TTM Technologies Inc: Form 10-Q for the period ended Jun 30, 2025

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (Report) contains forward-looking statements regarding future events or our future financial and operational performance. Forward-looking statements include statements regarding markets for our products; trends in net sales, gross profits, and estimated expense levels; liquidity and anticipated cash needs and availability; and any statement that contains the words “anticipate,” “believe,” “plan,” “forecast,” “foresee,” “estimate,” “project,” “expect,” “seek,” “target,” “intend,” “goal,” and other similar expressions. The forward-looking statements included in this Report reflect our current expectations and beliefs, and we do not undertake publicly to update or revise these statements, even if experience or future changes make it clear that any projected results expressed in this Report or future quarterly reports to stockholders, press releases, or company statements will not be realized. In addition, the inclusion of any statement in this Report does not constitute an admission by us that the events or circumstances described in such statement are material. Furthermore, we wish to caution and advise readers that these statements are based on assumptions that may not materialize and may involve risks and uncertainties, many of which are beyond our control, that could cause actual events or performance to differ materially from those contained or implied in these forward-looking statements. These risks and uncertainties include the risks identified under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 30, 2024, as updated by our other filings with the Securities and Exchange Commission (SEC), and described elsewhere in this Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated condensed financial statements and the related notes and the other financial information included in this Report, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the fiscal year ended December 30, 2024, filed with the SEC.

COMPANY OVERVIEW

We are a leading global manufacturer of technology solutions including mission systems, radio frequency (RF) components, RF microwave/microelectronic assemblies, and quick-turn and technologically advanced printed circuit boards (PCB). We focus on providing time-to-market and volume production of advanced technology products and offer a one-stop design, engineering, and manufacturing solution to our customers. This solution allows us to align technology development with the diverse needs of our customers and to enable them to reduce the time required to develop new products and bring them to market. We serve a diversified customer base consisting of approximately 1,400 customers in various markets throughout the world, including aerospace and defense, data center computing, automotive, medical, industrial, and instrumentation, and networking. Our customers include original equipment manufacturers (OEMs), electronic manufacturing services (EMS) providers, original design manufacturers (ODMs), distributors, and government agencies (both domestic and allied foreign governments).

RECENT DEVELOPMENTS

On July 9, 2025, we announced the acquisition of a 750,000-square-foot facility in Eau Claire, Wisconsin, as well as land rights for an additional future manufacturing site in Penang, Malaysia. We believe the Eau Claire, Wisconsin facility comes equipped with the necessary infrastructure to support advanced technology PCB manufacturing and enhances our ability to support future high-volume U.S. production of advanced technology PCBs across key markets, particularly data center computing and networking for generative artificial intelligence (AI) applications. In addition, we acquired land rights for ten acres in Penang to establish a new production site that we anticipate will align with customers’ increasing interests in supply chain diversification beyond China. The future Penang facility will be in close proximity to our existing facility and will enable us to deliver cost-competitive, high-quality advanced technology PCB manufacturing to commercial markets such as data center computing, networking, and medical, industrial, and instrumentation. Together, these new investments support our strategy to offer regionally optimized, globally connected manufacturing solutions for our customers.

We previously announced we are in the process of constructing a new advanced technology PCB manufacturing facility in Syracuse, New York. We expect that our new facility will bring advanced technology capability for our domestic high-volume production of ultra‑high‑density interconnect (HDI) PCBs in support of national security requirements. The external construction of our facility is largely complete and we continue to make progress on the internal fabrication. We have equipment orders in place and, assuming no delays in delivery, expect installation to begin in the third quarter of 2025 with production expected to commence in the second half of 2026.

FINANCIAL OVERVIEW

Our customers include both OEMs and EMS providers. We sell to OEMs both directly and indirectly through EMS providers. For such indirect sales, we measure customers based on OEM companies as they are the ultimate end customers. Sales to our ten largest customers collectively accounted for 53% and 54% of our net sales for the quarter and two quarters ended June 30, 2025, respectively. Sales to our ten largest customers collectively accounted for 54% of our net sales for both the quarter and two quarters ended July 1, 2024.

The percentage of our net sales attributable to each of the principal end markets we served was as follows:

(1) The end market revenue prior to the quarter ended June 30, 2025 has been recast to reflect certain adjustments to allocations resulting from the segment reorganization.

(2) Sales to EMS companies are classified by the end markets of their OEM customers.

We derive revenues primarily from the sale of PCBs, engineered systems using customer-supplied engineering and design plans, as well as our long-term contracts related to the design and manufacture of highly sophisticated intelligence, surveillance, and communications solutions, and RF microwave/microelectronics components, assemblies, and subsystems. Orders for products generally correspond to the production schedules of our customers and are supported with firm purchase orders. Our customers have continuous control of the work in progress and finished goods throughout the PCB and engineered systems manufacturing process, as these are built to customer specifications with no alternative use, and there is an enforceable right of payment for work performed to date. As a result, we recognize revenue progressively over time based on the extent of progress towards completion of the performance obligation. We recognize revenue based on a cost method as it best depicts the transfer of control to the customer which takes place as we incur costs. Revenues are recorded proportionally as costs are incurred.

We also manufacture certain components, assemblies, subsystems, and completed systems which service our RF and Specialty Components (RF&S Components) customers and certain aerospace and defense customers. We recognize revenue at a point in time upon transfer of control of the products to our customer. Point in time recognition was determined as our customers do not simultaneously receive or consume the benefits provided by our performance and the asset being manufactured has alternative uses to us.

Net sales consist of gross sales less an allowance for returns, which typically have been approximately 2% of gross sales. We provide our customers a limited right of return for defective PCBs including components, assemblies, and subsystems. We record an estimate for sales returns and allowances at the time of sale based on historical results and anticipated returns.

Cost of goods sold consists of materials, labor, outside services, and overhead expenses incurred in the manufacture and testing of our products. Shipping and handling fees and related freight costs and supplies associated with shipping products are also included as a component of cost of goods sold. Many factors affect our gross margin, including capacity utilization, product mix, production volume, supply chain costs, and yield.

Selling and marketing expenses consist primarily of salaries, labor-related benefits, and commissions paid to our internal sales force, independent sales representatives, and our sales support staff, as well as costs associated with marketing materials and trade shows.

General and administrative costs primarily include the salaries for executive, finance, accounting, information technology, and human resources personnel, as well as expenses for accounting and legal assistance, incentive compensation expense, and gains or losses on the sale or disposal of property, plant, and equipment.

Research and development expenses consist primarily of salaries and labor-related benefits paid to our research and development staff, as well as material costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated condensed financial statements included in this Report have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities.

See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 30, 2024 for further discussion of critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates since December 30, 2024.

CONSOLIDATED OPERATING RESULTS

Selected financial highlights are presented in the table below:

(In thousands, except margin rates)

The following discussion and analysis is for the quarter and two quarters ended June 30, 2025, compared to the quarter and two quarters ended July 1, 2024, unless otherwise stated.

Net Sales

Total net sales increased $125.5 million, or 20.7%, to $730.6 million for the quarter ended June 30, 2025, from $605.1 million for the quarter ended July 1, 2024. The primary driver of this increase was strong demand in our aerospace and defense, data center computing, and networking end markets, the latter two being driven by generative AI. In addition, our medical, industrial, and instrumentation end market was also stronger as inventories and demand have normalized in this end market.

Total net sales increased $204.0 million, or 17.4%, to $1,379.3 million for the two quarters ended June 30, 2025, from $1,175.3 million for the two quarters ended July 1, 2024. The primary drivers of the increase were as discussed in the paragraph above.

Gross Profit and Margin Rate

Gross profit increased $30.9 million to $148.1 million for the quarter ended June 30, 2025, from $117.2 million for the quarter ended July 1, 2024, primarily due to higher sales. Gross margin rate increased to 20.3% for the quarter ended June 30, 2025, from 19.4% for the quarter ended July 1, 2024. This increase was primarily due to improved operational execution, favorable product mix, and increased volume of PCB shipments as compared to the second quarter of 2024.

Gross profit increased $58.1 million to $279.1 million for the two quarters ended June 30, 2025, from $220.9 million for the two quarters ended July 1, 2024, primarily due to higher sales. Gross margin rate increased to 20.2% for the two quarters ended June 30, 2025, from 18.8% for the two quarters ended July 1, 2024. The increase was primarily due to improved operational execution, favorable product mix, and increased volume of PCB shipments as compared to the same period of 2024.

Operating Expenses

Operating expenses increased $8.1 million to $86.3 million for the quarter ended June 30, 2025, from $78.2 million for the quarter ended July 1, 2024, primarily due to the absence of gains on the sale of assets primarily related to the sale of two buildings vacated with the closure of our Anaheim and Santa Clara plants of $14.4 million that occurred in the quarter ended July 1, 2024, partially offset by the absence of the write down of our Hong Kong building of $6.1 million that occurred in the quarter ended July 1, 2024. Higher incentive compensation expense also contributed to the increase in operating expenses, partially offset by a decrease in amortization of definite-lived intangibles.

Operating expenses increased $2.2 million to $167.1 million for the two quarters ended June 30, 2025, from $164.9 million for the two quarters ended July 1, 2024, primarily due to the absence of gains on the sale of assets primarily related to the sale of two buildings vacated with the closure of our Anaheim and Santa Clara plants of $14.4 million that occurred in the two quarters ended July 1, 2024, partially offset by the absence of the write down of our Hong Kong building of $6.1 million that occurred in the two quarters ended July 1, 2024. In addition, increased stock-based compensation and incentive compensation expense contributed to the higher operating expenses, partially offset by a decrease in amortization of definite-lived intangibles.

Operating Income and Margin Rate

Operating income increased $22.8 million to $61.8 million for the quarter ended June 30, 2025, from $39.0 million for the quarter ended July 1, 2024. Operating margin rate increased to 8.5% for the quarter ended June 30, 2025, from 6.4% for the quarter ended July 1, 2024. The primary drivers of these increases are discussed above in the variance explanations for Gross Profit and Margin Rate and Operating Expenses.

Operating income increased $56.0 million to $112.0 million for the two quarters ended June 30, 2025, from $56.1 million for the two quarters ended July 1, 2024. Operating margin rate increased to 8.1% for the two quarters ended June 30, 2025, from 4.8% for the two quarters ended July 1, 2024. The primary drivers of these increases are discussed above in the variance explanations for Gross Profit and Margin Rate and Operating Expenses.

Total Other Expense, Net

Total other expense, net increased $7.8 million to $16.2 million for the quarter ended June 30, 2025, from $8.5 million for the quarter ended July 1, 2024, primarily as a result of unrealized foreign exchange losses during the quarter ended June 30, 2025. We utilize the Chinese Renminbi (RMB) and Malaysian Ringgit (MYR) at our China and Malaysia facilities, respectively, for employee‑related and other costs of running our operations in foreign countries. There was an unrealized loss from foreign exchange of $5.7 million during the quarter ended June 30, 2025, compared to $0.1 million during the quarter ended July 1, 2024. This unrealized loss was related to the translation of our China and Malaysia balance sheets from their local currencies into the U.S. dollar functional currency, which experienced devaluation against the RMB and MYR during the quarter ended June 30, 2025 as compared to the quarter ended July 1, 2024.

Total other expense, net increased $14.1 million to $25.5 million for the two quarters ended June 30, 2025, from $11.5 million for the two quarters ended July 1, 2024, primarily as a result of unrealized foreign exchange losses during the two quarters ended June 30, 2025. There was an $8.0 million unrealized loss from foreign exchange during the two quarters ended June 30, 2025, compared to a $4.2 million unrealized gain from foreign exchange during the two quarters ended July 1, 2024. This unrealized loss was related to the translation of our China and Malaysia balance sheets from their local currencies into the U.S. dollar functional currency, which experienced devaluation against the RMB and MYR during the two quarters ended June 30, 2025 as compared to the two quarters ended July 1, 2024.

Income Taxes

Income tax expense decreased $0.2 million to $4.0 million for the quarter ended June 30, 2025, from $4.2 million for the quarter ended July 1, 2024, primarily due to an income tax benefit from the deduction of stock-based compensation, partially offset by accruals for potential assessments in various jurisdictions and the finalization of China and Canada corporate income tax returns.

Income tax expense increased $5.0 million to $12.8 million for the two quarters ended June 30, 2025, from $7.8 million for the two quarters ended July 1, 2024, primarily due to an increase in income before income taxes for the two quarters ended June 30, 2025 and accruals for potential assessments in various jurisdictions, partially offset by an income tax benefit from the deduction of stock‑based compensation.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, introducing amendments to U.S. tax laws with various effective dates from 2025 to 2027. The OBBBA includes provisions such as the permanent extension of certain provisions of the Tax Cuts and Jobs Act that were set to expire at the end of 2025 and modifications to the international tax framework. Income Taxes (Topic 740): Improvements to Income Tax Disclosures requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Therefore, our tax provisions for the quarter and two quarters ended June 30, 2025, do not incorporate the effects of these tax law changes. We are in the process of evaluating and estimating the impact of the OBBBA on our consolidated condensed financial statements and will complete our assessment during the third quarter of 2025.

Our effective tax rate is primarily impacted by the mix of foreign and U.S. income, tax rates in China and Hong Kong, the U.S. federal income tax rate, apportioned state income tax rates, the generation of credits and deductions available to us as well as changes in valuation allowances and certain non-deductible items. We had a net deferred income tax liability of $41.8 million and $42.9 million as of June 30, 2025 and July 1, 2024, respectively.

SEGMENT OPERATING RESULTS

Basis of Presentation

During the quarter ended June 30, 2025, in connection with our change in organizational structure to enhance clarity in sector performance, accountability, and operating costs, our management finalized its assessment of our operating segments and concluded that we now have three reportable segments: Aerospace and Defense (A&D), Commercial, and RF&S Components. As a result, certain prior period amounts have been reclassified to conform with this new presentation. See Part I, Item 1, Note 10, Segment Information, of the Notes to Consolidated Condensed Financial Statements in this Report for further information.

Selected segment financial highlights, with reconciliations to operating income, are presented in the table below:

(In thousands, except margin rates)

(1) Amortization of definite-lived intangibles relates to the A&D, Commercial, and RF&S Components reportable segments, but is not reviewed separately by the chief operating decision maker (CODM). For the quarters ended June 30, 2025 and July 1, 2024, amortization expense of $2,336 and $2,335, respectively, is included in cost of goods sold for the A&D reportable segment. For both the two quarters ended June 30, 2025 and July 1, 2024, amortization expense of $4,671 is included in cost of goods sold for the A&D reportable segment.

Segment operating income, as reconciled in Part I, Item 1, Note 10, Segment Information, of the Notes to Consolidated Condensed Financial Statements in this Report, and segment operating margin rate (segment operating income divided by segment sales) are presented in conformity with Accounting Standards Codification (ASC) Topic 280, Segment Reporting. These measures are reported to the CODM, who is the President and Chief Executive Officer, for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, these measures are excluded from the definition of non‑GAAP financial measures under the SEC's Regulation G and Item 10(e) of Regulation S-K.

A&D

Segment Sales

Segment sales for the A&D reportable segment increased $53.1 million, or 19.3%, to $327.6 million for the quarter ended June 30, 2025, from $274.5 million for the quarter ended July 1, 2024. The primary drivers of this increase were improved spending in previous defense budgets, our strong strategic program alignment, and key bookings for ongoing franchise programs, including restricted programs. These increases were driven by increased sales related to missiles and munitions as well as strong demand in our Mission Systems and Specialty Assembly businesses.

Segment sales for the A&D reportable segment increased $83.4 million, or 15.1%, to $637.7 million for the two quarters ended June 30, 2025, from $554.3 million for the two quarters ended July 1, 2024. The primary drivers of the increase were as discussed in the paragraph above.

Segment Operating Income and Margin Rate

Segment operating income for the A&D reportable segment increased $19.8 million to $45.3 million for the quarter ended June 30, 2025, from $25.5 million for the quarter ended July 1, 2024. Segment operating margin rate for the A&D reportable segment increased to 13.8% for the quarter ended June 30, 2025, from 9.3% for the quarter ended July 1, 2024. The primary drivers of these increases were higher sales volume as discussed above, and improved operational execution.

Segment operating income for the A&D reportable segment increased $26.1 million to $86.1 million for the two quarters ended June 30, 2025, from $60.0 million for the two quarters ended July 1, 2024. Segment operating margin rate for the A&D reportable segment increased to 13.5% for the two quarters ended June 30, 2025, from 10.8% for the two quarters ended July 1, 2024. The primary drivers of these increases were higher sales volume as discussed above, and improved operational execution.

Commercial

Segment Sales

Segment sales for the Commercial reportable segment increased $72.4 million, or 22.4%, to $395.6 million for the quarter ended June 30, 2025, from $323.3 million for the quarter ended July 1, 2024. The primary driver of this increase was strong demand in our data center computing and networking end markets driven by generative AI. In addition, our medical, industrial, and instrumentation end market was also stronger as inventories and demand have normalized in this end market with growth in the industrial and instrumentation areas.

Segment sales for the Commercial reportable segment increased $121.3 million, or 20.0%, to $728.3 million for the two quarters ended June 30, 2025, from $607.1 million for the two quarters ended July 1, 2024. The primary driver of this increase was strong demand in our data center computing and networking end markets driven by generative AI, as well as normalized demand in our medical, industrial, and instrumentation end market.

Segment Operating Income and Margin Rate

Segment operating income for the Commercial reportable segment increased $10.4 million to $60.1 million for the quarter ended June 30, 2025, from $49.7 million for the quarter ended July 1, 2024. However, segment operating margin rate for the Commercial reportable segment slightly decreased to 15.2% for the quarter ended June 30, 2025, from 15.4% for the quarter ended July 1, 2024. The primary driver of the increase in segment operating income was higher sales volume as discussed above, while the segment operating margin rate slightly decreased due to ramp-up costs in connection with our fabrication plant in Penang, Malaysia, as well as product mix change.

Segment operating income for the Commercial reportable segment increased $24.0 million to $103.7 million for the two quarters ended June 30, 2025, from $79.8 million for the two quarters ended July 1, 2024. Segment operating margin rate for the Commercial reportable segment increased to 14.2% for the two quarters ended June 30, 2025, from 13.1% for the two quarters ended July 1, 2024. The primary drivers of these increases were higher sales volume as discussed above, and improved operational execution.

RF&S Components

Segment Sales

Segment sales for the RF&S Components reportable segment increased $1.0 million, or 11.0%, to $10.1 million for the quarter ended June 30, 2025, from $9.1 million for the quarter ended July 1, 2024. The primary driver of this increase was strong demand across the networking and medical, industrial, and instrumentation end markets.

Segment sales for the RF&S Components reportable segment increased $1.5 million, or 8.5%, to $18.9 million for the two quarters ended June 30, 2025, from $17.4 million for the two quarters ended July 1, 2024. The primary driver of this increase was strong demand across the networking and medical, industrial, and instrumentation end markets.

Segment Operating Income and Margin Rate

Segment operating income for the RF&S Components reportable segment increased $0.8 million to $2.9 million for the quarter ended June 30, 2025, from $2.1 million for the quarter ended July 1, 2024. Segment operating margin rate for the RF&S Components reportable segment increased to 28.4% for the quarter ended June 30, 2025, from 22.6% for the quarter ended July 1, 2024. The primary drivers of these increases were higher sales volume as discussed above, and improved operational execution.

Segment operating income for the RF&S Components reportable segment increased $0.7 million to $4.5 million for the two quarters ended June 30, 2025, from $3.7 million for the two quarters ended July 1, 2024. Segment operating margin rate for the RF&S Components reportable segment increased to 23.6% for the two quarters ended June 30, 2025, from 21.3% for the two quarters ended July 1, 2024. The primary drivers of these increases were higher sales volume as discussed above, and improved operational execution.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations, the issuance of debt, and borrowings under our revolving credit facilities. Our principal uses of cash have been to finance capital expenditures, finance acquisitions, fund working capital requirements, repay debt obligations, and repurchase common stock. We anticipate that financing capital expenditures, financing acquisitions, funding working capital requirements, servicing debt, and repurchasing common stock will be the principal demands on our cash in the future.

Cash flow provided by operating activities during the first two quarters of 2025 was $87.1 million as compared to cash flow provided by operating activities of $85.8 million in the same period in 2024. The increase in cash flow was primarily due to an increase in net income of $36.9 million partially offset by increased investment in working capital largely driven by the timing of collections and advance payments and increased inventories related to ramping production levels.

Net cash used in investing activities during the first two quarters of 2025 was $123.5 million, primarily resulting from the use of $123.7 million for net purchases of property, plant, and equipment and other assets. Net cash used in investing activities during the first two quarters of 2024 was approximately $52.5 million, primarily resulting from the use of $88.8 million for purchases of property, plant and equipment and other assets. This was partially offset by the receipt of $29.6 million of proceeds from the sale of property, plant, and equipment and other assets primarily related to the sale of two buildings vacated by the closure of our Anaheim and Santa Clara plants and $6.7 million of proceeds from the sale of property associated with our Shanghai E‑MS subsidiary.

Net cash used in financing activities during the first two quarters of 2025 was $19.8 million, reflecting the use of $17.9 million for repurchases of our common stock and $1.9 million for the repayment of long-term debt borrowings. Net cash used in financing activities during the first two quarters of 2024 was $37.1 million, reflecting the use of $34.5 million for repurchases of common stock and $2.6 million for the repayment of long-term debt borrowings.

As of June 30, 2025, we had cash and cash equivalents of approximately $448.0 million, of which approximately $137.7 million was held by our foreign subsidiaries, primarily in China, and $201.4 million of available borrowing capacity under our revolving credit facilities. Should we choose to remit cash to the United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States. However, we believe there would be no material tax expenses not previously accrued for the repatriation of this cash.

Our total 2025 capital expenditures are expected to be in the range of $235.0 million to $255.0 million, of which approximately $66.0 million relate to construction of our new plant in Syracuse, New York.

Share Repurchases

On May 8, 2025, our Board of Directors authorized a new share repurchase program (2025 Repurchase Program), under which we may repurchase up to $100.0 million in value of our common stock from time to time through May 7, 2027. We did not repurchase any shares of our common stock during the quarter ended June 30, 2025. During the two quarters ended June 30, 2025, under our previous two-year repurchase program that expired on May 3, 2025, we repurchased approximately 0.7 million shares of our common stock for a total cost of $17.9 million (including commissions). As of June 30, 2025, the remaining amount in value available to be repurchased under the 2025 Repurchase Program was $100.0 million.

Long-term Debt and Letters of Credit

As of June 30, 2025, we had $917.1 million of outstanding debt, net of discount and issuance costs, composed of $497.0 million of Senior Notes due 2029, $338.0 million under the Term Loan Facility due 2030 (Term Loan Facility), $80.0 million under the Asia Asset-Based Lending Credit Agreement (Asia ABL), and $2.1 million of other loans.

Pursuant to the terms of the Senior Notes due 2029 and Term Loan Facility, we are subject to certain affirmative and negative covenants, including limitations on indebtedness, corporate transactions, investments, dispositions, and restricted payments. Under the U.S. Asset-Based Lending Credit Agreement (U.S. ABL) and Asia ABL (collectively, the ABL Revolving Loans), we are also subject to various financial covenants, including leverage and fixed charge coverage ratios. As of June 30, 2025, we were in compliance with the covenants under the Senior Notes due 2029, Term Loan Facility, and ABL Revolving Loans.

Based on our current level of operations, we believe that cash generated from operations, cash on hand, and cash from the issuance of term and revolving debt will be adequate to meet our currently anticipated capital expenditure, debt service, and working capital needs for the next 12 months. Additional information regarding our indebtedness, including information about the credit available under our debt facilities, interest rates, and other key terms of our outstanding indebtedness, is included in Part I, Item 1, Note 8, Long‑term Debt and Letters of Credit, of the Notes to Consolidated Condensed Financial Statements included in this Report.

Supplier Finance Program Obligations

We have agreements with financial institutions to facilitate payments to certain suppliers. Liabilities associated with these agreements are recorded in accounts payable on the consolidated condensed balance sheets and amounted to $12.8 million and $17.2 million as of June 30, 2025 and December 30, 2024, respectively.

Contractual Obligations and Commitments

As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. These obligations impact our liquidity and capital resource needs. Our estimated future obligations consist of long-term debt obligations, interest on debt obligations, derivative liabilities, purchase obligations, and leases. As of June 30, 2025, there were no material changes outside the ordinary course of business since December 30, 2024 to our contractual obligations and commitments and the related cash requirements.

Seasonality

We tend to experience modest seasonal softness in the first and third quarters due to holidays and vacation periods in China and North America, respectively, which limit production leading to stronger revenue levels in the second and fourth quarters.

Recently Issued Accounting Standards

For a description of recently adopted and issued accounting standards, including the respective dates of adoption and the expected effects on our results of operations and financial condition, see Part I, Item 1, Note 1, Nature of Operations and Basis of Presentation, of the Notes to Consolidated Condensed Financial Statements included in this Report.

In the normal course of business operations, we are exposed to risks associated with fluctuations in interest rates and foreign currency exchange rates. We address these risks through controlled risk management that includes the use of derivative financial instruments to economically hedge or reduce these exposures. We do not enter into derivative financial instruments for trading or speculative purposes. As of June 30, 2025, we did not have any material commodity contracts in place and believe our exposure to commodity price risk is not material.

We have not experienced any losses to date on any derivative financial instruments due to counterparty credit risk.

Interest Rate Risks

Our business is exposed to risk resulting from fluctuations in interest rates. Our interest expense is more sensitive to fluctuations in the general level of Term Secured Overnight Financing Rate (SOFR) interest rates than to changes in rates in other markets. Increases in interest rates would increase interest expense relating to our outstanding variable rate borrowings and increase the cost of debt. Fluctuations in interest rates can also lead to significant fluctuations in the fair value of our debt obligations.

In March 2023, we entered into a four-year pay-fixed, receive-floating (1-month Chicago Mercantile Exchange (CME) Term SOFR), interest rate swap arrangement with a notional amount of $250.0 million for the period beginning April 1, 2023 and ending on April 1, 2027. Under the terms of the interest rate swap, we pay a fixed rate of 3.49% against a portion of our Term SOFR-based debt and receive floating 1-month CME Term SOFR during the swap period.

At inception, we designated the interest rate swap as a cash flow hedge and the fair value of the interest rate swap was zero. As of June 30, 2025, the fair value of the interest rate swap was recorded as a net asset in the amount of $0.2 million, of which $1.1 million is included as a component of prepaid expenses and other current assets and $0.9 million is included as a component of other long-term liabilities. As of December 30, 2024, the fair value of the interest rate swap was recorded as an asset of $3.1 million, of which $1.8 million is included as a component of prepaid expenses and other current assets and $1.3 million is included as a component of deposits and other non-current assets. No ineffectiveness was recognized for the quarter and two quarters ended June 30, 2025. During the quarter and two quarters ended June 30, 2025, the interest rate swap decreased interest expense by $0.6 million and $1.1 million, respectively. During the quarter and two quarters ended July 1, 2024, the interest rate swap decreased interest expense by $1.2 million and $2.3 million, respectively.

See Liquidity and Capital Resources and Long-term Debt and Letters of Credit appearing in Part I, Item 2 of this Quarterly Report on Form 10-Q for further discussion of our financing facilities and capital structure. As of June 30, 2025, approximately 81.2% of our total debt was based on fixed rates. Based on our borrowings as of June 30, 2025, an assumed 100 basis point change in variable rates would cause our annual interest cost to change by $1.7 million.

Foreign Currency Exchange Rate Risks

In the normal course of business, we are exposed to risks associated with fluctuations in foreign currency exchange rates related to transactions that are denominated in currencies other than our functional currencies, as well as the effects of translating amounts denominated in a foreign currency to the U.S. Dollar as a normal part of our financial reporting process. Most of our foreign operations have the U.S. Dollar as their functional currency. However, one of our China facilities utilizes the Renminbi (RMB), which results in recognition of translation adjustments included as a component of accumulated other comprehensive loss. Our foreign exchange exposure results primarily from employee-related and other costs of running our operations in foreign countries, foreign currency denominated purchases, and translation of balance sheet accounts denominated in foreign currencies. We do not engage in hedging to manage this foreign currency risk. However, we may consider the use of derivatives in the future. Our primary foreign exchange exposure is to the RMB and Malaysian Ringgit (MYR).

Debt Instruments

The fiscal calendar maturities of our debt instruments for the next five years and thereafter were as follows:

(In thousands, except interest rates)

(1) Interest rate swap effectively fixed $250,000 of variable rate debt.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our CEO and CFO have concluded that, as of June 30, 2025 such disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

We continue to expand our implementation of an enterprise resource planning (ERP) system on a worldwide basis, which is expected to improve the efficiency of the financial reporting and related transaction processes. We are in the process of rolling out the ERP system to our remaining locations to standardize the ERP system.

There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors as previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 30, 2024.