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

AcquisitionStrategic Transaction Risks

As part of our business strategy, we have consummated and may continue to pursue business combinationsacquisitions and acquisitionsother thatstrategic transactions, which may be difficult to identify and complete, challenging and costly to integrate,identify and complete, disruptive to our business and our management, and/or dilutive to stockholder value.

As part of our business strategy, we have consummated and may continue to pursue acquisitions and other strategic transactions. Our most recent acquisition of Atotech Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”) significantly increased our size, including with respect to revenue, product offerings, technologies, employees, facilities, and geographic and market exposure. Our ability to successfully identify suitable acquisition targets, complete acquisitions on acceptable terms, and efficiently, effectively and profitably integrate and operate our acquired businesses, is critical to our growth. We may not be able to identify target companies that meet our strategic objectives or successfully negotiate and complete acquisitions with companies we have identified on acceptable terms. Further, we may incur significant expense in pursuing acquisitions that cannot be completed, or are significantly delayed, due to regulatory or other restrictions. Additionally, our Credit Facilities (as defined below) only permit us to make acquisitions under certain circumstances and also restrict our ability to incur additional indebtedness in certain circumstances. As a result, our ability to pursue our acquisition strategy may be hindered by our indebtedness. Moreover, we may not realize the benefits we anticipate from these acquisitions,acquisitions because of potentially significant challenges, such as:

The difficulty, distraction, disruption, resource requirements, costrequirements and disruptioncost of developing sufficient knowledge of, managing, and integrating the operations, personnel, and internal controls, financial reporting and information technology (“IT”) systems of the acquired companies;

The potential disruption of our ongoing business and distraction of management;

Potential internalInternal control or other compliance weaknesses of the acquired companies;

The assumption of unknown or contingent liabilities associated with the acquired businessescompanies;

Potentially incompatibleIncompatible cultural differences between us and the acquired companies;

Potential additionalAdditional geographic dispersion of operations and/or increased exposure to high-risk geographies;

The difficulty of retaining key customers, suppliers and employees of the acquired companies; and The potential to incurIncurring or recordrecording significant cash or non-cash charges or writewriting down the carrying value of intangible assets and goodwill obtained in the acquisitions, which could adversely impact our cash flow or lower our earnings in the period or periods for which we incur such charges or write down such assets.earnings.

In addition, we could use substantial portions of our available cash for all or a portion of the purchase price of future acquisitions. We could also issue additional securities as consideration for or to finance these acquisitions, which could cause significant stockholder dilution, or obtain additional debt financing, which would increase our costs, reduce our future cash flow and subject us to covenants and other restrictions that may impede our ability to manage our operations, without achieving the desired accretion to our business.

As a result of previous acquisitions, we presently have several different decentralized operating and accounting systems. We will need to continue to modify our accounting policies, internal controls, procedures and compliance programs to provide consistency across our operations. In order to increase efficiency and operating effectiveness and improve corporate visibility into our decentralized operations, we continue to review opportunities to integrate enterprise resource planning systems or deploy data consolidation tools where practical. Any such integrationssystems changes may disrupt our operations during the conversion periods and may require significantly more management time and higher implementation costs than anticipated.

Our substantial consolidated indebtedness has increased substantially as a result of the Atotech Acquisition in August 2022. This increased level of indebtedness could adversely affect us, including by increasing our interest expense and decreasing our business flexibility.

OurWe have substantial consolidated indebtedness has increased substantially as a result of the Atotech Acquisition in August 2022.indebtedness. As of JanuaryFebruary 31,4, 2025,2026, we had approximately $3.1$1.6 billion of principal indebtedness outstanding under a senior secured term loan facility (the “Term Loan Facility”) comprised of two tranches: a $2.5$914 billionmillion loan (the “USD Tranche B”) and a €596587 million loan (the “Euro Tranche B”). As of JanuaryFebruary 31,4, 2025,2026, we also had $675$1.0 millionbillion of available borrowing capacity under a senior secured revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Credit Facilities”). On May 16, 2024, we completed a private offering of $1.4 billion aggregate principal amount of convertible senior notes due 2030 (the “Convertible Notes,Notes”), and used approximately $1.2 billion of the proceeds to partially repay borrowings under the USD Tranche B. On February 4, 2026, we completed a private offering of €1.0 billion aggregate principal amount of senior notes due 2034 (the “2034 Notes”), and used the net proceeds thereof, together with cash on hand, to partially repay approximately $1.3 billion of borrowings under the USD Tranche B.

If a change of control triggering event (as defined in the indenture with respect to the 2034 Notes) occurs prior to the maturity of the 2034 Notes, holders of the 2034 Notes will have the right, at their option, to require us to repurchase all or a portion of their 2034 Notes. In addition, if a fundamental change occurs prior to the maturity date of the Convertible Notes, holders of the Convertible Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes. In addition, if a make-whole fundamental change occurs prior to the maturity date of the Convertible Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change. Furthermore, the indentureindentures governing the Convertible Notes prohibitsand the 2034 Notes prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Convertible Notes, the 2034 Notes and the indenture.indentures, as applicable. These and other provisions in the indentureindentures could deter or prevent a third party from acquiring us even when the acquisition may be favorable to investors.

The terms of our Term Loan Facility, Revolving Facility and Revolving2034 FacilityNotes impose significant financial obligations and risks upon us, limit our ability to take certain actions, and could discourage a change in control.

As of JanuaryFebruary 31,4, 2025,2026, the total principal balance of our USD Tranche B was $2.5$914 billion,million, and the total principal balance of our Euro Tranche B was €596587 million. As of JanuaryFebruary 31,4, 2025,2026, our Revolving Facility provided us with a senior secured revolving credit facility of up to $675$1.0 million.billion. We have not borrowed against our Revolving Facility as of JanuaryFebruary 31,4, 2025.2026. Additionally, on February 4, 2026, we completed a private offering of €1.0 billion aggregate principal amount of the 2034 Notes.

In addition, our Revolving Facility requires that we meet a financial covenant based on a consolidated leverage ratio test in certain circumstances. Under our Revolving Facility, whenever the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of us and our restricted subsidiaries) exceeds 35% of the aggregate commitments under the Revolving Facility, our first lientotal net leverage ratio cannot exceed 6.00 to 1.00.

The amount of cash available to us for repayment of amounts owed under the Credit Facilities and the 2034 Notes will depend on our usage of our existing cash balances and our operating performance and ability to generate cash flows from operations, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. We cannot provide any assurances that we will generate sufficient cash flows from operations to service our debt obligations. Any failure to repay these obligations as they become due would result in an event of default under the Credit Facilities.Facilities and the 2034 Notes.

If an event of default occurs,occurs under the Credit Facilities, the lenders may end their obligation to make loans to us under the Credit Facilities and may declare any outstanding indebtedness under the Credit Facilities immediately due and payable. In addition, if an event of default occurs under the 2034 Notes, the trustee and holders thereof may declare any outstanding indebtedness under the 2034 Notes immediately due and payable. In such case,cases, we would need to obtain additional financing or significantly deplete our available cash, or both, to repay this indebtedness. Any additional financing may not be available on reasonable terms or at all, and significant depletion of our available cash would harm our ability to fund our operations or execute our broader corporate objectives. If we were unable to repay outstanding indebtedness following an event of default, then in addition to other available rights and remedies, the lenders could initiate foreclosure proceedings on substantially all of our assets. Any such foreclosure proceedings or other rights and remedies successfully implemented by the lenders in an event of default would have a material adverse effect on our business, financial condition and operating results.

As of December 31, 2024,2025, our goodwill and intangible assets, net, represented approximately $4.8$4.7 billion, or 55%,54%, of our total assets. Goodwill is generated as a result of our acquisitions when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets we acquire. For example, as a result of the Atotech Acquisition, we added significant additional goodwill and intangible assets because the cost of the Atotech Acquisition significantly exceeded the fair value of Atotech’s net tangible and identifiable intangible assets. Intangible assets relate primarily to the developed technologies, customer relationships, trade names and trademarks acquired by us as part of our acquisitions of other companies.acquisitions. Goodwill and indefinite-lived intangible assets are subject to an impairment analysis at least annually based on the fair value of the reporting unit in which the respective goodwill and intangible assets are recorded. In addition, goodwill and intangible assets and goodwill are subject to an impairment analysis whenever events or changes in circumstances indicate that the carrying value of the goodwill or intangible assets might not be recoverable. AsIn described in Note 13 to the Notes to Consolidated Financial Statements, following triggering events at each of our EL and GMF reporting units, which together constitute MSD, and the ESB reporting unit of PSD,2023, we recorded goodwill and intangible asset impairments of $1.8$1.9 billion during the quarter ended June 30, 2023 and, following anour annual impairment analysis of all our reporting units, we recorded goodwill and intangiblefollowing assetcertain impairmentstriggering of $75 million during the quarter ended December 31, 2023. We will continue to monitor and evaluate the carrying value of goodwill and intangible assets.events. If market and economic conditions or business performance deteriorate, the likelihood that we wouldcould record another impairment charge would increase. Any impairment charge could materially and adversely affect our financial condition and operating results, including by significantly reducing our net income in future periods.income.

We rely on various IT networks and systems, some of which are managed by third parties, to process, transmit and store electronic information and to carry out and support avirtually variety ofall business activities, including, among others, finance and accounting,operational order management, human resources, communications, manufacturing, research and development, intellectual property, supply chain management, sales and IT, including critical functions such as internet connectivity, network communications, and email.activities. Many of these activities are processed via Software-as-a-Service (“SaaS”) products provided by third parties and hosted on their own networks and servers or on third-party networks and servers. The data on such IT networks and systems includes confidential information, personally identifiable information, transactional information and intellectual propertyIP belonging to us and our employees, customers, suppliers and other business partners.

We and our third-party administrators, vendors, customers and partners are subject to ongoing cybersecurity threats, including ransomware and other malware, hacking, phishing, smishing, denial of service attacks, employee errors or malfeasance, telecommunication failures, system failures, natural disasters and other attacks and events. We cannot guarantee that these threats will not have an adverse impact on our business, financial condition or resultsoperating of operations.results. For example, in February 2023, we identified that we had become subject to a ransomware event. Based on our investigation, we concluded ransomware actors encrypted certain of our systems by deploying malware. This incident required us to temporarily suspend operations at certain of our facilities and had a material impact during the three months ended March 31, 2023 on our ability to process orders, ship products and provide service to our Vacuum Solutions Division (“VSD”) and Photonics Solutions Division (“PSD”) customers. For the year ended December 31, 2023, we incurred net costs related to the incident of approximately $15 million. In addition, as a result of the incident, we were previously subject to two lawsuits, and we may be subject to future litigation, investigations, claims or actions, in addition to fines, penalties, or other obligations related to impacted data, whether or not such data is misused.

We face the challenge of supporting our older and disparate IT systems and implementing necessary upgrades. Further, asAs we transition to using more cloud-based solutions that are dependentdepend on the internet or other networks to operate, we exposemay ourselves toface additional or different cybersecurity and other data security threats, whether directly or through our third-party administrators, vendors and partners. As cybersecurity threats rapidly evolve and become increasingly difficult to detect and defend against, our current security controls and measures may not be effective in detectingdetect vulnerabilities or preventingprevent cybersecurity incidents. These risks may be amplified by increased reliance on remote access to IT systems as a result of the use of SaaS software, cloud and remote services, and employees working remotely. Further, the use of AI by us, our customers, suppliers and other business partners and third-party providers may introduce vulnerabilities into our IT systems and data. AI may also be used by bad actors to identify vulnerabilities and implementcarry out increasingly sophisticated cybersecurity attacks. Additionally, we mayface needthe tochallenge updateof supporting and updating security protocols for, transitiontransitioning to or from, orand integrateintegrating various IT and information management systemssystems, including as a result of mergers, acquisitions and divestitures. The systems that we acquire or that are used by acquired entities or businesses may pose security risks of which we are unaware or unable to mitigate, particularly during the transition of these systems.

The evolving regulatory landscape for data privacy presents a number of legal and operational challenges, and our efforts to comply with relevant regulations may be unsuccessful. For example, regulations in the European Union (the “EU”) and China prohibit the transfer of personally identifiable information from their respective countries to other countries whose laws do not adequately protect personal data. While we have utilized certainThe permitted approaches forwe transferringuse to transfer personally identifiable information from these countries, these approachescountries may be invalidated by courts or regulatory bodies, andrequiring we may be requiredus to ascertain an alternative legal basis for such transfers. Additionally, based on our investigation of the 2023 ransomware eventevent, we identifiedprovided notifications to individuals and regulators in Februaryaccordance 2023,with applicable laws after we became aware on February 13, 2023 that the ransomware actors may have exfiltrated personal information from our systems. We provided notifications to individuals and to regulators in accordance with applicable laws, and we may be required to provide additional notifications in the future. See “We are exposed to various risks related to legal proceedings, including, for example, product liability claims, intellectual property infringement claims, regulatory claims, contractual claims and class action litigation, which if successful, could have a material adverse effect on our commercial relationships, business, financial condition and operating results” below for more information regarding legal risks associated with privacy-related matters.

A failure to comply with the evolving regulatory landscape, or a breach of our operational or security systems or infrastructure, or those of our customers, suppliers and other business partners, could disrupt our business, including business operations and manufacturing processes; result in the disclosure, misuse, corruption or loss of confidential or other valuable business information, including intellectual property,IP, personally identifiable information and other critical data of ours and our employees, customers, suppliers and other business partners; result in competitive disadvantages to the extent the information is competitively sensitive; damage our reputation; negatively affect our relationships with our employees, customers, suppliers and other business partners, including loss of confidence, which could lead to loss of or reduction in orders; divert the attention of management; cause losses; result in litigation, investigations or liability under contracts; require notifications to regulatory authorities and impacted individuals; result in significant penalties and/or fines from regulatory bodies, including pursuant to privacy laws and export control laws; add to the complexity of our compliance obligations; increase our cybersecurity protection costs; and result in the incurrence of remediation costs. These adverse effects would likely be amplified in the event a breach of operational or security systems remains undetected for an extended period of time.

The costs of compliance with, and other burdens imposed by, privacy, cybersecurity, data protection and data localization laws, regulations and policies, including restrictions on marketing activities, could have a material adverse effect on our business, financial condition and operating results. For example, as a result of the 2023 ransomware event described above,event, we incurred significant costs in connection with efforts to investigate the incident, assess the impact of the incident and recover our systems. We have incurred and expect to continue to incur significant costs to enhance our data security and protect against unauthorized access to, or manipulation of, our systems and data. Despite incurring these costs,However, we cannot eliminate every possible vulnerability, as cybersecurity threats rapidly evolve and become more sophisticated. Accordingly, similar incidents may occur in the future. Further, customers and third-party providers increasingly demand rigorous contractual provisions regarding privacy, cybersecurity, data protection, confidentiality, and intellectual property,IP, which may also increase our overall compliance burden and potential liability.

Although we maintain insurance related to cybersecurity risks, these costs, expenses, liabilityliabilities and other matters may not be adequately covered by insurance and may result in an increase in ourinsurance costs for insurance or insurance not being available to us on economically feasible terms, or at all. Insurers may also deny us coverage as to any future claim. Any of these results could harm our business, financial condition and reputation. For additional information on our cybersecurity risk management, strategy and governance, please refer to Part I, Item 1C of this Annual Report on Form 10-K.

Our continued success and ability to compete dependdepends in large part upon protecting our proprietary technology. We rely on a combination of patent,patent and trademark andlaws, trade secret protection and contractual agreements, such as nondisclosure agreements and other contractual agreements with our employees and third parties,agreements, to protect our proprietary rights. The stepsHowever, we have taken may not be sufficientable to deter or prevent the infringement or misappropriation of our intellectual property,IP, particularly in countries and regions outside, for example, the United States and Europe, where laws may not protect our proprietary rights as fully.comprehensively. For example, the patent prosecution and enforcement systems within China and India, where we have a significant customer base and manufacturing presence, are comparatively less robust and, as a result, weand may befavor limitedlocally inheadquartered companies over foreign entities, potentially limiting our ability to enforce our intellectual propertyIP rights there. WeThe mayinfringement, alsomisappropriation, beinvalidation, at a disadvantage in any enforcement proceeding in China and India as a foreign entity seeking protection against a locally headquartered company. Patent and trademark laws and trade secret protection may not adequately deter third-party infringement or misappropriation of our patents, trademarks, trade secrets and similar proprietary rights. In addition, patents issued to us may be challenged, invalidated or circumvented. Thecircumvention, loss or expiration of any of our key patents could lead to a significant loss of sales of certain of our products and could materially affect our operating results. We have in the past and may in the future be subject to or may initiate interference proceedings, validity challenges or opposition proceedings in the U.S. Patent and Trademark Office, the European Patent Office, or similar agencies, which can demand significant financial and management resources. The process of seekingSeeking patent protection can be time consuming and expensiveexpensive. andThere is no guarantee patents may notwill be issued fromto pendingus or future applications. Moreover, our patents may not be sufficient in scope or strength to provide meaningful protection or a commercial advantage to us. We may initiate claims, enforcement actions or litigation against third parties for infringement of our proprietary rights in order to determine the scope and validity of our proprietary rights or the proprietary rights of our competitors,competitors. whichWe may also be subject to similar claims, enforcement actions or litigation, including counterclaims asserting the invalidity of our patents. In either case, these claims could result in costly litigation,litigation and the diversion of management and our technical and management personnel and the assertion of counterclaims by defendants, including counterclaims asserting invalidity of our patents.personnel. Further, governments and courts are considering new issues in intellectual propertyIP law with respect to work created by AI technology, which could result in different intellectual propertyIP rights in development processes, procedures and technologies we may create with artificialAI technology, which could have a material adverse effect on our business.

Our business depends on the timely supply of products and services that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of raw materials, parts, components and subassemblies from our suppliers, including contract manufacturers. For example, fromthroughout the first quarter of 2021 until the second half of 2023,2025, we experienced significant constraints due to global supply chain disruptions,disruptions caused by geopolitical instability, including difficulty procuring electronicraw materials, increased materials costs for components, and higher tariffs, which negatively impacted our sales, costs and margins, and our ability to timely produce products to meet customer demand. Supply constraints and the potential for shortages caused us to increase safety stock levels, which has increased the amount of inventory we hold. Cyclical industry conditions and volatility of demand for our products increase capital, technical, operational and other risks for us and for companies throughout our supply chain. We have experienced, and we couldmay experience in the future, significant disruptions in our supply chain, interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs, price volatility, and customer order cancellations, which have been, or may in the future be, as a result of:

Pandemics such as COVID-19, natural disasters or other events beyond our control (such as earthquakes, floods or storms, wildfires, power outages, such as rolling blackouts previously experienced in China, regional economic downturns, social unrest, political instability, terrorism, or acts of war), particularly where we or our suppliers, subcontractors and contract manufacturers conduct manufacturing;

For example, we use certain raw materials derived from petrochemical based feedstocks, the prices of which have historically been subject to periods of rapid and significant upward and downward movement. We may not be able to pass on price increases in raw materials, or price increases by our suppliers, to our customers due to competitive pricing pressure, and, even when we are able to do so, there may be a delay between price increases in raw materials and ourprice ability to increase the pricesincreases of our products.

In addition, a rapid increase in our business and manufacturing capacity to meet increases in demand or expedited shipment schedules may exacerbate any interruptions in our manufacturing operations and supply chain and the associated effect on our working capital. Moreover, if actual demand for our products is different than expected, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If we purchase inventory in anticipation of customer demand that does not materialize, or if our customers reduce or delay orders, we may incur excess inventory charges. Any of these factors could materially and adversely affect our business, financial condition and operating results.

Prohibitively higher raw material or component prices, including ason aaging result of tariffscomponents;

Difficulty obtaining raw materialsmaterials, including critical rare earth elements, concentrated in limited geographies at reasonable prices or at all due to trade restrictions for those materials;

At times, we have not been able to, and in the future, we may not be able to, obtain and qualify alternative sources of these components on favorable terms, on a timely basis, or at all, whether because there are a limited number of suppliers or because we have entered into supply agreements with certain suppliers that contain certain minimum purchase requirements. The use of alternative sources could require us to redesign our products, which could result in increased costs, shipping delays and the need to requalify products with customers, particularly those with “copy exact” requirements. Any inability to redesign our products could result in further costs and shipping delays. Increased costs would decrease our profit margins if we could not pass these costs to our customers. Further, shipping delays damage,have damaged, and may continue to damage, our relationships with customers and could have a material adverse effect on our business and operating results.

As part of our continuous cost-reduction and business continuity efforts, we continue to relocate the manufacturing of certain of our existing product lines and subassemblies to, and initiate the manufacturing of certain new products in, our facilities in Mexico, Romania and Singapore, as well as to our significant subcontracted operations in Mexico and selected contract manufacturers in Asia. In addition, we have relocated certain segments of other functions to, or initiated certain segments of other functions in, centralized locations, including relocating certain procurement activity to Mexico and Romania, relocating certain IT and research and development activity to India, relocating certain administrative finance, payroll, software and IT activity to Poland, and continuing certain engineering activity in India. In the future, weWe may expand the level of functions that we initiate in or move to other global locations to take advantage of cost efficiencies or for business continuity purposes. For example, we are currently in Octoberthe 2024,process weof announcedbuilding that we broke ground on a newsignificant manufacturing factoryfacilities located in each of Penang, Malaysia.Malaysia, Yangzhou, China and Bangkok, Thailand. However, we may not be able to achieve significant cost savings or other benefits from these actions. For example, costs may increase as development and manufacturing expenses increase and labor, material, logistics and facility-related costs rise, as we have seen in our existing manufacturing locations in China, Mexico and Romania. If these costs increase to the extentsuch that we noare longerunable to realize the cost savings we anticipated, we may need to relocate these operations and functions to other lower-cost regions. Additionally, if we are unable to successfully manage the relocation, initiation or oversight of these operations and functions, including identifying, training and retaining skilled labor, our business, financial condition and operating results would be harmed.

In particular, transferring product lines to other manufacturing locations and/or to or from our contract manufacturers' facilities often requires us to transplant complex manufacturing equipment and processes across a large geographical distance, train a completely new workforce concerning theto use of this equipment and these processesprocesses, and comply with local regulations. In addition, our customers may require us to requalify products supplied to them in connection with the relocation of manufacturing operations.relocation. If we are unable to successfully manage these transfers and training smoothly and comprehensively,training, or if we are unable to requalify products in a timely manner, we could suffer manufacturing and supply chain delays, excessive product defects, harm to our operating results and our reputation, and loss of customers. Further, the utilization ofutilizing overseas manufacturing locations and contract manufacturers may require additional transportation and shipping costs and customs tariffs or export licenses, which may be difficult or costly to obtain.obtain, or which may become subject to unanticipated changes.

In addition, our contract manufacturers may terminate our agreements with them, including immediately if we become insolvent or fail to perform a material obligation under the agreements. If we are required to change contract manufacturers or assume internal manufacturing operations, including due to the termination of one of our contract manufacturing contracts, we will likely suffer manufacturing and shipping delays, lost sales, increased costs and damage to our customer relationships, any of which would harm our business, financial condition and operating results.

Many of our products are inherently complex in design and, in some cases, require extensive customization and/or ongoing regular maintenance. Further, the manufacturing of these products often involves a highly complex and precise process, the utilization of specially qualified materials or components that conform to stringent specifications, and highly skilled labor. As a result of the technical complexity of these products, design defects, skilled labor turnover, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective or nonconforming materials or software by us or our suppliers could adversely affect our manufacturing yields and product reliability. This could in turn harm our business, operating results, financial condition and customer relationships.

We provide warranties for our products, and we accrue reserves for estimated warranty costs at the time we recognize revenue for the sale of the products. The determination of such reserves requires us to make estimates of product return rates and expected costs to repair or replace the products under warranty. We establish warranty reserves based on historical warranty costs for our products. If actual return rates or repair and replacement costs differ significantly fromexceed our estimates, our operating results would be negatively impacted.

We outsource a number of services, including certain IT systems and systems management, logistics, contract manufacturing, payroll and tax functions, to third-party service providers. While outsourcing arrangements may lower our cost of operations, they also reduce our direct control over the services rendered. This diminished control may have an adverse effect on the quality or quantity of services rendered, our ability to quickly respond to changing market conditions, or our ability to ensure compliance with all applicable laws and regulations. If we do not effectively develop and manage our outsourcing strategies, if required export and other governmental approvals are not timely or accurately obtained, if our third-party service providers do not comply with laws orlaws, perform as anticipated,anticipated or do not adequately protect our data, including from cybersecurity breaches, or if there are delays or difficulties in enhancing business processes, we may experience operational difficulties, increased costs, manufacturing or service interruptions or delays, loss of intellectual propertyIP rights or other sensitive data, quality and compliance issues, and challenges in managing our product inventory or recording and reporting financial and management information, any of which could materially and adversely affect our business, financial condition and operating results.

The loss of net revenues from any one of our major customers would likely have a material adverse effect on us.

MKS Inc., formerly known as MKS Instruments, Inc. (“MKS,” the “Company,” “our,” or “we”), was founded in 1961 as a Massachusetts corporation. We enable technologies that transform our world. We deliver foundational technology solutions to leading edge semiconductor manufacturing, electronics and packaging, and specialty industrial applications. We apply our broad science and engineering capabilities to create instruments, subsystems, systems, process control solutions and specialty chemicals technology that improve process performance, optimize productivity and enable unique innovations for many of the world’s leading technology and industrial companies. Our solutions are critical to addressing the challenges of miniaturization and complexity in advanced device manufacturing by enabling increased power, speed, feature enhancement and optimized connectivity. Our solutions are also critical to addressing ever-increasing performance requirements across a wide array of specialty industrial applications.

VSD delivers foundational technology solutions tofor semiconductor manufacturing, electronics and packaging and specialty industrial applications. VSD products are derived from our core competencies in vacuum technologies, including pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and fiber optic temperature and position sensing.

MKSWe isare a critical solutions provider for semiconductor manufacturing. Our products are used in major semiconductor processing steps, such as deposition, etching, cleaning, lithography, metrology, and inspection. The semiconductor industry continually faces new challenges, as products become smaller, more powerful and highly mobile. Ultra-thin layers, smaller critical dimensions, new materials, 3D structures, and the ongoing need for higher yield and productivity drive the need for tighter process measurement and control, all of which MKSwe supports.support. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment (“WFE”) ecosystem and address over 85% of the market. We characterize our broad and unique offering as Surround the Wafer® to reflect the technology enablement we provide across almost every major process in semiconductor manufacturing today.

The semiconductor market is subject to rapid demand shifts, which are difficult to predict, and we cannot be certain as to the timing or extent of future demand or any future softening in the semiconductor capital equipment industry. In addition to these rapid demand shifts, the semiconductor capital equipment industry ishas recently been subject to significant trade restrictions, especially in key markets, including China.

MKSWe isare a foundational solutions provider for the electronics and packaging market. Our portfolio includes photonics components, laser drilling systems, electronics chemistries and plating equipment that are critical for the manufacturing of PCBsprinted circuit boards (“PCB”) and package substrates, and critical to wafer level packaging (“WLP”) applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs.

Net revenues from customers in our electronics and packaging market increased by $6$189 million, or 1%,20%, in 20242025 compared to 2023.2024. This increase was primarily due to anhigher increasechemistry and equipment sales in industrythe demandelectronics formarket at MSD as well as higher sales of PCB via drilling systems at PSD and an increase in the volume of chemistry materials at MSD, partially offset by a decline in palladium prices for chemistry products, which lower prices are passed through to our customers, and lower equipment revenue at MSD as customers postponed investment decisions.PSD.

MKS’Our strategy in the specialty industrial market is to leverage our domain expertise and proprietary technologies across a broad array of applications in industrial, life and health sciences, and research and defense markets.

Net revenues from customers in our specialty industrial market decreased by $61$42 million, or 5%,4%, in 2024,2025, compared to 2023.2024. This decrease was primarily driven primarily by lower revenuesales in the solar, generalto industrial andcustomers material processing markets, mainly withinat VSD and lower chemistry and equipment sales to industrial customers at MSD.

A significant portion of our net revenues is from sales to customers in international markets. International net revenues accounted for approximately 78%81% and 75%78% of our total net revenues in 20242025 and 2023,2024, respectively. We report geographical net revenues based on the shipped-to location of the end customer. A significant portion of our international net revenues was from customers in China, South Korea, Japan,Singapore, Taiwan and Singapore.Japan. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.

Long-lived assets located outside of the United States accounted for approximately 59%70% and 58%59% of our total long-lived assets as of December 31, 20242025 and 2023,2024, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets, netassets and certain other assets.

MD&A discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, warranty costs, pension plan valuations, stock-based compensation expense, intangible assets, goodwill and long-lived assets, income taxes and derivatives. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Inventory Valuation. We value our inventory at the lower of cost or net realizable value, cost being determined using a standard costing system that approximates actual costs, based on a first-in, first-out method. We regularly review inventory quantities on hand and record a provision to write-down excess and obsolete inventory to its estimated net realizable value, if less than cost, based primarily on our estimated forecast of product demand. Once our inventory value is written-down and a new cost basis has been established, the inventory value is not increased due to demand increases. Demand for our products can fluctuate significantly. A significant increase in the demand for our products could result in a short-term increase in the cost of inventory purchases as a result of supply shortages or a decrease in the cost of inventory purchases as a result of volume discounts, while a significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand. In addition, our industry is subject to technological change, new product development and product technological obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results. Excess and obsolete expense was $45 million, $56 million,million and $64 million and $21 million for 2024,2025, 20232024 and 2022,2023, respectively. The higher excess and obsolete charge in 2023 was partially thedue result ofto an inventory write-off relatedas toa result of the discontinuation of a product line in 2023 and partially thedue result ofto reduced forecasted usage. The higher excess and obsolete chargecharges in 2025 and 2024 waswere mainly the result of reduced forecasted usage.

Stock-Based Compensation Expense. Stock-based awards include (i) time-based restricted stock units (“time-based RSUs”), (ii) performance-based RSUs based on the achievement of Company adjusted EBITDA targets over a one-year performance period (the “Adjusted EBITDA RSUs”), (iii) performance-based RSUs based on the Company’s total shareholder return relative to a group of peers over a three-year performance period (the “rTSR RSUs”) and (iv) employee stock purchase plan rights. We record compensation expense for all stock-based compensation awards to employees and directors based upon the estimated fair market value of the underlying instrument. Accordingly, stock-based compensation cost is measured at the grant date, based upon the fair value of the award.

We determine the fair value of time-based RSUs based on the closing market price of our common stock on the date of grant reduced by the award.present value of dividends expected to be paid on our common stock prior to vesting. We determine the original fair value of Adjusted EBITDA RSUs based upon the closing market price of our common stock on the date of grant reduced by the awardpresent value of dividends expected to be paid on our common stock prior to vesting and adjust the fair value quarterly during the firstone-year yearperformance period based upon actual and forecasted results against Company Adjusted EBITDA targets. Accordingly, the number of performanceAdjusted sharesEBITDA RSUs earned will vary baseddepend on the levelactual ofCompany achievementAdjusted ofEBITDA financial performance objectivesachieved for the applicableone-year performance period. For each quarter untilduring suchthe time that our financialone-year performance can ultimately be determined,period, we estimate the number of performanceAdjusted sharesEBITDA RSUs to be earned based on an evaluation of the probability of achieving the financialCompany performanceAdjusted objectives.EBITDA targets. Such estimates are revised, if necessary, in subsequent periods when the underlying factors change our evaluation of the probability of achieving thesuch financialCompany performanceAdjusted objectives.EBITDA targets. Accordingly, share-based compensation expense associated with performanceAdjusted sharesEBITDA RSU targets may differ significantly from the amount recorded in the current period. Such values are recognized as expense using the accelerated graded vesting method for Adjusted EBITDA RSUs, all over the requisite service periods. We estimate the fair value of rTSR RSUs using the Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying common stock. For the rTSR RSUs, the expense computed for the total shareholder return shares is fixed and recognized on a straight-line basis over the vestingservice period.

The assumptions used in calculating the fair value of share-based compensation awards representsrepresent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

As of October 31, 2025 and 2024, we performed our annual impairment assessment of goodwill using a qualitative assessment for all of our reporting units. We determined that it was more likely than not that the fair values were more than the carrying values for each of the reporting units.

Income Taxes. We evaluate the realizability of our net deferred tax assets and assess the need for a valuation allowance on a quarterly basis. The future benefit to be derived from our deferred tax assets is dependent upon our ability to generate sufficient future taxable income in each jurisdiction of the right type to realize the assets. We record a valuation allowance to reduce our net deferred tax assets to the amount that is expected to be realized. Evaluating positive and negative evidence regarding the realization of the net deferred tax assets in accordance with ASC 740, “Accounting for Income Taxes,” is a key judgment in this process. This assessment includes an evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income, and tax-planning strategies. To the extent we establish a valuation allowance, or determine that a valuation allowance is no longer needed, an expense or benefit is recorded within the provision for income taxes line in the consolidated statements of operations and comprehensive income (loss). income.In 2025, we decreased our valuation allowance by $72 million, primarily related to certain foreign interest and net operating loss carryforwards. Although realization is not guaranteed, we have concluded it is more likely than not that these assets, net of the remaining valuation allowance, will be realized.

The following table sets forth our net revenues for productsproduct and servicesservice:

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. Net service revenues increased $40$33 million in 2024,2025, compared to 2023,2024, primarily due to an increase in net service revenues in our semiconductor market, mainly at VSD, andoffset anby increasea decrease of net service revenues in our electronics and packaging market, mainly at PSD and MSD.

Total international net revenues, including product and service, were $3.2 billion in 2025, compared to $2.8 billion in 2024, comparedprimarily driven by an increase of $155 million in sales to $2.7 billion in 2023.China.

Net revenues for our PSD segment increased $45$8 million in 2024,2025, compared to 2023,2024, primarily as a result of an increase in sales of our lithography, metrology and inspection products, that are a part of our World Class Optics portfolio, in our semiconductor market and an increase in industryincreased demand for PCB via drilling systems in our electronics and packaging market offset by decreased sales of our lithography, metrology and inspection products in our semiconductor market.

Gross profit as a percentage of net serviceproduct revenues increaseddecreased by 8.30.9 percentage points in 2024,2025, compared to 2023,2024, primarily due to favorablehigher duty and tariff costs and unfavorable product mixmix, andpartially loweroffset directby laborhigher andrevenue overhead cost on repairs.volumes.

Gross profit as a percentage of net revenues for PSDVSD increased in 2024,2025, compared to 2023,2024, primarily due to higher revenue volumes, lowerimproved excessfactory and obsolete inventory chargesutilization and lower freight and dutywarranty costs, partially offset by higher duty and tariff costs and unfavorable product mix.

Gross profit as a percentage of net revenues for MSDPSD increaseddecreased in 2024,2025, compared to 2023,2024, primarily due to lowerhigher palladium pricesduty and favorabletariff productcosts mix,and variable compensation, partially offset by higherlower warrantyexcess costs.and obsolete inventory charges.

Research and development expenses decreasedincreased $17$28 million in 2024,2025, compared to 2023,2024, mainly due to decreasesan increase of $8$21 million in compensation-related costs, including salaries, fringe and variable compensation expenses,expenses and a decrease of $2 million in engineering consulting fees, and a decrease of $5 million of research and development credits and government assistance received in 2024.received.

Our research and development efforts are primarily focused on developing and improving our instruments, components, chemistry, subsystems, systems and process control solutions to improve process performance and productivity. We have thousands of products, and our research and development efforts primarily consist of a large number of projects related to these products, none of which is individually material to us.material. Projects typically have a duration of 3 to 36 months but may be extended for development of new products.

We continue to make product advancements designed to meet our customers’ evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the rising demand for more complex hardware architecture related to increasing investments in artificial intelligence, the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accurate components and devices within the handset and tablet market, the transition to 5G for both devices and infrastructure, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers’ product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.

Selling, general and administrative expenses decreasedincreased $1$50 million during 2024,2025, compared to 2023,2024, primarily due to a $20$53 million decreaseincrease in compensation-related costs, mainly related to salaries, fringe and variable compensation and a $14 million reduction in net costs mostly incurred in 2023 due to the ransomware event in February 2023. These savings werecompensation, partially offset by increasesa of $14$5 million in information technology investments, $7 millionreduction in consulting and professional fees, $5 million in non-income related taxes, $2 million in lease expenses and $2 million in travel expenses.fees.

Acquisition and integration costs incurred during 2024 and 2023 were related to consulting and professional fees related to the acquisition of Atotech Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”).

Fees and Expenses Related to Amendments to the Term Loan Facility In 2023,2025, we recorded fees and expenses related to the FirstFifth Amendment to Credit Agreement, dated as of OctoberJanuary 3,24, 2023,2025, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “FirstFifth Amendment”).

Amortization of intangible assets decreasedincreased $50$2 million in 2024,2025, compared to 2023,2024, primarily due to the backlog-relatedimpact of foreign exchange rates on intangible assets related to MSD being fully amortized in 2023, and the write-off of completed technology at ourforeign ESB reporting unit of PSD in the second quarter of 2023.locations.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations describes principal factors affecting the results of operations, financial condition, cash flows and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our condensed consolidated financial statements, and is intended to better allow investors to view the Company from management’s perspective. This section focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of our future operating results or of our future financial condition. This section provides an analysis of our financial results for the three months ended MarchJune 31,30, 2026 compared to the three months ended DecemberMarch 31, 20252026, and the threesix months ended MarchJune 31,30, 2026 compared to the six months ended June 30, 2025. As a result of rounding, there may be immaterial differences in amounts presented and certain calculations may not sum to the total number expressed in each category or tie to a corresponding schedule.

For the three months ended MarchJune 31,30, 2026, net revenues in our semiconductor market increased by $31$88 million, or 7%,19%, compared to the prior quarterquarter, primarily due to higher sales of our semiconductor capital equipment at VSD serving deposition and etch applications as well as NAND memory production upgrades.upgrades and increased service revenues, all at VSD.

For the threesix months ended MarchJune 31,30, 2026, net revenues in our semiconductor market increased by $53$173 million, or 13%,20%, compared to the same period in the prior year. This increase was mainly due to higher sales of our semiconductor capital equipment serving deposition and etch applications and service revenues at VSD, as well as higher sales inof our lithography, metrology and inspection products at PSD.

We are a foundational solutions provider for the electronics and packaging market. Our portfolio includes photonics components, laser drilling systems, electronics chemistries and plating equipment that are critical for the manufacturing of printed circuit boards (“PCB”) and package substrates, and critical to wafer level packaging (“WLP”) applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs. We are currently seeing increased investments driven by AI applications.

For the three months ended MarchJune 31,30, 2026, net revenues in our electronics and packaging market increased by $68$60 million, or 27%,19%, compared to the same period in the prior year. This increase wasquarter primarily due to higher sales of chemistry salesand chemistry equipment at MSD as well as higher sales of flexible PCB via drilling systems at PSD.

Industrial encompasses a wide range of diverse applications, including chemistries for functional coatings, surface finishing and wear resistance in the automobile industry, vacuum solutions for synthetic diamond manufacturing and photonics for solar manufacturing.manufacturing and datacom applications. Other applications include vacuum and photonics solutions for light emitting diode and laser diode manufacturing.

For the three months ended MarchJune 31,30, 2026, net revenues in our specialty industrial market increased by $21$22 million, or 8%, compared to the same period in the prior year.quarter, This increase was primarilymainly due to higher sales in datacom applications,applications asat well as higher researchPSD and defensegeneral sales.industrial applications across all our divisions.

A significant portion of our net revenues is from sales to customers in international markets. For the threesix months ended MarchJune 31,30, 2026 and 2025, international net revenues accounted for approximately 82% and 81% respectively, of our total net revenues. We report geographical net revenues based on the shipped-to location of the end customer. A significant portion of our international net revenues was from customers in China, South Korea, Singapore, Malaysia, JapanTaiwan, Singapore and Taiwan.Japan. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.

Long-lived assets located outside of the United States accounted for approximately 69% and 70% of our total long-lived assets as of bothJune March 31,30, 2026 and December 31, 2025.2025, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets and certain other assets.

For the three months ended MarchJune 31,30, 2026, net product revenues increased $47$150 million compared to the prior quarter primarily due to higher sales of our semiconductor capital equipment at VSD serving deposition and etch applications andas well as higher NAND memory production upgrades,upgrades at VSD, higher sales of chemistry at MSD and higher sales of flexible PCB via drilling systems at PSD.

For the threesix months ended MarchJune 31,30, 2026, net product revenues increased $135$390 million compared to the same period in the prior year, primarily as a result of higher sales related toof chemistry at MSD, semiconductor capital equipment serving deposition and etch applications at VSD, and flexible PCB via drilling systems and datacom applications at PSD.

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. For the three months ended MarchJune 31,30, 2026, net service revenues decreasedincreased $2$20 million compared to the prior quarter mainly as a result of lowerhigher repair demand in our semiconductor and specialty industrial marketsmarket at VSD.

For the threesix months ended MarchJune 31,30, 2026, net service revenues increased $7$26 million compared to the same period in the prior year, primarily due to higher repair demand in our semiconductor market at VSD.

For the three months ended MarchJune 31,30, 2026, net revenues from VSD increased $25$82 million compared to the prior quarter mainly due to increased sales inof semiconductor capital equipment serving deposition and etch applications as well as NAND memory production upgrades.upgrades and higher service revenues. For the threesix months ended MarchJune 31,30, 2026, net revenues from VSD increased $39$140 million compared to the same period in the prior year, mainly due to higher sales of our semiconductor capital equipment serving deposition and etch applications and higher service revenues.

For the three months ended MarchJune 31,30, 2026, net revenues from PSD increased $29$38 million compared to the prior quarter mainly due to higher sales of flexible PCB via drilling systems in our electronics and packaging market, lithography, metrology and inspection products in our semiconductor market and higher sales in datacom applications withinin our specialty industrial market. For the threesix months ended MarchJune 31,30, 2026, net revenues from PSD increased $40$136 million compared to the same period in the prior year, mainly due to higher sales in datacom applications in our specialty industrial market, higher sales of flexible PCB via drilling systems in our electronics and packaging marketmarket, datacom applications in our specialty industrial market, as well as higher sales of our lithography, metrology and inspection products in our semiconductor market.

For the three months ended MarchJune 31,30, 2026, net revenues from MSD decreasedincreased $9$50 million compared to the prior quarter mainly due to a decrease in electronic equipmenthigher sales and lower sales for industrial applications, partially offset by increasedof chemistry salesand chemistry equipment in our electronics and packaging market. For the threesix months ended MarchJune 31,30, 2026, net revenues from MSD increased $63$140 million compared to the same period in the prior year, mainly due to higher electronicsales of chemistry sales in our electronics and packaging market as well as higher sales for industrial applications.market.

Gross profit as a percentage of net product revenues increased by 0.21.2 percentage points for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to higher revenue volumesvolumes, lower excess and obsolete inventory charges, and lower materialtariff costsand duty costs, partially offset by unfavorable product mix.

Gross profit as a percentage of net servicesproduct revenues increased by 1.40.7 percentage points for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior year, primarily due to favorablehigher laborrevenue and overhead absorptionvolumes and lower excess and obsolete inventory chargescharges, partially offset by unfavorable product mix.

Gross profit as a percentage of net revenues for VSD increased for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to higher revenue volumesvolumes, lower excess and favorableobsolete factoryinventory utilization,charges and lower tariff and duty costs, partially offset by unfavorable productfactory mixutilization and higherproduct excess and obsolete inventory charges.mix. Gross profit as a percentage of net revenues for VSD decreased for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior year, primarily due to unfavorable product mix and higher duty and tariff costs,mix, partially offset by higher revenue volumes and favorable factory utilization as well as lower excess and obsolete inventory charges.

Gross profit as a percentage of net revenues for PSD increased for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to lower tariff and duty costs and higher revenue volumes and favorable factory utilization.volumes. Gross profit as a percentage of net revenues for PSD increased for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior year, primarily due to higher revenue volumes, favorable factory utilization and lower excess and obsolete inventory charges, partially offset by higherunfavorable dutyproduct and tariff costs.mix.

Gross profit as a percentage of net revenues for MSD decreased for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to higherunfavorable palladiumproduct prices,mix, partially offset by higher revenue volumes. Gross profit as a percentage of net revenues for MSD decreased for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior year, primarily due to higherunfavorable palladiumproduct prices,mix, partially offset by higher revenue volumes.

Research and development expenses for the three months ended MarchJune 31,30, 2026 increaseddecreased $3$5 million compared to the prior quarterquarter, primarily due to a $4 million reduction in project material costs and a $2 million increase in compensation-relatedgovernment assistance grants, partially offset by a $2 million increase in compensation related costs. Research and development expenses increased $11$12 million for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior yearyear, primarily due to $4increases of $8 million in compensation-related costs, $3 million in project material costs and $2$3 million in software maintenance costs.

We continue to make product advancements designed to meet our customers’ evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the rising demand for more complex hardware architecture related to increasing investments in artificial intelligence, the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accuratecapable components and devicessystems withinfor theAI handsetdatacenters and tabletedge market,devices, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers’ product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.

Selling, general and administrative expenses increased $5$10 million for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to an increaseincreases of $11 million, mainly related to stock compensation, partially offset by decreases of $3$6 million in consultingcompensation feesrelated costs and $2$1 million in legalsoftware maintenance costs.

Selling, general and administrative expenses increased $5$28 million for the threesix months ended MarchJune 31,30, 2026 compared to the same period in the prior year, primarily due to an increaseincreases of $5$23 million in variablecompensation incentive compensation, partially offset by lower headcountrelated costs resultingand from$2 themillion globalin costsales saving initiative implemented during the first quarter of 2025.commissions.

Restructuring and other charges during the three and six months ended June 30, 2026 and the three months ended March 31, 2026 related primarily to severance costs incurred as a result of a reorganization of certain business units within PSD, which was implemented in the first quarter of 2026, and the planned closing of a PSD implementedfacility in Europe, which was initiated during the first quarter of 2026. RestructuringThe andfacility otherclosing chargesis during the three months ended December 31, 2025 related primarilyexpected to thirdbe partycompleted costsin supportingearly certain strategic initiatives.2027. Restructuring and other charges during the threesix months ended MarchJune 31,30, 2025 related primarily to severance costs incurred as a result of a global cost saving initiative implemented induring the first quarter of 2025, primarilymainly in the general metal finishing business within MSD.

During the three months ended March 31, 2026 and the six months ended June 30, 2026, we recorded a charge related to the resolution of a legal matter.

During the three months ended March 31, 2026 and the six months ended June 30, 2026, we recorded fees and expenses related to the Sixth Amendment to Credit Agreement, dated as of February 4, 2026, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Sixth Amendment”) as well as a fee from a foreign exchange option contract related to the 2034 Notes (as defined below). During the threesix months ended MarchJune 31,30, 2025, we recorded fees and expenses related to the Fifth Amendment to Credit Agreement, dated as of January 24, 2025, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Fifth Amendment”).

Amortization of intangible assets for the three months ended MarchJune 31,30, 2026 increaseddecreased $1 million compared to the prior quarter and for the six months ended June 30, 2026 increased $3 million compared to the same period in the prior yearyear, primarily due to the impact of foreign exchange rates on intangible assets at foreign locations.

Interest expense, net decreased by $4$7 million for the three months ended MarchJune 31,30, 2026 compared to the prior quarter, primarily due to the Sixth Amendment, which resulted in a reduction in interest rates under our Term Loan Facility and the 2034 Notes Offering (each as defined below), the proceeds of which we used, together with cash on hand, to prepay approximately $1.3 billion of our USD Tranche B (as defined below). We also made a voluntary prepayment of $100 million on our USD Tranche B during the three months ended DecemberJune 31,30, 2025.2026.

Interest expense, netnet, decreased by $7$22 million for the threesix months ended MarchJune 31,30, 20262026, compared to the same period in the prior yearyear, primarily as a result of the Sixth Amendment and the 2034 Notes Offering as described above, as well as various quarterly voluntary prepayments on the USD Tranche B in the amount of $400 million throughoutand 2025.$200 million in 2025 and 2026, respectively.

For the three months ended DecemberJune 31,30, 2025,2026, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discountdiscounts costsassociated with our loans under the Term Loan Facility in connection with a voluntary prepayment on our USD Tranche B loan in October 2025.prepayment.

For the three months ended March 31, 2025,2026 and six months ended June 30, 2026, in connection with the FifthSixth Amendment and a voluntary prepayment on our USD Tranche B loan in JanuaryFebruary 2025,2026, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discounts associated with our loans under the Term Loan Facility.

Other (income) expense, net for the three monthsand ended March 31, 2026, threesix months ended DecemberJune 31,30, 2025 and2026, three months ended March 31, 2026 and six months ended June 30, 2025 consisted primarily of net foreign exchange and fair value gains and losses.

Provision (Benefit) for Income Taxes

Our effective tax rates for the three months ended MarchJune 31, 2026, three months ended December 31, 2025, and three months ended March 31, 2025 were 17.7%, (20.8%), and 12.3%, respectively. Our effective tax rates for the three months ended March 31,30, 2026 and March 31, 20252026 were 17.8% and 17.7%, respectively. The effective tax rate for both periods was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for Foreign-Derived Deduction Eligible Income (“FDDEI”) and research and development tax credits, partially offset by foreign withholding taxes and a waiver of deductions related to U.S. base erosion payments. Our effective tax rate for the three months ended December 31, 2025 was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for Foreign-Derived Deduction Eligible Income, research and development tax credits, and valuation allowance release partially offset by foreign withholding taxes and a waiver of deductions related to U.S. base erosion payments.

The Organisation for Economic Co-operation and Development (“OECD”) and participating OECD member countries have issued rules introducing a 15% global minimum corporate tax rate for large multinational enterprise groups, also known as “Pillar Two.” These rules were amended in January 2026 by the OECD “Side-by-Side package” in particular to address the coexistence of U.S. minimum tax regimes and ensure that U.S. based multinational groups are not subject to both primary and secondary top-up taxes under Pillar Two. The adoption and effective dates of Pillar Two and any additional rules vary by country. However, Pillar Two has not had a material impact on our financial results for the six months ended June 30, 2026, and we do not expect Pillar Two to have a material impact on our 2026 financial results.results for the year ending December 31, 2026. We will continue to monitor and evaluate the impact of any developing legislation.

Cash and cash equivalents at MarchJune 31,30, 2026 and December 31, 2025 totaled $569$611 million and $675 million, respectively. The primary driver of our current and anticipated future cash flows is, and we expect will continue to be, cash generated from operations, consisting primarily of our net income, excluding non-cash charges and changes in operating assets and liabilities.

Our total cash and cash equivalents at MarchJune 31,30, 2026 consisted of $126$128 million held in the United States and $443$483 million held by our foreign subsidiaries. We believe that our current cash and cash equivalentsequivalents, and available borrowing capacity, together with the cash anticipated to be generated from our operations, will be sufficient to satisfy our estimated working capital needs, planned capital expenditure requirements, payments of debt, potential settlement of convertible debt conversions and any future cash dividends declared by our Board of Directors or share repurchases through at least the next 12 months and the foreseeable future.

Net cash provided by operating activities was $53$296 million for the threesix months ended MarchJune 31,30, 2026 and resulted from net income of $84$258 million, which included non-cash charges of $103$189 million, mainly the result of $85$171 million in depreciation and amortization, partially offset by $24 million in deferred income taxes of $44 million and a net increase in working capital of $134$151 million. The net increase in working capital was primarily due to increases in accounts receivable of $129$184 million,million as a result of higher sales,sales and inventory of $49$139 million,million andas a decrease in current and non-current accrued compensationresult of $68higher million, mainly due to payments of variable compensation.demand. The net increase in working capital was partially offset by increasesan increase in accounts payable of $45$146 million andas othera current and non-current liabilitiesresult of $36increased million, and by a decrease in other current and non-current assets of $21 million.demand.

Net cash used in investing activities was $25$80 million for the threesix months ended MarchJune 31,30, 2026 primarily related to capital expenditures for new facility additions in Malaysia and China.

Net cash used in financing activities was $137$285 million for the threesix months ended MarchJune 31,30, 2026, primarily due to net proceeds of €1.0 billion aggregate principal amount from the 2034 Notes, as defined and described further below, offset by the prepayment of $1.3 billion of the USD Tranche B loan using the proceeds from the 2034 Notes, together with cash on hand. InNet addition,cash thereused werein financing activities also included additional payments of $22the millionTranche B loans of $104 million, net payments related to employee stock awards of $42 million, payments for deferred finance costs related to the issuance of the 2034 Notes of $22 million and a dividend paymentpayments of $17$34 million.

During the threesix months ended MarchJune 31,30, 2026, we did not repurchase any shares of common stock. During the threesix months ended MarchJune 31,30, 2025, we repurchased approximately 546,000 shares of our common stock for total consideration of $45 million. We have repurchased approximately 3.1 million shares of common stock for approximately $172 million pursuant to the program since its adoption.

Holders of our common stock are entitled to receive dividends when and if they are declared by our Board of Directors. ForDuring the threefirst monthsand endedsecond Marchquarters 31,of 2026, we paid cash dividends of $17 million in the aggregate of $0.25 per share.share, Fortotaling in aggregate $34 million during the threesix months ended MarchJune 31,30, 2026. During the first and second quarters of 2025, we paid cash dividends of $15 million in the aggregate of $0.22 per share.share, Futuretotaling dividendin declarations,aggregate if$30 any,million as well asduring the recordsix andmonths paymentended datesJune for30, such dividends, are subject to the final determination of our Board of Directors.2025.

On August 17, 2022, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto, which we have since amended several times, including most recently in February 2026 (as amended, the “Credit Agreement”). As of MarchJune 31,30, 2026, after giving effect to all amendments and repayments prior to such date, the Credit Agreement provided for (i) a senior secured term loan facility comprised of two tranches: a $914$812 million loan (as refinanced and otherwise modified from time to time, the “USD Tranche B”) and a €587585 million loan (as refinanced and otherwise modified from time to time, the “Euro Tranche B” and together with the USD Tranche B, the “Term Loan Facility”) and (ii) a senior secured revolving credit facility with aggregate commitments of $1.0 billion (as refinanced and otherwise modified from time to time, the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”).

As of MarchJune 31,30, 2026, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at our option, any of the following, plus, in each case, an applicable margin: (a) with respect to the USD Tranche B and the Revolving Facility, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on the variable secured overnight financing rate (“Term SOFR”) for an interest period of one month, plus 1.00%, and (y) a Term SOFR rate for the interest period relevant to such borrowing; and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate (“EURIBOR”) rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case of clauses (a) and (b) above subject to a rate floor of 0.0%. As of MarchJune 31,30, 2026, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche B and the Revolving Facility, 0.75% with respect to base rate borrowings and 1.75% with respect to Term SOFR borrowings and (ii) under the Euro Tranche B, 2.00%.

In addition to paying interest on outstanding principal under the Credit Facilities, we are required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility. The commitment fee is subject to adjustment based on our first lien net leverage ratio as of the end of the preceding fiscal quarter. As of MarchJune 31,30, 2026, the commitment fee was 0.25% per annum. We must also pay customary letter of credit fees and agency fees.

On each of May 6, 2026 and August 4, 2026, we made a voluntary prepayment of $100 million principal amount on the USD Tranche B loan.