CGNX 10-K & 10-Q changes, risk factors and insider trading

The market for our products is characterized by rapidly changing technology and increasingly capable competitors. Accordingly, we believe that our future success will depend on our ability to accelerate time-to-market for new products with improved functionality, ease-of-use, performance, and price. This includes continuing to introduce products embedded with artificial intelligence ("AI") technology that augments rule-based machine vision with image-based analysis. There can be no assurance that we will be able to introduce new products in accordance with scheduled release dates or that new products will achieve market acceptance. Our inability to keep pace with the rapid rate of technological change and customer demands in the high-technology marketplace could have a material adverse effect on our operating results. In addition, we may not achieve significant revenue from new product investments for several years, if at all. Moreover, new products, if introduced, may not generate the gross margins that we have experienced historically.

In recent years, advancementsAdvancements in AI, particularly the availability of sophisticated AI algorithms and open-source machine vision platforms,platforms havemay lowered thelower barriers to entryenter our market in ourthe market.future. TheseA toolsfurther enablefragmentation newof entrantsthe andmarket low-costcould providers, particularly in China, to produce vision systems that may perform comparably to our offerings. This commoditization trend intensifiesintensify pricing pressures and challengeschallenge our ability to differentiate our products solely on performance or features. Additionally, large technology companies and other competitors with substantial financial and technological resources may continue to develop and distribute free or low-cost solutions, further eroding market prices.solutions. If we fail to effectively respond to these trends through innovation, customer experience improvements, cost management, or other strategies, our competitive position could weaken. This could result in decreased market share, reduced pricing power,share and have a material adverse effect on our revenue, gross margins, and operating results.

Further, in recent years, we have seen some examples of industry consolidationcompanies in our markets.industry This trend may continue as companiescould attempt to strengthen or hold their market positions inthrough anconsolidation. evolving industry and as companies are acquired or are unable to continue operations. We believe thatSuch industry consolidation may result in stronger competition and may be accompanied by pressure from customers for lower prices. This could have a material adverse effect on our revenue, gross margins, and operating results.

If we fail to attract and retain key talent, effectively plan for and execute management succession, and maintain our unique corporate culture, our business and operating results could suffer.

To support our growth and execute our operating plans and strategic initiatives, we must effectively attract, train, develop, motivate, and retain skilled employees, while maintaining our unique corporate culture. Technical personnel with experience in machine vision, and more recently AI and transformer-based models,technology, are in high demand and competition for their talents is intense.demand. We rely on attracting and retaining talent with these skills to execute our product development plans. We use time-based and performance-based equity awards, including stock options and restricted stock units ("RSUs"), including performance restricted stock units ("PRSUs"), as a key component of compensation for our more senior employees to align employee interests with the interests of our shareholders, provide competitive compensation packages, and encourage employee retention. Our stock price volatility may cause periods of time during which option exercise prices might be less than the sale price of our common stock or the value of RSUs might be less competitive, which may lessen the retentive attributes of these awards. We are limited as to the number of stock options and RSUs that we may grant under our stock plans, and we are unsure how effective different stock-based awards with different vesting schedules will be to retain key talent. Accordingly, we may find it difficult to attract and retain employees, and any such difficulty could materially adversely affect our business.

OurWith the appointment of our new Chief Executive Officer in June 2025, we are transitioning to a different management style and strategic focus. Navigating this transition is important to the near- and long-term success of the business. More generally, our success significantly depends on the continued contributions of our executive officers and other key management personnel. The loss of any of these individuals or the failure to successfully navigate succession could materially adversely affect our business, operating results, and financial condition. Effective succession planning is crucial to ensure smooth transitions and maintain business continuity. Failure to attract and retain executive officers and other key management personnel or to implement effective succession planning could have a material adverse effect on our business, reputation, and financial performance.

We utilize a direct sales force, as well as a network of distributiondistribution, original equipment manufacturer, and integration partners, to sell our products and services. We are continually reviewing our go-to-market strategy to help ensure that we are reaching the most customers that we can and with the highest level of service. At times, this may require strategic changes to our sales organization or enlisting or dropping various partners in certain regions, which could result in additional costs or operational challenges. In 2023, we began investing more aggressively to expand our direct sales force to include entry-level sales personnel to sell our easier-to-deploy and easier-to-use products.

WeIn addition to the above, we face several risks related to conducting business in China. InAn escalation of the China-Taiwan conflict could lead to challenges procuring integrated circuit chips from Taiwan-based vendors that are fundamental to the design of our products. Furthermore, in recent years, trade tariffs imposed by the United States on certain components imported from Chinese suppliers resulted in higher costs for our products, which, to date, have not been material to our total cost of revenue. In addition to trade tariffs, U.S. export controls that place restrictions on the exportation of our products or a subset of our products, including applicable regulations promulgated by the U.S. Commerce Department’s Bureau of Industry and Security, have had a negative impact on our revenue from customers based in China.

The recent expansion of U.S. sanctions on Chinese companies, including expanded restrictions with respect to Chinese semi-conductorsemiconductor companies, has heightened the risks and complexities for U.S. companies conducting business in China. These sanctions have led to increased scrutiny and operational challenges, which may result in costly supply chain shifts and loss of customers and business opportunities. Adjusting our business and supply chain to comply with new or amended international trade restrictions, sanctions, or tariffs can be expensive, time-consuming, and operationally challenging and may cause our customers to find alternative providers of machine vision products and services. Such restrictions are often implemented with little or no advance notice, creating uncertainty and limiting our ability to mitigate their impact effectively. Furthermore, customers in China may perceive heightened risks in doing business with U.S. companies, which may reduce demand for our products. To date, the impact of these restrictions has been immaterial to our total revenue and costs; however, if disputes and conflicts continue or further escalate, actions by governments in response could be significantly more severe and restrictive and could materially adversely affect our operating results.

We have acquired, and may continue to acquire, new businesses and technologies. During the fourth quarter ofIn 2023, we completed our largest acquisition to date by acquiring Moritex Corporation, a global provider of premium optical components based in Japan, for an enterprise value of approximately $270 million. The Moritex acquisition, and acquisitions in general, may involve significant risks and uncertainties, which could include, among others:

We rely on our information technology systems, including third-party services, to effectively run our business. We may be subject to information security failures or breaches caused by social engineering, hacking, malicious software, acts of vandalism or terrorism, or other events. The risk of a cyberattack continues to increase given rapid advancements in technologies, as well as the proliferation of diplomatic and armed conflict throughout the world. Our security measures or those of our third-party service providers may not detect or prevent such breaches.

Cybersecurity threats are becoming increasingly sophisticated and frequent, with attackers employing new and varied methods such as ransomware, phishing, and advanced persistent threats. These threats pose significant risks to our operations and potentially to our customer's operations, including:

We have experienced cybersecurity incidents in the past,past; however, to date, these incidents have not had a material impact on our operations or financial results. Future cybersecurity incidents could have a material adverse effect on our business, reputation, financial condition, or operating results. We continuously invest in and enhance our cybersecurity measures, including employee training, incident response planning, and collaboration with third-party experts, to attempt to mitigate these risks.

Changes in laws or regulations relating to data privacy orprivacy, data protection, or product security, or any actual or perceived failure by us to comply with such laws and regulations, could harm our business.

We rely on our proprietary software technology and hardware designs, as well as the technical expertise, creativity, and knowledge of our personnel,personnel and third parties, to maintain our position as a leading provider of machine vision products. Software piracy and reverse engineering may result in counterfeit products that are misrepresented in the market as Cognex products or pirated products that contain stolen technology, such as software. Although we use a variety of methods to protect our intellectual property, we rely most heavily on patent, trademark, copyright, and trade secret protection, as well as non-disclosure agreements with customers, suppliers, employees, and consultants. We also attempt to protect our intellectual property by restricting access to our proprietary information by a combination of technical and internal security measures. These measures, however, may not be adequate to:

A significant portion of our products is manufactured by a third-party contractor located in Indonesia. SinceIn 2022,recent years we have beentaken scalingsteps upto anbroaden additionalour contractmanufacturing manufacturerbase locatedto inattempt Malaysia, which hasto further mitigatedmitigate risk, diversifieddiversify our supply chain, and expandedexpand our production capacity. With the acquisition of Moritex Corporation in the fourth quarter of 2023,Moritex, we began in-house manufacturing of optical components, such as lenses and lighting, in production plants located in China and Vietnam. In-house manufacturing exposes us to various risks that could adversely impact our business operations and financial condition, including, but not limited to, (i) the health and safety of our employees engaged in manufacturing; (ii) the storage, use, and transportation of hazardous materials utilized in the manufacturing process; and (iii) legal risks related to environmental protection and health and safety laws in all applicable jurisdictions. Although our third-party and in-house manufacturers have the ability to shift production to plants in other regions when operations in their primary plant are disrupted, production and test equipment located at the plant that is unique to the manufacture of Cognex products creates practical challenges to doing so in a timely manner. Furthermore, the loss of a key supplier, or failure of a key supplier to access necessary credit to operate its business or otherwise remain in business, could have a material adverse impact on our operating results. Changes and additions to our supply chain require considerable time and resources and involve significant risks and uncertainties, and we can provide no assurance of return on, or success of, such investments.

We also rely on our third-party and in-house manufacturers to meet delivery schedules. We have experienced, and may continue to experience, delays in the delivery of our products from our suppliers due to the impact of global supply chain challenges or other factors. For example, on June 7,in 2022, our primary contract manufacturer experienced a fire at its plant in Indonesia which destroyed a significant amount of Cognex inventories. The fire resulted in delayed shipments, loss of sales, and higher-than-normal purchase costs to replenish component inventories, which adversely impacted our business, financial condition, and results of operations through the first half of 2023. Challenges in obtaining components and maintaining production have resulted in delays, and may continue to result in delays,delays in meeting our delivery schedules that, as a result, delaydelayed deliveries to our customers past their requested delivery date. Delays in customer orders also can result in delayed revenue recognition or loss of business which can impact our operating results in a particular reporting period.

Certain key electronic and mechanical components, such as integrated circuit chips, are fundamental to the design of Cognex products. Due to the impact of global supply chain challenges and other factors, we have experienced, and may continue to experience, disruptions to the supply of components for our products that have resulted, and may continue to result, in higher purchase costs, higher delivery costs, and manufacturing delays. An escalation of the China-Taiwan conflict could also lead to challenges procuring integrated circuit chips from Taiwan-based vendors that are fundamental to the design of our products.

OverAt different times over the past few years, we have had twoone customerscustomer that represented 10%a ormaterial moreportion of our total revenue. Large customers may divert management’s attention from other operational matters and pull resources from other areas of the business, resulting in potential loss of sales from other customers. In addition, large customers may receive preferred pricing and a higher level of support, which may lower our gross margin. Furthermore, in certain instances, due to long supplier lead times, we may purchase inventory in advance of receipt of a large customer purchase order, which exposes us to an increased risk of excess or obsolete inventory and resulting charges. The loss of, or curtailment of purchases by, any one or more of our large customers, has had, and could in the future have a material adverse effect on our operating results.

As of December 31, 2024,2025, we had approximately $401$379 million of debt securities in our investment portfolio. These debt securities are reported at fair value, with unrealized gains and losses, net of tax, included in shareholders’ equity as other comprehensive income (loss). As of December 31, 2024,2025, our portfolio of debt securities had a net unrealized lossgain of $4,904,000.$2,787,000. Included in this net loss,gain, were gross unrealized losses totaling $5,317,000,$529,000, of which $2,118,000$456,000 related to debt securities in a loss position for greater than twelve months. Management monitors its debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit quality of the issuer that would be reported in current operations. While management currently intends to hold these securities to full value recovery at maturity, we may determine to sell these securities prior to maturity to fund our operations, complete acquisitions, or for other purposes, which may result in a loss. It is our policy to invest in investment-grade debt securities that minimize our exposure to credit losses; however, no assurances can be made that we will not incur credit losses with respect to our securities portfolio.

As of December 31, 2024,2025, we had approximately $91$81 million in acquired intangible assets, consisting primarily of customer relationships and completed technologies. The majority of these intangible assets were recorded in the fourth quarter of 2023 when Cognex acquired Moritex Corporation.Moritex. These assets are susceptible to changes in fair value due to a decrease in the historical or projected cash flows from the use of these assets, which may be negatively impacted by economic trends. We evaluate long-lived assets for impairment annually each fourth quarter and whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value may not be recoverable. If we determine that any of these investments or intangible assets are impaired, we will be required to take a related charge that could have a material adverse effect on our operating results.

Our revenue levels are impacted by global economic conditions, as we have a significant business presence in many countries throughout the world. Unfavorable economic conditions, such as inflation, slower growth or recession, higher interest rates, tighter credit, and labor shortages, may cause companies to delay or reduce spending for automation projects, including those with machine vision, amid weaker general manufacturing confidence and heightened uncertainty around global trade. Furthermore, customer confidence and capital investment can be materially adversely impacted as a result of financial market volatility, negative financial news, declines in income or asset values, tariffs and trade wars, energy shortages and cost increases, labor and healthcare costs, and other global economic conditions. When global economic conditions are unfavorable, our revenue and our ability to generate operating profits could be materially adversely affected.

As of December 31, 2024,2025, we had approximately $587$642 million in cash and investments. In addition, we have no long-term debt. We believe that our strong cash position putsenhances usour in a relatively good positionability to weather any future economic downturns. Nevertheless, our operating results have been materially adversely affected in the past, and could be materially adversely affected in the future, as a result of unfavorable economic conditions and reduced capital spending by manufacturers and logistics companies worldwide.

Governments, regulators,Regulators, investors, employees, customers, suppliers, and other stakeholders aremay increasingly focusedfocus on environmental, social, and governance disclosures relating to businessesbusiness activities. Performance in this area is driven by transparency, goal setting, and third-party opinion. Any failure, or perceived failure, to further our initiatives, adhere to our public statements, comply with federal, state, or international environmental, social, and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against the Company and adversely affect our business, reputation, financial condition, operating results, stock price, and ability to operate in certain geographic regions.

Responding to changing environmental, social, and governance disclosure requestsexpectations and the implementation or modification of associated initiatives involves risks and uncertainties, requiresmay require investments, and dependsmay depend in part on third-party performance or data that is outside of our control. InitiativesAs related to climate performance may be dependent upon the availability of alternative energy sources and evolving procurement practices. Stakeholderstakeholder expectations and priorities continue to change.change, Wewe cannot guarantee that we will achieve our environmental, social, and governance goals or commitments.

From time to time, we may be subject to various claims, demands, and lawsuits by competitors, shareholders, customers, distributors, patent trolls, former employees, or other parties arising in the ordinary course of business, including lawsuits charging patent infringement, or claims and lawsuits instituted by us to protect our intellectual property and confidential information, or for other reasons. These matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses. Furthermore,In theaddition, resultsactivist of any of these actionsinvestors may seek to influence our business strategy, capital allocation, governance, or leadership. While we evaluate all shareholder input, such activities can create increased costs, disruption, or uncertainty, including potential public campaigns, proxy contests, or proposals that may not align with our long-term objectives. These situations could divert management’s focus, lead to volatility in our stock price, and have a material adverse effect on our operating results.results and ability to execute our strategic plan.

Certain statements made in this report, as well as oral statements made by the Company from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Readers can identify these forward-looking statements by our use of the words “"expects,”" “"anticipates,”" “"estimates,”" "potential," “"believes,”" “"projects,”" “"intends,”" “"plans,”" “"aims," "will,”" “"may,”" “"shall,”" “"could,”" “"should,”" "opportunity," "goalgoal," "objective," "target," "milestone" and similar words and other statements of a similar sense. These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market trends, future financial performance andperformance, financial targets, milestones and related timing expectations, the impacts of our strategic portfolio review, the impact of tariffs, customer demand and order rates and timing of related revenue, future product or revenue mix, research and development activities, sales and marketing activities,activities including our salesforce transformation, new product offerings, innovation and product development activities, customer acceptance of our products, commercial partnerships, capital expenditures, cost and working capital management activities,activities including expected annualized operating expense reductions, investments, liquidity, dividends and stock repurchases, strategic and growth plans and opportunities, acquisitions, and estimated tax benefits and expensesexpenses, changes in tax legislation, and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the technological obsolescence of current products and the inability to develop new products; (2) the impact of competitive pressures; (3) the inability to attract and retain skilled employees,employees and effectively plan for succession,succession andincluding maintainmanaging the transition of our Chief Executive Officer, while maintaining our unique corporate culture; (4) the failure to properly manage the distribution of products and services; (5) economic, political, and other risks associated with international sales and operations, including the impact of trade disputesdisputes, onthe imposition of tariffs, the economic climate in ChinaChina, and the wars and conflicts involving Ukraine and Israel and those that may arise in the future in the geographies where we conduct business; (6) the challenges in integrating and achieving expected results from acquired businesses; (7) uncertainty surrounding our future capital needs; (8) the inability to effectively scale our operations and salesforce to support a significantly expanded customer base; (9) information security breaches and other cybersecurity threats; (910) the failure to comply with laws or regulations relating to data privacyprivacy, data protection, AI, or dataother protectionautomated technologies; (1011) the inability to protect our proprietary technology and intellectual property; (1112) the inability to manage direct and indirect disruptions to our supply chain, which could cause delays in obtaining components for our products at reasonable prices; (13) the failure to manufacture and deliver products in a timely manner; (1214) the inability to obtain, or the delay in obtaining, components for our products at reasonable prices; (1315) the inability to design and manufacture high-quality products; (1416) the loss of, or curtailment of purchases by, large customers in the logistics, consumer electronics, or automotive industries; (1517) challenges in accurately forecasting our financial results due to seasonal and cyclical variations in customer purchasing patterns and economic and market volatility; (1618) potential impairment charges with respect to our investments or acquired intangible assets; (1719) exposure to additional tax liabilities, increases and fluctuations in our effective tax rate, and other tax matters; (1820) fluctuations in foreign currency exchange rates and the use of derivative instruments; (1921) unfavorable global economic conditions, includingincluding, without limitation, increases in interest rates andrates, elevated inflation ratesrates, and recession risks; (2022) business disruptions from natural or man-made disasters, public health crises, or other events outside our control; (21) exposure to potential liabilities, increased costs, reputational harm, and other adverse effects associated with expectations relating to environmental, social, and governance considerations; (2223) stock price volatility; and (2324) our involvement in time-consuming and costly litigation or activist shareholder activities.activities; and (25) the failure to effectively transform our operating model, manage our expenses, and achieve expected cost reductions. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of this Annual Report on Form 10-K. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.

Cognex Corporationmakes (“theadvanced Company”)machine inventsvision andeasy, commercializes technologies that address some ofpaving the mostway criticalfor manufacturing and distribution challenges.companies to become faster, smarter, and more efficient through automation. We are a leading global providertechnology ofleader in industrial machine vision products and solutionssystems that seek to improve efficiency and qualityhelp insolve critical manufacturing and distribution challenges, providing support across a widediverse rangeset of businesses across attractive industrial end markets. In addition to product revenue derived from the sale of machine vision products, the Company also generates revenue by providing maintenance and support, consulting, and training services to its customers; however, service revenue accounted for less than 10% of total revenue for all periods presented.

Machine vision is used in a variety of industries where technology is widely recognized as an important component of automated production, distribution, and quality assurance. Virtually every manufacturer or distributor can achieve better quality and efficiency by using machine vision. This results in a broad base of potential customers across a variety of industries, including logistics, automotive, consumer electronics, semiconductor,automotive, consumer products, medical-related,packaging, and food and beverage.semiconductor.

Gross margin was 68%67% in 20242025 compared to 72%68% in 2023.2024. The decrease was primarily due to ahigher lesscharges favorablefor revenue mix related to the contribution of Moritexexcess and higherobsolete logistics revenue, and to a lesser extent, the impact of pricing pressures.inventory.

Net cash provided by operating activities totaled $245,514,000 in 2025 and $149,081,000 in 2024. Significant uses of cash consisted of anThe increase in accountsoperating receivablecash relatedflow tofrom growththe inprior logisticsyear revenuewas primarily driven by stronger business performance and in supportoptimization of salesworking initiatives.capital.

Certain statements made in this report, as well as oral statements made by Cognex Corporation ("Cognex", "we", "us", "our", or the "Company") from time to time, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Readers can identify these forward-looking statements by our use of the words "expects," "anticipates," "estimates," "potential," "believes," "projects," "intends," "plans," "aims," "will," "may," "shall," "could," "should," "opportunity," "goal," "objective," "target," "milestone" and similar words and other statements of a similar sense. These statements are based on our current estimates and expectations as to prospective events and circumstances, which may or may not be in our control and as to which there can be no firm assurances given. These forward-looking statements, which include statements regarding business and market trends, future financial performance, financial targets, milestones and related timing expectations, the impacts of our strategic portfolio review, the impact of tariffs, customer demand and order rates and timing of related revenue, future product or revenue mix, research and development activities, sales and marketing activities including our salesforce transformation, new product offerings, innovation and product development activities, customer acceptance of our products, commercial partnerships, capital expenditures, cost management activities including expected annualized operating expense reductions, investments, liquidity, dividends and stock repurchases, strategic and growth plans and opportunities, financial and operating models, acquisitions, and estimated tax benefits and expenses, changes in tax legislation, and other tax matters, involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the technological obsolescence of current products andproducts, the inability to develop new productsproducts, and the inability to achieve growth through expanding and adjacent markets; (2) the impact of competitive pressures; (3) the inability to attract and retain skilled employees and effectively plan for succession, while maintaining our unique corporate culture; (4) the failure to properly manage the distribution of products and services; (5) economic, political, and other risks associated with international sales and operations, including the impact of trade disputes, the imposition of tariffs, the economic climate in China, and the wars and conflicts involving Iran, Ukraine, and Israel and those that may arise in the future in the geographies where we conduct business; (6) the challenges in integrating and achieving expected results from acquired businesses; (7) uncertainty surrounding our future capital needs; (8) the inability to effectively scale our operations and salesforce to support a significantly expanded customer base in an increasing number of geographies; (9) information security breaches and other cybersecurity threats; (10) the failure to comply with laws or regulations relating to data privacy, data protection, AI,artificial intelligence, or other automated technologies; (11) the inability to protect our proprietary technology and intellectual property; (12) the inability to manage direct and indirect disruptions to our supply chain, which could cause delays in obtaining components for our products at reasonable prices; (13) the failure to manufacture and deliver products in a timely manner; (14) the inability to obtain, or the delay in obtaining, components for our products at reasonable prices, including memory chips; (15) the inability to design and manufacture high-quality products; (16) the loss of, or curtailment of purchases by, large customers in the logistics, consumer electronics, or automotive end markets; (17) challenges in accurately forecasting our financial results due to seasonal and cyclical variations in customer purchasing patterns and economic and market volatility; (18) potential impairment charges with respect to our investments or acquired intangible assets; (19) exposure to additional tax liabilities, increases and fluctuations in our effective tax rate, and other tax matters; (20) fluctuations in foreign currency exchange rates and the use of derivative instruments; (21) unfavorable global economic conditions, including, without limitation, increases in interest rates, elevated inflation rates, and recession risks; (22) business disruptions from natural or man-made disasters, public health crises, or other events outside our control; (23) stock price volatility; (24) our involvement in time-consuming and costly litigation or activist shareholder activities; and (25) the failure to effectively transform our operating model, manage our expenses, and achieve expected cost reductions. The foregoing list should not be construed as exhaustive and we encourage readers to refer to the detailed discussion of risk factors included in Part I - Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "Annual Report"), as updated by Part II - Item 1A of this Quarterly Report on Form 10-Q (this "Quarterly Report"). The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are made.

Revenue for the firstsecond quarter of 2026 totaled $268,437,000,$291,263,000, representing an increase of 24%17% over the firstsecond quarter of 2025 due to broad-based strength across ourmost major end markets, as well as the favorable impact of foreign currency exchange rate changes on revenue. Gross margin as a percentage of revenue was 71% for the firstsecond quarter of 2026 as compared to 67% for the firstsecond quarter of 2025 due to a more favorable end-market mix and increased cost efficiencies from higher sales volume.volume, which improved fixed-cost absorption. Operating expenses for the firstsecond quarter of 2026 increaseddecreased 11%3% from the firstsecond quarter of 2025. The impactdecrease ofwas higher incentive compensation accrualsprimarily due to strongersavings businessfrom performance,continued cost management activities and lower stock-based compensation expense, partially offset by the unfavorable impact of foreign exchange rates on expenses, and higher reorganization charges incurred to further drive efficiencies across the organization were partially offset by savings from continued cost management activities.expenses.

Operating income increased to 22%29% of revenue for the firstsecond quarter of 2026 as compared to 12%17% of revenue for the firstsecond quarter of 2025 due to operating leverage achieved from revenue growth. Net income increased to 19%25% of revenue, or $0.31$0.43 per diluted share, for the firstsecond quarter of 2026, as compared to 11%16% of revenue, or $0.14$0.24 per diluted share, for the firstsecond quarter of 2025.

Revenue increased by $52,401,000,$42,170,000, or 24%,17%, for the three-month period in 2026 and increased $94,571,000, or 20%, for the six-month period in 2026 as compared to the same periodperiods in 2025. Changes in foreign currency exchange rates resulted in a higher level of reported revenue in the 2026 periods as compared to the corresponding periods in 2025. Excluding the impact of foreign currency exchange rate changes, revenue increased by 21%16% overfor the priorthree-month year.period in 2026 and 18% for the six-month period in 2026 as compared to the same periods in 2025. The increaseincreases waswere due to broad-based demand across ourmost major end markets, including revenue growth across our consumer electronics customer base, higher revenue from semiconductor and packaging customers, and continued growth with large logistics customers.markets.

The following table sets forth our disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands) for the three-month and six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025.2025, respectively.

•Revenue from customers based in the Americas increased by 22%27% for the three-month period in 2026 and increased by 24% for the six-month period in 2026 as compared to the same periodperiods in 2025 due to stronger performance across ourmost major end markets. Revenue from customers based in the Americas also benefitted from consumer electronics customer procurement changes as purchases shifted from entities based in Europe to the Americas.

•Revenue from customers based in otherEurope countriesdecreased by 12% for the three-month period in Asia2026 and increased by 6% for the three-monthsix-month period in 2026 as compared to the same periodperiods in 2025. ChangesExcluding inthe impact of foreign currency exchange ratesrate did not have a material impact onchanges, revenue from customers based in Europe decreased by 15% for the three-month period in 2026 and decreased by 1% for the six-month period in 2026. The increasedecrease for the three-month period was primarilydriven due to higher revenue from customers inby the consumer electronics andcustomer semiconductorprocurement shift from Europe to the Americas mentioned above, as well as ongoing softness in the automotive end markets.market. These decreases were largely offset by stronger performance across our other major end markets, including logistics and packaging, for the six-month period.

The following table sets forth our gross profit (in thousands) for the three-month and six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025.2025, respectively.

Gross margin was 71% for the three-month periodand six-month periods in 2026 as compared to 67% for the same periodperiods in 2025. The increaseincreases waswere primarily due to more favorable end-market mix and increased cost efficiencies from higher sales volume, slightlywhich offsetimproved byfixed-cost the impact of tariffs.absorption.

The following table sets forth our operating expenses (in thousands) for the three-month and six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025.2025, respectively.

Research, development, and engineering ("RD&E") expenses increaseddecreased by $2,298,000,$711,000, or 7%,2%, for the three-month period in 2026 and increased by $1,587,000, or 2%, for the six-month period in 2026 as compared to the same periodperiods in 2025. TheFor the three-month period in 2026, the decrease was primarily due to savings from continued cost management activities, partially offset by the unfavorable impact of foreign exchange rates. For the six-month period in 2026, higher incentive compensation accruals due to stronger business performance and the unfavorable impact of foreign exchange rates were partially offset by savings from continued cost management activities.

RD&E expenses as a percentage of revenue waswere 14%11% and 12% for the three-month periodand six-month periods in 2026 as compared to 16%13% and 15%, respectively, for the same periodperiods in 2025. We believe that a continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide innovative new product offerings, as well as to provide engineering support for large customers. These percentages are impacted by revenue levels and investment cycles.

Selling, general, and administrative ("SG&A") expenses decreased by $3,476,000, or 4%, and increased by $10,537,000,$7,061,000, or 13%,4%, respectively, for the three-month periodand six-month periods in 2026 as compared to the same periodperiods in 2025. TheFor the three-month period, the decrease was primarily due to savings from continued cost management activities and lower stock-based compensation expense, partially offset by the unfavorable impact of foreign exchange rates. For the six-month period, higher incentive compensation accruals due to stronger business performance, higher reorganization charges incurred to drive efficiencies across the organization, and the unfavorable impact of foreign exchange rates, higher stock-based compensation, and higher reorganization charges incurred to further drive efficiencies across the organization were partiallyrates offset by savings from continued cost management activities.

The following table sets forth our non-operating income (expense) (in thousands) for the three-month and six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025.2025, respectively.

The Company recorded foreign currency losses of $1,345,000$862,000 and $2,453,000$2,207,000 for the three-month and six-month periods in 20262026, respectively, and losses of $1,503,000 and $3,956,000 for the same periods in 2025, respectively. Foreign currency gains and losses in each period resulted primarily from the revaluation and settlement of assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is the U.S. Dollar, or its subsidiaries.

Investment income increased by $846,000,$1,051,000, or 21%,26%, for the three-month period and increased by $1,897,000, or 24%, for the six-month period in 2026 as compared to the same periodperiods in 2025 primarily due to a higher invested balance.

The Company recorded other expense of $1,607,000$446,000 and $2,053,000 for the three-month periodand six-month periods in 20262026, respectively, and other income of $169,000$2,092,000 and $2,261,000 for the three-monthsame periodperiods in 2025.2025, respectively. Other expense for the three-monthsix-month period in 2026 included a pre-tax loss of $1,539,000 related to the divestiture of the Company's Japan-focused trading business (refer to Note 13 of the Consolidated Financial Statements). Other income for the second quarter of 2025 included a one-time, net Employee Retention Credit of $2,119,000 from the U.S. Internal Revenue Service to refund payroll taxes paid during the COVID-19 pandemic.

The following table sets forth income tax information (in thousands) for the three-month and six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025.2025, respectively.

The Company’s effective tax rate was 16%19% and 18% for the three-month periodand six-month periods in 20262026, respectively, and 16% and 15% for the same periodperiods in 2025.2025, respectively. The Company recorded a net discrete tax expense of $450,000 and a net discrete tax benefit of $729,000 for the three-month and six-month periods in 2026, respectively, compared to net discrete tax benefits of $1,179,000$211,000 and $307,000$518,000 for the three-month and six-month periods in 2026 and 2025, respectively.

Excluding the impact of discrete tax items, the Company's effective tax rate was 18% for the three-month periodand six-month periods in 2026 and 16% for the same periodperiods in 2025. The increase was primarily due to a greater portion of the Company's pre-tax income being earned in higher tax rate jurisdictions.

The Company has historically been able to generate positive cash flow from operations, which has funded its operating activities and other cash requirements and resulted in an accumulated cash and investment balance of $621,942,000$755,013,000 as of AprilJuly 5, 2026. The Company has established guidelines relative to credit ratings, diversification, and maturities of its investments to maintain liquidity and safety of its investment portfolio.

Net cash provided by operating activities totaled $45,093,000$114,246,000 for the three-monthsix-month period in 2026 as compared to $40,502,000$83,127,000 for the same period in 2025. The increase in operating cash inflow from the prior year was primarily driven by stronger business performance,performance. This increase was partially offset by higher Companyworking bonuscapital paymentsrequirements thatassociated arewith revenue growth, primarily higher accounts receivable balances and inventory purchases. These impacts were partially offset by lower cash tax payments, driven largely by a one-time transition tax payment on unrepatriated foreign earnings made in the firstsecond quarter of each2025 year.that did not recur in 2026.

Net cash providedused byin investing activities totaled $791,000$69,693,000 for the three-monthsix-month period in 2026 as compared to $33,087,000net cash provided by investing activities of $29,121,000 for the same period in 2025. The decrease in investing cash inflow from the prior year was due to a higher level of investment maturities during the three-monthsix-month period in 2025 to provide liquidity for our stock repurchase program.2025.

Investing activities for the three-monthsix-month period in 2026 included net proceeds of $11,519,000 from the divestiture of the Company's Japan-focused trading business (refer to Note 13 of the Consolidated Financial Statements).

Investing activities also included capital expenditures that totaled $2,757,000$4,289,000 for the three-monthsix-month period in 2026 as compared to $2,501,000$4,695,000 for the same period in 2025. Capital expenditures in each period consisted primarily of investments in business systems, manufacturing test equipment related to new product introductions, and building and leasehold improvements.

Net cash used in financing activities totaled $68,901,000$2,138,000 for the three-monthsix-month period in 2026 and $118,370,000$131,626,000 for the same period in 2025. The decrease in financing cash outflow from the prior year was due to higher proceeds from stock option exercises during the three-monthsix-month period in 2026 that partially offset the impact of the Company's stock repurchase and dividend programs.2026.

In March 2022, the Company's Board of Directors (the "Board") authorized a program providing for the repurchase of up to $500,000,000 of the Company's common stock (the "Program"). Under the Program, in addition to repurchases made in other periods, the Company repurchased 2,375,0002,501,000 shares at a total cost of $98,995,000$105,231,000 during the three-monthsix-month period in 2026, leaving a remaining balance of $16,025,000$9,789,000 as of AprilJuly 5, 2026. On February 11, 2026, the Board authorized the repurchase of up to an additional $500,000,000 of the Company's common stock upon completion of the Program. The Company may repurchase shares under these programs in future periods depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and cash requirements. The Company is authorized to make repurchases of its common stock through open market purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.

The Board declared and paid cash dividends of $0.085 per share infor the three-monthfirst periodand endedsecond Aprilquarters 5,of 2026, totaling $14,196,000.$28,454,000. Future dividends will be declared at the discretion of the Board and will depend on such factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash flow from operations.

As of AprilJuly 5, 2026, the Company had inventory purchase commitments of $50,616,000,$66,839,000, with the majority payable within twelve months, and lease payment obligations of $90,537,000,$88,148,000, with $16,482,000$16,327,000 payable within twelve months.

Refer to Part I - Note 2 within this Quarterly Report,Report for a full description of recently issued accounting pronouncements including the expected dates of adoption and the expected impact on the financial position and results of operations of the Company.