Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to known and unknown risks and uncertainties. The forward-looking statements include statements concerning, among other things, our business strategy (including the influence of anticipated trends and developments in our business and the markets in which we operate), financial and operating results, revenues, gross margins, liquidity, operating expenses, effective tax rate and deferred tax assets, products, projected costs and capital expenditure requirements, research and development programs, sales and marketing initiatives, competition and impact of accounting standards. In some cases, you can identify these statements by forward-looking words, such as "may," "likely," "will," "could," "forecast," "should," "expect," "estimate," "plan," "intend," "anticipate," "target," "believe," "continue," the negative or plural of these words and other comparable terminology.
The forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements. We have no obligation to update any of these statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements, including risks related to general market trends, the benefits of acquisitions and investments, our credit facilities, our supply chain, our tax burden, uncertainties related to public health-related crises, the interpretation and impacts of changes in export controls, tariffs and other trade barriers, military conflicts, political volatility, legislative changes and similar factors, our ability to execute our business strategy including any plans of expansion, and other risks discussed in the section titled "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 27, 2025 and in this Quarterly Report on Form 10-Q. You should carefully consider the numerous risks and uncertainties described under these sections.
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q. Unless expressly stated or the context otherwise requires, the terms "we," "our," "us" and "FormFactor" refer to FormFactor, Inc. and its subsidiaries.
Overview
FormFactor, Inc., headquartered in Livermore, California, is a leading provider of essential test and measurement technologies along the full semiconductor product lifecycle - from characterization, modeling, reliability, and design de-bug, to qualification and production test. We provide a broad range of high-performance probe cards, analytical probes, probe stations, thermal systems, and cryogenic systems to both semiconductor companies and scientific institutions. Our products provide electrical and optical information from a variety of semiconductor and electro-optical devices and integrated circuits from early research, through development, to high-volume production. Customers use our products and services to optimize device performance and advance yield knowledge.
We operate in two reportable segments consisting of the Probe Cards segment and the Systems segment. Sales of our probe cards and analytical probes are included in the Probe Cards segment, while sales of our probe stations, thermal systems and cryogenic systems are included in the Systems segment.
We generated net income of $20.4 million in the first three months of fiscal 2026, compared to $6.4 million in the first three months of fiscal 2025. The increase in net income was primarily attributable to higher revenues, which reached record quarterly levels, and improved gross margins, partially offset by higher restructuring charges from plans adopted to better align our cost structure and support gross margin improvement to our target financial model.
Recent Developments
2026 Restructuring Plans - In January 2026, we adopted restructuring plans that are intended to better align cost structure and support gross margin improvement to our target financial model, while also aligning manufacturing capabilities with current and anticipated business needs and our strategic priorities. As part of this restructuring plan, we are consolidating the manufacturing facilities located in Carlsbad and Baldwin Park, California to other sites. The Baldwin Park site manufactured through January 2026 and the Carlsbad site is expected to manufacture through December 2026.
Factory Expansion - In June 2025, we purchased a manufacturing site in Farmers Branch, Texas. We expect to begin production at this site late in the fourth quarter of fiscal 2026, with a ramp to initial target production levels over the course of fiscal 2027. The facility expands our manufacturing footprint and is expected to support incremental production capacity and a more favorable cost structure overall, once ramped to initial target production levels.
Critical Accounting Estimates
Management's Discussion and Analysis and Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements in our 2025 Annual Report on Form 10-K describe the significant accounting estimates and significant accounting policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management's estimates. During the three months ended March 28, 2026, there were no significant changes in our significant accounting policies or estimates from those reported in our Annual Report on Form 10-K for the year ended December 27, 2025.
Results of Operations
The following table sets forth our operating results as a percentage of revenues for the periods indicated:
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| Revenues | 100.0 | % | 100.0 | % | |||||||
| Cost of revenues | 61.6 | 62.3 | |||||||||
| Gross profit | 38.4 | 37.7 | |||||||||
| Operating expenses: | |||||||||||
| Research and development | 13.6 | 16.2 | |||||||||
| Selling, general and administrative | 14.3 | 19.5 | |||||||||
| Factory start-up costs | 3.1 | - | |||||||||
| Total operating expenses | 31.0 | 35.7 | |||||||||
| Operating income | 7.4 | 2.0 | |||||||||
| Interest income, net | 0.9 | 1.9 | |||||||||
| Other income, net | 0.2 | 0.5 | |||||||||
| Income before income taxes and equity investment | 8.5 | 4.4 | |||||||||
| Provision for income taxes | 0.2 | 0.6 | |||||||||
| Income from equity investment | 0.7 | - | |||||||||
| Net income | 9.0 | % | 3.8 | % | |||||||
Revenues by Segment and Market
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Probe Cards | $ | 198,257 | $ | 136,520 | |||||||
Systems | 27,887 | 34,836 | |||||||||
| $ | 226,144 | $ | 171,356 | ||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
|
March 28, 2026 | % of Revenues |
March 29, 2025 | % of Revenues | $ Change | % Change | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Probe Cards Markets: | |||||||||||||||||||||||||||||||||||
| Foundry & Logic | $ | 111,188 | 49.2 | % | $ | 85,272 | 49.8 | % | $ | 25,916 | 30.4 | % | |||||||||||||||||||||||
| DRAM | 82,933 | 36.7 | 48,858 | 28.5 | 34,075 | 69.7 | |||||||||||||||||||||||||||||
| Flash | 4,136 | 1.8 | 2,390 | 1.4 | 1,746 | 73.1 | |||||||||||||||||||||||||||||
| Systems Market: | |||||||||||||||||||||||||||||||||||
Systems | 27,887 | 12.3 | 34,836 | 20.3 | (6,949) | (19.9) | |||||||||||||||||||||||||||||
| Total revenues | $ | 226,144 | 100.0 | % | $ | 171,356 | 100.0 | % | $ | 54,788 | 32.0 | % | |||||||||||||||||||||||
Foundry & Logic - The increase in Foundry & Logic product revenues for the three months ended March 28, 2026, compared to the three months ended March 29, 2025, was driven by stronger probe-card demand for networking and high-performance compute microprocessor designs.
DRAM - The increase in DRAM product revenues for the three months ended March 28, 2026, compared to the three months ended March 29, 2025, was primarily driven by increased demand for high-bandwidth memory ("HBM") designs utilized in generative artificial intelligence applications, with additional contributions from higher demand for other non-HBM DRAM designs.
Flash - The increase in Flash product revenues for the three months ended March 28, 2026, compared to the three months ended March 29, 2025, was driven by increased customer production activity and demand for our products. A portion of Flash product revenues during the period was associated with manufacturing activity at our Baldwin Park manufacturing facility, which was closed in connection with our 2026 Restructuring Plans. As a result of this closure, we expect Flash revenues to comprise a lower percentage of our portfolio going forward.
Systems - The decrease in Systems market revenues for the three months ended March 28, 2026, compared to the three months ended March 29, 2025, was driven by decreased sales of probe stations and cryogenic systems, partially offset by an increase in sales of thermal systems. The decline in probe station sales primarily reflects reduced demand for legacy product offerings as we transition toward production of Triton, our high-volume co-packaged optics ("CPO") testing platform.
Revenues by Geographic Region
| Three Months Ended | |||||||||||||||||||||||
|
March 28, 2026 | % of Revenues |
March 29, 2025 | % of Revenues | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| South Korea | $ | 80,562 | 35.6 | % | $ | 43,171 | 25.2 | % | |||||||||||||||
| Taiwan | 70,840 | 31.3 | 45,362 | 26.5 | |||||||||||||||||||
| United States | 29,410 | 13.0 | 40,325 | 23.5 | |||||||||||||||||||
| China | 11,362 | 5.0 | 13,615 | 7.9 | |||||||||||||||||||
| Singapore | 10,275 | 4.5 | 6,249 | 3.6 | |||||||||||||||||||
| Japan | 8,282 | 3.7 | 10,319 | 6.0 | |||||||||||||||||||
| Europe | 7,774 | 3.4 | 7,781 | 4.5 | |||||||||||||||||||
| Malaysia | 3,714 | 1.6 | 2,600 | 1.5 | |||||||||||||||||||
| Rest of the world | 3,925 | 1.9 | 1,934 | 1.3 | |||||||||||||||||||
| Total revenues | $ | 226,144 | 100.0 | % | $ | 171,356 | 100.0 | % | |||||||||||||||
Geographic revenue information is based on the location to which we ship the product. For example, if a certain South Korean customer purchases through its U.S. subsidiary and requests the products to be shipped to an address in South Korea, this sale will be reflected in the revenue for South Korea rather than the U.S.
Changes in revenues by geographic region for the three months ended March 28, 2026, compared to the three months ended March 29, 2025, were primarily attributable to changes in customer demand, product sales mix, and the timing of customer
shipments and revenue recognition. Specifically, the changes in revenues by geographic region were attributable to the following:
•South Korea - Increased demand for our DRAM probe card products, including those supporting HBM designs, contributed to the increase in revenues.
•Taiwan - Increased demand for our Foundry & Logic probe card products contributed to the increase in revenues.
•United States - Decreased demand for certain Foundry & Logic and Systems customers contributed to the decrease in revenue.
Cost of Revenues and Gross Margins
Cost of revenues consists primarily of manufacturing materials, compensation and benefits, shipping and handling costs, manufacturing-related overhead (including equipment costs, related occupancy, and computer services), warranty costs, inventory adjustments (including write-downs for inventory obsolescence), and amortization of certain intangible assets. Our manufacturing operations rely on a limited number of suppliers to provide key components and materials for our products, some of which are a sole source. We order materials and supplies based on backlog and forecasted customer orders. Tooling and setup costs related to changing manufacturing lots at our suppliers are also included in the cost of revenues. We expense all warranty costs, inventory provisions and amortization of certain intangible assets as cost of revenues.
We have been executing on initiatives for gross margin improvements through operational effectiveness and financial discipline, including:
•Deploying our workforce and existing manufacturing footprint more effectively, which included the execution of our 2026 Restructuring Plans. In first quarter of 2026, costs of revenues include $21.5 million of restructuring costs in connection with the 2026 Restructuring Plans.
•Driving improvement in manufacturing yields in key process areas, innovating to reduce manufacturing spending, and reducing cycle times in key manufacturing operations.
Our gross profit and gross margin were as follows (dollars in thousands):
| Three Months Ended | |||||||||||||||||||||||
|
March 28, 2026 |
March 29, 2025 | $ Change | % Change | ||||||||||||||||||||
| Gross profit | $ | 86,794 | $ | 64,523 | $ | 22,271 | 34.5 | % | |||||||||||||||
| Gross margin | 38.4 | % | 37.7 | % | |||||||||||||||||||
Our gross profit and gross margin by segment were as follows (dollars in thousands):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Probe Cards | Systems | Corporate and Other | Total | Probe Cards | Systems | Corporate and Other | Total | ||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 100,131 | $ | 10,602 | $ | (23,939) | $ | 86,794 | $ | 51,615 | $ | 15,515 | $ | (2,607) | $ | 64,523 | |||||||||||||||||||||||||||||||
| Gross margin | 50.5 | % | 38.0 | % | 38.4 | % | 37.8 | % | 44.5 | % | 37.7 | % | |||||||||||||||||||||||||||||||||||
Probe Cards - For the three months ended March 28, 2026, gross profit and gross margins increased compared to the three months ended March 29, 2025, primarily due to increased revenue from a favorable product mix, higher factory utilization, and increased volumes, which includes the impact of our gross margin initiatives described earlier, partially offset by increased costs for tariffs.
Systems - For the three months ended March 28, 2026, gross profit and gross margins decreased compared to the three months ended March 29, 2025, primarily as a result of lower factory utilization and decreased volumes.
Corporate and Other - Corporate and Other includes unallocated expenses relating to restructuring charges, net, stock-based compensation expense, and amortization of intangible assets and fixed asset fair value adjustments due to acquisitions, which are not used in evaluating the results of, or in allocating resources to, our reportable segments. For the three months ended March 28, 2026, corporate and other costs increased compared to the three months ended March 29, 2025, primarily due to the $21.5 million of restructuring charges incurred in connection with the 2026 Restructuring Plans.
Overall - Gross profit and gross margins fluctuate with revenue levels, product mix, selling prices, factory loading, and material costs. For the three months ended March 28, 2026, compared to the three months ended March 29, 2025, gross profit and gross margins increased due to increased revenue from a favorable product mix, higher factory utilization, and increased
volumes, which includes the impact of our gross margin initiatives described earlier, partially offset by $21.5 million of restructuring charges incurred in connection with the 2026 Restructuring Plans and increased costs for tariffs which impacted gross margins by 1.4%.
Cost of revenues included stock-based compensation expense as follows (in thousands):
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| Stock-based compensation | $ | 1,841 | $ | 2,005 | |||||||
Research and Development
| Three Months Ended | |||||||||||||||||||||||
|
March 28, 2026 |
March 29, 2025 | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Research and development | $ | 30,780 | $ | 27,800 | $ | 2,980 | 10.7 | % | |||||||||||||||
| % of revenues | 13.6 | % | 16.2 | % | |||||||||||||||||||
Research and development expenses in the three months ended March 28, 2026 increased compared to the corresponding period in the prior year primarily due to higher performance-based compensation and higher restructuring charges, partially offset by lower project material costs, lower general operational costs, and lower stock-based compensation. In first quarter of 2026, research and development includes $1.4 million of restructuring costs incurred in connection with the 2026 Restructuring Plans.
A detail of the changes is as follows (in thousands):
| Three Months Ended March 28, 2026 compared to Three Months Ended March 29, 2025 | ||||||||
| Employee compensation costs | $ | 3,180 | ||||||
| Restructuring charges | 1,252 | |||||||
| Project material costs | (752) | |||||||
| General operational costs | (458) | |||||||
| Stock-based compensation expense | (242) | |||||||
| $ | 2,980 | |||||||
Research and development included stock-based compensation expense as follows (in thousands):
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
Stock-based compensation expense | $ | 2,404 | $ | 2,646 | |||||||
Selling, General and Administrative
| Three Months Ended | |||||||||||||||||||||||
|
March 28, 2026 |
March 29, 2025 | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Selling, general and administrative | $ | 32,292 | $ | 33,454 | $ | (1,162) | (3.5) | % | |||||||||||||||
| % of revenues | 14.3 | % | 19.5 | % | |||||||||||||||||||
Selling, general and administrative expenses decreased for the three months ended March 28, 2026 compared to the corresponding period in the prior year primarily due to decreased restructuring charges and lower stock-based compensation expense, partially offset by employee compensation costs from higher performance-based compensation.
A detail of the changes is as follows (in thousands):
| Three Months Ended March 28, 2026 compared to Three Months Ended March 29, 2025 | ||||||||
| Employee compensation costs | $ | 3,215 | ||||||
| Restructuring charges | (2,228) | |||||||
| Stock-based compensation expense | (1,327) | |||||||
| General operating expenses | (450) | |||||||
| Amortization of intangibles | (191) | |||||||
| Commission expenses | (181) | |||||||
| $ | (1,162) | |||||||
Selling, general and administrative included stock-based compensation expense as follows (in thousands):
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| Stock-based compensation expense | $ | 3,818 | $ | 5,145 | |||||||
Stock-based compensation expense was lower as of March 28, 2026, primarily due to the elimination of previously recognized equity compensation expense related to our former Chief Financial Officer.
Factory Start-Up Costs
| Three Months Ended | |||||||||||||||||||||||
|
March 28, 2026 |
March 29, 2025 | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Factory start-up costs | $ | 7,074 | $ | - | $ | 7,074 | - | ||||||||||||||||
| % of revenues | 3.1 | % | - | % | |||||||||||||||||||
Factory start-up costs are current year costs associated with our newly purchased manufacturing site in Farmers Branch, Texas. The start-up costs consist of consulting costs, employee compensation costs, utilities, taxes and licenses, facility maintenance, and other expenses being incurred while the site is being brought to its intended use. These costs are expected to continue throughout the build-out, with production expected to begin at this site late in the fourth quarter of fiscal 2026.
Interest Income, Net
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Interest Income | $ | 2,429 | $ | 3,416 | |||||||
| Weighted average balance of cash and investments | $ | 305,505 | $ | 349,664 | |||||||
| Weighted average yield on cash and investments | 3.67 | % | 4.47 | % | |||||||
| Interest Expense | $ | 255 | $ | 99 | |||||||
| Average debt outstanding | $ | 11,993 | $ | 13,110 | |||||||
| Weighted average interest rate on debt | 2.75 | % | 2.75 | % | |||||||
Interest income is earned on our cash, cash equivalents, restricted cash and marketable securities. The decrease in interest income for the three months ended March 28, 2026, compared with the corresponding period in the prior year, was attributable to lower invested balances and lower yields.
Interest expense primarily includes interest on our term loan, interest rate swap derivative contracts, commitment fee on our revolving credit facility, term loan issuance costs amortization charges, and our revolving credit facility issuance costs
amortization charges. The interest expense for the three months ended March 28, 2026 increased compared with the corresponding period in the prior year due to entering into the revolving credit facility in the third quarter of fiscal 2025.
Other Income, Net
Other income, net, primarily includes the effects of foreign currency and various other gains and losses. We partially mitigate our risks from currency movements by hedging certain balance sheet exposures, which minimizes the impacts during periods of foreign exchange volatility.
Provision for Income Taxes
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| (In thousands, except percentages) | |||||||||||
| Provision for income taxes | $ | 396 | $ | 1,075 | |||||||
| Effective tax rate | 2.1 | % | 14.4 | % | |||||||
Provision for income taxes reflects the tax provision on our operations in foreign and U.S. jurisdictions, offset by tax benefits from tax credits and the foreign-derived intangible income deduction. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss by jurisdiction, changes to the valuation allowance, changes to U.S. federal, state or foreign tax laws, changes in the benefit or expense related to stock-based compensation expense, future expansion into areas with varying country, state, and local income tax rates, and deductibility of certain costs and expenses by jurisdiction. The decrease in our effective tax rate for the three months ended March 28, 2026 compared to the corresponding period in the prior year was primarily driven by increased stock-based compensation discrete benefits that arose due to the increase in stock price between the grant date and the vesting date of the awards.
Liquidity and Capital Resources
Capital Resources
Our working capital increased to $468.7 million at March 28, 2026, compared to $433.2 million at December 27, 2025.
Cash and cash equivalents primarily consist of deposits held at banks and money market funds. Marketable securities primarily consist of U.S. treasuries, corporate bonds, U.S. agency securities, and commercial paper. We typically invest in highly rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or better, and limits the types of acceptable investments, issuer concentration and duration of the investment.
Our cash, cash equivalents and marketable securities totaled approximately $303.3 million at March 28, 2026, compared to $275.2 million at December 27, 2025. We have the full amount available under our $150 million revolving credit facility as of March 28, 2026. Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, the cash we expect to generate from operations, and the available capacity under our revolving credit facility, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: research and development, capital expenditures, working capital, outstanding commitments, and other liquidity requirements associated with existing operations. However, we cannot be certain that our cash, cash equivalents, and marketable securities on hand, and cash generated from operations, will be available in the future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital resources. To the extent necessary, we may consider entering into short and long-term debt obligations, raising cash through a stock issuance, or obtaining new financing facilities, which may not be available on terms favorable to us. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.
If we are unsuccessful in maintaining or growing our revenues, maintaining or reducing our cost structure, or increasing our available cash through debt or equity financings, our cash, cash equivalents and marketable securities may decline.
We utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where needed. As part of these strategies, we indefinitely reinvest a portion of our foreign earnings. Should we require additional capital in the United States, we may elect to repatriate indefinitely-reinvested foreign funds or raise capital in the United States.
Cash Flows
The following table sets forth our net cash flows from operating, investing and financing activities:
| Three Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by operating activities | $ | 44,961 | $ | 23,539 | |||||||
| Net cash used in investing activities | $ | (23,407) | $ | (84,660) | |||||||
| Net cash used in financing activities | $ | (1,196) | $ | (2,964) | |||||||
Operating Activities
Net cash provided by operating activities consists of net income for the period, adjusted for certain non-cash items and changes in certain operating assets and liabilities. Net cash provided by operating activities for the three months ended March 28, 2026 was attributable to net income of $20.4 million and net non-cash expenses of $37.0 million, partially offset by the increase in net working capital of $12.4 million. The cash used in net working capital was primarily driven by increased inventories of $7.4 million, increased accounts receivable, net, of $7.0 million, increased prepaid and other current assets of $5.7 million, and decreased accrued liabilities of $5.3 million, partially offset by increased accounts payable of $7.5 million and increased deferred revenue of $6.0 million. The non-cash expenses mainly consisted of non-cash restructuring, depreciation, amortization, stock-based compensation, and the provision for excess and obsolete inventories.
Investing Activities
Net cash used in investing activities for the three months ended March 28, 2026 primarily related to $15.2 million of property, plant and equipment purchases and $8.3 million in net purchases of marketable securities.
Financing Activities
Net cash used in financing activities for the three months ended March 28, 2026 primarily related to $6.8 million used to pay tax withholdings for net share settlements of employee stock awards, partially offset by $5.8 million received from issuances of common stock under our employee stock purchase plan.
Debt
Revolving Credit Agreement
On July 29, 2025, we entered into a Revolving Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto, providing us with a $150 million revolving credit facility (the "Facility"). The Facility has a maturity date of July 29, 2030. The Facility may be used for working capital and other general corporate purposes, subject to the terms and conditions set forth in the Credit Agreement. No amounts were outstanding under the Facility as of March 28, 2026.
Borrowings under the Facility will bear interest at a fluctuating rate per annum equal to, at our option, (i) the forward-looking secured overnight financing rate ("SOFR") term, (ii) a base rate set forth in the Credit Agreement, or (iii) a combination thereof, plus, in each case, an applicable margin calculated based on our leverage ratio. Voluntary prepayments are permissible without penalty, subject to certain conditions pertaining to minimum notice and minimum prepayment and reduction amounts as described in the Credit Agreement.
The Facility also bears a quarterly commitment fee ranging from 0.15% to 0.25% on the daily amount by which the commitments under the Facility exceed the outstanding amount. The commitment fee as of March 28, 2026 was 0.15%.
The Credit Agreement contains customary representations and warranties, and affirmative and negative covenants and events of default, including limitations on subsidiary indebtedness and liens, and the requirement to maintain specified financial ratios including the requirement to maintain a consolidated total net leverage ratio not exceeding 3.50 to 1.00 as of the last day of each fiscal quarter with an increase to 4.00 to 1.00 for four quarters following a permitted acquisition. We were in compliance with the Facility's covenants as of March 28, 2026.
Building Term Loan and Interest Rate Swap
On June 22, 2020, we entered into an $18.0 million 15-year credit facility loan agreement (the "Building Term Loan"). The proceeds of the Building Term Loan were used to purchase a building adjacent to our leased facilities in Livermore, California. On May 19, 2023, we amended the Building Term Loan, replacing the benchmark reference rate London Interbank Offered Rate ("LIBOR") with the term SOFR, with no change to the amount or timing of contractual cash flows.
The Building Term Loan bears interest at a rate equal to the applicable SOFR rate plus 1.86% per annum. Interest payments are payable in monthly installments over a fifteen-year period. The interest rate at March 28, 2026, before consideration of interest rate swap discussed in the next paragraph, was 5.53%. As of March 28, 2026, the balance outstanding pursuant to the Building Term Loan was $12.0 million.
On March 17, 2020, we entered into an interest rate swap agreement to hedge the interest payment on the Building Term Loan for the notional amount of $18.0 million, and an amortization period that matches the debt. As future levels of LIBOR over the life of the loan were uncertain, we entered into this interest-rate swap agreement to hedge the exposure in interest rate risks associated with movement in LIBOR rates. This agreement was amended on May 19, 2023 to replace the benchmark reference rate LIBOR with SOFR to match the Building Term Loan agreement (as amended). After the amendment, the interest rate swap continues to convert our floating-rate interest into a fixed-rate at 2.75%. As of March 28, 2026, the notional amount of the loan that is subject to this interest rate swap is $12.0 million.
Stock Repurchase Programs
On October 30, 2023, our Board of Directors authorized a two-year program to repurchase up to $75.0 million of outstanding common stock, with the primary purpose of offsetting potential dilution from issuance of common stock under our stock-based compensation programs. On March 29, 2025, our Board of Directors approved an increase to the repurchase program, authorizing the repurchase of an additional $1.6 million in shares of common stock. During the first fiscal quarter of 2025, we repurchased and retired 665,000 shares of common stock for $22.1 million, utilizing the remaining shares available for repurchase under the program.
On April 24, 2025, our Board of Directors authorized a new two-year program to repurchase up to $75.0 million of outstanding common stock to offset potential dilution from issuance of common stock under our stock-based compensation programs. This share repurchase program will expire on April 24, 2027. During fiscal 2025, we repurchased and retired 135,000 shares of common stock for $4.1 million. During the three months ended March 28, 2026, we did not repurchase and retire shares of common stock under this plan, and as of March 28, 2026, $70.9 million remained available for future repurchases.
Contractual Obligations and Commitments
The following table summarizes our significant contractual commitments to make future payments in cash under contractual obligations as of March 28, 2026:
| Payments Due In Fiscal Year | |||||||||||||||||||||||||||||||||||||||||
Remainder
2026 |
2027 |
2028 |
2029 |
2030 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Operating leases | $ | 6,865 | $ | 8,746 | $ | 5,064 | $ | 594 | $ | 456 | $ | 972 | $ | 22,697 | |||||||||||||||||||||||||||
| Term loans - principal payments | 860 | 1,175 | 1,208 | 1,242 | 1,278 | 6,212 | 11,975 | ||||||||||||||||||||||||||||||||||
Term loans - interest payments(1) | 488 | 593 | 528 | 460 | 386 | 815 | 3,270 | ||||||||||||||||||||||||||||||||||
Revolver - commitment fee(2) | 193 | 228 | 232 | 228 | 131 | - | 1,012 | ||||||||||||||||||||||||||||||||||
| Total | $ | 8,406 | $ | 10,742 | $ | 7,032 | $ | 2,524 | $ | 2,251 | $ | 7,999 | $ | 38,954 | |||||||||||||||||||||||||||
(1) Represents our minimum interest payment commitments at 5.53% per annum, excluding the interest rate swap described in Debt, above.
(2) Represents our quarterly commitment fee of 0.15% on the daily amount by which the commitments under the Facility exceed the outstanding amount. This commitment assumes no borrowings.
The table above excludes our gross liability for unrecognized tax benefits and our deferred grant. The gross liability for unrecognized tax benefits was $55.5 million as of March 28, 2026. The timing of any payments which could result from these unrecognized tax benefits will depend upon a number of factors and, accordingly, the timing of payment cannot be estimated. The deferred grant was $18.0 million as of March 28, 2026, and consists of cash received from a California Competes Grant awarded from the California Governor's Office of Business and Economic Development. The timing of any potential repayments is dependent upon a number of factors, including the number of employees and capital investments within California over the 5-year term. Accordingly, the timing of any repayment cannot be estimated.
Off-Balance Sheet Arrangements
Historically, we have not participated in transactions that have generated relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 28, 2026, we were not involved in any such off-balance sheet arrangements.
Recent Accounting Standards
For a description of a recent change in accounting standards, including the expected dates of adoption and estimated effects, if any, in our condensed consolidated financial statements, see Note 1, Basis of Presentation and Significant Accounting Policies, in Part I, Item 1 of this Form 10-Q.