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What changed in MKS INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MKS INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+477 added−469 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-25)

Top changes in MKS INC's 2025 10-K

477 paragraphs added · 469 removed · 379 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAdditionally, our executive leadership team routinely engages in direct communication with employees worldwide, ensuring alignment with the Company's strategic goals. Our executive leadership team is committed to continuously enhancing MKS’ 11 workplace environment and steering organizational growth, with the annual engagement survey serving as a pivotal component for gathering employee insights.
Biggest changeOur executive leadership team is committed to continuously enhancing MKS’ workplace environment and steering organizational growth, with the annual engagement survey serving as a pivotal component for gathering employee insights. Compensation and Benefits MKS is committed to providing total compensation packages that attract, motivate and retain our employees, as well as recognizing and rewarding employees’ sustained performance and results.
Where You Can Find More Information We file reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. Our website is http://www.mks.com.
Where You Can Find More Information We file reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”). Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. Our website is http://www.mks.com.
These inflections provide additional growth opportunities for MKS, as we believe we are uniquely positioned to deliver the broadest and deepest portfolio of solutions. Third is the accelerating need for laser-based precision manufacturing techniques, which are enabled by lasers, photonics, optics, precision motion control, vibration control and systems solutions.
Third is the accelerating need for laser-based precision manufacturing techniques, which are enabled by lasers, photonics, optics, precision motion control, vibration control and systems solutions. These inflections provide additional growth opportunities for MKS, as we believe we are uniquely positioned to deliver the broadest and deepest portfolio of solutions.
We also maintain a global flexible work policy. We are committed to ensuring that our total compensation packages are externally competitive and internally equitable, while supporting our business plans and strategies. As employee turnover is an indicator of employee satisfaction, we monitor turnover globally. MKS has a very stable and committed workforce, as evidenced by low voluntary turnover.
We also maintain a global flexible work policy. We are committed to ensuring that these total compensation packages are externally competitive and internally equitable, while supporting our business plans and strategies. As employee turnover is an indicator of employee satisfaction, we monitor turnover globally. MKS has a very stable and committed workforce, as evidenced by low voluntary turnover.
Reportable Segments, and Product and Service Offerings We are divided into three divisions: the Vacuum Solutions Division (“VSD”), the Photonics Solutions Division (“PSD”) and the Materials Solutions Division (“MSD”). We group our product offerings by our reportable segments: VSD, PSD and MSD. Global Service represents our various service offerings across our three divisions.
Reportable Segments, Products and Service Offerings We are divided into three divisions: the Vacuum Solutions Division (“VSD”), the Photonics Solutions Division (“PSD”) and the Materials Solutions Division (“MSD”). We group our product offerings by our reportable segments: VSD, PSD and MSD. Global Service represents our various service offerings across our three divisions.
Specialty Industrial Market MKS’ 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.
Specialty Industrial Market 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.
Coherent Corp., Excelitas Technologies Corp., Jenoptik AG and Thorlabs, Inc. offer products that compete with our laser and photonics products. Sigma Koki Co., Ltd. and PI miCos GmbH offer products 9 that compete with our photonics products.
Coherent Corp., Excelitas Technologies Corp., Jenoptik AG and Thorlabs, Inc. offer products that compete with our laser and photonics products. Sigma Koki Co., Ltd. and PI miCos GmbH offer products that compete with our photonics products.
Item 1. B usiness 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.
Item 1. B usiness 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 believe our long history and deep expertise in solving critical problems position us well to address these challenges for our customers. 5 Semiconductor Market MKS is 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.
We believe our long history and deep expertise in solving critical problems position us well to address these challenges for our customers. 5 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.
Its products include: • Advanced chemical processes and production equipment, for the manufacturing of PCBs, package substrates and wafers used in smartphones, computers, other consumer electronics, server and data centers, automotive electronics, and the medical and industrial industries. 7 • Advanced chemical processes and production equipment for decorative and functional surface finishing, which include decorative, corrosion-protective, and wear-resistant coatings for various end markets, such as automotive, construction, energy, household appliance and heavy machinery. • Advanced chemical processes for paint support applications, including pretreatment, stripping and overspray treatment for various end markets such as automotive, construction, aviation, heavy machinery and household appliance.
Its products include: • Advanced chemical processes and production equipment, for the manufacturing of PCBs, package substrates and wafers used in smartphones, computers, other consumer electronics, server and data centers, including infrastructure related to AI, automotive electronics, and the medical and industrial industries. 7 • Advanced chemical processes and production equipment for decorative and functional surface finishing, which include decorative, corrosion-protective, and wear-resistant coatings for various end markets, such as automotive, construction, energy, household appliance and heavy machinery. • Advanced chemical processes for paint support applications, including pretreatment, stripping and overspray treatment for various end markets such as automotive, construction, aviation, heavy machinery and household appliance.
Hitachi Ltd., Horiba Ltd., Brooks Instrument and VAT, Inc. offer products that compete with our materials delivery solutions products. In PSD, Trumpf Group, Lumentum Holdings Inc., IPG Photonics Corporation, EdgeWave GmbH and Amplitude Systemes SA offer products that compete with our laser products.
Hitachi Ltd., Horiba Ltd., Brooks Instrument and VAT, Inc. offer products that compete with our materials delivery solutions products. In PSD, Trumpf Group, Lumentum Holdings Inc., IPG Photonics Corporation, EdgeWave GmbH and Amplitude Laser Group offer products that compete with our laser products.
For further information on our segments, see Note 21 to the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
For further information on our segments, see Note 20 to the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.
Electronics and Packaging Market MKS is 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 PCBs and package substrates, and critical to wafer level packaging (“WLP”) applications.
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 PCBs and package substrates, and critical to wafer level packaging (“WLP”) 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 26%, 25%, and 15% of our net revenues for 2024, 2023, and 2022, respectively, were from sales to our electronics and packaging market.
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%, 26%, and 25% of our net revenues for 2025, 2024, and 2023, respectively, were from sales to our electronics and packaging market.
As part of these 10 efforts, we strive to foster an inclusive and welcoming community, invest in continuous learning and development, engage meaningfully with employees, offer a competitive compensation and benefits program and provide a safe and healthy workplace. As of December 31, 2024, we had a total workforce of approximately 10,200 individuals, excluding contracted employees.
As part of these efforts, we strive to foster an inclusive and welcoming community, invest in continuous learning and development, engage meaningfully with employees, offer a competitive compensation and benefits program and provide a safe and healthy workplace. 10 As of December 31, 2025, we had a total workforce of approximately 10,300 individuals, excluding contracted employees.
We have sites in 37 countries, with 32% of our employees located in the Asia-Pacific region, 34% located in Europe, the Middle East and India and 34% located in the Americas. Of our total workforce, approximately 10,100 were employees and approximately 100 were temporary workers.
We have sites in 37 countries, with 33% of our employees located in the Asia-Pacific region, 34% located in Europe, the Middle East and India and 33% located in the Americas. Of our total workforce, approximately 10,200 were employees and approximately 100 were temporary workers.
We have developed, and continue to develop, new products to address industry trends, such as 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, tablet and high performance computing markets, the transition to 5G for both communications devices and infrastructure, the growth in units and via counts in the HDI PCB and package substrate markets, the industry transition to battery-powered vehicles in the automotive market, and the advancement of artificial intelligence (“AI”).
We have developed, and continue to develop, new products to address industry trends, such as 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, tablet and high performance computing markets, the growth in units and via counts in the HDI PCB and package substrate markets, the industry transition to battery-powered vehicles in the automotive market, and the advancement of AI.
Our voluntary turnover for the year ended December 31, 2024 was below 7%. Our average employee tenure as of December 31, 2024 was more than ten years. Health and Safety MKS is committed to providing a safe and healthy workplace for all employees.
Our voluntary turnover for the year ended December 31, 2025 was 6%. Our average employee tenure as of December 31, 2025 was more than ten years. Health and Safety MKS is committed to providing a safe and healthy workplace for all employees.
VSD delivers foundational technology solutions to semiconductor manufacturing, electronics and packaging and specialty industrial applications.
VSD delivers foundational technology solutions for semiconductor manufacturing, electronics and packaging and specialty industrial applications.
We believe there are three secular trends benefiting MKS. First is the impact of a world that continues to be increasingly interconnected, driving the need for smaller, more powerful and feature-rich advanced electronic devices, which is enabled by semiconductor manufacturing, laser processing and chemistry solutions.
At our core, we are a foundational enabler of miniaturization and complexity. We believe there are three secular trends benefiting MKS. First is the impact of a world that continues to be increasingly interconnected, driving the need for smaller, more powerful and feature-rich advanced electronic devices, which is enabled by semiconductor manufacturing, laser processing and chemistry solutions.
Of our total workforce, 19% work in research and development, 53% work in operations, manufacturing, service and quality assurance, and 28% work in sales, order administration, marketing, finance, human resources, legal, information technology, general management and other administrative functions.
Of our total workforce, 18% work in research and development, 55% work in operations, manufacturing, service and quality assurance, and 27% work in sales, order administration, marketing, finance, human resources, legal, information technology, general management and other administrative functions.
Our laser-based systems for PCB manufacturing primarily compete with laser-based systems provided by Via Mechanics, Ltd., EO Technics Co., Ltd. and Mitsubishi Electric Corporation. In MSD, Element Solutions Inc., DuPont de Nemours, Inc., Uyemura, Dipsol Chemicals Co., Ltd., JCU International, Inc. and Okuno Chemical Industries Co., Ltd. offer products that compete with our chemistry products.
Our laser-based systems for PCB manufacturing primarily compete with laser-based systems provided by Via Mechanics, Ltd., EO Technics Co., Ltd. and Mitsubishi Electric Corporation. 9 In MSD, Element Solutions Inc., Qnity Electronics, Inc., Uyemura, JCU International, Inc. and Okuno Chemical Industries Co., Ltd. offer products that compete with our chemistry products.
Net revenues from our top ten customers accounted for 32%, 30% and 42% of net revenues for 2024, 2023 and 2022, respectively. None of our customers in 2024 or 2023 accounted for greater than 10% of net revenues.
Our top ten customers accounted for 35%, 32% and 30% of net revenues for 2025, 2024 and 2023, respectively. None of our customers in 2025, 2024 or 2023 accounted for greater than 10% of net revenues.
None of the information on, or accessible through, MKS’ website is part of this Annual Report on Form 10-K or is incorporated by reference herein.
Our Environmental, Social, Governance Report is updated periodically. None of the information on, or accessible through, MKS’ website is part of this Annual Report on Form 10-K or is incorporated by reference herein.
Our business depends on the timely supply of products and services that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of chemicals, parts, components and subassemblies from suppliers, including contract manufacturers.
In addition, we rely on significant subcontracted operations in Mexico and selected contract manufacturers in Asia. Our business depends on the timely supply of products and services that meet the rapidly changing technical and volume requirements of our customers, which depends in part on the timely delivery of chemicals, parts, components and subassemblies from suppliers, including contract manufacturers.
For example, due in part to these demand shifts and trade restrictions, our semiconductor market revenue sequentially increased 1% in 2024, but sequentially decreased 28% in 2023 and sequentially increased 12% in 2022. Approximately 42%, 41%, and 58% of our net revenues for 2024, 2023, and 2022, respectively, were from sales to our semiconductor market.
Due in part to these demand shifts, including AI-related demand and trade restrictions, our semiconductor market revenue sequentially increased 13% in 2025, sequentially increased 1% in 2024, but sequentially decreased 28% in 2023. Approximately 43%, 42%, and 41% of our net revenues for 2025, 2024, and 2023, respectively, were from sales to our semiconductor market.
As of December 31, 2024, we owned 638 U.S. patents and 2,534 foreign patents that expire at various dates through 2043. As of December 31, 2024, we had 142 pending U.S. patent applications. Foreign counterparts of certain U.S. applications have been filed or may be filed at the appropriate time.
As of December 31, 2025, we owned 585 U.S. patents and 2,217 foreign patents that expire at various dates through 2044. As of December 31, 2025, we had 150 pending U.S. patent applications. Foreign counterparts of certain U.S. applications have been filed or may be filed at the appropriate time.
In connection with the Atotech Acquisition, we introduced an extension of the Surround the Workpiece offering called Optimize the Interconnect®, which refers to MKS’ combined laser drilling and chemistry solutions geared towards accelerating innovation and customers’ time-to-market in printed circuit board (“PCB”) and package substrate manufacturing. At its core, MKS is a foundational enabler of miniaturization and complexity.
In connection with the Atotech Acquisition (as defined below), we introduced an extension of the Surround the Workpiece offering called Optimize the Interconnect®, which refers to MKS’ combined laser drilling and chemistry solutions geared towards accelerating innovation and customers’ time-to-market in printed circuit board (“PCB”) and package substrate manufacturing.
Our research and development efforts include numerous projects, none of which are individually material, and generally have a duration of 3 to 36 months, depending upon whether the product is an enhancement of existing technology or a new product.
Our research and development expenses were $299 million, $271 million and $288 million for 2025, 2024 and 2023, respectively. Our research and development efforts include numerous projects, none of which are individually material, and generally have a duration of 3 to 36 months, depending upon whether the product is an enhancement of existing technology or a new product.
In our chemistry and equipment plating businesses, a majority of our research and 8 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.
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. 8 We involve our marketing, engineering, manufacturing and sales personnel in the development of new products in order to reduce the time to market for new products.
Long-lived assets located outside of the United States accounted for approximately 59% and 58% of our total long-lived assets in 2024 and 2023, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets, net and certain other assets.
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 in 2025 and 2024, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets and certain other assets.
Schmid Group, Process Automation International Limited and Manz AG offer products that compete with our plating equipment products. Sources and Availability of Materials, Parts and Components We use various suppliers and contract manufacturers to supply materials, parts and components for manufacturing and support of our product lines.
Sources and Availability of Materials, Parts and Components We use various suppliers and contract manufacturers to supply materials, parts and components for manufacturing and support of our product lines.
Additional information regarding MKS’ activities related to its people and sustainability can be found in our Environmental, Social, Governance Report, which is accessible through the Environmental, Social and Governance section of our website. Our Environmental, Social, Governance Report is updated periodically.
In addition, we offer employees and eligible family members a full range of health and wellness programs, as well as many clinical and administrative services. Additional information regarding MKS’ activities related to its people and sustainability can be found in our Environmental, Social, Governance Report, which is accessible through the Environmental, Social and Governance section of our website.
Our manufacturing facilities are located in Austria, Brazil, Canada, China, Czech Republic, France, Germany, India, Israel, Italy, Japan, Malaysia, Mexico, Romania, Singapore, Slovenia, South Korea, Taiwan and the United States. In addition, we rely on significant subcontracted operations in Mexico and selected contract manufacturers in Asia.
Our manufacturing facilities are located in Austria, Brazil, Canada, China, France, Germany, India, Israel, Italy, Japan, Malaysia, Mexico, Romania, Singapore, Slovenia, South Korea, Taiwan and the United States. We are also currently in the process of building a new manufacturing facility located in Thailand and fitting out a new manufacturing facility located in Malaysia.
A significant portion of our international net revenues was from customers in China, South Korea, Japan, Taiwan, and Singapore. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.
For 2025, 2024, and 2023, international net revenues accounted for approximately 81%, 78%, and 75%, respectively, of our total net revenues. 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 involve our marketing, engineering, manufacturing and sales personnel in the development of new products in order to reduce the time to market for new products. Our employees also work closely with our customers’ development personnel, helping us to identify and define future technical needs on which to focus research and development efforts.
Our employees also work closely with our customers’ development personnel, helping us to identify and define future technical needs on which to focus research and development efforts. We support research at academic institutions targeted at advances in materials science, semiconductor process development and photonics.
Approximately 32%, 34%, and 27% of our net revenues for 2024, 2023, and 2022, respectively, were from sales to our specialty industrial market. 6 International Markets Starting in the second quarter of 2024, we changed our basis of reporting geographical net revenues from the location in which the sale originated to the shipped-to location of the end customer.
Approximately 29%, 32%, and 34% of our net revenues for 2025, 2024, and 2023, respectively, were from sales to our specialty industrial market. 6 International Markets A significant portion of our net revenues is from sales to customers in international markets.
We also provide mandatory environmental, health and safety training to ensure all employees are provided with the education to perform their jobs safely and to protect the environment. We have instituted MEHS, a formal Global MKS Management System for Environmental, Health, and Safety, to protect our employees, other stakeholders, and the environment.
We recently launched two new safety programs aimed at raising awareness among leaders and mid-level management: Safety Toolbox Talks and Safety Moments. We also provide mandatory environmental, health and safety training to ensure all employees are provided with the education to perform their jobs safely and to protect the environment.
Comprehensive communication of the results was extended to all employees and supplemented with executive videos and both in-person and virtual focus groups to pinpoint prevailing themes. Leveraging these themes and data points, tailored action items were created to encourage meaningful change, with corporate initiatives focusing on communication, innovation and inclusion.
The survey findings were analyzed and shared with our President and Chief Executive Officer, the executive leadership team and our Board of Directors. Comprehensive communication of the results was extended to all employees and supplemented with executive videos and both in-person and virtual focus groups 11 to pinpoint prevailing themes.
Similar to the semiconductor industry, the PCB, package substrate and WLP industries continue to 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.
Similar to the semiconductor industry, the PCB, package substrate and WLP industries continue to demand smaller features, greater density, and better performance. We believe we are well positioned to support innovation in advanced technologies that underpin the growing adoption of AI.
Employee Engagement MKS remains dedicated to fostering meaningful connections with its employees. In 2024, MKS conducted its fourth annual global employee engagement survey, with a record 88% participation rate. The survey findings were analyzed and shared with our President and Chief Executive Officer, the executive leadership team and our Board of Directors.
Additionally, we ensure accessibility to online learning resources via LinkedIn Learning for all employees, cultivating professional development. Employee Engagement MKS remains dedicated to fostering meaningful connections with its employees. In 2025, MKS conducted its fifth annual global employee engagement survey, with a record 91% participation rate.
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Prior periods have been recast to reflect this change, which was made to better align with how management reviews geographic net revenues. A significant portion of our net revenues is from sales to customers in international markets. For 2024, 2023, and 2022, international net revenues accounted for approximately 78%, 75%, and 69%, respectively, of our total net revenues.
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Schmid Group, Process Automation International Limited, Top Creation Machines Co., Ltd., Universal Circuit Board Equipment Co., Ltd., Almex Technologies Inc. and Manz Asia offer products that compete with our plating equipment products.
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We support research at academic institutions targeted at advances in materials science, semiconductor process development and photonics. Our research and development expenses were $271 million, $288 million and $241 million for 2024, 2023 and 2022, respectively.
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Culture and Belonging At MKS, we are committed to fostering a culture grounded in respect, belonging, and merit, where employees are empowered to contribute fully and perform at their best. We believe that a workplace that values different perspectives, experiences, and ways of thinking strengthens collaboration, drives innovation, and supports long-term business performance.
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Inclusion and Belonging At MKS, we are committed to cultivating an inclusive environment where every individual is valued, respected and empowered to bring their authentic selves to their work. This commitment stems from our belief that diverse viewpoints not only spur innovation but also fuel exceptional performance and sustainable progress.
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Our global Culture and Belonging strategy is aligned with our corporate values and business objectives and is designed to support an engaged, high-performing workforce across all regions in which we operate.
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By embracing our global workforce’s unique backgrounds and perspectives, we strengthen our collective ability to innovate, collaborate and drive sustainable growth.
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To support this commitment, we advance a number of programs and practices, including the following: • Inclusion Academy, a structured enterprise learning framework designed to build capability in inclusive leadership, communication, and collaboration. Launched in 2025, the Inclusion Academy includes various facilitated workshops such as Inclusive Leadership, Own Your Voice, and Inclusive Hiring & Interviewing.
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To further foster inclusion and belonging at MKS, we operate several initiatives: • We recently launched programs—including cultural awareness workshops, book-read discussion groups, bias awareness trainings, and inclusive leadership sessions—to strengthen empathy, foster deeper cross-functional collaboration and cultivate a workplace culture where every voice is heard and valued. • We also recently launched two Employee Resource Groups (“ERGs”) — Veterans@MKS and Women@MKS.
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Offerings are scalable and can be tailored by management level and function to address specific business and workforce needs while maintaining consistent global standards. • 4C: Cross-Cultural Communication & Collaboration, an enterprise-wide learning program focused on strengthening cross-cultural effectiveness in a geographically and functionally diverse organization.
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While these ERGs focus on the unique experiences of these groups, they are open to all employees who want to connect, learn and contribute to a culture of belonging at MKS. • Our recruitment and selection procedures are bolstered by our MKS Hiring Guide & Toolkit, which is designed to attract top talent while mitigating potential bias. • Consistent with our Corporate Governance Guidelines, we actively seek diverse candidates for the pool from which our Board of Director nominees are chosen. • We routinely conduct comprehensive analyses of pay practices in our major regions of operations to identify and, if needed, rectify any disparities promptly and effectively.
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The program provides practical tools to support communication, feedback, trust-building, persuasion, and decision-making across cultural contexts and is designed to improve alignment, execution, and collaboration across global teams. • Employee Resource Groups, which are open to all employees and provide opportunities for professional development, mentoring, community impact, and dialogue that strengthen engagement and belonging across the organization. • MentorConnect, MKS’ enterprise-wide mentoring program, which facilitates knowledge sharing, professional development, and connection across functions, geographies, and levels of the organization. • Comprehensive analyses of pay practices in our major regions of operations to identify and, if needed, rectify any disparities promptly and effectively.
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Our most recent global compensation analysis has resulted in equitable pay for our workforce with minimal adjustments. Learning and Development MKS remains steadfast in its dedication to fostering learning and professional growth. We offer our employees a comprehensive catalog of programs, courses and resources aimed at building leadership capabilities and personal effectiveness.
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Our most recent global compensation analysis has resulted in equitable pay for our workforce with minimal adjustments. • Consistent with our Corporate Governance Guidelines, we actively seek diverse candidates for the pool from which our Board of Director nominees are chosen.
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Our performance management framework is designed to provide ongoing, actionable feedback and facilitate dynamic career development conversations throughout the year. In 2024, we launched a global mentorship program designed to connect our employees across all regions and functions and build mentor and mentee relationships that focus on continuous learning and development.
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Through these efforts, we aim to cultivate a work environment where employees feel respected, supported, and connected to our shared purpose, while reinforcing a culture of accountability, performance, and continuous improvement that supports MKS’ long-term success. Learning and Development MKS remains steadfast in its dedication to fostering learning and professional growth.
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This program reflects our commitment to investing in our people and promoting a culture of growth and development. We extend financial assistance for higher education to eligible employees, including support for college and graduate studies. Additionally, we ensure accessibility to online learning resources via LinkedIn Learning for all employees, cultivating professional development.
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We offer our employees a comprehensive catalog of programs, courses and resources aimed at building leadership capabilities and personal effectiveness. Our performance management framework is designed to provide ongoing, actionable feedback and facilitate dynamic career development conversations throughout the year. We extend financial assistance for higher education to eligible employees, including support for college and graduate studies.
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Compensation and Benefits MKS is committed to providing total compensation packages that attract, motivate and retain our employees, as well as recognizing and rewarding employees’ sustained performance and results. We run a recognition program for all U.S. employees, which allows peer-to-peer recognition and recognition by managers. We continue to assess the potential expansion of this recognition program globally.
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Leveraging these themes and data points, tailored action items were created to encourage meaningful change, with corporate initiatives focusing on innovation and cross-departmental collaboration. Additionally, our executive leadership team routinely engages in direct communication with employees worldwide, ensuring alignment with the Company's strategic goals.
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We continue to implement this strong foundation across our organization in a stepwise process. In addition, we offer employees and eligible family members a full range of health and wellness programs, as well as many clinical and administrative services.
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We have instituted MEHS, a formal Global MKS Management System for Environmental, Health, and Safety, to protect our employees, other stakeholders, and the environment. This system is structured around four strategic pillars: foundation and structure; operational discipline; mindset and culture; and governance and compliance.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

182 edited+39 added−37 removed155 unchanged
Biggest changeOur Term Loan Facility and Revolving Facility contain customary events of default, including: • Failure to make required payments; • Failure to comply with certain agreements or covenants; • Materially breaching any representation or warranty; • Failure to pay, or otherwise causing the acceleration of, certain other indebtedness; • Certain events of bankruptcy and insolvency; • Failure to pay certain judgments; and • A change in control of us. 15 The amount of cash available to us for repayment of amounts owed under the Credit Facilities will depend on our usage of our existing cash balances and our operating performance and ability to generate cash flows from operations, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.
Biggest changeOur Term Loan Facility and Revolving Facility contain customary events of default, including: • Failure to make required payments; • Failure to comply with certain agreements or covenants; • Materially breaching any representation or warranty; • Failure to pay, or otherwise causing the acceleration of, certain other indebtedness; • Certain events of bankruptcy and insolvency; • Failure to pay certain judgments; and • A change in control of us. 15 Our 2034 Notes contain customary events of default, including: • Failure to make required payments; • Failure to comply with certain agreements or covenants; • Failure to pay, or otherwise causing the acceleration of, certain other indebtedness; • Certain events of bankruptcy and insolvency; and • Failure to pay certain judgments.
Any of these results could 17 harm our business, financial condition and reputation. For additional information on our cybersecurity risk management, strategy and governance, please refer to Part I, Item 1C of this Annual Report on Form 10-K. Our proprietary technology is important to the continued success of our business.
Any of these results could harm our business, financial condition and reputation. For additional information on our cybersecurity risk management, strategy and governance, please refer to Part I, Item 1C of this Annual Report on Form 10-K. 17 Our proprietary technology is important to the continued success of our business.
In addition, due to the relatively long manufacturing lead times for some of the products we sell to these industries, we may incur expenditures or purchase raw materials or components for products we are unable to sell. As a result, downturns in these industries may materially harm our business, financial condition and operating results.
In addition, due to the relatively long manufacturing lead times for some of our products, we may incur expenditures or purchase raw materials or components for products we are unable to sell. As a result, downturns in these industries may materially harm our business, financial condition and operating results.
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 to $250 million, most of which was realized in 2023.
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.
Export Administration Regulations administered by BIS, the requirement for a license is dependent on the type and end use of the product and technology, the final destination and the identity and nationality of the end user.
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.
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 cash dividend in the future. This could adversely affect the market price of our common stock.
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.
Anti-takeover provisions in our Restated Articles of Organization, as amended, in our Second Amended and Restated By-laws 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.
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.
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 33 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; • 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.
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; 34 • 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.
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 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.
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 30 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.
These regulations, which BIS has amended several times since initial publication (as amended, the “BIS Rules”), have resulted in, and 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.
These regulations, which BIS has amended several times since initial publication (as amended, the “BIS Rules”), have resulted in, and 27 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.
We could also issue additional securities as consideration for or to finance these acquisitions, which could cause significant stockholder dilution, or obtain additional debt financing, which would increase our costs, reduce our future cash flow and subject us to covenants and other restrictions that may impede our ability to manage our operations, without achieving the desired accretion to our business.
We could also issue additional securities as consideration for or to finance these acquisitions, which could cause significant stockholder dilution, or obtain additional debt financing, which would increase our costs, reduce our cash flow and subject us to covenants and other restrictions that may impede our ability to manage our operations, without achieving the desired accretion to our business.
During downturns in the semiconductor and electronics manufacturing industries, periods of overcapacity have resulted in significantly reduced demand for our products, which may result in lower gross margins due to reduced absorption of manufacturing overhead, as our ability to rapidly and effectively reduce our cost structure in response to such downturns is limited by the fixed nature of many of our expenses in the near term.
During downturns in the semiconductor and electronics manufacturing industries, periods of overcapacity have significantly reduced demand for our products, which may result in lower gross margins due to reduced absorption of manufacturing overhead, as our ability to rapidly and effectively reduce our cost structure in response to such downturns is limited by the fixed nature of many of our expenses in the near term.
As a result of our extensive presence in China, we are subject to the following significant risks: • Adverse changes in Chinese political, economic or social conditions or Chinese laws, regulations or policies, including the imposition of unexpected or confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency, the nationalization or other expropriation of private enterprises, or the reversal of economic reform policies that encourage private economic activity, foreign investments and greater economic decentralization; • Differing economic practices compared to most developed countries, including with respect to the amount of government involvement, control of foreign exchange and allocation of resources; • Uncertainties presented by the Chinese legal system, which is not fully integrated and continues to rapidly evolve, impeding our ability to interpret certain Chinese laws and regulations, predict and evaluate the outcome of administrative and court proceedings and the level of legal protection in China and enforce contracts we have entered into in China; • Chinese controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China, restricting our ability to remit sufficient foreign currency to pay dividends or make other payments to us, or otherwise satisfy foreign currency-denominated obligations; and • The escalation of trade tensions between China and other countries, including the United States, and the imposition of tariffs, sanctions and export controls by various government agencies, has impacted international trade.
As a result of our extensive presence in China, we are subject to the following significant risks: • Adverse changes in Chinese political, economic or social conditions or Chinese laws, regulations or policies, including the imposition of unexpected or confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency, the nationalization or other expropriation of private enterprises, or the reversal of economic reform policies that encourage private economic activity, foreign investments and greater economic decentralization; • Differing economic practices compared to most developed countries, including with respect to the amount of government involvement, control of foreign exchange and allocation of resources; • Uncertainties presented by the Chinese legal system, which is not fully integrated and continues to rapidly evolve, impeding our ability to interpret certain Chinese laws and regulations, predict and evaluate the outcome of administrative and court proceedings and the level of legal protection in China and enforce contracts we have entered into in China; • Chinese controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China, restricting our ability to remit sufficient foreign currency to repay outstanding indebtedness, pay dividends or make other payments to us, or otherwise satisfy foreign currency-denominated obligations; and • The escalation of trade tensions between China and other countries, including the United States, and the imposition of tariffs, sanctions and export controls by various government agencies, has impacted international trade.
In addition, BIS has modified the Foreign Direct Product, De Minimis and “military end-use” rules, expanded the scope of 27 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.
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.
If we are unable to introduce new products in a timely manner or are otherwise unsuccessful in making sales to customers, we may miss market upturns or fail to have our products or subsystems designed into our customers' products. For example, new products designed by capital equipment manufacturers historically have had a lifespan of five to fifteen years.
If we are unable to introduce new products in a timely manner or are otherwise unsuccessful in making sales to customers, we may miss market upturns or fail to have our products or subsystems designed into our customers' products. For example, new products designed by capital equipment manufacturers historically have had a lifespan 23 of five to fifteen years.
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 30 obligations in the future.
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.
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 environmental standards, regulations and laws, such as the EU’s Corporate Sustainability Reporting Directive.
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 future annual and quarterly effective tax rates could be materially affected by numerous factors, including changes in the following: 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.
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.
Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, 14 among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control.
Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control.
However, we may not be able to achieve significant cost savings or other benefits from these actions. For example, costs may increase as development and manufacturing expenses increase and labor, material, logistics and facility-related costs rise, as we have seen in our manufacturing locations in China, Mexico and Romania.
However, we may not be able to achieve significant cost savings or other benefits from these actions. For example, costs may increase as development and manufacturing expenses increase and labor, material, logistics and facility-related costs rise, as we have seen in our existing manufacturing locations in China, Mexico and Romania.
The loss of any of these customers or any significant reduction in orders by these customers, including reductions due to economic, market or competitive conditions, regulatory requirements, or failure to meet customer demands, would likely have a material adverse effect on our business, financial condition and operating results.
The loss of any of these customers or a significant reduction in orders by these customers, including due to economic, market or competitive conditions, regulatory requirements, or failure to meet customer demands, would likely have a material adverse effect on our business, financial condition and operating results.
As a result of these factors, among others, we may experience 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.
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.
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 of ours, including our chemicals products and laser systems, are inherently hazardous and must be used with particular care.
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.
While we have attempted to mitigate these issues by establishing a significant local presence in many of these countries, companies like us that are based elsewhere remain at a disadvantage in these markets. We face significant risks associated with doing business in China in particular.
While we have attempted to mitigate these issues by establishing a significant local presence in many of these countries, companies like us that are based elsewhere remain at a disadvantage in these markets. 25 We face significant risks associated with doing business in China in particular.
We and our third-party administrators, vendors, customers and partners are subject to ongoing cybersecurity threats, including ransomware and other malware, hacking, phishing, smishing, denial of service attacks, employee errors or malfeasance, telecommunication failures, system failures, natural disasters and other attacks and events.
We and our third-party administrators, vendors, customers and partners are subject to ongoing cybersecurity threats, including ransomware and other malware, hacking, phishing, smishing, denial of service attacks, employee errors or malfeasance, 16 telecommunication failures, system failures, natural disasters and other attacks and events.
If we fail to remediate any future material weaknesses and maintain effective internal control over financial reporting, our ability to accurately record, process, and report financial information and, consequently, our ability to prepare financial statements within required time periods could be adversely affected.
If we fail to remediate any future material weaknesses or maintain effective internal control over financial reporting, our ability to accurately record, process, and report financial information and, consequently, our ability to prepare financial statements within required time periods could be adversely affected.
Our business depends upon capital expenditures of semiconductor device manufacturers (which in turn depends upon demand for semiconductors), electronics manufacturers and Tier 1 and Tier 2 suppliers for the automotive industry. All of these industries have historically experienced cyclical variations in product supply and demand.
Our business depends upon capital expenditures of semiconductor device manufacturers (which in turn depends upon demand for semiconductors), electronics manufacturers and Tier 1 and Tier 2 suppliers for the automotive industry. These industries have historically experienced cyclical variations in product supply and demand.
Increased costs would decrease our profit margins if we could not pass these costs to our customers. Further, shipping delays damage, and may continue to damage, our relationships with customers and have a material adverse effect on our business and operating results.
Increased costs would decrease our profit margins if we could not pass these costs to our customers. Further, shipping delays have damaged, and may continue to damage, our relationships with customers and could have a material adverse effect on our business and operating results.
In addition, we have relocated certain segments of other functions to, or initiated certain segments of other 19 functions in, centralized locations, including relocating certain procurement activity to Mexico and Romania, relocating certain IT and research and development activity to India, relocating certain administrative finance, payroll, software and IT activity to Poland, and continuing certain engineering activity in India.
In addition, we have relocated certain segments of other functions to, or initiated certain segments of other functions in, centralized locations, including relocating certain procurement activity to Mexico and Romania, relocating certain IT and research and development activity to India, relocating certain administrative finance, payroll, software and IT activity to Poland, and continuing certain engineering activity in India.
In China, with the publication of the first and second 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.
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.
In addition, pursuant to our Second Amended and Restated By-laws, 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.
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.
As a result of previous acquisitions, we presently have several different decentralized operating and accounting systems. We will need to continue to modify our accounting policies, internal controls, procedures and compliance programs to provide consistency across our operations.
As a result of previous acquisitions, we have several different decentralized operating and accounting systems. We will need to continue to modify our accounting policies, internal controls, procedures and compliance programs to provide consistency across our operations.
Failure to obtain or maintain permits for our facilities or other failure 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.
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.
If we fail to anticipate the likelihood of, or the costs or timing associated with, sales of these products, or the cancellation or rescheduling of orders for these products, our business and operating results would be harmed.
If we fail to anticipate the likelihood of, or the costs or timing associated with, 33 sales of these products, or the cancellation or rescheduling of orders for these products, our business and operating results would be harmed.
Some provisions of our Restated Articles of Organization, as amended, our Second Amended and Restated By-laws and Massachusetts law could discourage potential acquisition proposals and could delay or prevent a change in control.
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.
We cannot guarantee that these threats will not have an adverse impact on our business, financial condition or results of operations. For example, in February 2023, we identified that we had become subject to a ransomware event. Based on our investigation, we concluded ransomware actors encrypted certain of our systems by deploying malware.
We cannot guarantee that these threats will not have an adverse impact on our business, financial condition or operating results. For example, in February 2023, we identified that we had become subject to a ransomware event. Based on our investigation, we concluded ransomware actors encrypted certain of our systems by deploying malware.
In October 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) implemented new and novel restrictions related to end-uses in semiconductor, semiconductor manufacturing, supercomputer, and advanced computing, along with certain equipment used to develop and produce them, as well as controls around the activities of U.S. persons in certain markets, including China.
Department of Commerce’s Bureau of Industry and Security (“BIS”) implemented new and novel restrictions related to end-uses in semiconductor, semiconductor manufacturing, supercomputer, and advanced computing, along with certain equipment used to develop and produce them, as well as controls around the activities of U.S. persons in certain markets, including China.
Factors that could harm our competitive position include: 22 • Our failure to anticipate demand for and internally develop or acquire new, improved and disruptive technologies; • Our investment in emerging applications that do not achieve widespread adoption or significant growth; • Delays in introducing new, enhanced and differentiated products, many of which are difficult to design and manufacture because of their technical sophistication and complexity; • Inadequate manufacturing capabilities, customer service or support; • Semiconductor device manufacturers failing to direct semiconductor capital equipment manufacturers to use our products at their semiconductor fabrication facilities; • Global electronics OEMs failing to specify our products in their manufacturing processes for the rigid PCB manufacturers they use; • Customers failing to achieve market demand for their products that incorporate our technologies; • Efforts of customers to internally develop products that compete with our technologies or to engage subcontract manufacturers or system integrators to manufacture competitive products on their behalf; • Implementation by our customers of dual source strategies, after historically relying on sole or limited source suppliers; • Competitors that develop products that offer superior performance, technological features or value than our products; • Competitors with greater financial, technical, marketing and other resources, including ownership by or affiliations with members of government, political entities or larger, multinational businesses, which may offer a number of competitive advantages, such as the ability to incur lower costs due to control over sources of components and raw materials or exclusive agreements with suppliers thereof; • Competitors with greater recognition and stronger presences in specific product niches and/or regions, including in the specialty chemicals industry; • Competitors, particularly in Asia, that are able to develop low-cost competitive products; • Difficulties in displacing competitors' products that are designed into customers' products; • Pricing pressure from customers and competitors, particularly new competitors that offer aggressive price and payment terms in an attempt to gain market share, and especially during cyclical downturns in our markets, when end-markets become more sensitive to costs and competitors are more likely to seek to maintain or increase market share, reduce inventory or introduce more technologically advanced or lower-cost products; • Competitors that are able to adopt new technologies and technological advancements using AI and machine learning to pursue new products and approaches more quickly, successfully and effectively than us; • Industry consolidation among competitors, which could exacerbate certain of these factors; and • Regulatory changes that prevent or restrict the supply of our products and services to a particular industry, market or country.
Factors that could harm our competitive position include: • Our failure to anticipate demand for and internally develop or acquire new, improved and disruptive technologies; • Our investment in emerging applications that do not achieve widespread adoption or significant growth; • Delays in introducing new, enhanced and differentiated products, many of which are difficult to design and manufacture because of their technical sophistication and complexity; • Inadequate manufacturing capabilities, customer service or support; • Semiconductor device manufacturers failing to direct semiconductor capital equipment manufacturers to use our products at their semiconductor fabrication facilities; • Global electronics OEMs failing to specify our products in their manufacturing processes for the rigid printed circuit board manufacturers they use; • Customers failing to achieve market demand for their products that incorporate our technologies; • Efforts of customers to internally develop products that compete with our technologies or to engage subcontract manufacturers or system integrators to manufacture competitive products on their behalf; • Implementation by our customers of dual source strategies, after historically relying on sole or limited source suppliers; • Competitors that develop products that offer superior performance, technological features or value than our products; • Competitors with greater financial, technical, marketing and other resources, including ownership by or affiliations with members of government, political entities or larger, multinational businesses, which may offer a number of competitive advantages, such as the ability to incur lower costs due to control over sources of components and raw materials or exclusive agreements with suppliers thereof; • Competitors with greater recognition and stronger presences in specific product niches and/or regions, including in the specialty chemicals industry; • Competitors, particularly in Asia, that are able to develop low-cost competitive products; • Difficulties in displacing competitors' products that are designed into customers' products; • Pricing pressure from customers and competitors, particularly new competitors that offer aggressive price and payment terms in an attempt to gain market share, and especially during cyclical downturns in our markets, when end-markets become more sensitive to costs and competitors are more likely to seek to maintain or increase market share, reduce inventory or introduce more technologically advanced or lower-cost products; • Competitors that are able to adopt new technologies and technological advancements using AI and machine learning to pursue new products and approaches more quickly, successfully and effectively than us; • Industry consolidation among competitors, which could exacerbate certain of these factors; and • Regulatory changes that prevent or restrict the supply of our products and services to a particular industry, market or country, or impose tariffs on our supplies or products, but that do not equally impact the products of our competitors.
Moreover, if actual demand for our products is different than expected, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If we purchase inventory in anticipation of customer demand that does not materialize, or if our customers reduce or delay orders, we may incur excess inventory charges.
Moreover, if actual demand for our products is different than expected, we may purchase more or fewer parts than 18 necessary or incur costs for canceling, postponing or expediting delivery of parts. If we purchase inventory in anticipation of demand that does not materialize, or if our customers reduce or delay orders, we may incur excess inventory charges.
We have experienced, and we could experience in the future, significant disruptions in our supply chain, interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs, price volatility, and customer order cancellations, which have been, or may in the future be, as a result of: • Volatility in the availability and cost of materials, including electronic components and raw materials, whether due to interruptions in production by suppliers, allocations of products to other purchasers, fluctuations in foreign currency exchange rates, changes in worldwide price levels (whether due to inflationary pressures or otherwise), environmental limitations, geopolitical issues or other factors; • Pandemics such as COVID-19, natural disasters or other events beyond our control (such as earthquakes, floods or storms, wildfires, power outages, such as rolling blackouts previously experienced in China, regional economic downturns, social unrest, political instability, terrorism, or acts of war), particularly where we or our suppliers, subcontractors and contract manufacturers conduct manufacturing; • Global logistics network challenges, such as limited availability of and constraints on freight capacity; • IT or infrastructure failures; and 18 • New laws or regulations.
We have experienced, and we may experience in the future, significant disruptions in our supply chain, interruptions of our manufacturing operations, delays in our ability to deliver products or services, increased costs, price volatility, and customer order cancellations, which have been, or may in the future be, as a result of: • Volatility in the availability and cost of materials, including electronic components and raw materials, whether due to interruptions in production by suppliers, allocations of products to other purchasers, fluctuations in foreign currency exchange rates, changes in worldwide price levels (whether due to inflationary pressures or otherwise), environmental limitations, geopolitical issues or other factors; • Pandemics such as COVID-19, natural disasters or other events beyond our control (such as earthquakes, floods or storms, wildfires, power outages, regional economic downturns, social unrest, political instability, terrorism, or acts of war), particularly where we or our suppliers, subcontractors and contract manufacturers conduct manufacturing; • Global logistics network challenges, such as limited availability of and constraints on freight capacity; • IT or infrastructure failures; and • New laws or regulations.
If we do not effectively develop and manage our outsourcing strategies, if required export and other governmental approvals are not timely obtained, if our third-party service providers do not comply with laws or perform as anticipated, or do not adequately protect our data, including from cybersecurity breaches, or if there are delays or difficulties in enhancing business processes, we may experience operational difficulties, increased costs, manufacturing or service interruptions or delays, loss of intellectual property rights or other sensitive data, quality and compliance issues, and challenges in managing our product inventory or recording and reporting financial and management information, any of which could materially and adversely affect our business, financial condition and operating results.
If we do not effectively develop and manage our outsourcing strategies, if required export and other governmental approvals are not timely or accurately obtained, if our third-party service providers do not comply with laws, perform as anticipated or adequately protect our data, including from cybersecurity breaches, or if there are delays or difficulties in enhancing business processes, we may experience operational difficulties, increased costs, manufacturing or service interruptions or delays, loss of IP rights or other sensitive data, quality and compliance issues, and challenges in managing our product inventory or recording and reporting financial and management information, any of which could materially and adversely affect our business, financial condition and operating results.
Any failure to maintain the adequacy of this internal control may adversely affect our results of operations, our stock price and investor confidence in our Company. We previously identified a material weakness in our internal control over financial reporting that was remediated as of December 31, 2023.
Any failure to maintain the adequacy of this internal control may adversely affect our operating results, our stock price and investor confidence in our Company. We previously identified a material weakness in our internal control over financial reporting that was remediated as of December 31, 2023.
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, which liability could exceed the amount of our liability insurance coverage (if any) and the resources of our business.
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.
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. We are subject to trade compliance laws in both the United States and other jurisdictions where we operate.
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. 28 We are subject to trade compliance laws in the United States and other jurisdictions where we 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, could also force us to reformulate or discontinue certain of our products.
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.
Many of these activities are processed via Software-as-a-Service (“SaaS”) products provided by third parties and hosted on their own networks and servers or on third-party networks and servers. The data on such IT networks and systems includes confidential information, personally identifiable information, transactional information and intellectual property belonging to us and our employees, customers, suppliers and other business partners.
Many of these activities are processed via Software-as-a-Service (“SaaS”) products provided by third parties and hosted on their own networks and servers or on third-party networks and servers. The data on such IT networks and systems includes confidential information, personally identifiable information, transactional information and IP belonging to us and our employees, customers, suppliers and other business partners.
With respect to data privacy, as a result of the ransomware event described under “Risks Related to Cybersecurity, Data Privacy and Intellectual Property Protection” above, we were previously subject to two lawsuits, and we may 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.
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.
Moreover, we may not realize the benefits we anticipate from these acquisitions, because of significant challenges, such as: • The difficulty, distraction, resource requirements, cost and disruption of developing sufficient knowledge of, managing, and integrating the operations, personnel, and internal controls, financial reporting and information technology (“IT”) systems of the acquired companies; • The potential disruption of our ongoing business and distraction of management; • Potential internal control or other compliance weaknesses of the acquired companies; • Significant expenses related to the acquisitions, including any resulting shareholder litigation; • The assumption of unknown or contingent liabilities associated with acquired businesses; • Potentially incompatible cultural differences between us and the acquired companies; • The difficulty of incorporating the acquired companies' technology and products into our current and future product lines, and successfully generating market demand for these expanded product lines; • Potential additional geographic dispersion of operations and/or increased exposure to high-risk geographies; • The difficulty in achieving anticipated synergies and efficiencies; • The difficulty in leveraging the acquired companies' and our combined technologies and capabilities across our product lines and customer base; • Burdensome requirements or conditions imposed by government regulators in connection with their review of acquisitions, including divestitures and restrictions on the conduct of our business or the business of the acquired companies; • Competitive disadvantages we may face by selling products that are new to us and/or selling products in markets and geographies that are new to us; • The difficulty of retaining key customers, suppliers and employees of the acquired companies; and • The potential to incur or record significant cash or non-cash charges or write down the carrying value of intangible assets and goodwill obtained in the acquisitions, which could adversely impact our cash flow or lower our earnings in the period or periods for which we incur such charges or write down such assets.
Moreover, we may not realize the benefits we anticipate from these acquisitions because of potentially significant challenges, such as: • The difficulty, distraction, disruption, resource requirements and cost of developing sufficient knowledge of, managing, and integrating the operations, personnel, and internal controls, financial reporting and information technology (“IT”) systems of the acquired companies; • The disruption of our ongoing business and distraction of management; • Internal control or other compliance weaknesses of the acquired companies; • Significant expenses related to the acquisitions, including any resulting shareholder litigation; • The assumption of unknown or contingent liabilities associated with the acquired companies; • Incompatible cultural differences between us and the acquired companies; • The difficulty of incorporating the acquired companies' technology and products into our current and future product lines, and successfully generating market demand for these expanded product lines; • Additional geographic dispersion of operations and/or increased exposure to high-risk geographies; • The difficulty in achieving anticipated synergies and efficiencies; • The difficulty in leveraging the acquired companies' and our combined technologies and capabilities across our product lines and customer base; • Burdensome requirements or conditions imposed by government regulators in connection with their review of acquisitions, including divestitures and restrictions on the conduct of our business or the business of the acquired companies; • Competitive disadvantages we may face by selling products that are new to us and/or selling products in markets and geographies that are new to us; • The difficulty of retaining key customers, suppliers and employees of the acquired companies; and • Incurring or recording significant cash or non-cash charges or writing down the carrying value of intangible assets and goodwill obtained in the acquisitions, which could adversely impact our cash flow or lower our earnings.
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 intellectual property rights, data privacy, antitrust, environmental regulations, trade regulations, tax regulations, securities, contracts, unfair competition, employment, workplace safety, liability to shareholders, and other matters.
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.
In addition, if we or our international representatives or distributors fail to comply with any of these 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.
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.
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 materially adverse impact our financial results.
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.
If a fundamental change occurs prior to the maturity date of the Convertible Notes, holders of the Convertible Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes.
In addition, if a fundamental change occurs prior to the maturity date of the Convertible Notes, holders of the Convertible Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes.
In particular, transferring product lines to other manufacturing locations and/or to or from our contract manufacturers' facilities often requires us to transplant complex manufacturing equipment and processes across a large geographical distance, train a completely new workforce concerning the use of this equipment and these processes and comply with local regulations.
In particular, transferring product lines to other manufacturing locations and/or to or from our contract manufacturers' facilities often requires us to transplant complex manufacturing equipment and processes across a large geographical distance, train a completely new workforce to use this equipment and these processes, and comply with local regulations.
The determination of such reserves requires us to make estimates of product return rates and expected costs to repair or replace the products under warranty. We establish warranty reserves based on historical warranty costs for our products. If actual return rates or repair and replacement costs differ significantly from our estimates, our operating results would be negatively impacted.
The determination of such reserves requires us to make estimates of product return rates and expected costs to repair or replace the products under warranty. We establish warranty reserves based on historical warranty costs for our products. If actual return rates or repair and replacement costs significantly exceed our estimates, our operating results would be negatively impacted.
Under our Revolving Facility, whenever the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of us and our restricted subsidiaries) exceeds 35% of the aggregate commitments under the Revolving Facility, our first lien net leverage ratio cannot exceed 6.00 to 1.00.
Under our Revolving Facility, whenever the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of us and our restricted subsidiaries) exceeds 35% of the aggregate commitments under the Revolving Facility, our total net leverage ratio cannot exceed 6.00 to 1.00.
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 intellectual property rights.
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.
These actions have caused us, and will in the future cause us, to lose anticipated revenue from product sales, the amount of which could be significant. In addition, these or other customers could elect to purchase products from unaffected non-U.S. competitors, even when trade restrictions are not in place, jeopardizing our long-term relationship with them.
These actions have caused us, and could in the future cause us, to lose anticipated revenue from product sales, the amount of which could be significant. In addition, these or other customers have purchased, and will likely continue to purchase, products from unaffected non-U.S. competitors, even when trade restrictions are not in place, jeopardizing our long-term relationship with them.
The ongoing geopolitical tensions and economic uncertainty between the United States and China 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 Chinese 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.
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.
We cannot provide any assurances that we will generate sufficient cash flows from operations to service our debt obligations. Any failure to repay these obligations as they become due would result in an event of default under the Credit Facilities.
We cannot provide any assurances that we will generate sufficient cash flows from operations to service our debt obligations. Any failure to repay these obligations as they become due would result in an event of default under the Credit Facilities and the 2034 Notes.
We can make no assurances regarding the outcome of legal proceedings, enforcement actions, claims or investigations or that the insurance we maintain will be adequate to cover them.
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.
Our reliance on sole and limited source suppliers and international suppliers involves a number of risks, including: • The inability to obtain an adequate supply of required raw materials or components, including if our suppliers cannot scale their manufacturing output to meet our demands; • Quality and reliability problems with raw materials or components, which in turn may adversely affect our products' quality and reliability; • Prohibitively higher raw material or component prices, including as a result of tariffs; • Supply chain disruptions, including as a result of the relocation of certain low-cost and sole and limited source suppliers to less-developed countries; • Reduced control over pricing and timing of delivery of raw materials and components; • The inability of our suppliers to develop technologically advanced products to support our growth and development of new products; • Difficulty obtaining raw materials concentrated in limited geographies at reasonable prices or at all due to trade restrictions for those materials; • The unavailability of service and/or spare parts for critical capital equipment; and • The inability or unwillingness of our suppliers to continue to offer supplies or services on commercially acceptable terms.
Our reliance on sole and limited source suppliers and international suppliers involves a number of risks, including: • The inability to obtain an adequate supply of required raw materials or components, including if our suppliers cannot scale their manufacturing output to meet our demands; • Quality and reliability problems with raw materials or components, which in turn may adversely affect our products' quality and reliability; • Prohibitively higher raw material or component prices, including on aging components; • High and fluctuating tariffs on our supplies, resulting in higher prices and our products becoming less competitive; • Supply chain disruptions, including as a result of the relocation of certain low-cost and sole and limited source suppliers to less-developed countries; • Reduced control over pricing and timing of delivery of raw materials and components; • The inability of our suppliers to develop technologically advanced products to support our growth and development of new products; • Difficulty obtaining raw materials, including critical rare earth elements, concentrated in limited geographies at reasonable prices or at all due to trade restrictions for those materials; • The unavailability of service and/or spare parts for critical capital equipment; and • The inability or unwillingness of our suppliers to continue to offer supplies or services on commercially acceptable terms.
A failure to comply with the evolving regulatory landscape, or a breach of our operational or security systems or infrastructure, or those of our customers, suppliers and other business partners, could disrupt our business, including business operations and manufacturing processes; result in the disclosure, misuse, corruption or loss of confidential or other valuable business information, including intellectual property, personally identifiable information and other critical data of ours and our employees, customers, suppliers and other business partners; result in competitive disadvantages to the extent the information is competitively sensitive; damage our reputation; negatively affect our relationships with our employees, customers, suppliers and other business partners, including loss of confidence, which could lead to loss of or reduction in orders; divert the attention of management; cause losses; result in litigation, investigations or liability under contracts; require notifications to regulatory authorities and impacted individuals; result in significant penalties and/or fines from regulatory bodies, including pursuant to privacy laws and export control laws; add to the complexity of our compliance obligations; increase our cybersecurity protection costs; and result in the incurrence of remediation costs.
A failure to comply with the evolving regulatory landscape, or a breach of our operational or security systems or infrastructure, or those of our customers, suppliers and other business partners, could disrupt our business, including business operations and manufacturing processes; result in the disclosure, misuse, corruption or loss of confidential or other valuable business information, including IP, personally identifiable information and other critical data of ours and our employees, customers, suppliers and other business partners; result in competitive disadvantages; damage our reputation; negatively affect our relationships with our employees, customers, suppliers and other business partners, including loss of confidence, which could lead to loss of or reduction in orders; divert the attention of management; cause losses; result in litigation, investigations or liability under contracts; require notifications to regulatory authorities and impacted individuals; result in significant penalties and/or fines from regulatory bodies, including pursuant to privacy laws and export control laws; add to the complexity of our compliance obligations; increase cybersecurity protection costs; and result in remediation costs.
If we are unable to manage these transfers and training smoothly and comprehensively, or if we are unable to requalify products in a timely manner, we could suffer manufacturing and supply chain delays, excessive product defects, harm to our operating results and our reputation, and loss of customers.
If we are unable to successfully manage these transfers and training, or if we are unable to requalify products in a timely manner, we could suffer manufacturing and supply chain delays, excessive product defects, harm to our operating results and our reputation, and loss of customers.
If our customers or the industries we serve shift to other technologies, our business, financial condition and operating results would be harmed. 23 We offer products for multiple markets and must face the challenges of supporting the distinct needs of each of the markets we serve. We offer products for very diverse markets.
If our customers or the industries we serve shift to other technologies, our business, financial condition and operating results would be harmed. We offer products for multiple markets and must face the challenges of supporting the distinct needs of each of the markets we serve.
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 of our transaction with them.
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.
Although we maintain insurance related to cybersecurity risks, these costs, expenses, liability and other matters may not be adequately covered by insurance and may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms, or at all. Insurers may also deny us coverage as to any future claim.
Although we maintain insurance related to cybersecurity risks, these costs, expenses, liabilities and other matters may not be adequately covered by insurance and may result in an increase in insurance costs or insurance not being available to us on economically feasible terms, or at all. Insurers may also deny us coverage as to any future claim.
We are constantly engaged in systematic, risk-based reviews of our 28 compliance-related activities to identify and remediate known and suspected weaknesses (e.g., 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.
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.
These risks, many of which we have experienced, include: • Adverse changes or instability in political or economic conditions in countries or regions where we and our customers and suppliers are located, including currency devaluations, debt defaults, lack of liquidity and recessions; • Challenges of administering our diverse business and product lines globally; • Actions of government regulatory authorities, including embargoes, sanctions (including “anti-blocking” rules), executive orders, import, export, and reexport restrictions, antiboycott laws, tariffs (including anti-dumping and countervailing duties), currency controls, trade restrictions and trade barriers (including retaliatory actions), license requirements (including license-specific restrictions and provisos), citizenship requirements, nationality restrictions, environmental requirements and other rules and regulations (including extraterritorial rules and regulations) applicable to the manufacture, import, export, reexport or end-use of our products, all of which may be complicated and conflicting, require significant investments in cost, time and resources for compliance, negatively impact revenues and margins, and impose strict and severe penalties for non-compliance; • Political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors; • Greater risk of violations of U.S. and international laws and regulations, including anti-corruption and trade laws, and our code of conduct, by our employees, sales representatives, distributors or other agents; • Ambiguous or vague laws that make collecting payments or seeking recourse difficult; • Increased credit risk and differing financial conditions of customers and distributors, resulting in longer accounts receivable collection periods and payment cycles, increased bad debt write-offs and additions to reserves; • Overlapping, burdensome and differing tax structures and laws; • Potential for certain tax benefits to be revoked or reclaimed; • Reduced, inconsistent or differing protection of intellectual property, including unequal recognition and treatment of multi-national corporations’ rights by hostile or indifferent governments; 24 • Increasingly stringent privacy, security, consumer and data protection laws, such as the EU General Data Protection Regulation, the Data Security Law of China and the China Personal Information Protection Law; • Shipping, logistics and other supply chain complications or cargo security requirements, including forced-labor mitigation rules and increased shipping costs, the latter of which certain parts of our business are experiencing as a result of the attacks on shipping in the Red Sea; • Adverse currency exchange rate fluctuations; • Restrictions on currency conversion or the transfer of funds, including restrictions on certain financial institutions themselves; • Compliance costs, withholding taxes and legal and contractual restrictions associated with repatriating overseas earnings; • Increased risk of exposure to significant health concerns (such as Monkeypox, COVID-19, Sudden Acute Respiratory Syndrome, Avian Influenza and the H7N9, Ebola or Zika viruses); • Differences in business practices, culture, language and management style; • Complex, burdensome and differing labor and employment laws and practices; • Changing labor conditions and difficulties staffing, managing, and rationalizing our foreign operations, including rising wages and other labor costs, retention of employees, the formation of labor unions and works councils and the maintenance of defined benefit pension plans; • Nationalization or other expropriation of private enterprises or land; • Involuntary geopolitical annexations or accessions through military force or otherwise, including, for example, any actions by China to take control over Taiwan, and the implications any such action would have on our customers, other partners, and the global semiconductor ecosystem; and • Increased risk of exposure to civil unrest, terrorism, government sanctioned and non-government sanctioned acts of violence, and military activities.
These risks, many of which we have experienced, include: • Adverse changes or instability in political or economic conditions in countries or regions where we and our customers and suppliers are located, including currency devaluations, debt defaults, lack of liquidity and recessions; • Challenges of administering our diverse business and product lines globally; • Actions of government regulatory authorities, including embargoes, sanctions (including “anti-blocking” rules), executive orders, import, export, and reexport restrictions, antiboycott laws, tariffs (including anti-dumping and countervailing duties), currency controls, trade restrictions and trade barriers (including retaliatory actions), license requirements (including license-specific restrictions and provisos), citizenship requirements, nationality restrictions, environmental requirements and other rules and regulations (including extraterritorial rules and regulations) applicable to the manufacture, import, export, reexport or end-use of our products, all of which may be complicated and conflicting, require significant investments in cost, time and resources for compliance, negatively impact revenues and margins, and impose strict and severe penalties for non-compliance; • Political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors; • Greater risk of violations of U.S. and international laws and regulations, including anti-corruption and trade laws, and our code of conduct, by our employees, sales representatives, distributors or other agents; • Ambiguous or vague laws that make collecting payments or seeking recourse difficult; 24 • Increased credit risk and differing financial conditions of customers and distributors, resulting in longer accounts receivable collection periods and payment cycles, increased bad debt write-offs and additions to reserves; • Overlapping, burdensome and differing tax structures and laws; • Potential for certain tax benefits to be revoked or reclaimed; • Reduced, inconsistent or differing protection of IP, including unequal recognition and treatment of multi-national corporations’ rights by hostile or indifferent governments; • Increasingly stringent privacy, security, consumer and data protection laws, such as the EU General Data Protection Regulation, the Data Security Law of China and the China Personal Information Protection Law; • Shipping, logistics and other supply chain complications or cargo security requirements, including forced-labor mitigation rules and increased shipping costs related to security disruptions in traditional shipping lanes; • Adverse currency exchange rate fluctuations; • Restrictions on currency conversion or the transfer of funds, including restrictions on certain financial institutions themselves; • Compliance costs, withholding taxes and legal and contractual restrictions associated with repatriating overseas earnings; • Increased risk of exposure to significant health concerns, including pandemics; • Differences in business practices, culture, language and management style; • Complex, burdensome and differing labor and employment laws and practices; • Changing labor conditions and difficulties staffing, managing, and rationalizing our foreign operations, including rising wages and other labor costs, retention of employees, the formation of labor unions and works councils and the maintenance of defined benefit pension plans; • Nationalization or other expropriation of private enterprises or land; • Involuntary geopolitical annexations or accessions through military force or otherwise, including, for example, any actions by China to take control over Taiwan, and the implications any such action would have on our customers, other partners, and the global semiconductor ecosystem; and • Increased risk of exposure to civil unrest, terrorism, government sanctioned and non-government sanctioned acts of violence, and military activities.
We must monitor relevant chemical regulatory developments in order to limit the associated risks of new developments by triggering countermeasures, such as alternative products and phase-outs, at the right time. We are subject to environmental regulations. If we fail to comply with these regulations, our business could be harmed.
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 those governing discharges 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.
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.
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 34 in the market of a substantial number of additional shares of our common stock received upon conversion of the Convertible Notes; and (ii) hedging or arbitrage trading activity that may develop involving the Convertible Notes and our common stock.
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 .
This incident required us to temporarily suspend operations at 16 certain of our facilities and had a material impact during the three months ended March 31, 2023 on our ability to process orders, ship products and provide service to our Vacuum Solutions Division (“VSD”) and PSD customers.
This incident required us to temporarily suspend operations at certain of our facilities and had a material impact during the three months ended March 31, 2023 on our ability to process orders, ship products and provide service to our Vacuum Solutions Division (“VSD”) and Photonics Solutions Division (“PSD”) customers.
Further, governments and courts are considering new issues in intellectual property law with respect to work created by AI technology, which could result in different intellectual property rights in development processes, procedures and technologies we may create with artificial technology, which could have a material adverse effect on our business.
Further, governments and courts are considering new issues in IP law with respect to work created by AI technology, which could result in different IP rights in development processes, procedures and technologies we may create with AI technology, which could have a material adverse effect on our business.
Any intellectual property 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.
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.
None of our significant customers has entered into an agreement with us that requires it to purchase any minimum quantity of our products. Attempts to offset the effect of any loss or reduction of net revenues through the rapid addition of new customers would be difficult because a relatively small number of companies dominate the semiconductor and electronics manufacturing industries.
None of our significant customers have entered into an agreement with us that requires them to purchase any minimum quantity of our products. Attempts to offset the loss or reduction of net revenues through the rapid addition of new customers would be difficult because a relatively small number of companies dominate the semiconductor and electronics manufacturing industries.
Our future success will continue to depend upon: • Our ability to maintain relationships with existing key customers; • Our ability to attract new customers and satisfy any required qualification periods; • Our ability to introduce new products in a timely manner for existing and new customers; 21 • The successes of our original equipment manufacturer (“OEM”) customers in creating demand for their capital equipment products that incorporate our products; and • Our ability to gain significant customers and business in new, emerging segments of our markets.
Our success will continue to depend upon: • Our ability to maintain relationships with existing key customers; • Our ability to attract new customers and satisfy any required qualification periods; • Our ability to introduce new products in a timely manner for existing and new customers; • The ability of our original equipment manufacturer (“OEM”) customers to create demand for their capital equipment products that incorporate our products; and • Our ability to gain significant customers and business in new, emerging segments of our markets.
We may not be able to pass on price increases in raw materials, or price increases by our suppliers, to our customers due to competitive pricing pressure, and, even when we are able to do so, there may be a delay between price increases in raw materials and our ability to increase the prices of our products.
We may not be able to pass on price increases in raw materials, or price increases by our suppliers, to our customers due to competitive pricing pressure, and, even when we are able to do so, there may be a delay between price increases in raw materials and price increases of our products.
If our product offerings in any particular market are not competitive, our analyses of a market are incorrect or our sales and marketing approach for a market is ineffective, we may not achieve anticipated growth rates in this market, and our business, financial condition and operating results would be harmed.
If our product offerings are not competitive, our market analyses are incorrect or our sales and marketing approach is ineffective, we may not achieve anticipated growth rates in a particular market, and our business, financial condition and operating results would be harmed.
Further, the manufacturing of these products often involves a highly complex and precise process, the utilization of specially qualified materials or components that conform to stringent specifications, and highly skilled labor.
Further, manufacturing these products often involves a highly complex and precise process, specially qualified materials or components that conform to stringent specifications, and highly skilled labor.
Further, compliance with regulatory restrictions may cause us to breach contractual obligations, which could result in costs, penalties and litigation. Additionally, potential customers in certain countries, particularly in Asia, have a strong preference for technology and products developed by suppliers based in their home countries.
Further, compliance with regulatory restrictions may cause us to breach contractual obligations, which could result in costs, penalties and litigation. Additionally, potential customers in certain countries, particularly in Asia, have a strong preference for, and are increasingly legally required to procure, technology and products developed by suppliers based in their home countries.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeActivity Reportable Segment Owned/Leased China Guangzhou 704,000 Manufacturing, Warehouse, Sales, and Research and Development MSD Owned Shenzhen 253,000 Manufacturing and Service VSD Leased Tianjin 179,000 Manufacturing, Office, Warehouse, and Sales MSD Owned Yangzhou 156,000 Manufacturing, Warehouse, and Office MSD Owned Germany Berlin 200,000 Manufacturing, Office, and Research and Development MSD Leased Feucht 301,000 Manufacturing, Warehouse, Office, and Research and Development MSD Owned Neuruppin 170,000 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 South Korea Hwasung 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 201,000 Manufacturing, Warehouse, Office, and Research and Development MSD Owned Wilmington, MA 118,000 Manufacturing, Customer Support, Service, and Research and Development VSD Owned 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.
Biggest changeActivity 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.
Item 2. P roperties The following table provides information concerning MKS’ principal and certain other owned and leased facilities as of December 31, 2024: Country City Sq. Ft.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Saf ety Disclosures Not applicable. 37 PART II
Biggest changeMine Saf ety Disclosures Not applicable. 38 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have repurchased approximately 2.6 million shares of common stock for approximately $127 million pursuant to the program since its adoption.
Biggest changeDuring 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, 2019, and plotted at the last trading day of each of the fiscal years ended December 31, 2020, 2021, 2022, 2023 and 2024 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.
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.
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 2024, which totaled $59 million or $0.88 per share.
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 2023, 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.
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.
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 2024 and 2023, we did not repurchase any shares of common stock.
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.
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 18, 2025, we had 62 stockholders of record.
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.
On February 10, 2025, our Board of Directors declared a quarterly cash dividend of $0.22 per share to be paid on March 7, 2025 to shareholders of record as of February 24, 2025. 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.
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 stock price performance in the graph below is not necessarily indicative of future price performance. 38 Performance Graph 2019 2020 2021 2022 2023 2024 MKS Instruments, Inc. $ 100.00 $ 137.70 $ 160.22 $ 78.55 $ 96.28 $ 98.41 Nasdaq Market Index $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.77 $ 223.87 S&P 1500 Composite / Electronic Equipment, Instruments & Components Index $ 100.00 $ 123.86 $ 160.00 $ 125.15 $ 150.70 $ 175.92 Item 6.
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

133 edited+40 added−41 removed98 unchanged
Biggest changeWhile there can be no assurance, we do not anticipate any material non-performance by any of these counterparties. 46 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, 2024 2023 Net revenues: Product 87.1 % 88.3 % Service 12.9 11.7 Total net revenues 100.0 100.0 Cost of revenues: Cost of product revenues 46.3 48.3 Cost of service revenues 6.0 6.4 Total cost of revenues (exclusive of amortization shown separately below) 52.4 54.7 Gross profit 47.6 45.3 Research and development 7.6 8.0 Selling, general and administrative 18.8 18.6 Acquisition and integration costs 0.3 0.4 Restructuring and other 0.2 0.6 Fees and expenses related to amendments to the Term Loan Facility 0.1 0.1 Amortization of intangible assets 6.8 8.1 Goodwill and intangible asset impairments — 52.5 Gain on sale of long-lived assets — (0.1 ) Income (loss) from operations 13.9 (42.9 ) Interest income (0.6 ) (0.5 ) Interest expense 7.9 9.8 Loss on extinguishment of debt 1.6 0.2 Other (income) expense, net (0.1 ) 0.7 Income (loss) before income taxes 5.0 (53.2 ) Provision (benefit) for income taxes (0.3 ) (2.4 ) Net income (loss) 5.3 % (50.8 )% Year Ended December 31, 2024 compared to 2023 The following table sets forth our net revenues for products and services: Net Revenues Years Ended December 31, (Dollars in millions) 2024 2023 Product $ 3,124 $ 3,200 Service 462 422 Total net revenues $ 3,586 $ 3,622 Net product revenues decreased $76 million in 2024, compared to 2023, primarily driven by a decrease of $63 million in net product revenues from our specialty industrial market mainly due to lower solar, general industrial, and material processing sales and a decrease of $12 million in net product revenues from our electronics and packaging market, primarily due to lower equipment revenues at MSD as customers postponed investment decisions and also as a result of lower palladium prices for chemistry products which lower prices are passed through to our customers in our electronics component business at MSD, partially offset by volume increases in chemistry materials.
Biggest changeResults 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.
We also have certain prior year federal credit carryforwards and state tax loss and credit carryforwards that are subject to examination to the extent used in an open year.
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.
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. By nature, all financial instruments involve market and credit risks.
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. 47 By nature, all financial instruments involve market and credit risks.
As of December 31, 2024, 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 an applicable credit spread adjustment) for an interest period of one month, plus 1.00%, and (y) a Term SOFR rate (plus 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, 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%.
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 to us.
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.
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 immediately in earnings in the period it occurs.
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.
We believe the following critical accounting policies affect the most significant judgments, assumptions and estimates we use in preparing our Consolidated Financial Statements: Revenue Recognition . We account for revenue using Accounting Standards Codification 606, “Revenue from Contracts with Customers” (“ASC Topic 606”).
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”).
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 accumulated OCI in stockholders’ equity.
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.
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 twelve 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).
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).
In cases, where 42 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.
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.
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 transition to 5G for both devices and infrastructure, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles.
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.
Such values are recognized as expense using the accelerated graded vesting method for Adjusted EBITDA RSUs, all 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 stock.
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.
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, 2024 compared to the year ended December 31, 2023.
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.
As of December 31, 2024, the Convertible Notes are 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.
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.
As of October 31, 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.
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.
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. 44 The assumptions used in calculating the fair value of share-based compensation awards represents management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.
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.
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 MKS supports. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment (“WFE”) ecosystem and address over 85% of the market.
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.
Specialty Industrial Market MKS’ 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.
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.
The Amended Credit Agreement contains customary representations and warranties, covenants and provisions relating to events of default. As of December 31, 2024, we were in compliance with all covenants under the Amended Credit Agreement.
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.
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.
The conversion rate is subject to adjustment upon the occurrence of certain events. 55 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.
As of December 31, 2024, the Amended Credit Agreement provided for (i) a senior secured term loan facility comprised of two tranches: a $2.6 billion loan (the “USD Tranche B”) and a €596 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.
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.
Stock-based awards include (i) time-based restricted stock units (“RSUs”), (ii) performance-based RSUs based on the achievement of adjusted EBITDA targets (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.
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 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, planned capital expenditure requirements, payments of debt, 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.
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.
Interest Expense, Net Years Ended December 31, (Dollars in millions) 2024 2023 Interest expense, net $ 263 $ 339 Interest expense, net, decreased by $76 million in 2024, compared to 2023, 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%.
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%.
For the discussion and analysis covering the year ended December 31, 2023 compared to the year ended December 31, 2022, 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, 2023, as filed with the SEC on February 27, 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.
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 (as amended, the “Amended Credit Agreement”).
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”).
These derivatives are not designated as cash flow hedging instruments and gains or losses from these derivatives are recorded immediately in other (income) expense, net. The net foreign exchange gain on these derivatives was $1 million in 2024, compared to a loss of $4 million in 2023.
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 notional value of the agreements was $2,600 million and $2,300 million as of December 31, 2024 and December 31, 2023, 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 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.
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 (“U.S. GAAP”).
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.
Long-lived assets located outside of the United States accounted for approximately 59% and 58% of our total long-lived assets as of December 31, 2024 and 2023, respectively. Long-lived assets include property, plant and equipment, net, right-of-use assets, net and certain other assets.
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.
For the rTSR RSUs, the expense computed for the total shareholder return shares is fixed and recognized on a straight-line basis over the vesting period. We provide certain employees the opportunity to purchase our shares through an Employee Stock Purchase Plan (“ESPP”).
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”).
The net increase was primarily due to the addition of income tax reserves related to intercompany transactions. We accrue interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are classified as a component of income tax expense.
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.
Net Investment Hedge 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, 2024, we designated as a net investment hedge €596 million in aggregate principal amount of our Euro Tranche B loan.
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.
The lines of credit and financing facility provided for aggregate borrowings as of December 31, 2024 and December 31, 2023 of up to an equivalent of $19 million and $14 million, respectively. There were no borrowings outstanding under these arrangements at December 31, 2024 or December 31, 2023.
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.
We had foreign exchange forward contracts not designated as hedging instruments with notional amounts totaling $154 million and $155 million outstanding at December 31, 2024 and at December 31, 2023, respectively.
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.
Gains and losses on foreign exchange forward contracts that qualify for hedge accounting are classified in cost of products in 2024 and 2023 and totaled gains of $6 million and $7 million, respectively. There were no ineffective portions of the derivatives recorded in 2024 and 2023.
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.
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.
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.
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.
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 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.
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 British pound and Chinese yuan were the largest notional contracts for 2024, and the Euro and British pound were the largest notional contracts for 2023 for balance sheet hedges not designated as a hedging instrument.
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.
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 is subject to significant trade restrictions, especially in China.
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.
Interest Rate Swap and Interest Rate Cap Agreements We have various interest rate swap agreements 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.
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.
As of December 31, 2024, the effective interest rate of the Convertible Notes was 1.56%. 55 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.
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.
A significant portion of our international net revenues was from customers in China, South Korea, Japan, Taiwan and Singapore. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.
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.
As of December 31, 2024, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche B and the Revolving 53 Facility, 1.25% with respect to base rate borrowings and 2.25% with respect to Term SOFR borrowings and (ii) under the Euro Tranche B, 2.75%.
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.
As of December 31, 2024, our estimated benefit payments over the next 10 years amount to $80 million. The majority of the benefit payments covered by these arrangements occurs after 2029.
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.
Excess and obsolete expense was $56 million, $64 million and $21 million for 2024, 2023 and 2022, respectively. The higher excess and obsolete charge in 2023 was partially the result of an inventory write-off related to the discontinuation of a product line in 2023 and partially the result of reduced forecasted usage.
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.
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 (loss) income. We are subject to the income tax laws and regulations of the many jurisdictions in which we operate.
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).
The higher excess and obsolete charge in 2024 was 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.
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.
The following table sets forth gross profit as a percentage of net revenues by reportable segment: Gross Profit Excluding Amortization Years Ended December 31, % Points (As a percentage of net revenues) 2024 2023 Change Vacuum Solutions Division 42.9 % 42.6 % 0.3 % Photonics Solutions Division 44.9 % 43.4 % 1.5 % Materials Solutions Division 56.1 % 51.4 % 4.7 % Total gross profit percentage 47.6 % 45.3 % 2.3 % Gross profit as a percentage of net revenues for VSD increased in 2024, compared to 2023, primarily due to higher factory utilization and lower material costs, partially offset by unfavorable product mix, higher excess and obsolete inventory charges and higher warranty costs.
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.
Liquidity and Capital Resources Cash and cash equivalents at December 31, 2024 and 2023 totaled $714 million and $875 million, respectively.
Liquidity and Capital Resources Cash and cash equivalents at December 31, 2025 and 2024 totaled $675 million and $714 million, respectively.
Fees and expenses related to amendments to the Term Loan Facility Years Ended December 31, (Dollars in millions) 2024 2023 Fees and expenses related to amendments to the Term Loan Facility $ 5 $ 2 In 2024, we recorded fees and expenses related to (i) 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”) and (ii) 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”).
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”).
Our total cash and cash equivalents at December 31, 2024 consisted of $268 million held in the United States and $446 million held by our foreign subsidiaries.
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.
Such estimates are revised, if necessary, in subsequent periods when the underlying factors change our evaluation of the probability of achieving the financial performance objectives. Accordingly, share-based compensation expense associated with performance shares may differ significantly from the amount recorded in the current period.
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.
In addition, we recorded a $14 million impairment of IPR&D allocated to the EL reporting unit. 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.
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.
In 2023, we recorded fees and expenses related to the First Amendment to Credit Agreement, dated as of October 3, 2023, 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 “First 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”).
We must also pay customary letter of credit fees and agency fees. As of December 31, 2024, the commitment fee was 0.25% per annum, representing a downward adjustment from 0.375% as of June 30, 2024. As of December 31, 2024, the principal outstanding on the Term Loan Facility was $3.2 billion, and the weighted average interest rate was 6.4%.
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%.
The USD Tranche B and the Euro Tranche B are not subject to financial maintenance covenants. 2025 Amendments and Prepayment of Credit Facilities On January 24, 2025 (the “Fifth Amendment Effective Date”), we entered into the Fifth Amendment to Credit Agreement (the “Fifth Amendment”).
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”).
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.
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.
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 43 than cost, based primarily on our estimated forecast of product demand.
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.
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.
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.
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.
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.
Any principal amount outstanding under the Revolving Facility is due and payable in full on the fifth anniversary of the Effective Date.
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.
Loss on extinguishment of debt Years Ended December 31, (Dollars in millions) 2024 2023 Loss on extinguishment of debt $ 57 $ 8 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, Convertible Notes in May 2024 and Fourth Amendment in July 2024.
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 in July 2024, we entered into the Fourth Amendment, which decreased the applicable margin for both the USD Tranche B and the EUR Tranche B (each as defined and described further below under “Credit Facilities”) by 0.25%.
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%.
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.
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.
Our effective tax rate for 2024 was lower than the U.S. statutory tax rate, mainly due to the U.S. deduction for foreign derived intangible income (“FDII”) and valuation allowance release partially offset by the increase in withholding taxes.
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.
Research and Development Years Ended December 31, (Dollars in millions) 2024 2023 Research and development $ 271 $ 288 Research and development expenses decreased $17 million in 2024, compared to 2023, mainly due to decreases of $8 million in compensation-related costs, including salaries, fringe and variable compensation expenses, a decrease of $2 million in engineering consulting fees, and a decrease of $5 million of research and development credits and government assistance received in 2024.
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.
Net revenues for our PSD segment increased $45 million in 2024, compared to 2023, primarily as a result of an increase in sales of our lithography, metrology and inspection products, that are a part of our World Class Optics portfolio, in our semiconductor market and an increase in industry demand for PCB via drilling systems in our electronics and packaging 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 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.
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.
Restructuring and other Years Ended December 31, (Dollars in millions) 2024 2023 Restructuring and other $ 6 $ 20 Restructuring and other charges incurred in 2024 and 2023 were primarily related to severance costs as a result of global cost-saving 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.
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) 2024 2023 Change Product 46.8 % 45.4 % 1.4 % Service 53.3 % 45.0 % 8.3 % Total gross profit percentage 47.6 % 45.3 % 2.3 % Gross profit as a percentage of net product revenues increased by 1.4 percentage points in 2024, compared to 2023, primarily due to favorable product mix, higher factory utilization and lower excess and obsolete inventory charges, partially offset by higher warranty costs.
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.
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 26% and 25% of our net revenues for 2024 and 2023, respectively, were from sales to customers in our electronics and packaging market.
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.
Prior to March 1, 2030, noteholders may convert all or any portion of their Convertible Notes only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.
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.
We are 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 seventh anniversary of the Effective Date. There is no scheduled amortization 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.
Our effective tax rate for 2023 was lower than the U.S. statutory tax rate, mainly due to the impairment of goodwill and intangible assets. As of December 31, 2024 and 2023, total gross unrecognized tax benefits, which excludes interest and penalties, was $94 million and $86 million, respectively.
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.
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 to semiconductor manufacturing, electronics and packaging and specialty industrial applications.
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.
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. 41 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.
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.
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.
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. 46 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.
The Revolving Facility has a maturity date in August 2027 while the USD Tranche B and Euro Tranche B have a maturity date in August 2029. As of December 31, 2024, there were no borrowings under the Revolving Facility.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThis 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.
Biggest changeInterest 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.
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, 2024 and 2023 would be immaterial.
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, 2024, we designated as a net investment hedge €596 million in aggregate principal amount of our Euro Tranche B loan.
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.
We mainly enter into foreign exchange forward contracts to reduce currency exposure arising from intercompany sales of inventory. 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 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.
A 10% increase or decrease in the weighted average interest rate as of December 31, 2024 would increase or decrease annual interest expense by approximately $13 million, excluding the effect of our interest rate hedges.
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.
We had foreign exchange forward contracts not designated as hedging instruments with notional amounts totaling $154 million and $155 million outstanding at December 31, 2024 and December 31, 2023, respectively.
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.
Because the notional amount of our interest rate hedges as of December 31, 2024 equaled approximately 91% of the principal outstanding on our Term Loan Facility, the resulting net impact to interest expense would be approximately $4 million. 60
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 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.
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 are exposed to market risks related to fluctuations in interest rates related to our Term Loan Facility. As of December 31, 2024, the principal outstanding on our Term Loan Facility was $3.2 billion, at a weighted average interest rate of 6.4%.
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%.
For 2024, the British pound and Chinese yuan were the largest notional contracts and for 2023 the Euro and British pound were the largest notional contracts for balance sheet hedges not designated as a hedging instrument.
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.
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.
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.
We had foreign exchange forward contracts designated as cash flow hedges with notional amounts totaling $74 million and $178 million outstanding at December 31, 2024 and December 31, 2023, respectively, with the Japanese yen and the South Korean won being the largest notional contracts in both periods.
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.
Removed
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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

Other MKSI 10-K year-over-year comparisons