{"url_path":"/sec/staa/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/718937/0000718937-26-000023-index.html","accession_number":"0000718937-26-000023","cik":"0000718937","ticker":"STAA","issuer_name":"STAAR SURGICAL CO","edgar_url":"https://www.sec.gov/Archives/edgar/data/718937/0000718937-26-000023-index.html","primary_entity_key":"0000718937","primary_entity_name":"STAAR SURGICAL CO"},"word_count":3677,"has_tables":true,"body_markdown":"## ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS\n\nThe matters addressed in this Item 2 that are not historical information constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created therein. In some cases readers can recognize forward-looking statements by the use of words like “anticipate,” “estimate,” “expect,” “project,” “intend,” “may,” “plan,” “believe,” “will,” “should,” “could,” “forecast,” “potential,” “continue,” “ongoing” (or the negative of those words and similar words or expressions), although not all forward-looking statements contain these words. Forward-looking statements include, without limitation, statements regarding the intent, belief or current expectations of the Company and its management regarding any of the following: demand for our Implantable Collamer® Lenses; the benefits of our leadership realignment and related efforts; China macroeconomic conditions, procedure volumes, demand, and inventory levels; any projections of or guidance as to future earnings, revenue, sales, profit margins, expense rate, cash, effective tax rate, product mix, capital expense or any other financial items; the plans, strategies, and objectives of management for future operations or prospects for achieving such plans; statements regarding new, existing, or improved products, including but not limited to, expectations for success of new, existing, and improved products in the U.S. or international markets or government approval of new or improved products; commercialization of new or improved products; future economic conditions or size of market opportunities globally; expected costs of operations; statements of belief, including as to achieving business plans for 2026 and beyond; expected regulatory activities and approvals, product launches, and any statements of assumptions underlying any of the foregoing.\n\nAlthough we believe that the expectations reflected in these forward-looking statements are reasonable, we caution investors and prospective investors that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors, which if they do not materialize or prove correct, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on these forward-looking statements and to note they speak only as of the date hereof. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, without limitation, our ability to grow and generate profit; our reliance on independent distributors in international markets; a slowdown or disruption to the Chinese economy; global economic conditions; disruptions in our supply chain; fluctuations in foreign currency exchange rates; international trade disputes (including involving tariffs) and substantial dependence on demand from Asia; changes in effective tax rate or tax laws; any loss of use of our principal manufacturing facility; competition; potential losses due to product liability claims; our exposure to environmental liability; data corruption, cyber-based attacks or network security breaches and/or noncompliance with data protection and privacy regulations; acquisitions of new technologies; climate changes; the willingness of surgeons and patients to adopt a new or improved product and procedure; extensive clinical trials and resources devoted to research and development; compliance with government regulations; the discretion of regulatory agencies to approve or reject existing, new or improved products, or to require additional actions before or after approval, or to take enforcement action; laws pertaining to healthcare fraud and abuse; changes in FDA or international regulations related to product approval; product recalls or failures; and other important factors; and those described in our Annual Report on Form 10-K in “Item 1A. Risk Factors” filed on March 3, 2026.\n\nWe disclaim any intention or obligation to update or review these financial projections or forward-looking statements due to new information or other events except as required by law.\n\nThe following discussion should be read in conjunction with the Company’s unaudited Condensed Consolidated Financial Statements, including the related notes, provided in this report.\n\nWe intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the ‘Investor Relations’ sections. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.\n\nOverview\n\nSTAAR Surgical Company designs, develops, manufactures, and sells implantable lenses for the eye and accessory delivery systems used to deliver the lenses into the eye. We are the leading manufacturer of phakic implantable lenses used worldwide in corrective or “refractive” surgery. We have been dedicated solely to ophthalmic surgery for over 40 years. Our goal is to position our refractive lenses throughout the world as primary and premium solutions for patients seeking visual freedom from wearing eyeglasses or contact lenses while achieving excellent visual acuity through refractive vision correction. We generate worldwide revenue almost exclusively from sales of our Implantable Collamer® Lenses, or “ICLs.” Our ICLs are made from Collamer, which is a proprietary collagen copolymer material created and exclusively used by STAAR to make our lenses soft, flexible and biocompatible with the eye. Our ICLs are phakic lenses, meaning that they are implanted into the eye\n\n18\n\n \n\nwithout removing the eye’s natural crystalline lens. This distinguishes an ICL procedure from other refractive procedures, as it does not involve the removal of corneal eye tissue. All of our ICLs are foldable, which allows the surgeon to insert them into the eye through a small incision during minimally invasive surgery. Further, while ICLs are intended to be permanent, our ICLs are reversible lens implants, meaning they can be removed by a doctor if desired.\n\nSTAAR employs a commercialization strategy that strives for sustainable, profitable growth. Our growth strategy includes making our complete ICL product line available in our existing geographic markets and expanding into attractive markets where we do not sell our products today. In addition, we are focused on driving awareness of the ICL procedure and the clinical benefits of our ICLs, and providing surgeon training, support and education, particularly in our newer markets.\n\nBusiness Environment and Factors Affecting Comparability\n\nFor the three months ended April 3, 2026, net sales were $93.5 million, up 119.6% from $42.6 million for the three months ended March 28, 2025. The increase was primarily driven by strong sales performance in China, while distributor inventory was maintained at or below contractual levels. Net sales to our two distributors in China were $47.4 million for the three months ended April 3, 2026, compared to net returns of $0.9 million in the prior-year period.\n\nDuring the first quarter of 2026, we completed the launch of EVO+ ICL in China, which was met with strong market acceptance. EVO+ ICL carries a premium selling price, supporting potential margin expansion as production volumes increase over time. As previously disclosed, shipments to the two distributors in China were largely suspended during the first half of 2025 due to elevated inventory levels following a market slowdown in 2024, with procedure demand primarily fulfilled from existing inventory.\n\nGross margin increased year-over-year to 73.6% from 65.8%, reflecting cost reduction initiatives implemented in the first quarter of 2025. This improvement was partially offset by higher per-unit manufacturing costs associated with low production volumes at the new Swiss facility during 2025. As production in Switzerland has scaled in 2026, unit costs have begun to improve. By the end of fiscal 2026, we expect to manufacture and supply 100% of EVO and EVO+ ICL lenses for China from Switzerland without exposure to tariffs.\n\nAs a result of significantly increased sales, higher gross profit, and reduced operating expenses, GAAP net income for the first quarter of 2026 was $5.2 million or $0.10 per diluted share, up from a net loss of $(54.2) million or $(1.10) per share for the prior year quarter. Although cash and investments available for sale decreased to $163.9 million at April 3, 2026 from $187.5 million due to front-loaded payments for seasonal bonuses and other employee incentives, global sales meetings, severance, and costs associated with our Cooperation Agreement with Broadwood Partners, we expect to generate cash during the remainder of the year.\n\nCritical Accounting Estimates\n\nThis Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses and analyzes data in our unaudited Condensed Consolidated Financial Statements provided in this report, which we have prepared in accordance with U.S. generally accepted accounting principles. Preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board. Actual results may differ, significantly at times, from these estimates if actual conditions differ from our assumptions.\n\nManagement believes that there have been no significant changes during the three months ended April 3, 2026 to the items that we disclosed as our critical accounting estimates in 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 January 2, 2026.\n\n19\n\n \n\nResults of Operations\n\nThe following table shows the percentage of our total sales represented by certain items reflected in our Condensed Consolidated Statements of Income for the periods indicated.\n\n \n\n \n\n \n\nPercentage of Net Sales for\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\nNet sales\n\n \n\n \n\n100.0\n\n%\n\n \n\n \n\n100.0\n\n%\n\nCost of sales\n\n \n\n \n\n26.4\n\n%\n\n \n\n \n\n34.2\n\n%\n\nGross profit\n\n \n\n \n\n73.6\n\n%\n\n \n\n \n\n65.8\n\n%\n\nGeneral and administrative\n\n \n\n \n\n18.2\n\n%\n\n \n\n \n\n57.4\n\n%\n\nSelling and marketing\n\n \n\n \n\n26.2\n\n%\n\n \n\n \n\n63.3\n\n%\n\nResearch and development\n\n \n\n \n\n10.6\n\n%\n\n \n\n \n\n26.6\n\n%\n\nMerger transaction and related costs\n\n \n\n \n\n7.2\n\n%\n\n \n\n \n\n0.0\n\n%\n\nRestructuring, impairment and related charges\n\n \n\n \n\n2.9\n\n%\n\n \n\n \n\n53.2\n\n%\n\nTotal selling, general and administrative\n\n \n\n \n\n65.1\n\n%\n\n \n\n \n\n200.5\n\n%\n\nOperating income (loss)\n\n \n\n \n\n8.5\n\n%\n\n \n\n \n\n(134.7\n\n)%\n\nTotal other income, net\n\n \n\n \n\n0.3\n\n%\n\n \n\n \n\n6.8\n\n%\n\nIncome (loss) before income taxes\n\n \n\n \n\n8.8\n\n%\n\n \n\n \n\n(127.9\n\n)%\n\nProvision (benefit) for income taxes\n\n \n\n \n\n3.2\n\n%\n\n \n\n \n\n(0.6\n\n)%\n\nNet income (loss)\n\n \n\n \n\n5.6\n\n%\n\n \n\n \n\n(127.3\n\n)%\n\n \n\nNet Sales\n\nThe following table presents our net sales (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nNet sales\n\n \n\n$\n\n93,522\n\n \n\n \n\n$\n\n42,589\n\n \n\n \n\n \n\n—\n\n*\n\n \n\n* Denotes change is greater than +100%.\n\nNet sales for the three months ended April 3, 2026 increased 119.6% from the same period of 2025, primarily due to increased sales in China. The composition of our net sales is primarily related to ICL sales. Net sales also include sales of delivery system sales and normal recurring sales adjustments such as sales return allowances. The sales increase was driven by the Asia Pacific (“APAC”) region, which increased by 218%, with ICL unit increase of 227%. The increase in the APAC region was driven by increased sales in China, Japan and Korea. The Europe, Middle East and Africa region sales decreased 3%, with ICL units down 11%, due to decreased sales in our distributor markets, partially offset by increased sales in our direct markets. The Americas region sales increased 26%, with ICL unit growth up 28%, primarily due to sales growth in the U.S. Changes in foreign currency favorably impacted net sales by $1.2 million.\n\nGross Profit\n\nThe following table presents our gross profit and gross profit margin (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nGross profit\n\n \n\n$\n\n68,859\n\n \n\n \n\n$\n\n28,005\n\n \n\n \n\n \n\n—\n\n*\n\nGross profit margin\n\n \n\n \n\n73.6\n\n%\n\n \n\n \n\n65.8\n\n%\n\n \n\n \n\n \n\n \n\n* Denotes change is greater than +100%.\n\nGross profit for the three months ended April 3, 2026 increased 145.9%, from the same period of 2025. Gross profit margin increased to 73.6% of revenue for the three months ended April 3, 2026 compared to 65.8% of revenue for the three months ended March 28, 2025, due to the elimination of period costs related to the ramp-up of manufacturing in Switzerland, a reduction in Advanced Manufacturing expenses as a result of our cost reductions implemented during the three months ended\n\n20\n\n \n\nMarch 28, 2025, lower inventory provisions, and decreased freight and other cost of sales as a percentage of sales. This was partially offset by higher per unit manufacturing costs resulting from lower production volume in 2025.\n\nGeneral and Administrative Expense\n\nThe following table presents our general and administrative expenses (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nGeneral and administrative expense\n\n \n\n$\n\n17,022\n\n \n\n \n\n$\n\n24,458\n\n \n\n \n\n \n\n(30.4\n\n)%\n\nPercentage of sales\n\n \n\n \n\n18.2\n\n%\n\n \n\n \n\n57.4\n\n%\n\n \n\n \n\n \n\nGeneral and administrative expenses for the three months ended April 3, 2026 decreased 30.4% from the same period of 2025 due to decreased outside services, bonus and stock-based compensation expenses and salary-related and payroll tax expenses.\n\nSelling and Marketing Expense\n\nThe following table presents our selling and marketing expenses (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nSelling and marketing expense\n\n \n\n$\n\n24,509\n\n \n\n \n\n$\n\n26,945\n\n \n\n \n\n \n\n(9.0\n\n)%\n\nPercentage of sales\n\n \n\n \n\n26.2\n\n%\n\n \n\n \n\n63.3\n\n%\n\n \n\n \n\n \n\nSelling and marketing expenses for the three months ended April 3, 2026 decreased 9.0% from the same period of 2025 due to decreased advertising and promotional activities and trade shows and sales meeting expenses, partially offset by bad debt expense and bonus and stock-based compensation expenses.\n\nResearch and Development Expense\n\nThe following table presents our research and development expenses (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nResearch and development expense\n\n \n\n$\n\n9,925\n\n \n\n \n\n$\n\n11,339\n\n \n\n \n\n \n\n(12.5\n\n)%\n\nPercentage of sales\n\n \n\n \n\n10.6\n\n%\n\n \n\n \n\n26.6\n\n%\n\n \n\n \n\n \n\nResearch and development expenses for the three months ended April 3, 2026 decreased 12.5% from the same period of 2025, due mainly to decreased salary-related and payroll tax expenses and bonus and stock-based compensation expenses.\n\nMerger Transaction and Related Costs\n\nAt the special meeting of shareholders held on January 6, 2026, the Company’s shareholders voted against the merger with Alcon. Following the termination of the Merger Agreement, the Company entered into the Cooperation Agreement with Broadwood, which provided for the reimbursement of certain reasonable out-of-pocket fees and expenses to Broadwood, Yunqi Capital and Defender Capital related to the merger with Alcon. The following table presents our professional services expenses we incurred in connection with the proposed merger with Alcon and the Cooperation Agreement (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nMerger transaction and related costs\n\n \n\n$\n\n6,743\n\n \n\n \n\n$\n\n—\n\n \n\n \n\n \n\n—\n\n*\n\nPercentage of sales\n\n \n\n \n\n7.2\n\n%\n\n \n\n \n\n0.0\n\n%\n\n \n\n \n\n \n\n \n\n* Denotes change is greater than +100%.\n\n21\n\n \n\nRestructuring, Impairment and Related Charges\n\nThe following table presents our restructuring, impairment and related charges (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nRestructuring, impairment and related charges\n\n \n\n$\n\n2,681\n\n \n\n \n\n$\n\n22,664\n\n \n\n \n\n \n\n(88.2\n\n)%\n\nPercentage of sales\n\n \n\n \n\n2.9\n\n%\n\n \n\n \n\n53.2\n\n%\n\n \n\n \n\n \n\nIn the first half of 2025, the Company took a number of steps to change its leadership team, realign its leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. In addition, in 2026, as a result of the Cooperation Agreement with Broadwood, the Company incurred additional restructuring related charges related to leadership realignment as follows (in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\nSeverance and reduction in workforce\n\n \n\n$\n\n1,614\n\n \n\n \n\n$\n\n8,808\n\n \n\nConsulting expenses\n\n \n\n \n\n1,067\n\n \n\n \n\n \n\n639\n\n \n\nImpairment on leasehold improvements and machinery and equipment(1)\n\n \n\n \n\n—\n\n \n\n \n\n \n\n7,059\n\n \n\nImpairment on real property right-of-use assets(2)\n\n \n\n \n\n—\n\n \n\n \n\n \n\n3,407\n\n \n\nImpairment on internally developed software(1)\n\n \n\n \n\n—\n\n \n\n \n\n \n\n2,751\n\n \n\n \n\n \n\n$\n\n2,681\n\n \n\n \n\n$\n\n22,664\n\n \n\n \n\n(1)\nThe Company will no longer be using these assets.\n\n(2)\nThe Company is actively pursuing subleasing opportunities.\n\nOther Income, Net\n\nThe following table presents our other income, net (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nOther income, net\n\n \n\n$\n\n239\n\n \n\n \n\n$\n\n2,915\n\n \n\n \n\n \n\n(91.8\n\n)%\n\nPercentage of sales\n\n \n\n \n\n0.3\n\n%\n\n \n\n \n\n6.8\n\n%\n\n \n\n \n\n \n\nThe decrease in other income, net for the three months ended April 3, 2026, was due mainly to higher foreign exchange losses for the three months ended April 3, 2026.\n\nProvision (Benefit) for Income Taxes\n\nThe following table presents our income tax provision (benefit) (dollars in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\nPercentage\nChange\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\n \n\n2026 vs. 2025\n\n \n\nProvision (benefit) for income taxes\n\n \n\n$\n\n3,012\n\n \n\n \n\n$\n\n(275\n\n)\n\n \n\n \n\n—\n\n*\n\n \n\n* Denotes change is greater than +100%.\n\nThe effective tax rates for the three months ended April 3, 2026 and March 28, 2025 were 36.7% and 0.5%, respectively. Our effective tax rates differ from the U.S. federal statutory rate of 21%, primarily due to the income tax expense generated in foreign jurisdictions.\n\nOur future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.\n\n22\n\n \n\nLiquidity and Capital Resources\n\nOur principal sources of liquidity are cash, cash equivalents, investments available for sale (“AFS”) and cash flow from operating activities. We believe these sources of liquidity will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements. We expect that cash flow from operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital needs, capital expenditures, and capital deployment decisions. In addition, future capital requirements will depend on many factors including our growth rate in net sales, the timing and extent of spending to support our growth strategy, the expansion of selling and marketing activities, the timing of introductions of new products, as well as global macroeconomic factors. If our anticipated future cash flow from operating activities is insufficient to satisfy our future capital requirements in the long-term, we may need to seek additional capital. Our financial condition at April 3, 2026 and January 2, 2026 included the following (in thousands):\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nJanuary 2, 2026\n\n \n\n \n\n2026 vs. 2025\n\n \n\nCash and cash equivalents\n\n \n\n$\n\n131,864\n\n \n\n \n\n$\n\n153,150\n\n \n\n \n\n$\n\n(21,286\n\n)\n\nInvestments available for sale\n\n \n\n \n\n32,025\n\n \n\n \n\n \n\n34,386\n\n \n\n \n\n \n\n(2,361\n\n)\n\nTotal\n\n \n\n$\n\n163,889\n\n \n\n \n\n$\n\n187,536\n\n \n\n \n\n$\n\n(23,647\n\n)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCurrent assets\n\n \n\n$\n\n312,398\n\n \n\n \n\n$\n\n311,545\n\n \n\n \n\n$\n\n853\n\n \n\nCurrent liabilities\n\n \n\n \n\n60,994\n\n \n\n \n\n \n\n68,504\n\n \n\n \n\n \n\n(7,510\n\n)\n\nWorking capital\n\n \n\n$\n\n251,404\n\n \n\n \n\n$\n\n243,041\n\n \n\n \n\n$\n\n8,363\n\n \n\n \n\nCash and cash equivalents include cash and balances in deposits and money market accounts held at banks and financial institutions. Our investment policy’s primary objective is capital preservation while maximizing our return on investment. Investments available for sale may include U.S. government and corporate debt securities, commercial paper, certain certificates of deposit and related security types, that are rated by two nationally recognized statistical rating organizations with minimum investment grade ratings of AAA to A-/A-1+ to A-2, or the equivalent. The maturity of individual investments may not extend 24 months from the date of purchase. There are also limits to the amount of credit exposure in any given security type. We do not have any off-balance sheet arrangements.\n\nA summary of cash flows for the three months ended April 3, 2026 and March 28, 2025 was as follows (in thousands):\n\n \n\n \n\n \n\nThree Months Ended\n\n \n\n \n\n \n\nApril 3, 2026\n\n \n\n \n\nMarch 28, 2025\n\n \n\nCash flows from:\n\n \n\n \n\n \n\n \n\n \n\n \n\nOperating activities\n\n \n\n$\n\n(21,695\n\n)\n\n \n\n$\n\n(5,734\n\n)\n\nInvesting activities\n\n \n\n \n\n2,147\n\n \n\n \n\n \n\n35,351\n\n \n\nFinancing activities\n\n \n\n \n\n(1,693\n\n)\n\n \n\n \n\n(948\n\n)\n\nEffect of exchange rate changes\n\n \n\n \n\n(45\n\n)\n\n \n\n \n\n286\n\n \n\nNet increase (decrease) in cash and cash equivalents\n\n \n\n \n\n(21,286\n\n)\n\n \n\n \n\n28,955\n\n \n\nCash and cash equivalents, at beginning of year\n\n \n\n \n\n153,150\n\n \n\n \n\n \n\n144,159\n\n \n\nCash and cash equivalents, at end of period\n\n \n\n$\n\n131,864\n\n \n\n \n\n$\n\n173,114\n\n \n\n \n\nFor the three months ended April 3, 2026, net cash used in operating activities consisted of $42.7 million in working-capital changes primarily related to increases in accounts receivable due to higher sales in the first quarter of 2026, partially offset by $15.8 million in non-cash items primarily related to stock-based compensation, provision for sales returns and credit losses and depreciation of property, plant and equipment and $5.2 million in net income. For the three months ended March 28, 2025, net cash used in operating activities consisted of $54.2 million in net loss; partially offset by $28.3 million in working-capital changes primarily related to changes in accounts receivable, partially offset by changes in inventory, and $20.2 million in non-cash items primarily related to impairment on fixed assets and operating leases and stock-based compensation.\n\nFor the three months ended April 3, 2026, net cash provided by investment activities was $2.1 million which consisted of $7.1 million of proceeds from the maturity and sale of investments AFS, partially offset by $4.5 million of purchases of investments AFS. For the three months ended March 28, 2025, net cash provided by investment activities was $35.4 million which consisted of $51.1 million of proceeds from the maturity of investments AFS, partially offset by $14.7 million in purchases of investments AFS.\n\nFor the three months ended April 3, 2026, net cash used in financing activities was $1.7 million which primarily consisted of $1.9 million to repurchase employee common stock for taxes withheld. For the three months ended March 28, 2025, net cash used in financing activities was $0.9 million which primarily consisted of $1.3 million to repurchase employee common stock for taxes withheld.\n\n23\n\n \n\nCommitments\n\nExecutive Agreements\n\nThe Company has entered into agreements with certain of its executives that provide for severance payments and benefits upon termination of employment by the company without “cause” or by the executive for “good reason” as defined in the applicable agreements. Certain executives are also party to agreements that provide for enhanced payments and benefits in connection with a termination of employment upon a “change in control.”"}