Note 9. Commitments and Contingencies

Purchase Obligations

The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. The Company is exposed to lengthening lead times and increasing costs on various components, certain of which are non-cancelable regardless of lead time, and as a result the Company has issued purchase orders to supply chain partners beyond contractual termination periods. As of June 28, 2026, the Company had approximately $67.9 million, as compared to $55.3 million as of December 31, 2025, in short-term non-cancelable purchase commitments with suppliers or where the suppliers had procured unique materials and components upon receipts of the Company’s purchase orders. As of June 28, 2026, $231.8 million of purchase orders beyond contractual termination periods remained outstanding. Consequently, the Company may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order if the purchase order is cancelled. Expenses incurred in respect of cancelled purchase orders have historically not been significant relative to the original order value. For those orders not governed by master purchase agreements, the commitments are governed by the commercial terms on the Company’s purchase orders subject to acknowledgment from its suppliers. The Company establishes a loss liability for all products it does not expect to sell or orders it anticipates canceling for which it has committed purchases from suppliers. Such loss liability, which was $1.9 million as of June 28, 2026 and $0.8 million as of December 31, 2025, was included in Other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. Losses incurred in relation to purchase commitments, including unique materials and components, were $1.3 million for the three and six months ended June 28, 2026, substantially all of which were incurred in the second fiscal quarter, and $0.2 million and $0.3 million for the three and six months ended June 29, 2025, respectively.

Non-Trade Commitments

As of June 28, 2026, the Company had non-cancelable purchase commitments of $7.4 million pertaining to non-trade activities.

Warranty Obligations

Litigation and Other Legal Matters

From time to time, the Company is involved in disputes, litigation, and other legal actions. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next twelve months, or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company’s business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company’s estimates, which could result in the need to adjust the liability and record additional expenses.

The Company does not believe that it will incur a material loss for any of its pending litigation matters at this time, and consequently has not established any material loss provisions.