Ichor Holdings (ICHR) came out with a quarterly loss of $0.09 per share versus the Zacks Consensus Estimate of $0.01. This compares to earnings of $0.38 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -1,000%. A quarter ago, it was expected that this company would post earnings of $0.07 per share when it actually produced a loss of $0.06, delivering a surprise of -185.71%.Over the last four quarters, the company has surpassed ...

Financial Performance - Q1 2024 revenue was $201.4 million, a decrease of 1.1% from Q4 2023 ($203.5 million) and a decrease of 10.8% from Q1 2023 ($225.9 million) [2] - Q1 2024 GAAP gross margin was 11.4%, up from 10.0% in Q4 2023 but down from 14.7% in Q1 2023 [1] - Q1 2024 net loss was $9.0 million, an improvement from a net loss of $11.9 million in Q4 2023 and a net income of $0.0 million in Q1 2023 [2] - Q1 2024 diluted EPS was $(0.30), compared to $(0.40) in Q4 2023 and $0.00 in Q1 2023 [2] - Non-GAAP net loss for Q1 2024 was $(2.7) million, compared to $(1.7) million in Q4 2023 and $11.1 million in Q1 2023 [3] - Operating loss for the three months ended March 29, 2024, was $3.7 million, an improvement from a loss of $8.0 million in the previous quarter [32] - U.S. GAAP net loss for Q1 2024 was $8.989 million, an improvement from a loss of $11.899 million in Q4 2023 [36] - Non-GAAP net loss for Q1 2024 was $2.712 million, compared to a loss of $1.675 million in Q4 2023 and a profit of $11.128 million in Q1 2023 [36] - Non-GAAP operating income for the three months ended March 29, 2024, was $2.4 million, compared to $13.7 million in the same period last year [32] - U.S. GAAP diluted EPS for Q1 2024 was $(0.30), improving from $(0.40) in Q4 2023 [36] - Non-GAAP diluted EPS for Q1 2024 was $(0.09), slightly worse than $(0.06) in Q4 2023 [36] Cash Flow and Liquidity - Cash and cash equivalents at the end of Q1 2024 were $102.1 million, an increase of $22.2 million from the prior year [6] - Cash provided by operating activities in Q1 2024 was $4.8 million, consisting of a net loss of $9.0 million and net non-cash charges of $10.2 million [8] - Net cash provided by operating activities for Q1 2024 was $4.804 million, down from $37.574 million in Q4 2023 [38] - Free cash flow for Q1 2024 was $314 thousand, a significant decrease from $35.317 million in Q4 2023 [38] - Cash and cash equivalents increased to $102.1 million as of March 29, 2024, up from $80.0 million at the end of the previous quarter [27] Debt and Assets - The company reduced total debt outstanding by $117 million at the end of Q1 2024 [3] - Total current assets rose to $421.2 million, compared to $401.4 million in the previous quarter [23] - Total liabilities decreased significantly to $260.2 million from $373.8 million in the previous quarter [23] - The company issued ordinary shares, net of fees, amounting to $136.7 million during the quarter [27] Expenses and Investments - Research and development expenses for the three months ended March 29, 2024, were $5.4 million, slightly down from $5.5 million in the previous quarter [25] - Capital expenditures in Q1 2024 were $4.490 million, compared to $2.257 million in Q4 2023 [38] - Share-based compensation expenses were $2.375 million in Q1 2024, down from $4.672 million in Q4 2023 [36] - The company incurred transaction-related costs of $785 thousand in Q1 2024 related to acquisitions [36] Future Outlook - For Q2 2024, the company expects revenue to be in the range of $190 million to $205 million and GAAP diluted EPS to be between $(0.22) and $(0.10) [4] - The company aims to deepen and expand its penetration of proprietary products in the semiconductor capital equipment market [1] Valuation and Tax - The company recorded a valuation allowance against U.S. federal and state deferred tax assets starting Q1 2024 [37]

Part I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) Ichor Holdings designs and manufactures critical fluid delivery subsystems for semiconductor capital equipment, with 2023 revenue of $811.1 million reflecting an industry downturn Key Financial Performance (2021-2023) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Revenue** | $811.1M | $1,280.1M | $1,096.9M | | **GAAP Net Income (Loss)** | $(43.0)M | $72.8M | $70.9M | | **Non-GAAP Net Income** | $12.3M | $104.9M | $97.7M | - The company is a leader in designing, engineering, and manufacturing critical fluid delivery subsystems (gas and chemical) for semiconductor capital equipment[16](index=16&type=chunk) - Ichor's top three customers, Applied Materials, Lam Research, and ASML, accounted for a combined **82% of sales in 2023**[37](index=37&type=chunk) [Company Overview](index=5&type=section&id=Company%20Overview) Ichor specializes in critical fluid delivery subsystems and vertically integrated components for semiconductor manufacturing, enabling OEMs to focus on core competencies - Primary products include gas delivery subsystems for 'dry' processes (etch, deposition) and chemical delivery subsystems for 'wet' processes (CMP, cleaning)[16](index=16&type=chunk) - The company also provides vertically integrated components like precision-machined parts, weldments, and surface treatment technologies[16](index=16&type=chunk) - Outsourcing to specialized suppliers like Ichor allows OEMs to leverage specialized engineering skills and focus on their core value-added processes[17](index=17&type=chunk) [Our Competitive Strengths](index=6&type=section&id=Our%20Competitive%20Strengths) Ichor's strengths include deep engineering expertise, early customer engagement, strong OEM relationships, operational excellence, and a capital-efficient model - Key strengths include: - Deep fluids engineering expertise with a team of chemical, mechanical, electrical, and software engineers - Early engagement in customers' product development, often leading to sole-source supplier status - Strong, long-term relationships with top-tier customers like Applied Materials, Lam Research, and ASML - Operational excellence with strategically located facilities and short lead times (often less than four weeks) - A capital-efficient and scalable business model with low fixed costs[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Our Growth Strategy](index=8&type=section&id=Our%20Growth%20Strategy) Ichor's growth strategy focuses on increasing market share, expanding into new markets and products, acquiring new customers, and improving manufacturing efficiency - Grow market share with existing customers by leveraging engineering talent and expanded product offerings[26](index=26&type=chunk) - Expand total available market through new products in areas like machined components and chemical delivery, and by entering new sectors such as medical, aerospace, and defense via acquisitions[27](index=27&type=chunk)[28](index=28&type=chunk) - Expand the total customer base by engaging with new OEMs considering outsourcing their fluid delivery needs[29](index=29&type=chunk) - Continuously improve manufacturing process efficiency to reduce cycle times, lower costs, and improve profitability[30](index=30&type=chunk) [Customers, Sales, and Marketing](index=11&type=section&id=Customers%2C%20Sales%2C%20and%20Marketing) Ichor sells directly to a concentrated OEM customer base, with its top three customers accounting for **82% of 2023 sales**, operating on a purchase order basis - The semiconductor equipment market is highly concentrated, with **five companies accounting for over 70% of process tool revenues**[37](index=37&type=chunk) - For 2023, the **top three customers (Applied Materials, Lam Research, and ASML) represented a combined 82% of sales**[37](index=37&type=chunk) - The company generally operates on a purchase order basis and does not have long-term contracts with fixed or minimum volumes[37](index=37&type=chunk) [Competition](index=13&type=section&id=Competition) Ichor competes with other fluid delivery suppliers and OEM internal groups, with key factors including customer relationships, engineering, and manufacturing flexibility - The fluid delivery subsystem market is concentrated, with key competition from **Ultra Clean Technology** and regional suppliers[49](index=49&type=chunk) - Primary competitive factors emphasized are customer relationships, early engagement, engineering staff, cycle times, and manufacturing flexibility[49](index=49&type=chunk) [Human Capital Resources](index=14&type=section&id=Human%20Capital%20Resources) As of December 29, 2023, Ichor had **1,690 full-time employees**, focusing on competitive compensation, talent development, diversity, and safety Workforce Demographics (as of Dec 29, 2023) | Category | Number of People | | :--- | :--- | | Full-time employees | ~1,690 | | Contract/temporary workers | ~555 | | **By Function:** | | | Engineers | ~140 | | Sales & Marketing | ~110 | | Manufacturing | ~1,770 | | Executive & Administrative | ~225 | [Risk Factors](index=15&type=section&id=ITEM%201A.%20RISK%20FACTORS) Ichor faces significant risks from semiconductor industry cyclicality, customer concentration, competition, supply chain disruptions, and geopolitical factors [Economic and Strategic Risks](index=18&type=section&id=Economic%20and%20Strategic%20Risks) Ichor's business is highly exposed to the cyclical semiconductor industry, customer concentration, intense competition, and global economic and geopolitical instability - Business depends significantly on the **cyclical semiconductor capital equipment industry**[69](index=69&type=chunk)[70](index=70&type=chunk) - Reliance on a very small number of OEM customers is a major risk; in 2023, the **top three customers accounted for 82% of sales**[73](index=73&type=chunk) - The company is exposed to risks from global economic weakness, geopolitical instability (e.g., Russia-Ukraine conflict, Middle East conflict), and trade tensions between the U.S. and China[80](index=80&type=chunk) [Business and Operational Risks](index=22&type=section&id=Business%20and%20Operational%20Risks) Operational risks include manufacturing complexity, supply chain reliance, order uncertainties, IT system vulnerabilities, and dependence on key employee expertise - The manufacturing process is highly complex, and any failure to manage it effectively can lead to lost customers and liability[88](index=88&type=chunk) - Dependence on a limited number of suppliers for quality components may harm production and increase costs[92](index=92&type=chunk) - The business is subject to order and shipment uncertainties as it generally operates on short-term purchase orders rather than long-term contracts[96](index=96&type=chunk) - The business is vulnerable to IT system failures and cyber-attacks, with risks heightened by the evolving nature of threats and global political environment[97](index=97&type=chunk)[98](index=98&type=chunk) [Legal and Regulatory Risks](index=27&type=section&id=Legal%20and%20Regulatory%20Risks) Ichor faces legal and regulatory risks from data privacy laws, trade policy changes (e.g., BIS Rule), environmental compliance, and internal control requirements - The business is subject to complex international laws regarding data privacy, such as **GDPR** and **CCPA**[106](index=106&type=chunk) - Changes in U.S. or international trade policy, tariffs, and import/export regulations, such as the **BIS Rule impacting semiconductor-related exports to China**, may have a material adverse effect on business[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company previously identified and has since remediated material weaknesses in its internal control over financial reporting related to IT general controls[123](index=123&type=chunk) [Liquidity and Capital Resources Risks](index=33&type=section&id=Liquidity%20and%20Capital%20Resources%20Risks) Ichor faces liquidity risks from substantial variable-rate debt totaling **$250.0 million** as of December 29, 2023, and restrictive covenants - As of December 29, 2023, the company had **$135.0 million outstanding under its term loan** and **$115.0 million under its revolving credit facility**[129](index=129&type=chunk) - The credit facilities contain restrictive covenants limiting actions such as incurring additional debt, making investments, and paying dividends[129](index=129&type=chunk) - Borrowings are subject to variable interest rates, exposing the company to risk from rising rates[132](index=132&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that it has no unresolved staff comments from the SEC - None[143](index=143&type=chunk) [Cybersecurity](index=36&type=section&id=ITEM%201C.%20CYBERSECURITY) Ichor's cybersecurity program, based on the **NIST Framework**, is overseen by the Audit Committee and CIO, focusing on risk assessment and employee training - The cybersecurity program utilizes the **National Institute of Standards and Technology (NIST) Cybersecurity Framework**[144](index=144&type=chunk) - Governance is managed by the Audit Committee of the Board, which receives regular reports, and overseen by the Chief Information Officer with over **25 years of experience**[148](index=148&type=chunk)[149](index=149&type=chunk) - The company provides annual cybersecurity awareness training and regular phishing exercises to its employees[146](index=146&type=chunk) [Properties](index=37&type=section&id=ITEM%202.%20PROPERTIES) As of December 29, 2023, Ichor leases approximately **865,700 square feet** for global manufacturing and administrative facilities Leased Facilities by Location | Location | Approximate Square Footage | | :--- | :--- | | California | 271,300 | | Oregon | 172,100 | | Minnesota | 113,300 | | Singapore | 97,700 | | Mexico | 62,900 | | Texas | 47,800 | | Scotland | 37,700 | | Malaysia | 31,900 | | Korea | 18,500 | | Nevada | 12,500 | [Legal Proceedings](index=38&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material litigation or regulatory proceedings - The company is not presently a party to any material litigation or regulatory proceeding[152](index=152&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[153](index=153&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Ichor's ordinary shares trade on NASDAQ under 'ICHR'; the company does not anticipate paying cash dividends soon - The company's ordinary shares trade on the NASDAQ under the symbol '**ICHR**'[158](index=158&type=chunk) - The company does not anticipate paying cash dividends for the foreseeable future[155](index=155&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2023, net sales decreased to **$811.1 million**, resulting in a **$43.0 million net loss** due to a semiconductor industry downturn, despite positive operating cash flow [Results of Operations](index=45&type=section&id=Results%20of%20Operations) For 2023, net sales decreased by **36.6%** to **$811.1 million**, leading to a **$43.0 million net loss** due to reduced demand and higher interest and tax expenses Comparison of Net Sales (2023 vs 2022) | Period | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $811,120K | $1,280,069K | $(468,949)K | (36.6)% | Comparison of Gross Profit (2023 vs 2022) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $103,396K | $211,864K | $(108,468)K | | Gross Margin | 12.7% | 16.6% | -390 bps | - The decrease in gross margin was primarily due to reduced factory utilization from lower volumes and a **60 basis point unfavorable impact** from increased excess and obsolete inventory expense[195](index=195&type=chunk) - Selling, general, and administrative (SG&A) expenses decreased by **10.4%** to **$79.3 million**, mainly due to reduced employee-related expenses and a **$4.1 million legal settlement accrual** in 2022 that did not recur[197](index=197&type=chunk) - Net interest expense increased by **75.3%** to **$19.4 million**, driven by a rise in the weighted average borrowing rate from **3.37% in 2022 to 6.80% in 2023**[199](index=199&type=chunk) - Income tax expense increased to **$11.9 million** from **$2.5 million in 2022**, primarily due to an **$11.1 million charge** for a valuation allowance against U.S. federal and state deferred tax assets[201](index=201&type=chunk) [Non-GAAP Financial Results](index=49&type=section&id=Non-GAAP%20Financial%20Results) In 2023, non-GAAP net income was **$12.3 million** (vs. **$43.0 million GAAP net loss**), reflecting adjustments for non-cash and infrequent charges Reconciliation of GAAP to Non-GAAP Net Income (2023) | Description | Amount (in thousands) | | :--- | :--- | | **U.S. GAAP net income (loss)** | **$(42,985)** | | Amortization of intangible assets | $14,734 | | Share-based compensation | $17,338 | | Other (severance costs) | $2,298 | | Tax adjustments related to non-GAAP items | $9,778 | | Tax expense from valuation allowance | $11,094 | | **Non-GAAP net income** | **$12,257** | GAAP vs. Non-GAAP Diluted EPS (2023) | Metric | 2023 | | :--- | :--- | | U.S. GAAP Diluted EPS | $(1.47) | | Non-GAAP Diluted EPS | $0.42 | [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) As of year-end 2023, Ichor had **$80.0 million** in cash, with **$57.6 million** from operations offsetting **$52.5 million** in net debt payments Summary of Cash Flows (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $57,632 | $31,453 | | Cash used in investing activities | $(15,496) | $(28,933) | | Cash provided by (used in) financing activities | $(48,651) | $8,455 | | **Net increase (decrease) in cash** | **$(6,515)** | **$10,975** | - Cash from operations of **$57.6 million** was driven by non-cash charges (**$61.7 million**) and a decrease in net operating assets (**$38.9 million**), which offset the net loss of **$43.0 million**[215](index=215&type=chunk) - Cash used in financing activities included net payments on credit facilities of **$52.5 million**[219](index=219&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Ichor faces interest rate risk from **$250.0 million** in variable-rate debt, with a **100 basis point** change impacting annual interest expense by **$2.5 million** - Foreign currency exchange risk is not considered material as most transactions are denominated in U.S. dollars[223](index=223&type=chunk) - The company has significant interest rate risk due to variable-rate debt. Total indebtedness was **$250.0 million** as of December 29, 2023[225](index=225&type=chunk) - A hypothetical **100 basis point** change in interest rates would result in a **$2.5 million** change to annualized interest expense[225](index=225&type=chunk) [Controls and Procedures](index=55&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and internal control over financial reporting were effective as of December 29, 2023, remediating prior ITGC weaknesses - Management concluded that disclosure controls and procedures were effective as of December 29, 2023[229](index=229&type=chunk) - A material weakness related to ITGCs in user access and program change management, disclosed in the 2022 Form 10-K, has been remediated as of December 29, 2023[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=57&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%2C%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2024 General Meeting[239](index=239&type=chunk) [Executive Compensation](index=57&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information on executive compensation is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2024 General Meeting[241](index=241&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=59&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information on security ownership is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2024 General Meeting[242](index=242&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=59&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on related party transactions and director independence is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2024 General Meeting[243](index=243&type=chunk) [Principal Accountant Fees and Services](index=59&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information on principal accountant fees and services is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the registrant's Definitive Proxy Statement for its 2024 General Meeting[244](index=244&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=59&type=section&id=ITEM%2015.%20EXHIBIT%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section presents the audited consolidated financial statements and exhibits, with KPMG LLP issuing an unqualified opinion - The independent registered public accounting firm, **KPMG LLP**, issued an unqualified opinion on the consolidated financial statements and on the effectiveness of the company's internal control over financial reporting as of December 29, 2023[251](index=251&type=chunk)[259](index=259&type=chunk) - The auditor's report identified the 'Evaluation of excess and obsolete inventory' as a Critical Audit Matter due to the subjective judgment required in evaluating assumptions about future inventory consumption[262](index=262&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) [Consolidated Balance Sheets](index=63&type=section&id=Consolidated%20Balance%20Sheets) As of December 29, 2023, total assets were **$938.5 million**, with total liabilities at **$373.8 million**, reflecting decreases in receivables and inventories Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 29, 2023 | Dec 30, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $401,365 | $513,458 | | Inventories | $245,885 | $283,660 | | Goodwill | $335,402 | $335,402 | | **Total Assets** | **$938,481** | **$1,083,742** | | **Total Current Liabilities** | $98,962 | $166,292 | | Long-term debt, net | $241,183 | $293,218 | | **Total Liabilities** | **$373,804** | **$496,246** | | **Total Shareholders' Equity** | **$564,677** | **$587,496** | [Consolidated Statements of Operations](index=64&type=section&id=Consolidated%20Statements%20of%20Operations) For 2023, net sales were **$811.1 million**, resulting in a **$43.0 million net loss** or **($1.47) diluted EPS**, a reversal from 2022 net income Statement of Operations Summary (in thousands, except per share data) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $811,120 | $1,280,069 | $1,096,917 | | Gross profit | $103,396 | $211,864 | $177,480 | | Operating income (loss) | $(10,895) | $85,823 | $81,014 | | Net income (loss) | $(42,985) | $72,804 | $70,899 | | Diluted EPS | $(1.47) | $2.51 | $2.45 | [Notes to Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including inventory valuation, revenue recognition, and goodwill testing, with specifics on tax, debt, and segment reporting - Inventories are valued at the lower of cost or net realizable value. The excess and obsolete inventory provision increased from **$17.5 million in 2022 to $28.4 million in 2023** (Note 3)[318](index=318&type=chunk)[319](index=319&type=chunk) - A valuation allowance of **$28.0 million** was recorded against deferred tax assets as of Dec 29, 2023, as it was determined not more-likely-than-not that U.S. entities will generate sufficient taxable income to realize them (Note 7)[328](index=328&type=chunk)[329](index=329&type=chunk) - The company's credit facilities mature on **October 29, 2026**, and require maintaining a minimum fixed charge coverage ratio of **1.25:1** and a maximum leverage ratio of **3.50:1** (Note 9)[338](index=338&type=chunk)[339](index=339&type=chunk) Sales by Major Customer (as % of Net Sales) | Customer | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Applied Materials | 36.4% | 31.0% | 32.1% | | Lam Research | 35.4% | 48.1% | 52.8% | | ASML | 10.6% | <10% | <10% | | **Total % from Major Customers** | **82.4%** | **~79%** | **~85%** |

Financial Data and Key Metrics Changes - The company reported cash and equivalents of $80 million, a $4 million increase from Q3, and generated $37.6 million in cash flow from operations, resulting in a free cash flow of $35.3 million after capital expenditures of $2.3 million [1] - The company paid down $31.2 million of debt, with a net debt coverage ratio of 3.4 times [1] - Q4 revenues were $203 million, reflecting a sequential growth of 3% from Q3, but gross margin was only 10.4%, significantly below expectations due to unfavorable product mix and inventory sales at zero margin [46][50] Business Line Data and Key Metrics Changes - The build-to-print gas panel business, which is the lowest margin segment, improved during the quarter, offsetting a decrease in the weldment business as customers focused on reducing inventory levels [34] - The company expects a significant improvement in gross margins as it moves through 2024, driven by new product introductions and recovery in the component business [49][50] Market Data and Key Metrics Changes - The company estimates that its exposure to memory wafer fabrication equipment (WFE) declined to about 25% in 2023, positioning it to outperform industry growth as memory spending improves, particularly in the NAND segment [35] - The silicon carbide market for gas delivery is estimated to be around $60 million in 2023, expected to double in the next three to four years, driven by new technology drivers and process inflections [48] Company Strategy and Development Direction - The company is focused on developing proprietary products, including next-generation gas panels, which contain about 75% proprietary content compared to around 10% previously, aiming to drive gross margin expansion above 20% [36] - The company is pursuing opportunities in growing market segments such as EUV lithography and FE gas panels for silicon carbide, with expectations of expanding its customer base and revenue potential [35][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth ahead, anticipating a revenue run rate around $200 million through the first half of 2024, followed by a ramp in the second half, with expectations for a strong recovery year in 2025 [56] - The company noted that the business environment for WFE is expected to remain stable through the first half of 2024, with modest mid-single-digit growth outlook for the full year [56] Other Important Information - The company won a supplier excellence award from Applied Materials for quality in 2023, highlighting its contributions to customer success [12] - The company is making targeted investments in IT and R&D, with operating expenses expected to remain at a similar level beyond Q1 2024 [38] Q&A Session Summary Question: Can you clarify the gross margin dynamics in Q4 and how they will play out in 2024? - Management indicated that the decision to sell inventory at cost impacted gross margin significantly, with a mix shift towards lower-margin products being a major factor [52] Question: What is the outlook for the component business this year? - Management expects the component business to recover, with design wins contributing to growth, but noted that the ramp is taking longer due to existing inventory levels [18] Question: How do you see the revenue potential from your two largest customers? - Management acknowledged different profiles for the two largest customers, with expectations of revenue growth driven by memory market recovery and ongoing discussions with customers about future demand [16][24]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Unaudited financial statements for Q3 and nine months 2023 show significant performance decline, net losses, and positive operating cash flow from working capital changes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$994.4 million** from **$1,083.7 million**, with liabilities also down, while shareholders' equity slightly declined Consolidated Balance Sheet Highlights (in thousands) | Account | September 29, 2023 | December 30, 2022 | | :--- | :--- | :--- | | **Total current assets** | $451,325 | $513,458 | | **Total assets** | $994,384 | $1,083,742 | | **Total current liabilities** | $115,668 | $166,292 | | **Total liabilities** | $421,705 | $496,246 | | **Total shareholders' equity** | $572,679 | $587,496 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q3 2023 net sales fell to **$196.8 million**, resulting in a **$10.4 million** net loss, while the nine-month period also saw a **$31.1 million** net loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $196,761 | $355,643 | $607,639 | $978,349 | | Gross profit | $24,069 | $63,560 | $83,051 | $162,953 | | Operating income (loss) | $(4,824) | $32,547 | $(2,936) | $67,808 | | Net income (loss) | $(10,425) | $29,031 | $(31,086) | $58,607 | | Diluted EPS | $(0.36) | $1.00 | $(1.07) | $2.02 | [Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity decreased to **$572.7 million** due to a **$31.1 million** net loss, partially offset by **$12.7 million** in share-based compensation - The primary drivers of change in shareholders' equity during the first nine months of 2023 were a net loss of **$31.1 million** and share-based compensation expense of **$12.7 million**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated **$20.1 million** cash, a significant improvement driven by working capital changes, while investing and financing activities used cash Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 29, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $20,058 | $(7,321) | | Net cash used in investing activities | $(13,239) | $(21,958) | | Net cash provided by (used in) financing activities | $(17,356) | $10,247 | | **Net decrease in cash** | **$(10,537)** | **$(19,032)** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, showing **$266.9 million** in inventories, a **(67.4)%** effective tax rate due to a valuation allowance, **$281.9 million** long-term debt, and concentrated sales in the US and Singapore - The effective tax rate for the nine months ended September 29, 2023 was **(67.4)%**, primarily due to an **$11.1 million** valuation allowance recorded against U.S. federal and state deferred tax assets in Q2 2023[37](index=37&type=chunk) Sales by Geographic Area (in thousands) | Region | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | United States of America | $215,204 | $457,753 | | Singapore | $232,881 | $350,255 | | Europe | $86,625 | $76,084 | | Other | $72,929 | $94,257 | | **Total net sales** | **$607,639** | **$978,349** | - As of September 29, 2023, the company had total principal long-term debt of **$281.9 million**, consisting of a term loan and borrowings on a revolving credit facility[40](index=40&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=16&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes declining revenue and profitability to a semiconductor industry downturn, exacerbated by macroeconomic factors, leading to cost reductions and increased debt-servicing costs [Overview and Macroeconomic Conditions](index=16&type=section&id=Overview%20and%20Macroeconomic%20Conditions) The company, a semiconductor equipment supplier, faces a cyclical industry downturn and macroeconomic headwinds, prompting cost reduction initiatives - The semiconductor industry entered a cyclical downturn in Q4 2022, leading to reduced spending on capital equipment and weakened customer demand for Ichor's products through the first three quarters of 2023[61](index=61&type=chunk) - To align resources with lower business levels, the company initiated labor and other cost reduction programs, incurring severance charges in Q4 2022 and Q1/Q3 2023[61](index=61&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Q3 2023 net sales declined **44.7%** to **$196.8 million**, with gross margin contracting **570 bps** and operating losses recorded for both periods Net Sales Performance (in thousands) | Period | 2023 | 2022 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended | $196,761 | $355,643 | $(158,882) | (44.7)% | | Nine Months Ended | $607,639 | $978,349 | $(370,710) | (37.9)% | Gross Margin Performance | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended | 12.2% | 17.9% | -570 bps | | Nine Months Ended | 13.7% | 16.7% | -300 bps | - The decrease in gross margin was primarily due to reduced factory utilization from lower volumes[68](index=68&type=chunk) - Increased excess and obsolete inventory expense also unfavorably impacted gross margin by **150bps** for the third quarter of 2023[68](index=68&type=chunk) - Interest expense increased by **115.0%** for the nine-month period year-over-year, driven by a significant rise in the weighted average borrowing rate from **2.74%** to **6.60%** due to tightening monetary policy[73](index=73&type=chunk) [Non-GAAP Financial Results](index=21&type=section&id=Non-GAAP%20Financial%20Results) Non-GAAP net income for Q3 2023 was **$2.1 million** ($0.07 diluted EPS), contrasting with a GAAP net loss, after adjustments for non-cash and severance costs GAAP to Non-GAAP Net Income Reconciliation (Q3 2023, in thousands) | Description | Amount | | :--- | :--- | | U.S. GAAP net loss | $(10,425) | | Amortization of intangible assets | $3,639 | | Share-based compensation | $4,752 | | Other (severance) | $793 | | Tax adjustments | $3,338 | | **Non-GAAP net income** | **$2,097** | GAAP vs. Non-GAAP Diluted EPS | Period | GAAP Diluted EPS | Non-GAAP Diluted EPS | | :--- | :--- | :--- | | Q3 2023 | $(0.36) | $0.07 | | Q3 2022 | $1.00 | $1.22 | | Nine Months 2023 | $(1.07) | $0.47 | | Nine Months 2022 | $2.02 | $2.90 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q3 2023 with **$75.9 million** cash, with operating activities providing **$20.1 million** cash, and sufficient liquidity for the next 12 months - Primary sources of liquidity are sales to customers and proceeds from credit facilities[92](index=92&type=chunk) - As of September 29, 2023, **$105.0 million** remained available under the **$250.0 million** revolving credit facility[92](index=92&type=chunk) - Cash from operations improved to a **$20.1 million** inflow in the first nine months of 2023 from a **$7.3 million** outflow in the prior-year period, primarily due to favorable changes in working capital balances[93](index=93&type=chunk)[95](index=95&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=26&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Primary market risks are interest rate risk on variable-rate debt, with a **100 bps** change impacting interest expense by **$2.8 million**, and immaterial foreign currency risk - Foreign currency exchange risk is limited because substantially all sales and the majority of supplier arrangements are priced and paid in U.S. dollars[100](index=100&type=chunk) - The company is exposed to interest rate risk on its **$281.9 million** of variable-rate debt[102](index=102&type=chunk) - A hypothetical **100 basis point** change in the interest rate would change annualized interest expense by **$2.8 million**[102](index=102&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=27&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting, with remediation expected by year-end 2023 - Disclosure controls and procedures were deemed not effective as of September 29, 2023, due to a previously identified material weakness in internal control over financial reporting[103](index=103&type=chunk) - The company is implementing a remediation plan and expects the material weakness to be remediated before the end of fiscal year 2023[106](index=106&type=chunk) [PART II - OTHER INFORMATION](index=28&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered equity sales, other information, and a list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=28&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material pending or threatened legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[107](index=107&type=chunk) [ITEM 1A. RISK FACTORS](index=28&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors have occurred since the 2022 Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the 2022 Annual Report on Form 10-K[108](index=108&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=28&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds were reported during the period - None[109](index=109&type=chunk) [ITEM 5. OTHER INFORMATION](index=28&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q3 2023 - No directors or officers adopted or terminated insider trading arrangements under Rule 10b5-1 during Q3 2023[112](index=112&type=chunk) [ITEM 6. EXHIBITS](index=29&type=section&id=ITEM%206.%20EXHIBITS) This section lists filed exhibits, including executive certifications and Inline XBRL documents - Exhibits filed include executive certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files[114](index=114&type=chunk)

Financial Data and Key Metrics Changes - In Q3, the company's revenues were $197 million, a 6% increase from Q2, primarily due to a rebound in the core gas delivery business [28][47] - Q3 gross margin was 13.1%, lower than expectations due to additional inventory provisions and a less favorable product mix [28][47] - Operating expenses for Q3 were $21.3 million, a decline from Q2 levels, resulting in an operating margin of 2.2% [28] - Net earnings for the quarter were $0.07 per share, aligning with expectations [28][47] - For Q4, the company anticipates revenues between $190 million and $205 million, with gross margins expected to improve to approximately 14% [29][30] Business Line Data and Key Metrics Changes - The NAND Memory segment has seen spending declines of up to 75%, with memory WFE now representing about 25% of total revenues [24] - The company is experiencing growth in segments like EUV and lithography, with new customer design wins in silicon carbide [24][25] - Proprietary machine components are seeing new qualifications, with initial shipments expected soon [26] Market Data and Key Metrics Changes - The company noted that the semiconductor process equipment market is stabilizing, with expectations for a revenue ramp in the second half of 2024 [49] - The overall industry is expected to recover significantly in 2025, with the company positioned to benefit from this recovery [49] Company Strategy and Development Direction - The company is focusing on share gains for proprietary products and investing in new offerings to support long-term customer technology roadmaps [49] - The new gas panel contains about 75% proprietary content, which could significantly expand the gross margin profile [49] - The company is working on integrating proprietary components into existing gas panels, which will take time as customers deplete existing inventory [26][49] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current demand environment is expected to remain stable, with new technology drivers emerging [48] - The company does not foresee a NAND inflection in the first half of 2024, which may impact revenue growth [43] - Management expressed confidence in achieving a 25% flow-through at similar revenue levels compared to Q2 [54] Other Important Information - Cash and equivalents totaled $76 million at the end of the quarter, with a decrease primarily due to net debt reduction [53] - The company generated $4 million in cash flow from operations, with free cash flow for the quarter at $1.6 million [53] Q&A Session Summary Question: What is the outlook for Ichor's business in 2024? - Management expects revenue levels to remain similar, with potential share gains to offset muted order patterns [58] Question: What drove the inventory reserve increase in Q3? - The increase was due to headwinds in various business units and additional reserves taken for inventory roll-off from prior quarters [59] Question: How does the company benefit from shipments to China? - The company does not sell directly to Chinese OEMs but benefits indirectly through customer shipments [6] Question: What is the status of the silicon carbide market? - The company has one customer in the silicon carbide space, with expectations for market growth [80] Question: What is the timeline for new gas panel evaluations? - Initial evaluations are expected to lead to production tool rollouts in late 2024 and 2025 [83]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __ to __ Commission File Number: 001-37961 ______________________________________________________________________________________________________________________ ...

Financial Data and Key Metrics Changes - The second quarter revenues were $185 million, which is an 18% decline from Q1 but at the upper end of expectations [22][55] - Gross margin was 14.5%, consistent with expectations of just under 20% flow-through on the revenue decline [22][55] - Net earnings for the quarter were $0.02 per share, exceeding prior expectations of a breakeven quarter [7][55] - Interest expense is expected to increase to approximately $5.3 million due to higher interest rates [9] Business Line Data and Key Metrics Changes - The company has seen increased demand in trailing nodes, logic, and high-bandwidth memory, but this is offset by softening demand in leading-edge logic and slower build schedules in areas like EUV lithography [2][68] - Incremental gross margin flow-through expectations are approximately 25% on increasing revenues, which is expected to drive Q3 gross margin improvement to the high 14s level [24][55] Market Data and Key Metrics Changes - The company is less exposed to the memory market than before, estimating current exposure to be less than 25% compared to 40% in 2022 [56] - The component side of the business is expected to take longer to recover, with inventory levels at OEM customers still not matching demand [46][68] Company Strategy and Development Direction - The company is focusing on driving share gains for proprietary products and making investments in new offerings that support long-term technology roadmaps [69] - The company is reviewing its Japan strategy to accelerate results in that region and developing new components for the market expected to be leased in 2024 [4][69] Management's Comments on Operating Environment and Future Outlook - Management views the second quarter of 2023 as the trough quarter, with modest sequential growth expected as the year progresses [2] - The overall outlook for 2023 remains largely unchanged, with expectations of a revenue decline of 20% to 25% due to various factors [68] - Management remains optimistic about a strong snapback of demand as the industry recovers, particularly in the silicon carbide market [56][68] Other Important Information - The company generated $27 million of cash flow from operations, with free cash flow for the quarter at $23 million [73] - The company plans to maintain a nominal non-GAAP tax expense each quarter, with a projected net tax benefit of $4 million to $5 million for fiscal 2023 [75] Q&A Session Summary Question: Can you discuss the design activity for the new gas panels? - Management indicated that there is both a cost advantage and a technology advantage that has attracted initial customers [16] Question: Are you where you want to be regarding resizing headcount and expense structure? - Management stated that they have right-sized the workforce to meet expected demand and are taking a guarded approach to operating expenses while continuing R&D investments [17] Question: What is the status of inventory levels with OEM customers? - Management noted that inventory levels are still not matching demand and that the component side of the business will take longer to recover [46] Question: What areas do you think will allow you to grow faster than the industry? - Management highlighted silicon carbide as a significant growth driver and mentioned that they expect to see growth year-over-year in that area [47][68] Question: Can you elaborate on the actions being taken to accelerate penetration in the Japanese market? - Management is reviewing their strategy and developing new components for the market to enhance results [4][69] Question: What is the expected cash generation for Q3 and potential debt reduction? - Management expects to generate enough cash flow to service the business and address some debt in the quarter [109][110]

Financial Performance - Net sales for the three months ended March 31, 2023, were $225,870, a decrease of $67,276 or 22.9% compared to $293,146 for the same period in 2022[59][66] - Gross margin for the first quarter of 2023 was 14.7%, down from 15.0% in the first quarter of 2022, reflecting reduced factory utilization due to lower customer demand[59][69] - Operating income for the three months ended March 31, 2023, was $4,794, a decline of 54.1% from $10,465 in the same period of 2022[64] - The decrease in net income for the first quarter of 2023 was $5, compared to a net income of $8,039 in the first quarter of 2022[59][64] - Cost of sales for the first quarter of 2023 was $192,630, down 22.7% from $249,214 in the same period of 2022[68] Expenses - Research and development expenses decreased by 11.1% to $4,313 in the first quarter of 2023, down from $4,851 in the first quarter of 2022[70] - Selling, general, and administrative expenses fell by 13.3% to $20,167 in the first quarter of 2023, compared to $23,267 in the same period of 2022[73] - The company incurred severance charges of $1.3 million in the first quarter of 2023 as part of cost reduction initiatives[61] - Interest expense increased significantly to $4,550 in the first quarter of 2023, compared to $1,532 in the same period of 2022, due to rising borrowing rates[64][62] - Other expense, net increased to $784,000 from $84,000, reflecting an 833.3% increase primarily due to currency exchange rate fluctuations[79] Non-GAAP Metrics - Non-GAAP gross profit for the three months ended March 31, 2023, was $34,948,000, down from $46,975,000 in the prior year, with a non-GAAP gross margin of 15.5% compared to 16.0%[85] - Non-GAAP operating income decreased to $13,721,000 from $24,578,000, with a non-GAAP operating margin of 6.1% compared to 8.4%[85] - Non-GAAP net income for the three months ended March 31, 2023, was $11,128,000, down from $20,178,000, with non-GAAP diluted EPS of $0.38 compared to $0.70[88] Cash Flow and Indebtedness - Cash and cash equivalents at the end of Q1 2023 were $68.8 million, a decrease of $17.6 million from the prior year[93] - Cash used in operating activities was $10,873,000 for Q1 2023, compared to $36,278,000 in the prior year, with a net decrease in cash of $17,633,000[93][94] - Total indebtedness as of March 31, 2023, was $300.6 million, with $7.5 million due within 12 months[100] Interest Rate and Currency Risks - The weighted average borrowings outstanding rose to $302,479,000, a 2.5% increase from $294,959,000 in the prior year[77] - The weighted average borrowing rate increased by 427 basis points to 6.10% from 1.83% due to tightening monetary policy[77] - A hypothetical 100 basis point change in interest rates would result in a $0.8 million change to interest expense for the quarter, or $3.0 million on an annualized basis[100] - The company does not expect foreign currency exchange rate fluctuations to materially affect its results, as most sales and supplier arrangements are in U.S. dollars[98] - The company has not engaged in any foreign currency hedging transactions to date[99] Future Outlook - The company expects long-term growth in demand for semiconductors and semiconductor equipment despite current macroeconomic challenges[61] - The company does not anticipate being exposed to material risks due to changes in interest rates[100] - Increases in the value of the U.S. dollar could make products more expensive compared to competitors priced in other currencies, potentially impacting competitiveness[98] - Foreign suppliers may raise prices if the U.S. dollar decreases in value relative to other currencies[98]

Financial Performance - Revenue for 2022 was $1,280.1 million, an increase from $1,096.9 million in 2021, representing a growth of approximately 16.7%[19] - Net income for 2022 was $72.8 million, compared to $70.9 million in 2021, reflecting a growth of about 2.7%[19] - Total capital expenditures in 2022 were $29.4 million, which is 2.3% of sales, significantly up from $20.8 million (1.9% of sales) in 2021[24] Market Position and Strategy - The company aims to grow its market share within existing customers by leveraging specialized engineering talent and early collaboration, targeting a broader range of process tools[25] - The acquisition of IMG Companies in November 2021 expanded the company's product offerings and customer base, including entry into medical and aerospace sectors[27] - The company has established long-standing relationships with top-tier customers, including Lam Research, Applied Materials, and ASML, which are critical for competitive positioning[22] - The semiconductor capital equipment market is cyclical, and the company has structured its business to minimize fixed costs, allowing for growth in net income at a higher rate than sales during growth periods[24] - The company is actively engaging with new customers in various sectors, including those considering outsourcing their gas and chemical delivery needs[28] - The semiconductor equipment market is highly concentrated, with five companies accounting for over 70% of all process tool revenues[37] - In 2022, the two largest customers, Lam Research and Applied Materials, accounted for a combined 79% of sales[37] Innovation and Development - As of December 30, 2022, the engineering team consisted of approximately 90 engineers and designers, enhancing the company's product development capabilities[46] - The company has established an ESG council to support sustainable practices and community involvement, with a five-year roadmap initiated in 2022[58] - As of December 30, 2022, the company had 59 granted patents and 67 pending patent applications, indicating a strong focus on intellectual property[50] - The company is focused on improving manufacturing process efficiency to reduce cycle times and costs, enhancing profitability and product attractiveness[29] - The average order-to-delivery cycle time for manufacturing a gas delivery system can be as little as 20 to 30 days[40] Operations and Manufacturing - The company operates ISO 9001 certified manufacturing locations and adheres to strict design tolerances and specifications[41] - The company utilizes just-in-time stocking programs to manage component inventories and respond to changing customer requirements[44] - Approximately 2,280 full-time employees and 700 contract or temporary workers were employed as of December 30, 2022, supporting operational flexibility[53] Financial Management and Risks - Total indebtedness as of December 30, 2022, was $302.5 million, with $7.5 million payable within the next 12 months[209] - The interest rate on outstanding debt is based on the Bloomberg Short-Term Bank Yield Index, with a hypothetical 100 basis point change resulting in a $3.0 million change to annual interest expense[209] - The company does not expect foreign currency exchange rate fluctuations to materially affect its results, as most sales and supplier arrangements are in U.S. dollars[207] - Operating expenses may be subject to fluctuations due to foreign currency exchange rates, particularly in currencies such as the Singapore dollar and euro[208] - The company has not engaged in foreign currency hedging transactions, and foreign currency transaction gains and losses have not been material to financial statements[208] - The company has not used derivative financial instruments to manage interest rate risk exposure[209] Compliance and Environmental - The company believes it operates in substantial compliance with environmental regulations, but future compliance costs could be significant[206] - There are no known environmental investigations, lawsuits, or claims against the company at this time[206] Investor Relations - The company maintains a variety of information available on its Investor Relations website, including annual and quarterly reports[60] - The SEC maintains a site with reports and information regarding issuers that file documents electronically[61]