APPLIED OPTOELECTRONICS, INC.

Previous wording

The four end markets we target are all driven by significant bandwidth demand fueled by the growth of network-connected devices, video traffic, cloud computing and online social networking. Within the internet data center market, we benefit from the increasing use of higher-capacity optical networking technology as a replacement for older, lower-speed optical interconnects, particularly as speeds reach 800 Gbps and above, as well as the movement to open internet data center architectures and the increasing use of in-house equipment design among leading internet companies. Within the CATV market, we benefit from a number of ongoing trends including the move to higher bandwidth networks among CATV service providers, especially the desire by MSOs to increase the return-path bandwidth available to offer to their customers. In the FTTH market, we benefit from continuing PON deployments and system upgrades among telecom service providers. In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks.

Current wording

The four end markets we target are all driven by significant bandwidth demand fueled by the growth of network-connected devices, video traffic, cloud computing and online social networking. Within the internet data center market, we benefit from the increasing use of higher-capacity optical networking technology as a replacement for older, lower-speed optical interconnects, particularly as speeds reach 800Gbps and above, as well as the movement to open internet data center architectures and the increasing use of in-house equipment design among leading internet companies. Within the CATV market, we benefit from a number of ongoing trends including the move to higher bandwidth networks among CATV service providers, especially the desire by MSOs to increase the return-path bandwidth available to offer to their customers. In the FTTH market, we benefit from continuing PON deployments and system upgrades among telecom service providers. In the telecom market, we benefit from deployment of new high-speed fiber-optic networks by telecom network operators, including 5G networks.

Previous wording

In 2024, 2023 and 2022, our revenue was $249.4 million, $217.6 million and $222.8 million, and our gross margin was 24.8%, 27.1% and 15.1%, respectively. We have grown our annual revenue at a compound annual growth rate, or CAGR, of 6.7% between 2014 and 2024. In the years ended December 31, 2024, 2023 and 2022, we had net loss of $186.7 million, $56.0 million and$66.4 million, respectively. At December 31, 2024 and 2023, our accumulated deficit was $451.9 million and $265.1 million, respectively. In 2024, we earned 59.5% of our total revenue from the internet data center market and 35.2% of our total revenue from the CATV market.

Current wording

In 2025, 2024 and 2023, our revenue was $455.7 million, $249.4 million and $217.6 million, and our gross margin was 30.1%, 24.8% and 27.1%, respectively. We have grown our annual revenue at a compound annual growth rate, or CAGR, of 5.7% between 2016 and 2025. In the years ended December 31, 2025, 2024 and 2023, we had net loss of $38.2 million, $186.7 million and $56.0 million, respectively. At December 31, 2025 and 2024, our accumulated deficit was $491.0 million and $451.9 million, respectively. In 2025, we earned 53.8% of our total revenue from the CATV market and 42.9% of our total revenue from the internet data center market.

Previous wording

We sell our products to leading OEMs in the CATV, telecom, and FTTH markets as well as internet data center operators and CATV MSOs. In 2024, revenue from the internet data center market, CATV market, telecom market, FTTH and other markets provided 59.5%, 35.2%, 4.4% and 0.9% of our revenue, respectively, compared to 64.9%, 27.5%, 6.4% and 1.2% of our 2023 revenue, respectively. In 2024, our key customers in the internet data center market included Microsoft, Oracle and a U.S. based datacenter equipment manufacturer. In 2024,2023, and 2022, Microsoft accounted for 43.7%, 46.6%, and 18.4% of our revenue and a Oracle accounted for 12.4%, 8.8% and 5.9% of our revenue, respectively. In 2024, our key customer in the CATV market was Digicomm, a provider of logistics solutions and a distributor of equipment to CATV MSOs. In 2024,2023, and 2022, Digicomm accounted for 34.1%, 11.3% and 0% of our revenue.

Current wording

We sell our products to leading OEMs in the CATV, telecom, and FTTH markets as well as internet data center operators and CATV MSOs. In 2025, revenue from CATV market, the internet data center market, telecom market, FTTH and other markets provided 53.8%, 42.9%, 3.0% and 0.3% of our revenue, respectively, compared to 35.2%, 59.5%, 4.4% and 0.9%, respectively, in 2024. In 2025, our key customer in the CATV market was Digicomm. In 2025,2024, and 2023, Digicomm accounted for 53.1%, 34.1% and 11.3% of our revenue, respectively, and in 2023, ATX Networks accounted for 15.6% of our revenue. In 2025, our key customer in the internet data center market was Microsoft. In 2025, 2024 and 2023, Microsoft accounted for 28.8%, 46.6% and 18.4% of our revenue, respectively, and in 2024, Oracle accounted for 12.4% of our revenue.

Previous wording

In 2024, our increase of revenue of 14.6% over the prior-year was driven primarily by increased demand for our internet data center products, which we believe is arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, and the demand recovery in the CATV market, offset by the lack of revenue from Non-Recurring Engineering ("NRE") projects. Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2025. We also believe that sales in our CATV market will increase in 2025.

Current wording

In 2025, our increase of revenue of 82.8% over the prior-year was driven primarily by increased demands both for our CATV products and internet data center products, which we believe is arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI. Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2026. We also believe that sales in our CATV market will increase in 2026.

Previous wording

We expect continued sales of our 40 Gbps and 100 Gbps products in 2025, and we expect that sales of 400 Gbps products will likely exceed sales of 100 Gbps products later in 2025. However, quarter-to-quarter results may show considerable variability as is usual in a period of technology transition. Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, global supply chain situation, raw material cost reduction or increase, manufacturing utilization rate and changes in manufacturing efficiency. We currently expect to see material revenue from 800G products in 2025.

Current wording

We expect continued sales of our 40 Gbps, 100 Gbps, and 400 Gbps products in 2026, and we expect that sales of 800 Gbps products will likely exceed sales of 400 Gbps products later in 2026. However, quarter-to-quarter results may show considerable variability as is usual in a period of technology transition. Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, global supply chain situation, raw material cost reduction or increase, manufacturing utilization rate and changes in manufacturing efficiency.

Previous wording

In 2024, 2023 and 2022, we had 8, 6, and 12 design wins, respectively. We define a design win as the successful completion of the evaluation stage, where our customer has tested our product, verified that our product meets substantially all of their requirements and has informed us that they intend to purchase the product from us. Although we believe that our ability to obtain design wins is a key strength and can provide meaningful and recurring revenue, an increase or decrease in the mere number of design wins does not necessarily correlate to a likely increase or decrease in revenue, particularly in the short term. As such, the number of design wins we achieve on a quarterly or annual basis and any increase or decrease in design wins will not necessarily result in a corresponding increase or decrease in revenue in the same or immediately succeeding quarter or year. For example, if our total number of design wins in an annual or quarterly period increases or decreases compared to the total number of design wins in a prior period, this does not necessarily mean that our revenue in such period will be higher or lower than our revenue in the prior period. In fact, our experience is that some design wins result in significant revenue and some do not, and the timing of such revenue is difficult to predict as it depends on the success of the end customer’s product that uses our components. Thus, some design wins result in orders and significant revenue shortly after the design win is awarded and other design wins do not result in significant orders and revenue for several months or longer after the initial design win (if at all). We do believe that over a period of years the collective impact of design wins correlates to our overall revenue growth.

Current wording

In 2025, 2024 and 2023, we had 9, 8 and 6 design wins, respectively. We define a design win as the successful completion of the evaluation stage, where our customer has tested our product, verified that our product meets substantially all of their requirements and has informed us that they intend to purchase the product from us. Although we believe that our ability to obtain design wins is a key strength and can provide meaningful and recurring revenue, an increase or decrease in the mere number of design wins does not necessarily correlate to a likely increase or decrease in revenue, particularly in the short term. As such, the number of design wins we achieve on a quarterly or annual basis and any increase or decrease in design wins will not necessarily result in a corresponding increase or decrease in revenue in the same or immediately succeeding quarter or year. For example, if our total number of design wins in an annual or quarterly period increases or decreases compared to the total number of design wins in a prior period, this does not necessarily mean that our revenue in such period will be higher or lower than our revenue in the prior period. In fact, our experience is that some design wins result in significant revenue and some do not, and the timing of such revenue is difficult to predict as it depends on the success of the end customer’s product that uses our components. Thus, some design wins result in orders and significant revenue shortly after the design win is awarded and other design wins do not result in significant orders and revenue for several months or longer after the initial design win (if at all). We do believe that over a period of years the collective impact of design wins correlates to our overall revenue growth.

Previous wording

Our product pricing is established when the product is initially introduced to the market, and thereafter through periodic negotiations with customers. We generally do not agree to periodic automatic price reductions. Furthermore, due to the dynamics in the CATV market and the value of our outsourced design services to our customers, we believe we face less downward price pressure than many of our competitors in this market. We sell a wide variety of products among our four target markets and our gross margin is heavily dependent in any quarter on the product mix achieved during that period as well as any price changes that we have agreed upon with our customers.

Current wording

Our product pricing is established when the product is initially introduced to the market, and thereafter through periodic negotiations with customers. Furthermore, due to the dynamics in the CATV market and the value of our outsourced design services to our customers, we believe we face less downward price pressure than many of our competitors in this market. We sell a wide variety of products among our four target markets and our gross margin is heavily dependent in any quarter on the product mix achieved during that period as well as any price changes that we have agreed upon with our customers.

Previous wording

Customer Concentration within End Markets. Our revenue tends to be split primarily between CATV market and data center market. Moreover, within these markets, revenue tends to be concentrated among a small number of customers. We have taken several actions to increase the diversity of our customer base. These actions include hiring additional sales staff to improve our ability to serve new customers and introduction of new products that we believe will appeal to new customers. Furthermore, we have developed additional original design manufacturer, or ODM, relationships with customers in each of our target markets which should enable us to diversify our revenue base. We had three customers that accounted for more than 10% of our revenue in 2024 and 2023, respectively.

Current wording

Customer Concentration within End Markets. Our revenue tends to be split primarily between CATV market and data center market. Moreover, within these markets, revenue tends to be concentrated among a small number of customers. We have taken several actions to increase the diversity of our customer base. These actions include hiring additional sales staff to improve our ability to serve new customers and introduction of new products that we believe will appeal to new customers. Furthermore, we have developed additional original design manufacturer, or ODM, relationships with customers in each of our target markets which should enable us to diversify our revenue base. We had two customers that accounted for more than 10% of our revenue in 2025 and three customers that accounted for more than 10% of our revenue in 2024. Given the size of our data center customers, however, we continue to expect high concentration of our revenue with the largest of these customers.

Previous wording

In 2024, 2023 and 2022, our top ten customers represented 95.0%, 92.7% and 87.2% of our revenue, respectively.

Current wording

In 2025, 2024 and 2023, our top ten customers represented 96.6%, 95.0% and 92.7% of our revenue, respectively.

Previous wording

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. A majority of our annual sales are denominated in U.S. dollars, but some sales from our Taiwan location and China-based subsidiary are denominated in NT dollars and RMB, respectively. For the year ended December 31, 2024, 44.8% of our total revenue was manufactured at our China-based subsidiary, with $0.8 million denominated in RMB and 50.8% of our total revenue was from products manufactured at our Taiwan-based facility, with no revenue denominated in NT dollars. We expect a similar portion of our sales to be denominated in foreign currencies in 2025.

Current wording

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. A majority of our annual sales are denominated in U.S. dollars, but some sales from our Taiwan location and China-based subsidiary are denominated in NT dollars and RMB, respectively. For the year ended December 31, 2025, 57.5% of our total revenue was manufactured at our China-based subsidiary, with $3.4 million denominated in RMB and 38.2% of our total revenue was from products manufactured at our Taiwan-based facility, with no revenue denominated in NT dollars. We expect a similar (negligible) portion of our sales to be denominated in foreign currencies in 2026. In 2026, we expect to expand our manufacturing operations in the U.S. and Taiwan, with these two locations contributing more meaningfully to total revenue than in prior years.

Previous wording

We manufacture products in three of our four facilities located in the U.S., Taiwan and China. Generally, laser chips and optical components are manufactured in our Sugar Land facility, and optical components, subassemblies and optical equipment are manufactured in our Taiwan and China facility. Because of our vertical integration model, we generally utilize our own optical component products in our semi-finished and finished goods that we sell between and among our respective manufacturing operations. We base those internal sales upon established transfer pricing methodologies. However, we eliminate all of those internal sales, and cost of goods sold transactions, to arrive at total revenue and cost of goods sold on a consolidated basis.

Current wording

We manufacture products in our facilities located in the U.S., Taiwan and China. Generally, laser chips and optical components are manufactured in our Sugar Land facility, and optical components, subassemblies and optical equipment are manufactured in our Taiwan and China facility. Because of our vertical integration model, we generally utilize our own optical component products in our semi-finished and finished goods that we sell between and among our respective manufacturing operations. We base those internal sales upon established transfer pricing methodologies. However, we eliminate all of those internal sales, and cost of goods sold transactions, to arrive at total revenue and cost of goods sold on a consolidated basis.

Previous wording

Gross profit as a percentage of total revenue, or gross margin, has been and is expected to continue to be affected by a variety of factors, including the introduction of new products, production volumes, the mix of products sold, the geographic region in which products are sold, changes in the cost and volumes of materials purchased from our suppliers, changes in labor costs, changes in overhead costs, reserves for excess and obsolete inventories and changes in the average selling prices of our products. Although our overall gross margins over the past three years have been between 15.1% and 27.1%, our gross margins vary more broadly on a product-by-product basis. Our newer and more advanced products typically have higher average selling prices and higher gross margins; however, until the product volumes scale, the gross margin from newer and advanced products may initially be lower. Within our markets, we may sell similar products to different geographic regions at different prices, and therefore realize different gross margins among those similar products. Our strategy is to improve our gross margins through vertical integration such as utilization of our own laser chips and optical sub-components in our solutions. We expect that our gross margins are likely to continue to fluctuate from quarter to quarter because of the variety of products we sell and the relative product mix within a quarter.

Current wording

Gross profit as a percentage of total revenue, or gross margin, has been and is expected to continue to be affected by a variety of factors, including the introduction of new products, production volumes, the mix of products sold, the geographic region in which products are sold, changes in the cost and volumes of materials purchased from our suppliers, changes in labor costs, changes in overhead costs, reserves for excess and obsolete inventories and changes in the average selling prices of our products. Although our overall gross margins over the past three years have been between 24.8% and 30.0%, our gross margins vary more broadly on a product-by-product basis. Our newer and more advanced products typically have higher average selling prices and higher gross margins; however, until the product volumes scale, the gross margin from newer and advanced products may initially be lower. Within our markets, we may sell similar products to different geographic regions at different prices, and therefore realize different gross margins among those similar products. Our strategy is to improve our gross margins through vertical integration such as utilization of our own laser chips and optical sub-components in our solutions. We expect that our gross margins are likely to continue to fluctuate from quarter to quarter because of the variety of products we sell and the relative product mix within a quarter.

Previous wording

We are a U.S. registered company and are subject to income taxes in the U.S. We also operate in a number of countries throughout the world, including Taiwan and China. Consequently, our effective tax rate is impacted by the geographic distribution of our earnings or losses and the tax laws and regulations in each geographical region. We expect that our income taxes will vary in relation to our profitability and the geographic distribution of our profits. In 2024, 2023 and 2022 our effective tax rate was 0%.

Current wording

We are a U.S. registered company and are subject to income taxes in the U.S. We also operate in a number of countries throughout the world, including Taiwan and China. Consequently, our effective tax rate is impacted by the geographic distribution of our earnings or losses and the tax laws and regulations in each geographical region. We expect that our income taxes will vary in relation to our profitability and the geographic distribution of our profits. In 2025, 2024 and 2023 our effective tax rate was 17.97%.

Previous wording

We are uncertain whether the demand for our internet data center, CATV, telecom and FTTH products is seasonal, as our sales data does not indicate a significant trend with respect to these products. We began to manufacture a meaningful quantity of CATV and internet data center products in our Ningbo, China factory in 2017 and 2020, respectively. This factory experiences a lengthy shut-down associated with the Lunar New Year holiday which occurs in Q1 of each year. In addition to the factory shut-down, it is also common for employees in the factory to fail to return to work following resumption of operations. In the years 2024,2023, and 2022, the percentage of employees in our China factory who resigned or were terminated during Q1, relative to the average number of employees during the quarter was 17.2%, 53.8% and 66.1%, respectively. We believe that the turnover in 2022 was higher than usual due to the COVID-19 pandemic which caused travel restrictions, additional health check requirements, and a lengthy shutdown of operations in Ningbo. As a result of employee turnover, we must hire and train replacement employees. These replacement employees require a period of training and improvement, and this impacts the quantity of products we can produce in the quarter. The combined effect of the factory shut-down and employee turnover in the quarter may also contribute to negative seasonality in Q1. In 2024, we began to produce more of our CATV and internet data center products outside of China which we believe will be instrumental in further alleviating some of the typical seasonality that we see in Q1.

Current wording

We are uncertain whether the demand for our internet data center, CATV, telecom and FTTH products is seasonal, as our sales data does not indicate a significant trend with respect to these products. Our Ningbo, China factory experiences a lengthy shut-down associated with the Lunar New Year holiday which occurs in the first quarter of each year. In addition to the factory shut-down, it is also common for employees in the factory to fail to return to work following resumption of operations. In the years 2025,2024, and 2023, the percentage of employees in our China factory who resigned or were terminated during the first quarter, relative to the average number of employees during the quarter was 7.9%, 17.2% and 53.8% , respectively. As a result of employee turnover, we must hire and train replacement employees. These replacement employees require a period of training and improvement, and this impacts the quantity of products we can produce in the quarter. The combined effect of the factory shut-down and employee turnover in the quarter may also contribute to negative seasonality in the first quarter. In 2025, we began to produce more of our CATV and internet data center products outside of China which we believe will be instrumental in alleviating some of the typical seasonality that we see in the first quarter.

Previous wording

Revenue increased by $31.7 million or 14.6% from 2023 to 2024. The increase was driven primarily by increased demand in the CATV market, which we believe is due to market acceptance on our newly release DOCSIS 4.0 products in 2024, and increased demand for our internet data center products, arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, offset by the lack of NRE project revenue in 2024. Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2025. We also believe that sales in our CATV market will increase in 2025 as a result of further adoption of our DOCSIS 4.0 products.

Current wording

Revenue increased by $206.4 million, or 82.8%, from 2024 to 2025. The increase was driven primarily by increased demand in the CATV market, which we believe is due to large scale deployments of our DOCSIS 4.0 products in 2025, and increased demand for our internet data center products, arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI. Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2026. We also believe that sales in our CATV market will increase in 2026 as a result of further adoption of our DOCSIS 4.0 products, including adoption by new customers.

Previous wording

In the years ended December 31, 2024 and 2023, our top ten customers represented 95.0% and 92.7% of our revenue, respectively. We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers.

Current wording

In the years ended December 31, 2025 and 2024, our top ten customers represented 96.6% and 95.0% of our revenue, respectively. We believe that diversifying our customer base is critical for our future success, since reliance on a small number of key customers makes our ability to forecast future results dependent upon the accuracy of the forecasts we receive from those key customers.

Previous wording

Research and development expense increased $19.0 million, or 52.8% from 2023 to 2024. Research and development costs consist of R&D work orders, R&D material usage and other project related costs related to 100 Gbps, 200/400/800/1600 Gbps data center products, DOCSIS 4.0 capable CATV products, including 1.8 GHz-capable amplifier products, and other new product development, and depreciation expense resulting from R&D equipment investments. The expenses increased due to a higher volume of internal work orders and headcount increase. During 2024, we experienced increased interest in new technologies like 800G and 1.6T among our data center customers. Supporting customer testing and qualification for these new opportunities materially increased our R&D expenditures, and to the extent that we continue to see elevated customer interest in these new technologies we also expect continued elevated R&D expenditures relative to historical averages. We continue to place a high degree of strategic focus on innovation and product development to support future growth.

Current wording

Research and development expense increased $30.6 million, or 55.6%, from 2024 to 2025. Research and development costs consist of R&D work orders, R&D material usage and other project related costs related to 100 Gbps, 200/400/800/1,600 Gbps data center products, DOCSIS 4.0 capable CATV products, including 1.8 GHz-capable amplifier products, and other new product development, and depreciation expense resulting from R&D equipment investments. The expenses increased due to a higher volume of internal work orders and headcount increase. During 2025, we experienced increased interest in new technologies like 800G and 1.6T among our data center customers. Supporting customer testing and qualification for these new opportunities materially increased our R&D expenditures, and to the extent that we continue to see elevated customer interest in these new technologies we also expect continued elevated R&D expenditures relative to historical averages. We continue to place a high degree of strategic focus on innovation and product development to support future growth.

Previous wording

Sales and marketing expense increased by $7.1 million, or 64.0%, from 2023 to 2024. These increases were primarily due to more sales effort for our Quantum Bandwidth™ products and higher shipping expenses.

Current wording

Sales and marketing expense increased by $12.1 million, or 66.7%, from 2024 to 2025. These increases were primarily due to more sales effort for our Quantum Bandwidth™ products and higher shipping expenses, including tariffs.

Previous wording

General and administrative expense increased by $6.4 million, or 12.0%, from 2023 to 2024. These increases were primarily due to the higher professional service fees and share-based compensation expense.

Current wording

General and administrative expense increased by $16.1 million, or 27.1%, from 2024 to 2025. These increases were primarily due to the higher professional service fees and increased headcount and offset by decreased share-based compensation.

Previous wording

Interest income increased by $0.3 million, or 43.5% from 2023 to 2024. The increase was primarily due to higher savings balance in 2024.

Current wording

Interest income increased by $0.9 million, or 105.0%, from 2024 to 2025. The increase was primarily due to higher savings balance in 2025.

Previous wording

Other expense increased by $104.0 million, or 1,771.4% from 2023 to 2024. This increase was primarily due to the debt extinguishment cost relating to the 2026 Notes, reflecting the difference between the book value of the 2026 Notes and its fair value at the time of settlement. This resulted in a one-time loss recognized in the period, contributing to the overall rise in non-operating expenses.

Current wording

Other expense of $109.9 million in 2024 shifted to other income of $9.6 million in 2025. This favorable variance was primarily due to the absence of debt extinguishment costs related to the 2026 Notes, which in the prior period reflected the difference between the carrying value of the 2026 Notes and their fair value at the time of settlement. The settlement resulted in a one-time loss recognized in the prior period, which increased non-operating expenses. In 2025, the company recorded $1.9 million foreign currency exchange gains and $4.9 million of government subsidies in other income.

Previous wording

Our income tax provision consists of U.S. income tax, state taxes, and Taiwan and China income tax recorded during the periods. Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions and the relative amounts of income we earn in those jurisdictions.

Current wording

Our income tax benefit (expense) consists of U.S. income tax, state taxes, and Taiwan and China income tax recorded during the periods. Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions, the relative amounts of income we earn in those jurisdictions, and valuation allowances on our deferred taxes.

Previous wording

As of December 31, 2024, we had $24.8 million of unused borrowing capacity from all of our loan agreements. As of December 31, 2024, our cash, cash equivalents, restricted cash and short-term investments totaled $79.1 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds.

Current wording

As of December 31, 2025, we had $60.7 million of unused borrowing capacity from all of our loan agreements. As of December 31, 2025, our cash, cash equivalents, restricted cash and short-term investments totaled $216.0 million. Cash and cash equivalents are held for working capital purposes and are invested primarily in money market or time deposit funds.

Previous wording

On December 18, 2024, the Company filed an automatic shelf registration statement on Form S-3ASR (Registration File No. 333-283905) (the "Automatic Shelf Registration Statement") with the U.S. Securities and Exchange Commission, which became effective immediately upon filing.

Current wording

On December 18, 2024, the Company filed an automatic shelf registration statement on Form S-3ASR (Registration File No. 333-283905) with the Securities and Exchange Commission, which became effective immediately upon filing.

Previous wording

On March 13, 2024, we entered into an Equity Distribution Agreement (the "First ATM Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $25 million (the "First ATM Offering"), from time to time through the Sales Agent. On August 6, 2024, we entered into Amendment No. 1 to the First ATM Agreement with the Sales Agent, to increase the aggregate offering price from $25 million to $60 million. On November 6, 2024, we provided notice of its termination, effective on such date, of the First ATM Agreement, as amended. We sold approximately 5.7 million shares at a weighted average price of $10.55 per share, providing proceeds of $58.7 million, net of expenses and underwriting discounts and commissions, under the First ATM Offering.

Current wording

On February 28, 2025, the Company entered into an Equity Distribution Agreement with Raymond James & Associates ("Raymond James") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $100 million (the "First ATM Offering"), from time to time through Raymond James. On April 8, 2025, the Company completed the First ATM Offering and sold approximately 2.1 million shares at a weighted average price of $12.69 per share, providing proceeds of approximately $26 million, net of expenses and underwriting discounts and commissions.

Previous wording

On November 7, 2024, we entered into another Equity Distribution Agreement (the "Second ATM Agreement") with the Sales Agent pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $55 million (the "Second ATM Offering"), from time to time through the Sales Agent. Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any one day. Subject to the terms and conditions of the Agreement, the Sales Agent would use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.

Current wording

On November 7, 2025, the Company entered into another Equity Distribution Agreement (the "Agreement") with the Sales Agents pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $180 million (the "Fourth ATM Offering"), from time to time through the Sales Agents. Upon delivery of a placement notice and subject to the terms and conditions of this Agreement, sales of the Shares were made through the Sales Agents in transactions that are deemed to be "at the market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company's common stock, on any other existing trading market for the Company's common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agents. In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in one day. Subject to the terms and conditions of the Agreement, the Sales Agents would use its commercially reasonable efforts to sell Shares on the Company's behalf up to the designated amount specified in the placement notice.

Previous wording

The Second ATM Agreement provided that the Sales Agent would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through the Sales Agent from time to time. The Company also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred. The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent could be required to make because of any of those liabilities.

Current wording

The Agreement provided that each of the Sales Agents would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through such Sales Agent from time to time. The Company also agreed to reimburse the Sales Agents for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred. The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities.

Previous wording

On November 22, 2024, the Company completed the Second ATM Offering and sold approximately 1.8 million shares at a weighted average price of $31.17 per share, providing proceeds of $53.9 million, net of expenses and underwriting discounts and commissions.

Current wording

By December 23, 2025, the Company completed the Fourth ATM Offering and sold approximately 6.7 million shares at a weighted average price of $26.87 per share, providing proceeds of $176 million, net of expenses and underwriting discounts and commissions.

Previous wording

The details of the shares of common stock sold through the First ATM Offering and the Second ATM Offering through December 31, 2024 are as follows (in thousands, except shares and weighted average per share price):

Current wording

The details of the shares of common stock sold through the First ATM Offering, the Second ATM Offering, the Third ATM Offering and the Fourth ATM Offering through December 31, 2025 are as follows (in thousands, except shares and weighted average per share price):

Previous wording

On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the “2026 Notes”), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2024 Notes to exchange or repurchase approximately $80.2 million principal amount of the 2024 Notes for aggregate consideration consisting of approximately $81.1 million in cash, which included accrued interest on the 2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $0.001 per share. Also refer to Note L “Convertible Senior Notes” to the consolidated financial statements for further discussion of the 2026 Notes.

Current wording

On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the "2026 Notes"), bearing interest at a rate of 5.250% per year maturing on December 5, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. The sale of the 2026 Notes generated net proceeds of $76.2 million, after expenses. On July 30, 2025, the Company retired the final $3.5 million principal and accrued and unpaid interest on the 2026 Notes by exchanging such outstanding principal for 239,404 shares of the Company's common stock and by paying the accrued and outstanding interest in cash. Also refer to Note L “Convertible Senior Notes” to the consolidated financial statements for further discussion of the 2026 Notes.

Previous wording

In 2022, our financing activities provided $10.8 million in cash. This increase in cash was due to $12.2 million of net proceeds from line of credit borrowing, $5.1 million of net proceeds from bank acceptance payable and $1.2 million of net proceeds from our ATM Offering. These activities were offset by $7.3 million debt repayment and $0.5 million related to tax withholding associated with employee share-based compensation.

Current wording

In 2025, our financing activities provided$527.9 million in cash. This increase in cash was primarily due to $518.9 million of net proceeds from our ATM offerings, and around $19.6 million from net proceeds from line of credit borrowing and bank acceptance payable.

Previous wording

In 2024, our financing activities provided $142.2 million in cash. This increase in cash was primarily due to $113 million of net proceeds from our First ATM Offering and Second ATM Offering, and around $30 million from the 2030 Notes.

Current wording

In 2024, our financing activities provided $142.2 million in cash. This increase in cash was primarily due to $113 million of net proceeds from our ATM offerings, and around $30 million from the 2030 Notes.

Previous wording

In 2023, our financing activities provided $40.6 million in cash. This increase in cash was primarily due to $69.0 million of net proceeds fromour ATM Offering, $76.1 million from the 2026 Notes, offset by the repayment of 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million.

Current wording

In 2023, our financing activities provided $40.6 million in cash. This increase in cash was primarily due to $69.0 million of net proceeds fromour ATM offering, $76.1 million from the 2026 Notes, offset by the repayment of the 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million.

Previous wording

On December 5, 2023, the Company issued $80.2 million of 5.250% convertible senior notes due 2026. The 2026 Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. As of December 31, 2024, the outstanding principal amount remaining on the 2026 Notes is $3.5 million.

Current wording

On December 5, 2023, the Company issued $80.2 million of 5.250% convertible senior notes due 2026. The 2026 Notes were to mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. On July 30, 2025, the Company retired the final $3.5 million principal and accrued and unpaid interest on the 2026 Notes by exchanging such outstanding principal for 239,404 shares of the Company's common stock and by paying the accrued and outstanding interest in cash.

Previous wording

On December 23, 2024, the Company issues $125.0 million of 2.75% convertible senior notes due 2030. The 2030 Notes will mature on January 15, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms.

Current wording

On December 23, 2024, the Company issued $125.0 million of 2.75% convertible senior notes due 2030. The 2030 Notes will mature on January 15, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms.

Previous wording

We have outstanding notes payable and debt with varying maturities with various financial institutions. As of December 31, 2024, our notes payable and debt had an amount of $26.7 million, $22.4 million of which is due within 12 months. Further information regarding our notes payable is provided in Note K – Notes Payable and Long-Term Debt in the Notes to Consolidated Financial Statements in this Form 10-K. We also have fixed-rate convertible senior notes. As of December 31, 2024, the 2026 Notes had a principal amount of $3.5 million and future interest payments associated with the 2026 Notes totaled $0.2 million. As of December 31, 2024, the 2030 Notes had an aggregate principal amount of $125 million and future interest payments associated with the 2030 Notes totaled $13.9 million. Further information regarding our convertible senior notes is provided in Note L – Convertible Senior Notes in the Notes to Consolidated Financial Statements in this Form 10-K. In addition, we have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of December 31, 2024, the future minimum payments required under these leases totaled $12.3 million, with $1.7 million payable within 12 months. Further information regarding our leases is provided in Note D – Leases to Consolidated Financial Statements in this Form 10-K.

Current wording

We have outstanding notes payable and debt with varying maturities with various financial institutions. As of December 31, 2025, our debt had an amount of $34.0 million, which is due within 12 months. Further information regarding our notes payable is provided in Note K – Notes Payable and Long-Term Debt in the Notes to Consolidated Financial Statements in this Form 10-K. We also have fixed-rate convertible senior notes. As of December 31, 2025, the 2030 Notes had an aggregate principal amount of $125 million and future interest payments associated with the 2030 Notes totaled $10.5 million. Further information regarding our convertible senior notes is provided in Note L – Convertible Senior Notes in the Notes to Consolidated Financial Statements in this Form 10-K. In addition, we have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of December 31, 2025, the future minimum payments required under these leases totaled $63.2 million, with $5.2 million payable within 12 months. Further information regarding our leases is provided in Note D – Leases to Consolidated Financial Statements in this Form 10-K.

Previous wording

The annual inflation rate in the US came down to 2.9% in 2024, compared with 3.4% in 2023. Even though the inflation has slowed from the peak, it remained above the Federal Reserve's objective of 2%. The annual inflation rate in Taiwan came down to 2.1% in 2024 from 2.7% in 2023. The cost of inflation was reflected in increases in shipping costs, labor rates, and in costs of some raw materials. We believe these decreases are related to the supply chain pressure easing and decreasing commodity prices, however the labor market is still tight, and the wage pressure is still high. We cannot be sure when or if prices will return to pre-pandemic levels. Compared to other major economies in the world, China has a stable level of inflation, which has not had a significant impact on our sales or operating results. However, there is no guarantee that we may increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our sales margins and profitability.

Current wording

The annual inflation rate in the US came down to 2.7% in 2025, compared with 2.9% in 2024. Even though the inflation has slowed from the peak, it remained above the Federal Reserve's objective of 2%. The annual inflation rate in Taiwan came down to around 1.7% in 2025 from 2.1% in 2024. The cost of inflation was reflected in increases in shipping costs, labor rates, and in costs of some raw materials. We believe these decreases are related to the supply chain pressure easing and decreasing commodity prices, however the labor market is still tight, and the wage pressure is still high. We cannot be sure when or if prices will return to pre-pandemic levels. Compared to other major economies in the world, China has a stable level of inflation, which has not had a significant impact on our sales or operating results. However, there is no guarantee that we may increase selling prices or reduce costs to fully mitigate the effect of inflation on our costs, which may adversely impact our sales margins and profitability.

Previous wording

During the years ended December 31, 2024, 2023 and 2022, we recorded excess and obsolete inventory reserve charges of $3.4 million, $8.7 million and $4.9 million, respectively. For the years ended December 31, 2024, 2023 and 2022, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $3.8 million, $10.6 million and $10.4 million, respectively.

Current wording

During the years ended December 31, 2025, 2024 and 2023, we recorded excess and obsolete inventory reserve charges of $9.7 million, $3.4 million and $8.7 million, respectively. For the years ended December 31, 2025, 2024 and 2023, the direct inventory write-offs related to scrap, discontinued products and damaged inventories were $9.4 million, $3.8 million and $10.6 million, respectively.

Previous wording

On the basis of this evaluation, as of December 31, 2024, a valuation allowance of$94.8 million has been recorded related to deferred tax assets to recognize only the portion of the deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

Current wording

On the basis of this evaluation, as of December 31, 2025, the company recognized $7.6 million deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.