Business Combinations and Acquisitions

9 Months Ended

Sep. 30, 2025

Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]

Business Combinations and Acquisitions

Business Combinations and Acquisitions

Acquisition of EM4

On March 18, 2024 (the “Acquisition Date”), the Company completed its acquisition of EM4, a designer, manufacturer and seller of packaged photonic components and sub-systems for aerospace and industrial markets. The EM4 acquisition is expected to accelerate the Company’s strategy to package lasers, detectors and ASICs into modules and sub-systems.

The Company acquired 100% of the membership interests of EM4 from G&H Investment Holding, Inc. (“G&H”), for an aggregate purchase price of approximately $4.2 million in cash, net of working capital adjustments, and up to $6.75 million in contingent future payments to G&H subject to the achievement of certain financial performance targets. The Company utilized a Monte Carlo simulation model to estimate the probability-weighted fair value of the contingent consideration. This transaction has been accounted for as a business combination. The acquisition related costs incurred as part of the transaction were not material.

Recording of Assets Acquired and Liabilities Assumed

The following table summarizes the purchase price allocation to assets acquired (in thousands):

	Recorded Value
Cash and cash equivalents	$	557
Accounts receivable	1,064
Contract asset	1,644
Inventories, net	3,539
Prepaid expenses and other current assets	252
Property plant and equipment	1,888
Operating lease right-of-use assets	2,072
Total assets acquired	11,016
Current liabilities	(3,148)
Operating lease liabilities, non-current	(1,628)
Total liabilities assumed	(4,776)
Net assets acquired	$	6,240

Since the consideration paid by the Company to acquire EM4’s business was lower than the estimated fair value of net assets acquired, the Company recognized a $1.5 million gain from the acquisition of EM4. The following factors contributed towards the purchase price paid by the Company being lower than the estimated fair value of the net assets acquired: (a) EM4 had historically been incurring losses; (b) G&H viewed EM4 as non-core; (c) although G&H pursued a competitive auction process for the business, the ultimate timeline to completion was drawn-out due to the complexity of the transaction structure; and (d) during the later stages of the sale process, after the Company was selected as the winning bidder, EM4’s business was impacted by the cancellation of certain material government programs as well as delays in certain other purchase orders, which also served to significantly reduce the estimated probability of the contingent future payments to G&H. In the first quarter of 2024, the gain from the acquisition of EM4 was estimated to be $1.8 million, but in the fourth quarter of 2024 the Company and G&H agreed to certain adjustments to EM4’s closing balance sheet which resulted in a $0.3 million reduction in purchase price and a commensurate increase in the gain from the acquisition of EM4.

The results of operations related to EM4 are included in the Company’s condensed consolidated statements of operations beginning from the Acquisition Date.