Sonos : Quarterly Report for Quarter Ending December 27, 2025 (Form 10-Q)

About this update from Sonos, Inc.

Management's discussion and analysis of financial condition and results of operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report. We operate on a 52- week or 53- week fiscal year ending on the Saturday nearest September 30 each year. Our fiscal year is divided into four quarters of 13 weeks, each beginning on a Sunday and containing two 4-week periods followed by a 5-week period. An additional week is included in the fourth fiscal quarter approximately every five years to realign fiscal quarters with calendar quarters. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding future operations and performance, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "expect," "objective," "plan," "potential," "seek," "grow," "target," "if," and similar expressions intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations, objectives, restructuring efforts, cost initiatives, timing of certain tax impacts and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled "Risk Factors" set forth in Part I, Item 1A of the Annual Report and in our other SEC filings. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. Except as required by law, we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. Overview Sonos is a leading audio company dedicated to elevating life through sound. Since pioneering multi-room wireless audio in 2005, Sonos has built a system that unites every dimension of sound - music, movies, stories and conversations - into one connected platform. The portfolio includes home theater speakers, components, plug-in and portable speakers, and headphones that compound in value with every room and device its customers add. Known for exceptional sound, thoughtful design, ease of use and seamless access to the world's audio content, Sonos is trusted by more than 17 million households in 60+ countries around the world. We are building on the strong foundation established during our transformational year in fiscal 2025. With Tom Conrad now in place as our Chief Executive Officer we are well-positioned to continue building upon the improvements we have made to our software products and operational efficiency. Under Mr. Conrad's direction, we have restored our software with reliability now exceeding historical levels, reorganized our operations to improve our efficiency and effectiveness and recommitted to delivering the kind of premium experience our customers expect. We have also recommitted to new product introductions, including the announcement of Amp Multi in January 2026. With every new product, software feature and integration, the Sonos platform becomes more powerful, provides greater value to our customers, and further strengthens as the differentiated system for connected home audio. Our cost transformation initiative, which began in fiscal 2024, has delivered meaningful results. The organizational restructuring we completed-including workforce reductions of 6% in August 2024 and 12% in February 2025-has created a more streamlined, agile organization. We remain focused on transformation efforts to continually improve both our operational efficiency and effectiveness. Additionally, during the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency. We expect to complete this exit with minimal disruption to our business by the second quarter of fiscal 2026. We continue to maintain diversified contract manufacturing partnerships. Macroeconomic environment Our business and financial performance depend significantly on worldwide economic conditions. We face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the financial markets, volatility in exchange rates, low or negative growth in certain regions, declining consumer sentiment of international customers towards U.S.-based companies as a result of Table of contents U.S. trade policy, and uncertainty in consumer demand. In addition, our business may be adversely impacted by the potential expansion of tariffs on goods imported into the U.S., as well as any retaliatory tariffs or policies enacted in other countries or any "trade wars." Global economic and political conditions and uncertainties, including global trade tensions, have caused and may continue to cause volatility in demand for our products as well as cost of materials and logistics, and as a result may impact our results of operations. We are continuing to evaluate and implement mitigating actions, including taking measures to manage our expenses and contain costs, leveraging our supply chain flexibility and evaluating potential pricing and promotion strategies. For additional information, see Part II, Item 1A "Risk Factors." Seasonality Historically, we have typically experienced the highest levels of revenue in the first fiscal quarter of the year coinciding with the holiday shopping season and our promotional activities. Key Metrics In addition to the measures presented in our condensed consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, identify trends affecting our business and assist us in making operational and strategic decisions. Our key metrics are total revenue, products sold, Adjusted EBITDA, and Adjusted EBITDA margin. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA is net income. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA margin is net income margin. Three Months Ended December 27, 2025 December 28, 2024 (In thousands, except percentages) Total revenue $ 545,662 $ 550,857 Products sold 1,793 1,850 Net income $ 93,798 $ 50,237 Net income margin (1) 17.2 % 9.1 % Adjusted EBITDA (2) $ 132,139 $ 91,173 Adjusted EBITDA margin (2) 24.2 % 16.6 % (1) Net income margin is calculated by dividing net income by revenue. (2) For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net income to Adjusted EBITDA, see the section titled "Non-GAAP Financial Measures" below. Products Sold Products sold represents the number of products that are sold during a period, net of returns, and includes units sold from the Sonos speakers and Sonos system products categories, as well as architectural speakers sold through our partnerships from our Partner products and other revenue category. Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the price at which we sell our products, the introduction of new products that may have higher or lower than average selling prices, the impact of foreign exchange rate fluctuations, as well as the impact of recognition of previously deferred revenue. Non-GAAP Financial Measures To supplement our condensed consolidated financial statements presented in accordance with U.S. GAAP, we use Adjusted EBITDA, Adjusted EBITDA margin, and constant currency which are non-GAAP financial measures. We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude from these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past Table of contents performance and future prospects, and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. We define Adjusted EBITDA as net income adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, legal and transaction related costs, restructuring and other costs, and other items that we do not consider representative of underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. We present percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. We calculate constant currency growth percentages by translating our current period financial results using the prior period average currency exchange rates and comparing these amounts to our prior period reported results. These non-GAAP financial measures are not based on standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. Furthermore, other companies may not publish these or similar metrics. These metrics may also have certain limitations as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations and comprehensive income, including stock-based compensation, which has been and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy. Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP. The following table presents a reconciliation of net income to Adjusted EBITDA: Three Months Ended December 27, 2025 December 28, 2024 (In thousands, except percentages) Net income $ 93,798 $ 50,237 Add (deduct): Depreciation and amortization 14,022 17,611 Stock-based compensation expense 15,191 25,334 Interest income (1,348) (1,861) Interest expense 116 110 Other (income) expense, net (420) 6,029 Provision for (benefit from) income taxes 8,270 (6,422) Legal and transaction related costs (1) 2,510 195 Restructuring and other charges (2) - (60) Adjusted EBITDA $ 132,139 $ 91,173 Revenue $ 545,662 $ 550,857 Net income margin 17.2 % 9.1 % Adjusted EBITDA margin 24.2 % 16.6 % (1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, as well as legal and transaction costs associated with our acquisition activity, which we do not consider representative of our underlying operating performance. (2) On August 14, 2024, we initiated a restructuring plan to reduce our cost base involving approximately 6% of our employees (the "2024 restructuring plan"). Restructuring and other charges for the three months ended December 28, 2024, reflect a gain resulting from the impact of remaining restructuring costs that were lower than our estimated liability under the 2024 restructuring plan. Table of contents Results of Operations Comparison of the three months ended December 27, 2025 and December 28, 2024 Revenue by Product Comparison of the three months ended December 27, 2025 and December 28, 2024 Three Months Ended Change December 27, 2025 December 28, 2024 $ % (In thousands) Sonos speakers $ 459,240 $ 467,142 $ (7,902) (1.7) % % of total revenue 84.2 % 84.8 % Sonos system products 65,058 60,274 4,784 7.9 % of total revenue 11.9 % 10.9 % Partner products and other revenue 21,364 23,441 (2,077) (8.9) % of total revenue 3.9 % 4.3 % Total revenue $ 545,662 $ 550,857 $ (5,195) (0.9) % Volume data (products sold in thousands) Units % Total products sold 1,793 1,850 (57) (3.1) % We generate substantially all of our revenue from the sale of Sonos speakers and Sonos system products. We also generate a portion of revenue from Partner products and other revenue sources, such as architectural speakers from our Sonance partnership, accessories such as speaker stands and wall mounts, professional services, licensing, and advertising revenue. Total revenue decreased $5.2 million, or 0.9%, for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, attributable to softer demand due to market conditions, partially offset by favorability from foreign exchange rates. Sonos speakers revenue represented 84.2% of total revenue for the three months ended December 27, 2025 and decreased 1.7% compared to the three months ended December 28, 2024, primarily driven by expected declines in Arc, as well as Sub and portables, partially offset by higher sales of Arc Ultra and Era 100. Sonos system products represented 11.9% of total revenue for the three months ended December 27, 2025 and increased 7.9% compared to the three months ended December 28, 2024, due to higher sales to our installed solutions channel. Partner products and other revenue represented 3.9% of total revenue for the three months ended December 27, 2025 and decreased 8.9% compared to the three months ended December 28, 2024. The volume of products sold decreased 3.1% for the three months ended December 27, 2025 compared to the three months ended December 28, 2024. Revenue by Region The following table presents the change in revenue for the three months ended December 27, 2025 compared with the three months ended December 28, 2024: Three Months Ended December 27, 2025 Change (%) Constant Currency Change (%) (1) Americas 1.3 % 1.2 % EMEA (4.1) % (10.7) % APAC (4.6) % (3.9) % Total revenue (0.9) % (3.3) % Table of contents (1) Constant currency is a financial measure that is not calculated in accordance with U.S. GAAP. For additional information, see the section titled "Non-GAAP Financial Measures" above. Cost of Revenue and Gross Profit Comparison of the three months ended December 27, 2025 and December 28, 2024 Three Months Ended Change December 27, 2025 December 28, 2024 $ % (In thousands, except percentages) Cost of revenue $ 292,202 $ 309,451 $ (17,249) (5.6) % Gross profit $ 253,460 $ 241,406 $ 12,054 5.0 % Gross margin 46.5 % 43.8 % Cost of Revenue Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, tariffs, duty costs, warranty replacement costs, packaging, fulfillment costs, manufacturing and tooling equipment depreciation, warehousing costs, hosting costs, and excess and obsolete inventory write-downs. It also includes licensing costs, such as royalties to third parties, and amortization attributable to acquired developed technology. In addition, we allocate certain costs related to management and facilities, personnel-related expenses, and supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses. Cost of revenue decreased $17.2 million, or 5.6%, for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a decrease in product and material costs and inventory-related write-downs, partially offset by increased tariff expenses. Gross Margin Our gross margin fluctuates from period to period based on a number of factors, including the mix of products we sell, the mix of channels through which we sell our products, fluctuations of our product and material cost savings, fluctuations in our product and material and logistics markets, product pricing strategies and promotional activity, the foreign currency in which our products are sold, and tariffs and duty costs implemented by governmental authorities. Gross margin increased 270 basis points for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, primarily due to a decrease in product and material costs and inventory-related write-downs, in addition to foreign exchange rate favorability and the net impact of pricing changes, partially offset by tariff expenses and unfavorable product mix. Table of contents Operating Expenses Comparison of the three months ended December 27, 2025 and December 28, 2024 Three Months Ended Change December 27, 2025 December 28, 2024 $ % (Dollars in thousands) Research and development $ 59,762 $ 80,838 $ (21,076) (26.1) % Less restructuring and other charges (1) - (60) 60 (100.0) Research and development, net of restructuring and other charges $ 59,762 $ 80,898 $ (21,136) (26.1) % Sales and marketing $ 65,273 $ 86,644 $ (21,371) (24.7) % Less restructuring and other charges (1) - - - * Sales and marketing, net of restructuring and other charges $ 65,273 $ 86,644 $ (21,371) (24.7) % General and administrative $ 28,009 $ 25,831 $ 2,178 8.4 % Less restructuring and other charges (1) - - - * General and administrative, net of restructuring and other charges $ 28,009 $ 25,831 $ 2,178 8.4 % Operating expenses $ 153,044 $ 193,313 $ (40,269) (20.8) % Less restructuring and other charges (1) - (60) 60 (100.0) Operating expenses, net of restructuring and other charges $ 153,044 $ 193,373 $ (40,329) (20.9) % * Not meaningful (1) Restructuring and other charges for the three months ended December 28, 2024, reflect a gain resulting from the impact of remaining restructuring costs that were lower than our estimated liability under the 2024 restructuring plan. Research and Development Research and development expenses consist primarily of personnel-related expenses, third-party resource expenses, tooling, test equipment, prototype materials, and related overhead costs. To date, software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant. Research and development expenses decreased $21.1 million, or 26.1%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This decrease was primarily driven by lower personnel-related costs due to lower headcount and our reorganization efforts. Sales and Marketing Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, maintenance and repair expenses for our product displays, as well as depreciation, customer experience expenses, revenue related sales fees from our direct-to-consumer and installer solution sales channels, and related overhead costs. Sales and marketing expenses decreased $21.4 million, or 24.7%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This decrease was primarily driven by ongoing savings resulting from our cost transformation initiatives, lower marketing costs due to the timing of our launch of Arc Ultra in October 2024, and lower personnel-related costs due to lower headcount. Table of contents General and Administrative General and administrative expenses consist of administrative personnel-related expenses for our information technology, finance, legal, human resources, and similar personnel, as well as the costs of professional services, information technology, litigation, patents, related overhead, and other administrative expenses. General and administrative expenses increased $2.2 million, or 8.4%, for the three months ended December 27, 2025, compared to the three months ended December 28, 2024. This increase was primarily driven by an increase in legal fees mainly related to our IP litigation, partially offset by lower personnel-related costs due to lower headcount. Interest Income, Interest Expense, and Other Income (Expense), Net Comparison of the three months ended December 27, 2025 and December 28, 2024 Three Months Ended Change December 27, 2025 December 28, 2024 $ % (In thousands, except percentages) Interest income $ 1,348 $ 1,861 $ (513) (27.6) % Interest expense (116) (110) (6) 5.5 Other income (expense), net 420 (6,029) 6,449 (107.0) Total other income (expense), net $ 1,652 $ (4,278) $ 5,930 (138.6) % Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances. Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. Other income (expense), net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. Interest income for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, decreased due to higher international cash balances with lower yields. Interest expense for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, remained relatively consistent. Other income (expense), net for the three months ended December 27, 2025 compared to the three months ended December 28, 2024, increased from other expenses of $6.0 million for the three months ended December 28, 2024 to other income of $0.4 million for the three months ended December 27, 2025 due to foreign currency exchange fluctuations. Provision for (benefit from) Income Taxes Comparison of the three months ended December 27, 2025 and December 28, 2024 Three Months Ended Change December 27, 2025 December 28, 2024 $ % (In thousands, except percentages) Provision for (benefit from) income taxes $ 8,270 $ (6,422) $ 14,692 * * Not meaningful We are subject to income taxes in the United States and foreign jurisdictions in which we operate. Foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rate will vary depending on jurisdictional mix of earnings, and changes in tax laws. In addition, certain U.S. tax regulations subject the earnings of our non-U.S. subsidiaries to current taxation in the United States. Our effective tax rate will be impacted by our ability to claim deductions and foreign tax credits to offset the taxation of foreign earnings in the United States. On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted. The legislation includes provisions such as accelerated cost recovery of qualified property, immediate expensing of U.S.-based research and development costs, and changes to the U.S. international taxation regime. Table of contents We recognized an income tax provision of $8.3 million and an income tax benefit of $6.4 million for the three months ended December 27, 2025 and December 28, 2024, respectively. For the three months ended December 27, 2025, the repeal of the requirement to capitalize research and experimental expenditures under the OBBBA resulted in a reduction in the Company's U.S. current tax expense with no impact to deferred tax expense as a result of the full valuation allowance maintained against the Company's net U.S. deferred tax assets. The tax benefit for the three months ended December 28, 2024 primarily resulted from the application of a negative annual effective tax rate to year-to-date U.S. pre-tax income for the quarter, which was driven in part by the capitalization of research and experimental expenditures under Section 174 and the valuation allowance maintained against U.S. deferred tax assets. Liquidity and Capital Resources Our operations are financed primarily through cash flows from operating activities. As of December 27, 2025, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $312.5 million, including $195.7 million held by our foreign subsidiaries, marketable securities of $51.0 million, proceeds from the exercise of stock options, and borrowing capacity under the credit facility under our Revolving Credit Agreement. In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of December 27, 2025, as they are required to fund needs outside of the United States. In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we may be required to accrue and pay additional U.S. taxes to repatriate these funds. As of December 27, 2025, our open purchase orders to contract manufacturers for finished goods were approximately $125 million, the majority of which are expected to be paid over the next six months. As of December 27, 2025, our expected commitments to suppliers for components were in the range of $141 million to $159 million, the majority of which is expected to be paid and/or utilized by our contract manufacturers in building finished goods within the next two years. The expected commitments are subject to change as a result of fluctuations in the demand forecast, as well as ongoing negotiations with contract manufacturers and suppliers. These commitments are related to components that can be specific to Sonos products and comprised 1) indirect obligations to third-party manufacturers and suppliers, 2) the inventory owned by contract manufacturers procured to manufacture Sonos products, and 3) purchase commitments made by contract manufacturers to their upstream suppliers. We believe our existing cash and cash equivalent balances, cash flows from operations and committed credit lines will be sufficient to meet our long-term working capital and capital expenditure needs for at least the next 12 months. We hold our cash with a diverse group of major financial institutions and have processes and safeguards in place to manage our cash balances and mitigate the risk of loss. In October 2021, we entered into the Revolving Credit Agreement, which was amended in October 2025 to provide for aggregate commitments of up to $80.0 million with a maturity date in October 2030. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, our planned sales and marketing activities, the timing of new product introductions, our potential merger and acquisition activity, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in increased dilution to our stockholders. If we were to incur additional debt financing, it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations. Debt Obligations On October 13, 2021, we entered into the Revolving Credit Agreement which was amended in October 2025 with JPMorgan Chase Bank, N.A., KeyBank National Association and Goldman Sachs Bank USA. Amendment No. 2 to the Revolving Credit Agreement provides for (i) a five-year senior secured revolving credit facility in the amount of up to $80.0 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes. The facility may be drawn as an Alternative Base Rate Loan (at 1.00% plus an applicable margin) or Term Benchmark Loan (SOFR plus an applicable margin). We must also pay (i) an unused commitment fee ranging from 0.200% to 0.275% per annum of the average daily unused portion of the aggregate revolving credit commitment under the agreement and (ii) a per annum fee equal to the applicable margin over SOFR multiplied by the aggregate face amount of outstanding letters of credit. As of December 27, 2025, we did not have any outstanding borrowings and had $2.4 million in undrawn letters of credit that reduce the availability under the Revolving Credit Agreement. Our obligations under the Revolving Credit Agreement are secured by substantially all of our assets. The Revolving Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires us to maintain a certain consolidated leverage ratio, and customary events of default. As of December 27, 2025, we were in compliance with all financial covenants under the Revolving Credit Agreement Table of contents Cash Flows The following table summarizes our cash flows for the periods indicated: Three Months Ended December 27, 2025 December 28, 2024 (In thousands) Net cash provided by (used in): Operating activities $ 163,307 $ 156,173 Investing activities (4,064) (9,334) Financing activities (23,421) (33,798) Effect of exchange rate changes 2,014 (2,818) Net increase in cash and cash equivalents $ 137,836 $ 110,223 Cash flows from operating activities Net cash provided by operating activities of $163.3 million for the three months ended December 27, 2025, consisted of net income of $93.8 million, non-cash adjustments of $29.8 million, and a favorable impact of net changes in operating assets and liabilities of $39.7 million. Non-cash adjustments primarily consisted of stock-based compensation expense and depreciation and amortization. The net increase in cash from the change in operating assets and liabilities was primarily due to a decrease in inventories of $45.5 million due to higher sales volumes during the holiday season, an increase in accounts payable and accrued expenses of $31.2 million, and an increase in other liabilities of $5.2 million. The net increase in cash from the change in operating assets and liabilities was partially offset by an increase in accounts receivable of $49.1 million. Cash flows from investing activities Cash used in investing activities of $4.1 million for the three months ended December 27, 2025, primarily consisted of the purchases of marketable securities of $12.5 million and purchases of property and equipment of $6.0 million mainly related to manufacturing-related tooling and test equipment to support the launch of new products, partially offset by cash provided by maturities of marketable securities of $14.4 million. Cash flows from financing activities Cash used in financing activities of $23.4 million for the three months ended December 27, 2025, primarily consisted of payments for repurchases of common stock of $25.0 million, and payments for repurchases of common stock related to shares withheld for tax in connection with vesting of stock awards of $10.9 million, partially offset by proceeds from the exercise of stock options of $13.2 million. Commitments and Contingencies See Note 7. Commitments and Contingencies in the notes to condensed consolidated financial statements. Critical Accounting Policies and Estimates Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates. Other than items discussed in Note 2 of our condensed consolidated financial statements, there have been no material changes to our critical accounting policies as compared to the critical accounting policies and significant judgments and estimates disclosed in our Annual Report on Form 10-K. Table of contents

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