Income Taxes

3 Months Ended

Apr. 05, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, change in the valuation allowance, and other permanent differences.

Income tax expense (benefit) was $1.9 million and $(0.4) million for the three months ended April 5, 2025 and March 30, 2024, resulting in effective tax rates of (6.6)% and 0.7%, respectively. The change in the provision for income taxes for the three months ended April 5, 2025 is primarily due to tax expense associated with the increase in the valuation allowance in the three months ended April 5, 2025, whereas the valuation allowance had not yet been established in the three months ended March 30, 2024. During the three months ended June 29, 2024, the Company recorded a valuation allowance in the U.S. and Singapore due to a three-year cumulative pre-tax loss in conjunction with the downturn in the semiconductor industry. The Company intends to maintain the valuation allowance until its ability to forecast sufficient future sources of taxable income is reestablished.

Uncertain Tax Positions

As of April 5, 2025, the Company had gross unrecognized tax benefits, inclusive of interest, of $5.2 million, of which $4.2 million would affect the effective tax rate if recognized. During the three months ended April 5, 2025, the Company did not release any unrecognized tax benefits.

Tax years 2019 through 2025 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company’s 2022 tax year is currently under examination in the U.S. The Company’s 2021 and 2022 tax years are currently under examination in India. Although the outcome of tax audits is always uncertain, the Company believes that the results of these examinations will not materially impact its financial position or results of operations. The Company is not currently under audit in any other major taxing jurisdiction.

The Company’s gross unrecognized tax benefits will decrease by approximately $1.8 million, inclusive of interest, in the next 12 months due to the lapse of the statute of limitations.