Financial Analysis

15. ACQUISITION: Odyssey Semiconductor Technologies On March 12, 2024, the Company agreed to acquire the assets of Odyssey, a U.S. company and a developer of vertical GaN transistor technology. The transaction closed on July 1, 2024, at which time all key Odyssey employees joined the Company. P ursuant to the asset purchase agreement, Odyssey sold, transferred and assigned substantially all of its assets to the Company for $9.52 million in cash. The purchase is intended to augment the Companys development of high-power GaN switching technology. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill, the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company. Goodwill is expected to be deductible over 15 years for tax purposes. The following table summarizes the purchase price and estimated fair values of the assets acquired as of July 1, 2024, the completion of the Odyssey acquisition: (In thousands) Total Amount Assets Acquired Property and equipment $ 1,168 In-process …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

16. RETIREMENT PLANS: The Company sponsors a defined benefit pension plan (Pension Plan) for its Swiss subsidiary in accordance with the legal requirements of Switzerland. The plan assets, which provide benefits in the event of an employees retirement, death or disability, are held in legally autonomous trustee-administered funds that are subject to Swiss law. Benefits are based on the employees age, years of service and salary, and the plan is financed by contributions by both the employee and the Company. The net periodic benefit cost of the Pension Plan was not material to the Companys financial statements during the years ended December 31, 2025, 2024 and 2023. As of December 31, 2025, the projected benefit obligation was $23.2 million, the plan assets were $14.2 million and the net pension liability was $9.0 million. As of December 31, 2024, the projected benefit obligation was $18.3 million, the plan assets were $11.4 million, and the net pension liability was $6.9 million. The Company has recorded the unfunded amount as a liability in its consolidated balance sheet at December 31, 2025 and 2024, under the other liabilities caption. The Company expects to make contributions to the Pension Plan of approximately $0.6 million during 2026. The accumulated unrealized actuarial balance on pension benefits, net of tax, at December 31, 2025, 2024 and 2023 was $0.1 million loss, $1.5 million loss and $1.6 million gain, respectively. These amounts were reflected in Note 3 under t …

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"17. BANK LINE OF CREDIT: On July 27, 2016, the Company entered into a credit agreement with Wells Fargo Bank, National Association (the ""Credit Agreement"") that provides the Company with a $75.0 million revolving line of credit to use for general corporate purposes with a $20.0 million sub-limit for the issuance of standby and trade letters of credit. The Credit Agreement was amended on April 30, 2018, to extend the termination date from July 26, 2019, to April 30, 2022, with all other terms remaining the same. The Credit Agreement was amended on June 7, 2021, to provide an alternate borrowing rate as a replacement for LIBOR and extend the termination date from April 30, 2022, to June 7, 2026, with all other terms remaining the same. The Credit Agreement was amended with an effective date of June 28, 2023 to include the Secured Overnight Financing Rates as interest rate benchmark rates, with all other terms remaining the same. The Companys ability to borrow under the revolving line of credit is conditioned upon the Companys compliance with specified covenants, including reporting and financial covenants, primarily a minimum cash requirement and a debt to earnings ratio. The Credit Agreement terminates on June 7, 2026; all advances under the revolving line of credit will become due on such date, or earlier in the event of a default. The Company was compliant with all covenants and had no advances outstanding under the Credit Agreement as of December 31, 2025."

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7. STOCK PLANS AND SHARE BASED COMPENSATION: Stock Plans As of December 31, 2025, the Company had three stock-based compensation plans (the Plans) which are described below. 2025 Inducement Award Plan The 2025 Inducement Award Plan (Inducement Plan) was adopted by the board of directors on November 14, 2025. The Inducement Plan provides for the grant of RSU awards, PSU awards and performance cash awards. No other forms of equity-based awards, including stock options and stock appreciation rights, may be granted. The plan is intended to be used in connection with the recruiting and inducement of senior management and employees. Each award under the Inducement Plan is intended to qualify as an employment inducement grant under the Inducement Listing Rule or to otherwise qualify under the exception relating to plans or arrangements relating to an acquisition or merger under NASDAQ Listing Rule 5635(c)(3) and the official guidance thereunder. Pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules, the Company did not seek stockholders approval. As of December 31, 2025, 0.1 million awards have been issued, net of forfeitures or cancellations, and approximately 0.3 million shares of common stock remain available for future grant under the Inducement Plan. On January 27, 2026, the Talent and Compensation Committee of the board of directors approved the Amended and Restated 2025 Inducement Award Plan, reserving an additional 0.5 million shares of the Companys common stock, or 0.9 mi …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

4. FAIR VALUE MEASUREMENTS: ASC 820-10, Fair Value Measurements , clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Companys cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The type of instrument valued based on quoted market prices in active markets primarily includes money market securities …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

6. GOODWILL AND INTANGIBLE ASSETS: Goodwill increased during the year ended December 31, 2024, due to the Companys acquisition of Odyssey Semiconductor Technologies (Odyssey) (refer to Note 15, Acquisition , for details on the Companys Odyssey acquisition). Changes in the carrying amount of goodwill as of the December 31, 2025 and 2024 are as follows: (in thousands) Goodwill Balance at January 1, 2024 $ 91,849 Goodwill acquired during the period 3,422 Balance at December 31, 2024 95,271 Goodwill acquired during the period - Ending balance at December 31, 2025 $ 95,271 The $3.4 million of goodwill acquired in 2024, resulted from the purchase of Odyssey (see Note 15, Acquisition , for further details). Intangible assets consist primarily of developed technology, in-process research and development, acquired licenses and domain name, and are reported net of accumulated amortization. In July 2024, the Company acquired the assets of Odyssey, a U.S. company and developer of vertical gallium-nitride (GaN) transistor technology, resulting in the addition of in-process research and development of $4.9 million. The Company amortizes the cost of all intangible assets over the estimated useful life of the developed technology and technology licenses, which range from two to twelve years, with the exception of $4.9 million of in-process research and development which will commence amortization once development is completed and products are available for sale as well as $1.3 million paid t …

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"11. PROVISION (BENEFIT) FOR INCOME TAXES: Income Taxes The Company accounts for income taxes under the provisions of ASC 740, Income Taxes . Under the provisions of ASC 740, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, utilizing the tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. U.S. and foreign components of income before income taxes were: Year Ended December 31, (In thousands) 2025 2024 2023 U.S. operations $ (25,273) $ (4,521) $ 2,995 Foreign operations 46,252 35,275 42,912 Total income before income taxes $ 20,979 $ 30,754 $ 45,907 The Companys effective tax rate is impacted by the geographic distribution of the Companys world-wide earnings in lower-tax jurisdictions, federal research tax credits and the recognition of excess tax benefits related to share-based payments. The rate was further reduced by the release of federal uncertain tax position caused by an expiration in the statute of limitations on these positions. These benefits were partially offset by foreign income subject to U.S. tax, known as Net Controlled Foreign Corporation Tested Income (""NCTI""). The Companys primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction. Income earned in other foreign jurisdict …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

14. LEGAL PROCEEDINGS AND CONTINGENCIES: From time to time in the ordinary course of business, the Company becomes involved in lawsuits, or customers and distributors may make claims against the Company. In accordance with ASC 450-10, Contingencies, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. On December 18, 2019, CogniPower LLC (CogniPower) filed a complaint against a customer of the Company in the United States District Court for the District of Delaware for infringement of two patents; the Company thereafter intervened and sought a declaration of non-infringement with respect to use of the Companys products. Following a trial in August 2025, the Company successfully obtained verdicts of noninfringement and invalidity of all asserted claims, and as part of the noninfringement verdict, the jury found that no products incorporating the Companys InnoSwitch products met the specific requirements of CogniPowers asserted claims. The Court thereafter entered judgment in favor of the Company; briefing on post-trial motions is complete, with rulings expected in the coming months. On January 16, 2025, CogniPower filed a follow-on complaint against the same customer asserting the same two patents in the United States District Court for the District of Delaware, but that case was dismissed following the August 2025 verdict in the Companys favor in CogniPowers earlier ca …

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Adoption of New Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures (ASU 2023-09), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. The Company adopted the new standard on a prospective basis in fiscal year 2025 for annual reporting periods. Refer to Note 11. Provision ( Benefit) for Income Taxes . …

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13. SEGMENT REPORTING: The Company is organized and operates as one operating and reportable segment; the design, development, manufacture and marketing of integrated circuits and related components for use primarily in high-voltage power conversion. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (CODM) for making decisions and assessing performance as the source of determination of the Companys reportable segments. The Companys CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance. The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The CODM regularly reviews net income as reported on the Companys consolidated statements of income. Financial forecasts and budget to actual results used by the CODM to assess performance and allocate resources, as well as those used for strategic decisions related to headcount and capital expenditures are also reviewed on a consolidated basis. The CODM considers the impact on net income of the significant segment expenses in the table below when deciding whether to reinvest profits, propose dividends or share repurchase, or pursue strategic mergers and acquisitions. The measure of segment assets is reported on the balance sheet as total assets. The CODM does not revi …

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2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS: Significant Accounting Policies and Estimates Segment Reporting The Company is organized and operates as one reportable segment, the design, development, manufacture and marketing of integrated circuits and related components for use primarily in high-voltage power conversion. The Companys chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of all intercompany transactions and balances. Estimates The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, allowances for receivables, inventories, litigation and income taxes. These estimates are based on historical facts and various other factors, which the Company believe …

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9. COMMON STOCK REPURCHASES AND CASH DIVIDENDS: Common Stock Repurchases From time to time the Companys board of directors has authorized the use of funds to repurchase shares of the Companys common stock. As of December 31, 2024, the Company had $48.1 million available under a stock-repurchase program announced in November 2024. After this authorization was exhausted in April 2025, the Companys board of directors authorized the use of an additional $50.0 million for the repurchase of the Companys common stock, with repurchases to be executed according to pre-defined price/volume guidelines. In 2025, 2024 and 2023, the Company purchased approximately 2.0 million shares, 0.4 million shares and 0.8 million shares, respectively, for approximately $98.1 million, $27.9 million and $55.3 million, respectively. As of December 31, 2025, the Company had exhausted their repurchase authorization. Any future repurchase program would be authorized at the discretion of the Companys board of directors and will depend on the Companys financial condition, results of operations, capital requirements, business conditions and other factors. Common Stock Dividends The following table presents the quarterly dividends declared per share of the Companys common stock for the periods indicated: Year Ended December 31, 2025 2024 2023 First Quarter $ 0.21 $ 0.20 $ 0.19 Second Quarter $ 0.21 $ 0.20 $ 0.19 Third Quarter $ 0.21 $ 0.20 $ 0.19 Fourth Quarter $ 0.21 $ 0.21 $ 0.20 The Company paid approximatel …

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18. SUBSEQUENT EVENTS: On January 31, 2026, the Company approved a reduction in force that resulted in the termination of approximately 7% of the Companys global workforce on February 2, 2026 in order to decrease the Companys costs and create a more efficient organization to support its business. In connection with the reduction in force, the Company estimates it will incur approximately between $3.5 million and $4.0 million of costs, substantially all of which are related to employee severance and benefit costs, which the Company expects to recognize in the first quarter of 2026. …

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15. ACQUISITION: Odyssey Semiconductor Technologies On March 12, 2024, the Company agreed to acquire the assets of Odyssey, a U.S. company and a developer of vertical gallium-nitride (GaN) transistor technology. The transaction closed on July 1, 2024, at which time all key Odyssey employees joined the Company. P ursuant to the asset purchase agreement, Odyssey sold, transferred and assigned substantially all of its assets to the Company for $9.52 million in cash. The purchase is intended to augment the Companys development of high-power GaN switching technology. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill, the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company. Goodwill is expected to be deductible over 15 years for tax purposes. The fair value of in-process research and development was determined based on the cost approach using the Companys estimate of the costs that would be incurred if a market participant were to create the acquired technology from sc …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

6. STOCK-BASED COMPENSATION: The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and nine months ended September 30, 2025 and 2024: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2025 2024 2025 2024 Cost of revenues $ 517 $ 496 $ 1,766 $ 1,549 Research and development 2,850 2,997 8,290 9,307 Sales and marketing 1,910 1,876 5,418 5,990 General and administrative 2,374 2,969 10,937 8,941 Other operating expenses 13,554 13,554 Total stock-based compensation expense $ 21,205 $ 8,338 $ 39,965 $ 25,787 Stock-based compensation expense in the three months ended September 30, 2025, was approximately $21.2 million, comprising approximately $13.6 million related to the modification of outstanding equity awards held by the Companys former chief executive officer (discussed in further detail below), $5.8 million related to restricted stock unit (RSU) awards, $1.5 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $0.3 million related to the Companys employee stock purchase plan. Stock-based compensation expense in the nine months ended September 30, 2025, was approximately $40.0 million, comprising approximately $16.7 million for RSUs, $13.6 million related to the modification of outstanding equity awards held by the Companys former CEO, $8.6 million related to PSUs and PRSUs and $1.1 million related to the Companys employee stock purcha …

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4. FAIR VALUE MEASUREMENTS: The FASB established a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Companys cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The fair-value hierarchy of the Companys cash equivalents and marketable securities at September 30, 2025 and December 31, 2024, was as follows: Fair Value Measurement at September 30, 2025 Quoted Prices in Active Markets for Significant Other Identical Assets Observable Inputs (In thousands) Total Fair Value (Level 1) (Level 2) Commercial paper $ 3,228 $ $ 3,228 Corporate securities 191,733 191,733 Money market funds 1,524 1,524 Total $ 196,485 $ 1,524 $ 194,961 Fair Value Measurement at December 31, 2024 Quoted Prices in Active Markets for Signific …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

10. PROVISION (BENEFIT) FOR INCOME TAXES: Income-tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for certain discrete items which are fully recognized in the period they occur. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate. The Companys effective tax rate for the three and nine months ended September 30, 2025, was (3.0%) and 10.5%, respectively, and in the corresponding periods of 2024 was 0.3% and 1.5%, respectively. The effective tax rate in these periods were lower than the statutory federal income-tax rate of 21% due to the geographic distribution of the Companys world-wide earnings in lower-tax jurisdictions and federal tax credits. In the three and nine months ended September 30, 2025, the Companys effective tax rate was negatively impacted by the recognition of a tax deficiency or shortfall related to share-based payments. Additionally, i n the three and nine months ended September 30, 2024, the Companys effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments and by discrete items associated with the release of unrecognized tax benefits. The Companys primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction. Income earned in other foreign jurisdictions was not materia …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

13. LEGAL PROCEEDINGS AND CONTINGENCIES: From time to time in the ordinary course of business, the Company becomes involved in lawsuits, or customers and distributors may make claims against the Company. In accordance with ASC 450-10, Contingencies , the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. On December 18, 2019, CogniPower LLC (CogniPower) filed a complaint against a customer of the Company in the United States District Court for the District of Delaware for infringement of two patents; the Company thereafter intervened and sought a declaration of non-infringement with respect to use of the Companys products. Following a trial in August 2025, the Company successfully obtained verdicts of noninfringement and invalidity of all asserted claims, and as part of the noninfringement verdict, the jury found that no products incorporating the Companys InnoSwitch products met the specific requirements of CogniPowers asserted claims. The Court thereafter entered judgment in favor of the Company; briefing on post-trial motions is under way, with rulings expected in the coming months. On January 16, 2025, CogniPower filed a follow-on complaint against the same customer asserting the same two patents in the United States District Court for the District of Delaware, but that case was dismissed following the August 2025 verdict in the Companys favor in CogniPowers earlier …

LegalMattersAndContingenciesTextBlock · excerpt; the full note is in the filing

12. SEGMENT REPORTING: The Company is organized and operates as one operating and reportable segment; the design, development, manufacture and marketing of integrated circuits and related components for use primarily in high-voltage power conversion. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (CODM) for making decisions and assessing performance as the source of determination of the Companys reportable segments. The Companys CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance. The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The CODM regularly reviews net income as reported on the Companys consolidated statements of income (loss). Financial forecasts and budget to actual results used by the CODM to assess performance and allocate resources, as well as those used for strategic decisions related to headcount and capital expenditures are also reviewed on a consolidated basis. The CODM considers the impact on net income of the significant segment expenses in the table below when deciding whether to reinvest profits, propose dividends or share repurchase, or pursue strategic mergers and acquisitions. The measure of segment assets is reported on the balance sheet as total assets. The CODM does n …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

16. SUBSEQUENT EVENTS: Departure of Chief Financial Officer As disclosed in the Current Report on Form 8-K filed with the SEC on September 22, 2025, the Companys Vice President and Chief Financial Officer and Principal Accounting Officer, Sandeep Nayyar, informed the Company on September 16, 2025 of his resignation from his positions effective October 4, 2025. Pursuant to this announcement, Mr. Nayyar resigned on October 4, 2025, at which time Robert Eric Verity, the Companys Senior Director of Finance, became the Companys interim Chief Financial Officer and Principal Accounting Officer. Mr. Nayyars resignation is not the result of any disagreement with the Company related to its operations, policies, or practices. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing