Lattice Semiconductor Corp: Form 10-Q for the period ended Jul 4, 2026

The following discussion should be read along with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 10-K.

Overview

Lattice develops technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and technology licenses. Lattice is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the Compute, Communications, Industrial, and Embedded markets. Our technology, long-standing relationships, and commitment to world-class support helps our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.

Lattice has focused its strategy on delivering programmable logic products and related solutions based on low power, small size, and ease of use. We also serve our customers with intellectual property ("IP") licensing and various other services. Our product development activities include new proprietary products, advanced packaging, existing product enhancements, software development tools, soft IP, and system solutions for high-growth applications such as Edge Artificial Intelligence, wireless and wireline infrastructure, platform security, and factory automation.

Critical Accounting Policies and Use of Estimates

Critical accounting policies are those that are both most important to the portrayal of a company's financial condition and results of operations, and that require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no material changes to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2025 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, actual results may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.

Results of Operations

Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table:

(In thousands)

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Revenue by End Market

During the first quarter of 2026, we aligned our end market structure to our larger strategic market focus areas. We sell our products globally to a broad base of customers in two primary end market groups: Compute and Communications, and Industrial and Embedded. Across our end markets, our products are increasingly used for AI-related applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, and AI-enabled robotics and ADAS systems, among others. We also provide IP licensing and services to these end markets.

Within these end markets, there are multiple drivers, including:

• Compute and Communications: data center servers, storage, and networking equipment, client computing platforms, and wireless and wireline communications infrastructure deployments,
• Industrial and Embedded: factory automation, robotics, automotive electronics, and industrial Internet of Things ("IoT"), smart home, prosumer, and other applications.

The end market data we use is derived from data provided to us by our distributors and end customers. With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue for which end customers and end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.

The following are examples of end market applications for the periods presented:

The composition of our revenue by end market is presented in the following table:

(In thousands)

Note: During the first quarter of 2026, we began disaggregating our revenue by Compute and Communications, and Industrial and Embedded. Prior periods have been reclassified to match current period presentation.

Revenue from the Compute and Communications end market increased by 83% for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 and increased by 84% for the first six months of fiscal 2026 compared to the first six months of fiscal 2025 primarily due to stronger demand in data center applications, including general-purpose and AI-specific servers, as well as wireline networking components.

Revenue from the Industrial and Embedded end market increased by 36% for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 and increased by 18% for the first six months of fiscal 2026 compared to the first six months of fiscal 2025 primarily due to recovering end market demand particularly from industrial and aerospace customers.

AI applications are pervasive across our end markets, so we do not consider AI applications as a distinct end market. We expect AI-related revenue to grow over the next few years based on the growing pipeline of AI-related design wins in a diverse set of applications across both of our end market groups.

Revenue by Geography

We have a diverse base of customers where distributors represent a significant portion of our total revenue. Our revenue by geographical market is based on the ship-to location of our customers, which can vary from time to time. For the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 and for the first six months of fiscal 2026 compared to the first six months of fiscal 2025, revenue from Asia increased by 92% and 82%, respectively, primarily due to hyperscaler demand, while revenue from the Americas decreased by 14% and 26%, respectively, primarily due to the non-recurrence of certain one-time sales in the prior year period, and revenue from Europe increased by 32% and 44%, respectively, primarily due to broad market recovery in this region.

The composition of our revenue by geography is presented in the following table:

(In thousands)

Revenue from Customers

We sell our products to independent distributors and directly to customers. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 95% and 84% for the second quarter of fiscal 2026 and 2025, respectively, and 95% and 81% for the first six months of fiscal 2026 and 2025, respectively.

Gross Margin

The composition of our Gross margin, including as a percentage of revenue, is presented in the following table:

(In thousands)

Gross margin, as a percentage of revenue, increased 190 basis points in the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 and increased by 140 basis points for the first six months of fiscal 2026 compared to the first six months of fiscal 2025. Higher margins resulted primarily from changes in product mix and volume between the periods, partially offset by higher stock-based compensation expense associated with market and performance-based awards in the current year.

Operating Expenses

Research and Development Expense

The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table:

(In thousands)

Research and development expense includes headcount-related costs, including cash- and stock-based compensation and benefits, R&D equipment expenses, engineering wafers, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The increase in Research and development expense for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 was primarily due to higher stock-based and cash-based compensation expense, along with higher depreciation and amortization on semiconductor equipment and licensed software tools, and higher expenses for mask sets and prototypes. We believe that investing in research and development is important to delivering innovative products to our customers. We expect research and development expense to increase in the future, but to decline as a percentage of revenue.

Selling, General, and Administrative Expense

The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table:

(In thousands)

Selling, general, and administrative expense includes headcount-related costs, including cash- and stock-based compensation and benefits, related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses. The increase in Selling, general, and administrative expense for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 was primarily due to higher stock-based and cash-based compensation expense. We expect selling, general, and administrative expense to increase in the future, but to decline as a percentage of revenue.

Amortization of Acquired Intangible Assets

The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table:

(In thousands)

The increase in Amortization of acquired intangible assets for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 was due to the purchase of intellectual property assets in the second quarter of fiscal 2025.

Restructuring and Other

The composition of our Restructuring and other activity, including as a percentage of revenue, is presented in the following table:

(In thousands)

Restructuring and other is generally comprised of expenses resulting from workforce reductions, cancellation of contracts, and consolidation of our facilities. Details of our restructuring plans and expenses accrued under them are discussed in "Note 6 – Restructuring" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring and other costs decreased in the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 as we completed the actions planned under the Q3 2024 Plan.

Acquisition Related

The composition of our Acquisition related activity, including as a percentage of revenue, is presented in the following table:

(In thousands)

Acquisition related activity includes professional fees and other expenses directly related to acquisitions. For fiscal 2026, Acquisition related expenses were entirely attributable to our acquisition of AMI which we completed in July 2026 and were comprised of professional fees for legal, accounting, and outside services, and for acquisition related travel costs.

Interest Income (Expense), net

The composition of our Interest income (expense), net, including as a percentage of revenue, is presented in the following table:

(In thousands)

Changes in Interest income (expense) for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 were primarily due to amortization of debt costs related to the bridge facility in the current year periods as discussed in "Note 5 – Long-Term Debt" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other Income (Expense), net

The composition of our Other income (expense), net, including as a percentage of revenue, is presented in the following table:

(In thousands)

Changes in Other income (expense) for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of 2025 were primarily due to the write-off of $4.7 million of unamortized debt costs related to the bridge facility and $0.2 million of unamortized debt cost associated with the 2022 Credit Agreement upon the re-financing of our long-term debt.

Income Tax Expense

The composition of our Income tax expense is presented in the following table:

(In thousands)

The lower income tax expense for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 was primarily due to the impact of stock-based compensation combined with federal tax credits, partially offset by increased worldwide income.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net income before net interest income (expense), income tax expense, depreciation and amortization, stock-based compensation, and other items that are considered unusual or not representative of underlying trends of our business, including but not limited to: legal expenses outside the ordinary course of business, transformation charges incurred in connection with our multi‑year strategic initiative to realign our organizational structure and modernize our technology platforms, restructuring, and other charges, if applicable for the periods presented.

We believe that the exclusion of the items eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of our business. Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating results in the same manner as our management and our Board of Directors. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison.

There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the most directly comparable financial measure calculated in accordance with GAAP. Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these potential capital expenditures. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items, as in the future we may incur expenses similar to the adjustments in this presentation. Evaluation of our performance should consider Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results.

A reconciliation of Net income to Adjusted EBITDA, including as a percentage of revenue, is presented in the following table:

(In thousands)

(1) Includes stock-based compensation and related payroll tax expenses.

(2) Includes accruals for the portion of our annual Corporate Incentive Plan that we intend to settle in equity and related payroll tax expenses.

(3) Includes legal expenses outside the ordinary course of business, including those incurred defending against claims described in our 2025 10-K.

Adjusted EBITDA increased for the second quarter and first six months of fiscal 2026 compared to the second quarter and first six months of fiscal 2025 primarily as a result of higher revenue, partially offset by higher headcount-related expenses and higher expenses for mask sets and prototypes.

Liquidity and Capital Resources

The following sections discuss material changes in our financial condition from the end of fiscal 2025, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources. There continues to be uncertainty around the extent of market volatility, the impact of tariffs, inflationary pressures, interest rate changes, recessionary concerns, uncertainty in the financial and banking industry, and geopolitical tension, which may impact our liquidity and working capital needs in future periods.

We have historically financed our operating and capital resource requirements through cash flows from operations and from the issuance of long-term debt to fund acquisitions. Cash provided by or used in operating activities will fluctuate from period to period due to fluctuations in operating results, the timing and collection of accounts receivable, and required inventory levels, among other things.

We believe that our financial resources, including current cash and cash equivalents, cash flow from operating activities, and our credit facilities, will be sufficient to meet our liquidity and working capital needs through at least the next 12 months. On June 30, 2026, we entered into our 2026 Credit Agreement, as described in "Note 5 – Long-Term Debt" under Part I, Item 1 of this report. As of July 4, 2026, we did not have significant long-term commitments for capital expenditures. For further information on our cash commitments for operating lease liabilities, see "Note 7 – Leases" under Part I, Item 1 of this report.

In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings. In connection with funding capital expenditures, acquisitions, securing additional wafer supply, increasing our working capital, or other purposes, we may seek to obtain equity or additional debt financing. We may also seek to obtain equity or additional debt financing if we experience downturns or cyclical fluctuations in our business that are more severe or longer than we anticipated when determining our current working capital needs.

Cash and cash equivalents

(In thousands)

As of July 4, 2026, we had Cash and cash equivalents of $173.3 million, of which $46.5 million was held by our foreign subsidiaries. We manage our global cash requirements considering, among other things, (i) available funds among our subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-US earnings may require us to withhold and pay foreign income tax on dividends. This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of July 4, 2026, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

The net increase in Cash and cash equivalents of $39.4 million between January 3, 2026 and July 4, 2026 was primarily driven by cash flows from the following activities:

Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities for the first six months of fiscal 2026 was $138.6 million compared to $70.4

million for the first six months of fiscal 2025. This increase of $68.2 million was primarily driven by $67.6 million more cash provided by net income adjusted for non-cash items, coupled with $0.6 million of net changes in working capital.

Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures, payments for software and intellectual property licenses, and purchases of other investments. Net cash used by investing activities in the first six months of fiscal 2026 was $42.7 million compared to $23.6 million in the first six months of fiscal 2025.

Financing activities — Financing cash flows consist primarily of repurchases of common stock, tax payments related to the net share settlement of restricted stock units, proceeds from the acquisition of common stock under our employee stock purchase plan, and activity related to our long-term debt. Net cash used by financing activities was $56.5 million in the first six months of fiscal 2026 compared to $76.6 million in the first six months of fiscal 2025. This decrease of $20.1 million was due to the following activities: (i) during the first six months of fiscal 2026, we repurchased 0.2 million shares of common stock for $15.0 million, a decrease of $55.9 million compared to the first six months of fiscal 2025, where we repurchased 1.3 million shares of common stock for $70.9 million, (ii) payments for tax withholdings on vesting of RSUs partially offset by purchases under the employee stock purchase plan used net cash flows of $29.7 million in the first six months of fiscal 2026, an increase of $24.0 million from the net $5.7 million used in the first six months of fiscal 2025, and (iii) during the first six months of fiscal 2026, we paid $11.7 million in issuance costs related to new long-term debt under the bridge facility and the 2026 Credit Agreement.

Accounts receivable, net

(In thousands)

Accounts receivable, net as of July 4, 2026 increased by $17.7 million, or 17%, compared to January 3, 2026. This increase was due to increased revenue and order scheduling through the quarter. We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.

Inventories

(In thousands)

Inventories as of July 4, 2026 increased by $11.3 million, or 13%, compared to January 3, 2026 as we build inventory to meet continued demand growth.

The Days of inventory on hand ratio compares the inventory balance at the end of a quarter to the cost of revenue in that quarter. We calculate Days of inventory on hand on the basis of a 365-day year as Inventories at the end of the quarter divided by Cost of revenue during the quarter annualized and then multiplied by 365.

Credit Arrangements

As of July 4, 2026, we had no used or unused credit arrangements beyond the facilities described in the 2026 Credit Agreement. The details of this arrangement are described in "Note 5 – Long-Term Debt" in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Share Repurchase Program

See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” of this Quarterly Report on Form 10-Q for more information about the share repurchase program.

New Accounting Pronouncements

The information contained under the heading "New Accounting Pronouncements" in Note 1 – Basis of Presentation to our Consolidated Financial Statements in Part I, Item 1 of this report is incorporated by reference into this Part I, Item 2.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. There have been no material changes to either the foreign currency exchange rate risk or interest rate risk previously disclosed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our 2025 10-K.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

In connection with the filing of this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, 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 (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the second quarter of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors set forth below, together with the risk factors associated with our business previously described in Part I, Item 1A, “Risk Factors,” in our 2025 10-K. Other than as set forth below there have been no material changes in the risk factors included in our 2025 10-K, and this report should be read in conjunction with the risk factors set forth in our 2025 10-K. These risk factors are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we may currently deem to be immaterial could materially adversely affect our business, financial condition, or operating results, including those related to adverse macroeconomic conditions, such as tariffs and trade disruptions, rising inflation, and labor shortages, and supply constraints arising from increased demand for our products or for semiconductor manufacturing capacity across the industry, which may affect demand for our products or increase our product or labor costs, negatively impacting our revenues, gross margins, and overall financial results. If any of these risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected, and the trading price of our common stock could decline. These factors, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q, should be carefully considered before making an investment decision relating to our common stock.

Acquisitions, divestitures, strategic investments and strategic partnerships could disrupt our business and adversely affect our financial condition and operating results.

We actively evaluate and may continue to pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships. For example, in July 2026, we completed the AMI Acquisition, and we are in the process of integrating AMI's business, operations, technology, and personnel with our own. The identification, evaluation, negotiation, and pursuit of such transactions, strategic investments or strategic partnership candidates requires significant management time and attention and involves substantial costs, including fees paid to financial advisors, consultants, legal counsel, and other third parties, regardless of whether any transaction is ultimately consummated. If such strategic transactions require us to seek additional debt or equity financing, we may not be able to obtain such financing on terms favorable to us or at all, and such transactions may adversely affect our liquidity, capital structure, and overall financial flexibility. We may also choose to divest certain non-core assets, which could lead to charges against earnings and may expose us to additional liabilities and risks. Any strategic transaction might not strengthen our competitive position, may increase some of our risks, and may be viewed negatively by our customers, partners or investors. Even if we successfully complete a strategic transaction, we may not be able to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business or global tax structure. We may not realize the anticipated benefits, synergies, or cost savings of the AMI Acquisition or any other strategic transaction within the expected timeframe or at all, and our integration of AMI or other acquired businesses may be more difficult, costly, or time-consuming than we currently anticipate, including as a result of challenges in retaining key employees and customers, coordinating geographically dispersed organizations, and integrating disparate business systems, technologies, and controls. We may experience unexpected changes in how we are required to account for strategic transactions pursuant to U.S. GAAP and may not achieve the anticipated benefits of any strategic transaction. We may incur unexpected costs, obligations, claims or liabilities during the strategic transaction or that we assume from the acquired business, or we may discover adverse conditions post acquisition for which we have limited or no recourse, including but not limited to those related to intellectual property, litigation, regulatory compliance, taxes, indemnification obligations, or accounting treatment, each of which may require us to make significant judgments and estimates under U.S. GAAP that could affect our reported financial results. In addition, we may be required to incur restructuring charges, impairment charges, or other costs in connection with any transaction, including the AMI Acquisition. We may also be subject to increased scrutiny by regulators, customers, partners, and investors in connection with strategic transactions, and any perceived failure to execute effectively could adversely affect our reputation and market position. We may also be a target for unsolicited acquisition or business combination offers. Appropriately reviewing and responding to any such offer can be costly and complex, and diverts the efforts and attention of management.

We may incur indebtedness which could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations.

Our Second Amended and Restated Credit Agreement, dated June 30, 2026 (the “2026 Credit Agreement”) allows us to draw up to $200 million in revolving loans and up to $950.0 million of delayed draw term loans. The level of committed capacity available to us under the revolving credit facility may limit our financial flexibility, including our ability to respond to adverse economic conditions, fund working capital needs, pursue strategic initiatives or acquisitions, or address unforeseen operational or regulatory challenges. As of July 4, 2026, we had no borrowings outstanding under the 2026 Credit Agreement. We borrowed $925 million of delayed draw term loans on July 27, 2026 in connection with the completion of the AMI Acquisition. Following the borrowing of $925 million under the delayed draw term loan facility, the remaining $25 million of undrawn commitments under the delayed draw term loan facility expired on the closing date of the acquisition. Our obligations under the 2026 Credit Agreement are guaranteed by certain of our U.S. subsidiaries meeting materiality thresholds set forth in the 2026 Credit Agreement. The term loans amortize quarterly as set forth in the 2026 Credit Agreement and mature on June 30, 2031 and the revolving loans under the 2026 Credit Agreement may be reborrowed and repaid at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan facility on June 30, 2031. Our ability to meet our debt service obligations depends upon our operating and financial performance, which is subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to service our debt, we may need to sell material assets, restructure or refinance our debt, increase our borrowing capacity, or incur additional indebtedness, or seek additional equity capital. Prevailing economic conditions and global credit markets could adversely impact our ability to sell material assets, restructure or refinance our debt on terms acceptable to us, or at all, or we may not be able to restructure or refinance our debt without incurring significant additional fees and expenses.

The 2026 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and our subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2026 Credit Agreement. We are also required to maintain compliance with a total net leverage ratio and an interest coverage ratio, in each case, determined in accordance with the terms of the 2026 Credit Agreement.

The amount and terms of our indebtedness, as well as our credit rating, could have important consequences, including the following:

• we may be more vulnerable to economic downturns, less able to withstand competitive pressures, and less flexible in responding to changing business and economic conditions;
• our cash flow from operations may be allocated to the payment of outstanding indebtedness, and not to research and development, operations or business growth;
• we might not generate sufficient cash flow from operations or other sources to enable us to meet our payment obligations under the facility and to fund other liquidity needs;
• our ability to make distributions to our stockholders in a sale or liquidation may be limited until any balance on the facility is repaid in full; and
• our ability to incur additional debt, including for working capital, acquisitions, or other needs, is more limited.

If we breach a loan covenant, the lenders could accelerate the repayment of the facility. We might not have sufficient assets to repay our indebtedness upon acceleration. If we are unable to repay or refinance the indebtedness upon acceleration or at maturity, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our assets and subsidiaries securing the facility, which could materially decrease the value of our common stock.