Quarterly Report for Quarter Ending September 25, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, and the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" included in our Annual Report on Form 10-K for the fiscal year ended March 27, 2026, filed with the SEC on May 21, 2026 (the "2026 Annual Report").

In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section titled "Forward-Looking Statements" and in Part I, Item 1A. "Risk Factors" of our 2026 Annual Report, and Part II, Item 1A. "Risk Factors" of this Quarterly Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks. All references to the three- and six-month periods ended
September 25, 2026 and September 26, 2025 relate to the 13- and 26-week periods ended September 25, 2026 and September 26, 2025, respectively. All references to "2027," "fiscal year 2027" or similar references relate to the 52-week period ending March 26, 2027. All references to "2026," "fiscal year 2026" or similar references relate to the 52-week period ended March 27, 2026.

Overview

We are a global leader in the design, development, and marketing of sensor integrated circuits ("ICs") and application-specific power ICs that enable the sensing, motion control, power management and isolation functions of complex electromechanical or power conversion systems. We primarily serve automotive and industrial markets, including advanced industrial markets such as Artificial Intelligence ("AI") data centers, robotics, and energy infrastructure, where our solutions enable customers to sense, move, manage and isolate power with efficiency, precision, and reliability.

Our sensor ICs provide critical feedback for motion, position, speed, and electrical current sensing, while our power ICs control motors, manage power conversion and regulation, and provide high-voltage isolation across a wide range of applications. By embedding system-level intelligence directly into our products, we reduce the number of components required in a customer's design while improving performance, energy efficiency, safety, and reliability. We believe our deep application knowledge, differentiated technology, and strong customer relationships enable us to deliver solutions that are more integrated, intelligent and efficient than typical ICs.

We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,500 products, and we ship over 2 billion units annually to more than 15,000 customers worldwide. During the three- and six-month periods ended September 25, 2026, we generated $276.9 million and $536.1 million in total net sales, respectively, with $23.3 million and $39.2 million in net income, respectively. During the three- and six-month periods ended September 26, 2025, we generated $214.3 million and $417.7 million in total net sales, respectively, with $6.6 million in net income and $6.6 million in net loss, respectively.

Other Key Factors and Trends Affecting Our Operating Results

Our financial condition and results of operations have been, and will continue to be, affected by numerous other factors and trends, including the following:

Inflation

While global inflation rates have remained persistent, the markets in which we operate have remained elevated and may continue to rise as a result of cost increases attributable to a rise in global energy and commodity prices and global tariff policies. Inflation in recent quarters has led us to experience higher costs, including higher labor costs, wafer and other costs for materials from suppliers, and transportation and energy costs. Our suppliers have raised their prices in recent years and may continue to raise prices, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability. If inflation rates continue to rise or remain elevated for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity. While we have attempted to offset increases in these costs through various productivity and cost reduction initiatives, as well as adjusting our selling prices and releasing new products with improved gross margins, our ability to increase our average selling prices ("ASPs") depends on market conditions and competitive dynamics. Given the timing of our actions compared to the timing of these inflationary pressures, there may be periods during which we are unable to fully recover the increases in our costs.

Design Wins with New and Existing Customers

Our end customers continually develop new products in existing and new application areas, and we work closely with most of our significant original equipment manufacturer ("OEM") customers in our target markets to understand their product roadmaps and strategies. For new products, the time from design initiation and manufacturing until we generate sales can be lengthy, typically between two and four years. As a result, our future sales are highly dependent on our continued success at winning designs from our customers. Further, despite current inflationary and pricing conditions, unless we take actions to increase the prices of our products, we expect the ASPs of our products to decline over time, and we consider design wins to be critical to our future success as they help mitigate declines in ASPs. We anticipate being increasingly dependent on revenue from newer design wins for our newer products. The selection process is typically lengthy and may require us to incur significant design and development expenditures in pursuit of a design win, with no assurance that our solutions will be selected. As a result, the loss of any key design win or any significant delay in the ramp-up of volume production of a customer's products into which our product is designed could adversely affect our business. In addition, volume production is contingent upon the successful introduction and market acceptance of our customers' end products, which may be affected by several factors beyond our control.

Customer Demand, Orders and Forecasts

Demand for our products is highly dependent on market conditions in the end markets in which our customers operate, which are generally subject to seasonality, cyclicality, tariffs and other pricing increases and competitive conditions. In addition, a substantial portion of our total net sales is derived from sales to customers that purchase large volumes of our products. These customers generally provide periodic forecasts of their requirements. However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory. These risks may be compounded by broader geopolitical and supply chain disruptions affecting the electronics supply chain, even when our own supply, manufacturing and distribution capabilities are unaffected. Because our products are incorporated into our customers' end products alongside components and materials supplied by numerous third parties over whom we have no control, a shortage, trade restriction, geopolitical disruption or other event affecting any other critical component or input could cause our customers to delay, reduce, reschedule or cancel orders for our products, and we have observed that the effects of such disruptions may lag the underlying event by one or more quarters. We are currently operating in an inflationary environment for our products as a result of a rise in global energy and commodity prices and global tariff policies, which also have the potential to reduce end market demand in certain markets. Over the past several quarters, we and other semiconductor companies have experienced an increase in market demand, but historically such periods are often followed by periods of softening demand, primarily driven by lower demand from customers across various markets and digestion of excess accumulated inventory. In addition, factors that cause a reduction in demand from the end users of our OEM's or other customers' products, including as a result of increased prices resulting from a rise in global energy and commodity prices and global trade policies, tariffs or a recessionary environment in the markets in which we operate, may in the future continue to cause our direct customers to significantly reduce the number of products ordered from us.

Manufacturing Costs and Product Mix

Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies. We believe the primary driver of gross margin is the ASP negotiated between us and our customers relative to material costs and yields. Our pricing and margins depend on the volumes and the features of the products we produce and sell to our customers. As our products mature and unit volumes increase, we expect their ASPs to decline in the long-term. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers, as we target new design win opportunities and manage the product life cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these ASP declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, as well as selective price increases, which offset some or all of the margin reduction that results from declining ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to product mix, new product introductions, transitions into volume manufacturing and manufacturing costs. Gross margin generally decreases if production volumes are lower as a result of decreased demand, which leads to a reduced absorption of our fixed manufacturing costs. Gross margin generally increases when the opposite occurs.

Cyclical Nature of the Semiconductor Industry

The semiconductor industry has historically been highly cyclical and is characterized by increasingly rapid technological change, product obsolescence, competitive pricing pressures, evolving standards, short product life cycles in consumer and other rapidly changing markets and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform changes that may render some of our products obsolete and require us to devote significant research and development resources to compete effectively. Periods of rapid growth and capacity expansion are occasionally followed by significant market corrections in which sales decline, inventories accumulate, and facilities go underutilized. Furthermore, emerging secular growth drivers and concentrated infrastructure investments, such as those supporting advanced computing, AI and data centers, and electrification, may alter the historical amplitude or duration of these industry cycles. During periods of expansion, our margins generally improve as fixed costs are spread over higher manufacturing volumes and unit sales. In addition, we may build inventory to meet increasing market demand for our products during these times, which serves to absorb fixed costs further and increase our gross margins. During an expansion cycle, we may increase capital spending and hiring to add to our production capacity. During periods of slower growth or industry contractions, our sales, production, productivity and margins generally decline.

Results of Operations

Three-Month Period Ended September 25, 2026 Compared to Three-Month Period Ended September 26, 2025

The following table summarizes our results of operations and our results of operations as a percentage of total net sales for the three-month periods ended September 25, 2026 and September 26, 2025.

Total net sales

Total net sales increased in the three-month period ended September 25, 2026 compared to the three-month period ended
September 26, 2025. The increases by market, product and geographic location are as follows:

Sales trends by market

The following table summarizes total net sales by market. The categorization of net sales by market is based on the characteristics of the end product and application into which our product will be designed.

Automotive net sales increased in the three-month period ended September 25, 2026 compared to the three-month period ended
September 26, 2025, primarily due to increases in demand for advanced driver assistance systems ("ADAS"), components for electrified and hybrid vehicles ("xEVs"), (collectively, "Focus Auto"), safety, comfort and convenience applications, and internal combustion engine products.

Industrial and Other net sales increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to increases in demand for data center applications, consumer products, personal and industrial transport products and broad-based industrial products.

Sales trends by product

The following table summarizes net sales by product.

The increase in PIC sales was primarily driven by an increase in demand for our motor and high-performance power products. The increase in MS sales was primarily due to an increase in demand for our current sensor products and magnetic position sensors, both of which include our tunneling magnetoresistance ("TMR") sensor solutions, as well as our magnetic speed sensor products.

Sales trends by geographic location

The following table summarizes net sales by geographic location based on ship-to location.

Taiwan net sales increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily driven by an increase in demand for our data center applications, partially offset by decline in safety, comfort and convenience applications. Other Asia net sales increased primarily driven by sales of personal and industrial transport products. Japan net sales increased primarily driven by demand for safety, comfort and convenience applications, and data center applications. EMEA net sales increased primarily due to increased sales of consumer products. Greater China net sales increased primarily driven by an increase in internal combustion engine products and consumer products. South Korea net sales increased primarily driven by demand for ADAS components. United States net sales increased primarily driven by an increase in broad-based industrial products.

Cost of goods sold

Cost of goods sold increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to higher production volume in support of higher product sales.

Cost of goods sold as a percentage of our total net sales was 50.8% and 53.7% for the three-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease was primarily due to the increase in net sales and favorable manufacturing absorption.

Gross profit and gross margin

Gross profit increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to the increase in net sales and favorable product mix.

Gross margin was 49.2% and 46.3% for the three-month periods ended September 25, 2026 and September 26, 2025, respectively. The increase was primarily due to the increase in net sales and a change in product mix and favorable manufacturing absorption.

Research and development expenses

Research and development ("R&D") expenses increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to the increase in personnel costs and general operating expenses.

R&D expenses as a percentage of our total net sales were 20.1% and 23.7% for the three-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by the increase in personnel costs and general operating expenses.

Selling, general and administrative expenses

Selling, general and administrative ("SG&A") expenses increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to an increase in personnel costs.

SG&A expenses as a percentage of our total net sales were 16.2% and 19.7% in the three-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by the increase in personnel costs.

Interest expense

Interest expense decreased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025. The decrease was due to the voluntary payments applied to the outstanding balance of our term loans under our revolving credit facility (as described in Note 9, "Debt and Other Borrowings" to the unaudited condensed consolidated financial statements included in this Quarterly Report), in addition to the impact from refinancing the Company's outstanding term loans under the Company's revolving credit facility in January 2026.

Interest income

Interest income increased in the three-month period ended September 25, 2026 compared to the three-month period ended September 26, 2025, primarily due to higher cash and cash equivalents balances in interest-bearing accounts.

Other expense, net

The foreign currency loss recorded in the three-month period ended September 25, 2026 was primarily due to U.S. Dollar weakening against the Philippine Peso. The foreign currency loss recorded in the three-month period ended September 26, 2025 was primarily due to the U.S. Dollar weakening against various currencies, including the Euro and the Philippine Peso.

We recorded a net loss of $3.0 million and $2.4 million for the three-month periods ended September 25, 2026 and
September 26, 2025, respectively, related to our equity investment in Polar Semiconductor, LLC.

Income tax provision (benefit)

Income tax provision and the effective income tax rate were approximately $4.5 million and 16.2%, respectively, in the three-month period ended September 25, 2026, compared to income tax benefit and effective income tax rate of approximately $9.3 million and 342.5%, respectively, in the three-month period ended September 26, 2025. The change in the effective tax rates for the three-month periods primarily resulted from the significant increase in GAAP income before taxes, partially offset by the deduction for foreign-derived deduction-eligible income (formerly foreign-derived intangible income) ("FDDEI"), stock-based compensation windfalls, and R&D credit benefits.

Six-Month Period Ended September 25, 2026 Compared to Six-Month Period Ended September 26, 2025

The following table summarizes our results of operations and our results of operations as a percentage of total net sales for the six-month periods ended September 25, 2026 and September 26, 2025.

Total net sales

Total net sales increased in the six-month period ended September 25, 2026 compared to the six-month period ended
September 26, 2025. The increases by market, product and geographic location are as follows:

Sales trends by market

The following table summarizes total net sales by market. The categorization of net sales by market is based on the characteristics of the end product and application into which our product will be designed.

Automotive net sales increased in the six-month period ended September 25, 2026 compared to the six-month period ended
September 26, 2025, primarily due to growth in Focus Auto, safety, comfort and convenience applications, and internal combustion engine products.

Industrial and Other net sales increased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025, primarily due to increases in demand for data center applications, consumer products, and personal and industrial transport products.

Sales trends by product

The following table summarizes net sales by product.

The increase in PIC sales was primarily driven by an increase in demand for our motor and high-performance power products. The increase in MS sales was primarily due to an increase in demand for our current sensor products and magnetic position sensors, both of which include our TMR sensor solutions, as well as our magnetic speed sensor products.

Sales trends by geographic location

The following table summarizes net sales by geographic location based on ship-to location.

Taiwan net sales increased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025, primarily driven by an increase in demand for our data center applications, partially offset by decrease in safety, comfort and convenience applications. Japan net sales increased primarily driven by safety, comfort and convenience applications, data center applications and Focus Auto. Greater China net sales increased primarily driven by an increase in internal combustion engine products, ADAS components, consumer products, and safety, comfort and convenience applications, partially offset by a decrease in broad-based industrial products. Other Asia net sales increased primarily due to an increase in demand for personal and industrial transport products. EMEA net sales increased primarily due to increases in consumer products and xEV components. South Korea net sales increased primarily due to an increase in demand for ADAS components and safety, comfort and convenience applications. United States net sales increased primarily due to increases in broad-based industrial products.

Cost of goods sold

Cost of goods sold increased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025, primarily due to higher production volume in support of higher product sales.

Cost of goods sold as a percentage of our total net sales was 51.2% and 54.4% for the six-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease was primarily due to the increase in net sales and favorable manufacturing absorption.

Gross profit and gross margin

Gross profit increased in the six-month period ended September 25, 2026 compared to the six-month period ended
September 26, 2025, primarily due to the increase in net sales and favorable product mix.

Gross margin was 48.8% and 45.6% for the six-month periods ended September 25, 2026 and September 26, 2025, respectively. The increase was primarily due to the increase in net sales and a change in product mix and favorable manufacturing absorption.

Research and development expenses

R&D expenses increased in the six-month period ended September 25, 2026 compared to the six-month period ended
September 26, 2025, primarily due to the increase in personnel costs, operating expenses and outside services.

R&D expenses as a percentage of our total net sales were 20.7% and 23.3% for the six-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by the increase in personnel costs, operating expenses and outside services.

Selling, general and administrative expenses

SG&A expenses increased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025, primarily due to an increase in personnel costs, partially offset by a decrease in outside services.

SG&A expenses as a percentage of our total net sales were 16.8% and 21.5% in the six-month periods ended
September 25, 2026 and September 26, 2025, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, in addition to a decrease in outside services, partially offset by an increase in personnel costs.

Interest expense

Interest expense decreased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025. The decrease was due to the voluntary payments applied to the outstanding balance of our term loans under our revolving credit facility, in addition to the impact from refinancing the Company's outstanding term loans under the Company's revolving credit facility in January 2026.

Interest income

Interest income increased in the six-month period ended September 25, 2026 compared to the six-month period ended September 26, 2025, primarily due to higher cash and cash equivalents balances in interest-bearing accounts.

Other expense, net

The foreign currency loss recorded in the six-month period ended September 25, 2026 was primarily due to the U.S. Dollar weakening against the Philippine Peso. The foreign currency loss recorded in the six-month period ended September 26, 2025 was primarily due to the U.S. Dollar weakening against various currencies, including the Euro and the Philippine Peso.

We recorded a net loss of $6.6 million and $3.2 million for the six-month periods ended September 25, 2026 and
September 26, 2025, respectively, related to our equity investment in Polar Semiconductor, LLC.

Income tax provision (benefit)

Income tax provision and the effective income tax rate were approximately $6.0 million and 13.3%, respectively, in the six-month period ended September 25, 2026, compared to income tax benefit and effective income tax rate of approximately $6.1 million and 48.2%, respectively, in the six-month period ended September 26, 2025. The change in the effective tax rates for the six-month periods primarily resulted from the significant increase in GAAP income before taxes, partially offset by the FDDEI deduction, stock-based compensation windfalls, and R&D credit benefits.

Liquidity and Capital Resources

As of September 25, 2026, we had $193.0 million of cash and cash equivalents and $425.1 million of working capital, compared to $168.8 million of cash and cash equivalents and $357.7 million of working capital as of March 27, 2026. Working capital is impacted by the timing and extent of our business needs.

Our primary requirements for liquidity and capital resources besides our growth initiatives are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal year 2027 is to utilize cash on hand and capacity under our revolving credit facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions. As of September 25, 2026, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The cash requirements for the current fiscal year relate to our operating leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans. Additionally, we expect to continue to strategically invest in expanding our operations in China, Europe, Japan and India in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses. For information regarding the Company's expected cash requirements and timing of payments related to leases, noncancellable purchase commitments and pension and defined contribution plans, see Note 12, "Leases," Note 15, "Retirement Plans," and Note 16, "Commitments and Contingencies" to the audited consolidated financial statements in the 2026 Annual Report.

We believe that our existing cash will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months. In order to support and achieve our future growth plans, we may need or advantageously seek to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our revolving credit facility or seek additional financing. If we raise additional funds by issuing equity securities that are not used to repurchase existing shares outstanding, our stockholders will experience dilution. Debt financing, if available, may contain covenants that significantly restrict our operations or our ability to obtain additional debt financing in the future. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders. We cannot assure you that we would be able to obtain additional financing on terms favorable to us or our existing stockholders, or at all.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our cash flows for the six-month periods ended September 25, 2026 and September 26, 2025:

Operating Activities

Net cash provided by operating activities was $58.8 million in the six-month period ended September 25, 2026, resulting primarily from net income of $39.2 million and noncash charges of $67.5 million, further adjusted by a net decrease in cash from an increase in net operating assets and liabilities of $47.9 million. Noncash charges primarily included increases of $34.1 million for depreciation and amortization, $28.3 million of stock-based compensation, $6.6 million of loss in earnings of equity investment, and $2.3 million for provisions for inventory and expected credit losses, partially offset by $4.5 million of deferred income taxes. The net increase in operating assets and liabilities consisted of a $27.3 million decrease in other changes in operating assets and liabilities, net, a $20.0 million increase in payment to related party, a $2.2 million increase in inventories, a $15.2 million increase in trade accounts receivable, net, and a $1.2 million increase in net amounts due to and from related party, partially offset by a $12.3 million increase in trade accounts payable, and a $5.7 million decrease in prepaid expenses and other assets. The decrease in other changes in operating assets and liabilities, net was primarily the result of a reduction in accrued personnel costs due to the timing of the payments pursuant to our annual incentive compensation plan. The increase in payment to related party was primarily the result of advance payment on products. The increase in inventories was primarily the result of the increase in supplies to support future sales. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year and timing of collections. The increase in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. Trade accounts payable increased, primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $2.0 million. The decrease in prepaid expenses and other assets was primarily due to the timing of tax payments.

Net cash provided by operating activities was $82.0 million in the six-month period ended September 26, 2025, resulting primarily from a net loss of $6.6 million and noncash charges of $62.6 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $26.0 million. Noncash charges primarily included increases of $32.8 million for depreciation and amortization, $24.4 million of stock-based compensation, $4.5 million for provisions for inventory and expected credit losses and $3.2 million in loss in earnings of equity investment, partially offset by $4.2 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $23.5 million decrease in prepaid expenses and other assets, a $9.3 million decrease in inventories, a $14.0 million increase in other changes in operating assets and liabilities, net, and a $4.2 million increase in trade accounts payable, partially offset by a $21.7 million increase in trade accounts receivable, net and a $3.3 million increase in net amounts due to and from related party. The increase in trade accounts receivable, net, was primarily a result of increased sales year-over-year and timing of collections. Trade accounts payable increased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $1.1 million. The decrease in prepaid expenses and other assets was mostly due to the timing of tax payments. The decrease in inventories was primarily the result of the increase in net sales. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in other changes in operating assets and liabilities, net was primarily the result of higher accrued income taxes and accrued personnel costs.

Investing Activities

Net cash used in investing activities was $15.4 million in the six-month period ended September 25, 2026, consisting of $14.4 million for purchases of property, plant and equipment and $1.0 million for investment in equity security.

Net cash used in investing activities was $17.0 million in the six-month period ended September 26, 2025, consisting of purchases of property, plant and equipment.

Financing Activities

Net cash used in financing activities was $16.9 million in the six-month period ended September 25, 2026, primarily consisting of $18.2 million of payments for taxes related to the net settlement of equity awards.

Net cash used in financing activities was $70.7 million in the six-month period ended September 26, 2025, primarily consisting of $60.0 million of payments on our term loans and $9.3 million of payments for taxes related to the net settlement of equity awards.

Debt Obligations

See Note 9, "Debt and Other Borrowings" to the unaudited condensed consolidated financial statements included in this Quarterly Report for information regarding our debt obligations.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies" to the unaudited condensed consolidated financial statements included in this Quarterly Report for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our significant accounting policies are described in Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements included in our 2026 Annual Report. There have been no material changes in our critical accounting policies and estimates since March 27, 2026.