What changed in Astera Labs,'s 10-K for the fiscal year ended December 31, 2025

Regulatory activity, such as tariffs, export controls, economic sanctions, and restrictions on investment and data transfers as well as vigorous enforcement of U.S. export controls and economic sanctions laws have in the past and may continue to materially limit our ability to make sales to our customers in China, which has in the past and may continue to harm our results of operations, reputation, and financial condition. Due to the U.S. government restricting sales to certain customers in China, sales to some of our customers may require licenses in order for us to export our products; however, there can be no assurances that requests for licenses will be approved by the U.S. government. Further, augmentation of restricted or prohibited persons lists maintained by the U.S. government could reduce our ability to sell to certain customers. Fluid tariff policies of both the U.S. and Chinese governments may reduce demand for our products and could [added] increase input costs. Moreover, concerns that U.S. companies may not be reliable suppliers as a result of these and other actions has caused, and may in the future cause, some of our customers in China to amass large inventories of our products well in advance of need or caused some of our customers to replace our products in favor of products from other suppliers. Additionally, the Chinese government adopted a law with respect to unreliable suppliers. Any designation as an unreliable supplier may have an adverse impact on our business and operations. Recent U.S. government restrictions on investments into China by U.S. persons and regarding access by Chinese persons to certain personal data relating to U.S. persons could hinder our Chinese operations. In addition, there may be indirect impacts to our business that we cannot easily quantify such as the fact that some of our other customers' systems may also be impacted by export restrictions.

[added] Regulators and legislators across the world are also increasingly scrutinizing and restricting certain personal data transfers. For example, the Department of Justice's January 8, 2025, rule on "Preventing Access to U.S. Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons," prohibits or restricts certain data transactions involving countries of concern, including China. Actual or alleged violations of these regulations may be punishable by criminal and/or civil sanctions and may result in exclusion from participation in federal and state programs.

Cyber-attacks are increasing in number and sophistication, are well-financed, in some cases supported by state actors, and are designed to not only attack, but also to evade detection, and are being facilitated or enhanced by evolving technologies, including AI. Since the techniques used to obtain unauthorized access to systems and data, or to otherwise sabotage them, change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Attempts to disrupt or gain unauthorized access to our and our third-party vendors' information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by evolving technologies [added] such as AI. Geopolitical instability may also increase the likelihood that we will experience direct or collateral consequences from cyber conflicts between nation-states or other politically motivated actors targeting critical technology infrastructure. Accidental or willful cybersecurity incidents, data breaches, or other unauthorized access to our information systems or the systems of our third-party service providers, or the existence of computer viruses, malware (such as ransomware), or vulnerabilities in our or their data or software could expose us to a risk of information loss, business disruption, or the misappropriation of proprietary and confidential information, including information relating to our products or customers or the personal information of our employees or third parties.

[added] The AI regulatory environment is increasingly complex and uncertain. For example, in the United States, states have advanced, and in some cases passed, laws focusing on AI, while the federal government has pursued a deregulatory agenda. Significant resources will be required to design, develop, test and maintain our products to help ensure that AI is implemented and deployed in accordance with applicable law and regulation and in a manner intended to comply with applicable laws and regulations and mitigate foreseeable risks. Our customers may also become subject to such existing or upcoming AI laws and regulations, which could cause a delay or impediment to the commercialization of AI technology and could lead to a decrease in demand for our customers' AI systems, and may adversely affect our business, financial condition, and results of operations. In addition, uncertainty regarding the direction of AI regulation may affect customers' adoption of AI, which could adversely affect our business.

[added] Our use of AI in our business processes may also subject us to cybersecurity, data privacy, IT, intellectual property, regulatory, legal, operational, competitive, reputational and other risks and challenges that could affect our business. Use of AI by us or our vendors could result in bias, discrimination, or harmful or inaccurate content that may be actionable under privacy, data protection, and emerging AI laws. The use of certain AI technology can also give rise to intellectual property risks, including by disclosing or otherwise compromising our confidential or proprietary intellectual property and intellectual property infringement, or by undermining our ability to assert or defend ownership rights in intellectual property created with the assistance of AI tools.

[added] Gross margin decreased 70 bps to 75.7% for the year ended December 31, 2025 from 76.4% for the same period in 2024, primarily driven by product mix as we shipped more hardware modules.

[added] (2) Acquisition-related costs include certain incremental expenses incurred to effect a business combination such as third-party costs: advisory, legal, accounting, valuation, and other professional fees.

[added] We account for the warrants issued to a customer as consideration payable as we did not receive a distinct good or service in exchange for the warrants. The shares underlying the warrants vest upon the achievement of specified tranches of global payments by the customer and its affiliates. As it becomes probable that the performance-based vesting conditions underlying the warrants will be achieved and the related revenue is recognized, we recognize the related grant date fair value of the warrants as a reduction of revenue for each sales transaction in proportion to total expected cumulative sales volume resulting in achievement of the vesting conditions. For more information, see Note 10 - Common Stock Warrants in the Notes to the Consolidated Financial Statements set forth in Part II, Item 8 of this Annual Report on Form 10-K.

No corresponding language in the FY2025 10-K.

No corresponding language in the FY2025 10-K.

No corresponding language in the FY2025 10-K.

No corresponding language in the FY2025 10-K.

No corresponding language in the FY2025 10-K.

We have a [added] limited history of generating net [added] income. We recorded net income of $219.1 million and incurred net losses of $83.4 million and $26.3 million for the years ended December 31, [added] 2025, 2024 and 2023, respectively. As of December 31, [added] 2025, 2024 and 2023, we had [added] retained earnings of $10.3 million and accumulated deficits of $208.8 million and $125.4 million, respectively. [added] Our historical losses and [added] accumulated deficits were a result of the substantial investments we have made to grow our business. We expect our costs will [added] continue to increase over time and our losses may continue if such increases in costs are not more than fully offset by increases in our revenue. We expect to continue to invest significant additional funds in expanding our business and research and development activities as we continue to develop new products. We have experienced and expect to continue to incur additional general and administrative expenses as a result of our growth and increased costs to support our operations as a public company. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth.

A substantial portion of our revenue is driven by a limited number of end customers. In [added] 2025, one end customer represented more than [added] 70% of our revenue; the top three end customers represented an aggregate of approximately [added] 86% of our revenue. Our distributors and end customers' manufacturing partners provide us with information in their purchase orders about which end customer will receive the products purchased. This data allows us to estimate the portion of our revenue that is due to specific end customer demand. We anticipate that we will continue to be dependent on a limited number of end customers for a significant portion of our revenue in the future, and in some cases, the portion of our revenue attributable to certain end customers may increase in the future. However, we may not be able to maintain or increase sales to certain of our top end customers for a variety of reasons, including the following:

[added] Despite our internal controls and investment in security measures, we, and our third-party vendors, have been subject to cyber-attacks or unauthorized network intrusions. Should a cybersecurity incident or data breach occur, it could disrupt our business and result in, among other things, unfavorable publicity, damage to our reputation, loss of our trade secrets and other competitive information, litigation by affected [added] parties, possible financial obligations for liabilities and damages related to the theft or misuse of [added] any personal or confidential information, significant remediation costs, disruption of key business operations, and significant diversion of our [added] resources. Any of such events could have a material adverse effect on our business, profitability, and financial condition. In addition, despite our internal controls and processes, malicious code, and cybersecurity vulnerabilities in our products and services may expose our customers to cyberattacks and other security risks, which may result in claims, regulatory action, or reputational damage. While we may be entitled to damages if an adverse event arises from our third-party service providers' failure to perform under their agreements with us, any award may be insufficient to cover the actual costs incurred by us and, as a result of a service provider's failure to perform, we may be unable to collect any damages.

As a public company, we have incurred, and will continue to incur, significant finance, legal, accounting, and other expenses, including director and officer liability insurance, that we did not incur as a private company, and which we expect to further increase following our recent transition to large accelerated filer status. The Sarbanes-Oxley Act, the Dodd- Frank Act, stock exchange listing requirements, the reporting requirements of the Exchange Act and other applicable securities rules and regulations impose various requirements on public companies in the United States. As a [added] large accelerated filer, we are subject to enhanced reporting, internal control, and compliance obligations, including auditor attestation [added] of internal control over financial reporting, additional reporting obligations regarding executive [added] compensation, and the requirement to hold nonbinding advisory [added] votes on executive [added] compensation, and our management and other personnel devote a substantial amount of time to support compliance with these requirements. Moreover, these rules and regulations have increased, and will continue to increase, our legal and financial compliance costs and make certain activities more time-consuming and costly. We cannot predict the amount or timing of these additional costs that we will incur as a public company, and the resulting strain on management resources could adversely affect our results of operations and financial condition. These enhanced obligations may also increase the risk of errors or delays in our financial and SEC reporting, and we may not be able to effectively manage these additional requirements, which could adversely affect investor confidence and the [added] market price of our [added] common stock.

In addition, we maintain an inventory of our products at various stages of production and in finished goods inventory. We hold these inventories in anticipation of customer orders. If those customer orders do not materialize in a timely[added] manner, we may have excess or obsolete [added] inventory, which we would have to reserve or write-down, and our gross margins would be adversely affected.[added] In addition, for customers that we issue warrants, we recognize the related grant date fair value of the warrants as a reduction of revenue for each sales transaction in proportion to total expected cumulative sales volume resulting in achievement of the vesting conditions, which reduces the reported gross profit and gross margin in the periods the related revenue is recognized. The timing and magnitude of these charges may vary and could cause fluctuations in our reported gross margins and results of operations.

U.S. and foreign regulators have also increased their focus on cybersecurity vulnerabilities and risks. Compliance with laws and regulations concerning privacy, cybersecurity, data governance, and data protection could result in significant expense, and any failure to comply could result in proceedings against us by regulatory authorities or other third parties. Such proceedings could result in (among other things) unfavorable publicity, damage to our reputation, possible[added] financial obligations for liabilities, and government orders to implement additional protective measures or adopt new protocols, which could result in additional material expense. Moreover, we may be required to make legal notifications to affected individuals, disclosures to investors, and subject to fines and other sanctions resulting from any related breaches of applicable data privacy laws and regulations. Further, customers and third-party manufacturing partners increasingly demand rigorous contractual, certification, and audit provisions regarding privacy, cybersecurity, data governance, data protection, confidentiality, and intellectual property, which may also increase our overall compliance burden. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our privacy and data security obligations. Further, any cyber liability insurance that we maintain may not provide adequate coverage against potential liabilities related to any experienced cybersecurity incident or breach.

[added] We have designed and implemented new controls and measures to remediate [added] our previously identified material weaknesses, [added] and these measures may not be sufficient to avoid the identification of additional material weaknesses in the future. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we [added] are required to include in our periodic reports with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also result in errors in our consolidated financial statements that could result in a restatement of our financial statements and could cause us to fail to meet our periodic reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Global Select Market ("Nasdaq").

[added] Any failure, or perceived failure, by us to comply with applicable data protection or other laws, or with regulatory obligations or industry standards in our customer contracts, could result in [added] damage to our reputation, proceedings, or actions against us by governmental entities or others, subject us to significant fines, penalties, judgments, and negative publicity, require us to change our business practices as well as increase the costs and complexity of compliance. Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.

Further, any upturn in the semiconductor industry could result in increased competition for access to third-party manufacturing partners. We are dependent on the availability of this capacity to manufacture and assemble our products, [added] and our third-party manufacturing [added] partners have not provided assurances that adequate capacity will be available to us in the future.

[added] As we develop and introduce new products or new generations of our existing products, [added] we face the risk that our new products do not meet the needs of our customers' next generation systems and applications or that our customers may forego adopting one or more newer generations of our existing products. Regardless of the improved features or superior performance of the newer generations of our existing products, customers may be unwilling to adopt our new products due to design or pricing constraints, among other reasons. Even if customers choose to adopt our new products or new generations of our existing products, they may be slow to do so, which may result in certain of our products selling more frequently than other products for sustained periods of time. For example, most of our historical sales have been for our Aries Smart DSP Retimer product family. Because of the extensive time and resources that we invest in researching and developing new products and new generations of our existing products, if we are unable to sell new products or new generations of our existing products, our revenue could decline and our business, financial condition, and results of operations would be negatively affected.

[added] • Our business, financial condition, and results of operations [added] could be adversely affected by worldwide economic conditions, as well as [added] political and economic conditions in the countries in which we conduct business;

End customer relationships often require us to develop new products that may involve significant technological and design challenges, and our end customers frequently place considerable pressure on us to meet tight development schedules. Accordingly, we may have to devote a substantial amount of our resources to our strategic relationships, which could detract from or delay our completion of other important development projects. Delays in development could impair [added] our relationships with our end customers and negatively impact forecasted sales of the products under development. Moreover, it is possible that our end customers [added] may develop their own products that may compete with our solutions, or adopt a competitor's solution for products that they currently buy from us. If that happens, our sales would be adversely impacted and our business, financial condition, and results of [added] operations would be materially and adversely affected.

Further, determination by a government that we have failed to comply with trade sanctions, investment, anti-bribery, or other regulations can result in penalties that may include denial of export privileges, fines, penalties, and seizure of products, or loss of reputation, any of which could have a material adverse effect on our business, sales, and earnings. A change in laws and regulations could restrict our ability to transfer product to previously permitted countries, customers, distributors or others. For example, the U.S. Commerce Department imposes and periodically revises restrictions on advanced computing ICs, computer commodities that contain such ICs, as well as on certain semiconductor manufacturing items, and expands controls on transactions involving items for supercomputer and semiconductors and manufacturing end-uses. In October 2023, the U.S. Commerce Department issued proposed rules updating the October 2022 rule to seek additional export restrictions for certain semiconductors and related manufacturing equipment, and it is expected the U.S. Commerce Department will continue to revise such regulations in the future. The Export Administration Regulations also effectively prohibits sales of items for a "military end use," to a "military end-user," or for a "military intelligence end- [added] user," or end-use to certain countries, such as Belarus, Burma, Cambodia, Cuba, China, Iran, North Korea, Russia, Syria, and Venezuela. Any of the foregoing changes could adversely impact our operational costs due to the administrative impacts of complying with these regulations and may limit those with whom we conduct business. Any one or more of these sanctions, future sanctions, a change in laws or regulations, or a prohibition on shipment of our products to significant customers could have a material adverse effect on our business, financial condition, and results of operations.

We [added] have a rapidly growing business, a dynamic and rapidly evolving market in which we sell our products, our dependence on a limited number of customers, as well as numerous other factors beyond our control, could impede our ability to forecast quarterly and annual revenue accurately. As a result, we could experience budgeting and cash flow management problems, unexpected fluctuations in our results of operations and other challenges, any of which could make it difficult for us to maintain profitability and could increase the volatility of the market price of our common stock.

• We have [added] rapidly grown as a business in dynamic and rapidly evolving markets, and we may have difficulty accurately predicting our future revenue for the purpose of appropriately budgeting and adjusting our expenses;

We rely on information systems to manage our business, summarize our operating and financial results, and provide timely information to our management. We [added] have been evaluating the design and implementation of a new ERP system[added] as part of our efforts to enhance and scale our operational and financial systems. As our evaluation has progressed, we have continued to assess our organizational readiness, resource requirements, and overall prioritization of initiatives before proceeding with implementation. As a result, we are continuing to evaluate the appropriate timeline for the design and implementation of a new ERP system and may adjust the scope, timing, or approach to implementation based on our ongoing assessments. This process is a complex project with broad scope, in which we have and will continue to invest significant financial and human capital. Despite our efforts, we may experience delays, unexpected costs, or other difficulties throughout the design and implementation process. Further, although we will need to conduct extensive testing in an effort to ensure that the new ERP system is operating as intended, post-implementation disruptions to or difficulties in use of any such system could require us to incur additional costs, or could impair, among other things, our ability to record sales, process transactions, collect receivables, and produce timely and accurate historical and forecasted financial information, which could adversely impact our business, financial condition, and results of operations. Additionally, if the ERP system we implement does not ultimately operate as intended, the effectiveness of our internal control over financial reporting could be harmed.

Pursuant to our second amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee of ours to us or our stockholders; (iii) any action asserting a claim pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our second amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or (iv) any action asserting a claim governed by the internal affairs doctrine (collectively, the "Delaware Forum Provision"). The Delaware Forum Provision does not apply to any causes of action arising under the Securities Act or the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Our second amended and restated bylaws further provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or the Exchange Act and the respective rules and regulations promulgated thereunder (the "Federal Forum Provision"). In addition, our second amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

In any potential dispute involving patents or other intellectual property, our customers could also become the target of litigation. Our agreements with customers generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of third-party claims of intellectual property infringement. Large indemnity payments could harm our business, financial condition, and results of operations. From time to time, customers require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their intellectual property and trade secrets. Although we normally contractually limit our liability with respect to such obligations, certain of our customer agreements may not include [added] maximum loss clauses, which may result in substantial liability. Any litigation against our customers could trigger indemnification obligations under some of our agreements, which could result in substantial expense to us, and which could materially and adversely affect our financial results.

We are [added] subject to Section 404(a) and (b) of the [added] Sarbanes-Oxley Act, which requires us to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. [added] In addition, our independent registered public accounting firm is required to [added] formally attest to the effectiveness of our internal control over financial [added] reporting. Maintaining effective disclosure controls and procedures and effective internal controls over financial reporting are necessary for us to produce reliable financial statements and disclosure reports. While we have remediated previously identified material weaknesses, we cannot assure you that additional material weaknesses will not arise in the future, particularly as we continue to scale our operations, integrate new systems and processes such as a new enterprise resource planning system, and as certain of our foreign subsidiaries, which historically have not been subject to full SOX-based testing due to their size and scope, grow or otherwise become material and require expanded internal control design, documentation, and testing. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business and could cause a decline in the trading price of our common stock.

Cyber-attacks are increasing in number and sophistication, are well-financed, in some cases supported by state actors, and are designed to not only attack, but also to evade [added] detection, and are being facilitated or enhanced by evolving technologies, including AI. Since the techniques used to obtain unauthorized access to systems and data, or to otherwise sabotage them, change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. [added] Attempts to disrupt or gain unauthorized access to our [added] and our third-party [added] vendors' information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by evolving technologies such as AI. Geopolitical instability may also increase the likelihood that we will experience direct or collateral consequences from cyber conflicts between nation-states or other politically motivated actors targeting critical technology infrastructure. Accidental or willful cybersecurity incidents, data breaches, or other unauthorized access to our information systems or the systems of our third-party service providers, or the existence of computer viruses, malware (such as ransomware), or vulnerabilities in our or their data or software could expose us to a risk of information loss, business disruption, or the misappropriation of proprietary and confidential information, including information relating to our products or customers or the personal information of our employees or third parties.

We rely on third parties for technologies that are integrated into our products. If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies become unreliable, unavailable or fail to operate [added] properly, we may not be able to secure adequate alternatives in a timely manner or at all, and our ability to offer our products and remain competitive in our market would be harmed. In addition, even if we are unable to successfully license technology from third-parties to develop future products, we may not be able to develop such products in a timely manner or at all. The operation or security of our products could be impaired if errors or other defects occur in the third-party technologies we use, and it may be more difficult for us to correct any such errors and defects in a timely manner, if at all, because the development and maintenance of these technologies is not within our control. Any impairment of the technologies or of our relationship with these third parties could harm our business.

Our business could be adversely affected by [added] pandemics, epidemics, outbreaks of infectious diseases or other public health crises in regions where we operate or otherwise do business. [added] Such events could disrupt global and regional economic activity, labor markets, and supply chains, including those applicable to the semiconductor industry, and could adversely affect our employees, customers, suppliers and other business partners.

[added] Public health crises may result in cities, counties, states, and [added] countries imposing a wide range of restrictions on the physical movement of our employees, partners, and [added] customers, including physical distancing, travel bans and restrictions, closure of non-essential business, quarantines, work-from-home directives, and shelter-in-place orders. These measures have previously caused, and may cause in the future, business slowdowns or shutdowns in affected areas, both regionally and worldwide. If future pandemics, epidemics or other global health crises have a substantial impact on the productivity of our employees and partners, or [added] materially impair our ability to operate our business or our customers' ability to purchase our products, our results of [added] operations and overall financial performance may be harmed.

[added] Our business, financial condition, and results of operations have in the past and may in the future vary based on changes in our industry, as well as the impact of the global economy on our third-party manufacturing partners and customers. Our results of operations currently depend, in part, on the demand for our products, which in turn are influenced by the amount of business that our customers conduct. To the extent that weak or volatile economic conditions, including due to a pandemic or health epidemic, labor shortages, supply chain disruptions, inflation, [added] government shutdowns, geopolitical developments (such as [added] international conflicts and the implementation of, or changes to or further expansions of, trade sanctions, export restrictions, tariffs, and embargoes), deterioration of the financial services industry, and other events outside of our control, result in a reduced volume of business for our customers and prospective customers, demand for, and use of, our products has in the past and may in the future decline.

For example, the [added] CCPA as amended by the California Privacy Rights Act, affords California residents broad privacy rights and protections, [added] imposes specific obligations with respect to the processing and storage of personal data and provides for civil penalties for certain violations. Numerous additional states have passed and others have proposed and may in the future pass comprehensive state privacy laws that may impose additional obligations on our business. [added] Also, if we collect and process personal data regarding individuals in the European Economic Area ("EEA") or the UK, we may be subject to the GDPR in this report unless specified otherwise. Compliance with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to [added] change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our potential European activities.

We rely on information systems to manage our business, summarize our operating and financial results, and provide timely information to our management. We have been evaluating the design and implementation of a new ERP system as part of our efforts to enhance and scale our operational and financial systems. As our evaluation has progressed, we have continued to assess our organizational readiness, resource requirements, and overall prioritization of initiatives before proceeding with implementation. As a result, we are continuing to evaluate the appropriate timeline for the design and [added] implementation of a new ERP system and may adjust the scope, timing, or approach to implementation based on our ongoing assessments. This process is a complex project with broad scope, in which we [added] have and will continue to invest significant financial and human capital. Despite our efforts, we may experience delays, unexpected costs, or other difficulties throughout the design and implementation process. Further, although we [added] will need to conduct extensive testing in an effort to ensure that the new ERP system is operating as intended, post-implementation disruptions to or difficulties in use of [added] any such system could require us to incur additional costs, or could impair, among other things, our ability to record sales, process transactions, collect receivables, and produce timely and accurate historical and forecasted financial information, which could adversely impact our business, financial condition, and results of operations. Additionally, if the ERP system [added] we implement does not ultimately operate as intended, the effectiveness of our internal control over financial reporting could be harmed.

Any [added] investments, joint ventures or acquisitions we may undertake and their integration involve risks and uncertainties, such as:

In addition, to attract new customers or retain existing end customers, we may offer (in some cases through distributors) certain customers favorable prices for our products. In that event, our revenue and gross margins may decline.[added] The loss of a top end customer, a reduction in sales to any top end customer, or our inability to attract new end customers could impact our revenue and materially and adversely affect our results of operations.

In addition, in the future we may use third parties to conduct business on our behalf abroad. We or such future third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we can be held liable for the corrupt or other illegal activities of such future third-party intermediaries and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We have implemented an anti-corruption compliance program, but cannot guarantee that all our employees and agents, as well as those companies we outsource certain of our business operations to, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, prosecutions, loss of export privileges, suspension or debarment from U.S. government contracts, substantial diversion of management's attention, significant legal fees and fines, settlements, damages, severe criminal or civil sanctions, penalties or injunctions against us, our officers, or our employees, disgorgement of profits, and other sanctions, enforcement actions, and remedial measures, and prohibitions on the conduct of our business, any of which could have a materially adverse effect on our reputation, business, trading price, results of operations, financial condition, and prospects.

Any additional grants of equity awards under our stock incentive plans will also increase stock-based compensation expense and negatively affect our results of operations. For example, during the year ended December 31, [added] 2025, stock-based compensation expense was [added] $160.0 million. As a public company, our [added] equity awards are primarily subject to time-based vesting, and accordingly we expect to continue to incur stock-based compensation expense as these [added] awards vest.

In addition, in the future we may use third parties to conduct business on our behalf abroad. We or such future third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we can be held liable for the corrupt or other illegal activities of such future third-party [added] intermediaries and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We have implemented an anti-corruption compliance program, but cannot guarantee that all our employees and agents, as well as those companies we outsource certain of our [added] business operations to, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, prosecutions, loss of export privileges, suspension or debarment from U.S. government contracts, substantial diversion of management's attention, significant legal fees and fines, settlements, damages, severe criminal or civil sanctions, penalties or injunctions against us, our officers, or our employees, disgorgement of profits, and other sanctions, enforcement actions, and remedial measures, and prohibitions on the conduct of our business, any of which could have a materially adverse effect on our reputation, business, trading price, results of operations, financial condition, and prospects.

We rely on third parties for technologies that are integrated into our products. If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies become unreliable, unavailable or fail to operate properly, we may not be able to secure adequate alternatives in a timely manner or at all, and our ability to offer our products and remain competitive in our market would be harmed. In addition, even if we are unable to successfully license technology from third-parties to develop future products, we may not be able to develop such products in a timely manner or at all. The operation or security of our products could be impaired if errors or other defects occur in the third-party technologies we use, and it may be more difficult for us to correct any such errors and defects in a timely manner, if at all, because the development and maintenance of these technologies is not within our control. Any impairment of the technologies or of our relationship with these third parties could harm our business.

Regulatory activity, such as tariffs, export controls, economic sanctions, and restrictions on investment and data transfers as well as vigorous enforcement of U.S. export controls and economic sanctions laws have in the past and may continue to materially limit our ability to make sales to our customers in China, which has in the past and may continue to harm our results of operations, reputation, and financial condition. Due to the U.S. government restricting sales to certain customers in China, sales to some of our customers may require licenses in order for us to export our products; however, there can be no assurances that requests for licenses will be approved by the U.S. government. [added] Further, augmentation of restricted or prohibited persons lists maintained by the U.S. government could reduce our ability to sell to certain customers. Fluid tariff policies of both the U.S. and Chinese governments may reduce demand for our products and could increase input costs. Moreover, concerns that U.S. companies may not be reliable suppliers as a result of these and other actions has caused, and may in the future cause, some of our customers in China to amass large inventories of our products well in advance of need or caused some of our customers to replace our products in favor of products from other suppliers. Additionally, the Chinese government adopted a law with respect to unreliable suppliers. Any designation as an unreliable supplier may have an adverse impact on our business and operations. Recent U.S. government restrictions on investments into China by U.S. persons and regarding access by Chinese persons to certain personal data relating to U.S. persons could hinder our Chinese operations. In addition, there may be indirect impacts to our business that we cannot easily quantify such as the fact that some of our other customers' systems may also be impacted by export restrictions.

As a public company, we have incurred, and will continue to incur, significant finance, legal, accounting, and other expenses, including director and officer liability insurance, that we did not incur as a private company, and which we expect to further increase [added] following our recent transition to large accelerated filer status. The Sarbanes-Oxley Act, the Dodd- Frank Act, stock exchange listing requirements, the reporting requirements of the Exchange Act and other applicable securities rules and regulations impose various requirements on public companies in the United States. [added] As a large accelerated filer, we are subject to enhanced reporting, internal control, and compliance obligations, including auditor attestation of internal control over financial reporting, additional reporting obligations regarding executive compensation, and the requirement to hold nonbinding advisory votes on executive compensation, and our management and other personnel devote a substantial amount of time to support compliance with these requirements. Moreover, these rules and regulations have increased, and will continue to increase, our legal and financial compliance costs and make certain activities more time-consuming and costly. We cannot predict the amount or timing of these additional costs that we will incur as a public company, and the resulting strain on management resources could adversely affect our results of operations and financial condition. These enhanced obligations may also increase the risk of errors or delays in our financial and SEC reporting, and we may not be able to effectively manage these additional requirements, which could adversely affect investor confidence and the market price of our common stock.

End customer relationships often require us to develop new products that may involve significant technological and design challenges, and our end customers frequently place considerable pressure on us to meet tight development schedules. Accordingly, we may have to devote a substantial amount of our resources to our strategic relationships, which could detract from or delay our completion of other important development projects. Delays in development could impair our relationships with our end customers and negatively impact forecasted sales of the products under development. Moreover, it is possible that our end customers may develop their own products that may compete with our solutions, or adopt a competitor's solution for products that they currently buy from us. If that happens, our sales would be adversely impacted and our business, financial condition, and results of operations would be materially and adversely affected.

The rules governing U.S. federal, state, and local and non-U.S. taxation are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the U.S. Treasury Department, and other taxing authorities. Changes to tax laws or tax rulings, [added] such as the One Big Beautiful Bill Act enacted into law on July 4, 2025, or changes in interpretations of existing laws (which changes may have retroactive application), could adversely affect us or holders of our common stock. These changes could subject us to additional income-based taxes and non-income taxes (such as payroll, sales, use, value-added, digital tax, net worth, property, and goods and services taxes), which in turn could materially affect our financial position and results of operations. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our customers' and our compliance, operating, and other costs, as well as the costs of our products. In recent years, many such changes have been made, and changes are likely to continue to occur in the future. As we expand the scale of our business activities, any changes in the U.S. and non-U.S. taxation of such activities may increase our effective tax rate and harm our business, financial condition, and results of operations.

Pursuant to our second amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee of ours to us or our stockholders; (iii) any action asserting a claim pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our second amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the[added] State of Delaware; or (iv) any action asserting a claim governed by the internal affairs doctrine (collectively, the "Delaware Forum Provision"). The Delaware Forum Provision does not apply to any causes of action arising under the Securities Act or the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Our second amended and restated bylaws further provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or the Exchange Act and the respective rules and regulations promulgated thereunder (the "Federal Forum Provision"). In addition, our second amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

• We have a [added] limited history of generating net [added] income, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not maintain profitability in the future;

As we develop and introduce new products or new generations of our existing products, we face the risk that our new products do not meet the needs of our customers' next generation systems and applications or that our customers may forego adopting one or more newer generations of our existing products. Regardless of the improved features or superior performance of the newer generations of our existing products, customers may be unwilling to adopt our new products due to design or pricing constraints, among other reasons. Even if customers choose to adopt our new products or new generations of our existing products, they may be slow to do so, which may result in certain of our products selling more frequently than other products for sustained periods of time. For example, most of our historical sales have been for our Aries Smart DSP Retimer product family. Because of the extensive time and resources that we invest in researching and developing new products and new generations of our existing products, if we are unable to sell new products or new[added] generations of our existing products, our revenue could decline and our business, financial condition, and results of operations would be negatively affected.

We have in the past, and may in the future choose to acquire [added] or make investments in companies, businesses and/or assets that are complementary to our business, including for the purpose of expanding our new product design capacity, introducing new design, market, or application skills, enhancing, and expanding our existing product lines or grow the number of engineers. We cannot forecast the number, timing or size of future [added] investments or acquisitions, or the effect that any such [added] investments or acquisitions might have on our operating or financial results.

Further, any upturn in the semiconductor industry could result in increased competition for access to [added] third-party manufacturing partners. We are dependent on the availability of this capacity to manufacture and assemble our products, and our third-party manufacturing partners have not provided assurances that adequate capacity will be available to us in the future.

The United States and other countries have levied tariffs and taxes on certain goods, implemented trade restrictions, and introduced national security protection policies. Trade tensions between the United States and China, which escalated in 2018, have continued and include the United States increasing tariffs on Chinese origin goods and China increasing tariffs on U.S. origin goods. Increases on tariffs on Chinese-origin goods may intensify pricing pressure on our products and negatively impact our operating results. Increased tariffs on our customers' systems could adversely impact their sales, and increased tariffs on our products in comparison to those of our competitors could each result in lower demand for our products.[added] U.S. tariffs, including those on semiconductors, could reduce demand for our products. Additionally, U.S. tariffs, including those on critical minerals, could increase our input costs. Tariff increases by other nations could similarly negatively affect demand for our products and could increase input costs.

Additionally, we expect to see increasing government and supranational [added] legislation and regulation related to [added] AI use and ethics, which may also significantly increase the burden and cost of research, development, and compliance in this area. For example, the EU's Artificial Intelligence [added] Act ("EU AI Act"), entered into force in [added] August 2024 and, with some exceptions, [added] becomes effective 24 months thereafter. [added] As enacted, the EU AI Act imposes significant obligations on providers and deployers of high risk [added] AI systems and general purpose AI models and encourages providers and deployers to account for EU ethical principles [added] when developing and using AI technology. The scope of requirements depends on judicial interpretations and forthcoming legislative amendments, and non-compliance can lead to significant fines. If we develop or use AI systems that are governed by the EU AI Act, it may necessitate ensuring higher standards of data quality, transparency, and human oversight, as well as adhering to specific and potentially burdensome and costly ethical, accountability, and administrative requirements. [added] In addition, we may become subject to [added] similar or additional legislation or requirements in the United States or other jurisdictions, as well as evolving regulatory guidance and enforcement under existing laws.

• other events or factors, including those resulting from political conditions, election cycles, [added] government shutdowns, international or armed conflicts, war or incidents of terrorism, increased tariffs, or responses to these events.

There are numerous U.S. federal, state, local, and international laws and regulations regarding privacy, data protection, and cybersecurity that govern the collection, receipt, processing, and storage of personal information and other information. The scope of these laws and regulations is expanding and evolving, [added] and may be subject to differing interpretations, [added] which may be inconsistent [added] across jurisdictions, or conflict with other rules.

Our third-party manufacturing partners may also extend lead times, limit supplies, place products on allocation, or increase prices that could lead to interruption of supply or increased demand in the industry. For example, the supply of these materials may be negatively impacted by increased trade tensions between the United States and its trading partners, particularly the People's Republic of China. Moreover, TSMC has increased and may increase in the future the wafer prices we pay. Our products are incorporated into complex devices and systems, which creates supply chain cross-dependencies. Due to these cross dependencies, any supply chain disruptions could impact the demand for our products in[added] the short term. In the event that we cannot obtain sufficient quantities of materials in a timely manner or at reasonable prices from third-party manufacturing partners, the quality of the material deteriorates or we are not able to pass on higher manufacturing costs to our customers, our business, financial condition, and results of operations could be adversely impacted.

Our growth strategy includes acquiring businesses [added] and/or assets that offer complementary products, services, and technologies, enhance our market coverage or technological capabilities or [added] enable us to increase the number of engineering employees.

In addition, current and future changes to the U.S. and foreign regulatory approval process and requirements related to [added] investments or acquisitions may cause approvals to take longer than anticipated, not be forthcoming or contain burdensome conditions, which may prevent the transaction or jeopardize, delay or reduce the anticipated benefits of the transaction, and impede the execution of our business strategy.

Certain holders of our common stock have rights, subject to some conditions, to require us to file registration statements for the public resale of the common stock or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the trading price of our common stock to decline or be volatile.

From time to time, we may also seek to divest or wind down [added] assets or portions of our business, either acquired or otherwise, any of which could materially affect our cash flows and results of operations. Such dispositions involve risks and uncertainties, including our ability to sell such [added] assets or businesses on terms acceptable to us, or at all, disruption to other parts of our business, potential loss of employees or customers, or exposure to unanticipated liabilities or ongoing obligations to us following any such dispositions. In addition, dispositions may include the transfer of technology and/or the licensing of certain intellectual property rights to third parties, which could limit our ability to utilize such intellectual property rights or assert these rights against such third parties.

Our products may contain defects when they are first introduced or as new versions or enhancements are released, or their release may be delayed due to unforeseen difficulties during product development. If any of our products or third-party components used in our products, contain defects, bugs, vulnerabilities, or have reliability, quality, or compatibility problems, we may not be able to successfully design workarounds or resolve the issues in a timely manner. Furthermore, if any of these problems are not discovered until after we have commenced commercial production or deployment of a new product, we may be required to incur additional development costs, as well as costs to repair or replace our products, and expense previously capitalized production [added] equipment costs, all of which could materially adversely affect our reputation, business, results of operations, and/or financial condition.

In any potential dispute involving patents or other intellectual property, our customers could also become the target of litigation. Our agreements with customers generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of third-party claims of intellectual property infringement. Large indemnity payments could harm our business, financial condition, and results of operations. From time to time, customers require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their intellectual property and trade secrets. Although we normally contractually limit our liability with respect to such obligations, certain of our customer agreements may not include maximum loss clauses, which may result in substantial liability. Any litigation against our customers could trigger indemnification obligations under some of our agreements, which could result in substantial expense to us, and which could materially and adversely affect our financial results.

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors, consultants, and advisors under our stock incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments[added] in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

Our success depends in part upon protecting our intellectual property. We rely primarily on patent, copyright, trademark, and trade secret laws, as well as intellectual property assignment and confidentiality and non-disclosure agreements and other methods, to protect and establish our rights in our proprietary technologies and know-how. As of December 31, [added] 2025, we have been issued [added] 26 patents in the United States and [added] one patent in foreign jurisdictions. In addition, we have 35 patent applications pending in the United States, and [added] five patent applications pending in foreign jurisdictions. We cannot guarantee that any pending or future patent applications will be issued to have the coverage originally sought, and even if the pending patent applications are granted, the rights granted to us may not be meaningful or provide us with any commercial advantage. Additionally, our patents could be opposed, contested, narrowed, circumvented, challenged, abandoned, or designed around by our competitors or be declared invalid or unenforceable in judicial or administrative proceedings. The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies. Even if we do timely seek patent protection, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted after issuance, and as a result we can give no assurance that any patents that have issued to may issue in the future will protect our current and future products, will provide us with any competitive advantage, or will not be challenged, invalidated or circumvented in the future.

Furthermore, weak economic conditions have in the past and may in the future make it more difficult to collect on outstanding accounts receivable and increase our expenses. Specifically, our distributors or customers may fail to make payments when due, default under their agreements with us, or become insolvent or declare bankruptcy, or a supplier may determine that it will no longer do business with us as a customer. Additionally, a distributor, customer or supplier could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution. Further, in [added] recent years, we have seen labor costs, product supply costs, and other operating expenses rise due to high rates of inflation, but have not been able to offset these costs with higher prices of our products. If customers or prospective customers elect not to purchase our products, as a result of a weak economy or rising inflation and increased costs or otherwise, or our distributors are unable to continue to distribute our products, our business, results of operations, and financial condition could be adversely affected.

The industry in which we compete is characterized by rapid technological change, changes in customer requirements, frequent new product introductions and enhancements, short product cycles and evolving industry standards, and new delivery methods. In addition, the fabrication of semiconductor products has transitioned over time to increasingly smaller line width geometries, and failure to successfully transition to product designs utilizing smaller geometry process nodes could impair our competitive position. In order to remain competitive, we have made, and expect to continue to make, significant investments in research and [added] development and often well ahead of the anticipated product revenue. For the years ended December 31, [added] 2025 and 2024, research and developments expenses were [added] $304.0 million and [added] $200.8 million, respectively. If we fail to develop new and enhanced products and technologies, if we focus on technologies that do not become widely adopted, or if new competitive technologies or industry standards that we do not support become widely accepted, demand for our products may be reduced. Increased investments in research and development or unsuccessful research and development efforts could cause our cost structure to fall out of alignment with demand for our products, which would have a negative impact on our financial results.

Further, we continue to devote resources to protect our systems and data from unauthorized access or misuse, and we will be required to expend greater resources in the future. However, we cannot guarantee that our risk management processes will be effective at mitigating the risk to our information technology systems.

Our revenue and operating results could fluctuate materially and could be materially and disproportionately impacted by the purchasing decisions of our end customers. Due to the inability to predict demand or other reasons, some of our distributors and end customers' manufacturing partners may accumulate excess inventories and, as a consequence, defer purchases of our products. For example, in the first quarter of 2023 we had a $9.7 million charge to write down inventory in excess of our sales forecast for a legacy customer system. Anticipating demand is difficult because our end customers face unpredictable demand for their own products and/or deployment of their own systems. If we overestimate end customer demand, or end customer demand is otherwise impacted by other factors impacting our assumptions, we might produce significant excess [added] inventory and consequently inventory write-off, which would reduce our gross margin and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we may miss revenue opportunities, potentially lose market share and damage our customer relationships. In addition, as an increasing number of our products are being incorporated into end customer systems, we anticipate greater fluctuations in demand for our products, which makes it more difficult to forecast end customer demand.

In addition, as of December 31, [added] 2025, we had (i) [added] 2,721,076 options outstanding that, if fully exercised, would result in the issuance of [added] 2,721,076 shares of common stock, (ii) [added] 9,531,296 RSU and PSU awards outstanding that would result in the issuance of [added] 9,531,296 shares of common stock upon settlement, and (iii) 2,442,360 warrants outstanding that, if fully exercised, would result in the issuance of 2,442,360 shares of common stock. All of the shares of common stock issuable upon the exercise of stock options, subject to RSU awards and the shares reserved for future issuance under our equity incentive plans have been registered on a registration statement on Form S-8 under the Securities Act. Accordingly, these shares can be freely sold in the public market upon issuance, subject to volume limitations under Rule 144 for our executive officers and directors and applicable vesting requirements.

As of December 31, [added] 2025, our executive officers, directors, and greater than 5% stockholders, in the aggregate, beneficially owned approximately [added] 37.9% of our outstanding common stock (assuming no exercise of outstanding options warrants or settlement of RSUs in shares upon vesting). As a result, such persons, acting together, have the ability to control or significantly influence all matters submitted to our board of directors or shareholders for approval, including the appointment of our management, the election and removal of directors and approval of any significant transaction, as well as our management and business affairs. In addition, this concentration of ownership may have the effect of delaying, deferring, or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other shareholders.

Products for our target markets are based on industry standards that are continually evolving, and industry standards are often developed and promoted by larger companies who are industry leaders and provide other components of the systems into which our products are incorporated. In choosing products to develop, we also make certain assumptions[added] about which industry standards we believe will be adopted by industry leaders. For example, CXL connectivity solutions [added] and UALinkTM are in the early stages of market adoption. If our assumptions are incorrect, and larger companies do not support the same industry standards that we do, or if competing standards emerge, it could be difficult for our products to meet the requirements of certain customers. As a result, if we fail to introduce new products or new generations of our existing products that meet prevailing industry standards and the needs of our customers, or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will likely lose market share and our competitive position, potentially on an extended basis, and our operating results will be adversely affected.

Net [added] income was $219.1 million for the year ended December 31, [added] 2025 compared to a net loss of [added] $83.4 million for the year ended December 31, 2024, representing a $302.6 million year-over-year increase.

Net cash provided by operating activities for the year ended December 31, [added] 2025 was $319.3 million, compared to $136.7 million for the comparable period in 2024. The $182.6 million increase in net cash provided by operating activities was a result of a $302.6 million increase in net income, partially offset by both lower non-cash charges of $67.3 million and an unfavorable change of $52.7 million from changes in operating assets and [added] liabilities. The lower non-cash charges of $67.3 million was primarily [added] due to a $74.6 million decrease in non-cash stock-based compensation expense, partially offset by increased warrants contra revenue of $4.1 million and increased depreciation and amortization expense of $3.7 million. The unfavorable change of $52.7 million from changes in operating assets and liabilities was primarily attributable to (i) a $21.9 million unfavorable change in accounts payables and accrued other liabilities primarily due to the timing of payments, (ii) a $20.7 million increase in [added] the changes of the prepaid expenses and other [added] assets primarily due to [added] prepayment for a research and development vendor and a higher income tax receivable from excess tax benefits related to equity compensation, and (iii) a $13.9 million unfavorable change in accounts [added] receivable due to [added] higher product sales and the timing of [added] customer payments. These unfavorable changes were partially offset by a reduced inventory balance of $6.3 million.