# KULICKE & SOFFA INDUSTRIES INC (KLIC) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from KULICKE & SOFFA INDUSTRIES INC's 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/56978/000005697825000081/klic-20251004.htm
Accession: 0000056978-25-000081
Filing date: 2025-11-20
Report date: 2025-10-04
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/KLIC/
All MD&A years: /company/KLIC/mda/
Previous year: /company/KLIC/mda/fy2024/ (FY 2024)

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of this Form 10-K generally discusses fiscal 2025 and 2024 items and year-to-year comparisons between fiscal 2025 and 2024. Discussions of fiscal 2023 items and year-to-year comparisons between fiscal 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2024 Annual Report filed on November 16, 2024 (the "2024 Annual Report").

Our Management’s Discussion and Analysis (“MD&A”) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. The MD&A is organized as follows:

•Overview: Introduction of our operations, key events, business environment, technology leadership, products and services

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

•Results of Operations

•Liquidity and Capital Resources

•Other Obligations and Contingent Payments

Overview

For an overview of our business, please see “Part I, Item 1 — Business”.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. On an ongoing basis, we evaluate estimates, including, but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory, carrying value and lives of fixed assets, goodwill and intangible assets, income taxes, equity-based compensation expense and warranties. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. As a result, we make judgments regarding the carrying values of our assets and liabilities that are not readily apparent from other sources. Authoritative pronouncements, historical experience and assumptions are used as the basis for making estimates, and on an ongoing basis, we evaluate these estimates. Actual results may differ from these estimates.

We believe the following critical accounting policies, which have been reviewed with the Audit Committee of our Board of Directors, reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.

The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon resale of the products.

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Our business is subject to contingencies related to customer orders, including:

•Right of Return: A large portion of our revenue comes from the sale of equipment used in the semiconductor assembly process. Other product sales relate to consumable products, which are sold in high-volume quantities, and are generally maintained at low stock levels at the customer’s facility. Customer returns have historically represented a very small percentage of customer sales on an annual basis.

•Warranties: Our equipment is generally shipped with a one-year warranty against manufacturing defects. We establish reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management’s estimate of future expenses, including product parts replacement, freight charges and labor costs expected to be incurred to correct product failures during the warranty period.

•Conditions of Acceptance: Sales of our consumable products generally do not have customer acceptance terms. In certain cases, sales of our equipment have customer acceptance clauses which may require the equipment to perform in accordance with customer specifications or when installed at the customer’s facility. In such cases, if the terms of acceptance are satisfied at our facility prior to shipment, the revenue for the equipment will be recognized upon shipment. If the terms of acceptance are satisfied at our customers’ facilities, the revenue for the equipment will not be recognized until acceptance, which is typically obtained after installation and testing, is received from the customer.

Service revenue is generally recognized over time as the services are performed.

The Company measures revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Any variable consideration such as sales incentives are recognized as a reduction of net revenue at the time of revenue recognition.

The Company’s performance obligations relate to contracts with a duration of less than one year, therefore as allowed under ASC 606, we have opted not to disclose the unsatisfied performance obligations for contracts with original expected durations of less than one year.

The length of time between invoicing and payment is not significant under our payment terms. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. Shipping and handling costs billed to customers are recognized in net revenue.

Shipping and handling costs paid by the Company are included in cost of sales.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from our customers’ failure to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We are subject to concentrations of customers and sales to a few geographic locations, which could also impact the collectability of certain receivables. If global or regional economic conditions deteriorate or political conditions were to change in some of the countries where we do business, it could have a significant impact on our results of operations, and our ability to realize the full value of our accounts receivable.

Inventories

Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. We generally provide reserves for obsolete inventory and for inventory considered to be in excess of demand. Demand is generally defined as 18 months forecasted future consumption for equipment, 24 months forecasted future consumption for spare parts, and 12 months forecasted future consumption for tools. Forecasted consumption is based upon internal projections, historical sales volumes, customer order activity and a review of consumable inventory levels at customers’ facilities. We communicate forecasts of our future consumption to our suppliers and adjust commitments to those suppliers accordingly. If required, we reserve the difference between the carrying value of our inventory and the lower of cost or net realizable value, based upon projections about future consumption, and market conditions. If actual market conditions are less favorable than projections, additional inventory reserves may be required.

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Inventory reserve provision for certain subsidiaries is determined based on management’s estimate of future consumption for equipment and spare parts. This estimate is based on historical sales volumes, internal projections and market developments and trends.

Accounting for Impairment of Goodwill

ASC No. 350, Intangibles-Goodwill and Other requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually, or more frequently if circumstances indicate a possible impairment. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, a company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the impairment test is unnecessary. However, if a company concludes otherwise, then it is required to perform the goodwill impairment test. The Company’s impairment test is performed by comparing the fair value of a reporting unit with its carrying value, and determining if the carrying amount exceeds its fair value.

As part of the annual evaluation, the Company performs an impairment test of its goodwill in the fourth quarter of each fiscal year to coincide with the completion of its annual forecasting and refreshing of its business outlook processes. On an ongoing basis, the Company monitors if a “triggering” event has occurred that may have the effect of reducing the fair value of a reporting unit below its respective carrying value. Adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a non-cash impairment charge in the future.

Impairment assessments inherently involve judgment as to the assumptions made about the expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact the assumptions as to prices, costs, growth rates or other factors that may result in changes in the estimates of future cash flows. Although the Company believes the assumptions that it has used in testing for impairment are reasonable, significant changes in any one of the assumptions could produce a significantly different result. Indicators of potential impairment, including significant and unforeseen customer losses, a significant adverse change in legal factors or in the business climate, a significant adverse action or assessment by a regulator, a significant stock price decline or unanticipated competition, may lead the Company to perform interim goodwill impairment assessments.

The Company performed its annual impairment test in the fourth quarter of fiscal 2025 and elected to perform the quantitative impairment test as permitted by ASC 350 for another reporting unit within the "All Others" category and the qualitative impairment assessment for all of its remaining reporting units. Based on the quantitative and qualitative assessments performed, the Company concluded other than the impairment taken on one reporting unit within the APS reportable segment and one reporting unit within the "All Others" category in relation to the cessation of EA Equipment Business, no impairment on the Company's other recorded goodwill was required. The persistent macroeconomic headwinds could, in the future, require changes to assumptions utilized in the determination of the estimated fair values of the reporting units which could result in future goodwill impairment charges. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our products. The discount rate utilized in our valuation model could also be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital. For further information on goodwill and other intangible assets, see "Note 3: Goodwill and Intangible Assets” in the notes to our consolidated financial statements in “Part II, Item 8 — Financial Statements and Supplementary Data”.

Income Taxes

In accordance with ASC No. 740, Income Taxes, deferred income taxes are determined using the balance sheet method. The Company records a valuation allowance to reduce its deferred tax assets to the amount expected, on a more likely than not basis, to be realized. While the Company has considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, if it were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to deferred tax assets would increase income in the period when such determination is made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to deferred tax assets would decrease income in the period when such determination is made.

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The Company determines the amount of unrecognized tax benefit with respect to uncertain tax positions taken or expected to be taken on its income tax returns in accordance with ASC No. 740 Topic 10, Income Taxes, General (“ASC 740.10”). Under ASC 740.10, the Company utilizes a two-step approach for evaluating uncertain tax positions. Step one, or recognition, requires a company to determine if the weight of available evidence indicates a tax position is more likely than not to be sustained upon examination solely based on its technical merit. Step two, or measurement, is based on the largest amount of benefit, which is more likely than not to be realized on settlement with the taxing authority, including resolution of related appeals or litigation processes, if any.

Equity-Based Compensation

The Company accounts for equity-based compensation under the provisions of ASC No. 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 requires the recognition of the fair value of the equity-based compensation in net income. Compensation expense associated with Relative TSR Performance Share Units is determined using a Monte-Carlo valuation model, and compensation expense associated with time-based and Growth Performance Share Units is determined based on the number of shares granted and the fair value on the date of grant. See "Note 11: Shareholders’ Equity and Employee Benefit Plans” in the notes to our consolidated financial statements in “Part II, Item 8 — Financial Statements and Supplementary Data” for a summary of the terms of these performance-based awards. The fair value of equity-based awards is amortized over the vesting period of the award and the Company elected to use the straight-line method for awards granted after the adoption of ASC 718.

RECENT ACCOUNTING PRONOUNCEMENTS

See "Note 1: Basis of Presentation” in the notes to our consolidated financial statements in “Part II, Item 8 — Financial Statements and Supplementary Data” to our consolidated financial statements in Item 8 for a description of certain recent accounting pronouncements, including the expected dates of adoption and effects on our consolidated results of operations and financial condition.

RESULTS OF OPERATIONS

Results of Operations for fiscal 2025 and 2024

The following table reflects the loss from operations for fiscal 2025 and 2024:

[[GREPCENT_TABLE]]
[["","Fiscal"],["(dollar amounts in thousands)","2025","","2024","","$ Change","","% Change"],["Net revenue","$","654,081","","","$","706,232","","","$","(52,151)","","","(7.4)","%"],["Cost of sales","376,160","","","437,478","","","(61,318)","","","(14.0)","%"],["Gross profit","277,921","","","268,754","","","9,167","","","3.4","%"],["Selling, general and administrative","167,699","","","165,564","","","2,135","","","1.3","%"],["Research and development","149,616","","","151,214","","","(1,598)","","","(1.1)","%"],["Impairment charges","39,817","","","44,472","","","(4,655)","","","(10.5)","%"],["Gain relating to cessation of business","(75,987)","","","\u2014","","","(75,987)","","","N/A"],["Operating expenses","281,145","","","361,250","","","(80,105)","","","(22.2)","%"],["Loss from operations","$","(3,224)","","","$","(92,496)","","","$","89,272","","","96.5","%"]]
[[/GREPCENT_TABLE]]

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Bookings and Backlog

Our backlog consists of customer orders scheduled for shipment within the next twelve months. A booking is recorded when a customer order is reviewed and it is determined that all specifications can be met, production (or service) can be scheduled, a delivery date can be set, and the customer meets our credit requirements. We use bookings to evaluate the results of our operations, generate future operating plans and assess the performance of our Company. While we believe that this measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenue recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate bookings differently or not at all, which reduces its usefulness as a comparative measure. Reconciliation of bookings to net revenue is not practicable. A majority of our orders are subject to cancellation or deferral by our customers with limited or no penalties. Also, customer demand for our products can vary dramatically without prior notice. Because of the volatility of customer demand, possibility of customer changes in delivery schedules or cancellations and potential delays in product shipments, our backlog as of any particular date may not be indicative of net revenue for any succeeding period.

The following tables reflect the bookings and backlog for fiscal 2025 and 2024:

[[GREPCENT_TABLE]]
[["","Fiscal"],["(in thousands)","2025","","2024"],["Bookings","$","750,781","","","$","430,994"],["","As of"],["(in thousands)","October 4, 2025","","September 28, 2024"],["Backlog","$","245,280","","","$","148,585"]]
[[/GREPCENT_TABLE]]

The semiconductor industry is volatile and our operating results are adversely impacted by volatile worldwide economic conditions. Though the semiconductor industry’s cycle can be independent of the general economy, global economic conditions may have a direct impact on demand for semiconductor units and ultimately demand for semiconductor capital equipment and expendable tools. Accordingly, our business and financial performance is impacted, both positively and negatively, by fluctuations in the macroeconomic environment. Our visibility into future demand is generally limited and forecasting is difficult. There can be no assurances regarding levels of demand for our products and we believe historical industry-wide volatility will persist.

The U.S. and several other countries have levied tariffs on certain goods. In particular, trade tensions between the U.S. and China have been escalating since 2018, with U.S. tariffs on Chinese goods and retaliatory Chinese tariffs on U.S. goods. These have resulted in uncertainties in the semiconductor, LED, memory and automotive markets. While the Company anticipates long-term growth in semiconductor consumption, we observed trade-related adverse impacts in demand from China, which continues to persist in fiscal 2025 and beyond.

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Net Revenue

Our net revenues for fiscal 2025 decreased as compared to our net revenues for fiscal 2024. The decrease in net revenue is primarily due to lower volume in Ball Bonding Equipment, APS and All Others, partially offset by the higher volumes in Wedge Bonding Equipment and Advanced Solutions as further outlined in the tables presented immediately below.

The following table reflects the net revenue by reportable segment for fiscal 2025 and 2024:

[[GREPCENT_TABLE]]
[["","Fiscal"],["(dollar amounts in thousands)","2025","","2024","","$ Change","","% Change"],["","Net Revenue","","% of total net revenue","","Net Revenue","","% of total net revenue"],["Ball Bonding Equipment","$","292,951","","","44.8","%","","$","357,833","","","50.7","%","","$","(64,882)","","","(18.1)","%"],["Wedge Bonding Equipment","110,593","","","16.9","%","","105,826","","","15.0","%","","$","4,767","","","4.5","%"],["Advanced Solutions","72,737","","","11.1","%","","52,876","","","7.5","%","","$","19,861","","","37.6","%"],["APS","156,129","","","23.9","%","","160,009","","","22.7","%","","$","(3,880)","","","(2.4)","%"],["All Others","21,671","","","3.3","%","","29,688","","","4.1","%","","$","(8,017)","","","(27.0)","%"],["Total net revenue","$","654,081","","","100.0","%","","$","706,232","","","100.0","%","","$","(52,151)","","","(7.4)","%"]]
[[/GREPCENT_TABLE]]

Ball Bonding Equipment

For fiscal 2025, the decrease in Ball Bonding Equipment net revenue as compared to fiscal 2024 was primarily due to a lower volume of customer purchases in the general semiconductor and memory end markets as a result of relatively stable factory utilization levels in certain regions and a decrease in customer investments as a result of uncertainties in the overall macroeconomic environment.

Wedge Bonding Equipment

For fiscal 2025, the increase in Wedge Bonding Equipment net revenue as compared to fiscal 2024 was primarily due to a higher volume of customer purchases primarily in the general semiconductor and partially offset by lower customer purchases in the automotive markets.

Advanced Solutions

For fiscal 2025, the increase in Advanced Solutions net revenue as compared to fiscal 2024 was primarily due to a higher volume of customer purchases in LED which is included in the industrial end market and higher customer purchases in the general semiconductor end market.

APS

For fiscal 2025, the decrease in APS net revenue as compared to fiscal 2024 was primarily due to a lower volume of customer purchases primarily in spares and services, and unfavorable pricing from bonding tools.

All Others

For fiscal 2025, the decrease in net revenue in the “All Others” category as compared to fiscal 2024 was primarily due to a lower volume of customer purchases in the general semiconductor end market.

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Gross Profit Margin

The following table reflects the gross profit as a percentage of net revenue by reportable segment for fiscal 2025 and 2024: 

[[GREPCENT_TABLE]]
[["","Fiscal","","Basis Point"],["","2025","","2024","","Change"],["Ball Bonding Equipment","50.0","%","","47.7","%","","230"],["Wedge Bonding Equipment","45.1","%","","46.7","%","","(160)"],["Advanced Solutions","58.0","%","","(81.8)","%","","13,980"],["APS","48.3","%","","55.6","%","","(730)"],["All Others","(164.4)","%","","9.2","%","","(17,360)"],["Total gross profit margin","42.5","%","","38.1","%","","440"]]
[[/GREPCENT_TABLE]]

Ball Bonding Equipment

For fiscal 2025, the higher Ball Bonding Equipment gross profit margin as compared to fiscal 2024 was primarily driven by a favorable product mix, including lower sales of lower margin products and a shift in customer mix, including higher sales to customers where we achieve higher average margins.

Wedge Bonding Equipment

For fiscal 2025, the lower Wedge Bonding Equipment gross profit margin as compared to fiscal 2024 was primarily driven by a less favorable product mix, including higher sales of lower margin products and a shift in customer mix, including higher sales to customers where we achieve lower average margins.

Advanced Solutions

For fiscal 2025, the higher Advanced Solutions gross profit margin as compared to fiscal 2024 was primarily driven by the inventory write-down charges in the prior year as a result of the cancellation of Project W and favorable product mix, including higher sales of higher margin products.

APS

For fiscal 2025, the lower APS gross profit margin as compared to fiscal 2024 was primarily driven by the spares related inventory write-down charges incurred as a result of the cessation of the EA equipment business, lower volume from spares and services, and unfavorable pricing from bonding tools.

All Others

For fiscal 2025, the lower All Others gross profit margin as compared to fiscal 2024 was primarily driven by the inventory write-down charges incurred as a result of the cessation of the EA equipment business.

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Operating Expenses

The following table reflects the operating expenses for fiscal 2025 and 2024:

[[GREPCENT_TABLE]]
[["","Fiscal"],["(dollar amounts in thousands)","2025","","2024","","$ Change","","% Change"],["Selling, general and administrative","$","167,699","","","$","165,564","","","$","2,135","","","1.3","%"],["Research and development","149,616","","","151,214","","","(1,598)","","","(1.1)","%"],["Gain relating to cessation of business","(75,987)","","","\u2014","","","(75,987)","","","N/A"],["Impairment charges","39,817","","","44,472","","","(4,655)","","","(10.5)","%"],["Total","$","281,145","","","$","361,250","","","$","(80,105)","","","(22.2)","%"]]
[[/GREPCENT_TABLE]]

Selling, General and Administrative (“SG&A”)

For fiscal 2025, the higher SG&A expenses as compared to fiscal 2024 was primarily due to $7.8 million higher severance expenses and $3.1 million higher staff costs. This was partially offset by $6.2 million net favorable variance in foreign exchange, $1.6 million lower professional services and $1.2 million lower miscellaneous expenses.

Research and Development (“R&D”)

For fiscal 2025, the lower R&D expenses as compared to fiscal 2024 was primarily due to $4.5 million lower prototype materials. This was partially offset by $2.8 million higher staff costs.

Gain relating to cessation of business

For fiscal 2025, the gain relating to cessation of business as compared to fiscal 2024 was primarily due to the $71.1 million reimbursement for certain costs and expenses from Project W cancellation, a $3.2 million gain on the disposal of a subsidiary and a $1.7 million gain from the supplier settlement.

Impairment Charges

For fiscal 2025, the impairment charges were due to $39.9 million impairment charges on long-lived assets, intangible assets and goodwill related to the cessation of the EA equipment business. The impairment charges in fiscal 2024 were due to $44.5 million impairment charges on long-lived assets related to the cancellation of Project W.

Loss from Operations

The changes in income/loss from operations for the respective segments are due to the changes in net revenue, gross profit margin and operating expenses as explained in the respective sections above.

[[GREPCENT_TABLE]]
[["","Fiscal"],["(dollar amounts in thousands)","2025","","2024","","$ Change","","% Change"],["Ball Bonding Equipment","$","84,430","","","$","113,000","","","$","(28,570)","","","(25.3)","%"],["Wedge Bonding Equipment","18,387","","","19,575","","","(1,188)","","","(6.1)","%"],["Advanced Solutions","49,411","","","(155,350)","","","204,761","","","131.8","%"],["APS","28,865","","","49,744","","","(20,879)","","","(42.0)","%"],["All Others","(89,300)","","","(33,527)","","","(55,773)","","","(166.4)","%"],["Corporate Expenses","(95,017)","","","(85,938)","","","(9,079)","","","(10.6)","%"],["Total loss from operations","$","(3,224)","","","$","(92,496)","","","$","89,272","","","96.5","%"]]
[[/GREPCENT_TABLE]]

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Interest Income and Expense

The following table reflects the interest income and interest expense for fiscal 2025 and 2024: 

[[GREPCENT_TABLE]]
[["","Fiscal"],["(dollar amounts in thousands)","2025","","2024","","$ Change","","% Change"],["Interest income","$","23,834","","","$","34,230","","","$","(10,396)","","","(30.4)","%"],["Interest expense","$","(134)","","","$","(89)","","","$","(45)","","","(50.6)","%"]]
[[/GREPCENT_TABLE]]

Interest income

For fiscal 2025, the lower interest income as compared to fiscal 2024 was primarily due to lower weighted average interest rates on cash, cash equivalents and short-term investments.

Provision for Income Taxes

The following table reflects the provision for income taxes and the effective tax rate for fiscal 2025 and 2024: 

[[GREPCENT_TABLE]]
[["","","","","","","","Fiscal"],["(dollar amounts in thousands)","","","","","","","2025","","2024","","Change"],["Provision for income taxes","","","","","","","$","20,263","","","$","10,651","","","$","9,612"],["Effective tax rate","","","","","","","99.0","%","","(18.3)","%","","117.3","%"]]
[[/GREPCENT_TABLE]]

For fiscal 2025, the increase in provision for income taxes and effective tax rate as compared to fiscal 2024 was primarily due to the tax effects of the cessation of the Company's EA equipment business, the reimbursement from the cancellation of Project W and the reversal of unrecognized tax benefit, all of which were recorded in fiscal 2025, and the tax impact of the one-time charge for cancellation of Project W, and the tax benefit from the U.S. Tax Court opinion in Varian Medical Systems, Inc. v. Commissioner related to the U.S. Tax Cuts and Jobs Act of 2017 (“TCJA”) one-time transition tax, both of which were recorded in fiscal 2024.

Please refer to “Note 14: Income Taxes” in the notes to our consolidated financial statements in “Part II, Item 8 — Financial Statements and Supplementary Data” for additional information.

LIQUIDITY AND CAPITAL RESOURCES

The following table reflects the total cash, cash equivalents and short-term investments as of October 4, 2025 and September 28, 2024:

[[GREPCENT_TABLE]]
[["","As of"],["(dollar amounts in thousands)","October 4, 2025","","September 28, 2024","","$ Change"],["Cash and cash equivalents","$","215,708","","$","227,147","","$","(11,439)"],["Short-term investments","295,000","","350,000","","(55,000)"],["Total cash, cash equivalents, and short-term investments","$","510,708","","$","577,147","","$","(66,439)"],["Percentage of total assets","46.2%","","46.5%"]]
[[/GREPCENT_TABLE]]

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The following table reflects the summarized Consolidated Statements of Cash Flows information for fiscal 2025 and 2024:

[[GREPCENT_TABLE]]
[["","Fiscal"],["(in thousands)","2025","","2024"],["Net cash provided by operating activities","$","113,565","","","$","31,037"],["Net cash provided by (used in) investing activities","27,663","","","(138,501)"],["Net cash used in financing activities","(153,072)","","","(196,100)"],["Effect of exchange rate changes on cash and cash equivalents","405","","","1,309"],["Changes in cash and cash equivalents","$","(11,439)","","","$","(302,255)"],["Cash and cash equivalents, beginning of period","227,147","","","529,402"],["Cash and cash equivalents, end of period","$","215,708","","","$","227,147"]]
[[/GREPCENT_TABLE]]

Fiscal 2025

The net cash provided by operating activities was primarily due to non-cash adjustments to net income of $121.9 million and a net income of $0.2 million, partially offset by a net unfavourable change in operating assets and liabilities of $8.6 million. The non-cash adjustments were primarily due to impairment charges of $39.8 million and an inventory write-down of $31.5 million as a result of the cessation of the EA equipment business. The net change in operating assets and liabilities was primarily driven by an increase in inventories of $26.1 million after excluding the impact of the inventory write-down of $31.5 million, a decrease in income tax payable of $14.2 million and an increase in prepaid expenses and other current assets of $2.3 million. This was partially offset by a decrease in accounts and other receivable of $10.1 million and a net increase in accounts payable, accrued expenses and other liabilities of $24.1 million.

The increase in inventories was due to the buildup of long lead time materials to fulfill certain customer purchase orders. The decrease in income tax payable was primarily due to the current year payment of the U.S. one-time transition tax. The increase in prepaid expenses and other current assets was mainly due to higher prepayments to suppliers. The decrease in accounts and other receivable was mainly due to lower sales for the year. The net increase in accounts payable, accrued expenses and other liabilities was primarily due to higher accrued employee termination benefits and adverse purchase commitments.

Net cash provided by investing activities was due to net maturity of short-term investments of $55.0 million and net cash received from the disposal of a subsidiary of $2.5 million, partially offset by capital expenditures of $17.2 million, investment in debt securities of $10.0 million and investment in a private equity fund of $2.9 million.

Net cash used in financing activities was primarily due to common stock repurchases of $97.1 million and dividend payments of $54.1 million.

Fiscal 2024

Net cash provided by operating activities consisted of net loss of $69.0 million, non-cash adjustments of $179.3 million and a net unfavourable change in operating assets and liabilities of $79.2 million. The non-cash adjustments were primarily due to impairment charges of $44.5 million and inventory write-down of $57.3 million as a result of the cancellation of the Project. The net change in operating assets and liabilities was primarily driven by an increase in accounts and notes receivable of $34.7 million, an increase in inventories of $31.5 million, and a decrease in income tax payable of $17.7 million. This was partially offset by a decrease in prepaid expenses and other current assets of $9.1 million.

The increase in accounts and other receivable was primarily due to the timing of payments due. The increase in inventories was due to the buildup of long lead time materials to fulfill certain customer purchase orders. The decrease in income tax payable is primarily due to the current year payment of the U.S. one-time transition tax and tax benefit from the U.S. Tax Court opinion in Varian Medical Systems, Inc. v. Commissioner. The decrease in prepaid expenses was mainly due the transfer of contract assets to net account receivables.

The net cash used in investing activities was due to net purchase of short-term investments of $120.0 million, capital expenditures of $16.1 million and investment in a private equity fund of $2.4 million.

The net cash used in financing activities was primarily due to common stock repurchases of $150.8 million and dividend payments of $44.2 million.

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Fiscal 2026 Liquidity and Capital Resource Outlook

We expect our fiscal 2026 capital expenditures to be between $8.0 million and $12.0 million. The actual amounts for fiscal 2026 will vary depending on market conditions. Expenditures are anticipated to be primarily used for research and development projects, enhancements to our manufacturing operations, improvements to our information technology security, ongoing implementation of our enterprise resource planning system and leasehold improvements for our facilities. Our ability to make these expenditures will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing macroeconomic conditions, trade tensions, inflationary pressures, geopolitical tensions, including the ongoing tensions in the Middle East and the prolonged Ukraine/Russia conflict, and other factors, some of which are beyond our control.

As of October 4, 2025 and September 28, 2024, approximately $414.3 million and $302.6 million of cash, cash equivalents, and short-term investments were held by the Company’s foreign subsidiaries, respectively, with a large portion of the cash amounts expected to be available for use in the U.S. without incurring additional U.S. income tax.

The Company’s operations and capital requirements are funded primarily by cash on hand and cash generated by foreign operating activities. We believe these sources of cash and liquidity are sufficient to meet our additional liquidity needs for the foreseeable future, including payment of dividends, share repurchases and income taxes.

We believe that our existing cash, cash equivalents, short-term investments and anticipated cash flows from operations will be sufficient to meet our liquidity and capital requirements, notwithstanding the macroeconomic headwinds, for the next twelve months and beyond. Our liquidity is affected by many factors, some based on normal operations of our business and others related to macroeconomic conditions including inflationary pressures, industry-related uncertainties, and effects arising from the ongoing tensions in the Middle East and the prolonged Ukraine/Russia conflict, which we cannot predict. We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries. We intend to continue to use our cash for working capital needs and for general corporate purposes.

In this unprecedented macroeconomic environment, and as a result of the ongoing tensions in the Middle East and the prolonged Ukraine/Russia conflict or for other reasons, we may seek, as we believe appropriate, additional debt or equity financing which would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions. The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including our actual and projected demand for our products, semiconductor and semiconductor capital equipment industry conditions, competitive factors, the condition of financial markets and the global economic situation.

Share Repurchase Program

On August 15, 2017, the Company’s Board of Directors authorized a program to repurchase up to $100 million of the Company’s common stock on or before August 1, 2020. In 2018, 2019, 2020 and 2022, the Board of Directors increased the share repurchase authorization to $200 million, $300 million, $400 million and $800 million, respectively, and extended its duration through August 1, 2025 (the "Prior Program").

During the three months ended December 28, 2024, the Company repurchased a total of approximately 657.0 thousand shares of common stock under the Prior Program at a cost of approximately $30.3 million. On December 2, 2024, the Company announced that it had completed share repurchases under the Prior Program.

Additionally, as announced on November 13, 2024, the Board of Directors authorized a new share repurchase program to repurchase up to $300 million of the Company's common stock (the "New Program"). On December 2, 2024, the Company entered into a new written trading plan under Rule 10b5-1 of the Exchange Act, to facilitate repurchases under the New Program. The plan permits the purchase of up to approximately $300 million of the Company’s common stock from December 2, 2024 through December 2, 2029. The New Program may be suspended or discontinued at any time and is funded using the Company’s available cash, cash equivalents and short-term investments. Under the New Program, shares may be repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the New Program depend on market conditions as well as corporate and regulatory considerations.

During the fiscal year ended October 4, 2025, the Company repurchased a total of approximately 1,785.0 thousand shares of common stock under the New Program at a cost of approximately $66.2 million.

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The stock repurchases were recorded in the periods the repurchased shares were delivered and accounted for as treasury stock in the Company’s Consolidated Balance Sheets. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon re-issuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital.

If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings.

As of October 4, 2025, our remaining stock repurchase authorization under the New Program was approximately $233.8 million.

Dividends

On August 29, 2025, June 5, 2025, March 6, 2025 and November 13, 2024, the Board of Directors declared a quarterly dividend of $0.205 per share of common stock, resulting in an aggregate dividend of $0.82 per share of common stock for the fiscal year ended October 4, 2025. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s stockholders.

Other Obligations and Contingent Payments

In accordance with U.S. generally accepted accounting principles, certain obligations and commitments as of October 4, 2025 are appropriately not included in the Consolidated Balance Sheets and Statements of Operations in this Form 10-K. However, because these obligations and commitments are entered into in the normal course of business and because they may have a material impact on our liquidity, we have disclosed them in the table below.

Additionally, as of October 4, 2025, the Company had deferred tax liabilities of $35.5 million and unrecognized tax benefit recorded within the income tax payable for uncertain tax positions of $18.4 million, including related accrued interest of $3.1 million. These amounts are not included in the contractual obligation table below because we are unable to reasonably estimate the timing of these payments at this time.

The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of October 4, 2025:

[[GREPCENT_TABLE]]
[["","","","Payments due in"],["(in thousands)","Total","","Less than 1 year","","1 - 3 years","","3 - 5 years","","More than 5 years"],["Inventory purchase obligations (1)","$","177,305","","","177,305","","","\u2014","","","\u2014","","","\u2014"],["U.S. one-time transition tax payable (2)(reflected on our Consolidated Balance Sheets)","11,811","","","11,811","","","\u2014","","","\u2014","","","\u2014"],["Total","$","189,116","","","$","189,116","","","$","\u2014","","","\u2014","","","\u2014"]]
[[/GREPCENT_TABLE]]

(1)We order inventory components in the normal course of our business. A portion of these orders are non-cancellable and a portion may have varying penalties and charges in the event of cancellation.

(2)Associated with the U.S. one-time transition tax on certain earnings and profits of our foreign subsidiaries in relation to the TCJA.

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Credit Facilities

On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company and one of its subsidiaries with an overdraft facility of up to $150.0 million (the “Overdraft Facility”) for general corporate purposes.

On June 6, 2025, the Company terminated the Facility Agreements with the Bank. As of the date of termination, there were no outstanding amounts under the Overdraft Facility. In addition, the Company did not incur any early termination penalties in connection with the termination of the Facility Agreements.

As of October 4, 2025, other than the bank guarantee disclosed in "Note 10: Debt and Other Obligations” in the notes to our consolidated financial statements in “Part II, Item 8 — Financial Statements and Supplementary Data”, we did not have any other off-balance sheet arrangements, such as contingent interests or obligations associated with variable interest entities.