LITELumentum

U.S. regulatory activity, such as tariffs, export controls, and economic sanctions laws have in the past, and may in the future, materially limit our ability to make sales to customers in certain regions of the world, including China, and which have in the past, and may in the future, increase our costs and harm our results of operations and financial condition. Throughout 2025, 2025 and 2026, the U.S. imposed a series of tariffs on imported goods. While these These tariffs are were generally positioned to have the most significant impacts on goods originating from China, but nearly all countries worldwide are were impacted at levels ranging from 15% to stacked tariffs in excess of 100% in some cases. The While many of the tariffs and surcharges initially proposed were invalidated or expired, the tariff landscape continues to evolve daily and, as a result, the full impact of these current or future tariff measures on our business is uncertain. In addition to the geographic tariffs, U.S. government investigations are currently underway that may result in new tariffs on certain products, including semiconductors, computers, machines, and other products derivative of critical minerals. For example, on April 14, 2025, the Secretary of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on U.S. national security of imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including semiconductor substrates and bare wafers, legacy chips, leading-edge chips, microelectronics, and other components. Similarly, the U.S. government has initiated additional investigations that could result in tariffs or other trade restrictions affecting our operations, supply chain, customers, or markets. These include Section 232 investigations concerning processed critical minerals and their derivative products and robotics and industrial machinery, as well as Section 301 investigations concerning structural excess capacity and production in manufacturing sectors in certain foreign economies that have failed to adopt or effectively enforce forced labor prohibitions. Although these investigations are currently at different stages, they all may result in additional tariffs or trade restrictions, which could adversely impact our business. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, and any such actions could result in additional costs, manufacturing delays, or other difficulties, as well as additional risks, and may not be effective.

Cash provided by operating activities was $126.3 $751.4 million during the year ended June 28, 2025, 27, 2026, which reflects the net income loss of $25.9 $6,935.1 million and non-cash items of $414.9 $7,978.5 million, partially offset by $314.5 $292.0 million of changes in our operating assets and liabilities. Changes in operating assets and liabilities were primarily driven by an a $221.6 million increase in accounts payable of $69.2 million primarily due to higher inventory purchases and capital expenditures, an a $88.4 million increase in accrued payroll and related expenses of $22.0 million mainly driven by our accrual for employee cash incentive bonuses and related payroll taxes and payroll taxes related to stock-based compensation, offset by a decrease in income tax liabilities of $218.2 $43.4 million primarily due to income tax benefits during the year ended June 28, 2025, an increase in inventories of $71.3 million primarily due to inventory builds to support market demand, an increase in accounts receivable of $58.7 million driven by higher revenue, an increase of $35.1 million in prepayments and other current and non-current assets related mainly to value-added-tax receivables driven by higher recent capital expenditures and inventory purchases, and a decrease of $21.8 million in accrued expenses and other current and non-current liabilities driven by payment of the net settlement amount of the Oclaro merger litigation contractual liabilities and restructuring provision for warranty reserves, and a $47.9 million decrease in income tax liabilities primarily due to income tax payments, offset by a $270.4 million increase in accounts receivable mainly driven by higher revenue, a $228.4 million increase in inventories driven by builds to support market demand and a $96.2 million increase in prepayments and other current and non-current assets primarily driven by a $45.3 million increase in value-added-tax receivables related payments. to capital expenditures and inventory purchases, a $24.0 million inventory-related prepayments, and a $13.2 million increase in receivables from our contract manufacturers driven by increase manufacturing volume.

During the third quarter of fiscal year 2026, we completed a reorganization of our business units, which resulted in changes to our reporting unit structure. As a result of this reorganization, we performed an interim qualitative assessment of goodwill for our reporting units. In performing the assessment, we evaluated relevant events and circumstances, including changes in the composition of reporting units, financial performance, and other entity-specific and macroeconomic factors. Based on the impairment analysis performed this assessment along with a qualitative assessment done in the fourth quarter of each fiscal year presented, 2026, it was not more likely than not that the fair value of each any of our reporting units substantially exceeded the was less than its carrying value; as such, our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary. Accordingly, no goodwill impairment charge was recognized during fiscal year 2026.

We depend on a limited number of contract manufacturers, subcontractors and suppliers for raw materials, packages and standard components. We generally purchase these single or limited source products through standard purchase orders or one-year supply agreements and have no significant long-term guaranteed supply agreements with these vendors. While we seek to maintain a sufficient safety stock of such products and maintain on-going communications with our suppliers to guard against interruptions or cessation of supply, our business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or our inability to obtain reduced pricing from our suppliers in response to competitive pressures. In addition, the imposition of tariffs on certain imported goods and materials may increase our costs and place upward pressure on the cost of sales.