0001628280-26-028365
SEC filingRevenue grew 2.9% to $533.7M; gross margin declined to 15.8% due to unfavorable product mix.
For the three months ended March 27, 2026, total revenue increased 2.9% year-over-year to $533.7 million, driven by a 1.9% rise in Products revenue ($465.7M) and a 10.4% jump in Services revenue ($68.0M). Despite the top-line growth, gross margin declined 40 basis points to 15.8% from 16.2%, primarily due to an unfavorable product mix and geographic shift in Products, partially offset by Services margin improvement. Products gross margin fell to 14.0% (from 14.6%), while Services gross margin rose to 28.5% (from 28.1%). Operating income decreased 11.6% to $11.4 million, with operating margin contracting to 2.1% from 2.5%. The decline was driven by lower Products operating profit ($7.0M vs. $10.1M), reflecting higher cost of revenues that outpaced revenue growth. Interest expense fell 26.3% to $7.3 million due to lower rates and reduced principal, but other expense swung to a loss of $1.3 million (vs. income of $0.8M) primarily due to a loss on debt extinguishment. The provision for income taxes surged 159.5% to $19.2 million, including a $14.8 million discrete tax expense from a planned distribution of China subsidiary earnings, resulting in an effective tax rate of 457.1%. Net income was not explicitly disclosed, but the significant tax charge likely reduced profitability.
Products segment revenue rose modestly (+1.9%) amid improved semiconductor market conditions, but gross profit dipped 2.5% to $65.0 million as cost increases (labor +$9.4M, overhead +$2.2M) outpaced revenue. Operating profit plunged 30.7% to $7.0 million, and operating margin shrank to 1.5% from 2.2%. Management attributed the compression to an unfavorable product mix and geographic sales shift. Services segment outperformed, with revenue up 10.4% to $68.0 million, gross profit up 12.1% to $19.4 million, and operating income surging 57.1% to $4.4 million. Operating margin expanded to 6.5% from 4.5%, benefiting from higher volumes and fixed cost absorption. The mix shift toward Services (12.7% of total vs. 11.9% prior) provided a partial offset to Products margin weakness.
No specific numerical guidance was provided. Management noted ongoing semiconductor demand drivers (gate-all-around architectures, high-bandwidth memory, AI/ML) and increased OEM outsourcing. The company highlighted its $600 million convertible note issuance, term loan repayment, and $40 million share repurchase as capital allocation actions. Capital expenditures of $9.6 million year-to-date are expected to be funded from operations and cash. The company believes existing cash ($323.5M) and operating cash flow are sufficient for at least twelve months. No changes to critical accounting estimates were noted. The MD&A did not discuss future revenue or margin trends quantitatively.
Cash and equivalents rose to $323.5M from $311.8M at year-end 2025, despite $33.3M operating cash outflow. Total debt ballooned to $619.4M, primarily reflecting $600.0M convertible notes issuance (0.00% coupon, due 2031) partially offset by a $462.0M voluntary prepayment of the term loan. Net debt is $295.9M. The company ended the quarter with $145.9M available under its revolving credit facility. Equity dropped to $702.1M from $784.1M, driven by share repurchases and a net loss.
No purchase commitments were disclosed in Note 8 (Commitments and Contingencies). The company did disclose aggregate pension benefit obligations of $15.0M and future estimated pension payments of $21.3M through 2030+. Operating lease liabilities total $178.5M (current + non-current). Additionally, the company has $4.1M in outstanding letters of credit.
The company repurchased 0.7M shares for $40.3M during Q1 2026 via a privately negotiated transaction. A new $150M buyback program was authorized in October 2025; $109.7M remained as of quarter-end. No dividends were paid. On the debt side, the company issued $600M convertible notes and used proceeds plus cash to prepay $462M of its term loan, leaving a $19.4M term loan balance. Capex was $9.6M (1.8% of revenue), split $6.8M Products and $2.8M Services.
Note 14 provides segment detail. Products revenue grew 1.9% YoY to $465.7M, but operating profit fell 30.7% to $7.0M (margin 1.5% vs 2.2%). Services revenue grew 10.4% to $68.0M, with operating profit up 57.1% to $4.4M (margin 6.5% vs 4.5%). Segment assets: Products $1,561.2M, Services $294.0M. Geographically, revenue is concentrated in Singapore ($203.2M), US ($129.4M), and Austria ($57.2M). Two customers (Lam Research 36.7%, Applied Materials 21.8%) accounted for 58.5% of revenue.