter of fiscal 2023 (the Fiscal 2023 Plan) across various functions to better align the Company’s workforce with current business needs and strategic growth opportunities was completed in the first quarter of fiscal 2025.

The Fiscal 2023 Plan affected approximately 5% of the Company's workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges.

As of December 28, 2024, our total restructuring accrual was $5.7 million.

During the three and six months ended December 28, 2024, the Company recorded restructuring charges of $1.2 million and $1.4 million, respectively, related to the Fiscal 2024 Plan.

During the six months ended December 28, 2024, the Company recorded restructuring benefits of $0.2 million related to the Fiscal 2023 Plan.

During the three and six months ended December 30, 2023, the Company recorded restructuring benefits of $0.1 million and $0.9 million, respectively, related to the Fiscal 2023 Plan.

As of March 29, 2025, our total restructuring accrual was $4.5 million.

During the three and nine months ended March 29, 2025, the Company recorded restructuring benefits of $0.3 million and charges of $1.1 million, respectively, related to the Fiscal 2024 Plan.

During the nine months ended March 29, 2025, the Company recorded restructuring benefits of $0.2 million related to the Fiscal 2023 Plan.

During the three and nine months ended March 30, 2024, the Company recorded restructuring charges of $0.1 million and benefits of $0.8 million, respectively, related to the Fiscal 2023 Plan.

We estimate future cash payments of $4.5 million under the Fiscal 2024 Plan, funded by operating cash flow.

2 unchanged sentences

Interest and other income, net

Interest and other income, net, was $3.9 million during the three months ended December 28, 2024 compared to $3.8 million during the same period a year ago.

The increase was primarily driven by foreign exchange impact as the balance sheet hedging program provided a more favorable offset to the remeasurement of underlying foreign exchange exposures in the current period offset by a decrease in interest income due to lower cash balances and lower yields compared to the prior period.

Interest and other income, net, was $7.1 million during the six months ended December 28, 2024 compared to $14.0 million during the same period a year ago.

This $6.9 million decrease was primarily driven by a legal settlement in our favor in the amount of $7.3 million in the prior period.

Interest and other income, net, was $2.2 million during the three months ended March 29, 2025 compared to $4.0 million during the same period a year ago.

This $1.8 million decrease was primarily driven by a decrease in interest income due to lower cash balances and lower yields compared to the prior period.

Interest and other income, net, was $9.3 million during the nine months ended March 29, 2025 compared to $18.0 million during the same period a year ago.

This $8.7 million decrease was primarily driven by a legal settlement in our favor in the amount of $7.3 million in the prior period and a decrease in interest income due to lower cash balances and lower yields compared to the prior period.

Interest Expense

Interest expense decreased by $0.4 million, or 5.1% during the three months ended December 28, 2024 compared to the same period a year ago.

Interest expense decreased by $0.2 million, or 2.6% during the three months ended March 29, 2025 compared to the same period a year ago.

This decrease was primarily driven by lower outstanding debt when compared to the prior period.

Interest expense decreased by $0.7 million, or 4.5% during the six months ended December 28, 2024 compared to the same period a year ago.

Interest expense decreased by $0.9 million, or 3.8% during the nine months ended March 29, 2025 compared to the same period a year ago.

This decrease was primarily driven by lower outstanding debt when compared to the prior period.

Provision for Income Taxes

We recorded an income tax provision of $9.5 million and $18.5 million for the three and six months ended December 28, 2024, respectively.

We recorded an income tax provision of $7.6 million and $16.2 million for the three and six months ended December 30, 2023, respectively.

The income tax provision for the three and six months ended December 28, 2024 and December 30, 2023 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to our income from continuing operations before taxes primarily due to changes in the valuation allowance for deferred tax assets attributable to our domestic and foreign income from continuing operations.

As of December 28, 2024, and June 29, 2024, our unrecognized tax benefits (net of Federal benefits) totaled $51.1 million and $50.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities.

We had $4.0 million accrued for the payment of interest and penalties as of December 28, 2024.

We recorded an income tax benefit of $16.3 million and an income tax provision of $2.2 million for the three and nine months ended March 29, 2025, respectively.

We recorded an income tax provision of $9.0 million and $25.2 million for the three and nine months ended March 30, 2024, respectively.

The income tax benefit for the three months and the income tax provision for the nine months ended March 29, 2025 primarily relates to a $25.9 million release of valuation allowance related to our acquisition of Inertial labs and income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

The income tax provision for the three and nine months ended March 30, 2024 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

As of March 29, 2025, and June 29, 2024, our unrecognized tax benefits (net of Federal benefits) totaled $52.2 million and $50.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities.

We had $4.5 million accrued for the payment of interest and penalties as of March 29, 2025.

The timing and resolution of income tax examinations are uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.

2 unchanged sentences

Information related to our operating segments was as follows (in millions) :

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 Change Percentage Change December 28, 2024 December 30, 2023 Change Percentage Change

Three Months Ended Nine Months Ended

March 29, 2025 March 30, 2024 Change Percentage Change March 29, 2025 March 30, 2024 Change Percentage Change

Network Enablement

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Net revenue $ 208.2 $ 169.8 $ 38.4 22.6 % $ 567.5 $ 519.8 $ 47.7 9.2 %

Operating income 17.4 6.4 11.0 171.9 % 10.1 7.9 2.2 27.8 %

Operating income (loss) 21.7 (3.1) 24.8 800.0 % 31.8 4.8 27.0 562.5 %

Operating margin 10.4 % (1.8) % 5.6 % 0.9 %

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Network Enablement

NE net revenue increased by $23.5 million, or 15.1% during the three months ended December 28, 2024 compared to the same period a year ago, primarily driven by higher volume in Lab and Production, Fiber and Access, AvComm and Wireless revenue.

NE net revenue increased by $15.1 million, or 4.9% during the six months ended December 28, 2024 compared to the same period a year ago, primarily driven by higher volume in Lab and Production, AvComm and Fiber and Access.

NE gross margin increased by 2.0 percentage points during the three months ended December 28, 2024 to 64.5% from 62.5% in the same period a year ago primarily due to higher volume.

NE gross margin increased by 0.1 percentage points during the six months ended December 28, 2024 to 62.9% from 62.8% in the same period a year ago primarily due to higher volume, partially offset by unfavorable product mix.

NE net revenue increased by $36.3 million, or 23.9%, during the three months ended March 29, 2025 compared to the same period a year ago, primarily driven by higher volume in Lab and Production, Aerospace and Defense and Fiber and Access Solutions, partially offset by lower volume in Wireless.

NE net revenue increased by $51.4 million, or 11.2%, during the nine months ended March 29, 2025 compared to the same period a year ago, primarily driven by higher volume in Lab and Production, Aerospace and Defense and Fiber and Access Solutions, partially offset by lower volume in Wireless.

NE gross margin increased by 1.9 percentage points during the three months ended March 29, 2025 to 63.4% from 61.5% in the same period a year ago primarily due to higher volume and favorable product mix.

NE gross margin increased by 0.7 percentage points during the nine months ended March 29, 2025 to 63.1% from 62.4% in the same period a year ago primarily due to higher volume and favorable product mix.

Service Enablement

SE net revenue decreased by $3.2 million, or 13.3%, during the three months ended December 28, 2024 compared to the same period a year ago primarily due to lower Assurance revenue, partially offset by higher Wireless Enterprise Solutions revenue.

SE net revenue decreased by $5.8 million, or 13.0%, during the six months ended December 28, 2024 compared to the same period a year ago primarily due to lower Assurance revenue.

SE gross margin decreased by 1.4 percentage points during the three months ended December 28, 2024 to 67.5% from 68.9% in the same period a year ago primarily due to lower volume.

SE gross margin decreased by 3.8 percentage points during the six months ended December 28, 2024 to 64.3% from 68.1% in the same period a year ago primarily due to lower volume.

SE net revenue increased by $2.1 million, or 11.6%, during the three months ended March 29, 2025 compared to the same period a year ago primarily driven by higher volume in Assurance.

SE net revenue decreased by $3.7 million, or 5.9%, during the nine months ended March 29, 2025 compared to the same period a year ago primarily driven by lower volume in Assurance and Data Center, offset in part by higher Wireless Enterprise Solutions revenue.

SE gross margin decreased by 0.9 percentage points during the three months ended March 29, 2025 to 59.9% from 60.8% in the same period a year ago primarily due to lower volume.

SE gross margin decreased by 3.2 percentage points during the nine months ended March 29, 2025 to 62.8% from 66.0% in the same period a year ago primarily due to lower volume.

Network and Service Enablement

NSE operating margin increased by 5.1 percentage points during the three months ended December 28, 2024 to 8.7% from 3.6% in the same period a year ago primarily due to higher volume.

NSE operating margin increased by 0.5 percentage points during the six months ended December 28, 2024 to 2.8% from 2.3% in the same period a year ago primarily due to higher volume.

NSE operating margin increased by 12.2 percentage points during the three months ended March 29, 2025 to 10.4% from (1.8)% in the same period a year ago primarily due to higher volume and one-time R&D tax credit catch-up.

NSE operating margin increased by 4.7 percentage points during the nine months ended March 29, 2025 to 5.6% from 0.9% in the same period a year ago primarily due to higher volume and one-time R&D tax credit catch-up.

Optical Security and Performance Products

OSP net revenue decreased by $4.0 million, or 5.3%, during the three months ended December 28, 2024 compared to the same period a year ago.

This decrease was primarily driven by lower consumer and industrial and government revenue offset in part by an increase in anti-counterfeiting revenue.

OSP net revenue decreased by $2.7 million, or 1.8%, during the six months ended December 28, 2024 compared to the same period a year ago.

This decrease was primarily driven by lower consumer and industrial revenue offset in part by higher anti-counterfeiting revenue.

OSP gross margin decreased by 1.5 percentage points during the three months ended December 28, 2024 to 50.6% from 52.1% in the same period a year ago primarily due to lower volume.

OSP gross margin increased by 0.8 percentage points during the six months ended December 28, 2024 to 53.1% from 52.3% in the same period a year ago primarily due to favorable product mix.

OSP operating margin decreased by 4.0 percentage points during the three months ended December 28, 2024 to 32.4% from 36.4% in the same period a year ago primarily due to lower volume and higher operating expenses.

OSP operating margin decreased by 0.9 percentage points during the six months ended December 28, 2024 to 36.2% from 37.1% in the same period a year ago primarily due to lower volume and higher operating expenses.

OSP net revenue increased by $0.4 million, or 0.5%, during the three months ended March 29, 2025 compared to the same period a year ago.

This increase was primarily driven by Anti-Counterfeiting and Other revenues offset in part by a decrease in 3D sensing revenue.

OSP net revenue decreased by $2.3 million, or 1.0%, during the nine months ended March 29, 2025 compared to the same period a year ago.

This decrease was primarily driven by lower 3D sensing revenue offset in part by higher Anti-Counterfeiting and Other revenues.

OSP gross margin increased by 1.5 percentage points during the three months ended March 29, 2025 to 51.6% from 50.1% in the same period a year ago primarily due to higher volume.

OSP gross margin increased by 1.0 percentage points during the nine months ended March 29, 2025 to 52.6% from 51.6% in the same period a year ago primarily due to higher volume.

OSP operating margin decreased by 0.4 percentage points during the three months ended March 29, 2025 to 33.9% from 34.3% in the same period a year ago primarily due to unfavorable product mix and higher operating expense.

OSP operating margin decreased by 0.8 percentage points during the nine months ended March 29, 2025 to 35.4% from 36.2% in the same period a year ago primarily due to unfavorable product mix and higher operating expenses.

Liquidity and Capital Resources

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Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and reported as a separate component of stockholders’ equity.

As of December 28, 2024, U.S.

As of March 29, 2025, U.S.

subsidiaries owned approximately 27.5% of our cash and cash equivalents, short-term investments and restricted cash.

As of December 28, 2024, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

As of March 29, 2025, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

Nonetheless we could realize investment losses under adverse market conditions.

During the three months ended December 28, 2024, we have not realized material investment losses but we can provide no assurance that the value or liquidity of our investments will not be impacted by adverse conditions in the financial markets.

During the three months ended March 29, 2025, we have not realized material investment losses but we can provide no assurance that the value or liquidity of our investments will not be impacted by adverse conditions in the financial markets.

In addition, we maintain cash balances in operating accounts with third-party financial institutions.

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The Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met.

As of December 28, 2024, we had no borrowings under this facility and our available borrowing capacity was approximately $153.5 million, net of outstanding standby letters of credit of $4.4 million.

As of March 29, 2025, we had no borrowings under this facility and our available borrowing capacity was approximately $165.6 million, net of outstanding standby letters of credit of $4.4 million.

Refer to “Note 11.

Debt” for more information.

Cash Flows for the Six Months Ended December 28, 2024

As of December 28, 2024, our combined balance of cash and cash equivalents and restricted cash increased by $14.6 million to $496.4 million from $481.8 million as of June 29, 2024.

During the six months ended December 28, 2024, Cash provided by operating activities was $58.2 million, consisting of net income of $7.3 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) totaling $44.1 million, including changes in deferred tax balances, and changes in operating assets and liabilities that provided $6.8 million.

Changes in our operating assets and liabilities related to an increase in accrued payroll and related expenses of $10.6 million due primarily to variable pay accrual and timing of payroll, an increase in accounts payable of $5.9 million driven by timing of purchases and related payments, an increase in income taxes payable of $3.4 million and a decrease in other current and non-current assets of $1.9 million.

These were offset by a decrease in deferred revenue of $6.9 million primarily due to timing of support billings and project acceptances, a decrease in accrued expenses and other current and non-current liabilities of $5.7 million, a decrease in accounts receivable of $2.3 million and a decrease in inventory of $0.1 million.

During the six months ended December 28, 2024, Cash used in investing activities was $15.8 million, primarily resulting from $15.5 million used for capital expenditures, $3.0 million investment in a non-marketable equity security and $1.6 million net purchases of short-term investments offset by $4.3 million in proceeds from the sale of assets.

During the six months ended December 28, 2024, Cash used in financing activities was $21.9 million, primarily resulting from $16.4 million cash paid to repurchase common stock under our share repurchase program and $8.3 million in withholding tax payments on the vesting of restricted stock and performance-based awards.

Cash Flows for the Nine Months Ended March 29, 2025

As of March 29, 2025, our combined balance of cash and cash equivalents and restricted cash decreased by $99.1 million to $382.7 million from $481.8 million as of June 29, 2024.

During the nine months ended March 29, 2025, Cash provided by operating activities was $66.0 million, consisting of net income of $26.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) totaling $54.0 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $14.8 million.

Changes in our operating assets and liabilities related to an increase in accounts receivable of $31.9 million due to billings outpacing collections, a decrease in accrued expenses and other current and non-current liabilities of $8.3 million due primarily to restructuring payments, an increase in other current and non-current assets of $1.5 million, a decrease in deferred revenue of $0.9 million and an increase in inventory of $0.3 million.

These were offset by an increase in accounts payable of $15.7 million driven by timing of purchases and related payments, an increase in accrued payroll and related expenses of $6.8 million due primarily to variable pay and an increase in income taxes payable of $5.6 million.

During the nine months ended March 29, 2025, Cash used in investing activities was $140.7 million, primarily resulting from $117.9 million used for an acquisition, $22.3 million used for capital expenditures, $3.0 million investment in a non-marketable equity security and $2.2 million net purchases of short-term investments offset by $4.7 million in proceeds from the sale of assets.

During the nine months ended March 29, 2025, Cash used in financing activities was $23.5 million, primarily resulting from $16.4 million cash paid to repurchase common stock under our share repurchase program and $13.1 million in withholding tax payments on the vesting of restricted stock and performance-based awards.

These were offset by $6.0 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Share Repurchase Program

During the six months ended December 28, 2024, we repurchased 2.0 million shares of our common stock for $16.4 million pursuant to our 2022 Repurchase Plan.

As of December 28, 2024, the Company had remaining authorization of $198.4 million for future share repurchases under the 2022 Repurchase Plan.

During the nine months ended March 29, 2025, we repurchased 2.0 million shares of our common stock for $16.4 million pursuant to our 2022 Repurchase Plan.

As of March 29, 2025, the Company had remaining authorization of $198.4 million for future share repurchases under the 2022 Repurchase Plan.

Refer to “Note 15.

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Contractual Obligations

There were no material changes to our existing contractual commitments during the second quarter of fiscal 2025.

There were no material changes to our existing contractual commitments during the third quarter of fiscal 2025.

Off-Balance Sheet Arrangements

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plan is fully funded, and the other German plans, which were initially established as “pay-as-you-go” plans, are unfunded.

As of December 28, 2024, our pension plans were under-funded by $48.8 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

As of March 29, 2025, our pension plans were under-funded by $48.8 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

Pension plan assets are managed by external third parties and we monitor the performance of our investment managers.

As of December 28, 2024, the fair value of plan assets had decreased approximately 5.2% since June 29, 2024, our most recent fiscal year end.

As of March 29, 2025, the fair value of plan assets had decreased approximately 3.4% since June 29, 2024, our most recent fiscal year end.

We are also responsible for the non-pension PBO assumed from a past acquisition of $0.3 million.

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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