Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding the future financial performance, business prospects and growth of MKS Inc. ("MKS," the "Company," "our," or "we"). These statements are only predictions based on current assumptions and expectations. Any statements that are not statements of historical fact (including statements containing the words "will," "projects," "intends," "believes," "plans," "anticipates," "expects," "estimates," "forecasts," "continues" and similar expressions) should be considered forward-looking statements. Actual events or results may differ materially from those in the forward-looking statements set forth herein.

Among the important factors that could cause actual events to differ materially from those in the forward-looking statements that we make are the level and terms of our substantial indebtedness and our ability to service such debt; risks related to pursuing, completing, and/or failing to realize the benefits of acquisitions and other strategic transactions critical to our growth strategy; risks related to cybersecurity, data privacy and intellectual property; manufacturing and sourcing risks, including supply chain disruptions, component shortages and price increases, the use of limited, sole source and international suppliers, the relocation of manufacturing operations, and product defects; risks associated with doing business internationally, including geopolitical conflicts, trade compliance, trade protection measures, such as import tariffs by the United States and/or retaliatory actions taken by other countries, regulatory restrictions on our products, components or markets, particularly the semiconductor market, and unfavorable currency exchange and tax rate fluctuations; conditions affecting the markets in which we operate, including intense competition, rapid technological and market changes, dependence on new product development, the ability to anticipate and meet customer demand, fluctuations in capital spending in the semiconductor, electronics manufacturing and automotive industries, and fluctuations in sales to our major customers; disruptions or delays from third-party service providers upon which our operations may rely; risks associated with the attraction and retention of key personnel; potential fluctuations in quarterly results; volatility of stock price; risks associated with chemical manufacturing and environmental regulation compliance; risks associated with artificial intelligence ("AI"); financial and legal risk management; and the other important factors described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission on February 24, 2026 ("Annual Report") and any subsequent Quarterly Reports on Form 10-Q. We are under no obligation to, and expressly disclaim any obligation to, update or alter these forward-looking statements, whether as a result of new information, future events or otherwise, even if subsequent events cause our views to change.

The Management's Discussion and Analysis of Financial Condition and Results of Operations describes principal factors affecting the results of operations, financial condition, cash flows and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our condensed consolidated financial statements, and is intended to better allow investors to view the Company from management's perspective. This section focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of our future operating results or of our future financial condition. This section provides an analysis of our financial results for the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and the three months ended March 31, 2025. As a result of rounding, there may be immaterial differences in amounts presented and certain calculations may not sum to the total number expressed in each category or tie to a corresponding schedule.

Overview

MKS was founded in 1961 as a Massachusetts corporation. We enable technologies that transform our world. We deliver foundational technology solutions to leading edge semiconductor manufacturing, electronics and packaging, and specialty industrial applications. We apply our broad science and engineering capabilities to create instruments, subsystems, systems, process control solutions and specialty chemicals technology that improve process performance, optimize productivity and enable unique innovations for many of the world's leading technology and industrial companies. Our solutions are critical to addressing the challenges of miniaturization and complexity in advanced device manufacturing by enabling increased power, speed, feature enhancement and optimized connectivity. Our solutions are also critical to addressing ever-increasing performance requirements across a wide array of specialty industrial applications.

Segments

We have three divisions, which are our reportable segments: Vacuum Solutions Division ("VSD"), Photonics Solutions Division ("PSD") and Materials Solutions Division ("MSD").

VSD delivers foundational technology solutions for semiconductor manufacturing, electronics and packaging and specialty industrial applications. VSD products are derived from our core competencies in vacuum technologies, including pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and fiber optic temperature and position sensing.

PSD provides a broad range of instruments, components and subsystems to leading edge semiconductor manufacturing, electronics and packaging and specialty industrial applications. PSD products are derived from our core competencies in lasers, photonics, optics, precision motion control and vibration control.

MSD develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing. Applying a comprehensive systems-and-solutions approach, MSD's portfolio includes chemistry, equipment and services for innovative and high-technology applications in our electronics and packaging and specialty industrial markets.

Markets

Net Revenues by End Market

Semiconductor Market

We are a critical solutions provider for semiconductor manufacturing. Our products are used in major semiconductor processing steps, such as deposition, etching, cleaning, lithography, metrology, and inspection. The semiconductor industry continually faces new challenges, as products become smaller, more powerful and highly mobile. Ultra-thin layers, smaller critical dimensions, new materials, 3D structures, and the ongoing need for higher yield and productivity drive the need for tighter process measurement and control, all of which we support. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment ("WFE") ecosystem and address over 85% of the market. We characterize our broad and unique offering as Surround the Wafer® to reflect the technology enablement we provide across almost every major process in semiconductor manufacturing today.

The semiconductor market is subject to rapid demand shifts, which are difficult to predict, and we cannot be certain as to the timing or extent of future demand or any future softening in the semiconductor capital equipment industry. We are currently in a semiconductor ramp as demand for semiconductor chips is growing in the near term as a result of increased investments in AI transformation-related applications. In addition to these rapid demand shifts, the semiconductor capital equipment industry is currently subject to significant trade restrictions, especially in key markets, including China.

For the three months ended March 31, 2026, net revenues in our semiconductor market increased by $31 million, or 7%, compared to the prior quarter due to higher sales of our semiconductor capital equipment at VSD serving deposition and etch applications as well as NAND memory production upgrades.

For the three months ended March 31, 2026, net revenues in our semiconductor market increased by $53 million, or 13%, compared to the same period in the prior year. This increase was mainly due to higher sales of our semiconductor capital equipment serving deposition and etch applications and service revenues at VSD, as well as higher sales in our lithography, metrology and inspection products at PSD.

Electronics and Packaging Market

We are a foundational solutions provider for the electronics and packaging market. Our portfolio includes photonics components, laser drilling systems, electronics chemistries and plating equipment that are critical for the manufacturing of

printed circuit boards ("PCB") and package substrates, and critical to wafer level packaging ("WLP") applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs.

For the three months ended March 31, 2026, net revenues in our electronics and packaging market increased by $18 million, or 6%, compared to the prior quarter primarily due to higher sales of flexible PCB via drilling systems at PSD and chemistry at MSD, partially offset by lower sales of chemistry equipment at MSD.

For the three months ended March 31, 2026, net revenues in our electronics and packaging market increased by $68 million, or 27%, compared to the same period in the prior year. This increase was primarily due to higher chemistry sales at MSD as well as higher sales of flexible PCB via drilling systems at PSD.

Specialty Industrial Market

Our strategy in the specialty industrial market is to leverage our domain expertise and proprietary technologies across a broad array of applications in industrial, life and health sciences, and research and defense markets.

Industrial

Industrial encompasses a wide range of diverse applications, including chemistries for functional coatings, surface finishing and wear resistance in the automobile industry, vacuum solutions for synthetic diamond manufacturing and photonics for solar manufacturing. Other applications include vacuum and photonics solutions for light emitting diode and laser diode manufacturing.

Life and Health Sciences

Our products for life and health sciences are used in a diverse array of applications, including bioimaging, medical instrument sterilization, medical device manufacturing, analytical, diagnostic and surgical instrumentation, consumable medical supply manufacturing and pharmaceutical production.

Research and Defense

Our products for research and defense are sold to government, university and industrial laboratories for applications involving research and development in materials science, physical chemistry, photonics, optics and electronics materials. Our products are also sold for monitoring and defense applications, including surveillance, imaging and infrastructure protection.

For the three months ended March 31, 2026, net revenues in our specialty industrial market decreased by $4 million, or 2%, compared to the prior quarter, mainly due to lower life and health sciences as well as research and defense sales.

For the three months ended March 31, 2026, net revenues in our specialty industrial market increased by $21 million, or 8%, compared to the same period in the prior year. This increase was primarily due to higher sales in datacom applications, as well as higher research and defense sales.

International Markets

A significant portion of our net revenues is from sales to customers in international markets. For the three months ended March 31, 2026 and 2025, international net revenues accounted for approximately 82% and 81% respectively, of our total net revenues. We report geographical net revenues based on the shipped-to location of the end customer. A significant portion of our international net revenues was from customers in China, South Korea, Singapore, Malaysia, Japan and Taiwan. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.

Long-lived assets located outside of the United States accounted for approximately 70% of our total long-lived assets as of both March 31, 2026 and December 31, 2025. Long-lived assets include property, plant and equipment, net, right-of-use assets and certain other assets.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported. There have been no material changes in our critical accounting policies since December 31, 2025.

For further information about our critical accounting policies, please see the discussion of critical accounting policies in our Annual Report in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates."

Results of Operations

The following table sets forth, for the periods indicated, the percentage of total net revenues of certain line items included in our condensed consolidated statements of operations and comprehensive income (loss) data:

The following table sets forth our net revenues for product and service:

Net Revenues

For the three months ended March 31, 2026, net product revenues increased $47 million compared to the prior quarter primarily due to higher sales of our semiconductor capital equipment at VSD serving deposition and etch applications and higher NAND memory production upgrades, and higher sales of flexible PCB via drilling systems at PSD.

For the three months ended March 31, 2026, net product revenues increased $135 million compared to the same period in the prior year, primarily as a result of higher sales related to chemistry at MSD, semiconductor capital equipment serving deposition and etch applications at VSD, and datacom applications at PSD.

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. For the three months ended March 31, 2026, net service revenues decreased $2 million compared to the prior quarter mainly as a result of lower repair demand in our semiconductor and specialty industrial markets at VSD.

For the three months ended March 31, 2026, net service revenues increased $7 million compared to the same period in the prior year, primarily due to higher repair demand in our semiconductor market at VSD.

The following table sets forth our net revenues by reportable segment:

For the three months ended March 31, 2026, net revenues from VSD increased $25 million compared to the prior quarter mainly due to increased sales in semiconductor capital equipment serving deposition and etch applications as well as NAND memory production upgrades. For the three months ended March 31, 2026, net revenues from VSD increased $39 million compared to the same period in the prior year, mainly due to higher sales of our semiconductor capital equipment serving deposition and etch applications and higher service revenues.

For the three months ended March 31, 2026, net revenues from PSD increased $29 million compared to the prior quarter mainly due to higher sales of flexible PCB via drilling systems in our electronics and packaging market and higher sales in datacom applications within our specialty industrial market. For the three months ended March 31, 2026, net revenues from PSD increased $40 million compared to the same period in the prior year, mainly due to higher sales in datacom applications in our specialty industrial market, higher sales of flexible PCB via drilling systems in our electronics and packaging market as well as higher sales of our lithography, metrology and inspection products in our semiconductor market.

For the three months ended March 31, 2026, net revenues from MSD decreased $9 million compared to the prior quarter mainly due to a decrease in electronic equipment sales and lower sales for industrial applications, partially offset by increased chemistry sales in our electronics and packaging market. For the three months ended March 31, 2026, revenues from MSD increased $63 million compared to the same period in the prior year, mainly due to higher electronic chemistry sales in our electronics and packaging market as well as higher sales for industrial applications.

The following table sets forth gross profit as a percentage of net revenues by product and service:

Gross Profit Excluding Amortization

Gross profit as a percentage of net product revenues increased by 0.2 percentage points for the three months ended March 31, 2026 compared to the prior quarter, primarily due to higher revenue volumes and lower material costs offset by unfavorable product mix.

Gross profit as a percentage of net product revenues decreased by 0.5 percentage points for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to unfavorable product mix and higher duty and tariff costs, partially offset by higher revenue volumes and lower excess and obsolete inventory charges.

Gross profit as a percentage of net services revenues increased by 3.7 percentage points for the three months ended March 31, 2026 compared to the prior quarter, primarily due to favorable labor and overhead absorption and lower excess and obsolete inventory charges, partially offset by unfavorable product mix.

Gross profit as a percentage of net services revenues increased by 1.4 percentage points for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to favorable labor and overhead absorption and lower excess and obsolete inventory charges offset by unfavorable product mix.

The following table sets forth gross profit as a percentage of net revenues by reportable segment:

Gross profit as a percentage of net revenues for VSD increased for the three months ended March 31, 2026 compared to the prior quarter, primarily due to higher revenue volumes and favorable factory utilization, partially offset by unfavorable product mix and higher excess and obsolete inventory charges. Gross profit as a percentage of net revenues for VSD decreased for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to unfavorable product mix and higher duty and tariff costs, partially offset by higher revenue volumes and favorable factory utilization as well as lower excess and obsolete inventory charges.

Gross profit as a percentage of net revenues for PSD increased for the three months ended March 31, 2026 compared to the prior quarter, primarily due to higher revenue volumes and favorable factory utilization. Gross profit as a percentage of net revenues for PSD increased for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to higher revenue volumes, favorable factory utilization and lower excess and obsolete inventory charges, partially offset by higher duty and tariff costs.

Gross profit as a percentage of net revenues for MSD decreased for the three months ended March 31, 2026 compared to the prior quarter, primarily due to higher palladium prices, partially offset by higher revenue volumes. Gross profit as a percentage of net revenues for MSD decreased for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to higher palladium prices, partially offset by higher revenue volumes.

The above gross profit percentages by division exclude an immaterial amount of unallocated corporate expense included in the total gross profit percentage.

Research and Development

Research and development expenses for the three months ended March 31, 2026 increased $3 million compared to the prior quarter primarily due to $2 million in compensation-related costs. Research and development expenses increased $11 million for the three months ended March 31, 2026 compared to the same period in the prior year primarily due to $4 million in compensation-related costs, $3 million in project material costs and $2 million in software maintenance costs.

Our research and development efforts are primarily focused on developing and improving our instruments, components, chemistry, subsystems, systems and process control solutions to improve process performance and productivity. We have thousands of products, and our research and development efforts primarily consist of a large number of projects related to these products, none of which is individually material. Projects typically have a duration of 3 to 36 months but may be extended for development of new products.

We continue to make product advancements designed to meet our customers' evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the rising demand for more complex hardware architecture related to increasing investments in artificial intelligence, the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accurate components and devices within the handset and tablet market, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers' product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.

We believe that the continued investment in research and development and ongoing development of new products are essential to the expansion of our markets. We expect to continue to make significant investment in research and development activities. We are subject to risks from products not being developed in a timely manner, as well as from rapidly changing customer requirements and competitive threats from other companies and technologies. Our success depends on many of our products being designed into new generations of equipment for the semiconductor, electronics and packaging, and specialty industrial markets. We seek to develop products that are technologically advanced so that they are positioned to be chosen for use in each successive generation of semiconductor capital equipment and advanced markets applications. If our products are not chosen to be designed into our customers' products, our net revenues may be reduced during the lifespan of those products.

Selling, General and Administrative

Selling, general and administrative expenses increased $5 million for the three months ended March 31, 2026 compared to the prior quarter, primarily due to an increase of $11 million, mainly related to stock compensation, partially offset by decreases of $3 million in consulting fees and $2 million in legal costs.

Selling, general and administrative expenses increased $5 million for the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to an increase of $5 million in variable incentive compensation, partially offset by lower headcount costs resulting from the global cost saving initiative implemented during the first quarter of 2025.

Restructuring and Other

Restructuring and other charges during the three months ended March 31, 2026 related primarily to severance costs incurred as a result of a reorganization of certain business units within PSD implemented during the first quarter of 2026. Restructuring and other charges during the three months ended December 31, 2025 related primarily to third party costs supporting certain strategic initiatives. Restructuring and other charges during the three months ended March 31, 2025 related to severance costs incurred as a result of a cost saving initiative implemented in the first quarter of 2025, primarily in the general metal finishing business within MSD.

Legal Settlement

During the three months ended March 31, 2026, we recorded a charge related to the resolution of a legal matter.

Fees and Expenses Related to Debt Activities

During the three months ended March 31, 2026, we recorded fees and expenses related to the Sixth Amendment to Credit Agreement, dated as of February 4, 2026, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the "Sixth Amendment") as well as a fee from a foreign exchange option contract related to the 2034 Notes (as defined below). During the three months ended March 31, 2025, we recorded fees and expenses related to the Fifth Amendment to Credit Agreement, dated as of January 24, 2025, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the "Fifth Amendment").

Amortization of Intangible Assets

Amortization of intangible assets for the three months ended March 31, 2026 increased $1 million compared to the prior quarter and $3 million compared to the same period in the prior year primarily due to the impact of foreign exchange rates on intangible assets at foreign locations.

Interest Expense, Net

Interest expense, net decreased by $4 million for the three months ended March 31, 2026 compared to the prior quarter, primarily due to the Sixth Amendment, which resulted in a reduction in interest rates under our Term Loan Facility and the 2034 Notes Offering (each as defined below), the proceeds of which we used, together with cash on hand, to prepay approximately $1.3 billion of our USD Tranche B (as defined below). We also made a voluntary prepayment of $100 million on our USD Tranche B during the three months ended December 31, 2025.

Interest expense, net decreased by $7 million for the three months ended March 31, 2026 compared to the same period in the prior year primarily as a result of the Sixth Amendment and the 2034 Notes Offering as described above, as well as voluntary prepayments on the USD Tranche B in the amount of $400 million throughout 2025.

Loss on Extinguishment of Debt

For the three months ended March 31, 2026, in connection with the Sixth Amendment and voluntary prepayment on our USD Tranche B loan in February 2026, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discounts associated with our loans under the Term Loan Facility.

For the three months ended December 31, 2025, we recorded a loss on extinguishment of debt as a result of acceleration of deferred financing and original issue discount costs in connection with a voluntary prepayment on our USD Tranche B loan in October 2025.

For the three months ended March 31, 2025, in connection with the Fifth Amendment and a voluntary prepayment on our USD Tranche B loan in January 2025, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discounts associated with our loans under the Term Loan Facility.

Other (Income) Expense, Net

Other (income) expense, net for the three months ended March 31, 2026, three months ended December 31, 2025 and three months ended March 31, 2025 consisted primarily of net foreign exchange and fair value gains and losses.

Provision (Benefit) for Income Taxes

Our effective tax rates for the three months ended March 31, 2026, three months ended December 31, 2025, and three months ended March 31, 2025 were 17.7%, (20.8%), and 12.3%, respectively. Our effective tax rates for the three months ended March 31, 2026 and March 31, 2025 were lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for Foreign-Derived Deduction Eligible Income and research and development tax credits, partially offset by foreign withholding

taxes and a waiver of deductions related to U.S. base erosion payments. Our effective tax rate for the three months ended December 31, 2025 was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for Foreign-Derived Deduction Eligible Income, research and development tax credits, and valuation allowance release partially offset by foreign withholding taxes and a waiver of deductions related to U.S. base erosion payments.

Our future effective tax rate depends on various factors, including the impact of tax legislation, further interpretations and guidance from U.S. federal and state governments on the impact of proposed regulations issued by the Internal Revenue Service, as well as the geographic composition of our pre-tax income and changes in income tax reserves for unrecognized tax benefits. We monitor these factors and timely adjust our estimates of the effective tax rate accordingly. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax laws and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgment by management. Accordingly, we could record additional provisions or benefits for U.S. federal, state, and foreign tax matters in future periods as new information becomes available.

The Organisation for Economic Co-operation and Development ("OECD") and participating OECD member countries have issued rules introducing a 15% global minimum corporate tax rate for large multinational enterprise groups, also known as "Pillar Two." These rules were amended in January 2026 by the OECD "Side-by-Side package" in particular to address the coexistence of U.S. minimum tax regimes and ensure that U.S. based multinational groups are not subject to both primary and secondary top-up taxes under Pillar Two. The adoption and effective dates of Pillar Two and any additional rules vary by country. However, we do not expect Pillar Two to have a material impact on our 2026 financial results. We will continue to monitor and evaluate the impact of any developing legislation.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes changes to the U.S. tax code, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These changes to the U.S. tax code have not had a material impact on our results since the enactment of OBBBA and we do not anticipate these changes to the U.S. tax code will have a material impact on our results in future periods.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2026 and December 31, 2025 totaled $569 million and $675 million, respectively. The primary driver of our current and anticipated future cash flows is, and we expect will continue to be, cash generated from operations, consisting primarily of our net income, excluding non-cash charges and changes in operating assets and liabilities.

Our total cash and cash equivalents at March 31, 2026 consisted of $126 million held in the United States and $443 million held by our foreign subsidiaries. We believe that our current cash and cash equivalents and available borrowing capacity, together with the cash anticipated to be generated from our operations, will be sufficient to satisfy our estimated working capital needs, planned capital expenditure requirements, payments of debt, potential settlement of convertible debt conversions and any future cash dividends declared by our Board of Directors or share repurchases through at least the next 12 months and the foreseeable future.

In periods when our sales are growing, higher sales to customers will result in increased trade receivables, and inventories will generally increase as we build products for future sales. This may result in lower cash generated from operations. Conversely, in periods when our sales are declining, our trade accounts receivable and inventory balances will generally decrease, resulting in increased cash from operations.

Net cash provided by operating activities was $53 million for the three months ended March 31, 2026 and resulted from net income of $84 million, which included non-cash charges of $103 million, mainly the result of $85 million in depreciation and amortization, partially offset by $24 million in deferred income taxes and a net increase in working capital of $134 million. The net increase in working capital was primarily due to increases in accounts receivable of $129 million, as a result of higher sales, and inventory of $49 million, and a decrease in current and non-current accrued compensation of $68 million, mainly due to payments of variable compensation. The net increase in working capital was partially offset by increases in accounts payable of $45 million and other current and non-current liabilities of $36 million, and by a decrease in other current and non-current assets of $21 million.

Net cash used in investing activities was $25 million for the three months ended March 31, 2026 primarily related to capital expenditures for new facility additions in Malaysia and China.

Net cash used in financing activities was $137 million for the three months ended March 31, 2026, primarily due to net proceeds of €1.0 billion aggregate principal amount from the 2034 Notes, as defined and described further below, offset by the prepayment of $1.3 billion of the USD Tranche B loan using the proceeds from the 2034 Notes, together with cash on

hand. In addition, there were payments of $22 million for deferred finance costs related to the issuance of the 2034 Notes and a dividend payment of $17 million.

On July 25, 2011, our Board of Directors approved a share repurchase program for the repurchase of up to an aggregate of $200 million of our outstanding common stock from time to time in open market purchases, privately negotiated transactions or through other appropriate means. The timing and quantity of any shares repurchased depends upon a variety of factors, including business conditions, stock market conditions and business development activities, including, but not limited to, merger and acquisition opportunities. These repurchases may be commenced, suspended or discontinued at any time without prior notice. Any repurchased shares are held by us as authorized but unissued shares.

During the three months ended March 31, 2026, we did not repurchase any shares of common stock. During the three months ended March 31, 2025, we repurchased approximately 546,000 shares of our common stock for total consideration of $45 million. We have repurchased approximately 3.1 million shares of common stock for approximately $172 million pursuant to the program since its adoption.

Holders of our common stock are entitled to receive dividends when and if they are declared by our Board of Directors. For the three months ended March 31, 2026, we paid cash dividends of $17 million in the aggregate of $0.25 per share. For the three months ended March 31, 2025, we paid cash dividends of $15 million in the aggregate of $0.22 per share. Future dividend declarations, if any, as well as the record and payment dates for such dividends, are subject to the final determination of our Board of Directors.

Credit Facilities

On August 17, 2022, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto, which we have since amended several times, including most recently in February 2026 (as amended, the "Credit Agreement"). As of March 31, 2026, after giving effect to all amendments and repayments prior to such date, the Credit Agreement provided for (i) a senior secured term loan facility comprised of two tranches: a $914 million loan (as refinanced and otherwise modified from time to time, the "USD Tranche B") and a €587 million loan (as refinanced and otherwise modified from time to time, the "Euro Tranche B" and together with the USD Tranche B, the "Term Loan Facility") and (ii) a senior secured revolving credit facility with aggregate commitments of $1.0 billion (as refinanced and otherwise modified from time to time, the "Revolving Facility" and, together with the Term Loan Facility, the "Credit Facilities").

As of March 31, 2026, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at our option, any of the following, plus, in each case, an applicable margin: (a) with respect to the USD Tranche B and the Revolving Facility, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on the variable secured overnight financing rate ("Term SOFR") for an interest period of one month, plus 1.00%, and (y) a Term SOFR rate for the interest period relevant to such borrowing; and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate ("EURIBOR") rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case of clauses (a) and (b) above subject to a rate floor of 0.0%. As of March 31, 2026, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche B and the Revolving Facility, 0.75% with respect to base rate borrowings and 1.75% with respect to Term SOFR borrowings and (ii) under the Euro Tranche B, 2.00%.

In addition to paying interest on outstanding principal under the Credit Facilities, we are required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility. The commitment fee is subject to adjustment based on our first lien net leverage ratio as of the end of the preceding fiscal quarter. As of March 31, 2026, the commitment fee was 0.25% per annum. We must also pay customary letter of credit fees and agency fees.

On February 4, 2026, we entered into the Sixth Amendment to Credit Agreement (the "Sixth Amendment"), pursuant to which we, among other things, (i) refinanced our then-existing USD Tranche B loan and Euro Tranche B loan with the $914 million USD Tranche B loan and the €587 million Euro Tranche B loan, (ii) refinanced and increased the commitments under our then-existing Revolving Facility with the $1.0 billion Revolving Facility, (iii) decreased the applicable margin for the USD Tranche B from 2.00% to 1.75% with respect to Term SOFR borrowings and from 1.00% to 0.75% with respect to base rate borrowings, (iv) decreased the applicable margin for the Euro Tranche B from 2.50% to 2.00%, (v) decreased the applicable margin under the Revolving Facility from 2.50% to 1.75% with respect to SOFR borrowings and from 1.50% to 0.75% with respect to base rate borrowings, (vi) eliminated the credit spread adjustment applicable to SOFR borrowings of the Revolving Facility and (vii) extended the maturities of the Term Loan Facility to February 2033 and the Revolving Facility to February 2031. The refinanced USD Tranche B loan and Euro Tranche B loan were issued without original issue discount. In connection with the execution of the Sixth Amendment, we paid customary fees and expenses to JPMorgan Chase Bank, N.A.

On February 4, 2026, concurrently with the effectiveness of the Sixth Amendment, we made a voluntary prepayment of approximately $1.3 billion principal amount to the USD Tranche B loan using the net proceeds from the 2034 Notes (as defined below), together with cash on hand, reducing the outstanding principal amount of the USD Tranche B loan from approximately $2.2 billion to $914 million.

On May 6, 2026, we made a voluntary prepayment of $100 million principal amount on the USD Tranche B loan.

Under the Credit Agreement, we are required to prepay outstanding term loans, subject to certain exceptions, with portions of our annual excess cash flow as well as with the net cash proceeds of certain of its asset sales, certain casualty and condemnation events and the incurrence or issuances of certain debt. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Revolving Facility exceeds the aggregate commitments under the Revolving Facility, we are required to repay outstanding loans and/or cash collateralize letters of credit, with no reduction of the commitment amount.

We may voluntarily prepay outstanding loans under the Credit Facilities from time to time, subject to certain conditions, without premium or penalty other than customary "breakage" costs with respect to Term SOFR or EURIBOR loans; provided, however, that subject to certain exceptions, if on or prior to August 4, 2026, we prepay any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction, we must pay a prepayment premium of 1.00% of the aggregate principal amount of the loans so prepaid. Additionally, we may voluntarily reduce the unutilized portion of the commitment amount under the Revolving Facility.

As of March 31, 2026, we were required to make scheduled quarterly principal payments equal to $2 million with respect to the USD Tranche B and €2 million with respect to the Euro Tranche B, in each case with the balance due thereunder on the maturity date of the Term Loan Facility. There is no scheduled amortization under the Revolving Facility. Any principal amount outstanding under the Revolving Facility is due and payable in full on the maturity date of the Revolving Facility.

All obligations under the Credit Facilities are guaranteed by certain of our wholly-owned domestic subsidiaries and are required to be guaranteed by certain of our future wholly-owned domestic subsidiaries, and are secured by substantially all of our assets and the assets of such subsidiaries, subject to certain exceptions and exclusions.

Under the Credit Agreement, we have the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) approximately $1.0 billion and (2) 75% of consolidated last 12 months earnings before interest, taxes, depreciation, and amortization, plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt).

The Credit Agreement contains customary representations and warranties, covenants and provisions relating to events of default. As of March 31, 2026, we were in compliance with all covenants under the Credit Agreement. The USD Tranche B and the Euro Tranche B are not subject to financial maintenance covenants.

As of March 31, 2026, the weighted average interest rate of the Term Loan Facility was 4.79%. As of March 31, 2026, there were no borrowings under the Revolving Facility.

Convertible Notes

On May 16, 2024, we completed a private offering of $1.4 billion aggregate principal amount of convertible senior notes due 2030 (the "Convertible Notes").

We used approximately $167 million of the net proceeds from the offering to pay the cost of the capped call transactions described below. We used the remaining net proceeds from the offering to repay approximately $1.2 billion in borrowings outstanding under the USD Tranche B, together with accrued interest, as well as for general corporate purposes.

Convertible Notes Indenture and the Convertible Notes

On May 16, 2024, we entered into an indenture (the "Convertible Notes Indenture") with respect to the Convertible Notes with U.S. Bank Trust Company, National Association, as trustee (the "Convertible Notes Trustee"). Under the Convertible Notes Indenture, the Convertible Notes are senior unsecured obligations of ours and bear interest at a coupon rate of 1.25% per annum, with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The Convertible Notes will mature on June 1, 2030, unless earlier converted, redeemed or repurchased in accordance with their terms.

Subject to certain conditions, on or after June 5, 2027, we may redeem for cash all or any portion of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately preceding the date the notice of redemption is sent.

The conversion rate for the Convertible Notes was initially 6.4799 shares of our common stock per one thousand dollars principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $154.32 per share. Effective April 1, 2026, the conversion rate for the Convertible Notes was adjusted to 6.4807 shares of our common stock per one thousand dollars principal amount of the Convertible Notes, which is equivalent to a conversion price of approximately $154.30 per share. The conversion rate is subject to adjustment upon the occurrence of certain events.

Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. Prior to the close of business on the business day immediately preceding March 1, 2030, noteholders may convert all or any portion of their Convertible Notes under the following circumstances:

On or after March 1, 2030, until the close of business on the second scheduled trading day immediately preceding the maturity date, noteholders may convert all or any portion of their Convertible Notes at any time.

If we undergo a fundamental change (as defined in the Convertible Notes Indenture) prior to the maturity date of the Convertible Notes, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Convertible Notes Indenture contains customary terms and covenants, including that upon certain events of default that are occurring and continuing, either the Convertible Notes Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Convertible Notes to be due and payable.

The Sale Price Condition for the Convertible Notes was met during the calendar quarter ended March 31, 2026, and as a result, the Convertible Notes are convertible, in whole or in part, at the option of the holders thereof at any time during the calendar quarter ending June 30, 2026 and have been classified as short-term debt, net of issuance costs, on the condensed consolidated balance sheet as of March 31, 2026. The Convertible Notes were issued at par and costs associated with the issuance of the Convertible Notes are amortized to interest expense over the contractual term of the Convertible Notes. There were no conversions of the Convertible Notes in the calendar quarter ended March 31, 2026 or the year ended December 31, 2025. As of March 31, 2026, the effective interest rate of the Convertible Notes was 1.56%.

Capped Call Transactions

On May 13, 2024, in connection with the pricing of the Convertible Notes, and on May 14, 2024, in connection with the exercise in full by the initial purchasers of their option to purchase additional Convertible Notes, we entered into privately negotiated capped call transactions ("Convertible Debt Capped Calls") with certain of the initial purchasers of the Convertible Notes or their respective affiliates and other financial institutions. The Convertible Debt Capped Calls are expected generally to reduce the potential dilution to our common stock upon conversion of any Convertible Notes and/or offset any cash payments that we are required to make in excess of the principal amount of any converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to $237.42 per share, which represents a premium of 100% over the last reported sale price of $118.71 per share of our common stock on The Nasdaq Global Select Market on May 13, 2024, and is subject to customary adjustments under the terms of the Convertible Debt Capped Calls.

2034 Notes

On February 4, 2026, we completed a private offering (the "2034 Notes Offering") of €1.0 billion aggregate principal amount of senior notes due 2034 (the "2034 Notes"). The 2034 Notes were sold in a private placement to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. We used the net proceeds from the 2034 Notes Offering, together with cash on hand, to prepay approximately $1.3 billion of the USD Tranche B.

2034 Notes Indenture and the 2034 Notes

On February 4, 2026, we and the Guarantors (as defined below) entered into an indenture (the "2034 Notes Indenture") with respect to the 2034 Notes with U.S. Bank Trust Company, National Association, as trustee (the "2034 Notes Trustee").

Under the 2034 Notes Indenture, the 2034 Notes bear interest at a rate of 4.250% per annum, with interest payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2026. The 2034 Notes will mature on February 15, 2034, unless earlier redeemed or repurchased in accordance with their terms.

The 2034 Notes are unconditionally guaranteed, on a senior unsecured basis, jointly and severally, by our existing and future subsidiaries that guarantee the Credit Agreement or are required to become guarantors under certain circumstances and subject to certain exceptions (the "Guarantors").

The 2034 Notes and the guarantees are general senior unsecured obligations of us and the Guarantors. The 2034 Notes and guarantees will be:

At any time prior to February 15, 2029, we may redeem the 2034 Notes in whole or in part at a redemption price equal to 100% of their principal amount, plus a make-whole premium, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the redemption date.

At any time and from time to time on or after February 15, 2029, we may redeem for cash all or any portion of the 2034 Notes at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on February 15 of the year indicated below:

At any time and from time to time prior to February 15, 2029, we may redeem up to 40% of the original aggregate principal amount of the 2034 Notes using the net cash proceeds of certain equity offerings at a redemption price equal to 104.250%.

In the event of certain developments affecting taxation, we may elect to redeem all, but not less than all, of the 2034 Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the date fixed for redemption.

Upon the occurrence of a change of control triggering event (as defined in the 2034 Notes Indenture), each holder of the 2034 Notes may require us to repurchase all or a portion of their 2034 Notes at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the repurchase date.

The 2034 Notes Indenture contains customary terms and covenants that limit the ability of us and our Restricted Subsidiaries (as defined in the 2034 Notes Indenture) to, among other things, (i) incur liens, (ii) provide guarantees and (iii) consolidate, merge or sell or otherwise dispose of substantially all their assets.

The 2034 Notes Indenture also provides for customary events of default. Upon certain events of default that are occurring and continuing, either the 2034 Notes Trustee or the holders of at least 30% in aggregate principal amount of the outstanding 2034 Notes may declare the principal of, and accrued and unpaid interest, if any, and additional amounts, if any, on, all the 2034 Notes to be due and payable. In the event of certain insolvency and bankruptcy related events of default specified in the 2034 Notes Indenture, the principal of, and accrued and unpaid interest, if any, and additional amounts, if any, on, all the 2034 Notes shall automatically become due and payable.

As of March 31, 2026, the effective interest rate of the 2034 Notes was 4.48%.

Lines of Credit and Borrowing Arrangements

Certain of our Japanese subsidiaries have lines of credit and a financing facility with various financial institutions, many of which generally expire and are renewed at three-month intervals with the remaining having no expiration date. The lines of credit and financing facility provided for aggregate borrowings of up to an equivalent of $13 million as of both March 31, 2026 and December 31, 2025. There were no borrowings outstanding under these arrangements at March 31, 2026 and December 31, 2025.

Derivatives

We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments and those utilized as economic hedges. We operate internationally, and in the normal course of business, are exposed to fluctuations in interest rates and foreign exchange rates. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, such as foreign exchange forward contracts, options, and net investment hedges, to manage certain foreign currency exposure, and interest rate swaps and caps to manage certain interest rate exposure. We do not enter into derivative instruments for trading or speculative purposes.

By nature, all financial instruments involve market and credit risks. We enter into derivative instruments with major investment grade financial institutions and no collateral is required. We have policies to monitor the credit risk of these counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.

Interest Rate Swap

We have interest rate swap agreements described further in Note 5 of the condensed consolidated financial statements. These interest rate swap agreements exchange the variable Term SOFR rate to a fixed rate in order to manage the exposure to interest rate fluctuations associated with the variable Term SOFR rate paid on the outstanding balance of the Term Loan Facility.

Contractual Obligations

There have been no material changes outside the ordinary course of business to our contractual obligations as disclosed in our Annual Report.

Recent Accounting Pronouncements

For information on recently issued accounting pronouncements, see Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Notes to Unaudited Condensed Consolidated Financial Statements" of this Quarterly Report on Form 10-Q.