ALLEGRO MICROSYSTEMS, INC.

Previous wording

We operate on a 52- or 53-week fiscal year ending on the last Friday of March. Each fiscal quarter has 13 weeks, except in a 53-week year, when the fourth fiscal quarter has 14 weeks. All references to the three- and nine-month periods ended December 26, 2025 and December 27, 2024 relate to the 13- and 39-week periods ended December 26, 2025 and December 27, 2024, respectively. All references to “2026,” “fiscal year 2026” or similar references relate to the 52-week period ending March 27, 2026. All references to “2025,” “fiscal year 2025” or similar references relate to the 52-week period ended March 28, 2025.

Current wording

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

Previous wording

We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,500 products, and we ship over 1.5 billion units annually to more than 10,000 customers worldwide. During the three- and nine-month periods ended December 26, 2025, we generated $229.2 million and $646.9 million in total net sales, respectively, with $8.4 million and $1.8 million in net income, respectively. During the three- and nine-month periods ended December 27, 2024, we generated $177.9 million and $532.2 million in total net sales, respectively, with $6.8 million and $58.0 million in net losses, respectively.

Current wording

We are headquartered in Manchester, New Hampshire and have a global footprint across multiple continents. Our portfolio includes more than 1,500 products, and we ship approximately 2.1 billion units annually to more than 15,000 customers worldwide. During the three-month periods ended June 26, 2026 and June 27, 2025, we generated $259.2 million and $203.4 million in total net sales, respectively, with $15.9 million and $(13.2) million in net income (loss), respectively.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Demand for our products is highly dependent on market conditions in the end markets in which our customers operate, which are generally subject to seasonality, cyclicality, tariffs and other pricing increases and competitive conditions. In addition, a substantial portion of our total net sales is derived from sales to customers that purchase large volumes of our products. These customers generally provide periodic forecasts of their requirements. However, these forecasts do not commit such customers to minimum purchases, and customers can revise these forecasts without penalty. In addition, as is customary in the semiconductor industry, customers are generally permitted to cancel orders for our products within a specified period. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers expose us to the risks of inventory shortages or excess inventory. We are currently operating in an inflationary environment for our products as a result of global tariff policies, which also have the potential to reduce end market demand in certain markets. We believe that we are emerging from an extended period in which we and other semiconductor companies experienced a downturn in market demand, primarily driven by reduced demand from customers across various markets and digestion of excess accumulated inventory. In addition, factors that cause a reduction in demand from the end users of our OEMs’ or other customers’ products, including as a result of increased prices resulting from global trade policies, tariffs or a recessionary environment in the markets in which we operate, may in the future continue to cause our direct customers to significantly reduce the number of products ordered from us.

Current wording

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

Previous wording

Gross margin has been, and will continue to be, affected by a variety of factors, including the ASPs of our products, product mix in a given period, material costs, yields, manufacturing costs and efficiencies. We believe the primary driver of gross margin is the ASP negotiated between us and our customers relative to material costs and yields. Our pricing and margins depend on the volumes and the features of the products we produce and sell to our customers. As our products mature and unit volumes increase, we expect their ASPs to decline in the long term. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers, as we target new design win opportunities and manage the product life cycles of our existing customer designs. We also maintain a close relationship with our suppliers and subcontractors to improve quality, increase yields and lower manufacturing costs. As a result, these declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from declining ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to product mix, new product introductions, transitions into volume manufacturing and manufacturing costs. Gross margin generally decreases if production volumes are lower as a result of decreased demand as it did throughout fiscal year 2025, which leads to a reduced absorption of our fixed manufacturing costs. Gross margin generally increases when the opposite occurs.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Automotive net sales increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to growth in e-Mobility products and internal combustion engine products.

Current wording

Automotive net sales increased in the three-month period ended June 26, 2026 compared to the three-month period ended

Previous wording

Total net sales increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024. The increase was primarily driven by e-Mobility products, which includes our advanced driver assistance systems (“ADAS”) and components for electrified and hybrid vehicles (“xEV”), data center applications, internal combustion engine products, and industrial automation and robotics products, partially offset by a decrease in broad-based industrial products and personal and industrial transport products.

Current wording

June 27, 2025, primarily due to growth in safety, comfort and convenience applications and advanced driver assistance systems (“ADAS”) and components for electrified and hybrid vehicles (“xEV”), (collectively, “Focus Auto”).

Previous wording

Industrial and Other net sales increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to increases in demand for data center applications and industrial automation and robotics products, partially offset by a decrease in broad-based industrial products and personal and industrial transport products.

Current wording

Industrial and Other net sales increased in the three-month period ended June 26, 2026 compared to the three-month period ended June 27, 2025, primarily due to increases in demand for data center applications and personal and industrial transport products.

Previous wording

The increase in PIC sales was primarily driven by an increase in demand for our motor and high performance power products. The increase in MS sales was primarily due to an increase in demand for our current and isolator products, as well as our magnetic speed and position sensors.

Current wording

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

Previous wording

Other Asia net sales increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, in both Automotive and Industrial and Other applications, primarily in data center applications, partially offset by declines in broad-based industrial products. Greater China net sales increased primarily driven by an increase in ADAS and xEV components. Other Americas net sales increased in both Automotive and Industrial and Other applications, primarily in ADAS. Japan net sales increased in Automotive applications, primarily in xEV components, partially offset with a decrease in personal and industrial transport products. South Korea net sales increased primarily in internal combustion engine products. United States net sales increased in Automotive applications, primarily in internal combustion engine products, partially offset by declines in broad-based industrial products.

Current wording

June 27, 2025, primarily driven by an increase in demand of our data center applications. Japan net sales increased primarily driven by safety, comfort and convenience applications, xEV components, and internal combustion engine products. Greater China net sales increased primarily driven by an increase in ADAS components, and safety, comfort and convenience applications, partially offset by a decrease in broad-based industrial products. EMEA net sales increased primarily in consumer products. Other Asia net sales increased primarily in personal and industrial transport products.

Previous wording

Cost of goods sold increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to higher production volume in support of higher product sales.

Current wording

Cost of goods sold increased in the three-month period ended June 26, 2026 compared to the three-month period ended

Previous wording

Cost of goods sold as a percentage of our total net sales was 53.3% and 54.3% for the three-month periods ended December 26, 2025 and December 27, 2024, respectively. The decrease was primarily due to the increase in net sales.

Current wording

Cost of goods sold as a percentage of our total net sales was 51.5% and 55.1% for the three-month periods ended June 26, 2026 and June 27, 2025, respectively. The decrease was primarily due to the increase in net sales.

Previous wording

Gross profit increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to the increase in net sales and a change in product mix.

Current wording

Gross profit increased in the three-month period ended June 26, 2026 compared to the three-month period ended June 27, 2025, primarily due to the increase in net sales, operating leverage and pricing actions.

Previous wording

Gross margin was 46.7% and 45.7% for the three-month periods ended December 26, 2025 and December 27, 2024, respectively. The increase was primarily due to the increase in net sales and a change in product mix.

Current wording

Gross margin was 48.5% and 44.9% for the three-month periods ended June 26, 2026 and June 27, 2025, respectively. The increase was primarily due to the increase in net sales and a change in product mix.

Previous wording

Research and development (“R&D”) expenses increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to the increase in personnel costs, including the projected funding of the annual incentive program.

Current wording

Research and development (“R&D”) expenses increased in the three-month period ended June 26, 2026 compared to the three-month period ended June 27, 2025, primarily due to the increase in R&D personnel costs.

Previous wording

R&D expenses as a percentage of our total net sales was 23.1% and 24.4% for the three-month periods ended December 26, 2025 and December 27, 2024, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by the increase in the projected funding of the annual incentive program.

Current wording

R&D expenses as a percentage of our total net sales was 21.3% and 22.9% for the three-month periods ended June 26, 2026 and June 27, 2025, respectively. The decrease as a percentage of total net sales was primarily due to the increase in net sales, partially offset by the increase in personnel costs.

Previous wording

Selling, general and administrative (“SG&A”) expenses increased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024, primarily due to an increase in personnel costs, including the projected funding of the annual incentive program.

Current wording

Selling, general and administrative (“SG&A”) expenses decreased in the three-month period ended June 26, 2026 compared to the three-month period ended June 27, 2025, primarily due to a decrease in outside services, partially offset by an increase in personnel costs.

Previous wording

Interest expense decreased in the three-month period ended December 26, 2025 compared to the three-month period ended December 27, 2024. The decrease is due to the voluntary payments applied to the outstanding balance of the 2025 Refinanced Loans.

Current wording

Interest expense decreased in the three-month period ended June 26, 2026 compared to the three-month period ended

Previous wording

The foreign currency loss recorded in the nine-month period ended December 26, 2025 was primarily due to the U.S. Dollar weakening against various currencies, including the Euro and the Philippine Peso. The foreign currency loss recorded in the nine-month period ended December 27, 2024 was primarily due to the realized and unrealized losses from our Philippine location.

Current wording

The foreign currency loss recorded in the three-month periods ended June 26, 2026 and June 27, 2025 was primarily due to U.S. Dollar weakening against the Philippine Peso.

Previous wording

We recorded a net loss of $3.6 million related to our equity investment in Polar Semiconductor, LLC (“PSL”) in the three-month period ended December 26, 2025.

Current wording

We recorded a net loss of $3.6 million and $0.8 million for the three-month periods ended June 26, 2026 and June 27, 2025, respectively, related to our equity investment in Polar Semiconductor, LLC.

Previous wording

Income tax benefit and the effective income tax rate were approximately $7.9 million and (1,592.7)%, respectively, in the three-month period ended December 26, 2025, compared to income tax benefit and effective income tax rate of approximately $0.8 million and 10.6%, respectively, in the three-month period ended December 27, 2024. The change in the effective tax rate for the three-month period ended December 26, 2025, compared to the three-month period ended December 27, 2024 primarily resulted from a decrease in GAAP loss before taxes and the One Big Beautiful Bill Act (“OBBB”) impacts described in Note 13, “Income Taxes” to the unaudited condensed consolidated financial statements included in this Quarterly Report.

Current wording

Income tax provision and the effective income tax rate were approximately $1.5 million and 8.6%, respectively, in the three-month period ended June 26, 2026, compared to income tax provision and effective income tax rate of approximately $3.2 million and (31.7)%, respectively, in the three-month period ended June 27, 2025. The change in the effective tax rates for the three-month periods primarily resulted from the significant increase in GAAP income before taxes, partially offset by an FDDEI deduction, stock-based compensation windfalls, and R&D credit benefits.

Previous wording

As of December 26, 2025, we had $155.2 million of cash and cash equivalents and $374.3 million of working capital, compared to $121.3 million of cash and cash equivalents and $370.8 million of working capital as of March 28, 2025. Working capital is impacted by the timing and extent of our business needs.

Current wording

As of June 26, 2026, we had $162.0 million of cash and cash equivalents and $370.8 million of working capital, compared to $168.8 million of cash and cash equivalents and $357.7 million of working capital as of March 27, 2026. Working capital is impacted by the timing and extent of our business needs.

Previous wording

Our primary requirements for liquidity and capital resources besides our growth initiatives are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal year 2026 is to utilize cash on hand and capacity under our revolving credit facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions. As of December 26, 2025, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The cash requirements for the current fiscal year relate to our operating leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans. Additionally, we expect to continue to strategically invest in expanding our operations in China, Japan, India and Philippines in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses. For information regarding the Company’s expected cash requirements and timing of payments related to leases, noncancellable purchase commitments and pension and defined contribution plans, see Note 12, “Leases,” Note 15, “Retirement Plans,” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements in the Company’s 2025 Annual Report.

Current wording

Our primary requirements for liquidity and capital resources besides our growth initiatives are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for fiscal year 2027 is to utilize cash on hand and capacity under our revolving credit facility to support our continued growth initiatives into select markets and planned capital expenditures, as well as consider potential acquisitions. As of June 26, 2026, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. The cash requirements for the current fiscal year relate to our operating leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans. Additionally, we expect to continue to strategically invest in expanding our operations in China, Europe, Japan and India in order to directly manage and service our customers in these markets, which could result in increases in our total net sales, cost of goods sold and operating expenses. For information regarding the Company’s expected cash requirements and timing of payments related to leases, noncancellable purchase commitments and pension and defined contribution plans, see Note 12, “Leases,” Note 15, “Retirement Plans,” and Note 16, “Commitments and Contingencies” to the audited consolidated financial statements in the Company’s 2026 Annual Report.

Previous wording

The following table summarizes our cash flows for the nine-month periods ended December 26, 2025 and December 27, 2024:

Current wording

The following table summarizes our cash flows for the three-month periods ended June 26, 2026 and June 27, 2025:

Previous wording

Net cash provided by operating activities was $41.6 million in the nine-month period ended December 27, 2024, resulting primarily from a net loss of $58.0 million and noncash charges of $120.0 million, further adjusted by a net decrease in cash from an increase in net operating assets and liabilities of $20.4 million. Noncash charges primarily included increases of $48.6 million for depreciation and amortization, $34.8 million for loss on change in fair value of forward repurchase contract, $32.3 million of stock-based compensation, $7.5 million for provisions for inventory and expected credit losses and $6.6 million of other non-cash reconciling items, partially offset by $11.5 million of deferred income taxes. The net increase in operating assets and liabilities consisted of a $38.1 million increase in inventories, a $21.3 million decrease in other changes in operating assets and liabilities, net, partially offset by $34.4 million decrease in trade accounts receivable, net, a $5.5 million increase in trade accounts payable and a $0.6 million increase in net amounts due to related party. The decrease in trade accounts receivable, net, was primarily a result of decreased sales year-over-year. Trade accounts payable increased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $1.7 million. The increase in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in inventories was primarily the result of inventory builds of standard products to support anticipated sales growth. The increase in prepaid expenses and other assets was mostly due to higher long-term deposits and the timing of tax payments. The decrease in other changes in operating assets and liabilities, net was primarily the result of a reduction in accrued personnel costs due to the timing of payments pursuant to our annual incentive compensation plan.

Current wording

Net cash provided by operating activities was $22.0 million in the three-month period ended June 26, 2026, resulting primarily from a net income of $15.9 million and noncash charges of $31.1 million, further adjusted by a net decrease in cash from an increase in net operating assets and liabilities of $25.1 million. Noncash charges primarily included increases of $16.9 million for depreciation and amortization, $14.1 million of stock-based compensation, and $1.6 million for provisions for inventory and expected credit losses, partially offset by $1.7 million of deferred income taxes. The net increase in operating assets and liabilities consisted of a $25.9 million decrease in other changes in operating assets and liabilities, net, a $15.0 million increase in payment to related party, a $7.9 million increase in inventories, a $5.4 million increase in trade accounts receivable, net, and a $0.2 million decrease in net amounts due to related party, partially offset by a $13.8 million increase in trade accounts payable, and a $15.5 million decrease in prepaid expenses and other assets. The decrease in other changes in operating assets and liabilities, net was primarily the result of a reduction in accrued personnel costs due to the timing of the payments pursuant to our annual incentive compensation plan. The increase in payment to related party was primarily the result of advance payment on products. The increase in inventories was primarily the result of the increase in supplies to support future sales. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year and timing of collections. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. Trade accounts payable increased, primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $1.6 million. The decrease in prepaid expenses and other assets was primarily due to the receipt of a tax refund and the additional planning related to the OBBB.

Previous wording

Net cash provided by operating activities was $127.4 million in the nine-month period ended December 26, 2025, resulting primarily from a net income of $1.8 million and noncash charges of $88.9 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $36.7 million. Noncash charges primarily included increases of $49.8 million for depreciation and amortization, $37.3 million of stock-based compensation, and $7.6 million for provisions for inventory and expected credit losses, partially offset by $8.0 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $23.9 million increase in other changes in operating assets and liabilities, net, a $17.7 million decrease in prepaid expenses and other assets, and a $13.7 million increase in trade accounts payable, partially offset by a $15.6 million increase in trade accounts receivable, net, a $1.8 million decrease in net amounts due to related party and a $1.3 million increase in inventories. The increase in trade accounts receivable, net was primarily a result of increased sales year-over-year and timing of collections. Trade accounts payable increased, primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $2.4 million. The decrease in prepaid expenses and other assets was primarily due to the receipt of a tax refund and the additional planning related to the OBBB. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in other changes in operating assets and liabilities, net was primarily the result of higher accrued income taxes and accrued personnel costs. The increase in inventories was primarily the result of the increase in production to support the increase in net sales.

Current wording

Net cash provided by operating activities was $61.6 million in the three-month period ended June 27, 2025, resulting primarily from a net loss of $13.2 million and noncash charges of $26.2 million, further adjusted by a net increase in cash from a decrease in net operating assets and liabilities of $48.5 million. Noncash charges primarily included increases of $16.2 million for depreciation and amortization, $10.8 million of stock-based compensation, and $3.5 million for provisions for inventory and expected credit losses, partially offset by $5.1 million of deferred income taxes. The net decrease in operating assets and liabilities consisted of a $36.0 million decrease in prepaid expenses and other assets, a $7.2 million decrease in inventories, an $8.0 million increase in other changes in operating assets and liabilities, net and a $6.3 million increase in trade accounts payable, partially offset by a $5.3 million increase in trade accounts receivable, net and a $3.6 million decrease in net amounts due to related party. The increase in trade accounts receivable, net, was primarily a result of increased sales year-over-year. Trade accounts payable increased primarily due to the timing of payments to suppliers and vendors, including unpaid capital expenditures of $2.8 million. The decrease in prepaid expenses and other assets was mostly due to the timing of tax payments. The decrease in inventories was primarily the result of the increase in net sales. The decrease in net amounts due to related party was primarily due to variations in the timing of such payments in the ordinary course of business. The increase in other changes in operating assets and liabilities, net was primarily the result of higher accrued income taxes and accrued personnel costs.

Previous wording

Net cash used in investing activities was $21.2 million in the nine-month period ended December 26, 2025, consisting of purchases of property, plant and equipment.

Current wording

Net cash used in investing activities was $8.0 million in the three-month period ended June 26, 2026, consisting of purchases of property, plant and equipment.

Previous wording

Net cash used in investing activities was $34.2 million in the nine-month period ended December 27, 2024, primarily consisting of purchases of property, plant and equipment.

Current wording

Net cash used in investing activities was $10.6 million in the three-month period ended June 27, 2025, consisting of purchases of property, plant and equipment.

Previous wording

Net cash used in financing activities was $75.0 million in the nine-month period ended December 26, 2025, primarily consisting of $60.0 million of payments on our term loan, $10.4 million of taxes related to the net settlement of equity awards and $4.0 million of payments for intangible assets.

Current wording

Net cash used in financing activities was $44.2 million in the three-month period ended June 27, 2025, primarily consisting of $35.0 million of payments on our term loans and $9.0 million of payments for taxes related to the net settlement of equity awards.