FORMFACTOR INC

Previous wording

FormFactor, Inc., headquartered in Livermore, California, is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle — from characterization, modeling, reliability, and design de-bug, to qualification and production test. We provide a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production. Customers use our products and services to accelerate profitability by optimizing device performance and advancing yield knowledge.

Current wording

FormFactor, Inc., headquartered in Livermore, California, is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle — from characterization, modeling, reliability, and design de-bug, to qualification and production test. We provide a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical and optical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production. Customers use our products and services to accelerate profitability by optimizing device performance and advancing yield knowledge.

Previous wording

The increase in net income in the first six months of fiscal 2024 compared to the first six months of fiscal 2023 was due to two factors. Certain areas of the semiconductor industry strengthened in the second quarter of fiscal 2024, increasing demand in most markets within our Probe Cards segment, particularly with demand for high bandwidth memory (“HBM”) chips utilized in generative artificial intelligence applications, seasonal ramp of new mobile application processor designs, and demand for client PC and server microprocessor designs. While we experienced growth in total revenues during the first six months of fiscal 2024, our Systems segment revenues were negatively impacted due to the absence of metrology system sales during the first six months of fiscal 2024 as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023. Additionally, the increase in net income was attributable to the $20.3 million gain recognized from the China Transaction.

Current wording

We generated net income of $59.9 million in the first nine months of fiscal 2024 as compared to $6.5 million in the first nine months of fiscal 2023. Beginning in the second quarter of fiscal 2024, certain areas of the semiconductor industry strengthened, increasing demand in most markets within our Probe Cards segment, particularly with demand for high bandwidth memory (“HBM”) chips utilized in generative artificial intelligence applications, ramp of new mobile application processor designs, and demand for client PC and server microprocessor designs. While we experienced growth in total revenues during the first nine months of fiscal 2024, our Systems segment revenues were negatively impacted due to the absence of metrology system sales during the first nine months of fiscal 2024 as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023. Additionally, the increase in net income was partially attributable to the $20.3 million gain recognized from the completion of the sale of our China operations and establishment of an exclusive distribution and partnership agreement to continue sales and support of our products in the region (the “China Transaction”).

Previous wording

Management’s Discussion and Analysis and Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K describe the significant accounting estimates and significant accounting policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. During the six months ended June 29, 2024, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 30, 2023.

Current wording

Management’s Discussion and Analysis and Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K describe the significant accounting estimates and significant accounting policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management’s estimates. During the nine months ended September 28, 2024, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 30, 2023.

Previous wording

(1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business. As a result, metrology systems revenue will not recur in future periods. We generated no metrology systems revenue during the three and six months ended June 29, 2024, compared to $4.5 million and $8.6 million, during the three and six months ended July 1, 2023, respectively.

Current wording

(1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business. As a result, metrology systems revenue will not recur in future periods. We generated no metrology systems revenue during the three and nine months ended September 28, 2024, compared to $8.0 million and $16.7 million, during the three and nine months ended September 30, 2023, respectively.

Previous wording

(1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business. As a result, metrology systems revenue will not recur in future periods. We generated no metrology systems revenue during the three and six months ended June 29, 2024, compared to $4.5 million and $8.6 million, during the three and six months ended July 1, 2023, respectively.

Current wording

(1) During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business. As a result, metrology systems revenue will not recur in future periods. We generated no metrology systems revenue during the three and nine months ended September 28, 2024, compared to $8.0 million and $16.7 million, during the three and nine months ended September 30, 2023, respectively.

Previous wording

Foundry & Logic —The increase in Foundry & Logic product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by the seasonal ramp of new mobile application processor designs and stronger probe-card demand for client PC and server microprocessor designs.

Current wording

Foundry & Logic —The increase in Foundry & Logic product revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by the ramp of new mobile application processor designs and stronger probe-card demand for client PC and server microprocessor designs.

Previous wording

DRAM —The increase in DRAM product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by increased demand for HBM chips utilized in generative artificial intelligence applications.

Current wording

DRAM —The increase in DRAM product revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by increased demand for HBM designs utilized in generative artificial intelligence applications and increased demand for commodity DRAM designs, particularly DDR5.

Previous wording

Flash —The increase in Flash product revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by increased customer production activity and demand for our products.

Current wording

Flash —The increase in Flash product revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was driven by increased customer production activity and demand for our products.

Previous wording

Systems —The decrease in Systems market revenue for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, was driven by the absence of sales of our metrology systems, and decreased sales of probe stations and cryogenic systems due to timing of demand. During the fourth quarter of fiscal 2023, we completed the sale of our FRT Metrology business. The decrease in Systems revenue from sources not associated with metrology systems for the three and six months ended June 29, 2024 was $5.4 million, or 15.0%, and $9.4 million, or 13.0%, respectively.

Current wording

Systems —The decrease in Systems market revenue for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was primarily driven by the absence of metrology systems revenue due to the sale of our FRT Metrology business during the fourth quarter of fiscal 2023. The fluctuation in Systems revenue from sources not associated with metrology systems for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, was an increase of $0.6 million, or 1.6%, and a decrease of $8.8 million, or 8.2%, respectively. The increase for the three months ended September 28, 2024, compared to the three months ended September 30, 2023, was from increased sales of cryogenic systems, partially offset by decreased sales of thermal systems. The decrease for the nine months ended September 28, 2024, compared to the nine months ended September 30, 2023, was from decreased sales of stations and thermal systems, partially offset by an increase in sales of cryogenic stations.

Previous wording

Changes in revenue by geographic region for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, product sales mix, and impacts from trade restrictions. Specifically, the changes in revenue by geographic region was attributable to the following:

Current wording

Changes in revenue by geographic region for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, were primarily attributable to changes in customer demand, shifts in customer regional manufacturing strategies, particularly with our large multinational customers, product sales mix, and impacts from trade restrictions. Specifically, the changes in revenue by geographic region was attributable to the following:

Previous wording

•The increase in revenue for South Korea for the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023 was driven principally by increased demand for our DRAM probe card products, including those for HBM.

Current wording

•The increase in revenue for South Korea for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023 was driven principally by increased demand for our DRAM probe card products, including those for HBM.

Previous wording

•The increase in revenues for the United States, and decreases in revenues for China and Malaysia, for the six months ended June 29, 2024, compared to the six months ended July 1, 2023 were driven principally by a single large U.S.-based company with operations in these regions that shifted shipments from these regions to the United States.

Current wording

•The increase in revenues for the United States and the decrease in revenues for Malaysia, for the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023 were driven principally by a single large U.S.-based company with operations in these regions that shifted shipments from these regions to the United States.

Previous wording

•The decrease in revenues for China for the six months ended June 29, 2024, compared to the six months ended July 1, 2023, was also impacted by lowered demand caused by expanded export license requirements imposed by the U.S. government beginning the fourth quarter of fiscal 2022 for exporting advanced U.S. semiconductor technology to China. These trade restrictions have caused, and continue to drive, multinational customers to concentrate operations in regions other than China, and lowering overall demand in China, impacting our geographical mix.

Current wording

•Despite the increase in revenues for China previously described, expanded export license requirements imposed by the U.S. government beginning the fourth quarter of fiscal 2022 for exporting advanced U.S. semiconductor technology to China has negatively impacted revenue for that region. These requirements have restricted our ability to ship products to the region, decreasing demand from domestic China customers. Additionally, these requirements have caused, and continue to drive, some of our multinational customers to concentrate operations in regions other than China, lowering overall demand for those customers within the region.

Previous wording

Probe Cards—For the three and six months ended June 29, 2024, gross profit and gross margins increased compared to the three and six months ended July 1, 2023, primarily due to greater revenues and a more favorable absorption of costs on higher production volumes. This was partially offset by an unfavorable product mix resulting from a higher concentration of sales of lower-margin DRAM products for the three and six months ended June 29, 2024 compared to the corresponding period in the prior year, up from 26.4% and 20.8% of Probe Card sales to 34.8% and 34.2% of Probe Card sales, and a lower concentration of higher-margin Foundry & Logic sales for the three and six months ended June 29, 2024 when compared to the corresponding period in the prior year, down from 71.1% and 75.6% of Probe Card sales to 62.1% and 62.7% of Probe Card sales. In general, our DRAM products have lower margins than our Foundry & Logic products.

Current wording

Probe Cards—For the three and nine months ended September 28, 2024, gross profit and gross margins increased compared to the three and nine months ended September 30, 2023, primarily due to greater revenues and a more favorable absorption of costs on higher production volumes. This was partially offset by an unfavorable product mix with a higher concentration of lower-margin DRAM sales and a lower concentration of higher-margin Foundry & Logic sales. For the three and nine months ended September 28, 2024 compared to the corresponding period in the prior year, DRAM revenue was up from 21.4% and 21.0% of Probe Card sales to 35.0% and 34.5% of Probe Card sales, and Foundry & Logic revenue was down from 75.1% and 75.4% of Probe Card sales to 62.4% and 62.6% of Probe Card sales. In general, our DRAM products have lower margins than our Foundry & Logic products.

Previous wording

Systems —For the three and six months ended June 29, 2024, gross profit and gross margins decreased compared to the three and six months ended July 1, 2023, primarily as a result of lower revenues and a less favorable absorption of costs on lower production volumes, and a less favorable product mix.

Current wording

Systems —For the three and nine months ended September 28, 2024, gross profit and gross margins decreased compared to the three and nine months ended September 30, 2023, primarily as a result of lower revenues and a less favorable absorption of costs on lower production volumes, and a less favorable product mix, in part related to the divestiture of the FRT Metrology business.

Previous wording

Corporate and Other —Corporate and Other includes unallocated expenses relating to stock-based compensation expense, amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring charges, net, which are not used in evaluating the results of, or in allocating resources to, our reportable segments. For the three and six months ended June 29, 2024, Corporate and Other gross profit increased compared to the three and six months ended July 1, 2023, primarily from the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

Current wording

Corporate and Other —Corporate and Other includes unallocated expenses relating to stock-based compensation expense, amortization of intangible assets, inventory and fixed asset fair value adjustments due to acquisitions, and restructuring charges, net, which are not used in evaluating the results of, or in allocating resources to, our reportable segments. For the three months ended September 28, 2024, the Corporate and Other gross loss increased compared to the three months ended September 30, 2023, primarily from the an increase in stock-based compensation expense and restructuring charges that were partially offset due to the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023. For the nine months ended September 28, 2024, the Corporate and Other gross loss decreased compared to the nine months ended September 30, 2023, primarily from the absence of amortization expense associated with our FRT Metrology business, which was sold during the fourth quarter of fiscal 2023.

Previous wording

Overall —Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, and material costs. For the three and six months ended June 29, 2024, compared to the three and six months ended July 1, 2023, gross profit and gross margins have increased primarily as a result of more favorable absorption of costs and lower inventory excess and obsolescence reserves, partially offset by an unfavorable product mix, as described above.

Current wording

Overall —Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, and material costs. For the three and nine months ended September 28, 2024, compared to the three and nine months ended September 30, 2023, gross profit and gross margins have increased primarily as a result of more favorable absorption of costs and lower inventory excess and obsolescence reserves, partially offset by an unfavorable product mix, as described above.

Previous wording

Research and development expenses in the three months ended June 29, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, increased general operational costs and stock-based compensation expense.

Current wording

Research and development expenses in the three months ended September 28, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation and increased general operational costs, partially offset by lower compensation costs from decreased headcount as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023 and the China Transaction in the first quarter of fiscal 2024, lower project material costs, and lower stock-based compensation expense.

Previous wording

Research and development expenses in the six months ended June 29, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, increased project material costs and general operational costs.

Current wording

Research and development expenses in the nine months ended September 28, 2024 increased compared to the corresponding period in the prior year primarily due to increased employee compensation costs from higher performance-based compensation, general operational costs, and increased project material costs, partially offset by lower compensation costs from decreased headcount as a result of the sale of our FRT Metrology business in the fourth quarter of fiscal 2023 and the China Transaction in the first quarter of fiscal 2024.

Previous wording

Selling, general and administrative expenses increased in the six months ended June 29, 2024 compared to the corresponding period in the prior year. The drivers of the increase for the six month period were increased employee compensation costs from higher performance-based compensation, increased consulting fees from transaction expenses related to the sale of our FRT Metrology business in the fourth quarter of fiscal 2023 and the China Transaction in the first quarter of fiscal 2024, increased stock-based compensation expense from an increase in weighted average fair value of awards outstanding, and increased recruiting costs, partially offset by lower amortization expense from significant intangible assets becoming fully amortized and lower restructuring charges.

Current wording

Selling, general and administrative expenses for the three months ended September 28, 2024 compared to the corresponding period in the prior year was effectively flat. The drivers of the fluctuation for the three month period were increased employee compensation costs from higher performance-based compensation and increased commissions expense from increased revenues, mostly offset by lower stock-based compensation expenses, lower transaction expenses related to the sale of our FRT Metrology business earlier in 2024, and lower general operating expenses.

Previous wording

Selling, general and administrative expenses increased in the three months ended June 29, 2024 compared to the corresponding period in the prior year. The drivers of the increase for the three month period were increased employee compensation costs from higher performance-based compensation and increased commissions expense from increased revenues, partially offset by lower amortization expense from significant intangible assets becoming fully amortized.

Current wording

Selling, general and administrative expenses increased in the nine months ended September 28, 2024 compared to the corresponding period in the prior year. The drivers of the increase for the nine month period were increased employee compensation costs from higher performance-based compensation, increased commissions expense from increased revenues, increased consulting fees from the China Transaction in the first quarter of fiscal 2024 and increased general operating expenses, partially offset by lower amortization expense from significant intangible assets becoming fully amortized.

Previous wording

Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities. The increase in interest income for the three and six months ended June 29, 2024 compared with the corresponding period of the prior year, was attributable to an increase in weighted average yields due to the higher interest rate environment and on higher invested balances.

Current wording

Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities. The increase in interest income for the three and nine months ended September 28, 2024 compared with the corresponding period of the prior year, was attributable to higher invested balances.

Previous wording

Interest expense primarily includes interest on our term loan, interest rate swap derivative contracts, and term loan issuance costs amortization charges. The interest expense for the three and six months ended June 29, 2024 decreased compared to the corresponding period of the prior year due to lower outstanding debt.

Current wording

Interest expense primarily includes interest on our term loan, interest rate swap derivative contracts, and term loan issuance costs amortization charges. The interest expense for the three and nine months ended September 28, 2024 was effectively flat compared to the corresponding periods in the prior year. This stability is due to our interest rate swap, which fixes the interest rate on our long-term debt.

Previous wording

Provision (benefit) for income taxes reflects the tax provision on our operations in foreign and U.S. jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income deduction. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, changes in stock-based compensation expense/benefit, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction. The increase in our effective tax rate for the three and six months ended June 29, 2024 compared to the corresponding period in the prior year was primarily driven by higher taxable income during fiscal 2024.

Current wording

Provision for income taxes reflects the tax provision on our operations in foreign and U.S. jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income deduction. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, changes in stock-based compensation expense/benefit, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction. The decrease in our effective tax rate for the three months ended September 28, 2024 compared to the corresponding period in the prior year was primarily driven by stock-based compensation expense/benefit impacts on the provision for income tax expense. The increase in our effective tax rate for the nine months ended September 28, 2024 compared to the corresponding period in the prior year was primarily driven by higher taxable U.S. income during fiscal 2024.

Previous wording

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (“CHIPS Act”) was signed into law on August 9, 2022. The CHIPS Act provides for various incentives and tax credits, among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. At least a portion of our future capital expenditures and research and development costs will qualify for this credit, which benefits us by allowing us to net the credit received against our costs. The AMIC credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.

Current wording

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (“CHIPS Act”) was signed into law on August 9, 2022. The CHIPS Act provides for various incentives and tax credits, among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. At least a portion of our future capital expenditures and research and development costs is expected to qualify for this credit, which benefits us by allowing us to net the credit received against our costs. The AMIC credit is accounted for outside of ASC 740 as a reduction to the depreciable basis of the assets used in operations and will not have an impact on our effective tax rate.

Previous wording

Our working capital increased to $481.6 million at June 29, 2024, compared to $442.7 million at December 30, 2023.

Current wording

Our working capital increased to $485.6 million at September 28, 2024, compared to $442.7 million at December 30, 2023.

Previous wording

Cash and cash equivalents primarily consist of deposits held at banks and money market funds. Marketable securities primarily consist of corporate bonds, U.S. treasuries, commercial paper, and U.S. agency securities. We typically invest in highly rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.

Current wording

Cash and cash equivalents primarily consist of deposits held at banks and money market funds. Marketable securities primarily consist of corporate bonds, U.S. treasuries, U.S. agency securities, and commercial paper. We typically invest in highly rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.

Previous wording

Our cash, cash equivalents and marketable securities totaled approximately $357.6 million at June 29, 2024, compared to $328.3 million at December 30, 2023. Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, and the cash we expect to generate from operations, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: research and development, capital expenditures, working capital, outstanding commitments, and other liquidity requirements associated with existing operations. However, we cannot be certain that our cash, cash equivalents, and marketable securities on hand, and cash generated from operations, will be available in the future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital resources. To the extent necessary, we may consider entering into short and long-term debt obligations, raising cash through a stock issuance, or obtaining new financing facilities, which may not be available on terms favorable to us. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.

Current wording

Our cash, cash equivalents and marketable securities totaled approximately $354.5 million at September 28, 2024, compared to $328.3 million at December 30, 2023. Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, and the cash we expect to generate from operations, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: research and development, capital expenditures, working capital, outstanding commitments, and other liquidity requirements associated with existing operations. However, we cannot be certain that our cash, cash equivalents, and marketable securities on hand, and cash generated from operations, will be available in the future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital resources. To the extent necessary, we may consider entering into short and long-term debt obligations, raising cash through a stock issuance, or obtaining new financing facilities, which may not be available on terms favorable to us. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.

Previous wording

Net cash provided by operating activities consists of net income for the period adjusted for certain non-cash items and changes in certain operating assets and liabilities. Net cash provided by operating activities for the six months ended June 29, 2024 was attributable to net income of $41.2 million and net non-cash expenses of $15.5 million, partially offset by the increase in net working capital of $1.8 million. The cash used in net working capital is related to increased inventories of $14.5 million and increased accounts receivable, net, of $10.8 million, largely offset by increased accrued liabilities of $10.2 million, other liabilities of $7.3 million, and deferred revenue of $4.9 million. The non-cash expenses consisted of depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by the $20.6 million gain on sale of business.

Current wording

Net cash provided by operating activities consists of net income for the period, adjusted for certain non-cash items and changes in certain operating assets and liabilities. Net cash provided by operating activities for the nine months ended September 28, 2024 was attributable to net income of $59.9 million and net non-cash expenses of $32.0 million, partially offset by the increase in net working capital of $10.3 million. The cash used in net working capital is related to increased accounts receivable, net, of $13.3 million, increased inventories of $7.6 million, decreased accounts payable of $8.8 million, and decreased operating lease liabilities of $5.3 million, largely offset by increased accrued liabilities of $7.4 million, other liabilities of $9.3 million, and deferred revenue of $7.9 million. The non-cash expenses consisted of depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories, partially offset by the $20.6 million gain on sale of business and deferred income tax benefits.

Previous wording

Net cash used in investing activities for the six months ended June 29, 2024 primarily related to $21.8 million in property, plant and equipment purchases and $9.7 million in net purchases of marketable securities, partially offset by $21.6 million cash provided by the sale of businesses.

Current wording

Net cash used in investing activities for the nine months ended September 28, 2024 primarily related to $30.8 million in property, plant and equipment purchases and $15.5 million in net purchases of marketable securities, partially offset by $21.6 million cash provided by the sale of businesses.

Previous wording

Net cash used in financing activities for the six months ended June 29, 2024 primarily related to $20.3 million used to purchase common stock under our stock repurchase program, $3.6 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $4.9 million received from issuances of common stock under our employee stock purchase plan.

Current wording

Net cash used in financing activities for the nine months ended September 28, 2024 primarily related to $37.2 million used to purchase common stock under our stock repurchase program, $18.0 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $9.7 million received from issuances of common stock under our employee stock purchase plan.

Previous wording

On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the “Building Term Loan”). The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California. On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate London Interbank Offered

Current wording

On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the “Building Term Loan”). The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California. On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate London Interbank Offered Rate (“LIBOR“) with the term Secured Overnight Financing Rate (“SOFR”), with no change to the amount or timing of contractual cash flows.

Previous wording

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 1.86% per annum. Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at June 29, 2024, before consideration of the interest rate swap discussed in the next paragraph, was 7.19%. As of June 29, 2024, the balance outstanding pursuant to the Building Term Loan was $13.9 million.

Current wording

The Building Term Loan bears interest at a rate equal to the applicable SOFR rate, plus 1.86% per annum. Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at September 28, 2024, before consideration of the interest rate swap discussed in the next paragraph, was 7.07%. As of September 28, 2024, the balance outstanding pursuant to the Building Term Loan was $13.6 million.

Previous wording

On March 17, 2020, we entered into an interest rate swap agreement to hedge the interest payment on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt. As future levels of LIBOR over the life of the loan are uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates. This agreement was amended on May 19, 2023 to replace the benchmark reference rate LIBOR with SOFR to match the Building Term Loan agreement (as amended). After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75%. As of June 29, 2024, the notional amount of the loan that is subject to this interest rate swap is $13.9 million.

Current wording

On March 17, 2020, we entered into an interest rate swap agreement to hedge the interest payment on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt. As future levels of LIBOR over the life of the loan are uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates. This agreement was amended on May 19, 2023 to replace the benchmark reference rate LIBOR with SOFR to match the Building Term Loan agreement (as amended). After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75%. As of September 28, 2024, the notional amount of the loan that is subject to this interest rate swap is $13.6 million.

Previous wording

On October 30, 2023, our Board of Directors authorized an additional two-year program to repurchase up to $75.0 million of outstanding common stock, also with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs. This share repurchase program will expire on October 30, 2025. During fiscal 2023, we repurchased and retired 32,020 shares of common stock for $1.2 million. During the six months ended June 29, 2024, we repurchased and retired 483,951 shares of common stock for $20.3 million, and as of June 29, 2024, $53.5 million remained available for future repurchases.

Current wording

On October 30, 2023, our Board of Directors authorized an additional two-year program to repurchase up to $75.0 million of outstanding common stock, with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs. This share repurchase program will expire on October 30, 2025. During fiscal 2023, we repurchased and retired 32,020 shares of common stock for $1.2 million. During the nine months ended September 28, 2024, we repurchased and retired 889,683 shares of common stock for $37.2 million, and as of September 28, 2024, $36.6 million remained available for future repurchases.

Previous wording

(1)Represents our minimum interest payment commitments at 7.19% per annum, excluding the interest rate swap described in Debt, above.

Current wording

(1)Represents our minimum interest payment commitments at 7.07% per annum, excluding the interest rate swap described in Debt, above.

Previous wording

The table above excludes our gross liability for unrecognized tax benefits and our deferred grant. The gross liability for unrecognized tax benefits was $50.3 million as of June 29, 2024. The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated. The deferred grant was $18.0 million as of June 29, 2024, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development. The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments within California. Accordingly, the timing of any repayment cannot be estimated.

Current wording

The table above excludes our gross liability for unrecognized tax benefits and our deferred grant. The gross liability for unrecognized tax benefits was $50.3 million as of September 28, 2024. The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated. The deferred grant was $18.0 million as of September 28, 2024, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development. The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments within California over the 5-year term. Accordingly, the timing of any repayment cannot be estimated.