|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Two Quarters Ended |
|
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
|
A&D |
|
|
Commercial |
|
|
Total |
|
|
A&D |
|
|
Commercial |
|
|
Total |
|
|
|
(In thousands) |
|
End Markets (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense |
|
$ |
712,722 |
|
|
$ |
— |
|
|
$ |
712,722 |
|
|
$ |
632,510 |
|
|
$ |
— |
|
|
$ |
632,510 |
|
Automotive |
|
|
— |
|
|
|
149,235 |
|
|
|
149,235 |
|
|
|
— |
|
|
|
152,778 |
|
|
|
152,778 |
|
Data Center and Networking |
|
|
18,442 |
|
|
|
688,649 |
|
|
|
707,091 |
|
|
|
16,950 |
|
|
|
383,025 |
|
|
|
399,975 |
|
Medical, Industrial, and Instrumentation |
|
|
2,653 |
|
|
|
278,329 |
|
|
|
280,982 |
|
|
|
1,918 |
|
|
|
192,108 |
|
|
|
194,026 |
|
Total |
|
$ |
733,817 |
|
|
$ |
1,116,213 |
|
|
$ |
1,850,030 |
|
|
$ |
651,378 |
|
|
$ |
727,911 |
|
|
$ |
1,379,289 |
|
(1)The end market revenue for the quarter and two quarters ended June 30, 2025 has been recast to reflect certain adjustments to allocations resulting from the segment reorganization that occurred during the quarter ended March 30, 2026 as well as the combination of the data center computing and networking end markets. The end market revenue excludes intersegment sales totaling $301 and $1,032 for the quarter and two quarters ended June 29, 2026, respectively, and $186 and $473 for the quarter and two quarters ended June 30, 2025, respectively. See Note 4, Segment Information, for further information.
(3) Significant Customers and Concentration of Credit Risk
Financial instruments that are potentially subject to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable.
The Company had cash and cash equivalents held by its foreign subsidiaries of $185,429 and $191,925 as of June 29, 2026 and December 29, 2025, respectively. The Company maintains its cash and cash equivalents with major financial institutions and such balances exceed Federal Deposit Insurance Corporation (FDIC) insurance limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash and cash equivalents.
In the normal course of business, the Company extends credit to its customers. Some customers to whom the Company extends credit are located outside the United States. The Company performs ongoing credit evaluations of customers, does not require collateral, and considers the credit risk profile of the entity from which the receivable is due in further evaluating collection risk. As of June 29, 2026 and December 29, 2025, one customer accounted for 14% of the Company's accounts receivable.
The Company’s customers include both OEMs and EMS companies. The Company’s OEM customers often direct a significant portion of their purchases through EMS companies. While the Company’s customers include both OEM and EMS providers, the Company measures customer concentration based on OEM companies, as they are the ultimate end customers.
For the quarter and two quarters ended June 29, 2026, two customers collectively accounted for approximately 26% of the Company's net sales. For the quarter and two quarters ended June 30, 2025, one customer accounted for approximately 12% of the Company's net sales.
(4) Segment Information
During the quarter ended March 30, 2026, the Company strategically realigned RF&S Components within the A&D sector and concluded that the Company now has two reportable segments: A&D and Commercial. In prior periods, the Company had three reportable segments: A&D, Commercial, and RF&S Components following a change during the quarter ended June 30, 2025. As a result, certain prior period amounts have been reclassified to conform with this new presentation.
The reportable segments shown below are the Company’s segments for which separate financial information is available and upon which operating results are evaluated by the CODM, who is the President and CEO, to assess performance and to allocate resources. The CODM uses segment operating income to allocate resources such as employees and capital resources for each segment during the Company’s annual budgeting and forecasting process. Total sales and operating profit by segment include intersegment sales which are generally recorded at cost-plus a specified fee or at a negotiated fixed price. Amortization of definite-lived intangibles relates to the A&D reportable segment, but is not reviewed separately by the CODM. Separate segment asset measures are not used as a basis for the CODM to evaluate the performance of or to allocate resources to the segments.
The A&D reportable segment consists of PCBs, value-added assemblies, microelectronics, RF/microwave components and assemblies, integrated mission systems, and commercial off-the-shelf (COTS) components. These highly engineered electronics products include the manufacture and test of customer‑supplied designs as well as long-term contracts to design, develop, manufacture, and test new products. The products in the A&D reportable segment support surveillance, intelligence, communications, and other critical missions for customers in the aerospace and defense industry as well as commercial customers in the telecommunications, industrial, and instrumentation markets. The Commercial reportable segment consists of PCBs using customer-supplied engineering and design plans supporting customers in the automotive; data center and networking; and medical, industrial, and instrumentation end markets.
2026 Credit Agreement; Refinancing of Term Loan Facility and RCF
On June 1, 2026, the Company entered into the 2026 Credit Agreement, which amended and restated the Company’s Prior Term Loan Facility, and provided for a new RCF. In addition, the 2026 Credit Agreement will permit the Company to add one or more senior secured incremental term loan facilities to the Amended Term Loan Facility, subject to the satisfaction of certain conditions.
Amended Term Loan Facility
The 2026 Credit Agreement provided for a $400,000 senior secured term loan credit facility, of which $4,000 is included in short-term debt and $396,000 is included in long-term debt. The Company received $119,159 in cash and $280,841 of cashless rollover from continuing lenders to pay the full amount of indebtedness outstanding under the Company’s Prior Term Loan Facility, which was $340,436, and related fees and expenses. The Amended Term Loan Facility bears interest at a floating rate of 1-month CME Term SOFR plus an applicable margin of 1.75%. The Amended Term Loan Facility continues to require quarterly principal repayments equal to 1% of the $400,000 initial aggregate principal amount and maintains the same maturity date of May 30, 2030 as the Prior Term Loan Facility.
RCF
In addition, the 2026 Credit Agreement provides for a new RCF that replaces the Company’s previous $150,000 U.S. ABL, which was terminated on June 1, 2026, and the Company’s previous $150,000 Asia ABL, which was also terminated on June 1, 2026. The Company drew $80,000 on the RCF to pay the full amount outstanding under the previous Asia ABL. The $1,000,000 borrowing capacity is available to be drawn in USD by the Company to the extent that Foreign Subsidiary Borrowers (as defined in the 2026 Credit Agreement) have not drawn on the up to $300,000 available. Unless previously terminated in accordance with its terms, the RCF is scheduled to mature in May 2031.
The RCF includes a letter of credit subfacility with a sublimit of $200,000. Borrowings under the RCF bear interest at an interest rate of 1-month CME Term SOFR plus a margin ranging from 1.25% to 2.25% determined by the Company’s Consolidated Leverage Ratio (as defined in the 2026 Credit Agreement) of the previous quarter. The Company is also required to pay unused commitment fees based on the average daily unused portion of the RCF ranging from 0.15% to 0.35% on an annual basis based on the Consolidated Leverage Ratio. The proceeds of the loans may be used to finance working capital needs, for general corporate purposes including acquisitions, or as otherwise permitted under the 2026 Credit Agreement. As of June 29, 2026, available borrowing capacity under the RCF was $913,866.
The obligations under the 2026 Credit Agreement are unconditionally guaranteed by each of the Company’s Guarantors, subject to certain exceptions. In addition, subject to certain exclusions and limitations, the obligations of the Company and each Guarantor in respect of the 2026 Credit Agreement are secured by a perfected first priority security interest in substantially all of the tangible and intangible assets of the Company and the Guarantors, including all of the capital stock held by the Company and the Guarantors (subject to a limitation of 65% on pledges of capital stock of certain foreign subsidiaries and domestic holding companies of foreign subsidiaries).
The 2026 Credit Agreement contains certain affirmative and restrictive covenants that the Company must comply with, including limitations on additional indebtedness, liens, investments, the issuance of dividends, and fundamental changes, as well as other customary covenants for credit facilities of this type. The 2026 Credit Agreement contains customary maintenance financial covenants applicable solely to the RCF. Specifically, the Company is required to maintain a minimum consolidated interest coverage ratio of at least 2.50:1.00 and a maximum consolidated leverage ratio of not greater than 4.50:1.00 as of the end of each fiscal quarter. The maximum consolidated leverage ratio is subject to a customary acquisition holiday that permits the level to increase to 5.00:1.00 for the fiscal quarter in which a qualifying material acquisition is consummated and the following three fiscal quarters. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations under the 2026 Credit Agreement may be accelerated.
Loss on Extinguishment of Debt
During the quarter and two quarters ended June 29, 2026, the Company recognized loss on extinguishment of debt of $747, primarily related to the Company’s Prior Term Loan Facility.
(8) Income Taxes
The Company’s effective tax rate is impacted by the mix of foreign and U.S. income, tax rates in China and Hong Kong, the U.S. federal income tax rate, apportioned state income tax rates, the generation of credits, and deductions available to the Company as well as changes in valuation allowances and certain non-deductible items. No tax benefit was recorded on the losses incurred in certain foreign jurisdictions as a result of corresponding increases in the valuation allowances in these jurisdictions.
During the quarter and two quarters ended June 29, 2026, the Company’s effective tax rate was impacted by a net discrete benefit of $24,637 and $27,452, respectively. The net discrete benefit was primarily related to the deduction of stock‑based compensation, partially offset by tax expenses related to the finalization of China and Canada corporate income tax returns and the approval of the High and New Technology Enterprise (HNTE) status for a manufacturing subsidiary in China.
The Company has various foreign subsidiaries formed or acquired to conduct or support its business outside the U.S. The Company expects its earnings attributable to most foreign subsidiaries may be repatriated back to the U.S. Accordingly, a deferred tax liability has been recorded for foreign withholding taxes and the estimated federal/state tax impact on any repatriation. For the Company’s other foreign subsidiaries with earnings currently being reinvested outside of the U.S., no deferred tax liability on undistributed earnings has been recorded.
(9) Earnings Per Share, Share Repurchase Program, and Accumulated Other Comprehensive Loss
Earnings Per Share
The reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
For the Two Quarters Ended |
|
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
|
(In thousands, except per share amounts) |
|
Net income |
|
$ |
83,047 |
|
|
$ |
41,530 |
|
|
$ |
133,035 |
|
|
$ |
73,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares |
|
|
104,291 |
|
|
|
101,857 |
|
|
|
104,061 |
|
|
|
101,861 |
|
Dilutive effect of PRUs, RSUs, and stock options |
|
|
3,292 |
|
|
|
3,016 |
|
|
|
3,273 |
|
|
|
2,840 |
|
Diluted shares |
|
|
107,583 |
|
|
|
104,873 |
|
|
|
107,334 |
|
|
|
104,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.80 |
|
|
$ |
0.41 |
|
|
$ |
1.28 |
|
|
$ |
0.72 |
|
Diluted earnings per share |
|
|
0.77 |
|
|
|
0.40 |
|
|
|
1.24 |
|
|
|
0.70 |
|
PRUs and RSUs to purchase 84 and 42 shares of common stock for the quarter and two quarters ended June 29, 2026, respectively, and PRUs, RSUs, and stock options to purchase 369 and 250 shares of common stock for the quarter and two quarters ended June 30, 2025, respectively, were not included in the computation of diluted earnings per share because the impact would be anti-dilutive. The PRUs would have had an anti-dilutive impact because the performance conditions had not been met during the applicable quarter and two quarters. The RSUs and stock options would have had an anti-dilutive impact because the total expected proceeds under the treasury stock method or the options’ exercise prices were greater than the average market price of common stock during the applicable quarter and two quarters.
Share Repurchase Program
On May 8, 2025, the Company's Board of Directors authorized the 2025 Repurchase Program, under which the Company may repurchase up to $100,000 in value of the Company’s outstanding shares of common stock from time to time through May 7, 2027. The Company may repurchase shares through open market purchases, privately‑negotiated transactions, or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act, which sets certain restrictions on the method, timing, price, and volume of open market stock repurchases. In addition, the Company adopted one trading plan in accordance with Rule 10b5-1 of the Exchange Act to facilitate certain purchases that may be effected under the share repurchase program. The timing, manner, price, and amount of any repurchases will be determined at the Company’s discretion, and the share repurchase program may be suspended, terminated, or modified at any time for any reason. The repurchase program does not obligate the Company to acquire any specific number of shares.
During the quarter and two quarters ended June 29, 2026, the Company did not repurchase any shares. As of June 29, 2026, the remaining amount in value available to be repurchased under the 2025 Repurchase Program was $100,000.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This Report contains forward-looking statements regarding future events or our future financial and operational performance. Forward-looking statements include statements regarding markets for our products; trends in net sales, gross profits, and estimated expense levels; liquidity and anticipated cash needs and availability; and any statement that contains the words “anticipate,” “believe,” “plan,” “forecast,” “foresee,” “estimate,” “project,” “expect,” “seek,” “target,” “intend,” “goal,” and other similar expressions. The forward-looking statements included in this Report reflect our current expectations and beliefs, and we do not undertake publicly to update or revise these statements, even if experience or future changes make it clear that any projected results expressed in this Report or future quarterly reports to stockholders, press releases, or company statements will not be realized. In addition, the inclusion of any statement in this Report does not constitute an admission by us that the events or circumstances described in such statement are material. Furthermore, we wish to caution and advise readers that these statements are based on assumptions that may not materialize and may involve risks and uncertainties, many of which are beyond our control, that could cause actual events or performance to differ materially from those contained or implied in these forward-looking statements. These risks and uncertainties include the risks identified under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 29, 2025, as updated by our other filings with the SEC, and described elsewhere in this Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated condensed financial statements and the related notes and the other financial information included in this Report, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the fiscal year ended December 29, 2025, filed with the SEC.
COMPANY OVERVIEW
We are a leading global manufacturer of technology products, including mission systems, RF components, RF microwave/microelectronic assemblies, and technologically advanced interconnect products, including PCBs and substrates. We focus on providing time-to-market and volume production of advanced technology products and offer a one-stop design, engineering, and manufacturing solution to our customers. This solution allows us to align technology development with the diverse needs of our customers and to enable them to reduce the time required to develop new products and bring them to market. We serve a diversified customer base consisting of approximately 1,300 customers in various markets throughout the world, including aerospace and defense; automotive; data center and networking; and medical, industrial, and instrumentation. Our customers include OEMs, EMS providers, ODMs, distributors, and government agencies (both domestic and allied foreign governments).
RECENT DEVELOPMENTS
We previously announced we are in the process of constructing a new advanced technology PCB manufacturing facility in Syracuse, New York. We expect that our new facility will bring advanced technology capability for our domestic high-volume production of ultra‑high‑density interconnect (HDI) PCBs in support of national security requirements. The building construction is complete, equipment is arriving, and we continue to install and test equipment setups. Volume production in this facility is expected to commence in the second half of 2026.
On June 1, 2026, we entered into the 2026 Credit Agreement, which amended and restated our Prior Term Loan Facility, and provided for the Amended Term Loan Facility and a new RCF that replaced our prior revolving credit facilities, which have been terminated. In addition, the 2026 Credit Agreement will permit us to add one or more senior secured incremental term loan facilities to the Amended Term Loan Facility, subject to the satisfaction of certain conditions.
On June 17, 2026, we announced that we had entered into definitive stock purchase agreements to acquire STG and ILFA in separate transactions. These proposed transactions are expected to close in the third quarter of 2026, subject to the satisfaction of regulatory approvals and other customary closing conditions. In connection with the proposed STG acquisition, we entered into an economic hedge to mitigate foreign currency risk of the CHF-denominated purchase price and interest related to the planned drawdown under the RCF to finance the proposed STG acquisition.
FINANCIAL OVERVIEW
Our customers include both OEMs and EMS providers. We sell to OEMs both directly and indirectly through EMS providers. For such indirect sales, we classify net sales based on OEM companies as they are the ultimate end customers. Sales to our ten largest customers collectively accounted for 55% of our net sales for both the quarter and two quarters ended June 29, 2026. Sales to our ten largest customers collectively accounted for 53% and 54% of our net sales for the quarter and two quarters ended June 30, 2025, respectively.
The percentage of our net sales attributable to each of the principal end markets we served was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
For the Two Quarters Ended |
|
|
June 29, 2026 |
|
June 30, 2025 (1) |
|
June 29, 2026 |
|
June 30, 2025 (1) |
End Markets (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense |
|
|
37 |
|
% |
|
|
45 |
|
% |
|
|
39 |
|
% |
|
|
47 |
|
% |
Automotive |
|
|
8 |
|
|
|
|
11 |
|
|
|
|
8 |
|
|
|
|
11 |
|
|
Data Center and Networking |
|
|
40 |
|
|
|
|
29 |
|
|
|
|
38 |
|
|
|
|
28 |
|
|
Medical, Industrial, and Instrumentation |
|
|
15 |
|
|
|
|
15 |
|
|
|
|
15 |
|
|
|
|
14 |
|
|
Total |
|
|
100 |
|
% |
|
|
100 |
|
% |
|
|
100 |
|
% |
|
|
100 |
|
% |
(1)The end market revenue for the quarter and two quarters ended June 30, 2025 has been recast to reflect the combination of the data center computing and networking end markets.
(2)Sales to EMS companies are classified by the end markets of their OEM customers.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated condensed financial statements included in this Report have been prepared in accordance with U.S. GAAP. The preparation of these consolidated condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 29, 2025 for further discussion of critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates since December 29, 2025.
CONSOLIDATED OPERATING RESULTS
Net sales consist of gross sales less an allowance for returns, which typically have been approximately 2% of gross sales. We provide our customers a limited right of return for defective PCBs including components, assemblies, and subsystems. We record an estimate for sales returns and allowances at the time of sale based on historical results and anticipated returns.
Selected financial highlights are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
For the Two Quarters Ended |
|
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
|
(In thousands, except margin rates) |
|
Net sales |
|
$ |
1,004,054 |
|
|
$ |
730,621 |
|
|
$ |
1,850,030 |
|
|
$ |
1,379,289 |
|
Cost of goods sold |
|
|
792,196 |
|
|
|
582,512 |
|
|
|
1,456,991 |
|
|
|
1,100,208 |
|
Gross profit |
|
|
211,858 |
|
|
|
148,109 |
|
|
|
393,039 |
|
|
|
279,081 |
|
Gross margin |
|
|
21.1 |
% |
|
|
20.3 |
% |
|
|
21.2 |
% |
|
|
20.2 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
25,490 |
|
|
|
21,316 |
|
|
|
50,484 |
|
|
|
42,587 |
|
General and administrative |
|
|
62,107 |
|
|
|
49,719 |
|
|
|
130,852 |
|
|
|
93,493 |
|
Research and development |
|
|
7,978 |
|
|
|
7,009 |
|
|
|
15,786 |
|
|
|
15,073 |
|
Amortization of definite-lived intangibles |
|
|
6,888 |
|
|
|
6,888 |
|
|
|
13,777 |
|
|
|
13,777 |
|
Restructuring charges |
|
|
340 |
|
|
|
1,408 |
|
|
|
636 |
|
|
|
2,122 |
|
Total operating expenses |
|
|
102,803 |
|
|
|
86,340 |
|
|
|
211,535 |
|
|
|
167,052 |
|
Operating income |
|
|
109,055 |
|
|
|
61,769 |
|
|
|
181,504 |
|
|
|
112,029 |
|
Operating margin |
|
|
10.9 |
% |
|
|
8.5 |
% |
|
|
9.8 |
% |
|
|
8.1 |
% |
Total other expense, net |
|
|
(27,808 |
) |
|
|
(16,244 |
) |
|
|
(41,732 |
) |
|
|
(25,513 |
) |
Income tax benefit (provision) |
|
|
1,800 |
|
|
|
(3,995 |
) |
|
|
(6,737 |
) |
|
|
(12,808 |
) |
Net income |
|
$ |
83,047 |
|
|
$ |
41,530 |
|
|
$ |
133,035 |
|
|
$ |
73,708 |
|
Net Sales
Total net sales increased $273.4 million, or 37.4%, to $1,004.1 million for the quarter ended June 29, 2026, from $730.6 million for the quarter ended June 30, 2025. The primary driver of this increase was due to continued strong demand in our data center and networking end market driven by the continued build out of AI data centers and related applications, as well as strong growth in our aerospace and defense and medical, industrial, and instrumentation end markets.
Total net sales increased $470.7 million, or 34.1%, to $1,850.0 million for the two quarters ended June 29, 2026, from $1,379.3 million for the two quarters ended June 30, 2025. The primary driver of this increase was due to continued strong demand in our data
center and networking end market driven by the continued build out of AI data centers and related applications, as well as strong growth in our medical, industrial, and instrumentation and aerospace and defense end markets.
Gross Profit and Margin Rate
Gross profit increased $63.7 million to $211.9 million for the quarter ended June 29, 2026, from $148.1 million for the quarter ended June 30, 2025. Gross margin rate increased to 21.1% for the quarter ended June 29, 2026, from 20.3% for the quarter ended June 30, 2025. These increases were primarily due to higher sales volume, favorable product mix, and improved operational execution.
Gross profit increased $114.0 million to $393.0 million for the two quarters ended June 29, 2026, from $279.1 million for the two quarters ended June 30, 2025. Gross margin rate increased to 21.2% for the two quarters ended June 29, 2026, from 20.2% for the two quarters ended June 30, 2025. These increases were primarily due to higher sales volume, favorable product mix, and improved operational execution.
Operating Expenses
Operating expenses increased $16.5 million to $102.8 million for the quarter ended June 29, 2026, from $86.3 million for the quarter ended June 30, 2025, primarily due to higher labor costs, incentive compensation, and acquisition costs.
Operating expenses increased $44.5 million to $211.5 million for the two quarters ended June 29, 2026, from $167.1 million for the two quarters ended June 30, 2025, primarily due to higher stock-based compensation, labor costs, incentive compensation, and acquisition costs. The increase in stock-based compensation was primarily driven by exceeding predetermined targets, stock price appreciation, and vesting of certain performance-based stock grants.
Operating Income and Margin Rate
Operating income increased $47.3 million to $109.1 million for the quarter ended June 29, 2026, from $61.8 million for the quarter ended June 30, 2025. Operating margin rate increased to 10.9% for the quarter ended June 29, 2026, from 8.5% for the quarter ended June 30, 2025. The primary drivers of these increases are discussed above in the variance explanations for Gross Profit and Margin Rate and Operating Expenses.
Operating income increased $69.5 million to $181.5 million for the two quarters ended June 29, 2026, from $112.0 million for the two quarters ended June 30, 2025. Operating margin rate increased to 9.8% for the two quarters ended June 29, 2026, from 8.1% for the two quarters ended June 30, 2025. The primary drivers of these increases are discussed above in the variance explanations for Gross Profit and Margin Rate and Operating Expenses.
Total Other Expense, Net
Total other expense, net increased $11.6 million to $27.8 million for the quarter ended June 29, 2026, from $16.2 million for the quarter ended June 30, 2025, primarily due to a higher amount of foreign exchange losses during the quarter ended June 29, 2026 resulting from strengthening RMB and MYR during the quarter ended June 29, 2026 as compared to the quarter ended June 30, 2025. We utilize the RMB and MYR at our China and Malaysia facilities, respectively, for employee‑related and other costs of running our operations in foreign countries.
Total other expense, net increased $16.2 million to $41.7 million for the two quarters ended June 29, 2026, from $25.5 million for the two quarters ended June 30, 2025, primarily due to a higher amount of foreign exchange losses during the two quarters ended June 29, 2026 resulting from strengthening RMB and MYR during the two quarters ended June 29, 2026 as compared to the two quarters ended June 30, 2025.
Income Taxes
Income tax benefit increased $5.8 million to $1.8 million for the quarter ended June 29, 2026, from $4.0 million income tax expense for the quarter ended June 30, 2025, primarily due to tax benefits from the deduction of stock-based compensation, partially offset by tax expense driven by higher income before income taxes.
Income tax expense decreased $6.1 million to $6.7 million for the two quarters ended June 29, 2026, from $12.8 million for the two quarters ended June 30, 2025, primarily due to tax benefits from the deduction of stock-based compensation, partially offset by tax expense driven by higher income before income taxes.
Our effective tax rate is primarily impacted by the mix of foreign and U.S. income, tax rates in China and Hong Kong, the U.S. federal income tax rate, apportioned state income tax rates, the generation of credits and deductions available to us as well as changes in valuation allowances and certain non-deductible items. We had a net deferred income tax liability of $52.8 million and $41.8 million as of June 29, 2026 and June 30, 2025, respectively.
SEGMENT OPERATING RESULTS
Basis of Presentation
During the quarter ended March 30, 2026, the Company strategically realigned RF&S Components within the A&D sector and concluded that the Company now has two reportable segments: A&D and Commercial. In prior periods, the Company had three reportable segments: A&D, Commercial, and RF&S Components following a change during the quarter ended June 30, 2025. As a result, certain prior period amounts have been reclassified to conform with this new presentation. See Part I, Item 1, Note 4, Segment Information, of the Notes to Consolidated Condensed Financial Statements in this Report for further information.
Selected segment financial highlights, with reconciliations to operating income, are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended |
|
|
For the Two Quarters Ended |
|
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
June 29, 2026 |
|
|
June 30, 2025 |
|
|
|
(In thousands, except margin rates) |
|
Segment sales: |
|
|
|
|
|
|
|
|
|
|
|
|
A&D |
|
$ |
382,750 |
|
|
$ |
335,183 |
|
|
$ |
734,414 |
|
|
$ |
651,433 |
|
Commercial |
|
|
621,605 |
|
|
|
395,624 |
|
|
|
1,116,648 |
|
|
|
728,329 |
|
Total |
|
$ |
1,004,355 |
|
|
$ |
730,807 |
|
|
$ |
1,851,062 |
|
|
$ |
1,379,762 |
|
Segment operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
A&D |
|
$ |
63,861 |
|
|
$ |
48,145 |
|
|
$ |
118,640 |
|
|
$ |
90,514 |
|
Commercial |
|
|
112,676 |
|
|
|
60,069 |
|
|
|
194,244 |
|
|
|
103,718 |
|
Total |
|
|
176,537 |
|
|
|
108,214 |
|
|
|
312,884 |
|
|
|
194,232 |
|
Segment operating margin rate: |
|
|
|
|
|
|
|
|
|
|
|
|
A&D |
|
|
16.7 |
% |
|
|
14.4 |
% |
|
|
16.2 |
% |
|
|
13.9 |
% |
Commercial |
|
|
18.1 |
% |
|
|
15.2 |
% |
|
|
17.4 |
% |
|
|
14.2 |
% |
Total |
|
|
17.6 |
% |
|
|
14.8 |
% |
|
|
16.9 |
% |
|
|
14.1 |
% |
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
(340 |
) |
|
|
(1,408 |
) |
|
|
(636 |
) |
|
|
(2,122 |
) |
Acquisition-related and other charges |
|
|
(4,749 |
) |
|
|
— |
|
|
|
(4,946 |
) |
|
|
— |
|
Stock-based compensation |
|
|
(13,292 |
) |
|
|
(9,188 |
) |
|
|
(37,648 |
) |
|
|
(17,975 |
) |
Other corporate expenses |
|
|
(39,877 |
) |
|
|
(26,625 |
) |
|
|
(69,702 |
) |
|
|
(43,658 |
) |
Amortization of definite-lived intangibles (1) |
|
|
(9,224 |
) |
|
|
(9,224 |
) |
|
|
(18,448 |
) |
|
|
(18,448 |
) |
Operating income |
|
$ |
109,055 |
|
|
$ |
61,769 |
|
|
$ |
181,504 |
|
|
$ |
112,029 |
|
(1)Amortization of definite-lived intangibles relates to the A&D reportable segment, but is not reviewed separately by the CODM.
Segment operating income, as reconciled in Part I, Item 1, Note 4, Segment Information, of the Notes to Consolidated Condensed Financial Statements in this Report, and segment operating margin rate (segment operating income divided by segment sales) are presented in conformity with Accounting Standards Codification (ASC) Topic 280, Segment Reporting. These measures are reported to the CODM, who is the President and CEO, for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, these measures are excluded from the definition of non‑GAAP financial measures under the SEC's Regulation G and Item 10(e) of Regulation S-K.
A&D
Segment Sales
Segment sales for the A&D reportable segment increased $47.6 million, or 14.2%, to $382.8 million for the quarter ended June 29, 2026, from $335.2 million for the quarter ended June 30, 2025. The primary drivers of this increase were strong defense budget spending, our strong strategic program alignment, and key bookings for ongoing franchise programs, including restricted programs. These increases were driven by increased sales related to missiles and munitions as well as strong demand in our mission systems and specialty assembly businesses.
Segment sales for the A&D reportable segment increased $83.0 million, or 12.7%, to $734.4 million for the two quarters ended June 29, 2026, from $651.4 million for the two quarters ended June 30, 2025. The primary drivers of the increase were as discussed in the paragraph above.
Segment Operating Income and Margin Rate
Segment operating income for the A&D reportable segment increased $15.7 million to $63.9 million for the quarter ended June 29, 2026, from $48.1 million for the quarter ended June 30, 2025. Segment operating margin rate for the A&D reportable segment
increased to 16.7% for the quarter ended June 29, 2026, from 14.4% for the quarter ended June 30, 2025. The primary drivers of these increases were higher sales volume, as discussed above, favorable product mix, and improved operational execution.
Segment operating income for the A&D reportable segment increased $28.1 million to $118.6 million for the two quarters ended June 29, 2026, from $90.5 million for the two quarters ended June 30, 2025. Segment operating margin rate for the A&D reportable segment increased to 16.2% for the two quarters ended June 29, 2026, from 13.9% for the two quarters ended June 30, 2025. The primary drivers of these increases were as discussed in the paragraph above.
Commercial
Segment Sales
Segment sales for the Commercial reportable segment increased $226.0 million, or 57.1%, to $621.6 million for the quarter ended June 29, 2026, from $395.6 million for the quarter ended June 30, 2025. The primary drivers of this increase were strong demand in our data center and networking end market driven by the continued buildout of AI data centers and related applications, as well as strong sales performance in our medical, industrial, and instrumentation end market.
Segment sales for the Commercial reportable segment increased $388.3 million, or 53.3%, to $1,116.6 million for the two quarters ended June 29, 2026, from $728.3 million for the two quarters ended June 30, 2025. The primary drivers of this increase were as discussed in the paragraph above.
Segment Operating Income and Margin Rate
Segment operating income for the Commercial reportable segment increased $52.6 million to $112.7 million for the quarter ended June 29, 2026, from $60.1 million for the quarter ended June 30, 2025. Segment operating margin rate for the Commercial reportable segment increased to 18.1% for the quarter ended June 29, 2026, from 15.2% for the quarter ended June 30, 2025. The primary drivers of these increases were higher sales volume, as discussed above, improving mix, and improved operational execution.
Segment operating income for the Commercial reportable segment increased $90.5 million to $194.2 million for the two quarters ended June 29, 2026, from $103.7 million for the two quarters ended June 30, 2025. Segment operating margin rate for the Commercial reportable segment increased to 17.4% for the two quarters ended June 29, 2026, from 14.2% for the two quarters ended June 30, 2025. The primary drivers of these increases were as discussed in the paragraph above.
Liquidity and Capital Resources
Our principal sources of liquidity have been cash provided by operations, the issuance of debt, and borrowings under our RCF. Our principal uses of cash have been to finance capital expenditures, finance acquisitions, fund working capital requirements, repay debt obligations, and repurchase common stock. We anticipate that financing capital expenditures, financing acquisitions including but not limited to the proposed STG and ILFA acquisitions, funding working capital requirements, servicing debt, and repurchasing common stock will be the principal demands on our cash in the future.
Cash flow provided by operating activities during the first two quarters of 2026 was $118.2 million as compared to cash flow provided by operating activities of $87.1 million in the same period in 2025. The increase in cash flow was primarily due to an increase in net income of $59.3 million partially offset by increased working capital largely driven by the timing of collections.
Net cash used in investing activities during the first two quarters of 2026 was $157.2 million, primarily resulting from the use of $169.2 million for net purchases of property, plant, and equipment and other assets, partially offset by the receipt of $12.0 million of proceeds from the sale of property, plant, and equipment and other assets. Net cash used in investing activities during the first two quarters of 2025 was $123.5 million, primarily resulting from the use of $123.7 million for net purchases of property, plant, and equipment and other assets.
Net cash provided by financing activities during the first two quarters of 2026 was $45.6 million, primarily reflecting proceeds from long-term debt borrowing of $199.2 million, partially offset by repayment of long-term debt borrowings of $143.3 million, repayments of $5.0 million for customer deposits, and $4.7 million for payment of debt issuance costs. Net cash used in financing activities during the first two quarters of 2025 was $19.8 million, reflecting the use of $17.9 million for repurchases of common stock and $1.9 million for the repayment of long-term debt borrowings.
As of June 29, 2026, we had cash and cash equivalents of approximately $507.9 million, of which approximately $185.4 million was held by our foreign subsidiaries, primarily in China, $913.9 million of available borrowing capacity under our RCF, and $5.7 million of available letters of credit under our banking facility. Should we choose to remit cash to the United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States. However, we believe there would be no material tax expenses not previously accrued for the repatriation of this cash.
Our total 2026 capital expenditures are expected to be in the range of $345.0 million to $365.0 million, primarily for capacity expansion to meet market demand.
Share Repurchases
On May 8, 2025, our Board of Directors authorized the 2025 Repurchase Program, under which we may repurchase up to $100.0 million in value of our common stock from time to time through May 7, 2027. We did not repurchase any shares of our common stock during the quarter ended June 29, 2026. As of June 29, 2026, the remaining amount in value available to be repurchased under the 2025 Repurchase Program was $100.0 million.
Long-term Debt and Letters of Credit
As of June 29, 2026, we had $973.5 million of outstanding debt, net of discount and issuance costs, composed of $497.8 million of Senior Notes due 2029, $395.7 million under the Amended Term Loan Facility, and $80.0 million under the RCF.
Pursuant to the terms of the Senior Notes due 2029 and the 2026 Credit Agreement (which provides for the Amended Term Loan Facility and the RCF), we are subject to certain affirmative and negative covenants, including limitations on indebtedness, corporate transactions, investments, dispositions, and restricted payments, and with respect to the RCF, various financial covenants, including leverage and interest coverage ratios. As of June 29, 2026, we were in compliance with the covenants under the Senior Notes due 2029 and the 2026 Credit Agreement.
Based on our current level of operations, we believe that cash generated from operations, cash on hand, and cash from the issuance of available term, incremental, and revolving debt will be adequate to meet our currently anticipated capital expenditure, acquisitions, debt service, and working capital needs for the next 12 months. Additional information regarding our indebtedness, including information about the credit available under our debt facilities, interest rates, and other key terms of our outstanding indebtedness, is included in Part I, Item 1, Note 7, Long‑term Debt and Letters of Credit, of the Notes to Consolidated Condensed Financial Statements included in this Report.
Supplier Finance Program Obligations
We have agreements with financial institutions to facilitate payments to certain suppliers. Liabilities associated with these agreements are recorded in accounts payable on the consolidated condensed balance sheets and amounted to $15.3 million and $12.5 million as of June 29, 2026 and December 29, 2025, respectively.
Contractual Obligations and Commitments
As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. These obligations impact our liquidity and capital resource needs. Our estimated future obligations consist of long-term debt obligations, interest on debt obligations, derivative liabilities, purchase obligations, and leases.
A summary of our long-term debt obligations as of June 29, 2026 is included in Part I, Item 1, Note 7, Long‑term Debt and Letters of Credit, of the Notes to Consolidated Condensed Financial Statements included in this Report.
Our aggregate interest on debt obligations as of June 29, 2026, amounted to $162.8 million, which is expected to be settled as follows: $45.9 million within 1 year, $89.9 million within 1-3 years, and $27.0 million within 4-5 years. For debt obligations based on variable rates, interest rates used are as of June 29, 2026.
As of June 29, 2026, there were no other material changes outside the ordinary course of business since December 29, 2025 to our contractual obligations and commitments and the related cash requirements.
Seasonality
We do not consider any material portion of our business to be seasonal. Various factors, however, can affect the distribution of our sales between accounting periods, including the timing of customer orders, the availability of customer funding, product deliveries, and customer acceptance.
Recently Issued Accounting Standards
For a description of recently adopted and issued accounting standards, including the respective dates of adoption and the expected effects on our results of operations and financial condition, see Part I, Item 1, Note 1, Nature of Operations and Basis of Presentation, of the Notes to Consolidated Condensed Financial Statements included in this Report.