KULICKE & SOFFA INDUSTRIES INC

PART I. - FINANCIAL INFORMATION

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

Unaudited

NOTE 1. BASIS OF PRESENTATION

These consolidated condensed financial statements include the accounts of Kulicke and Soffa Industries, Inc. and its subsidiaries (“we,” “us,” “our,” or the “Company”), with appropriate elimination of intercompany balances and transactions.

The interim consolidated condensed financial statements are unaudited and, in management’s opinion, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair statement of results for these interim periods. The interim consolidated condensed financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Annual Report”) filed with the Securities and Exchange Commission on November 16, 2023, which includes the Consolidated Balance Sheets as of September 30, 2023 and October 1, 2022, and the related Consolidated Statements of Operations, Statements of Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows for each of the years in the three-year period ended September 30, 2023. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full year.

Fiscal Year

Each of the Company’s first three fiscal quarters end on the Saturday that is 13 weeks after the end of the immediately preceding fiscal quarter. The fourth quarter of each fiscal year ends on the Saturday closest to September 30. Fiscal 2024 quarters end on December 30, 2023, March 30, 2024, June 29, 2024 and September 28, 2024. In fiscal years consisting of 53 weeks, the fourth quarter will consist of 14 weeks. Fiscal 2023 quarters ended on December 31, 2022, April 1, 2023, July 1, 2023 and September 30, 2023.

Nature of Business

The Company designs, develops, manufactures and sells capital equipment and tools as well as services, maintains, repairs and upgrades equipment, all used to assemble semiconductor devices. The Company’s operating results depend upon the capital and operating expenditures of integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), foundry service providers, and other electronics manufacturers and automotive electronics suppliers worldwide which, in turn, depend on the current and anticipated market demand for semiconductors and products utilizing semiconductors. The semiconductor industry is highly volatile and experiences downturns and slowdowns which can have a severe negative effect on the semiconductor industry’s demand for semiconductor capital equipment, including assembly equipment manufactured and sold by the Company and, to a lesser extent, tools, solutions and services, including those sold or provided by the Company. These downturns and slowdowns have in the past adversely affected the Company’s operating results. The Company believes such volatility will continue to characterize the industry and the Company’s operations in the future.

In connection with the cancellation of a project with one of its strategic customers (previously referred to as Project W), on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of Project W. The wind down activities are ongoing and are expected to be substantially completed by the end of fiscal year 2024. For additional information, see Note 16: Restructuring and Cancellation of Project in our Notes to the Consolidated Condensed Financial Statements.

Use of Estimates

The preparation of consolidated condensed financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses during the reporting periods, and disclosures of contingent assets and liabilities as of the date of the consolidated condensed financial statements. On an ongoing basis, management evaluates estimates, including but not limited to, those related to accounts receivable, reserves for excess and obsolete inventory and inventory valuation, carrying value and lives of fixed assets, goodwill and intangible assets, accrual for customer credit programs, the valuation estimates and assessment of impairment and observable price adjustments, income taxes, equity-based compensation expense, accrual for employee termination benefits and warranties. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable. As a result, management makes judgments regarding the carrying values of the Company’s assets and liabilities that are not readily apparent from other sources. Authoritative pronouncements, historical experience and assumptions are used as the basis for making estimates, and on an ongoing basis, management evaluates these estimates. Actual results may differ from these estimates.

In light of macroeconomic headwinds, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of March 30, 2024. While there was no material impact from macroeconomic headwinds to our consolidated condensed financial statements as of and for the quarter ended March 30, 2024, these estimates may change, as new events occur and additional information is obtained, including factors related to these headwinds, that could materially impact our consolidated condensed financial statements in future reporting periods.

Significant Accounting Policies

There have been no material changes to our significant accounting policies summarized in Note 1: Basis of Presentation to our Consolidated Financial Statements included in our 2023 Annual Report.

Revision of Segment-Related Disclosures within the Previously Issued Consolidated Financial Statements

During the third quarter of fiscal year 2023, in response to comment letters from the staff of the Securities and Exchange Commission (the "SEC"), the Company reconsidered the guidance under ASC 280, Segment Reporting, and determined that certain prior period conclusions about the Company’s operating and reportable segments were erroneous. As a result, the Company had incorrectly presented certain segment-related disclosures in the notes to our previously issued consolidated financial statements, included in our Annual Report on Form 10-K for the year ended October 1, 2022, originally filed with the SEC on November 17, 2022 (the "Original Form 10-K").

The Company has evaluated the materiality of the incorrect presentation of its segment-related disclosures in the notes to its consolidated financial statements and has concluded that it did not result in a material misstatement of the Company’s previously issued consolidated financial statements.

In light of the changes to the Company’s operating and reportable segments, the Company has revised, in this Quarterly Report on Form 10-Q, the segment-related disclosures in Note 14: Segment Information, to update the prior period presentation. The effect of this revision has been reflected in all footnotes impacted by this revision.

Recent Accounting Pronouncements

Disclosure Improvements

In October 2023, the Financial Accounting Standards Board (the "FASB") issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU aligns the requirements in the FASB Accounting Standards Codification with the SEC’s regulations. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics. They will also allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. This ASU will become effective for each amendment on the date on which the SEC removes the related disclosure from its regulations. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments in the ASU enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. This ASU will be effective for the Company's fiscal year 2025, and interim periods within the fiscal years beginning after the Company’s fiscal year 2026. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

Income Taxes

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvement to Income Tax Disclosures. The amendments in this update are intended to enhance the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. This ASU will be effective for the Company's fiscal year 2026. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

NOTE 2. BALANCE SHEET COMPONENTS

The following tables reflect the components of significant balance sheet accounts as of March 30, 2024 and September 30, 2023:

(1)Please see Note 16: Restructuring and Cancellation of Project for more information on the wind down charges and impairments related to the cancellation of Project W.

(2)Represents customer advance payments, customer credit program, accrued warranty expense and accrued retrofit obligations.

NOTE 3. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Intangible assets classified as goodwill are not amortized. The goodwill established in connection with our acquisitions represents the estimated future economic benefits arising from the assets we acquired that did not qualify to be identified and recognized individually. The goodwill also includes the value of expected future cash flows from the acquisitions, expected synergies with our other affiliates and other unidentifiable intangible assets.

The Company performs an annual impairment test of its goodwill during the fourth quarter of each fiscal year, which coincides with the completion of its annual forecasting and refreshing of business outlook process.

The Company performed its annual impairment test in the fourth quarter of fiscal 2023 and concluded that no impairment charge was required. Any future adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in a non-cash impairment in the future.

During the three months ended March 30, 2024, the Company reviewed qualitative factors to ascertain if a “triggering” event may have taken place that may have the effect of reducing the fair value of the reporting unit below its carrying value and concluded that no triggering event had occurred. While we have concluded that a triggering event did not occur during the quarter ended March 30, 2024, the persistent macroeconomic headwinds could impact the results of operations due to changes to assumptions utilized in the determination of the estimated fair values of the reporting units that could be significant enough to trigger an impairment. Net sales and earnings growth rates could be negatively impacted by reductions or changes in demand for our products. The discount rate utilized in our valuation model could also be impacted by changes in the underlying interest rates and risk premiums included in the determination of the cost of capital.

The following table summarizes the Company’s recorded goodwill, where applicable, by reportable segments and the “All Others” category (refer to Note 14 for further information) as of March 30, 2024 and September 30, 2023:

(1) Cumulative goodwill impairment pertaining to the “All Others” category as of September 30, 2023 was $45.0 million.

Intangible Assets

Intangible assets with determinable lives are amortized over their estimated useful lives. The Company’s intangible assets consist primarily of developed technology, customer relationships, in-process research and development, and trade and brand names.

The following table reflects net intangible assets as of March 30, 2024 and September 30, 2023:

The following table reflects estimated annual amortization expense related to intangible assets as of March 30, 2024:

NOTE 4. CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. In general, these investments are free of trading restrictions.

Cash, cash equivalents, and short-term investments consisted of the following as of March 30, 2024:

(1)The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.

(2)All short-term investments were classified as available-for-sale and the fair value approximates cost basis. The Company did not recognize any realized gains or losses on the sale of investments during the three and six months ended March 30, 2024.

Cash, cash equivalents and short-term investments consisted of the following as of September 30, 2023:

(1)The fair value was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.

(2)All short-term investments were classified as available-for-sale and the fair value approximates cost basis. The Company did not recognize any realized gains or losses on the sale of investments during the three and six months ended April 1, 2023.

NOTE 5. EQUITY INVESTMENTS

Equity investments consisted of the following as of March 30, 2024 and September 30, 2023:

Net Asset Value (“NAV”) (Private Equity Fund): Equity investments in affiliated investment funds are valued based on the NAV reported by the investment fund in accordance with ASC Topic 820-10. Investments held by the affiliated investment fund include a diversified portfolio of investments in the global semiconductor industry. The Company receives distributions through the liquidation of the underlying investments by the affiliated investment fund. However, the period of time over which the underlying investments are expected to be liquidated is unknown. Additionally, the Company’s ability to withdraw from the fund is subject to restrictions. The term of the fund will continue until March 18, 2032 unless dissolved earlier or extended by the General Partner. In accordance with ASC Topic 820-10, this investment is measured at fair value using the NAV per share (or its equivalent) practical expedient has not been classified in the fair value hierarchy. As of March 30, 2024, the Company has funded $2.2 million into the affiliated investment fund and recognized a cumulative unrealized fair value gain of $0.1 million. The Company has recorded the amount of funded capital that has been called as an equity investment.

NOTE 6. FAIR VALUE MEASUREMENTS

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

We measure certain financial assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during the three and six months ended March 30, 2024.

Fair Value Measurements on a Nonrecurring Basis

Our non-financial assets such as intangible assets and property, plant and equipment are carried at cost unless impairment is deemed to have occurred.

Fair Value of Financial Instruments

Amounts reported as accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value.

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s international operations are exposed to changes in foreign exchange rates due to transactions denominated in currencies other than U.S. dollars. Most of the Company’s revenue and cost of materials are transacted in U.S. dollars. However, a significant amount of the Company’s operating expenses is denominated in local currencies, primarily in Singapore.

The foreign currency exposure of our operating expenses is generally hedged with foreign exchange forward contracts. The Company’s foreign exchange risk management programs include using foreign exchange forward contracts with cash flow hedge accounting designation to hedge exposures to the variability in the U.S. dollar equivalent of forecasted non-U.S. dollar-denominated operating expenses. These instruments generally mature within twelve months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings and in the same line item on the Consolidated Condensed Statements of Operations as the impact of the hedged transaction.

The fair value of derivative instruments on our Consolidated Condensed Balance Sheets as of March 30, 2024 and September 30, 2023 were as follows:

(1)The fair value of derivative liabilities is measured using level 2 fair value inputs and is included in accrued expenses and other current liabilities on our Consolidated Condensed Balance Sheets.

(2)Hedged amounts expected to be recognized to income within the next twelve months.

The effects of derivative instruments designated as cash flow hedges in our Consolidated Condensed Statements of Comprehensive Income for the three and six months ended March 30, 2024 and April 1, 2023 were as follows:

(1)Net change in the fair value of the effective portion classified in OCI.

(2)Effective portion classified as selling, general and administrative expense.

NOTE 8. LEASES

We have entered into various non-cancellable operating and finance lease agreements for certain of our offices, manufacturing, technology, sales support and service centers, equipment, and vehicles. We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. Our lease terms may include one or more options to extend the lease terms, for periods fromone year to 20 years, when it is reasonably certain that we will exercise that option. As of March 30, 2024, there wereno options to extend the lease which was recognized as a right-of-use (“ROU”) asset, or a lease liability. We have lease agreements with lease and non-lease components, and non-lease components are accounted for separately and not included in our leased assets and corresponding liabilities. We have elected not to present short-term leases on the Consolidated Condensed Balance Sheets as these leases have a lease term of 12 months or less at lease inception.

Operating leases are included in operating ROU assets, current operating lease liabilities and non-current operating lease liabilities, and finance leases are included in property, plant and equipment, accrued expenses and other current liabilities, and other liabilities on the Consolidated Condensed Balance Sheets. As of March 30, 2024 and September 30, 2023, our finance leases are not material.

The following table shows the components of lease expense:

(1)Operating lease expense includes short-term lease expense, which is immaterial for the three and six months ended March 30, 2024 and April 1, 2023.

The following table shows the cash flows arising from lease transactions. Cash payments related to short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:

The following table shows the weighted-average lease terms and discount rates for operating leases:

Future lease payments, excluding short-term leases, as of March 30, 2024, are detailed as follows:

NOTE 9. DEBT AND OTHER OBLIGATIONS

Bank Guarantees

On November 22, 2013, the Company obtained a $5.0 million credit facility with Citibank in connection with the issuance of bank guarantees for operational purposes. As of March 30, 2024, the outstanding amount under this facility was $4.9 million.

Credit Facilities

On February 15, 2019, the Company entered into a Facility Letter and Overdraft Agreement (collectively, the “Facility Agreements”) with MUFG Bank, Ltd., Singapore Branch (the “Bank”). The Facility Agreements provide the Company and one of its subsidiaries with an overdraft facility of up to $150.0 million (the “Overdraft Facility”) for general corporate purposes. Amounts outstanding under the Overdraft Facility, including interest, are payable upon thirty days written demand by the Bank. Interest on the Overdraft Facility is calculated on a daily basis, and the applicable interest rate is calculated at the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.5% per annum. The Overdraft Facility is an unsecured facility per the terms of the Facility Agreements. The Facility Agreements contain customary non-financial covenants, including, without limitation, covenants that restrict the Company’s ability to sell or dispose of its assets, cease owning at least 51% of two of its subsidiaries (the “Subsidiaries”), or encumber its assets with material security interests (including any pledge of monies in the Subsidiaries' cash deposit account with the Bank). The Facility Agreements also contain typical events of default, including, without limitation, non-payment of financial obligations when due, cross defaults to other material indebtedness of the Company and any breach of a representation or warranty under the Facility Agreements. As of March 30, 2024, there wereno outstanding amounts under the Overdraft Facility.

NOTE 10. SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Share Repurchase Program

On August 15, 2017, the Company’s Board of Directors authorized a program (the “Program”) to repurchase up to $100 million of the Company’s common stock on or before August 1, 2020. In 2018, 2019 and 2020, the Board of Directors increased the share repurchase authorization under the Program to $200 million, $300 million, and $400 million, respectively. On March 3, 2022, the Board of Directors further increased the share repurchase authorization under the Program by an additional $400 million to $800 million, and extended its duration through August 1, 2025. On November 17, 2023, the Company modified its written trading plan under Rule 10b5-1 of the Exchange Act, such plan as first entered into on May 7, 2022, to facilitate repurchases under the Program. The modified plan permits the purchase of up to approximately $169 million of the Company’s common stock from November 20, 2023 through August 1, 2025. The Program may be suspended or discontinued at any time and is funded using the Company’s available cash, cash equivalents and short-term investments. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations.

During the three and six months ended March 30, 2024, the Company repurchased a total of approximately 754.6 thousand and 1,310.2 thousand shares of common stock under the Program at a cost of approximately $37.3 million and $64.1 million, respectively. The stock repurchases were recorded in the periods the repurchased shares were delivered and accounted for as treasury stock in the Company’s Consolidated Condensed Balance Sheets. The Company records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon re-issuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital.

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

As of March 30, 2024, our remaining stock repurchase authorization under the Program was approximately $116.9 million.

Dividends

On November 15, 2023, the Board of Directors declared a quarterly dividend of $0.20 per share of common stock. Dividends paid during the three and six months ended March 30, 2024 totaled $11.3 million and $22.0 million, respectively. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that such dividends are in the best interests of the Company’s shareholders.

Accumulated Other Comprehensive Loss

The following table reflects accumulated other comprehensive loss reflected on the Consolidated Condensed Balance Sheets as of March 30, 2024 and September 30, 2023:

Equity-Based Compensation

The Company has a stockholder-approved equity-based compensation plan, the 2021 Omnibus Incentive Plan (the “Plan”) from which employees and directors receive grants. As of March 30, 2024,1.8 million shares of common stock are available for grant to the Company’s employees and directors under the Plan.

•Relative Total Shareholder Return Performance Share Units (“Relative TSR PSUs”) entitle the employee to receive common stock of the Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively practicable if later), if market performance objectives which measure the relative TSR are attained. Relative TSR is calculated based upon the 90-calendar day average price at the end of the performance period of the Company’s stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor Index. TSR is measured for the Company and each peer company over a performance period, which is generally three years. Vesting percentages range from 0% to 200% of awards granted. The provisions of the Relative TSR PSUs are reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the vesting date.

•Revenue Growth Performance Share Units (“Growth PSUs”) entitle the employee to receive common stock of the Company on the award vesting date, typically the third anniversary of the grant date (or as soon as administratively practicable if later), based on organic revenue growth objectives and relative growth performance against named competitors as set by the Management Development and Compensation Committee (“MDCC”) of the Company’s Board of Directors. Organic revenue growth is calculated by averaging revenue growth (net of revenues from acquisitions) over a performance period, which is generally three years. Revenues from acquisitions will be included in the calculation after four fiscal quarters after acquisition. Any portion of the grant that does not meet the revenue growth objectives and relative growth performance is forfeited. Vesting percentages range from 0% to 200% of awards granted.

•In general, Time-based Restricted Share Units (“Time-based RSUs”) awarded to employees vest ratably over athree-year period on the anniversary of the grant date provided the employee remains employed by the Company.

Equity-based compensation expense recognized in the Consolidated Condensed Statements of Operations for the three and six months ended March 30, 2024 and April 1, 2023 was based upon awards ultimately expected to vest, with forfeiture accounted for when they occur.

The following table reflects Time-based RSUs, Relative TSR PSUs, Growth PSUs and common stock granted during the three and six months ended March 30, 2024 and April 1, 2023:

The following table reflects total equity-based compensation expense, which includes Time-based RSUs, Relative TSR PSUs, Growth PSUs and common stock, included in the Consolidated Condensed Statements of Operations during the three and six months ended March 30, 2024 and April 1, 2023:

The following table reflects equity-based compensation expense, by type of award, for the three and six months ended March 30, 2024 and April 1, 2023:

NOTE 11. REVENUE AND CONTRACT BALANCES

The Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay. Service revenue is generally recognized over time as the services are performed. For the three and six months ended March 30, 2024 and April 1, 2023, the service revenue was not material.

The Company reports revenue based on its reportable segments and end markets, which provides information about how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Please refer to Note 14: Segment Information, for disclosure of revenue by segment and end markets.

Contract Balances

Our contract assets relate to our rights to consideration for revenue with collection dependent on events other than the passage of time, such as the achievement of specified payment milestones. The contract assets will be transferred to net account receivables as our right to consideration for these contract assets become unconditional. Contracts assets are reported in the accompanying Consolidated Condensed Balance Sheets within prepaid expenses and other current assets.

Our contract liabilities are primarily related to payments received in advance of satisfying performance obligations, and are reported in the accompanying Consolidated Condensed Balance Sheets within accrued expenses and other current liabilities.

Contract liabilities increase as a result of receiving new advance payments from customers and decrease as revenue is recognized from product sales under advance payment arrangements upon satisfying the performance obligations.

The following table shows the changes in contract asset balances during the three and six months ended March 30, 2024 and April 1, 2023:

The following table shows the changes in contract liability balances during the three and six months ended March 30, 2024 and April 1, 2023:

NOTE 12. (LOSS) EARNINGS PER SHARE

Basic (loss)/income per share is calculated using the weighted average number of shares of common stock outstanding during the period. Restricted stock are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. For the three and six months ended March 30, 2024, restricted stock were excluded due to the net loss the Company incurred during those periods.

The following table reflects a reconciliation of the shares used in the basic and diluted net income per share computation for the three and six months ended March 30, 2024 and April 1, 2023:

(1) Represents the Time-based RSUs, Relative TSR PSUs and Growth PSUs that are excluded from the calculation of diluted earnings per share for the three and six months ended March 30, 2024 and April 1, 2023 as the effect would have been anti-dilutive.

NOTE 13. INCOME TAXES

The following table reflects the provision for income taxes and the effective tax rate for the three and six months ended March 30, 2024 and April 1, 2023:

For the three and six months ended March 30, 2024 as compared to the three and six months ended April 1, 2023, the change in provision for income taxes was primarily due to an increase in valuation allowance recorded against certain deferred tax assets during the quarter, offset by the decrease in provision for income taxes resulting from lower profitability. The decrease in effective tax rate was primarily due to the tax benefit from the one-time charge for cancellation of Project W which was recorded as a discrete during the quarter, partially offset by an increase in valuation allowance recorded against certain deferred tax assets which was also recorded as a discrete during the quarter.

For the three and six months ended March 30, 2024, the effective tax rate is lower than the U.S. federal statutory tax rate primarily due to the two discrete tax items discussed above, foreign income earned in lower tax jurisdictions, tax incentives, and tax credits.

NOTE 14. SEGMENT INFORMATION

Reportable segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (the “CODM”) in deciding how to allocate resources and assess performance. The Company’s Chief Executive Officer is the CODM. The CODM does not review discrete asset information.

As discussed in Note 1, during the third quarter of fiscal year 2023, the Company reconsidered the guidance under ASC 280, Segment Reporting, and determined that certain prior period conclusions about the Company’s operating and reportable segments were erroneous. As a result, the Company had incorrectly presented certain segment-related disclosures in the notes to our previously issued consolidated financial statements, included in our Original Form 10-K.

The Company has revised the prior period presentation to reflect itsfour reportable segments as follows: (1) Ball Bonding Equipment, (2) Wedge Bonding Equipment, (3) Advanced Solutions, and (4) Aftermarket Products and Services (“APS”). The four reportable segments are disclosed below:

Ball Bonding Equipment: Reflects the results of the Company from the design, development, manufacture and sale of ball bonding equipment and wafer level bonding equipment.

Wedge Bonding Equipment: Reflects the results of the Company from the design, development, manufacture and sale of wedge bonding equipment.

Advanced Solutions: Reflects the results of the Company from the design, development, manufacture and sale of certain advanced display, die-attach and thermocompression systems and solutions.

APS: Reflects the results of the Company from the design, development, manufacture and sale of a variety of tools, spares and services for our equipment.

Any other operating segments that have not been aggregated within the reportable segments described above which do not meet the quantitative threshold to be disclosed as a separate reportable segment have been grouped within an “All Others” category. This group is reflective of the results of the Company from the design, development, manufacture and sale of certain advanced display, advanced dispense, electronics assembly, die-attach and lithography systems and solutions. Results for the “All Others” category and other corporate expenses are included as a reconciling item between the Company’s reportable segments and its consolidated results of operations.

The following table reflects operating information by segment for the three and six months ended March 30, 2024 and April 1, 2023:

We have considered: (1) information that is regularly reviewed by our CODM in evaluating financial performance and how to allocate resources; and (2) other financial data, including information that we include in our earnings releases but which is not included in our financial statements, to disaggregate revenues by end markets served. The principal category we use to disaggregate revenues is by the end markets served.

The following table reflects net revenue by end markets served for the three and six months ended March 30, 2024 and April 1, 2023:

The following table reflects capital expenditures, depreciation expense and amortization expense for the three and six months ended March 30, 2024 and April 1, 2023:

NOTE 15. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Warranty Expense

The Company’s equipment is generally shipped with aone-year warranty against manufacturing defects. The Company establishes reserves for estimated warranty expense when revenue for the related equipment is recognized. The reserve for estimated warranty expense is based upon historical experience and management’s estimate of future warranty costs, including product part replacement, freight charges and related labor costs expected to be incurred in correcting manufacturing defects during the warranty period.

The following table reflects the reserve for warranty activity for the three and six months ended March 30, 2024 and April 1, 2023:

Other Commitments and Contingencies

The following table reflects obligations not reflected on the Consolidated Condensed Balance Sheets as of March 30, 2024:

(1)The Company orders inventory components in the normal course of its business. A portion of these orders are non-cancelable and a portion may have varying penalties and charges in the event of cancellation.

From time to time, the Company is party to or the target of lawsuits, claims, investigations and proceedings, including for personal injury, intellectual property, commercial, contract, and employment matters, which are handled and defended in the ordinary course of business. The Company accrues a contingent loss liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When a single amount cannot be reasonably estimated but the cost can be estimated within a range, the Company accrues the minimum amount. The Company expenses legal costs, including those expected to be incurred in connection with a loss contingency, as incurred.

Unfunded Capital Commitments

As of March 30, 2024, the Company also has an obligation to fund uncalled capital commitments of approximately $7.8 million, as and when required, in relation to its investment in a private equity fund.

Concentrations

The following table reflects significant customer concentrations as a percentage of net revenue for the six months ended March 30, 2024 and April 1, 2023:

• Represents less than 10% of total net revenue

(1) Distributor of the Company’s products

The following table reflects significant customer concentrations as a percentage of total accounts receivable as of March 30, 2024 and April 1, 2023:

• Represents less than 10% of total accounts receivable

NOTE 16. RESTRUCTURING AND CANCELLATION OF PROJECT

Previously referred to as Project W, the Company was engaged with one of its strategic customers (the "Customer") to support the Customer with the development and future mass production of certain technologies relating to advanced display (the "Project"). In connection with the Customer's strategic review of its business, the Customer has informed the Company that it has cancelled the Project.

In connection with the foregoing, on March 11, 2024, the Company committed to a plan to cease operational activities and commence wind down activities concerning various aspects of Project W. The wind down activities are ongoing and are expected to be substantially completed by end of fiscal year 2024.

Wind down charges as a result of these activities incurred during the period ended March 30, 2024 were accounted in accordance with ASC 330, Inventoryand ASC 712, Compensation—Nonretirement Postemployment Benefits. The Company also performed the impairment tests of all associated assets with reference to the guidance under ASC 330, Inventory and ASC 360, Property, Plant and Equipment. The wind down charges and impairments are primarily recorded in the Advanced Solutions reportable segment. Based on current information available, we do not expect any material future charges with respect to the cancellation of Project W that will be classified as exit and disposal costs under the guidance of ASC 420, Exit or Disposal Cost Obligations. We plan to fund the cash costs through existing cash balances.

In addition to the cancellation of Project W, in March 2024, the Company also implemented a restructuring program to reallocate resources within the Company to enhance its performance, boost productivity and drive efficiency initiatives. The accrued costs pertaining to ongoing employee benefit arrangements arising from the restructuring program as of March 30, 2024 is accounted in accordance with ASC 712 and is expected to be paid by the end of fiscal year 2024.

The following table presents a summary of the charges related to the cancellation of Project W and restructuring expenses incurred for the period ended March 30, 2024.

Inventory write-down

In determining the value of our inventory, we consider indicators that net realizable value may be lower than cost based upon projections about future consumption, and market conditions. We recorded a write-down to inventory totaling $57.3 million with a corresponding increase to cost of sales in our consolidated condensed statement of operations for the three and six months ended March 30, 2024. See Note 2 for inventory balances.

Employee termination benefits

At March 30, 2024, accrued employee termination costs of $2.9 million related to other severance and employee costs incurred as a result of the cancellation of Project W and the restructuring program, primarily pertaining to ongoing employee benefit arrangements arising, were recorded within accrued compensation and benefits in our consolidated condensed balance sheet.

Purchase Order cancellation charges

At March 30, 2024, $2.8 million of purchase order cancellation charges are included in accrued expenses and other current liabilities in our consolidated condensed balance sheet. These costs relate to a net loss on firm purchase commitments for goods for inventory in accordance with ASC 330.

Impairment charges relating to long-lived assets

At March 30, 2024, we recorded an impairment charge of $38.0 million related to property, plant and equipment, $3.0 million related to the ROU assets and $3.5 million related to Asset Retirement Obligation (ARO).