10-K – 2026-02-24 – mksi-20251231.htm

may in the future result in, loss of business, both directly to China end-customers, and indirectly through our OEM customers, as well as additional export license requirements on shipments of our products, parts and supplies, and associated increased administrative burdens. For example, as a result of the initial BIS Rules promulgated in late 2022, we experienced an annual loss in net revenues of approximately $200 million to $250 million, most of which was realized in 2023. The extraordinary complexity of these rules, combined with their continued modification and the likelihood of further amendments from BIS, significantly increases our risk of non-compliance, which could result in fines and other penalties, and could change how these rules impact us. The U.S. government and other government agencies may promulgate new or additional export licensing or other regulations that have the effect of further limiting our ability to provide certain products and services to customers outside the United States, including China. The U.S. government may also revise or expand existing regulations or issue guidance clarifying the scope and application of these requirements, which could change the impact of these rules on our business and manufacturing operations. While we continue to adjust our policies and practices to ensure compliance with these regulations, and seek to mitigate their impact, there can be no assurances that current or future regulations, by the United States or other countries, will not have a material adverse effect on our business.
Since the beginning of 2019, regulatory changes have been implemented at an unprecedented pace, which increases the resources needed to monitor and comply with regulations, while heightening the risk of non-compliance. Such regulatory changes include the addition by BIS of China-based Huawei Technologies Co., Ltd. (“Huawei”), Semiconductor Manufacturing International Corporation (“SMIC”), Yangtze Memory Technologies Corp (“YMTC”), NAURA Technology Group, Piotech, Inc. and many of their respective affiliates onto its Entity List. Accordingly, we have implemented additional monitoring processes and suspended orders from these companies as well as other designated Chinese-based customers, where those orders are subject to U.S. jurisdiction. We were previously negatively impacted by the cancellation of orders from customers who are suppliers to these firms, and we could be negatively impacted in the future by further amendments to the Entity List. In addition, BIS has modified the Foreign Direct Product, De Minimis and “military end-use” rules, expanded the scope of products and technologies that would require licenses for military end-uses, primarily in China, and expanded the list of “military end users,” mostly in China, further limiting our sales. At the same time, BIS and the U.S. Department of Defense have also added numerous China-based companies, including companies with which we do business, to the “Unverified List,” and “Chinese Military Companies” list, respectively. Placement on such lists may be an indication of additional future restrictions by the U.S. government, as was the case with YMTC, which was added to the Unverified List in October 2022 and was then added to the Entity List in December 2022.
Increased restrictions on China have led to and may continue to lead to regulatory retaliation by the Chinese government and further escalate geopolitical tensions between China and Taiwan. For example, in 2019, China’s Ministry of Commerce announced an “unreliable entity list” under which non-Chinese entities that cut off supply to Chinese companies may be subject to government action. Because many of the mechanisms for being named to the list, removed from the list, and enforcement remain ill-defined, the potential impacts of the regulation remain unknown. In addition, in 2023, China adopted export curbs on crucial raw materials, including gallium, germanium, and graphite, that had both direct and indirect adverse impacts on our business and supply chain. In December 2024, the Chinese Ministry of Commerce imposed stricter export control restrictions on the export to the United States of gallium, germanium and other materials with potential dual-use applications, thereby increasing the adverse impact on our business, costs and supply chain. In April 2025, China implemented new export restrictions on certain rare earth minerals, including yttrium, which is a critical component used in the manufacturing of our lasers. As a result, we expect to encounter challenges in sourcing this and other critical materials, along with higher costs and potential supply chain disruptions, which may materially harm our business, financial condition and operating results. Additionally, as a result of Chinese extra-territorial controls, we expect increased compliance burdens and risk of violations, which also have the potential to harm our business, financial condition and operating results.
The ongoing geopolitical tensions and economic uncertainty between the United States and its trading partners caused by recent tariffs, Entity List and “military end user” designations, foreign-made product rules and the BIS Rules, and the unknown impact of current and future trade regulations, may continue to increase costs, as well as restrict our ability to sell, or decrease demand from customers to purchase, our products, directly and indirectly, which could materially harm our business, financial condition and operating results. This trade uncertainty has caused, and may continue to cause, customers to delay or cancel orders, as they mitigate the risk to their own supply chain and cost exposure by sourcing from locally based suppliers or suppliers based in other countries. Such delays and cancellations could have a material impact on our business, financial condition and operating results. It is possible that additional trade restrictions will be imposed, and that existing tariffs will be increased on imports of our products or the components used in our products and/or that our business will be impacted by additional retaliatory tariffs, policies that favor domestic industries, or restrictions imposed and/or increased by China or other countries in response to existing or future tariffs. These developments could cause us to lose additional sales and customers, incur increased costs and lower margins, seek alternative suppliers, raise prices or make changes to our operations, any of which could materially harm our business, financial condition and operating results.
We are subject to international trade compliance regulations, and violations of those regulations could result in fines or trade restrictions, which could have a material adverse effect on us.

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We are subject to trade compliance laws in the United States and other jurisdictions where we operate. For example, exports of our products and technology developed or manufactured in the United States are subject to export controls imposed by the U.S. government and administered by the U.S. Departments of Commerce and, to a lesser extent, State and Treasury. Export regulations govern exports of our products and technology developed or manufactured in other countries, including, for example, Austria, China, France, Germany, Israel, Romania and Singapore. In certain instances, these regulations may require us to obtain a license prior to exporting products or technology to international locations or foreign nationals, including foreign nationals employed by us in the United States and abroad. For products and technology subject to the U.S. Export Administration Regulations administered by BIS, the requirement for a license is dependent on the type, end use and final destination of the product and technology and the identity and nationality of the end user. Virtually all exports from the United States of defense articles are subject to the International Traffic in Arms Regulations, administered by the Department of State’s Directorate of Defense Trade Controls, and require a license. The Israeli Ministry of Economy and the Defense Export Control Agency of the Israeli Ministry of Defense administer similar export regulations and license requirements, which apply to many of our products and technology developed or manufactured in Israel. In addition, the Romanian Ministry of Foreign Affairs and the Department for Export Controls administer similar export regulations and license requirements, which apply to many of our products and technology developed or manufactured in Romania. Obtaining export licenses can be difficult and time-consuming, and we may not be successful in obtaining them. In addition, since early 2025, export licenses have taken a significantly longer time to be granted. Failure to obtain, or timely obtain, export licenses to enable product and technology exports could reduce our net revenues, harm our relationships with our customers and could adversely affect our business, financial condition and operating results. Compliance with export regulations requires resources and may also subject us to additional fees and costs. The absence of comparable export restrictions on competitors, whether due to technical specifications or such competitors’ geography, either with respect to their place of incorporation or the location of their operations, may adversely affect our competitive position.
In addition, if we or our international representatives or distributors fail to comply with export regulations, we or they could be subject to civil and criminal and monetary and non-monetary penalties and costly consent decrees, and we could experience disruptions to our business, restrictions on our ability to export products and technology, damage to our reputation and significant harm to our business and operating results. We are constantly engaged in systematic, risk-based reviews of our compliance-related activities to identify and remediate known and suspected weaknesses, such as product export classification. In connection with these reviews, we periodically identify certain activities that are non-compliant with applicable trade regulations and submit appropriate voluntary disclosures to applicable authorities to report such non-compliance. While such instances of non-compliance have not had a material adverse impact on us to date, other reported non-compliance may have a different effect. Additionally, while we have implemented, and continue to implement and optimize, policies and procedures to comply with these laws, we cannot be certain that our employees, contractors, suppliers or agents will not violate such laws or our policies.
Changes in tax rates or tax regulation or the termination of tax incentives could affect our operating results.
As a global company, we are subject to taxation in the United States and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future annual and quarterly effective tax rates could be materially affected by numerous factors, including changes in applicable tax laws; the organizational structure of our business, including reorganizations, location of assets and outstanding indebtedness; composition of pre-tax income in countries with differing tax rates; our determinations of tax liabilities; and/or valuation of our deferred tax assets and liabilities.
Changes in U.S. tax law, such as the One Big Beautiful Bill Act, and changes in regulations and tax guidance may affect our business. Additionally, the United States is considering various corporate and international income tax proposals, which, if enacted, could have a material impact on our provision for income taxes and effective tax rate.
We are subject to regular examination by the U.S. Internal Revenue Service and state, local and foreign tax authorities. We regularly assess the expected outcome of these examinations to determine the adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, we can make no assurances that any final determination of tax liability will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our financial condition and operating results.
We qualify for tax incentives based on our ability to meet, on a continuing basis, various tests relating to our employment levels, research and development expenditures and other qualification requirements in a particular jurisdiction. While we intend to operate in such a manner to maintain and maximize our tax incentives, we can make no assurances that we have so qualified, or that we will qualify, for tax incentives for any particular year or jurisdiction. If we fail to qualify or remain qualified for certain tax incentives, the tax incentives we previously received may be terminated and/or retroactively revoked, requiring repayment of past tax benefits, and we would be subject to an increase in our effective tax rate, which could have a material adverse impact on our financial results.
Many of our products and customers are subject to numerous laws regulating the production and use of chemical substances, and some of our products may need to be reformulated or discontinued to comply with these laws and regulations.

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As a manufacturer of specialty chemicals, we are subject to chemical approvals, registrations and regulations around the world, including European Union Regulations on Registration, Evaluation, Authorisation and Restriction of Chemicals (“EU REACH”) in the EU, the Toxic Substances Control Act (“TSCA”) in the United States, and similar laws and regulations in certain other jurisdictions in which we and our customers operate. In recent years, changes to existing laws and regulations and the adoption of new laws and regulations have imposed new obligations, including restrictions and prohibitions on highly hazardous substances, that could force us to reformulate or discontinue certain of our products.
Governmental and societal demands for greater product safety and environmental protection have increased pressure for more stringent regulatory control with respect to the chemical industry, including with respect to manufacturing, importing and using chemicals. For example, EU REACH imposes comprehensive compliance obligations and establishes mechanisms to identify and restrict high-concern chemicals, and comparable regulatory requirements have been adopted in several other countries. As another example, in the United States, TSCA mandates risk evaluation of existing “high priority” chemicals. In addition, the U.S. Environmental Protection Agency (the “EPA”) must make a no “unreasonable risk” finding before a new chemical can be fully commercialized. In China, with the publication of the first, second and third batch of the List of Chemicals under Priority Control, the Ministry of Ecology and Environment has begun to implement restrictions and bans on the use of certain substances in a variety of industrial sectors. Additionally, the Technical Standards on Environmental Risk Assessment and Control of Chemical Substances (2024) impose comprehensive obligations with respect to the screening, determination and mitigation of risks of certain chemicals. These laws and regulations generally create uncertainty about whether existing chemicals important to our business may be designated for restriction and whether the approval process for new chemicals may become more difficult and costly. These changes could adversely impact our ability to supply certain products to our customers and could also result in compliance obligations, fines, ongoing monitoring and other future business activity restrictions, which could have a material adverse effect on our business, financial condition and operating results.
Perfluorooctanesulfonic acid and other per- and polyfluoroaklyl substances (“PFAS”) are chemical agents that have been targeted for risk assessment, restriction, regulation and high-priority remediation and are the subject of litigation and governmental investigations in the United States and other countries. For example, we have been named as a defendant in several lawsuits related to PFAS as a result of alleged environmental contamination by certain of our end customers involving their use and disposal of products containing PFAS, and we could become subject to additional lawsuits in the future. We have also received and responded to requests for information from U.S. regulatory agencies. While we have developed a suite of products that do not require any PFAS chemicals and, when adopted by the industry, will obviate the need for PFAS-containing mist suppressants and wetting agents, we sell a limited number of products that contain permissible levels of PFAS.
International environmental protection requirements, including chemical regulation requirements, and enforcement of these requirements, may become more stringent in the future and could result in material costs relating to regulatory compliance, liabilities, litigation proceedings, or other impacts, such as restrictions or prohibitions on our products. Future regulatory or other developments could also restrict or eliminate the use of, or require us to make modifications to, our products, packaging, manufacturing processes, transportation methods, and technology, which could have a material adverse effect on our business, financial condition, and operating results. Our production facilities require permits, such as environmental, operating, and product-related permits and import/export permits, which are subject to renewal and, in some circumstances, revocation. We may not obtain these permits or they may be discontinued or may contain significant and costly new requirements. If a permit for a production facility is not renewed or is revoked, the facility may need to be closed temporarily or permanently, which may have a material adverse effect on our business, financial condition and operating results. Failure to obtain or maintain permits for our facilities or other failures to comply with applicable environmental regulations could result in the shutdown of, or suspension of operations at, our plants.
Many of our customers are subject to the same or similar environmental regulations. The impact of these regulations on our customers and our customers' ability to comply with these regulations is outside of our control. However, non-compliance by our customers could have an indirect negative effect on our business and result in claims against us. We must monitor relevant chemical regulatory developments in order to limit the associated risks of new developments by triggering timely countermeasures, such as alternative products and phase-outs.
We are subject to environmental regulations. If we fail to comply with these regulations, our business could be harmed.
Our operations are subject to various federal, state, local and international laws and regulations relating to environmental protection, including the discharge of pollutants into the air, water and land, the reporting, generation, use, handling, storage, transportation, treatment and disposal of hazardous substances, waste and other materials and the cleanup of contaminated sites. In the United States, we are subject to the federal regulation and control of the EPA, and we are subject to regulations and controls of comparable authorities in other countries. Some of our operations, including our chemical operations, require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. Future developments, administrative actions or liabilities relating to environmental matters, including sanctions such as capital expenditure obligations, clean-up and removal costs, long-term monitoring and maintenance

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costs, costs of waste disposal, natural resource damages and payments for property damage and personal injury, could have a material adverse effect on our business, financial condition or operating results.
Although we believe that our safety procedures for using, handling, storing and disposing of such materials comply with the standards required by applicable federal, state, local and international laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials, including risks related to our chemical products, which are inherently hazardous. We have been, and may in the future be, subject to claims by employees or third parties alleging contamination or injury, and could be liable for damages that could exceed the amount of our liability insurance coverage (if any) and the resources of our business. For example, we have been named as a defendant in a lawsuit alleging that we discharged industrial wastewater containing PFAS from one of our facilities into the local wastewater treatment plant which then entered the local water supply.
Certain portions of the soil at the former facility of our Spectra-Physics lasers business, located in Mountain View, California, and certain portions of the aquifer surrounding the facility, through which contaminated groundwater flows, are part of an EPA-designated Superfund site and are subject to a cleanup and abatement order from the California Regional Water Quality Control Board. Spectra-Physics, which we acquired as part of our acquisition of Newport Corporation (“Newport”) in April 2016 (the “Newport Acquisition”) and which had been acquired by Newport in 2004, along with other entities with facilities located near the Mountain View, California facility, were identified as responsible parties with respect to this Superfund site, due to releases of hazardous substances during the 1960s, 1970s and 1980s. Spectra-Physics and the other responsible parties entered into cost-sharing agreements covering the costs of remediating the off-site groundwater impact. The site is mature, and investigations, monitoring and remediation efforts by the responsible parties have been ongoing for approximately 35 years. We have certain ongoing costs related to investigation, monitoring and remediation of the site that have not historically been material to us as a whole. However, while we benefited from the indemnification of certain costs by a third party in the past, that indemnification is now in a transition period, and we will become subject to a greater portion of costs of remediation in the future. Our ultimate costs of remediation and other potential liabilities are difficult to predict. If the EPA and the California Regional Water Quality Control Board determine that the site cleanup requires additional measures to ensure that it meets current standards for environmental contamination, or if they enhance any of the applicable required standards, we will likely become subject to additional remediation obligations in the future. In addition to our investigation, monitoring and remediation obligations, we may be liable for property damage or personal injury claims relating to this site. While we are not aware of any material claims at this time, such claims could be made against us in the future. If significant costs or other liability relating to this site arise in the future, our business, financial condition and operating results would be adversely affected.
In addition, some of our manufacturing facilities and former facilities have an extended history of chemical manufacturing operations or other industrial activities, and contaminants have been detected at some of those sites. We or our predecessors have in the past been required to remediate contamination at several of these current and former sites, and there remains some risk that further investigation and remediation in the future might be necessary.
The environmental regulations that we are subject to include a variety of federal, state, local and international regulations that restrict the use and disposal of materials used in the manufacture of our products or require design changes or recycling of our products. If we fail to comply with any present or future regulations, we could be subject to future liabilities, the suspension of manufacturing or a prohibition on the sale of products we manufacture. In addition, these regulations could restrict our ability to equip our facilities or could require us to acquire costly equipment, or to incur other significant expenses to comply with environmental regulations, including expenses associated with the recall of any non-compliant product and the management of historical waste. For example, in addition to EU REACH, which regulates the use of certain hazardous substances in certain products, the EU has enacted the Waste Electrical and Electronic Equipment Directive, which requires the collection, reuse and recycling of waste from certain products. Compliance with such laws requires significant resources. These regulations may require us to redesign our products or source alternative components to ensure compliance with applicable requirements, for example by mandating the use of different types of materials in certain components. Any such redesign or alternative sourcing may increase the cost of our products, adversely impact the performance of our products, add greater testing lead-times for product introductions, or in some cases limit the markets for certain products. Further, such environmental laws are frequently amended, which increases the cost and complexity of compliance. For example, such amendments have in the past resulted in, and may in the future result in, certain of our products falling within the scope of a directive, even if they were initially exempt. In addition, certain of our customers, particularly OEM customers whose end products may be subject to these directives, may require that the products we supply to them comply with these directives, even if not mandated by law. Because certain directives, for example, those issued from the EU, are implemented in individual member states, compliance is particularly challenging. Our failure to comply with any of such regulatory requirements or contractual obligations could result in our being directly or indirectly liable for costs, fines or penalties and third-party claims, and could jeopardize our ability to conduct business in certain countries.
Additionally, we have established and communicated environmental goals, targets and objectives. For example, in December 2023, we announced our commitment to reduce our combined Scope 1 and 2 emissions by 42% by 2030 from our 2022 baseline. We may be unable to achieve these goals, targets and objectives or we may determine to modify these goals, targets and objectives or prioritize other business, social, governance or sustainable investments over these goals, targets and objectives, based on

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economic, technological, regulatory and social factors, business strategy or pressure from investors, activists or other stakeholders. Furthermore, the standards, regulations and laws by which these environmental efforts are tracked and measured may change over time and result in inconsistent data or significant revisions to our goals, targets and objectives. We also are, or may become subject to, new or changing environmental standards, regulations and laws, such as the EU’s Corporate Sustainability Reporting Directive. Our efforts to comply with these standards, regulations and laws, and to accurately report on our goals, targets and objectives, present numerous operational, reputational, financial, legal, and other risks, and require significant investments. Our processes and controls may not always align with evolving standards, our interpretation of standards may differ from others, and standards may continue to change over time, any of which could result in significant revisions to our goals, our reported progress toward those goals, or other environmental information we disclose, as well as significant unanticipated costs. In addition, any failure or perceived failure to pursue or fulfill our stated goals, targets and objectives or to satisfy various disclosure or reporting standards, could damage our relationship with our customers or have other negative impacts and expose us to government enforcement actions, private litigation and reputational harm.
We are exposed to various risks related to legal proceedings, including, for example, product liability claims, intellectual property infringement claims, regulatory claims, contractual claims and class action litigation, which if successful, could have a material adverse effect on our commercial relationships, business, financial condition and operating results.
From time to time, we may be involved in legal proceedings, enforcement actions or claims regarding product performance, product warranty, product certification, product liability, patent infringement, misappropriation of trade secrets, other IP rights, data privacy, antitrust, environmental regulations, trade regulations, tax regulations, securities, contracts, unfair competition, employment, workplace safety, liability to shareholders, and other matters. We can provide no assurance of the outcome of these legal proceedings, enforcement actions or claims or that the insurance we maintain will be adequate to cover them.
Certain of our products may be hazardous if not operated properly or if defective. For example, some of our products, such as certain ultrafast lasers, are used in medical and scientific research applications where misuse or malfunctions could result in serious injury. Other products, including our chemicals products and laser systems, are inherently hazardous and must be used with particular care. For example, we have been named as a defendant in several lawsuits related to PFAS as a result of alleged environmental contamination by certain of our end customers involving their use and disposal of products containing PFAS, and we could become subject to additional lawsuits in the future. We could face significant product liability claims or losses in the event of a significant line-down situation or if death, personal injury or property damage results from the handling, use or storage of our products. While we maintain insurance for certain product liability claims, our insurance coverage may not continue to be available on acceptable terms, if at all. This insurance coverage also may not adequately cover liabilities that we incur. Further, if our products are defective, we may be required to recall or redesign these products. A successful claim against us that exceeds our insurance coverage level or that is not covered by insurance, or any product recall, could have a material adverse effect on our commercial relationships, business, financial condition and operating results.
In addition, securities class action lawsuits and derivative lawsuits are often brought against companies who have entered into business combinations and acquisitions, particularly in the United States. We were involved in securities class action litigation in connection with the Newport Acquisition and the ESI Acquisition. In each case, the plaintiffs alleged, among other things, that the then-current directors of the acquired company breached their fiduciary duties to their respective shareholders by agreeing to sell the company through an inadequate and unfair process, leading to inadequate and unfair consideration, by agreeing to unfair deal protection devices, and by omitting material information from the proxy statement. We, or the companies we acquire, may be subject to additional securities class action litigation in connection with business combinations, acquisitions or divestitures in the future.
With respect to data privacy, as a result of the 2023 ransomware event described under “Risks Related to Cybersecurity, Data Privacy and Intellectual Property Protection” above, we were previously subject to two lawsuits, and, in the future, we could be subject to future litigation, investigations, claims or actions, in addition to fines, penalties, or other obligations related to impacted data, whether or not such data is misused.
In addition, we have from time to time received claims from third parties alleging that we are infringing certain IP rights held by them. Such infringement claims have in the past resulted in, and may in the future result in, litigation, settlement or enforcement action. Any such action could be protracted and costly, and we could become subject to damages for infringement, or to an injunction preventing us from making, selling or using certain of our products or services, or using certain of our trademarks. Such claims could also result in the necessity of obtaining a license or paying damages relating to one or more of our products, services or technologies, which may not be available on commercially acceptable terms or at all. Any IP action and the failure to obtain necessary licenses or other rights or develop substitute technology could have a material adverse effect on our business, financial condition and operating results. In addition, the terms of some of our customer contracts require us to indemnify the customer for any claim of infringement brought by a third party based on our products. These claims may have a material adverse effect on our commercial relationships, business, financial condition or operating results.

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Although our standard commercial documentation sets forth the terms and conditions that we intend to apply to commercial transactions with our business partners, counterparties to these transactions may not explicitly agree to our terms and conditions. In situations where we engage in business with a third party without an explicit written agreement regarding the applicable terms and conditions, or where the commercial documentation applicable to the transaction is subject to interpretation, we may have disputes with those third parties regarding the applicable terms and conditions. These disputes could result in deterioration of commercial relationships, costly and time-consuming litigation, concessions or obligations being offered by us to resolve these disputes, as well as impact our net revenue or cost recognition. Any of these outcomes could materially and adversely affect our business, financial condition and operating results.
In addition, from time to time in the normal course of business we indemnify parties with whom we enter into contractual relationships, including customers, suppliers, consultants and lessors, with respect to certain matters. We have agreed, under certain conditions, to hold these parties harmless against losses, such as those arising from a breach of representations or covenants, negligence or willful misconduct, and other third-party claims that our products and/or technologies infringe IP rights. We may be compelled to enter into or accrue for probable settlements of alleged indemnification obligations, or we may be subject to potential liability arising from our customers’ involvement in legal disputes. In addition, notwithstanding the provisions related to limitations on our liability that we seek to include in our business agreements, the counterparties to such agreements may dispute our interpretation or application of such provisions, and a court of law may not interpret or apply such provisions in our favor, any of which could result in an obligation for us to pay significant additional damages and engage in costly legal proceedings. It is difficult to determine the maximum potential amount of liability under any indemnification obligations, whether or not asserted, due to the unique facts and circumstances likely to be involved in any particular claim. Our business, financial condition and operating results in a reported fiscal period could be materially and adversely affected if we expend significant amounts in defending or settling any asserted claims, regardless of their merit or outcomes.
Legal proceedings, enforcement actions and claims, whether with or without merit, and associated internal investigations, may be time-consuming and expensive to prosecute, defend or conduct; divert management’s attention and other resources; inhibit our ability to sell our products or services; result in adverse judgments for damages, injunctive relief, penalties, fines or other resolutions that result in losses to us; and negatively affect our business, including result in a material adverse effect on our financial condition, operating results and cash flows. We can make no assurances regarding the outcome of these proceedings, enforcement actions, claims or investigations or that the insurance we maintain will be adequate to cover them.
Risks Related to Owning Our Common Stock
Our quarterly operating results have fluctuated, and are likely to continue to vary significantly, which may result in volatility in the market price of our common stock.
A substantial portion of our shipments occurs shortly after an order is received, and therefore we generally operate with a relatively low level of backlog. As a result, a decrease in demand for our products from one or more customers could occur with limited advance notice and could have a significant adverse effect on our operating results in any particular period. Further, we often recognize a significant portion of the revenue of certain of our business lines in the last month of a fiscal quarter, due in part to the tendency of some customers to wait until late in a quarter to commit to purchase our products as a result of capital expenditure approvals and budgeting constraints occurring at the end of a quarter, or the hope of obtaining more favorable pricing from a competitor. Thus, variations in timing of sales can cause significant fluctuations in our quarterly sales, gross margin and profitability. In addition, orders expected to ship in one period could shift to another period due to changes in the timing of our customers’ purchase decisions, requests for rescheduled delivery dates, material shortages, manufacturing capacity constraints or logistics delays. Our orders are generally subject to rescheduling or cancellation without penalty other than reimbursement in certain cases for certain labor and material costs. Our operating results for a particular period may be adversely affected if our customers, particularly our largest customers, cancel or reschedule orders, or if we cannot fill orders in time due to material shortages, capacity constraints or unexpected delays in manufacturing, testing, shipping, delivery or product acceptance. Also, we base our manufacturing plans on our forecasted product mix. If the actual product mix varies significantly from our forecast, we may not be able to fill some orders, which would result in delays in the shipment of our products and could shift sales to a subsequent period. Moreover, a significant percentage of our expenses are fixed and based in part on expectations of net revenues. Our inability to adjust spending quickly enough to compensate for any shortfall would magnify the adverse impact of a shortfall in net revenues on our operating results.
Customers of our high-value, more complex products often require substantial time to qualify our products and make purchase decisions. In addition, some of our sales to defense and security customers are under major defense programs that involve lengthy competitive bidding and qualification processes. These customers often perform, or require us to perform, extensive configuration, testing and evaluation of our products before committing to purchase them, which can require a significant upfront investment in time and resources. The sales cycle for these products from initial contact through shipment varies significantly, is difficult to predict and can last more than a year. If we fail to anticipate the likelihood of, or the costs or timing associated with,

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sales of these products, or the cancellation or rescheduling of orders for these products, our business and operating results would be harmed.
Our worldwide sales to customers in the research and defense markets rely to a large extent on government funding for research and defense-related programs. Any decline in government funding as a result of reduced budgets in connection with fiscal austerity measures, revised budget priorities or other causes would likely result in reduced sales of our products that are purchased either directly or indirectly with government funding, which would have an adverse impact on our operating results. Concerns regarding the global availability of credit may also make it more difficult for our customers to raise capital, whether debt or equity, to finance their projects and purchases of capital equipment, which would adversely affect sales of our products and therefore harm our business and operating results.
Market seasonality also causes fluctuations in our operating results. MSD has generally experienced its strongest revenue in the second half of the fiscal year, mostly driven by consumption trends during the holiday season, and its lowest revenue in the first quarter of the fiscal year, mostly driven by the slowdown in production as a result of the Lunar New Year. In addition, we typically experience our strongest revenue in the research market in the fourth quarter of our fiscal year as a result of government spending patterns, and our highest revenue in the electronics manufacturing market in the second half of our fiscal year as a result of consumer spending during the holiday season.
Other factors that could cause fluctuations in our financial results include:
• A worldwide economic slowdown or disruption in the global financial markets;

• Fluctuations in our customers’ capital spending, industry cyclicality (particularly in the semiconductor, electronics manufacturing and automotive industries), levels of government funding available to our customers (particularly in the life and health sciences and the research and defense markets) and other economic conditions within the markets we serve;

• The timing of the receipt of orders within a given period;

• Demand for our products and the products sold by our customers;

• Disruption in sources of supply;

• Production capacity constraints;

• Regulatory and trade restrictions in the countries where we source, manufacture or sell our products;

• Specific features requested by customers;

• Natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war);

• IT or infrastructure failures;

• The timing of product shipments and revenue recognition within a given quarter;

• Changes in our pricing practices or in the pricing practices of our competitors or suppliers, including as a result of inflationary pressures;

• Our and our competitors’ timing in introducing new products;

• Engineering and development investments relating to new product introductions, and significant changes to our manufacturing and outsourcing operations;

• Market acceptance of any new or enhanced versions of our products;

• The timing and level of inventory obsolescence, scrap and warranty expenses;

• The availability, quality and cost of components and raw materials we use to manufacture our products;

• Changes in our effective tax rates;

• Changes in our capital structure, including cash, marketable securities and debt balances, and changes in interest rates;

• Changes in bad debt expense based on the collectability of our accounts receivable;

• The timing, type and size of acquisitions and divestitures, and related expenses and charges;

• Fluctuations in currency exchange rates;

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• Our expense levels;

• Impairment charges for goodwill, intangible assets or long-lived assets; and

• Fees, expenses and settlement costs or judgments against us relating to litigation or regulatory compliance.

As a result of these factors, among others, we may experience significant quarterly or annual fluctuations in our operating results, and our operating results for any period may fall below our expectations or the expectations of public market analysts or investors. In any such event, the price of our common stock could fluctuate or decline significantly. Consequently, we believe that quarter-to-quarter and year-to-year comparisons of our operating results, or any other similar period-to-period comparisons, may not be reliable indicators of our future performance.
The market price of our common stock has fluctuated and may continue to fluctuate for reasons over which we have no control.
Prices of securities of technology companies can be especially volatile and fluctuate for reasons unrelated to operating performance. Historically, the market price of shares of our common stock has fluctuated greatly. For example, the closing price of our common stock ranged from a high of $167.88 to a low of $58.78 between January 1, 2025 and December 31, 2025. The market price of shares of our common stock could continue to fluctuate. Companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation, which could result in substantial costs and divert our management’s attention and resources.
The market price of our common stock is also likely to be influenced by the Convertible Notes. For example, the market price of our common stock could become more volatile and could be depressed by: (i) investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our common stock received upon conversion of the Convertible Notes; and (ii) potential hedging or arbitrage trading activity involving the Convertible Notes and our common stock .
We may not pay dividends on our common stock.
Holders of our common stock are only entitled to receive dividends when and if they are declared by our Board of Directors. Our Credit Facilities restrict our ability to pay dividends on our capital stock under certain circumstances. Although we have declared cash dividends on our common stock since 2011, and occasionally increased the dividends from prior quarters, we are not required to do so, and we may reduce or eliminate our dividend in the future. This could adversely affect the market price of our common stock.
Some provisions of our Restated Articles of Organization, our Second Amended and Restated By-laws, as amended, and Massachusetts law could discourage potential acquisition proposals and could delay, deter or prevent a change in control.
Anti-takeover provisions in our Restated Articles of Organization, in our Second Amended and Restated By-laws, as amended, and under Massachusetts law could diminish opportunities for stockholders to participate in tender offers, including tender offers at a price above the then-current market price of our common stock. Such provisions may also inhibit increases in the market price of our common stock that could result from takeover attempts. For example, while we have no present plans to issue any preferred stock, our Board of Directors, without further stockholder approval, may issue preferred stock that could have the effect of delaying, deterring or preventing a change in control of us. The issuance of preferred stock could adversely affect the voting power of the holders of our common stock, including the loss of voting control to others. In addition, pursuant to our Second Amended and Restated By-laws, as amended, the declassification of our Board of Directors, which currently consists of three classes, will be phased in so that our Board of Directors will be fully declassified by our 2028 annual meeting of stockholders. Until then, the classification of the Board could delay or deter a change in control of our Company.
Item 1B. Unresolve d Staff Comments
None.

35

 

Item 1C. Cybersecurity
Risk Management and Strategy
Processes for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats
We primarily assess, identify and manage material risks from cybersecurity threats through our enterprise information security program, which is maintained by our Chief Information Security Officer (“CISO”) and overseen by our Executive Vice President and Chief Information Officer (“CIO”).
Our enterprise information security program, which is designed to ensure that our information systems are adequately protected, is based on frameworks established by the National Institute of Standards and Technology and other applicable industry standards. We consider our enterprise information security program to be a key component of our overall risk management system, with program elements evaluated annually and briefings provided to management each quarter.
As part of our enterprise information security program, we regularly assess and deploy technical safeguards designed to detect cybersecurity threats and protect our information systems from these threats. In addition, we maintain incident response and recovery plans, the effectiveness of which is tested and evaluated on a regular basis. We also provide privacy and security training, including quarterly phishing education campaigns, to enhance employee awareness of how to detect and respond to cybersecurity threats.
We regularly engage assessors, consultants and other third parties to support our enterprise information security program. These engagements encompass a variety of activities, including information security maturity assessments and independent reviews of our information security control environment and operating effectiveness.
The information gleaned from these assessments and reviews is used to enhance our enterprise information security program, including cybersecurity policies, standards, processes and practices. In addition, significant findings from these assessments are reported to management and the Audit Committee of our Board of Directors (the “Board”).
We also have processes in place to oversee and identify risks from cybersecurity threats associated with the use of third-party service providers. Third-party service providers are subject to security risk assessments at the time of on-boarding, contract renewal, and upon detection of an increase in risk profile. We have similar processes in place to oversee and identify cybersecurity-related risks posed by our suppliers.
Risks from Cybersecurity Threats
We and our third-party administrators, vendors and partners are subject to ongoing cybersecurity threats. While we cannot guarantee that these threats will not have an adverse impact on us, these threats did not materially affect us during the year ended December 31, 2025 and we do not believe such threats are reasonably likely to materially affect us in the future, including with respect to our business strategy, results of operations, or financial condition. For more information on risks related to cybersecurity, refer to “Risk Factors—Risks Related to Cybersecurity, Data Privacy and Intellectual Property Protection.”
Governance
Board of Directors’ Oversight of Risks from Cybersecurity Threats
The Audit Committee is primarily responsible for oversight of risks from cybersecurity threats. As set forth in the Amended & Restated Audit Committee Charter, the Audit Committee oversees the steps management takes to monitor and control our data privacy and cybersecurity risk exposure. The Board delegated this responsibility to the Audit Committee in part because it includes members with significant experience and/or expertise in cybersecurity and other technology matters.
The Audit Committee is informed of risks from cybersecurity threats through regular reports from our CIO and CISO. Our CIO and CISO report to the Audit Committee at least quarterly. The Audit Committee actively engages with our CIO and CISO regarding these risks. Depending on the materiality of a risk, the Audit Committee, CIO or CISO may report on such risk to the full Board.

In addition, from time to time, the Board may constitute a special committee to focus on a particular cybersecurity matter or risk.

36

 

Management’s Role in Assessing and Managing Material Risks from Cybersecurity Threats
Management is integral to assessing and managing our material risks from cybersecurity threats. While all members of management are involved in the review of these risks, our CIO oversees and is responsible for our cybersecurity program. Our CIO is a seasoned technology leader and change agent who has served as the top technology executive for multi-billion-dollar global organizations spanning diverse industries. With over 25 years of experience, our CIO has led business and information technology transformations, implemented global digital strategies, and optimized and integrated governance, risk, and compliance frameworks, processes and technologies in complex regulatory and industry environments. We believe our CIO’s knowledge, skills and experience provide significant value to our Company.
Our CIO and CISO provide regular reports to management regarding risks from cybersecurity threats and the prevention, detection, mitigation and remediation of cybersecurity incidents. Within our information technology organization, our CISO and other key members of our information security team provide regular reports to our CIO.

As discussed above, our CIO and CISO also provide regular reports regarding risks from cybersecurity threats to our Audit Committee and, depending on the materiality of a risk, the full Board. In addition, from time to time, members of management may provide reports to a special committee of the Board for cybersecurity.

Item 2. P roperties
The following table provides information concerning MKS’ principal and certain other owned and leased facilities as of December 31, 2025:

Country

 

City

 

Sq. Ft.

 

Activity

 

Reportable Segment

 

Owned/Leased

China

 

Guangzhou

 

704,000

 

Manufacturing, Warehouse, Sales, and Research and Development

 

MSD

 

Owned

 

 

Shenzhen

 

293,000

 

Manufacturing and Service

 

VSD

 

Leased

 

 

Yangzhou

 

455,000

 

Manufacturing, Warehouse, and Office

 

MSD

 

Owned

Germany

 

Berlin

 

261,000

 

Manufacturing, Office, and Research and Development

 

MSD

 

Leased

 

 

Feucht

 

242,000

 

Manufacturing, Warehouse, Office, and Research and Development

 

MSD

 

Owned

 

 

Neuruppin

 

172,000

 

Manufacturing, Warehouse, Office, and Research and Development

 

MSD

 

Owned

India

 

Manesar

 

189,000

 

Manufacturing and Research and Development

 

MSD

 

Owned

Mexico

 

Nogales

 

124,000

 

Manufacturing and Service

 

VSD and PSD

 

Leased

Romania

 

Bucharest

 

131,000

 

Manufacturing, Office, Research and Development, Service, and Warehouse

 

PSD

 

Leased

Slovenia

 

Podnart

 

108,000

 

Lab, Manufacturing, Office, Service, Warehouse, and Sales

 

MSD

 

Owned

South Korea

 

Hwaseong

 

100,000

 

Manufacturing, Sales, and Office

 

MSD

 

Owned

 

 

Yongin-si

 

179,000

 

Research and Development, Office, Warehouse, Service, and Sales

 

VSD

 

Owned

United States

 

Andover, MA

 

76,000

 

Corporate Headquarters, Manufacturing, and Research and Development

 

VSD

 

Leased

 

 

Beaverton, OR

 

113,000

 

Manufacturing, Office, and Warehouse

 

PSD

 

Leased

 

 

Broomfield, CO

 

107,000

 

Manufacturing and Research and Development

 

VSD

 

Leased

 

Irvine, CA

 

191,000

 

Manufacturing and Research and Development

 

PSD

 

Leased

 

 

Milpitas, CA

 

103,000

 

Manufacturing, Sales, Customer Support, Service, and Research and Development

 

PSD

 

Leased

 

Rochester, NY

 

156,000

 

Manufacturing, Sales, Customer Support, Service, and Research and Development

 

VSD

 

Owned

 

Rock Hill, SC

 

200,000

 

Manufacturing, Warehouse, Office, and Research and Development

 

MSD

 

Owned

 

 

Wilmington, MA

 

118,000

 

Manufacturing, Customer Support, Service, and Research and Development

 

VSD

 

Owned

 

37

 

In addition to the significant facilities listed above, MKS also has manufacturing, sales and marketing, customer support and services operations in various other leased and owned facilities throughout the world. See “Business—Sales and Marketing” and “Business—Reportable Segments, and Product and Service Offerings” in Part I, Item 1 of this Annual Report on Form 10-K. We believe that our current facilities are suitable and adequate to meet our needs.
Item 3. Legal Proceedings
We are subject to various legal proceedings and claims, which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our results of operations, financial condition or cash flows.
Item 4. Mine Saf ety Disclosures
Not applicable.

38

 

PART II
Item 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol MKSI.
As of February 17, 2026, we had 58 stockholders of record.
Dividend Policy and Cash Dividends
Holders of our common stock are entitled to receive dividends when and if they are declared by our Board of Directors. Our Board of Directors declared a cash dividend of $0.22 per share during each quarter of 2025, which totaled $59 million or $0.88 per share. During 2024, our Board of Directors declared a cash dividend of $0.22 per share during each quarter of the year, which totaled $59 million or $0.88 per share.
On February 9, 2026, our Board of Directors declared a quarterly cash dividend of $0.25 per share to be paid on March 6, 2026 to shareholders of record as of February 23, 2026.
Future dividend declarations, if any, as well as the record and payment dates for such dividends, are subject to the final determination of our Board of Directors. The Board of Directors intends to declare and pay cash dividends on our common stock based on our financial conditions and results of operations, although it has no obligation to do so. Our Credit Facilities contain covenants that restrict our ability to grant cash dividends in certain circumstances.
Share Repurchase Program
On July 25, 2011, our Board of Directors approved, and on July 27, 2011, we publicly announced a share repurchase program for the repurchase of up to an aggregate of $200 million of our outstanding common stock from time to time in open market purchases, privately negotiated transactions or through other appropriate means. The timing and quantity of any shares repurchased depends upon a variety of factors, including business conditions, stock market conditions and business development activities, including, but not limited to, merger and acquisition opportunities. These repurchases may be commenced, suspended or discontinued at any time without prior notice.
During 2025, we repurchased approximately 546,000 shares of our common stock for total consideration of $45 million. During 2024, we did not repurchase any shares of common stock. We have repurchased approximately 3.1 million shares of common stock for approximately $172 million pursuant to the program since its adoption.
Comparative Stock Performance
The following graph compares the cumulative total shareholder return (assuming reinvestment of dividends) from investing $100 on December 31, 2020, and plotted at the last trading day of each of the fiscal years ended December 31, 2021, 2022, 2023, 2024 and 2025 of MKS’ common stock; a peer group index representing all companies comprising the S&P 1500 Composite Electronic Equipment Instruments & Components Index and the Nasdaq Market Index. The stock price performance in the graph below is not necessarily indicative of future price performance.

39

 

Performance Graph

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

MKS Inc.

 

$

100.00

 

 

$

116.36

 

 

$

57.04

 

 

$

69.93

 

 

$

71.47

 

 

$

110.29

 

Nasdaq Market Index

 

$

100.00

 

 

$

122.18

 

 

$

82.43

 

 

$

119.22

 

 

$

154.48

 

 

$

187.14

 

S&P 1500 Composite / Electronic Equipment,
   Instruments & Components Index

 

$

100.00

 

 

$

129.18

 

 

$

101.05

 

 

$

121.68

 

 

$

142.03

 

 

$

205.05

 

Item 6. Rese rved

40

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) describes principal factors affecting the results of operations, financial condition, cash flows and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our consolidated financial statements, and is intended to better allow investors to view the Company from management’s perspective. This section focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of our future operating results or of our future financial condition. This section provides an analysis of our financial results for the year ended December 31, 2025 compared to the year ended December 31, 2024. For the discussion and analysis covering the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 25, 2025. As a result of rounding, there may be immaterial differences in amounts presented and certain calculations may not sum to the total number expressed in each category or tie to a corresponding schedule.
Overview
MKS Inc., formerly known as MKS Instruments, Inc. (“MKS,” the “Company,” “our,” or “we”), was founded in 1961 as a Massachusetts corporation. We enable technologies that transform our world. We deliver foundational technology solutions to leading edge semiconductor manufacturing, electronics and packaging, and specialty industrial applications. We apply our broad science and engineering capabilities to create instruments, subsystems, systems, process control solutions and specialty chemicals technology that improve process performance, optimize productivity and enable unique innovations for many of the world’s leading technology and industrial companies. Our solutions are critical to addressing the challenges of miniaturization and complexity in advanced device manufacturing by enabling increased power, speed, feature enhancement and optimized connectivity. Our solutions are also critical to addressing ever-increasing performance requirements across a wide array of specialty industrial applications.
Current Trade Environment
As the global trade landscape continues to evolve to address trade imbalances, national security concerns, and market access issues, including the imposition of significant tariffs on numerous global trading partners and the expansion of various export controls, we continue to implement strategies to strengthen supplier diversification, explore alternative sourcing geographies and optimize logistics routes. Our efforts are designed to mitigate cost impacts, maintain operational efficiency, and support supply chain continuity against current and future regulatory risks.
 
Segments
We have three divisions, which are our reportable segments: Vacuum Solutions Division (“VSD”), Photonics Solutions Division (“PSD”) and Materials Solutions Division (“MSD”).
VSD delivers foundational technology solutions for semiconductor manufacturing, electronics and packaging and specialty industrial applications. VSD products are derived from our core competencies in vacuum technologies, including pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and fiber optic temperature and position sensing.
PSD provides a broad range of instruments, components and subsystems to leading edge semiconductor manufacturing, electronics and packaging and specialty industrial applications. PSD products are derived from our core competencies in lasers, photonics, optics, precision motion control and vibration control.
MSD develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing. Applying a comprehensive systems-and-solutions approach, MSD’s portfolio includes chemistry, equipment and services for innovative and high-technology applications in our electronics and packaging and specialty industrial markets.

41

 

Markets
Net Revenues by End Market

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

% Total

 

 

2024

 

 

% Total

 

Semiconductor

 

$

1,696

 

 

 

43

%

 

$

1,498

 

 

 

42

%

Electronics and Packaging

 

 

1,111

 

 

 

28

%

 

 

922

 

 

 

26

%

Specialty Industrial

 

 

1,124

 

 

 

29

%

 

 

1,166

 

 

 

32

%

Total net revenues

 

$

3,931

 

 

 

100

%

 

$

3,586

 

 

 

100

%

Semiconductor Market
We are a critical solutions provider for semiconductor manufacturing. Our products are used in major semiconductor processing steps, such as deposition, etching, cleaning, lithography, metrology, and inspection. The semiconductor industry continually faces new challenges, as products become smaller, more powerful and highly mobile. Ultra-thin layers, smaller critical dimensions, new materials, 3D structures, and the ongoing need for higher yield and productivity drive the need for tighter process measurement and control, all of which we support. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment (“WFE”) ecosystem and address over 85% of the market. We characterize our broad and unique offering as Surround the Wafer® to reflect the technology enablement we provide across almost every major process in semiconductor manufacturing today.
The semiconductor market is subject to rapid demand shifts, which are difficult to predict, and we cannot be certain as to the timing or extent of future demand or any future softening in the semiconductor capital equipment industry. In addition to these rapid demand shifts, the semiconductor capital equipment industry has recently been subject to significant trade restrictions, especially in key markets, including China.
Approximately 43% and 42% of our net revenues for 2025 and 2024, respectively, were from sales to customers in the semiconductor market.
Net revenues from customers in our semiconductor market increased by $198 million, or 13%, in 2025, compared to 2024. The increase was mainly due to higher sales of our semiconductor capital equipment in logic and foundry applications, higher NAND memory production upgrades, and higher service revenues at VSD, partially offset by decreases in sales in our lithography, metrology and inspection products at PSD.
Electronics and Packaging Market
We are a foundational solutions provider for the electronics and packaging market. Our portfolio includes photonics components, laser drilling systems, electronics chemistries and plating equipment that are critical for the manufacturing of printed circuit boards (“PCB”) and package substrates, and critical to wafer level packaging (“WLP”) applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs.
Approximately 28% and 26% of our net revenues for 2025 and 2024, respectively, were from sales to customers in our electronics and packaging market.
Net revenues from customers in our electronics and packaging market increased by $189 million, or 20%, in 2025 compared to 2024. This increase was primarily due to higher chemistry and equipment sales in the electronics market at MSD as well as higher sales of PCB via drilling systems at PSD.
Specialty Industrial Market

42

 

Our strategy in the specialty industrial market is to leverage our domain expertise and proprietary technologies across a broad array of applications in industrial, life and health sciences, and research and defense markets.
Industrial
Industrial encompasses a wide range of diverse applications, including chemistries for functional coatings, surface finishing and wear resistance in the automobile industry, vacuum solutions for synthetic diamond manufacturing and photonics for solar manufacturing. Other applications include vacuum and photonics solutions for light emitting diode and laser diode manufacturing.
Life and Health Sciences
Our products for life and health sciences are used in a diverse array of applications, including bioimaging, medical instrument sterilization, medical device manufacturing, analytical, diagnostic and surgical instrumentation, consumable medical supply manufacturing and pharmaceutical production.
Research and Defense
Our products for research and defense are sold to government, university and industrial laboratories for applications involving research and development in materials science, physical chemistry, photonics, optics and electronics materials. Our products are also sold for monitoring and defense applications, including surveillance, imaging and infrastructure protection.
Approximately 29% and 32% of our net revenues for 2025 and 2024, respectively, were from customers in our specialty industrial market.
Net revenues from customers in our specialty industrial market decreased by $42 million, or 4%, in 2025, compared to 2024. This decrease was primarily driven by lower sales to industrial customers at VSD and lower chemistry and equipment sales to industrial customers at MSD.
International Markets
A significant portion of our net revenues is from sales to customers in international markets. International net revenues accounted for approximately 81% and 78% of our total net revenues in 2025 and 2024, respectively. We report geographical net revenues based on the shipped-to location of the end customer. A significant portion of our international net revenues was from customers in China, South Korea, Singapore, Taiwan and Japan. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.
Long-lived assets located outside of the United States accounted for approximately 70% and 59% of our total long-lived assets as of December 31, 2025 and 2024, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets and certain other assets.
Critical Accounting Policies and Estimates
MD&A discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, warranty costs, pension plan valuations, stock-based compensation expense, intangible assets, goodwill and long-lived assets, income taxes and derivatives. We base our estimates and judgments on historical experience and on various other factors that are believed 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. Actual results may differ from these estimates under different assumptions or conditions.
For a complete description of our significant accounting policies, see Part II—Item 8 Financial Statements and Supplementary Data, Note 3, “Summary of Significant Accounting Policies”. We believe the following critical accounting policies affect the most significant judgments, assumptions and estimates we use in preparing our Consolidated Financial Statements:

43

 

Revenue Recognition . We account for revenue using Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC Topic 606”). We apply ASC Topic 606 using the following steps:
• Identify the contract with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to performance obligations in the contract

• Recognize revenue when or as we satisfy a performance obligation

Revenue is recognized when or as obligations under the terms of a contract with our customer have been satisfied and control has transferred to the customer. The majority of our performance obligations, and associated revenue, are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments. We recognize revenue over time for contracts relating to the manufacturing, modifications and retrofits of our plating equipment, as the equipment is built to customer specification, and we have an enforceable right to payment for the performance completed to date. For these sales, we use the cost-to-cost input method to measure progress. In cases, where cost-to-cost is not proportionate to our progress in satisfying the performance obligation because of uninstalled materials, we adjust the measure of progress and recognize revenue to the extent of cost incurred to satisfy the performance obligation under the contract. Revenue from customized products with no alternative future use to us, and that have an enforceable right to payment for performance completed to date, is also recorded over time. We consider this to be a faithful depiction of the transfer to the customer of revenue over time as the work is performed or service is delivered. Adjustments for custom products were immaterial in each of the periods presented.
Installation services, other than those related to our plating equipment, are not significant, are usually completed in a short period of time and, therefore, are recorded at a point in time when the installation services are completed, rather than over time, as they are not material. Extended warranty, service contracts, and repair services, which are transferred to the customer over time, are recorded as revenue as the services are performed. For repair services, we make an accrual at each quarter end based upon historical repair times within our product groups to record revenue based upon the estimated number of days completed to date, which is consistent with ratable recognition.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Performance obligations promised in a contract are identified based on the products or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the product or service is separately identifiable from other promises in the contract. Sales tax, value add tax, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Our normal payment terms are 30 to 60 days but vary by the type and location of our customers and the products or services offered. The time between invoicing and when payment is due is not significant. For certain products and services and customer types, we require payment before the products are delivered to, or the services are performed for, the customer. None of our contracts in each of the periods presented contained a significant financing component.
We periodically enter into contracts with our customers in which a customer may purchase a combination of goods and or services, such as products with installation services or extended warranties. These contracts include multiple deliverables that we evaluate to determine if the deliverables are separate performance obligations. Once we determine the performance obligations, we then determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the method we expect to better predict the amount of consideration to which we will be entitled. There are no constraints on the variable consideration recorded. We then allocate the transaction price to each performance obligation in the contract based on a relative stand-alone selling price charged separately to customers or using an expected cost-plus margin method. The corresponding revenues are recognized when or as the related performance obligations are satisfied, which are noted above. The impact of variable consideration was immaterial in each of the periods presented.
Our standard assurance warranty is normally 12 to 24 months. We sell separately priced service contracts and extended warranty contracts related to certain of our products, in particular related to our plating and laser-based products. These separately priced contracts generally range from 12 to 60 months. We normally receive payment at the inception of the contract and recognize revenue over the term of the contract in proportion to the costs expected to be incurred in satisfying the obligations under the contract. We have elected to use the practical expedient related to disclosing remaining performance obligations as of December 31, 2025 and 2024, as the majority have a duration of less than one year.

44

 

We monitor and track the amount of product returns, provide for sales return allowances and reduce revenue at the time of shipment for the estimated amount of such future returns, based on historical experience. We make estimates evaluating our allowance for doubtful accounts. While product returns have historically been within our expectations and established provisions, there is no assurance that we will continue to experience the same return rates that we have in the past. Any significant increase in product return rates could have a material adverse impact on our operating results for the period in which such returns materialize.
While we maintain a credit approval process, significant judgments are made by management in connection with assessing our customers' ability to pay at the time of shipment. Despite this assessment, from time to time, our customers are unable to meet their payment obligations. We continuously monitor our customers' creditworthiness and use our judgment in establishing a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, there is no assurance that we will continue to experience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our customers could have a material adverse impact on the collectability of accounts receivable and our future operating results. Bad debt expense was immaterial in each period presented.
Inventory Valuation . We value our inventory at the lower of cost or net realizable value, cost being determined using a standard costing system that approximates actual costs, based on a first-in, first-out method. We regularly review inventory quantities on hand and record a provision to write-down excess and obsolete inventory to its estimated net realizable value, if less than cost, based primarily on our estimated forecast of product demand. Once our inventory value is written-down and a new cost basis has been established, the inventory value is not increased due to demand increases. Demand for our products can fluctuate significantly. A significant increase in the demand for our products could result in a short-term increase in the cost of inventory purchases as a result of supply shortages or a decrease in the cost of inventory purchases as a result of volume discounts, while a significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand. In addition, our industry is subject to technological change, new product development and product technological obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand. Therefore, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results. Excess and obsolete expense was $45 million, $56 million and $64 million for 2025, 2024 and 2023, respectively. The excess and obsolete charge in 2023 was partially due to an inventory write-off as a result of the discontinuation of a product line in 2023 and partially due to reduced forecasted usage. The excess and obsolete charges in 2025 and 2024 were mainly the result of reduced forecasted usage.
Warranty Costs. We provide for the estimated costs to fulfill customer warranty obligations upon the recognition of the related revenue. We provide warranty coverage for our products for periods ranging from 12 to 36 months, with the majority of our products for periods ranging from 12 to 24 months. Short-term accrued warranty obligations, which expire within one year, are included in other current liabilities and long-term accrued warranty obligations are included in other liabilities in the consolidated balance sheets. We estimate the anticipated costs of repairing our products under such warranties based on the historical costs of the repairs and any known specific product issues. The assumptions we use to estimate warranty accruals are re-evaluated periodically in light of actual experience and, when appropriate, the accruals are adjusted. Our determination of the appropriate level of warranty accrual is based upon estimates. Should product failure rates differ from our estimates, actual costs could vary significantly from our expectations. Defective products will be either repaired or replaced, generally at our option, upon meeting certain criteria.
Pension Plan Valuations. Several of our non-U.S. subsidiaries have defined benefit pension plans covering employees of those subsidiaries. The majority of these defined benefit plans are frozen and do not allow new employees to join the plans. Some of the plans are unfunded, as permitted under the plans and applicable laws. For financial reporting purposes, we obtained actuarial reports supporting the calculation of net periodic pension costs that used a number of actuarial assumptions, including a discount rate for plan obligations, an assumed rate of return on pension plan assets, and an assumed rate of compensation increase for employees covered by the various plans. We reviewed these actuarial assumptions and concluded they were reasonable based upon our judgment, considering known trends and uncertainties. Actual results that differ from these assumptions would impact future expense recognition and the cash funding requirements of our pension plans.
Stock-Based Compensation Expense. Stock-based awards include (i) time-based restricted stock units (“time-based RSUs”), (ii) performance-based RSUs based on the achievement of Company adjusted EBITDA targets over a one-year performance period (the “Adjusted EBITDA RSUs”), (iii) performance-based RSUs based on the Company’s total shareholder return relative to a group of peers over a three-year performance period (the “rTSR RSUs”) and (iv) employee stock purchase plan rights. We record compensation expense for all stock-based compensation awards to employees and directors based upon the estimated fair market value of the underlying instrument. Accordingly, stock-based compensation cost is measured at the grant date, based upon the fair value of the award.
We determine the fair value of time-based RSUs based on the closing market price of our common stock on the date of grant reduced by the present value of dividends expected to be paid on our common stock prior to vesting. We determine the original fair value of Adjusted EBITDA RSUs based upon the closing market price of our common stock on the date of grant reduced by

45

 

the present value of dividends expected to be paid on our common stock prior to vesting and adjust the fair value quarterly during the one-year performance period based upon actual and forecasted results against Company Adjusted EBITDA targets. Accordingly, the number of Adjusted EBITDA RSUs earned will depend on the actual Company Adjusted EBITDA achieved for the one-year performance period. For each quarter during the one-year performance period, we estimate the number of Adjusted EBITDA RSUs to be earned based on the probability of achieving the Company Adjusted EBITDA targets. Such estimates are revised, if necessary, in subsequent periods when the underlying factors change the probability of achieving such Company Adjusted EBITDA targets. Accordingly, share-based compensation expense associated with Adjusted EBITDA RSU targets may differ significantly from the amount recorded in the current period. Such values are recognized as expense using the accelerated graded vesting method for Adjusted EBITDA RSUs, over the requisite service periods. We estimate the fair value of rTSR RSUs using the Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying common stock. For the rTSR RSUs, the expense computed is fixed and recognized on a straight-line basis over the service period.
We provide certain employees the opportunity to purchase our shares through an Employee Stock Purchase Plan (“ESPP”). We estimate the fair value of shares issued under our ESPP using the Black-Scholes model, which incorporates a number of complex and subjective variables, including expected stock price volatility over the term of the awards, expected life, risk-free interest rate and expected dividends. Management determined that blended stock-based compensation, a combination of historical and implied volatility, is more reflective of market conditions and a better indicator of expected volatility than historical or implied volatility alone.
The assumptions used in calculating the fair value of share-based compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
Intangible Assets, Goodwill and Long-Lived Assets . As a result of our acquisitions, we have identified intangible assets and generated significant goodwill. Definite-lived intangible assets are valued based on estimates of future cash flows and amortized over their estimated useful life. Determining fair value requires the exercise of significant judgment, including assumptions about appropriate discount rates as well as forecasted revenue, terminal growth rate, gross profit and operating expenses.
Goodwill and indefinite-lived intangible assets are subject to annual impairment testing as well as testing upon the occurrence of any event that indicates a potential impairment. Intangible assets and other long-lived assets are also subject to an impairment test if there is an indicator of impairment. If our expectations of future results and cash flows are significantly diminished, intangible assets, goodwill and other long-lived assets may be impaired and the resulting charge to operations may be material. When we determine that the carrying value of intangible assets or other long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method to determine whether an impairment exists and then measure the impairment using discounted cash flows. To measure impairment for goodwill, we compare the fair value of our reporting units by measuring discounted cash flows to the book value of the reporting units. Goodwill would be impaired if the resulting implied fair value was less than the recorded book value of the goodwill.
The estimation of useful lives and expected cash flows requires us to make significant judgments regarding future periods that are subject to factors outside of our control. Changes in these estimates can result in significant revisions to the carrying value of these assets and may result in material charges to the results of operations.
We have elected to perform our annual goodwill impairment test as of October 31 of each year, or more often if events or circumstances indicate that there may be impairment. Goodwill is the amount by which the cost of acquired net assets exceeded the fair value of those net assets on the date of acquisition. We allocate goodwill to reporting units at the time of acquisition or when there is a change in the reporting structure and base that allocation on which reporting units will benefit from the acquired assets and liabilities. Reporting units are defined as operating segments or one level below an operating segment, referred to as a component. The estimated fair value of our reporting units was based on discounted cash flow models derived from internal earnings and internal and external market forecasts. Determining fair value requires the exercise of significant judgment, including assumptions about appropriate discount and perpetual growth rates, as well as forecasted revenue growth rates and gross profit and operating expenses. Discount rates are based on a weighted average cost of capital (“WACC”), which represents the average rate a business must pay its providers of debt and equity. The WACC used to test goodwill is derived from a group of comparable companies. Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity. We make every effort to forecast these future cash flows as accurately as possible with the information available at the time the forecast is developed.
Effective January 1, 2025, we reassigned goodwill to certain reporting units within PSD resulting from a reorganization of that business. The goodwill was reassigned to the new reporting units using the relative fair value approach. We also concluded that the fair value of each reporting unit immediately before and after the reorganization exceeded its respective carrying value. For more information, see Note 12 to the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

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In performing our annual goodwill impairment test, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, including goodwill. In performing the qualitative assessment, we consider certain events and circumstances specific to the reporting unit and to the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We are also permitted to bypass the qualitative assessment and proceed directly to the quantitative assessment. If we choose to undertake the qualitative assessment and we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we would then proceed to the quantitative impairment assessment. In the quantitative assessment, we compare the fair value of the reporting unit to its carrying amount, which includes goodwill. If the fair value exceeds the carrying value, no impairment loss exists. If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.
As of October 31, 2025 and 2024, we performed our annual impairment assessment of goodwill using a qualitative assessment for all of our reporting units. We determined that it was more likely than not that the fair values were more than the carrying values for each of the reporting units.
We will continue to monitor and evaluate the carrying value of goodwill and intangible assets. If market and economic conditions or business performance deteriorate, this could increase the likelihood of us recording an impairment charge. Our stock price and any estimated control premium are factors affecting the assessment of the fair value of our underlying reporting units for purposes of performing any goodwill impairment assessment.
Income Taxes. We evaluate the realizability of our net deferred tax assets and assess the need for a valuation allowance on a quarterly basis. The future benefit to be derived from our deferred tax assets is dependent upon our ability to generate sufficient future taxable income in each jurisdiction of the right type to realize the assets. We record a valuation allowance to reduce our net deferred tax assets to the amount that is expected to be realized. Evaluating positive and negative evidence regarding the realization of the net deferred tax assets in accordance with ASC 740, “Accounting for Income Taxes,” is a key judgment in this process. This assessment includes an evaluation of scheduled reversals of deferred tax liabilities, estimates of projected future taxable income, and tax-planning strategies. To the extent we establish a valuation allowance, or determine that a valuation allowance is no longer needed, an expense or benefit is recorded within the provision for income taxes line in the consolidated statements of operations and comprehensive income (loss). In 2025, we decreased our valuation allowance by $72 million, primarily related to certain foreign interest and net operating loss carryforwards. Although realization is not guaranteed, we have concluded it is more likely than not that these assets, net of the remaining valuation allowance, will be realized.
We are subject to the income tax laws and regulations of the many jurisdictions in which we operate. These tax laws and regulations are complex and involve uncertainties in the application to our facts and circumstances that may be open to interpretation. Accounting for income taxes requires a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not that the position will be sustained upon audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. This process is inherently subjective since it requires our assessment of the probability of future outcomes. We re-evaluate these uncertain tax positions on a quarterly basis based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
Derivatives. As a result of our global operating activities and variable interest rate borrowings, we are exposed to market risks from changes in foreign currency exchange rates and interest rates, which may adversely affect our operating results and financial position. We address these risks through a risk management program that includes the use of derivative financial instruments. We operate the program pursuant to documented corporate risk management policies. We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments and those utilized as economic hedges. We do not enter into derivative instruments for trading or speculative purposes.
We have used derivative instruments, such as foreign exchange forward contracts, options and net investment hedges, to manage certain foreign currency exposure, and interest rate swaps and interest rate caps to manage certain interest rate exposure. Changes in fair value of derivative instruments are recognized in the consolidated statement of operations or, if hedge accounting is applied, in Other Comprehensive (Loss) Income (“OCI”) for the effective portion of the changes in fair value. The cash flows resulting from foreign exchange forward contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities. All derivatives are stated at fair value in the consolidated balance sheets.
Accounting principles for qualifying hedges require detailed documentation that describes the relationship between the hedging instrument and the hedged item, including, but not limited to, the risk management objectives and hedging strategy and the methods to assess the effectiveness of the hedging relationship. We assess the hedging relationships, both at the inception of the hedge and on an ongoing basis, using either the critical terms matching approach or a regression analysis approach to determine whether the designated hedging instrument is highly effective in offsetting changes in the value of the hedged item.

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By nature, all financial instruments involve market and credit risks. We enter into derivative instruments with a diversified group of major investment grade financial institutions, for which no collateral is required. We have policies to monitor the credit risk of these counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of total net revenues of certain line items included in our consolidated statements of operations and comprehensive income (loss) data:

 

 

Years Ended December 31,

 

 

 

2025

 

 

2024

 

 

 

 

 

 

 

 

Net revenues:

 

 

 

 

 

 

Product

 

 

87.4

%

 

 

87.1

%

Service

 

 

12.6

 

 

 

12.9

 

Total net revenues

 

 

100.0

 

 

 

100.0

 

Cost of revenues:

 

 

 

 

 

 

Cost of product revenues

 

 

47.3

 

 

 

46.3

 

Cost of service revenues

 

 

6.0

 

 

 

6.0

 

Total cost of revenues (exclusive of amortization shown separately below)

 

 

53.3

 

 

 

52.4

 

Gross profit

 

 

46.7

 

 

 

47.6

 

Research and development

 

 

7.6

 

 

 

7.6

 

Selling, general and administrative

 

 

18.4

 

 

 

18.8

 

Acquisition and integration costs

 

 

—

 

 

 

0.3

 

Restructuring and other

 

 

0.9

 

 

 

0.2

 

Fees and expenses related to amendments to the Term Loan Facility

 

 

0.1

 

 

 

0.1

 

Amortization of intangible assets

 

 

6.3

 

 

 

6.8

 

Income from operations

 

 

13.4

 

 

 

13.9

 

Interest income

 

 

(0.4

)

 

 

(0.6

)

Interest expense

 

 

5.4

 

 

 

7.9

 

Loss on extinguishment of debt

 

 

0.3

 

 

 

1.6

 

Other expense (income), net

 

 

0.4

 

 

 

(0.1

)

Income before income taxes

 

 

7.7

 

 

 

5.0

 

Provision (benefit) for income taxes

 

 

0.2

 

 

 

(0.3

)

Net income

 

 

7.5

%

 

 

5.3

%

Year Ended December 31, 2025 compared to 2024
The following table sets forth our net revenues for product and service:
Net Revenues

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Product

 

$

3,436

 

 

$

3,124

 

Service

 

 

495

 

 

 

462

 

Total net revenues

 

$

3,931

 

 

$

3,586

 

Net product revenues increased $312 million in 2025, compared to 2024, primarily driven by an increase of $206 million in net product revenues from our electronics and packaging market and an increase of $146 million in our semiconductor market, offset by a decrease of $41 million in our specialty industrial market. The increase in the electronics and packaging market was primarily a result of volume increases in chemistry and equipment sales at MSD as well as increased demand for PCB via drilling systems at PSD. The increase in the semiconductor market was primarily as a result of increases in sales at VSD, mainly due to an increase in demand in capital equipment related to strength in logic and foundry applications as well as higher NAND memory production upgrades, partially offset by volume decreases in sales in our lithography, metrology and inspection products at PSD. The decrease in the specialty industrial market was mainly due to a decrease in sales of our industrial products at VSD and MSD.

48

 

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. Net service revenues increased $33 million in 2025, compared to 2024, primarily due to an increase in net service revenues in our semiconductor market, mainly at VSD, offset by a decrease of net service revenues in our electronics and packaging market, mainly at PSD and MSD.
Total international net revenues, including product and service, were $3.2 billion in 2025, compared to $2.8 billion in 2024, primarily driven by an increase of $155 million in sales to China.
The following table sets forth our net revenues by reportable segment:

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Vacuum Solutions Division

 

$

1,579

 

 

$

1,384

 

Photonics Solutions Division

 

 

1,029

 

 

 

1,021

 

Materials Solutions Division

 

 

1,323

 

 

 

1,181

 

Total net revenues

 

$

3,931

 

 

$

3,586

 

Net revenues for our VSD segment increased $195 million in 2025, compared to 2024, mainly due to higher sales of our semiconductor capital equipment in logic and foundry applications, higher NAND memory production upgrades and higher service revenues. This was partially offset by decreases in industrial applications in our specialty industrial market.
Net revenues for our PSD segment increased $8 million in 2025, compared to 2024, primarily as a result of increased demand for PCB via drilling systems in our electronics and packaging market offset by decreased sales of our lithography, metrology and inspection products in our semiconductor market.
Net revenues for our MSD segment increased $142 million in 2025, compared to 2024, primarily due to higher chemistry and equipment sales in our electronics and packaging market partially offset by lower sales in industrial applications within our specialty industrial market.
The following table sets forth gross profit as a percentage of net revenues by product and service:
Gross Profit Excluding Amortization

 

 

Years Ended December 31,

 

 

% Points

 

(As a percentage of net revenues)

 

2025

 

 

2024

 

 

Change

 

Product

 

 

45.9

%

 

 

46.8

%

 

 

(0.9

)%

Service

 

 

52.5

%

 

 

53.3

%

 

 

(0.8

)%

Total gross profit percentage

 

 

46.7

%

 

 

47.6

%

 

 

(0.9

)%

Gross profit as a percentage of net product revenues decreased by 0.9 percentage points in 2025, compared to 2024, primarily due to higher duty and tariff costs and unfavorable product mix, partially offset by higher revenue volumes.
Gross profit as a percentage of net service revenues decreased by 0.8 percentage points in 2025, compared to 2024, primarily due to higher duty and tariff costs and variable compensation, partially offset by lower scrap and rework.
The following table sets forth gross profit as a percentage of net revenues by reportable segment:

 

 

Years Ended December 31,

% Points

 

(As a percentage of net revenues)

 

2025

 

 

2024

 

 

Change

 

Vacuum Solutions Division

 

 

43.3

%

 

 

42.9

%

 

 

0.4

%

Photonics Solutions Division

 

 

43.5

%

 

 

44.9

%

 

 

(1.4

)%

Materials Solutions Division

 

 

54.1

%

 

 

56.1

%

 

 

(2.0

)%

Total gross profit percentage

 

 

46.7

%

 

 

47.6

%

 

 

(0.9

)%

Gross profit as a percentage of net revenues for VSD increased in 2025, compared to 2024, primarily due to higher revenue volumes, improved factory utilization and lower warranty costs, partially offset by higher duty and tariff costs and unfavorable product mix.
Gross profit as a percentage of net revenues for PSD decreased in 2025, compared to 2024, primarily due to higher duty and tariff costs and variable compensation, partially offset by lower excess and obsolete inventory charges.
Gross profit as a percentage of net revenues for MSD decreased in 2025, compared to 2024, primarily due to unfavorable product mix as a result of higher chemistry equipment sales, and higher excess and obsolete inventory charges.

49

 

The above gross profit percentages by division exclude an immaterial amount of unallocated corporate expense included in the total gross profit percentage.
Research and Development

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Research and development

 

$

299

 

 

$

271

 

Research and development expenses increased $28 million in 2025, compared to 2024, mainly due to an increase of $21 million in compensation-related costs, including salaries, fringe and variable compensation expenses and a decrease of $2 million in research and development credits and government assistance received.
Our research and development efforts are primarily focused on developing and improving our instruments, components, chemistry, subsystems, systems and process control solutions to improve process performance and productivity. We have thousands of products, and our research and development efforts primarily consist of a large number of projects related to these products, none of which is individually material. Projects typically have a duration of 3 to 36 months but may be extended for development of new products.
We continue to make product advancements designed to meet our customers’ evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the rising demand for more complex hardware architecture related to increasing investments in artificial intelligence, the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accurate components and devices within the handset and tablet market, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers’ product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.
We believe that the continued investment in research and development and ongoing development of new products are essential to the expansion of our markets. We expect to continue to make significant investment in research and development activities. We are subject to risks from products not being developed in a timely manner, as well as from rapidly changing customer requirements and competitive threats from other companies and technologies. Our success depends on many of our products being designed into new generations of equipment for the semiconductor, electronics and packaging, and specialty industrial markets. We seek to develop products that are technologically advanced so that they are positioned to be chosen for use in each successive generation of semiconductor capital equipment and advanced markets applications. If our products are not chosen to be designed into our customers’ products, our net revenues may be reduced during the lifespan of those products.
Selling, General and Administrative

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Selling, general and administrative

 

$

724

 

 

$

674

 

Selling, general and administrative expenses increased $50 million during 2025, compared to 2024, primarily due to a $53 million increase in compensation-related costs, mainly related to salaries, fringe and variable compensation, partially offset by a $5 million reduction in consulting and professional fees.
Acquisition and Integration Costs

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Acquisition and integration costs

 

$

—

 

 

$

9

 

Acquisition and integration costs incurred during 2024 were related to consulting and professional fees related to the acquisition of Atotech Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”).

50

 

Restructuring and other

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Restructuring and other

 

$

37

 

 

$

6

 

Restructuring and other charges incurred in 2025 were primarily related to severance costs incurred as a result of a global cost saving initiative implemented during the first quarter of 2025, mainly in the general metals finishing business within MSD, as well as third party costs supporting other strategic initiatives. Restructuring and other charges incurred in 2024 were primarily related to severance costs incurred as a result of global cost-saving initiatives implemented in the fourth quarter of 2023.
Fees and Expenses Related to Amendments to the Term Loan Facility

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Fees and expenses related to amendments to the Term Loan Facility

 

$

2

 

 

$

5

 

In 2025, we recorded fees and expenses related to the Fifth Amendment to Credit Agreement, dated as of January 24, 2025, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Fifth Amendment”).
In 2024, we recorded fees and expenses related to the Fourth Amendment to Credit Agreement, dated as of July 23, 2024, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Fourth Amendment”) and the Second Amendment to Credit Agreement, dated as of January 22, 2024, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Second Amendment”).
Amortization of Intangible Assets

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Amortization of intangible assets

 

$

247

 

 

$

245

 

Amortization of intangible assets increased $2 million in 2025, compared to 2024, primarily due to the impact of foreign exchange rates on intangible assets at foreign locations.
Interest Expense, Net

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Interest expense, net

 

$

198

 

 

$

263

 

Interest expense, net, decreased by $65 million in 2025, compared to 2024, primarily as a result of the issuance of $1.4 billion of Convertible Notes (as defined and described further below under “Convertible Notes”) in May 2024, at a coupon rate of 1.25%, $1.2 billion of the proceeds of which were used to pay down our loans under the Term Loan Facility, which had an interest rate of approximately 7.8%. In addition, in July 2024, we entered into the Fourth Amendment, and in January 2025, we entered into the Fifth Amendment, each of which decreased the applicable margin for both the USD Tranche B and EUR Tranche B by 0.25%. Interest expense, net was also lower in 2025 as compared to the prior year as a result of various voluntary prepayments totaling $400 million in 2025 and $426 million in 2024, on loans under the Term Loan Facility.
Loss on Extinguishment of Debt

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Loss on extinguishment of debt

 

$

10

 

 

$

57

 

In 2025, we recorded a loss on extinguishment of debt as a result of acceleration of deferred financing and original issue discount costs in connection with voluntary prepayments made in 2025 as well as the repricing our USD Tranche B and EUR Tranche B in connection with the Fifth Amendment.

51

 

In 2024, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discount costs associated with the Second Amendment in January 2024, the issuance of Convertible Notes in May 2024 and the Fourth Amendment in July 2024. In addition, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discount costs as a result of voluntary prepayments under the Term Loan Facility made in 2024, as described above.
Other Expense (Income), Net

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Other expense (income), net

 

$

16

 

 

$

(2

)

Other expense (income), net, for 2025 and 2024 primarily related to net foreign exchange and fair value gains and losses.
Provision (Benefit) for Income Taxes

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2025

 

 

2024

 

Provision (benefit) for income taxes

 

$

9

 

 

$

(10

)

Our effective tax rates for 2025 and 2024 were 2.9% and (5.7)%, respectively. Our effective tax rate for 2025 was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for foreign derived intangible income (“FDII”), research and development tax credits and valuation allowance release partially offset by foreign withholding taxes and a waiver of deductions related to the U.S. base erosion payments.
Our effective tax rate for 2024 was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for FDII and valuation allowance release partially offset by foreign withholding taxes.
As of December 31, 2025 and 2024, total gross unrecognized tax benefits, which excludes interest and penalties, was $95 million and $94 million, respectively. The net increase was primarily due to the addition of income tax reserves related to intercompany transactions offset by a decrease related to audit settlements.
We accrue interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are classified as a component of income tax expense. As of December 31, 2025 and 2024, we accrued interest on unrecognized tax benefits of approximately $10 million and $8 million, respectively.
We are subject to examination by U.S. federal, state and foreign tax authorities. The U.S. federal statute of limitations remains open for tax years 2020 through the present. We are under U.S. federal audit by the Internal Revenue Service for the years ended December 31, 2020, 2021, and 2022, and do not expect and are not aware of any unrecorded material adjustments. The statute of limitations for our tax filings in other jurisdictions varies between fiscal years 2020 through the present. We also have certain prior year federal credit carryforwards, state tax loss carryforwards and state tax credit carryforwards that are subject to examination to the extent used in an open year.
Our future effective tax rate depends on various factors, including the impact of tax legislation, further interpretations and guidance from U.S. federal and state governments on the impact of proposed regulations issued by the Internal Revenue Service, as well as the geographic composition of our pre-tax income and changes in income tax reserves for unrecognized tax benefits. We monitor these factors and timely adjust our estimates of the effective tax rate accordingly. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax laws and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgment by management. Accordingly, we could record additional provisions or benefits for U.S. federal, state, and foreign tax matters in future periods as new information becomes available.
The Organisation for Economic Co-operation and Development (“OECD”) and participating OECD member countries have issued rules introducing a 15% global minimum corporate tax rate for large multinational enterprise groups, also known as “Pillar Two.” The adoption and effective dates of these rules vary by country. Although the enacted and effective legislation in some countries was applicable to us as of January 1, 2024, the legislation did not have a material impact on our 2025 financial results. We will continue to monitor and evaluate the impact of any developing legislation, but we do not anticipate it will have a material impact on our results in future periods.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA includes changes to the U.S. tax code, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These changes to the U.S.

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tax code have not had a material impact on our results since the enactment of OBBBA and we do not anticipate these changes to the U.S. tax code will have a material impact on our results in future periods.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2025 and 2024 totaled $675 million and $714 million, respectively. The primary driver of our current and anticipated future cash flows is, and we expect will continue to be, cash generated from operations, consisting primarily of our net income (loss), excluding non-cash charges and changes in operating assets and liabilities.
Our total cash and cash equivalents at December 31, 2025 consisted of $199 million held in the United States and $476 million held by our foreign subsidiaries. We believe that our current cash and investments position and available borrowing capacity, together with the cash anticipated to be generated from our operations, will be sufficient to satisfy our estimated working capital needs, planned capital expenditure requirements, payments of debt, potential settlement of convertible debt conversions and any future cash dividends declared by our Board of Directors or share repurchases through at least the next 12 months and the foreseeable future.
In periods when our sales are growing, higher sales to customers will result in increased trade receivables, and inventories will generally increase as we build products for future sales. This may result in lower cash generated from operations. Conversely, in periods when our sales are declining, our trade accounts receivable and inventory balances will generally decrease, resulting in increased cash from operations.
Net cash provided by operating activities was $645 million for 2025 and resulted from net income of $295 million, which included non-cash charges of $275 million, mainly the result of $344 million in depreciation and amortization, partially offset by $196 million in deferred income taxes and a net decrease in working capital of $75 million. The net decrease in working capital was primarily due to increases in current and non-current accrued compensation of $83 million as a result of higher variable compensation, accounts payable of $55 million and income taxes payable of $21 million, partially offset by increases in inventories of $50 million, as a result of higher business levels, as well as a decrease in other current and non-current liabilities of $32 million.
Net cash provided by operating activities was $528 million for 2024 and resulted from net income of $190 million, which included non-cash charges of $334 million, offset by a net decrease in working capital of $4 million. The net decrease in working capital was primarily due to an increase in income taxes payable of $49 million, an increase in accounts payable of $21 million, a decrease in other current and non-current assets of $25 million, primarily related to a decrease in right of use assets, and a decrease in inventory of $20 million. This net decrease in working capital was partially offset by a decrease in other current and non-current liabilities of $43 million, a decrease in current and non-current accrued compensation of $32 million as a result of lower variable compensation and an increase in accounts receivable of $36 million.
Net cash used in investing activities was $145 million for 2025, consisting primarily of $148 million in capital expenditures, primarily related to new facility additions in Malaysia and China.
Net cash used in investing activities was $117 million for 2024, consisting primarily of $118 million in capital expenditures.
Net cash used in financing activities was $562 million for 2025, consisting primarily of normal quarterly debt payments and voluntary debt prepayments that together totaled $451 million, as well as the repurchase of our common stock for $45 million and dividend payments of $59 million.
 
Net cash used in financing activities was $549 million for 2024, primarily due to net proceeds from the issuance of Convertible Notes of $1.4 billion and incremental loans under the Term Loan Facility in an aggregate principal amount of $761 million. The proceeds of the incremental loans under the Term Loan Facility were used in part to prepay the USD Tranche A term loans outstanding under the Amended Credit Agreement (as defined and described further below under “Credit Facilities”) in full in an aggregate principal amount of $744 million, and the proceeds of the Convertible Notes were used in part to prepay a portion of the USD Tranche B loans in an aggregate principal amount of $1.2 billion. In addition, there were normal quarterly debt payments and voluntary prepayments that totaled $476 million. We also made payments of $167 million to purchase a capped call option related to the Convertible Notes, $33 million for debt financing costs and $59 million for dividends.
On July 25, 2011, our Board of Directors approved a share repurchase program for the repurchase of up to an aggregate of $200 million of our outstanding common stock from time to time in open market purchases, privately negotiated transactions or through other appropriate means. The timing and quantity of any shares repurchased depends upon a variety of factors, including business conditions, stock market conditions and business development activities, including, but not limited to, merger and acquisition opportunities. These repurchases may be commenced, suspended or discontinued at any time without prior notice. Any repurchased shares are held by us as authorized but unissued shares.
In 2025, we repurchased approximately 546,000 shares of our common stock for total consideration of $45 million. We have

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repurchased approximately 3.1 million shares of common stock for approximately $172 million pursuant to the program since its adoption.
Holders of our common stock are entitled to receive dividends when and if they are declared by our Board of Directors. For the years ended December 31, 2025 and 2024, we paid cash dividends of $59 million in the aggregate or $0.88 per share, respectively.
On February 9, 2026, our Board of Directors declared a quarterly cash dividend of $0.25 per share to be paid on March 6, 2026 to shareholders of record as of February 23, 2026. Future dividend declarations, if any, as well as the record and payment dates for such dividends, are subject to the final determination of our Board of Directors.
Credit Facilities
In connection with the completion of the Atotech Acquisition, on August 17, 2022 (the “Effective Date”) we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto, which we have amended several times since including, most recently, in February 2026 (as amended, the “Amended Credit Agreement”). As of December 31, 2025, the Amended Credit Agreement provided for (i) a senior secured term loan facility comprised of two tranches: a $2.2 billion loan (the “USD Tranche B”) and a €587 million loan (the “Euro Tranche B” and together with the USD Tranche B, the “Term Loan Facility”) and (ii) a senior secured revolving credit facility of $675 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), with the commitments under each of the foregoing facilities subject to increase from time to time subject to certain conditions. In each of January 2025, June 2025, August 2025 and October 2025, we made an additional voluntary prepayment of $100 million principal amount to the USD Tranche B loan.
As of December 31, 2025, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at our option, any of the following, plus, in each case, an applicable margin: (a) with respect to the USD Tranche B and the Revolving Facility, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50%, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on the variable secured overnight financing rate (“Term SOFR”) (plus, with respect to the Revolving Facility, an applicable credit spread adjustment) for an interest period of one month, plus 1.00%, and (y) a Term SOFR rate (plus, with respect to the Revolving Facility, an applicable credit spread adjustment) for the interest period relevant to such borrowing, subject to a rate floor of (I) with respect to the USD Tranche B, 0.50% and (II) with respect to the Revolving Facility, 0.0%; and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate (“EURIBOR”) rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, subject to a EURIBOR rate floor of 0.0%. As of December 31, 2025, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche B, 1.00% with respect to base rate borrowings and 2.00% with respect to Term SOFR borrowings, (ii) under the Euro Tranche B, 2.50% and (iii) under the Revolving Facility, 1.50% with respect to base rate borrowings and 2.50% with respect to Term SOFR borrowings.
In addition to paying interest on outstanding principal under the Credit Facilities, we are required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility. The commitment fee is subject to adjustment based on our first lien net leverage ratio as of the end of the preceding fiscal quarter. We must also pay customary letter of credit fees and agency fees. As of December 31, 2025, the commitment fee was 0.25% per annum.
As of December 31, 2025, the principal outstanding on the Term Loan Facility was $2.9 billion, and the weighted average interest rate was 5.4%. As of December 31, 2025, the Revolving Facility had a maturity date in August 2027 while the Term Loan Facility had a maturity date in August 2029. As of December 31, 2025, there were no borrowings under the Revolving Facility.
As of December 31, 2025, we were required to make scheduled quarterly principal payments equal to approximately $10 million with respect to the USD Tranche B and approximately €2 million with respect to the Euro Tranche B, in each case with the balance due thereunder on the maturity date of the Term Loan Facility. There is no scheduled amortization under the Revolving Facility. Any principal amount outstanding under the Revolving Facility is due and payable in full on the maturity date of the Revolving Facility.
Under the Amended Credit Agreement, we are required to prepay outstanding term loans, subject to certain exceptions, with portions of our annual excess cash flow as well as with the net cash proceeds of certain of its asset sales, certain casualty and condemnation events and the incurrence or issuances of certain debt. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Revolving Facility exceeds the aggregate commitments under the Revolving Facility, we are required to repay outstanding loans and/or cash collateralize letters of credit, with no reduction of the commitment amount.

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We may voluntarily prepay, and have voluntarily repaid, outstanding loans under the Credit Facilities from time to time, subject to certain conditions, without premium or penalty other than customary “breakage” costs with respect to Term SOFR or EURIBOR loans and any prepayment premium that might be applicable to repayments we make prior to August 4, 2026. Additionally, we may voluntarily reduce the unutilized portion of the commitment amount under the Revolving Facility.
All obligations under the Credit Facilities are guaranteed by certain of our wholly-owned domestic subsidiaries and are required to be guaranteed by certain of our future wholly-owned domestic subsidiaries, and are secured by substantially all of our assets and the assets of such subsidiaries, subject to certain exceptions and exclusions.
Under the Amended Credit Agreement, we have the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) $1,011 million and (2) 75% of consolidated last 12 months earnings before interest, taxes, depreciation, and amortization, plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt).
The Amended Credit Agreement contains customary representations and warranties, covenants and provisions relating to events of default. As of December 31, 2025, we were in compliance with all covenants under the Amended Credit Agreement. The USD Tranche B and the Euro Tranche B are not subject to financial maintenance covenants.
2026 Amendment and Prepayment of Credit Facilities
On February 4, 2026 (the “Sixth Amendment Effective Date”), we entered into the Sixth Amendment to Credit Agreement (the “Sixth Amendment”). Pursuant to the Sixth Amendment, we (i) refinanced our existing USD Tranche B loan and Euro Tranche B loan with a new $914 million USD Tranche B loan and a new €587 million Euro Tranche B loan, (ii) refinanced and increased the commitments under our existing Revolving Credit Facility with a new $1 billion Revolving Credit Facility, (iii) decreased the applicable margin for the USD Tranche B from 2.00% to 1.75% with respect to Term SOFR borrowings and from 1.00% to 0.75% with respect to base rate borrowings, (iv) decreased the applicable margin for the Euro Tranche B from 2.50% to 2.00%, (v) decreased the applicable margin under the Revolving Facility from 2.50% to 1.75% with respect to SOFR borrowings and from 1.50% to 0.75% with respect to base rate borrowings, (vi) eliminated the credit spread adjustment applicable to SOFR borrowings of the Revolving Facility, (vii) extended the maturity of the Term Loan Facility to February 2033 and (viii) extended the maturity of the Revolving Facility to February 2031. Additionally, pursuant to the Sixth Amendment, we (a) extended the period during which a 1.00% prepayment premium may be required if we prepay any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction until the date that is six months following the Sixth Amendment Effective Date, and (b) reduced the amount of scheduled quarterly principal payments we are required to make with respect to the USD Tranche B to approximately $2 million. The repriced USD Tranche B loan and Euro Tranche B loan were issued without original issue discount.
On February 4, 2026, concurrently with the effectiveness of the Sixth Amendment, we made a voluntary prepayment of approximately $1.3 billion principal amount to the USD Tranche B loan using the net proceeds from the 2034 Notes (as defined below), together with cash on hand, reducing the principal from $2.2 billion to $914 million.
Convertible Notes
On May 16, 2024, we completed a private offering of $1.4 billion aggregate principal amount of convertible senior notes due 2030 (the “Convertible Notes”).
We used approximately $167 million of the net proceeds from the offering to pay the cost of the capped call transactions described below. We used the remaining net proceeds from the offering to repay approximately $1.2 billion in borrowings outstanding under the USD Tranche B, together with accrued interest, as well as for general corporate purposes.
Indenture and the Convertible Notes
On May 16, 2024, we entered into an indenture (the “Indenture”) with respect to the Convertible Notes with U.S. Bank Trust Company, National Association, as trustee. Under the Indenture, the Convertible Notes are senior unsecured obligations of ours and bear interest at a coupon rate of 1.25% per annum, with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024. The Convertible Notes will mature on June 1, 2030, unless earlier converted, redeemed or repurchased in accordance with their terms.
The conversion rate for the Convertible Notes is initially 6.4799 shares of our common stock per one thousand dollars principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $154.32 per share. The conversion rate is subject to adjustment upon the occurrence of certain events.

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Subject to certain conditions, on or after June 5, 2027, we may redeem for cash all or any portion of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately preceding the date the notice of redemption is sent.
Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. Prior to the close of business on the business day immediately preceding March 1, 2030, noteholders may convert all or any portion of their Convertible Notes under the following circumstances:
• during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ended September 30, 2024, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the Convertible Notes on each applicable trading day (approximately $200.62 per share based on an initial conversion price of approximately $154.32 per share, which is subject to adjustment upon the occurrence of certain events);

• during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day;

• if we call any or all of the Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

• upon the occurrence of specified corporate events as specified in the Indenture.

On or after March 1, 2030, until the close of business on the second scheduled trading day immediately preceding the maturity date, noteholders may convert all or any portion of their Convertible Notes at any time.
If we undergo a fundamental change (as defined in the Indenture) prior to the maturity date of the Convertible Notes, holders may require us to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture contains customary terms and covenants, including that upon certain events of default that are occurring and continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the Convertible Notes to be due and payable.
As of December 31, 2025, the Convertible Notes were classified as a long-term liability, net of issuances costs, on the consolidated balance sheet. The Convertible Notes were issued at par and costs associated with the issuance of the Convertible Notes are amortized to interest expense over the contractual term of the Convertible Notes. There were no conversions of the Convertible Notes in 2025 and 2024. As of December 31, 2025, the effective interest rate of the Convertible Notes was 1.56%.
Capped Call Transactions
On May 13, 2024, in connection with the pricing of the Convertible Notes, and on May 14, 2024, in connection with the exercise in full by the initial purchasers of their option to purchase additional Convertible Notes, we entered into privately negotiated capped call transactions with certain of the initial purchasers of the Convertible Notes or their respective affiliates and other financial institutions. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon conversion of any Convertible Notes and/or offset any cash payments that we are required to make in excess of the principal amount of any converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to $237.42 per share, which represents a premium of 100% over the last reported sale price of $118.71 per share of our common stock on The Nasdaq Global Select Market on May 13, 2024, and is subject to customary adjustments under the terms of the capped call transactions.
2034 Notes
On February 4, 2026, we completed a private offering (the “2034 Notes Offering”) of €1.0 billion aggregate principal amount of senior notes due 2034 (the “2034 Notes”). The Notes were sold in a private placement to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and

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to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. We used the net proceeds from the Offering, together with cash on hand, to prepay approximately $1.3 billion of the USD Tranche B.
 
Indenture and the 2034 Notes
 
On February 4, 2026, we and the Guarantors (as defined below) entered into an indenture (the “Indenture”) with respect to the 2034 Notes with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
 
Under the Indenture, the 2034 Notes bear interest at a rate of 4.250% per annum, with interest payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2026. The 2034 Notes will mature on February 15, 2034, unless earlier redeemed or repurchased in accordance with their terms.
 
The 2034 Notes are unconditionally guaranteed, on a senior unsecured basis, jointly and severally, by our existing and future subsidiaries that guarantee the Credit Agreement or are required to become guarantors under certain circumstances and subject to certain exceptions (the “Guarantors”).
 
The 2034 Notes and the guarantees are general senior unsecured obligations of us and the Guarantors. The 2034 Notes and guarantees will be:
 
• pari passu in right of payment with any of our and the Guarantors’ existing and future unsubordinated indebtedness (including the Credit Agreement);

• effectively subordinated to our and the Guarantors’ existing and future secured indebtedness (including the Credit Agreement) to the extent of the value of the assets securing such indebtedness;

• senior in right of payment to any of our and the Guarantors’ future subordinated indebtedness;

• structurally senior to any existing and future indebtedness of us that is not guaranteed by the Guarantors (including the Convertible Notes); and

• structurally subordinated to any existing and future indebtedness and other liabilities of our and the Guarantors’ subsidiaries that are not and do not become Guarantors.

 
At any time prior to February 15, 2029, we may redeem the 2034 Notes in whole or in part at a redemption price equal to 100% of their principal amount, plus a make-whole premium, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the redemption date.
 
At any time and from time to time on or after February 15, 2029, we may redeem for cash all or any portion of the 2034 Notes at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on February 15 of the year indicated below:
 

Year

 

 

 

Percentage

2029

 

 

 

102.125%

2030

 

 

 

101.0625%

2031 and thereafter

 

 

 

100.000%

 
At any time and from time to time prior to February 15, 2029, we may redeem up to 40% of the original aggregate principal amount of the 2034 Notes using the net cash proceeds of certain equity offerings at a redemption price equal to 104.250%.
 
In the event of certain developments affecting taxation, we may elect to redeem all, but not less than all, of the 2034 Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the date fixed for redemption.
 
Upon the occurrence of a change of control triggering event (as defined in the Indenture), each holder of the 2034 Notes may require us to repurchase all or a portion of their 2034 Notes at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any, and additional amounts, if any, to, but excluding, the repurchase date.
 

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The Indenture contains customary terms and covenants that limit the ability of us and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, (i) incur liens, (ii) provide guarantees and (iii) consolidate, merge or sell or otherwise dispose of substantially all their assets.
 
The Indenture also provides for customary events of default. Upon certain events of default that are occurring and continuing, either the Trustee or the holders of at least 30% in aggregate principal amount of the outstanding 2034 Notes may declare the principal of, and accrued and unpaid interest, if any, and additional amounts, if any, on, all the 2034 Notes to be due and payable. In the event of certain insolvency and bankruptcy related events of default specified in the Indenture, the principal of, and accrued and unpaid interest, if any, and additional amounts, if any, on, all the 2034 Notes shall automatically become due and payable.
 
Based on current interest rates, we expect that the annualized cash interest savings as a result of (i) the Sixth Amendment, (ii) the voluntary prepayment of approximately $1.3 billion principal amount to the USD Tranche B loan and (iii) the 2034 Notes Offering will be approximately $27 million.
Lines of Credit and Borrowing Arrangements
Certain of our Japanese subsidiaries have lines of credit and a financing facility with various financial institutions, many of which generally expire and are renewed at three-month intervals with the remaining having no expiration date. The lines of credit and financing facility provided for aggregate borrowings as of December 31, 2025 and December 31, 2024 of up to an equivalent of $13 million and $19 million, respectively. There were no borrowings outstanding under these arrangements at December 31, 2025 and December 31, 2024.
Derivatives
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments and those utilized as economic hedges. We operate internationally, and in the normal course of business, are exposed to fluctuations in interest rates and foreign exchange rates. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, such as foreign exchange forward contracts, options, and net investment hedges, to manage certain foreign currency exposure, and interest rate swaps and caps to manage certain interest rate exposure. We do not enter into derivative instruments for trading or speculative purposes.
By nature, all financial instruments involve market and credit risks. We enter into derivative instruments with major investment grade financial institutions and no collateral is required. We have policies to monitor the credit risk of these counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.
Interest Rate Swaps
We have various interest rate swap agreements, which are cash-flow hedges, maturing through January 31, 2029 that exchange a one-month forward-looking term rate based on Term SOFR paid on the outstanding balance of our USD Term Loan Facility, to a fixed rate. The notional value of the agreements was $1,900 million and $2,600 million as of December 31, 2025 and December 31, 2024, respectively. We acquired USD London Interbank Offered Rate (“USD LIBOR”) based interest rate cap agreements as a result of the Atotech Acquisition and had utilized these agreements to offset Term SOFR on our Term Loan Facility. The interest rate cap agreements expired on January 31, 2024.
The interest rate swaps are recorded at fair value on the consolidated balance sheets and changes in the fair value are recognized in OCI. To the extent these arrangements are no longer effective hedges, the hedging relationship will be discontinued and changes in the fair value of the hedging instruments from the last assessment period that were effective up to the current period will be recorded immediately in earnings. Amounts previously recorded in OCI will remain in OCI and will be reclassified to earnings when the interest payments impact consolidated earnings. If we determine that the interest payments are unlikely to occur, amounts previously recorded in OCI will be reclassified to earnings immediately. Changes in the fair value of interest rate caps were recorded immediately in earnings, as we did not designate these instruments as hedges and therefore these instruments did not qualify for hedge accounting. The cash flows resulting from interest rate agreements are classified in cash flows from operating activities. We expect an immaterial amount of gains or losses to be reclassified from accumulated OCI into interest expense related to interest rate swaps during the twelve months ending December 31, 2026.

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Foreign Exchange Forward Contracts
We hedge a portion of our forecasted foreign currency denominated intercompany sales of inventory and certain of our foreign subsidiaries’ operating expenses, over a maximum period of twenty-four months, using foreign exchange forward contracts accounted for as cash-flow hedges. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the hedge accounting criteria, changes in the derivatives’ fair value are not included in current earnings but are included in OCI in stockholders’ equity. These changes in fair value will subsequently be reclassified into earnings as applicable, when the forecasted transaction occurs. To the extent that a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded in earnings in the period it occurs. The cash flows resulting from foreign exchange forward contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities. Gains and losses on foreign exchange forward contracts that qualify for hedge accounting are classified in cost of revenues in 2025 and 2024 and totaled gains of $4 million and $6 million in 2025 and 2024, respectively. There were no ineffective portions of the derivatives recorded in 2025 and 2024. We expect an immaterial amount of gains or losses to be reclassified from accumulated OCI into cost of revenues related to foreign exchange forward contracts during the twelve months ending December 31, 2026.
We also enter into foreign exchange forward contracts to hedge against certain monetary asset and liability accounts on the consolidated balance sheet to mitigate the risk associated with certain foreign currency transactions in the ordinary course of business. These derivatives are not designated as cash flow hedging instruments and gains or losses from these derivatives are recorded immediately in other expense (income), net. The net foreign exchange loss on these derivatives was $3 million in 2025, compared to a gain of $1 million in 2024. The cash flows resulting from foreign exchange forward contracts are classified in our consolidated statements of cash flows as part of cash flows from operating activities.
We had foreign exchange forward contracts designated as cash flow hedges with notional amounts totaling $5 million and $74 million outstanding at December 31, 2025 and at December 31, 2024, respectively. The Canadian dollar was the only notional contract designated as a cash flow hedging instrument for 2025, and the Japanese yen and the South Korean won were the largest notional contracts designated as cash flow hedging instruments for 2024. We had foreign exchange forward contracts not designated as hedging instruments with notional amounts totaling $367 million and $154 million outstanding at December 31, 2025 and at December 31, 2024, respectively. The Euro, Chinese yuan, British pound and New Taiwan dollar were the largest notional contracts for 2025, and the British pound and Chinese yuan were the largest notional contracts for 2024 for balance sheet hedges not designated as a hedging instrument.
Net Investment Hedges
We have designated certain Euro-denominated debt as a net investment hedge to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the Euro. As of December 31, 2025, we designated as a net investment hedge €587 million in aggregate principal amount of our Euro Tranche B loan. On February 4, 2026, in connection with the 2034 Notes Offering, we also designated as a net investment hedge €1.0 billion in aggregate principal amount of the 2034 Notes. For these net investment hedges, we record foreign currency remeasurement gains and losses within a component of OCI. Recognition in earnings of amounts previously recorded in accumulated OCI is limited to circumstances such as the complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.

59

 

Contractual Obligations
As of December 31, 2025, we are a party to purchase commitments for certain inventory components and other equipment and services used in our normal operations totaling approximately $490 million. The majority of these purchase commitments covered by these arrangements are for periods of less than one year.
In addition, we have various operating leases for real estate and non-real estate items. The non-real estate leases are mainly comprised of automobiles but also include office equipment and other lower-valued items. We also have a small number of finance leases for real estate.
Future payments related to operating and finance leases are as follows:

(Dollars in millions)

 

Operating

 

 

Finance

 

Year Ending December 31,

 

Leases

 

 

Leases

 

2026

 

$

35

 

 

$

6

 

2027

 

 

31

 

 

 

6

 

2028

 

 

23

 

 

 

6

 

2029

 

 

20

 

 

 

6

 

2030

 

 

16

 

 

 

6

 

Thereafter

 

 

118

 

 

 

102

 

Total lease payments

 

 

243

 

 

 

132

 

Less: imputed interest

 

 

41

 

 

 

57

 

Total lease liabilities

 

$

202

 

 

$

75

 

Contractual maturities of our debt obligations as of December 31, 2025 are as follows:

(Dollars in millions)

 

 

 

Year

 

Amount

 

2026

 

$

51

 

2027

 

 

51

 

2028

 

 

51

 

2029

 

 

2,725

 

2030

 

 

1,400

 

We have a number of defined benefit pension plans, which cover some of our employees outside the United States. As of December 31, 2025, our estimated benefit payments over the next 10 years amount to $93 million. The majority of the benefit payments covered by these arrangements occurs after 2030.
Recent Accounting Pronouncements
For information on recently issued accounting pronouncements, see Note 4 to the Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

60

 

Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk
Market Risk and Sensitivity Analysis
Our primary exposures to market risks include fluctuations in interest rates on our Term Loan Facility, as defined and as described further in Item 7 of this Annual Report on Form 10-K, as well as fluctuations in foreign currency exchange rates.
Foreign Exchange Rate Risk
Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions, and net investments in certain subsidiaries. We use both nonderivative and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates.
We mainly enter into foreign exchange forward contracts to reduce currency exposure arising from intercompany sales of inventory and certain of our foreign subsidiaries’ operating expenses. We also enter into foreign exchange forward contracts to reduce foreign exchange risks arising from the change in fair value of certain foreign currency denominated assets and liabilities.
We had foreign exchange forward contracts designated as cash flow hedges with notional amounts totaling $5 million and $74 million outstanding at December 31, 2025 and December 31, 2024, respectively. The Canadian dollar was the only notional contract designated as a cash flow hedging instrument for 2025, and the Japanese yen and the South Korean won were the largest notional contracts designated as cash flow hedging instruments for 2024. We had foreign exchange forward contracts not designated as hedging instruments with notional amounts totaling $367 million and $154 million outstanding at December 31, 2025 and December 31, 2024, respectively. For 2025, the Euro, Chinese yuan, British pound and New Taiwan dollar were the largest notional contracts and for 2024 British pound and Chinese yuan were the largest notional contracts for balance sheet hedges not designated as a hedging instrument. The potential fair value loss for a hypothetical 10% adverse change in the currency exchange rate on our foreign exchange forward contracts at December 31, 2025 and 2024 would be immaterial.
We designated certain Euro-denominated debt as a net investment hedge to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the Euro. As of December 31, 2025, we designated as a net investment hedge €587 million in aggregate principal amount of our Euro Tranche B loan. On February 4, 2026, in connection with the 2034 Notes Offering, we also designated as a net investment hedge €1.0 billion in aggregate principal amount of 2034 Notes. For these nonderivative instruments, we defer recognition of the foreign currency remeasurement gains and losses within the foreign currency translation adjustment component of OCI.
Interest Rate Risk
We hold our cash and cash equivalents for working capital purposes. Some of the cash equivalents are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of such cash equivalents to fluctuate. To minimize this risk, we maintain a portion of our portfolio of cash and cash equivalents in money market funds. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our cash equivalents as a result of changes in interest rates. Declines in interest rates, however, would reduce future interest income. The effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our operating results or the total fair value of our portfolio.
We have various interest rate swap agreements as described further in “Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Derivatives” that exchange the one-month Term SOFR interest rate to a fixed rate in order to manage the exposure to interest rate fluctuations associated with the variable Term SOFR interest rate paid on the outstanding balance of the Term Loan Facility.
We are exposed to market risks related to fluctuations in interest rates related to our Term Loan Facility. As of December 31, 2025, the principal outstanding on our Term Loan Facility was $2.9 billion, at a weighted average interest rate of 5.4%. A 10% increase or decrease in the weighted average interest rate as of December 31, 2025 would increase or decrease annual interest expense by approximately $9 million, excluding the effect of our interest rate hedges. Because the notional amount of our interest rate hedges as of December 31, 2025 equaled approximately 66% of the principal outstanding on our Term Loan Facility, the resulting net impact to interest expense would be approximately $4 million. The quantitative information presented reflects the terms of our Term Loan Facility as of December 31, 2025 and does not reflect the Sixth Amendment and 2034 Notes Offering completed in 2026. For a discussion of the expected impact on our future interest expense and liquidity, see Part II—Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources.

61

 

Equity Price Risk
We are exposed to equity price risk related to the conversion options embedded in our Convertible Notes. We issued $1.4 billion of Convertible Notes in May 2024. The Convertible Notes bear interest at a fixed rate and therefore have no financial statement risk associated with changes in market interest rates. However, the fair value of Convertible Notes fluctuates when interest rates change. We carry the Convertible Notes at face value less an unamortized discount on our consolidated balance sheet, and we present the fair value for required disclosure purposes only. Additionally, the fair value can be affected when the market price of our common stock fluctuates. The potential value of the shares to be distributed to the holders of our Convertible Notes changes when the market price of our stock fluctuates. The Convertible Notes will mature on June 1, 2030 unless earlier repurchased by us or converted pursuant to their terms. Additional details about the terms of the Convertible Notes can be found in Note 14 to the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
 

62

 

Item 8. Financial Statements and Suppl ementary Data
Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Stockholders of MKS Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of MKS Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2025 appearing after Item 16 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

63

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Certain Product Revenue
As described in Note 3 to the consolidated financial statements, revenue is recognized when or as obligations under the terms of a contract with a customer have been satisfied by the Company and control has transferred to the customer. The majority of the Company’s performance obligations, and associated revenue, are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company’s total net product revenue was $3.4 billion for the year ended December 31, 2025, of which a majority relates to certain product revenue.
The principal consideration for our determination that performing procedures relating to revenue recognition for certain product revenue is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition for certain product revenue.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recording of revenue for certain product revenue at the consideration once control passes to the customer. These procedures also included, among others (i) testing revenue recognized for a sample of certain product revenue transactions by obtaining and inspecting source documents, such as purchase orders, invoices, and proof of shipment or delivery; (ii) testing revenue recognized for a sample of certain product revenue transactions before and after period end by obtaining and inspecting source documents, such as purchase orders, invoices and proof of shipment or delivery; and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment or delivery, and subsequent cash receipts.
 
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 24, 2026
 
We have served as the Company’s auditor since 1981.

64

 

MKS INC.
Consolidated B alance Sheets
(in millions, except per share data)
 

 

 

December 31,

 

 

 

2025

 

 

2024

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

675

 

 

$

714

 

Trade accounts receivable, net of allowance for doubtful accounts of
   $ 5  at both December 31, 2025 and 2024

 

 

651

 

 

 

615

 

Inventories

 

 

921

 

 

 

893

 

Other current assets

 

 

263

 

 

 

252

 

Total current assets

 

 

2,510

 

 

 

2,474

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

810

 

 

 

771

 

Right-of-use assets

 

 

270

 

 

 

238

 

Goodwill

 

 

2,574

 

 

 

2,479

 

Intangible assets, net

 

 

2,140

 

 

 

2,272

 

Other assets

 

 

492

 

 

 

356

 

Total assets

 

$

8,796

 

 

$

8,590

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

51

 

 

$

50

 

Accounts payable

 

 

407

 

 

 

341

 

Other current liabilities

 

 

469

 

 

 

384

 

Total current liabilities

 

 

927

 

 

 

775

 

 

 

 

 

 

 

Long-term debt, net

 

 

4,150

 

 

 

4,488

 

Non-current deferred taxes

 

 

474

 

 

 

504

 

Non-current accrued compensation

 

 

149

 

 

 

141

 

Non-current lease liabilities

 

 

246

 

 

 

211

 

Other non-current liabilities

 

 

131

 

 

 

149

 

Total liabilities

 

 

6,077

 

 

 

6,268

 

Commitments and contingencies  (Note 22)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $ 0.01  par value, 2  shares authorized; no  shares issued
   and outstanding

 

 

—

 

 

 

—

 

Common stock, no  par value, 200  shares authorized; 67.2
   and 67.4  shares issued and outstanding at December
   31, 2025 and 2024, respectively

 

 

—

 

 

 

—

 

Additional paid-in capital

 

 

2,101

 

 

 

2,067

 

Retained earnings

 

 

711

 

 

 

503

 

Accumulated other comprehensive loss

 

 

( 93

)

 

 

( 248

)

Total stockholders’ equity

 

 

2,719

 

 

 

2,322

 

Total liabilities and stockholders' equity

 

$

8,796

 

 

$

8,590

 

 
The accompanying notes are an integral part of the Consolidated Financial Statements.

65

MKS INC.
Consolidated Statements of Opera tions and Comprehensive Income (Loss)
(in millions, except per share data)
 

 

 

Years Ended December 31,

 

 

 

2025

 

 

2024

 

 

2023

 

Net revenues:

 

 

 

 

 

 

 

 

 

Products

 

$

3,436

 

 

$

3,124

 

 

$

3,200

 

Services

 

 

495

 

 

 

462

 

 

 

422

 

Total net revenues

 

 

3,931

 

 

 

3,586

 

 

 

3,622

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

Products

 

 

1,859

 

 

 

1,662

 

 

 

1,748

 

Services

 

 

235

 

 

 

216

 

 

 

232

 

Total cost of revenues (exclusive of amortization shown separately
   below)

 

 

2,094

 

 

 

1,878

 

 

 

1,980

 

Gross profit

 

 

1,837

 

 

 

1,708

 

 

 

1,642

 

Research and development

 

 

299

 

 

 

271

 

 

 

288

 

Selling, general and administrative

 

 

724

 

 

 

674

 

 

 

675

 

Acquisition and integration costs

 

 

—

 

 

 

9

 

 

 

16

 

Restructuring and other

 

 

37

 

 

 

6

 

 

 

20

 

Fees and expenses related to amendments to the Term Loan Facility

 

 

2

 

 

 

5

 

 

 

2

 

Amortization of intangible assets

 

 

247

 

 

 

245

 

 

 

295

 

Goodwill and intangible asset impairments

 

 

—

 

 

 

—

 

 

 

1,902

 

Gain on sale of long-lived assets

 

 

—

 

 

 

—

 

 

 

( 2

)

Income (loss) from operations

 

 

528

 

 

 

498

 

 

 

( 1,554

)

Interest income

 

 

( 14

)

 

 

( 21

)

 

 

( 17

)

Interest expense

 

 

212

 

 

 

284

 

 

 

356

 

Loss on extinguishment of debt

 

 

10

 

 

 

57

 

 

 

8

 

Other expense (income), net

 

 

16

 

 

 

( 2

)

 

 

27

 

Income (loss) before income taxes

 

 

304

 

 

 

180

 

 

 

( 1,928

)

Provision (benefit) for income taxes

 

 

9

 

 

 

( 10

)

 

 

( 87

)

Net income (loss)

 

$

295

 

 

$

190

 

 

$

( 1,841

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Changes in value of financial instruments designated as cash flow
  hedges

 

$

( 29

)

 

$

( 1

)

 

$

( 24

)

Foreign currency translation adjustments

 

 

237

 

 

 

( 213

)

 

 

( 83

)

Change in net investment hedge

 

 

( 63

)

 

 

36

 

 

 

( 25

)

Unrecognized pension gain (loss)

 

 

10

 

 

 

3

 

 

 

( 9

)

Unrealized gain (loss) on investments

 

 

—

 

 

 

23

 

 

 

( 23

)

Total comprehensive income (loss)

 

$

450

 

 

$

38

 

 

$

( 2,005

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

4.39

 

 

$

2.82

 

 

$

( 27.54

)

Diluted

 

$

4.37

 

 

$

2.81

 

 

$

( 27.54

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

67.3

 

 

 

67.3

 

 

 

66.8

 

Diluted

 

 

67.7

 

 

 

67.6

 

 

 

66.8

 

 
The accompanying notes are an integral part of the Consolidated Financial Statements.

66

 

MKS INC.
Consolidated Statements of Stockholders’ Equity
(in millions, except per share data)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

(Loss) Income

 

 

Equity

 

Balance at December 31, 2022

 

 

66.6

 

 

$

0.1

 

 

$

2,142

 

 

$

2,272

 

 

$

69

 

 

$

4,483

 

Net issuance under stock-based plans

 

 

0.3

 

 

 

 

 

 

( 1

)

 

 

 

 

 

 

 

 

( 1

)

Stock-based compensation

 

 

 

 

 

 

 

 

54

 

 

 

 

 

 

 

 

 

54

 

Cash dividend ($ 0.88  per common share)

 

 

 

 

 

 

 

 

 

 

 

( 59

)

 

 

 

 

 

( 59

)

Comprehensive loss (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

( 1,841

)

 

 

 

 

 

( 1,841

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( 164

)

 

 

( 164

)

Balance at December 31, 2023

 

 

66.9

 

 

$

0.1

 

 

$

2,195

 

 

$

373

 

 

$

( 96

)

 

$

2,472

 

Net issuance under stock-based plans

 

 

0.5

 

 

 

 

 

 

( 9

)

 

 

 

 

 

 

 

 

( 9

)

Stock-based compensation

 

 

 

 

 

 

 

 

48

 

 

 

 

 

 

 

 

 

48

 

Purchase of capped calls related to Convertible Notes

 

 

 

 

 

 

 

 

( 167

)

 

 

 

 

 

 

 

 

( 167

)

Cash dividend ($ 0.88  per common share)

 

 

 

 

 

 

 

 

 

 

 

( 59

)

 

 

 

 

 

( 59

)

Comprehensive income (loss) (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

 

 

190

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

( 152

)

 

 

( 152

)

Balance at December 31, 2024

 

 

67.4

 

 

$

0.1

 

 

$

2,067

 

 

$

503

 

 

$

( 248

)

 

$

2,322

 

Net issuance under stock-based plans

 

 

0.3

 

 

 

 

 

 

( 4

)

 

 

 

 

 

 

 

 

( 4

)

Stock-based compensation

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

Stock repurchase

 

 

( 0.5

)

 

 

 

 

 

( 17

)

 

 

( 28

)

 

 

 

 

 

( 45

)

Cash dividend ($ 0.88  per common share)

 

 

 

 

 

 

 

 

 

 

 

( 59

)

 

 

 

 

 

( 59

)

Comprehensive income (net of tax):