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

Failure to capitalize on, volatility within, or other adverse changes with respect to the Company’s growth drivers, including significant growth markets and high growth markets,opportunities may adversely affect our business.

We derivedcontinue approximatelyto 18%target andgrowth 34%opportunities of our net sales forin the year ended December 31, 2024 from sales relating to the significant growth markets (e.g., EV/HEV) and high growth markets (e.g.,HEV, ADAS, portable electronics, renewable energy andenergy, aerospace and defense), respectively.and other markets. These growth drivers,opportunities, as well as specific market and industry trends within them, may be volatile, cyclical and sensitive to a variety of factors, including general economic conditions (including higher inflation and interest rates), demand disruptions (including third-party component availability at our customers), technology disruptions, consumer preferences and political priorities. Adverse or cyclical changes to and within these growth drivers,opportunities, such as delays in adoption or implementation of new technologies, hashave resulted in, and may continue to result in, reduced demand for certain of our products, production overcapacity, increased inventory levels and related risks of obsolescence, as well as price erosion, ultimately leading to a decline in our operating results. Acceleration within these growth driversopportunities and corresponding rapid increases in demand for certain products may also require us to make significant capital investments or acquisitions in facilities and information systems and significantly increase our personnel in order to increase production levels and to maintain customer relationships and market positions. However, we may not be able to increase our production levels with sufficient speed or efficiency to capitalize on such increases in demand.

Macroeconomic conditions, such as high inflationary pressure, changes to monetary policy, high interest rates, volatile currency exchange rates, credit and sovereign debt concerns, decreasing consumer confidence and spending, including capital spending, concerns about the stability and liquidity of certain financial institutions, the introduction of or changes in tariffs or trade barriers, and global or local recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, or results of operations. Recent macroeconomic conditions have been adversely impacted by geopolitical events, instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia and the conflict between Israel, Hamas and Hezbollah),geographies, and monetary and financial uncertainties.

As part of our general growth strategy, we expect to continue to pursue organic growth (including the significant capital expenditures associated therewith),growth, while also continuing to evaluate potential acquisitions and expansion opportunities that we believe provide a strategic or geographic fit with our business. AlthoughIn the past, we have experienced periods of significant growth in our assets and revenuesrevenues, inas thewell past,as periods of decline. No assurance can be given that we may notwill be able to sustainreturn ourto or replicate these historical growth raterates or be able to grow at all. Our growth strategy may divert management from our existing business and may require us to incur additional expenditures to expand our administrative and operational infrastructure and, if we are unable to effectively manage our growth, including to the satisfaction of our regulators, we could be materially and adversely affected. Consequently, continued organic growth, if achieved, may place a strain on our administrative and operational infrastructure, which could have a material adverse effect on our financial condition and results of operations.

We continue to depend upon the continued services and performance of key executives, senior management and skilled technical personnel, particularly our sales engineers and other professionals with significant experience in the key industries we serve. Our ability to compete effectively and our future success depend on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition for these personnel from other companies, academic institutions and government entities is intense.exists. In addition, our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees. Outside the U.S., it is increasingly important that we are also able to attract and retain personnel with relevant local qualifications and experience. We may not be able to continue to attract and retain the qualified personnel necessary to continue to advance our business and achieve our strategic objectives. Additionally, as demand for our products and services increases, our existing personnel may not be able to effectively scale their job functions with the increased demand. If we are unable to identify, hire, develop, motivate, and retain new qualified personnel with relevant local qualifications and experience, our existing workforce may become too lean to accommodate the increased demand, which may have a material adverse effect on our ability to grow and scale our business.

Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss or disruption due to fire, flood, earthquake, hurricane, public health crisis, war, terrorism or other natural or man-made disasters or events. If any of these facilities, supply chains or systems were to experience a catastrophic loss or disruption, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation and result in legal exposure and large repair or replacement expenses. In 2021, we experienced fire damage in our Ansan, South Korea manufacturing facility, the impacts of which have since largely been resolved. The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against losses or disruptions.

For the year ended December 31, 2024,2025, approximately 73%72% of our net sales resulted from sales in foreign markets, with approximately 44%41% and 27%29% of such net sales occurring in Asia and Europe, respectively. We expect our net sales in foreign markets to continue to represent a substantial majority of our consolidated net sales. We maintain significant manufacturing and administrative operations in China, Germany, England, Belgium, South Korea and Hungary, and approximately 66%63% of our employees were located outside the U.S. as of December 31, 2024.2025. Risks related to our extensive international operations include the following:

•foreign currency fluctuations, particularly in the value of the euro, the Chinese renminbi, the South Korean won, the British pound, the Japanese yen and the Hungarian forint against the U.S. dollar;

OnBeginning in February 1, 2025, President Donald J. Trump signed anmultiple executive orderorders imposingand 25%amendments to these orders, raising tariffs on mostU.S. goods from Mexico and Canada and a 10% additional tariff on all goods from China, effective February 4, 2025. The tariffs on Mexico and Canada were delayed by 30 days following negotiations. Additionally, a 25% tariff on steel and aluminum was reinstated on February 11, 2025.imports. The situation remains fluid, and the duration and outcome of these tariff actions are uncertain. As a result, we are unable to predict the ultimate result and duration of any tariff actions by the U.S. government, or countermeasures that may be taken by other nations.

It remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use of foreign communications equipment, or other trade matters. Although the ultimate scope and timing of any such tariffsactions is indeterminable, if implemented, they could have a significant impact on our financial condition and results of operations. Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the U.S. or other countries relating to tax policy and trade regulation would not adversely affect our business, operations and financial results.

The increased trade conflicts between the U.S. and its major trading partners, evidenced by trade restrictions such as tariffs, taxes, export controls, economic sanctions, and enhanced policies designed to protect national security, could adversely impact our business. In particular, we have experienced in the past and expect that we may in the future experience impacts on our business due to the increase in trade conflicts between the U.S. and China. Export controls, as well as retaliatory controls and tariffs that China has imposed and which remain in place to a certain extent under the Phase 1 agreement reached between the U.S. and China on January 15, 2020,imposed, could continue to restrict our ability to do business with Chinese customers. Further U.S. government actions to protect domestic economic and security interests could lead to further restrictions. China continues to be a fast-developing market and an area of potential growth for us. Sales to customers located in China and the Asia Pacific region have typically accounted for nearlyapproximately half41% of our total sales and a substantial majority of our overall sales to customers located outside the U.S. as of December 31, 2025. In addition, certain of the end products created in China that incorporate our products are ultimately sold outside of the Asia Pacific region. We expect that revenue from these sales generally, and sales to China and the Asia Pacific region specifically, will continue to be a material component of our total revenue. Therefore, any financial crisis, trade war or dispute or other major event causing business disruption in international jurisdictions generally, and China and the Asia Pacific region in particular, could negatively affect our business, results of operations and financial position.

In the ordinary course of business, we collect and store confidential information, including proprietary business information belonging to us, our customers, suppliers, business partners and other third parties and personally identifiable information of our employees. We rely on information technology systems to protect this information and to keep financial records, process orders, manage inventory, coordinate shipments to customers, and operate other critical functions. Our information technology systems are susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, systems upgrades (including the plannedbeginning stage and continued implementation of a new ERP system) and user errors. If we experience a disruption in our information technology systems, it could result in the loss of sales and customers and significant incremental costs, which could materially adversely affect our business.

We are also subject to security breaches caused by computer viruses, illegal break-ins or hacking, sabotage, or acts of vandalism by disgruntled employees or third parties. The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, in part because of evolving technologies, the ubiquitous use of the Internet and telecommunications technologies (including mobile devices) to conduct business transactions. AI has heightened this risk by accelerating the speed, scale and sophistication of attacks. Our information technology network and systems have been and, we believe, continue to be under constant attack. Accordingly, despite our security measures or those of our third-party service providers, we have experienced and may in the future experience security breaches, including breaches that we may not be able to detect. Security breaches of our information technology systems, including through mobile devices, could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our customers, suppliers, business partners, employees or other third parties, which could result in our suffering significant financial and reputational damage. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our security processes and procedures and our compliance with applicable laws and regulations, including evolving government cyber security requirements for government contractors.

The use of generative AI technologies by employees and personnel to perform routine work is becoming more common within our business industry. Disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology is currently limited, but could result in additional compliance costs, regulatory investigations and actions, and lawsuits should we determine to increase our adoption and use of the technology. If we are unable to use generative AI due to these additional costs, it could make our business less efficient and result in competitive disadvantages.

By way of example, but not limitation, governmental authorities in the U.S. and in other jurisdictions are increasingly focused on potential contamination resulting from the use of so-called “forever chemicals,” most notable at present are per- and polyfluoroalkyl, substances (PFAS).PFAS. Products containing PFAS have been used in manufacturing, industrial, and consumer applications over many decades, including in some of our engineered materials and components, andand, aredue to their long-term use, have become virtually ubiquitous in parts of the environment. Until recently, these substances were largely unregulated.unregulated as a class. Nevertheless, over the last few years, PFAS regulation has been evolving rapidly. In 2023, China’s Ministry of Ecology and Environment added perfluorooctanoic acid (PFOA), a type of PFAS, to its List of Toxic Chemicals Strictly Restricted; the U.S. EPA issued a new rule under the Toxic Substances Control Act, requiring manufacturers and importers of PFAS to submit additional reporting information about production volumes, industrial uses, byproducts, worker exposure, and disposal.disposal; In 2023,and, certain EU member states submitted a proposal to the European Chemicals Agency calling for the phase out of the manufacture, import, sale, and use of PFAS substancessubstances. beginning in late 2025. In 2024,Recently, among other things,actions, the U.S. EPA issued new regulations regarding PFAS in drinking water, PFAS reporting obligations under Toxic Substances Control Act, and designated two PFAS chemicals (Perfluorooctanoic acid and Perfluorooctane sulfonic acid) as hazardous substances under Comprehensive Environmental Response, Compensation, and Liability Act. While PFAS regulation continues to advanceevolve at the federal leveland andstate levels in manythe states,U.S., as well as in jurisdictions around the world, the full scope of such regulation is still being developed. In some cases, PFAS compounds are regulated at, or even below, the ability of current technology to consistently detect their presence, making remediation difficult and complex. We may therefore incur costs in connection with any obligations to transition away from the usage of PFAS-containing products, to dispose of PFAS-containing waste or to remediate any PFAS contamination, which could have a negative effect on our financial position, results of operations and cash flows.

New and evolving laws, regulations and rule makings globally are expected to impose different and more restrictive standards and require greater disclosures. They could also require capital investments, incremental personnel resources, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. Our suppliers are expected to face similar challenges and incur additional compliance costs that may be passed on to us. These direct and indirect costs may adversely impact our results of operations and financial condition, and, if we are unable to comply with legislative and regulatory requirements or meet our sustainability objectives, our reputation and ability to do business could be negatively impacted. In addition, our customers’ requirements, priorities and ways of doing business with respect to environmental matters, and climate change specifically, also may have an impact on our business, operations and financial success. For example, the SEC finalized a rule in 2024 to enhance and standardize climate-related disclosures. The rule, which faces legal challenge and has been voluntarily stayed by the SEC, as well as other changes the government might implement, could impose significant new burdens on our Company and our suppliers, with significant potential costs and operational impacts, and adversely impact our ability to win business and operate successfully.

Even if domestic and foreign laws do grant initial protection toof our technology, our competitors or other third parties may subsequently obtain and unlawfully copy, use or disclose our technologies, products, and processes. We believe that the risk of piracy of our technology is particularly acute in the foreign countries in which we operate. In circumstances in which we conclude that our proprietary technology has been infringed, we have pursued, and may again pursue, litigation to enforce our rights. The defense and prosecution of intellectual property infringement suits are both costly and time consuming, even if the outcome is favorable to us. If we are not successful in protecting our proprietary technology or if the protection afforded to us is not sufficiently broad, our competitors may be able to manufacture and offer products substantially similar to our own, thereby reducing demand for our products and adversely affecting our results of operations and financial position. We may also be adversely affected by, and subject to increased competition as a result of, the normal expiration of our issued patents.

For instance, many foreign jurisdictions are actively considering, and some have enacted, changes to existing tax laws as a result of the base erosion and profit shifting project undertaken by the OECD.Organization for Economic Co-Operation and Development. As these changes are enacted, our tax obligations could increase in countries where we do business or sell our products.

The terms of our credit agreement subject us to risks, including potential acceleration of our outstanding indebtednessrisks if we fail to satisfy financial ratios and comply with numerous covenants.

Our credit agreement with JPMorgan Chase Bank, N.A. contains, and any future debt agreements into which we enter may contain, certain financial ratios and certain restrictive covenants that, among other things, limit our ability to incur indebtedness or liens, acquire other businesses, dispose of assets, or make investments. Our ability to make scheduled payments on these borrowings and to satisfy financial ratios may be adversely affected by changes in economic or business conditions beyond our control, while the restrictive covenants to which we are subject may limit our ability to take advantage of potential business opportunities as they arise. Failure to satisfy these financial ratios or to comply with the covenants in our credit agreement would constitute a default. An uncured default with respect to one or more of our covenants could result in outstanding borrowings thereunder being declared immediately due and payable, which may also trigger an obligation to repay other outstanding indebtedness. Any such acceleration of our indebtedness would have a material adverse effect on our cash flows, financial position and results of operations.

AddressingEffective climate change was a stated priorityJanuary of the former presidential administration, including recommitting2026, the U.S. towithdrew from the Paris Agreement and enactingpulled legislationback various sustainability-related federal commitments and incentives, however, states continue to advanceadopt objectivestheir toown achievesustainability a net zero emissions economy by 2050.regulations. For example, the IRA, the Bipartisan Infrastructure Law, and the CHIPS and Science Act, provide incentives to promote climate-friendly technologies and innovation that may increase the demand for the products we produce. The U.S. EPA, in addition to several state governments, promulgated regulations directed at GHG emissions reductions from certain types of facilities. California adopted the Climate Accountability Package in 2023 that introduces extensive climate-related disclosure requirements, andalthough thethese SEChave finalizedbeen a rulechallenged in 2024 to enhance and standardize climate-related disclosures. Both disclosure measures face legal challenge, and the SEC has voluntarily stayed its rule. On February 11, 2025, the acting Chairman of the SEC directed the SEC staff to request that the courts hearing legal challenges to the climate-related disclosure rules not schedule the case for argument to provide time for the SEC to deliberate and determine the appropriate next steps in these cases. The Trump administration has indicated that it will take a different approach towards climate change compared to its predecessor and there is uncertainty regarding what regulatory or executive actions may be forthcoming. Given these uncertainties, it is difficult to accurately estimate at this time if U.S. federal or state levelstate-level activity could result in increased operating costs for compliance, required acquisition or trading of emission allowances, or compliance costs associated with additional regulatory frameworks for a range of potential carbon reduction projects, including carbon capture, use, and sequestration projects. Additionally, demand for the products we produce may be reduced.reduced should the Company be unable to meet regulatory requirements.

In recent years, shareholder activists have become involved in numerous public companies. While we strive to maintain constructive communications with our shareholders, activist shareholders have engaged and may, from time to time, engage in proxy solicitations or shareholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. For example, as previously reported, in February 2023, after an activist shareholder provided notice of its intention to conduct a proxy contest to seek to elect several director candidates to our board of directors, we entered into a settlement agreement with the shareholder and certain of its affiliates regarding, among other things, changes to the composition of our board of directors, including the appointment of two new independent directors.

The following discussion and analysis of our results of operations and financial position should be read together with our consolidated financial statements and accompanying notes, which are contained in “Item 8. Financial Statements and Supplementary Data.” The discussion of the comparison of our 2024 and 2023 results was previously disclosed within the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2025 and has been omitted from this section pursuant to Instruction 1 to Item 303(b) of Regulation S-K.

Our growth and profitability strategy is based upon the following principles: (1) market-driven organization, (2) innovation leadership, (3) synergisticoperational mergers and acquisitions,excellence, and (4) operationalsynergistic excellence.mergers and acquisitions. Our priorities in executing this strategy are focused on driving near-term improvements to profitability and improving the growth outlook for the Company over the next several years by further strengthening our focus on our portfolio and commercial activities, optimizing our global capacity to meet customer demand and driving innovation.

As a market-driven organization, we are focused on capitalizing on growth opportunities in several differentmultiple end markets. This includes the automotive industry, where there are market opportunities resulting from the increasingcontinuing electrificationtrends ofin vehicles,vehicle electrification, and inADAS the expanding use of ADAS.adoption. Other opportunities are driven by the advancement of communication systems in aerospace and defense, the growth of next-generation smartphones in the portable electronics industry, and the continued expansion of renewable energy. In addition to our focus on these markets, we sell into a variety of other markets, including general industrial, wireless infrastructure and mass transit.

Our growth strategy is based on addressing trends in these markets and applyingmaintaining oura repeatablestrong customercustomer-centric engagement process.focus. Our sales engineers and technical service employees work closely with our customers to understand their complexneeds challenges. Theyand then leverage our innovation and technologydevelopment capabilities and deep applications expertise to provide uniquecustomized solutionssolutions. to customers’ challenges. In addition to these capabilities, ourOur strategy for success is alsosupported builtby onan ourexpansive product portfolio and a reputation for producing high performance and reliability,reliable trustedproducts. customer relationships and an expansive product portfolio. Through this strategy weWe expect to be able to drivesecure further commercial wins, which provide the potential for higher growth in the future. This growth strategy is enabled by both organicwins and inorganicimprove investmentssales from whichas we striveexecute toon ensurethis high-quality solutions for our customers.strategy.

Our operational excellence efforts are focused on driving ongoing cost structureimprovements improvementsand efficiencies to further enhance our profitability.profitability while enhancing the agility and customer focus of the organization. These efforts include focusing on improving yields, throughput, procurement capabilities, and manufacturing processes. We have also taken specific cost improvement actions in recent quarters that have and will benefit our performance. These actions include optimizing our manufacturing footprint, divesting non-core product lines and reducing manufacturing and corporate employees. We continue to review and re-align our manufacturing and engineering footprint in an effort to maintain a leading competitive position globally and to support our customers’ growth initiatives.

We seek to enhance our operational and financial performance by investing in research and development, manufacturing and materials efficiencies, and new product initiatives that respond to the needs of our customers. We strive to evaluate operational and strategic alternatives to improve our business structure and align our business with the changing needs of our customers and majorevolving industry trends affecting our business.trends.

•In 20242025, as compared to 2023,2024, our net sales decreased by 8.6%2.3% to $830.1$810.8 million, our gross margin decreased 40170 basis points to 33.4%31.7% from 33.8%,33.4%, and operating income as a percentage of net sales decreased 640860 basis points to 3.0%(5.6%) from 9.4%.3.0%.

•We recognized impairment charges of $7.9$71.8 million in 2024, primarily2025 related to our newcuramik® ERPreporting systemunit stillwithin our AES operating segment, and $1.9 million related to the impairment of our facility lease in development.Mexico.

•We repurchased 0.2 million738,145 shares of our capital stock for $19.8$52.4 million in 2024.2025.

Net sales decreased by 8.6%2.3% in 20242025 compared to 2023.2024. Our AES and EMS operating segments had net sales decreases of 11.3%1.5% and 4.8%,3.1%, respectively. The decrease in net sales was primarily due to lower net sales in the EV/HEV,wireless industrial, ADASinfrastructure and renewable energyEV/HEV markets, partially offset by higher net sales in the wireless infrastructure and aerospace and defense and ADAS markets. We experienced lower EV/HEV net sales in our AES operating segment as customers continued to manage inventory levels and adjustedadjust to softerchanging endregional marketdemands. demand and weWe experienced lower industrialwireless infrastructure net sales as a program for a key customer was launched and completed in our2024. EMSNet operatingsales segmentwere primarilyfavorably impacted by foreign currency impacts of $6.0 million, or 0.7%, due to the non-recurrenceappreciation in value of athe one-timeeuro bulkrelative purchaseto the U.S. dollar, partially offset by a customerdepreciation in 2023.value of the Korean won and Chinese renminbi, relative to the U.S. dollar.

SG&A expenses decreased 4.4%8.7% in 20242025 from 2023,2024, primarily due to an $10.6 million decrease in compensation and benefits expense due to our overall reduction in employee count, a $9.5$7.2 million decrease in professional services expense,expenses, and a $1.4 million decrease in intangible asset amortization, partially offset by thea non-recurrence of the $0.7$3.3 million gain on the sale of our high-performance engineered cellular elastomer businessincrease in 2023.fixed asset depreciation.

R&D expenses decreased 3.1%18.8% in 20242025 from 2023,2024, primarily due to a $1.0$3.4 million decrease in compensation and benefits expense and a $0.8$1.8 million decrease in professionalR&D servicestrials. expense,The partiallydecrease offsetin compensation and benefits expense was largely driven by aoverall $0.7 million increasereduction in trialemployee costscount forand alternativecost rawsavings materials.related to our exit from our Burlington, Massachusetts Innovation Center facility.

Up until Novemberearly 5,November, 2024, we had two unconsolidated JVs, eachunconsolidated, 50% ownedowned, JVs: RIC and RIS. EquityIn early November, 2024, our JV relationships were discontinued resulting in the year-over-year decrease in equity income in those unconsolidated JVs decreased 22.2% in 2024 from 2023 due to lower net sales for RIC and RIS, which was primarily driven by the portable electronics market in Asia, a change in the business model for RIS to subcontracting manufacturing in the second half of 2023, as well as the discontinuation of the JV relationships in November 2024.JVs. For additional information, refer to “Note 16 – Mergers and Acquisitions” to “Item 8. Financial Statements and Supplementary Data.”

Other income (expense), net increaseddecreased to $0.9 million of expense in 2025 compared to $8.8 million of income in 2024 compared to $0.7 million of expense in 2023.2024. The increasedecrease was due to the recognition of a $7.7 million ofgain gainsin 2024 in connection towith the execution of the JV Separation Agreement with INOAC, as$2.3 wellmillion asof a favorableunfavorable year-over-year changechanges in impacts from our foreign currency transactions, partially$1.4 offsetmillion by anof unfavorable year-over-year changechanges in impacts from our foreign currency derivatives, partially offset by $1.9 million in favorable year-over-year changes from our copper derivatives.

Interest Expense,Income (Expense), Net

Interest expense,income (expense), net, decreasedincreased by $9.3$1.6 million in 20242025 from 2023,2024, due to higher income on interest-bearing cash accounts and a lower weighted-averageaverage outstanding balance for our borrowings underon our revolving credit facility.

Our AES operating segment net sales decreased by 3.9%1.5% in 20232025 compared to 2022.2024. The decrease in net sales was primarily driven by lower net sales in the power interconnects EV/HEV, aerospace and defense, wireless infrastructure and portable electronicsEV/HEV markets, partially offset by higher net sales in the powerADAS substratesand aerospace and defense markets. EV/HEV,HEV renewablenet energysales were lower as customers continued to manage inventory levels and ADASadjusted markets.to changing regional demands. Wireless infrastructure net sales decreased as a program for a key customer was launched and completed in 2024. Net sales were favorably impacted by foreign currency fluctuations of $0.7$4.8 million, or 0.1%,1.1%, due to the appreciation in value of the euro relative to the U.S. dollar, partially offset by the depreciation in value of Chinese renminbi and Korean won relative to the U.S. dollar.

Our EMS operating segment net sales decreased by 9.8%3.1% in 20232025 compared to 2022.2024. The decrease in net sales was primarily driven by lower net sales in the general industrial, consumer, portable electronics and EV/HEV markets,market, partially offset by higher net sales in the aerospace and defenseindustrial market. We experienced lower EV/HEV net sales due to customer inventory management in response to end market demands. Net sales were unfavorablyfavorably impacted by foreign currency fluctuations of $3.6$1.2 million, or 0.9%,0.3%, due to the depreciationappreciation in value of Chinesethe renminbieuro and British pound relative to the U.S. dollar, partially offset by the appreciationdepreciation in value of theChinese eurorenminbi and Korean won relative to the U.S. dollar.

Net sales in our Other operating segment decreased by 13.7%6.5% in 20242025 from 2023.2024. Our Other operating segment gross margin in 2024 declined due to unfavorable impacts from lower volume and unfavorable factory utilization. Asas a percentage of net sales,sales grossdecreased 320 basis points to 32.1% in 2025 compared to 35.3% in 2024. Gross margin in 20242025 wasdeclined 35.3%, an approximately 280 basis point decrease as compareddue to 38.1%lower involumes 2023.and unfavorable mix.

We believe that our existing sources of liquidity and cash flows that are expected to be generated from our operations, together with our available credit facilities, will be sufficient to fund our operations, currently planned capital expenditures,expenditures and R&D efforts and our debt service commitments, for at least the next 12 months. We regularly review and evaluate the adequacy of our cash flows, borrowing facilities and banking relationships, seeking to ensure that we have the appropriate access to cash to fund both our near-term operating needs and our long-term strategic initiatives. The following table illustrates the location of our cash and cash equivalents by our three major geographic areas:

Approximately $75.1$96.9 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of December 31, 2024.2025. We did not make any changes in 20242025 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain ofAsian our Chinese subsidiaries, where a substantial portion of our Asia cash and cash equivalents is held,entities, we continue to assert that historical foreign earnings are indefinitely reinvested.

•Cash and cash equivalents were $159.8$197.0 million as compared to $131.7$159.8 million as of December 31, 2023,2024, an increase of $28.1$37.2 million, or 21.3%.23.3%. This increase was primarily due to $127.1 million of netour cash flowflows provided by operations,operations and $14.2 million in proceeds from the sale fixed assets primarily related to the sale of our Price Road facility, partially offset by $56.1 million in capital expenditures, $30.0 million in discretionary principal payments on our revolving credit facility, $19.8$52.4 million in share repurchases and $1.4$30.1 million in taxcapital paymentsexpenditures, relatedas towell as the effect of net sharefinancing settlementand ofinvesting equityactivity awards.outflows during the year.

•Accounts receivable, net decreased 16.4%3.5% to $130.6 million as of December 31, 2025, from $135.3 million as of December 31, 2024, from $161.9 million as of December 31, 2023.2024. The decrease from year-end was primarily due to lowera netdecrease in sales atacross theour end of 2024 compared to at the end of 2023segments and lowera days$1.0 salesmillion outstanding,decrease asin wellVAT asreceivable, partially offset by a $4.1$0.5 million receiptincrease ofin previouslycurrent recognizedtaxes UTIS fire insurance receivables for our business interruption claims.receivable.

•Inventories, net decreased 7.3%12.2% to $125.0 million as of December 31, 2025, from $142.3 million as of December 31, 2024, from $153.5 million as of December 31, 2023,2024. primarily driven by lowerreductions in raw materials and work-in-processfinished levels,goods combined with higher inventory reserves provisions,inventories, partially offset by higher finishedlevels goodsof levels.work-in-process inventory.

In 2025,2026, we expect capital spending to be in the range of approximately $40.0$30.0 million to $50.0$40.0 million, of which we are contractually committed to $2.9$4.7 million as of December 31, 2024.2025. We plan to fund our capital spending in 20252026 with cash from operations and cash on-hand, as well as our existing revolving credit facility, if necessary.on-hand.

Excluding $3.0$2.9 million of inventory purchase commitments, there are no contractual obligations requiring material cash requirements in 20252026 and beyond, excluding those already noted, including those related to our outstanding borrowings under our revolving credit facility, our operating and finance lease obligations and our pension benefit and other postretirement benefit obligations, which are discussed in “Note 9 – Debt,Revolving Credit Facility ,” “Note 6 – Leases” and “Note 8 – Postretirement Benefits,” to “Item 8. Financial Statements and Supplementary Data,” respectively.

The Fifth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 as of December 31, 2024.2025. For additional information regarding the Fifth Amended Credit Agreement, refer to “Note 9 – DebtRevolving Credit Facility ” to “Item 8. Financial Statements and Supplementary Data.”

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which require management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances and believe that appropriate reserves have been established using reasonable methodologies and appropriate assumptions based on facts and circumstances that are known; however, actual results may differ from these estimates under different assumptions or conditions. Certain accounting policies may require a choice between acceptable accounting methods or may require substantial judgment or estimation in their application. A summary of our critical accounting policies and estimates is presented below:

•In the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025, our net sales increased approximately 5.2%6.9% to $200.5$216.8 million, our gross margin increased approximately 23090 basis points to 32.2%32.5% from 29.9%,31.6%, and we had an operating margin of 5.3%9.2% compared to an operating loss of 0.2%.33.3%.

Net sales increased in the second quarter by 5.2%,6.9%, or $10.0$14.0 million, inclusiveof which $8.7 million was driven by higher demand and $5.3 million of acurrency $7.9 million benefit from the appreciation of the euro and Chinese yuan relative to the U.S. dollar.benefit. By end market, sales increased in the industrial and electronics and communicationscommunications, industrial, and automotive markets, partially offset by lower net sales in the automotiveaerospace and defense market, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025.

Gross margin as a percentage of net sales increased approximately 23090 basis points to 32.2%32.5% in the firstsecond quarter of 2026 compared to 29.9%31.6% in the firstsecond quarter of 2025. Gross margin in the firstsecond quarter of 2026 increased due to higher netsales sales,volume, favorable mix, and costoperational savingsefficiencies, followingpartially ouroffset manufacturingby footprintincreased consolidationraw inmaterial Belgium.costs.

SG&A expenses decreased 7.4%13.0% in the firstsecond quarter of 2026 from the firstsecond quarter of 2025, primarily due to a $2.3$2.1 million reduction in professional services costs, a $2.2 million reduction in total compensation and benefit expense, and a $0.9$0.5 million reduction in software costs.

RSG&DA expenses decreased 5.6%10.3% in the firstsix quartermonths ofended June 30, 2026 from the firstsix quartermonths ofended June 30, 2025, primarily due to a $2.2 million reduction in employeetotal compensation and benefits.benefit expense, a $4.6 million reduction in professional services costs, and a $1.4 million reduction in software costs.

OtherR&D incomeexpenses (expense),increased net was income of $0.3 million4.3% in the firstsecond quarter of 2026 compared to expense of $1.6 million infrom the firstsecond quarter of 2025. The increase was2025, primarily due to $2.6a $0.5 million of favorable year-over-year changesincrease in impactsR&D fromtrials foreignfor currencyproduct transactions,development, partially offset by $1.0a $0.4 million decrease in unfavorable performance on foreign exchangecompensation and copperbenefits derivative contracts.expense.

Compared to the 21% U.S. statutory federal income tax rate, we had a tax rate of 60.2%36.4% in the firstsecond quarter of 2026. During the quarter, our effective tax rate was unfavorably impacted by an increase in the valuation allowance attributable to loss jurisdictions in which no tax benefit is anticipated to be realized.

AES net sales increased in the second quarter by 3.4%,7.8%, or $3.5$8.5 million, inclusiveof which $5.2 million was driven by higher demand and $3.3 million of a $5.3 million benefit from the appreciation of the euro and Chinese yuan relative to the U.S. dollar. Inclusive of the foreign currency benefits,benefit. net sales byBy end marketmarket, sales increased for electronics and communications, and industrial,automotive, while net sales in the aerospace and defense market were lower, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025.

Our AES operating and reportable segment gross margin as a percentage of net sales in the firstsecond quarter of 2026 was 29.2%28.5% as compared to 27.9%28.3% in the firstsecond quarter of 2025. Gross margin improved primarily due to costhigher savingssales followingvolume ourand manufacturingfavorable footprint consolidation in Belgium,mix, partially offset by lowerincreased utilizationraw frommaterial a new production line.costs.

EMS net sales increased in the second quarter by 7.0%,6.0%, or $5.8$5.4 million, includingof $2.5which $3.6 million was driven by higher demand and $1.8 million of favorablecurrency impact from the appreciation of the euro and Chinese yuan relative to the U.S. dollar.benefit. By end market, sales increased in the industrial, electronics and communications, and aerospace and defense markets, partially offset by lower sales in the automotive market, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025.

Our EMS operating and reportable segment gross margin as a percentage of net sales in the firstsecond quarter of 2026 was 35.4%36.9% as compared to 32.3%35.2% in the firstsecond quarter of 2025. Gross margin improved primarily due to increased sales volume and related utilization benefits and favorableoperational mix.efficiencies.

Approximately $86.5$107.1 million of our cash and cash equivalents were held by non-U.S. subsidiaries as of MarchJune 31,30, 2026. We did not make any changes in the threesix months ended MarchJune 31,30, 2026 to our position on the permanent reinvestment of our earnings from foreign operations. With the exception of certain of our Chinese subsidiaries, where a substantial portion of our cash and cash equivalents located in Asia are held, we continue to assert that historical foreign earnings are indefinitely reinvested.

Changes in key financial position accounts and other significant changes in our condensed consolidated statements of financial position from December 31, 2025 to MarchJune 31,30, 2026 were as follows:

•InventoriesShort-term investments were $127.5$30.0 million as of March 31, 2026, compared to $125.0 millionnil as of December 31, 2025. The changeaddition of short-term investments was due to higherthe levelspurchase of rawtime materialsdeposits with original maturities of more than three months and work-in-processless inventory,than offsettwelve bymonths lowerat levelsthe date of finishedpurchase, goods.as of June 30, 2026.

In 2026, we expect capital spending to be in the range of approximately $30.0 million to $40.0$35.0 million. We plan to fund our capital spending in 2026 with cash from operations and cash on-hand.on hand.

The Fifth Amended Credit Agreement generally permits us to pay cash dividends to our shareholders, provided that (i) no default or event of default has occurred and is continuing or would result from the dividend payment and (ii) our total net leverage ratio does not exceed 2.75 to 1.00. If our total net leverage ratio exceeds 2.75 to 1.00, we may nonetheless make up to $20.0 million in restricted payments, including cash dividends, during the fiscal year, provided that no default or event of default has occurred and is continuing or would result from the payments. Our total net leverage ratio did not exceed 2.75 to 1.00 as of MarchJune 31,30, 2026.

During the firstsecond quarter of 2026, we did not become aware of any material developments related to environmental matters disclosed in our Annual Report, our asbestos litigation or other material contingencies previously disclosed or incur any material costs or capital expenditures related to such matters. Refer to “Note 9 – Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q for further discussion of these contingencies.