UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 27, 2020 OR ☐ 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 ICHOR HOLDINGS, LTD. (Exact Name of Registrant as Specified in its Charter) Cayman Islands Not Applicable ( State or ...

Ichor Holdings, Ltd. (ICHR) Q1 2020 Earnings Conference Call May 4, 2020 4:30 PM ET Company Participants Claire McAdams - Investor Relations Jeff Andreson - CEO Larry Sparks - CFO Conference Call Participants Quinn Bolton - Needham and Company Sidney Ho - Deutsche Bank Tom Diffely - D.A. Davidson Mitch Steves - RBC Capital Markets Patrick Ho - Stifel Carlin Lynch - B. Riley FBR Operator Good day, ladies and gentlemen. And welcome to the Ichor Systems' First Quarter 2020 Earnings Conference Call. At this tim ...

PART I [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS) Ichor Holdings, Ltd. designs, engineers, and manufactures critical fluid delivery subsystems and components for semiconductor capital equipment, leveraging expertise and OEM relationships for growth - Ichor is a leader in designing, engineering, and manufacturing critical fluid delivery subsystems and components for semiconductor capital equipment[14](index=14&type=chunk) - Product offerings include gas and chemical delivery systems, which are key elements in semiconductor manufacturing process tools, and precision machined components, weldments, and proprietary products[14](index=14&type=chunk) - The company benefits from an outsourcing trend by OEMs, who leverage Ichor's specialized engineering, design, and production skills to reduce costs and development time[15](index=15&type=chunk) - The company's strategy involves early engagement with customers in their design and development processes, leveraging engineering resources to create innovative solutions and become a preferred supplier[16](index=16&type=chunk) - Key competitive strengths include deep fluids engineering expertise, early engagement with customers on product development, long-standing relationships with top-tier customers (Lam Research, Applied Materials, ASML), operational excellence with scale, and a capital-efficient and scalable business model[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - Growth strategy focuses on increasing market share within the existing customer base, expanding the total available market with new product offerings (especially chemical delivery), expanding the total customer base, and continuously improving manufacturing process efficiency[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) Revenue and Net Income from Continuing Operations (2017-2019) | Metric | 2019 (Millions) | 2018 (Millions) | 2017 (Millions) | | :----- | :-------------- | :-------------- | :-------------- | | Revenue | $620.8 | $823.6 | $655.9 | | Net Income | $10.7 | $57.9 | $56.9 | [Company Overview](index=4&type=section&id=Company%20Overview) - Ichor is a leader in designing, engineering, and manufacturing critical fluid delivery subsystems and components for semiconductor capital equipment[14](index=14&type=chunk) - Product offerings include gas and chemical delivery systems, which are key elements in semiconductor manufacturing process tools, and precision machined components, weldments, and proprietary products[14](index=14&type=chunk) - The company benefits from an outsourcing trend by OEMs, who leverage Ichor's specialized engineering, design, and production skills to reduce costs and development time[15](index=15&type=chunk) - Ichor engages with customers early in their design and development processes, often becoming the sole supplier during initial production and preferred supplier for the tool's lifespan (**5-10 years**)[16](index=16&type=chunk) - Top-tier OEM customers include Lam Research, Applied Materials, and ASML, which were the three largest customers by sales in **2019**[17](index=17&type=chunk) [Our Competitive Strengths](index=5&type=section&id=Our%20Competitive%20Strengths) - Deep Fluids Engineering Expertise: An engineering team with chemical, mechanical, software, and systems expertise, including industry veterans, acts as an extension of customer product development teams[19](index=19&type=chunk) - Early Engagement with Customers on Product Development: Collaboration on product design, qualification, manufacturing, and testing provides comprehensive, customized solutions and early insight into customer technology roadmaps, often leading to sole-source supplier status[20](index=20&type=chunk) - Long History and Strong Relationships with Top Tier Customers: Established deep relationships with global leaders like Lam Research, Applied Materials, and ASML, enabling competition for next-generation products and market penetration[21](index=21&type=chunk) - Operational Excellence with Scale to Support the Largest Customers: Over **20 years** of experience in gas delivery systems, strategically located manufacturing facilities near customers for fast response, and investments in efficient manufacturing systems and supply chain[22](index=22&type=chunk) - Capital Efficient and Scalable Business Model: Low capital intensity, with capital expenditures representing **1.3% to 2.0% of sales** from 2017-2019, and a low fixed cost structure to minimize impact of cyclical downturns[23](index=23&type=chunk) [Our Growth Strategy](index=6&type=section&id=Our%20Growth%20Strategy) - Grow Market Share within Existing Customer Base: Leverage specialized engineering, early collaboration, and expanded product offerings to increase penetration at existing customers across various process tools[24](index=24&type=chunk) - Grow Total Available Market at Existing Customers with Expanded Product Offerings: Focus on underpenetrated markets like chemical delivery for wet processes (clean and ECD) by leveraging existing relationships and fluid mechanics expertise[25](index=25&type=chunk) - Expand Total Customer Base within Fluid Delivery Market: Actively engage with new customers considering outsourcing gas and chemical delivery needs, and expand the components business[26](index=26&type=chunk) - Continue to Improve Our Manufacturing Process Efficiency: Ongoing efforts to reduce cycle time, improve responsiveness to short lead-times and configuration changes, lower manufacturing costs, and enhance inventory efficiency to boost profitability and customer attractiveness[27](index=27&type=chunk) [Our Products and Services](index=7&type=section&id=Our%20Products%20and%20Services) - Gas Delivery Subsystems: Technologically complex systems used to deliver, monitor, and control precise quantities of vapors and gases for 'dry' manufacturing processes like etch, CVD, PVD, epitaxy, and strip[28](index=28&type=chunk) - Chemical Delivery Products and Subsystems: Used to precisely blend and dispense reactive chemistries and colloidal slurries for 'wet' front-end processes such as wet clean, ECD, and CMP, including process modules for direct wafer application[30](index=30&type=chunk) - Weldments: Complete offering of weldments supporting gas delivery through process tools, utilizing automated and manual welding processes for various metals in both wet and dry processes[31](index=31&type=chunk) - Precision Machining: Provides components for gas delivery systems and weldments, as well as custom machined solutions for critical applications downstream of gas systems, applicable in both wet and dry environments[32](index=32&type=chunk) [History](index=9&type=section&id=History) - Originally incorporated as Celerity, Inc. in **1999**, the business was acquired by Francisco Partners in **2011**, leading to the formation of Ichor Holdings, Ltd. in **2012**[33](index=33&type=chunk) - Key acquisitions include Semi Scenic UK Limited (**2012** for refurbishment), Ajax-United Patterns & Molds, Inc. (**2016** for chemical delivery), Cal-Weld, Inc. (**2017** for gas delivery and weldments), Talon Innovations Corporation (**2017** for gas delivery, precision machining), and IAN Engineering Co., Ltd. (**2018** for Korean market exposure)[33](index=33&type=chunk) - The company completed its initial public offering (IPO) in December **2016**[33](index=33&type=chunk) [Customers, Sales and Marketing](index=9&type=section&id=Customers,%20Sales%20and%20Marketing) - Primarily markets and sells products directly to equipment OEMs in the semiconductor equipment market, with a value-added reseller used in Japan for chemical delivery systems[34](index=34&type=chunk) - Highly dependent on a small number of customers; Lam Research (**51% of sales**) and Applied Materials (**33% of sales**) were the two largest customers in **2019**[34](index=34&type=chunk) - Operates on a purchase order basis without long-term fixed or minimum volume contracts, focusing on close business relationships and on-site support[34](index=34&type=chunk)[35](index=35&type=chunk) [Operations, Manufacturing and Supply Chain Management](index=9&type=section&id=Operations,%20Manufacturing%20and%20Supply%20Chain%20Management) - Maintains a flexible manufacturing model with cost-effective facilities located near major customers in the U.S., Singapore, Malaysia, the U.K., and Korea[36](index=36&type=chunk) - Manufacturing process is highly flexible, allowing for customer alterations and significantly decreased order-to-delivery cycle times (e.g., **20-30 days** for gas delivery systems)[37](index=37&type=chunk) - Facilities are ISO **9001 certified** or compliant, operating Class **100** and Class **10,000** clean rooms for high-purity gas and chemical delivery systems[38](index=38&type=chunk) - Supply chain management utilizes consignment material and just-in-time stocking programs to reduce inventory levels and maintain flexibility in response to demand changes, with a focus on multiple global suppliers[40](index=40&type=chunk)[41](index=41&type=chunk) [Technology Development and Engineering](index=10&type=section&id=Technology%20Development%20and%20Engineering) - Transitioning from an integration engineering and components company to a gas and chemical delivery system leader with product development and systems engineering expertise[42](index=42&type=chunk) - Engineering team of approximately **95 engineers** (mechanical, electrical, chemical, systems, software) works closely with customers, often on-site, to meet specific requirements and anticipate changes[43](index=43&type=chunk) - Collaborates with suppliers to identify new component technologies and enhance existing ones, using analytical and testing capabilities to offer a wide range of component and design choices[44](index=44&type=chunk) [Competition](index=10&type=section&id=Competition) - Faces intense competition from other gas/chemical delivery subsystem suppliers (primarily Ultra Clean Technology and regional suppliers) and internal manufacturing groups of OEMs[45](index=45&type=chunk)[46](index=46&type=chunk) - Competitive factors include customer relationships, early engagement, experienced engineering staff, design-to-delivery cycle times, and flexible manufacturing capabilities[47](index=47&type=chunk) - Anticipates increased competitive pressures, potential price-based competition, and new competitors when entering new markets[48](index=48&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) - Relies on patents, trade secrets, and confidentiality provisions to protect proprietary rights, with **47 patents** held as of December 27, 2019 (**21 U.S. patents**, **17** from a May 2019 IP purchase)[49](index=49&type=chunk) - Does not believe the business success is dependent on any single patent or group of related patents[49](index=49&type=chunk) - Intellectual property developed for customers is generally owned by those customers, and the company indemnifies customers against infringement claims[50](index=50&type=chunk) [Employees and Labor Relations](index=11&type=section&id=Employees%20and%20Labor%20Relations) - As of December 27, 2019, had approximately **1,355 full-time employees** and **360 contract/temporary workers**[51](index=51&type=chunk) - Employee breakdown: **95 engineers**, **70** in sales/marketing, **1,440** in manufacturing, and **110** in executive/administrative functions[51](index=51&type=chunk) - None of the employees are unionized, but participation in works councils is required in various countries, with no material work stoppages experienced[51](index=51&type=chunk) [Environmental, Health, and Safety Regulations](index=11&type=section&id=Environmental,%20Health,%20and%20Safety%20Regulations) - Operations and facilities are subject to federal, state, local, and foreign environmental, waste management, and health and safety regulations[52](index=52&type=chunk) - Believes business operates in substantial compliance, but future violations or non-compliance could incur substantial costs (cleanup, fines, sanctions, third-party claims)[52](index=52&type=chunk) [Available Information](index=11&type=section&id=Available%20Information) - Company's internet address is ichorsystems.com, with investor relations information available at ir.ichorsystems.com, including SEC filings (10-K, 10-Q, 8-K) and governance documents[53](index=53&type=chunk) - SEC filings are also available on the SEC's website at sec.gov[54](index=54&type=chunk) [ITEM 1A. RISK FACTORS](index=12&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces multiple risks in the cyclical semiconductor industry, customer concentration, global instability, technological obsolescence, and share ownership - The business is highly dependent on the cyclical semiconductor capital equipment industry, which can lead to decreased demand and pressure to reduce prices during downturns[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Significant customer concentration, with the top two customers accounting for **84% of sales in 2019**, poses a risk if relationships deteriorate or orders are reduced/canceled[60](index=60&type=chunk) - Intense competition from other suppliers and internal OEM manufacturing groups can lead to price reductions, reduced gross margins, or loss of market share[64](index=64&type=chunk) - Exposure to global economic weakness and geopolitical instability, including the potential impacts of Brexit and the COVID-19 pandemic, could adversely affect demand, workforce availability, and costs[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - Failure to keep pace with rapid technological innovation in the semiconductor industry could render products uncompetitive[69](index=69&type=chunk)[70](index=70&type=chunk) - Manufacturing complexity, dependence on a limited number of suppliers, and order/shipment uncertainties can harm production output, increase costs, and delay deliveries[73](index=73&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - Product defects could damage reputation, decrease market acceptance, and result in costly litigation or warranty claims[74](index=74&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Reliance on employee know-how and a less patent-protected intellectual property position makes the company vulnerable to competition and infringement claims[97](index=97&type=chunk)[98](index=98&type=chunk) - Restrictive covenants under Credit Facilities may limit operations, and failure to comply could lead to immediate debt repayment[86](index=86&type=chunk)[87](index=87&type=chunk) - The price of ordinary shares may fluctuate substantially due to various factors, and the company does not expect to pay cash dividends in the foreseeable future[125](index=125&type=chunk)[130](index=130&type=chunk) [Risks Related to Our Business](index=12&type=section&id=Risks%20Related%20to%20Our%20Business) - Business is significantly dependent on the cyclical semiconductor capital equipment industry, leading to demand fluctuations and potential price reductions without proportional cost decreases[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Reliance on a small number of OEM customers (top two accounted for **84% of 2019 sales**) means adverse changes in these relationships could materially impact business[60](index=60&type=chunk) - Customers exert significant negotiating leverage, potentially leading to lower prices, reduced gross margins, or increased liability risk[63](index=63&type=chunk) - Intense competition from other suppliers and internal OEM manufacturing groups could result in price reductions, reduced gross margins, or loss of market share[64](index=64&type=chunk) - Exposure to global economic weakness and geopolitical instability (e.g., Brexit, COVID-19) can impact demand, workforce, and manufacturing costs[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - Failure to keep pace with rapid technological innovation in the served industries could render products and services uncompetitive[69](index=69&type=chunk)[70](index=70&type=chunk) - The highly complex manufacturing process, dependence on limited suppliers, and order/shipment uncertainties can lead to production delays, increased costs, and inability to deliver products timely[73](index=73&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - Product defects could damage reputation, decrease market acceptance, and result in costly litigation or warranty claims[74](index=74&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Interruptions or failures in information technology systems, including cyber-attacks, could lead to data loss, operational delays, and financial losses[81](index=81&type=chunk)[82](index=82&type=chunk) - Subject to various U.S. and international laws regarding privacy and data protection (e.g., GDPR, CCPA), with non-compliance potentially leading to significant fines or business practice modifications[84](index=84&type=chunk)[85](index=85&type=chunk) - Restrictive covenants under Credit Facilities may limit operations, and non-compliance could trigger immediate debt repayment[86](index=86&type=chunk)[87](index=87&type=chunk) - Changes to LIBOR or its replacement rate could affect interest rates on credit agreements[89](index=89&type=chunk)[91](index=91&type=chunk) - Reliance on employee know-how and a less patent-protected intellectual property position makes the company vulnerable to competitors and infringement claims[97](index=97&type=chunk)[98](index=98&type=chunk) - Quarterly sales and operating results fluctuate significantly, potentially causing volatility in share price[103](index=103&type=chunk)[104](index=104&type=chunk) - As a global company, subject to risks of international business, including economic downturns, political instability, and changes in trade policy (tariffs, import/export regulations)[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - Fluctuations in foreign currency exchange rates could cause operating results to vary[111](index=111&type=chunk) - Subject to environmental laws and regulations, which could lead to liabilities or increased compliance costs[112](index=112&type=chunk) - Failure to maintain effective internal controls could lead to material misstatements or reporting failures[113](index=113&type=chunk)[115](index=115&type=chunk) - Compliance with 'conflict minerals' rules may incur substantial expense and result in negative disclosures[120](index=120&type=chunk) - Business is subject to risks of natural disasters and man-made disruptions, potentially causing operational interruptions and financial losses[121](index=121&type=chunk)[124](index=124&type=chunk) - Changes in tax laws, rates, or assets/liabilities could adversely affect financial condition[122](index=122&type=chunk) [Risks Related to Ownership of Our Ordinary Shares](index=25&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Ordinary%20Shares) - The price of ordinary shares may fluctuate substantially due to various factors, including company announcements, market conditions, and analyst expectations[125](index=125&type=chunk)[126](index=126&type=chunk) - Future sales of ordinary shares, or the perception of such sales, may depress the share price[127](index=127&type=chunk) - As an 'emerging growth company,' Ichor has elected to comply with reduced public company reporting requirements, which might make its ordinary shares less attractive to some investors[128](index=128&type=chunk) - The company does not anticipate paying cash dividends for the foreseeable future, meaning investment gains depend solely on share price appreciation[130](index=130&type=chunk) - Anti-takeover provisions in the articles of association could limit the ability of others to acquire control or sell shares at a premium[131](index=131&type=chunk) - The Board of Directors is authorized to issue preferred shares with preferential rights, which could adversely affect ordinary shareholders[132](index=132&type=chunk) - Shareholders may face difficulties protecting their interests due to Cayman Islands law providing substantially less protection compared to U.S. laws, and judgments obtained in the U.S. may not be enforceable[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - There is a risk of being classified as a Passive Foreign Investment Company (PFIC) for any taxable year, which could result in adverse U.S. federal income tax consequences for U.S. Holders[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) - U.S. persons owning at least **10% of shares** may be subject to adverse U.S. federal income tax consequences related to 'controlled foreign corporations'[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=29&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company has no unresolved staff comments from the Securities and Exchange Commission - None[142](index=142&type=chunk) [ITEM 2. PROPERTIES](index=29&type=section&id=ITEM%202.%20PROPERTIES) Ichor's principal executive office is in Fremont, California, with approximately **595,700 square feet** of leased global manufacturing and administrative facilities - Principal executive office is located at 3185 Laurelview Ct., Fremont, California 94538[143](index=143&type=chunk) - Total principal manufacturing and administrative facilities comprise approximately **595,700 square feet** as of December 27, 2019[143](index=143&type=chunk) - All facilities are leased, which allows for flexibility with changing business conditions and geographic demand[143](index=143&type=chunk) Approximate Square Footage of Facilities by Location | Location | Approximate Square Footage | | :------- | :------------------------- | | Austin, Texas | 25,700 | | East Blantyre, Scotland | 37,700 | | Fremont, California | 62,800 | | Seoul, Korea | 32,800 | | Osakis, Minnesota | 22,300 | | Sauk Rapids, Minnesota | 58,600 | | Selangor, Malaysia | 31,900 | | Singapore | 97,700 | | Tampa, Florida | 30,000 | | Tualatin, Oregon | 143,400 | | Union City, California | 52,800 | [ITEM 3. LEGAL PROCEEDINGS](index=29&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Ichor Holdings, Ltd. is not currently a party to any material legal proceedings, though future claims may arise - The company is not currently a party to any material legal proceedings[145](index=145&type=chunk) - Future legal claims and proceedings may arise in the ordinary course of business, including employment-related claims[145](index=145&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=29&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Ichor Holdings, Ltd.'s operations - Not applicable[146](index=146&type=chunk) PART II [ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=30&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20SHAREHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) As of March 4, 2020, Ichor had two record holders, no anticipated cash dividends, and **$8.42 million** remaining under its **$100.0 million** share repurchase program - As of March 4, 2020, Ichor Holdings, Ltd. had **2 holders of record** for its ordinary shares[147](index=147&type=chunk) - The company does not anticipate paying any cash dividends on its ordinary shares for the foreseeable future[148](index=148&type=chunk) - A **$50.0 million** share repurchase program was authorized on February 15, 2018, and increased by an additional **$50.0 million** on August 18, 2018, totaling **$100.0 million**[149](index=149&type=chunk) - The company's ordinary shares are listed for trading on NASDAQ under the symbol 'ICHR'[152](index=152&type=chunk) Share Repurchase Program Activity (2019) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | Amount Available Under Repurchase Program (dollars in thousands) | | :---------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------- | | Amount available at Dec 28, 2018 | | | $10,021 | | Quarter ended March 29, 2019 | 97,910 | $16.34 | $8,421 | | Quarter ended June 28, 2019 | — | $— | $8,421 | | Quarter ended September 27, 2019 | — | $— | $8,421 | | Quarter ended December 27, 2019 | — | $— | $8,421 | [Holders of Record](index=30&type=section&id=Holders%20of%20Record) - As of March 4, 2020, there were **2 holders of record** for ordinary shares, excluding those held in 'nominee' or 'street' name and treasury accounts[147](index=147&type=chunk) [Dividends](index=30&type=section&id=Dividends) - The company does not anticipate paying any cash dividends on its ordinary shares for the foreseeable future[148](index=148&type=chunk) - Future dividend decisions will depend on financial condition, results of operations, contractual restrictions (including Credit Facilities), applicable law, tax considerations, and Board discretion[148](index=148&type=chunk) [Share Repurchase Program](index=30&type=section&id=Share%20Repurchase%20Program) - On February 15, 2018, the Board authorized a **$50.0 million** share repurchase program, increased by **$50.0 million** on August 18, 2018[149](index=149&type=chunk) - Repurchases are funded with cash on-hand and cash flows from operations[149](index=149&type=chunk) Share Repurchase Program Activity (2019) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | Amount Available Under Repurchase Program (dollars in thousands) | | :---------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------- | | Amount available at Dec 28, 2018 | | | $10,021 | | Quarter ended March 29, 2019 | 97,910 | $16.34 | $8,421 | | Quarter ended June 28, 2019 | — | $— | $8,421 | | Quarter ended September 27, 2019 | — | $— | $8,421 | | Quarter ended December 27, 2019 | — | $— | $8,421 | [Stock Performance Graph](index=31&type=section&id=Stock%20Performance%20Graph) - The stock performance graph plots the cumulative total shareholder return of Ichor's ordinary shares against the Nasdaq Composite Index and the PHLX Semiconductor Sector Index from December 9, 2016, through December 27, 2019[152](index=152&type=chunk) - The comparison assumes a **$100 investment** on December 9, 2016, with reinvestment of dividends[152](index=152&type=chunk) [ITEM 6. SELECTED FINANCIAL DATA](index=31&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents Ichor's selected consolidated financial data for 2015-2019, highlighting trends in key financial and balance sheet metrics Consolidated Statement of Operations Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------------------------------ | :----- | :----- | :----- | :----- | :----- | | Net sales | $620,837 | $823,611 | $655,892 | $405,747 | $290,641 | | Gross profit | $86,364 | $136,137 | $100,761 | $65,395 | $48,554 | | Operating expenses | $71,387 | $72,172 | $54,581 | $41,524 | $35,953 | | Operating income | $14,977 | $63,965 | $46,180 | $23,871 | $12,601 | | Net income from continuing operations | $10,729 | $57,883 | $56,915 | $20,779 | $12,807 | | Diluted EPS from continuing operations | $0.47 | $2.30 | $2.17 | $0.87 | $(292.39) | | Shares used to compute diluted EPS | 22,766,903 | 25,128,055 | 26,218,424 | 1,967,926 | 31,875 | Consolidated Balance Sheet Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :-------------------- | :----- | :----- | :----- | :----- | :----- | | Cash and restricted cash | $60,612 | $43,834 | $69,304 | $52,648 | $24,188 | | Working capital | $113,080 | $123,821 | $131,233 | $56,020 | $24,860 | | Total assets | $566,555 | $485,489 | $557,684 | $282,491 | $198,023 | | Long-term debt | $181,037 | $204,787 | $189,535 | $39,830 | $65,000 | | Preferred shares | $— | $— | $— | $— | $142,728 | | Total shareholders' equity | $221,416 | $198,326 | $216,762 | $141,659 | $74,678 | Share-Based Compensation Expense (2015-2019, in thousands) | Category | 2019 | 2018 | 2017 | 2016 | 2015 | | :-------------------------- | :----- | :----- | :----- | :----- | :----- | | Gross profit | $705 | $608 | $118 | $20 | $105 | | Operating expenses | $7,832 | $6,969 | $2,112 | $3,196 | $1,013 | | Total share-based compensation | $8,537 | $7,577 | $2,230 | $3,216 | $1,118 | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=33&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes Ichor's financial condition and operations for 2017-2019, covering business factors, financial results, liquidity, cash flow, and accounting policies - Net sales decreased by **24.6%** from **$823.6 million** in 2018 to **$620.8 million** in 2019, primarily due to reduced demand in semiconductor capital equipment, partially offset by market share gains[182](index=182&type=chunk) - Gross margin decreased by **260 basis points** from **16.5%** in 2018 to **13.9%** in 2019, mainly due to lower factory utilization and product mix[183](index=183&type=chunk)[184](index=184&type=chunk) - Net income from continuing operations decreased significantly from **$57.9 million** in 2018 to **$10.7 million** in 2019[179](index=179&type=chunk) - Non-GAAP adjusted net income from continuing operations was **$28.3 million** in 2019, down from **$75.1 million** in 2018[202](index=202&type=chunk) - Cash and restricted cash increased to **$60.6 million** as of December 27, 2019, from **$43.8 million** in 2018, driven by operating cash flows and share issuances, partially offset by debt payments and capital expenditures[212](index=212&type=chunk) - Operating activities generated **$57.2 million** in 2019, **$60.5 million** in 2018, and **$38.8 million** in 2017[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Total contractual obligations and commitments as of December 27, 2019, amounted to **$221.5 million**, with **$22.6 million** due within one year[225](index=225&type=chunk) [Overview](index=33&type=section&id=Overview) - Ichor is a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment[158](index=158&type=chunk) - Product offerings include gas and chemical delivery systems, precision machined components, weldments, and proprietary products[158](index=158&type=chunk) - The company has a global footprint with production facilities in Malaysia, Singapore, Korea, California, Florida, Minnesota, Oregon, and Texas[160](index=160&type=chunk) - Lam Research and Applied Materials were the two largest customers by revenue in **2019**, **2018**, and **2017**[160](index=160&type=chunk) [Key Factors Affecting Our Business](index=33&type=section&id=Key%20Factors%20Affecting%20Our%20Business) - Investment in Semiconductor Manufacturing Equipment: Business is driven by OEMs' need to refine existing products and develop new ones, and semiconductor device manufacturers' investment in new wafer fabrication equipment[161](index=161&type=chunk) - Outsourcing of Subsystems by Semiconductor OEMs: Continued growth in outsourcing of gas and chemical delivery systems by OEMs due to increasing manufacturing complexities, shorter lead times, and significant capital requirements[162](index=162&type=chunk) - Cyclicality of Semiconductor Device Industry: Indirectly subject to the cyclical nature of the semiconductor device industry, with approximately **85% of 2019 sales** derived from this industry, leading to significant variations in results[163](index=163&type=chunk) - Customer Concentration: Sales are concentrated among a few large manufacturers, with Lam Research (**51%**) and Applied Materials (**33%**) accounting for **84% of 2019 sales**[164](index=164&type=chunk) - Acquisitions: Strategic acquisitions (Cal-Weld, Talon, IAN) have significantly impacted financial position and operations, contributing to sales growth and market expansion, with the company planning to continue opportunistic acquisitions[165](index=165&type=chunk) [Components of Our Results of Operations](index=34&type=section&id=Components%20of%20Our%20Results%20of%20Operations) - Sales: Generated primarily from the design, manufacture, and sale of subsystems and components for semiconductor capital equipment, recognized when control of goods/services is transferred to customers (generally at shipping point)[167](index=167&type=chunk) - Cost of Sales and Gross Profit: Consists of purchased materials, direct/indirect labor, factory overhead, depreciation, and non-recurring engineering services, featuring a highly variable cost structure with low fixed overhead[168](index=168&type=chunk) - Operating Expenses: Primarily research and development (R&D) and selling, general, and administrative (SG&A) expenses, with personnel costs as the most significant component[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Amortization of intangibles: Related to finite-lived intangible assets, computed using the straight-line method[173](index=173&type=chunk) - Interest Expense: Interest on outstanding debt under Credit Facilities[174](index=174&type=chunk) - Other Expense (Income), Net: Primarily foreign exchange gains and losses from transactions denominated in non-U.S. currencies (Singapore Dollar, Malaysian Ringgit, British Pound), as most sales are in U.S. dollars[175](index=175&type=chunk) - Income Tax Benefit: Influenced by taxable income/loss in the U.S., Singapore tax holiday, withholding taxes, stock option exercises, credit generation, and release of tax reserves[177](index=177&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) [Comparison of Fiscal Years 2019 and 2018](index=37&type=section&id=Comparison%20of%20Fiscal%20Years%202019%20and%202018) Net Sales (2018 vs 2019, in thousands) | Year | Net Sales | Change Amount | Change % | | :--- | :-------- | :------------ | :------- | | 2019 | $620,837 | $(202,774) | -24.6% | | 2018 | $823,611 | | | - Decrease in net sales primarily due to reduced demand for semiconductor capital equipment in 2019, partially offset by market share gains[182](index=182&type=chunk) Cost of Sales and Gross Margin (2018 vs 2019, in thousands) | Metric | 2019 | 2018 | Change Amount | Change % | | :--------- | :------- | :------- | :------------ | :------- | | Cost of sales | $534,473 | $687,474 | $(153,001) | -22.3% | | Gross profit | $86,364 | $136,137 | $(49,773) | -36.6% | | Gross margin | 13.9% | 16.5% | -260 bps | | - Gross margin decrease primarily due to lower factory utilization from reduced demand and product mix[184](index=184&type=chunk) Research and Development Expenses (2018 vs 2019, in thousands) | Year | R&D Expenses | Change Amount | Change % | | :--- | :----------- | :------------ | :------- | | 2019 | $11,102 | $1,747 | 18.7% | | 2018 | $9,355 | | | - Increase in R&D due to incremental expenses from IP purchase of developed flow controller technology assets in May 2019[185](index=185&type=chunk) Selling, General, and Administrative Expenses (2018 vs 2019, in thousands) | Year | SG&A Expenses | Change Amount | Change % | | :--- | :------------ | :------------ | :------- | | 2019 | $47,270 | $(178) | -0.4% | | 2018 | $47,448 | | | - Decrease in SG&A due to **$1.0 million** reduction in employee-related expenses from leadership restructuring and **$0.9 million** reduction in professional/consulting fees, partially offset by increased share-based compensation[186](index=186&type=chunk) Amortization of Intangible Assets (2018 vs 2019, in thousands) | Year | Amortization | Change Amount | Change % | | :--- | :----------- | :------------ | :------- | | 2019 | $13,015 | $(2,354) | -15.3% | | 2018 | $15,369 | | | - Decrease in amortization due to certain intangible assets being fully amortized by the end of 2018[187](index=187&type=chunk) Interest Expense (2018 vs 2019, in thousands) | Year | Interest Expense | Change Amount | Change % | | :--- | :--------------- | :------------ | :------- | | 2019 | $10,647 | $660 | 6.6% | | 2018 | $9,987 | | | - Increase in interest expense primarily due to an increase in weighted average interest rate from **4.36% to 4.78%**, partially offset by a reduction in average borrowed amount[188](index=188&type=chunk) Income Tax Benefit (2018 vs 2019, in thousands) | Year | Income Tax Benefit | Change Amount | Change % | | :--- | :----------------- | :------------ | :------- | | 2019 | $(6,454) | $(2,790) | 76.1% | | 2018 | $(3,664) | | | - Increase in income tax benefit due to decreased U.S. taxable income and release of tax reserves, partially offset by the non-repeat of a valuation allowance release related to foreign tax credits in 2018[191](index=191&type=chunk) [Comparison of Fiscal Years 2018 and 2017](index=39&type=section&id=Comparison%20of%20Fiscal%20Years%202018%20and%202017) Net Sales (2017 vs 2018, in thousands) | Year | Net Sales | Change Amount | Change % | | :--- | :-------- | :------------ | :------- | | 2018 | $823,611 | $167,719 | 25.6% | | 2017 | $655,892 | | | - Increase in net sales primarily due to industry growth, acquisitions of Cal-Weld, Talon, and IAN, and market share gains[192](index=192&type=chunk) Cost of Sales and Gross Margin (2017 vs 2018, in thousands) | Metric | 2018 | 2017 | Change Amount | Change % | | :--------- | :------- | :------- | :------------ | :------- | | Cost of sales | $687,474 | $555,131 | $132,343 | 23.8% | | Gross profit | $136,137 | $100,761 | $35,376 | 35.1% | | Gross margin | 16.5% | 15.4% | +110 bps | | - Gross margin increase primarily due to the accretive impact of Cal-Weld and Talon acquisitions, partially offset by inventory fair value adjustments and an error correction[194](index=194&type=chunk) Research and Development Expenses (2017 vs 2018, in thousands) | Year | R&D Expenses | Change Amount | Change % | | :--- | :----------- | :------------ | :------- | | 2018 | $9,355 | $1,456 | 18.4% | | 2017 | $7,899 | | | - Increase in R&D due to incremental expenses from Talon acquisition, increased share-based compensation, and higher headcount/program expenses for new product developments[195](index=195&type=chunk) Selling, General, and Administrative Expenses (2017 vs 2018, in thousands) | Year | SG&A Expenses | Change Amount | Change % | | :--- | :------------ | :------------ | :------- | | 2018 | $47,448 | $9,646 | 25.5% | | 2017 | $37,802 | | | - Increase in SG&A due to incremental operating expenses from acquisitions, increased share-based compensation, and costs to support growth, partially offset by decreased acquisition-related expenses and other credits[196](index=196&type=chunk) Amortization of Intangible Assets (2017 vs 2018, in thousands) | Year | Amortization | Change Amount | Change % | | :--- | :----------- | :------------ | :------- | | 2018 | $15,369 | $6,489 | 73.1% | | 2017 | $8,880 | | | - Increase in amortization due to incremental expense from intangible assets acquired in Cal-Weld, Talon (2017), and IAN (2018) acquisitions[197](index=197&type=chunk) Interest Expense (2017 vs 2018, in thousands) | Year | Interest Expense | Change Amount | Change % | | :--- | :--------------- | :------------ | :------- | | 2018 | $9,987 | $6,710 | 204.8% | | 2017 | $3,277 | | | - Increase in interest expense primarily due to an increase in the average amount borrowed, mainly from the Talon acquisition in December 2017[198](index=198&type=chunk) Income Tax Benefit (2017 vs 2018, in thousands) | Year | Income Tax Benefit | Change Amount | Change % | | :--- | :----------------- | :------------ | :------- | | 2018 | $(3,664) | $10,222 | -73.6% | | 2017 | $(13,886) | | | - Decrease in income tax benefit primarily due to non-repeat of discrete tax benefits recognized in 2017 related to intercompany debt re-characterization, acquisitions, and the Tax Cuts and Jobs Act[200](index=200&type=chunk) [Non-GAAP Results](index=41&type=section&id=Non-GAAP%20Results) - Management uses non-GAAP adjusted net income and diluted EPS to evaluate operating and financial results, believing it provides useful insights for investors[201](index=201&type=chunk) - Non-GAAP adjusted net income excludes amortization of intangible assets, share-based compensation, non-recurring expenses, and certain tax adjustments[201](index=201&type=chunk) Non-GAAP Adjusted Net Income from Continuing Operations (2017-2019, in thousands) | Metric | 2019 | 2018 | 2017 | | :------------------------------------------ | :----- | :----- | :----- | | U.S. GAAP net income | $10,729 | $57,883 | $56,915 | | Amortization of intangible assets | $13,015 | $15,369 | $8,880 | | Share-based compensation | $8,537 | $7,577 | $2,230 | | Other non-recurring expense, net | $2,808 | $1,727 | $4,767 | | Tax adjustments related to non-GAAP adjustments | $(6,743) | $(8,203) | $(626) | | Tax benefit from acquisitions | — | — | $(7,582) | | Tax benefit from re-characterizing intercompany debt to equity | — | — | $(1,627) | | Tax impact from tax law change | — | — | $(5,911) | | Tax benefit from release of valuation allowance | — | $(4,140) | — | | Adjustments to cost of goods sold | — | — | $1,752 | | Fair value adjustment to inventory from acquisitions | — | $4,839 | $5,230 | | Loss on Ajax acquisition arbitration settlement | — | — | $1,032 | | **Non-GAAP net income** | **$28,346** | **$75,052** | **$65,060** | | U.S. GAAP diluted EPS | $0.47 | $2.30 | $2.15 | | **Non-GAAP diluted EPS** | **$1.25** | **$2.99** | **$2.48** | | Shares used to compute diluted EPS | 22,766,903 | 25,128,055 | 26,218,424 | [Unaudited Quarterly Financial Results](index=43&type=section&id=Unaudited%20Quarterly%20Financial%20Results) Unaudited Quarterly Consolidated Statements of Operations Data (Q1 2018 - Q4 2019, in thousands) | Metric | Dec 27, 2019 | Sep 27, 2019 | Jun 28, 2019 | Mar 29, 2019 | Dec 28, 2018 | Sep 28, 2018 | Jun 29, 2018 | Mar 30, 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Sales | $189,355 | $154,456 | $139,195 | $137,831 | $141,402 | $175,207 | $248,973 | $258,029 | | Cost of sales | $163,440 | $133,763 | $119,662 | $117,608 | $119,953 | $146,993 | $205,098 | $215,430 | | Gross profit | $25,915 | $20,693 | $19,533 | $20,223 | $21,449 | $28,214 | $43,875 | $42,599 | | Operating expenses | $20,209 | $17,371 | $16,521 | $17,286 | $15,468 | $16,666 | $17,996 | $22,042 | | Operating income | $5,706 | $3,322 | $3,012 | $2,937 | $5,981 | $11,548 | $25,879 | $20,557 | | Interest expense | $2,454 | $2,663 | $2,762 | $2,768 | $2,627 | $2,553 | $2,303 | $2,504 | | Other expense (income), net | $67 | $(43) | $7 | $24 | $(181) | $(84) | $(217) | $241 | | Income before income taxes | $3,185 | $702 | $243 | $145 | $3,535 | $9,079 | $23,793 | $17,812 | | Income tax expense (benefit) | $(4,767) | $(221) | $(93) | $(1,373) | $50 | $(558) | $(4,247) | $1,091 | | Net income | $7,952 | $923 | $336 | $1,518 | $3,485 | $9,637 | $28,040 | $16,721 | | Diluted net income per share | $0.35 | $0.04 | $0.01 | $0.07 | $0.15 | $0.39 | $1.07 | $0.63 | Unaudited Quarterly Consolidated Statements of Operations Data as a Percentage of Sales (Q1 2018 - Q4 2019) | Metric | Dec 27, 2019 | Sep 27, 2019 | Jun 28, 2019 | Mar 29, 2019 | Dec 28, 2018 | Sep 28, 2018 | Jun 29, 2018 | Mar 30, 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Sales | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of sales | 86.3% | 86.6% | 86.0% | 85.3% | 84.8% | 83.9% | 82.4% | 83.5% | | Gross profit | 13.7% | 13.4% | 14.0% | 14.7% | 15.2% | 16.1% | 17.6% | 16.5% | | Operating expenses | 10.7% | 11.2% | 11.9% | 12.5% | 10.9% | 9.5% | 7.2% | 8.5% | | Operating income | 3.0% | 2.2% | 2.2% | 2.1% | 4.2% | 6.6% | 10.4% | 8.0% | | Net income | 4.2% | 0.6% | 0.2% | 1.1% | 2.5% | 5.5% | 11.3% | 6.5% | [Seasonality](index=44&type=section&id=Seasonality) - The company has not historically experienced meaningful seasonality in its business or results of operations[211](index=211&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash balance was **$60.6 million** as of December 27, 2019, up from **$43.8 million** as of December 28, 2018[212](index=212&type=chunk) - Principal uses of liquidity include funding working capital, purchasing capital equipment, acquisitions, and the share repurchase program[212](index=212&type=chunk) - Management believes current cash, revolving credit facility, and operating cash flows will be sufficient to meet anticipated cash needs for at least the next **12 months**[213](index=213&type=chunk) [Cash Flow Analysis](index=44&type=section&id=Cash%20Flow%20Analysis) Summary of Cash Flow Activities (2017-2019, in thousands) | Activity | 2019 | 2018 | 2017 | | :-------------------------------- | :----- | :----- | :----- | | Cash provided by operating activities | $57,150 | $60,475 | $38,803 | | Cash used in investing activities | $(20,490) | $(15,363) | $(186,751) | | Cash provided by (used in) financing activities | $(19,882) | $(70,582) | $164,604 | | Net increase (decrease) in cash | $16,778 | $(25,470) | $16,656 | - Operating activities generated **$57.2 million** in 2019, driven by net income, non-cash charges (depreciation, amortization, share-based compensation), and a decrease in net operating assets/liabilities[215](index=215&type=chunk) - Investing activities used **$20.5 million** in 2019 for capital expenditures (**$12.3 million**) and intangible assets (**$8.1 million**)[218](index=218&type=chunk) - Financing activities used **$19.9 million** in 2019, primarily for long-term debt payments (**$23.8 million**) and share repurchases (**$1.6 million**), partially offset by share-based compensation plan proceeds (**$5.5 million**)[220](index=220&type=chunk) [Contractual Obligations and Commitments](index=46&type=section&id=Contractual%20Obligations%20and%20Commitments) Contractual Obligations and Commitments as of December 27, 2019 (in thousands) | Type | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | :-------------------------- | :------ | :--------------- | :-------- | :-------- | :---------------- | | Operating leases | $15,723 | $5,492 | $9,000 | $1,231 | $— | | Long-term debt obligations, principal | $181,037 | $8,750 | $17,500 | $154,787 | $— | | Long-term debt obligations, interest | $24,784 | $8,364 | $15,521 | $899 | $— | | **Total** | **$221,544** | **$22,606** | **$42,021** | **$156,917** | **$—** | [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Preparation of financial statements requires significant estimates and assumptions, including fair value of acquired assets/liabilities, useful lives of long-lived assets, allowance for doubtful accounts, inventory valuation, uncertain tax positions, fair value of stock options, and impairment analysis for intangibles and goodwill[226](index=226&type=chunk)[281](index=281&type=chunk) - Key policies include Revenue Recognition (control transfer at shipping point), Inventory Valuation (lower of cost or net realizable value, with write-downs for obsolescence or excess), and impact of Recent Accounting Pronouncements[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) [Recent Accounting Pronouncements](index=46&type=section&id=Recent%20Accounting%20Pronouncements) - The company adopted ASC Topic 606, Revenue from Contracts with Customers, on December 30, 2017, with no significant change to revenue recognition[309](index=309&type=chunk) - Adopted ASU 2016-02, Leases (Topic 842), on December 29, 2018, which materially affected consolidated financial statements by recognizing ROU assets and lease liabilities for operating leases (**$17.7 million** ROU assets, **$18.1 million** liabilities)[310](index=310&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk) - Adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718), on December 29, 2018, with no significant impact[314](index=314&type=chunk) - Will adopt ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), in Q1 2020, which is not expected to have a material impact[315](index=315&type=chunk) [Off-Balance Sheet Arrangements](index=46&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of December 27, 2019, the company did not have any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[232](index=232&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=47&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Ichor is exposed to market risks from foreign currency exchange rates and interest rates, with a **1%** interest rate change potentially impacting 2019 interest expense by **$1.8 million** - The company is exposed to financial market risks, including changes in currency exchange rates and interest rates[233](index=233&type=chunk) [Foreign Currency Exchange Risk](index=47&type=section&id=Foreign%20Currency%20Exchange%20Risk) - Substantially all sales and supplier arrangements are denominated in U.S. dollars, limiting material exchange rate fluctuations on revenue[234](index=234&type=chunk) - Operating expenses in Singapore Dollars, Malaysian Ringgit, British Pounds, and Euros create foreign currency exchange rate exposure[235](index=235&type=chunk) - Foreign currency transaction gains and losses have not been material, and the company has not engaged in hedging transactions[235](index=235&type=chunk) [Interest Rate Risk](index=47&type=section&id=Interest%20Rate%20Risk) - Total indebtedness was **$181.0 million** as of December 27, 2019, with **$8.8 million** due within **12 months**[236](index=236&type=chunk) - The interest rate on outstanding debt is based on LIBOR, Prime Rate, or Federal Funds Rate[237](index=237&type=chunk) - A hypothetical **1%** interest rate change on outstanding debt would have resulted in a **$1.8 million** change to interest expense during 2019[237](index=237&type=chunk) - The company does not use derivative financial instruments to manage interest rate risk exposure and has not been exposed to material risks from interest rate changes[237](index=237&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=47&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents Ichor's audited consolidated financial statements for 2017-2019, including the auditor's report, core financial statements, and comprehensive notes - The consolidated financial statements for the three-year period ended December 27, 2019, are presented in this item[238](index=238&type=chunk) - KPMG LLP provided an unqualified opinion on the consolidated financial statements, affirming fair presentation in conformity with U.S. GAAP[260](index=260&type=chunk) - Changes in accounting principles include the adoption of ASU 2016-02 (Leases) as of December 29, 2018, and ASU 2014-09 (Revenue from Contracts with Customers) as of December 30, 2017[261](index=261&type=chunk) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - KPMG LLP issued an unqualified opinion on Ichor Holdings, Ltd.'s consolidated financial statements for the three-year period ended December 27, 2019, stating they present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with U.S. GAAP[260](index=260&type=chunk) - Noted changes in accounting principles for leases (ASU 2016-02, ASU 2018-11) adopted December 29, 2018, and revenue (ASU 2014-09) adopted December 30, 2017[261](index=261&type=chunk) - The audit was conducted in accordance with PCAOB standards, including assessing risks of material misstatement and evaluating accounting principles and estimates[263](index=263&type=chunk)[264](index=264&type=chunk) [Consolidated Balance Sheets](index=51&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (in thousands) | Asset/Liability | December 27, 2019 | December 28, 2018 | | :------------------------------------------ | :------------------ | :------------------ | | **Assets** | | | | Cash | $60,612 | $43,834 | | Accounts receivable, net | $84,849 | $40,287 | | Inventories, net | $127,037 | $121,106 | | Total current assets | $276,947 | $211,575 | | Property and equipment, net | $44,541 | $41,740 | | Operating lease right-of-use assets | $14,198 | $— | | Intangible assets, net | $52,027 | $56,895 | | Goodwill | $173,010 | $173,010 | | Total assets | $566,555 | $485,489 | | **Liabilities and Shareholders' Equity** | | | | Accounts payable | $131,578 | $64,300 | | Accrued liabilities | $12,814 | $9,556 | | Current portion of long-term debt | $8,750 | $8,750 | | Current portion of lease liabilities | $5,492 | $— | | Total current liabilities | $163,867 | $87,754 | | Long-term debt, less current portion, net | $169,304 | $192,117 | | Lease liabilities, less current portion | $9,081 | $— | | Total liabilities | $345,139 | $287,163 | | Total shareholders' equity | $221,416 | $198,326 | | Total liabilities and shareholders' equity | $566,555 | $485,489 | [Consolidated Statements of Operations](index=52&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations (in thousands, except per share data) | Metric | Year Ended Dec 27, 2019 | Year Ended Dec 28, 2018 | Year Ended Dec 29, 2017 | | :------------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | | Net sales | $620,837 | $823,611 | $655,892 | | Cost of sales | $534,473 | $687,474 | $555,131 | | Gross profit | $86,364 | $136,137 | $100,761 | | Operating expenses: | | | | | Research and development | $11,102 | $9,355 | $7,899 | | Selling, general, and administrative | $47,270 | $47,448 | $37,802 | | Amortization of intangible assets | $13,015 | $15,369 | $8,880 | | Total operating expenses | $71,387 | $72,172 | $54,581 | | Operating income | $14,977 | $63,965 | $46,180 | | Interest expense | $10,647 | $9,987 | $3,277 | | Other expense (income), net | $55 | $(241) | $(126) | | Income before income taxes | $4,275 | $54,219 | $43,029 | | Income tax benefit | $(6,454) | $(3,664) | $(13,886) | | Net income from continuing operations | $10,729 | $57,883 | $56,915 | | Net loss from discontinued operations | $— | $— | $(461) | | Net income | $10,729 | $57,883 | $56,454 | | Diluted EPS from continuing operations | $0.47 | $2.30 | $2.17 | | Diluted net income per share | $0.47 | $2.30 | $2.15 | [Consolidated Statements of Shareholders' Equity](index=53&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Consolidated Statements of Shareholders' Equity (in thousands) | Metric | Dec 30, 2016 | Dec 29, 2017 | Dec 28, 2018 | Dec 27, 2019 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | | Total Shareholders' Equity | $141,659 | $216,762 | $198,326 | $221,416 | | Ordinary Shares (Amount) | $2 | $3 | $2 | $2 | | Additional Paid-In Capital | $196,049 | $214,697 | $228,358 | $242,318 | | Treasury Shares (Amount) | $— | $— | $(89,979) | $(91,578) | | Retained Earnings | $(54,392) | $2,062 | $59,945 | $70,674 | | Net income | — | $56,454 | $57,883 | $10,729 | | Repurchase of ordinary shares | — | — | $(89,980) | $(1,599) | [Consolidated Statements of Cash Flows](index=54&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Activity | Year Ended Dec 27, 2019 | Year Ended Dec 28, 2018 | Year Ended Dec 29, 2017 | | :---------------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Net cash provided by operating activities | $57,150 | $60,475 | $38,803 | | Net cash used in investing activities | $(20,490) | $(15,363) | $(186,751) | | Net cash provided by (used in) financing activities | $(19,882) | $(70,582) | $164,604 | | Net increase (decrease) in cash | $16,778 | $(25,470) | $16,656 | | Cash at end of period | $60,612 | $43,834 | $69,304 | | Cash paid for interest | $8,424 | $8,273 | $3,436 | | Cash paid for taxes, net of refunds | $896 | $2,278 | $1,068 | [Notes to Financial Statements](index=55&type=section&id=Notes%20to%20Financial%20Statements) [Note 1 – Organization and Summary of Significant Accounting Policies](index=55&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Ichor Holdings, Ltd. designs, develops, manufactures, and distributes gas and liquid delivery subsystems and components for semiconductor markets, with operations in the U.S., U.K., Singapore, Malaysia, and Korea[274](index=274&type=chunk) - The company uses a **52- or 53-week** fiscal year ending on the last Friday in December[280](index=280&type=chunk) - Revenue is recognized when control of promised goods or services is transferred to customers, generally at the shipping point[282](index=282&type=chunk)[284](index=284&type=chunk) - Inventories are stated at the lower of cost or net realizable value, with write-downs for obsolescence or excess[296](index=296&type=chunk) - Long-lived assets are reviewed for impairment when circumstances indicate carrying amount may not be recoverable[300](index=300&type=chunk) - Goodwill is reviewed for impairment annually using a qualitative assessment, or a quantitative test if necessary[302](index=302&type=chunk)[303](index=303&type=chunk) - Research and development costs are expensed as incurred[304](index=304&type=chunk) - Adopted ASC Topic 606 (Revenue) on December 30, 2017, with no significant change, and ASC Topic 842 (Leases) on December 29, 2018, resulting in recognition of ROU assets and lease liabilities[309](index=309&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk) [Note 2 – Acquisitions](index=61&type=section&id=Note%202%20%E2%80%93%20Acquisitions) - IAN Engineering Co., Ltd. was acquired on April 19, 2018, for **$6.5 million**, providing exposure to the South Korean semiconductor capital equipment market[316](index=316&type=chunk) - Talon Innovations Corporation was acquired on December 11, 2017, for **$137.8 million**, expanding capacity in component manufacturing for gas and chemical delivery tools[320](index=320&type=chunk) - Cal-Weld, Inc. was acquired on July 27, 2017, for **$56.2 million**, expanding capacity in component manufacturing for gas delivery tools[325](index=325&type=chunk) - Goodwill recognized from acquisitions is primarily attributed to assembled workforce and expected synergies and is not tax deductible[318](index=318&type=chunk)[323](index=323&type=chunk)[328](index=328&type=chunk) [Note 3 – Inventories](index=63&type=section&id=Note%203%20%E2%80%93%20Inventories) Inventories (in thousands) | Category | December 27, 2019 | December 28, 2018 | | :------------------------ | :------------------ | :------------------ | | Raw materials | $85,329 | $90,713 | | Work in process | $31,825 | $20,852 | | Finished goods | $17,700 | $17,233 | | Excess and obsolete adjustment | $(7,817) | $(7,692) | | **Total inventories, net** | **$127,037** | **$121,106** | Changes to Excess and Obsolete Adjustment (in thousands) | Period | Excess and obsolete adjustment | | :------------------------ | :----------------------------- | | Balance at December 30, 2016 | $(8,080) | | Balance at December 29, 2017 | $(6,022) | | Balance at December 28, 2018 | $(7,692) | | Balance at December 27, 2019 | $(7,817) | - Inventory values are based on average costs and are written down for obsolescence or when cost exceeds net realizable value[296](index=296&type=chunk) [Note 4 – Property and Equipment](index=63&type=section&id=Note%204%20%E2%80%93%20Property%20and%20Equipment) Property and Equipment (in thousands) | Category | December 27, 2019 | December 28, 2018 | | :-------------------------------- | :------------------ | :------------------ | | Machinery | $33,684 | $29,885 | | Leasehold improvements | $27,835 | $15,333 | | Computer software, hardware, and equipment | $5,796 | $4,884 | | Office furniture, fixtures and equipment | $1,040 | $1,058 | | Vehicles | $26 | $26 | | Construction-in-process | $3,760 | $9,514 | | Less accumulated depreciation | $(27,600) | $(18,960) | | **Total property and equipment, net** | **$44,541** | **$41,740** | - Depreciation expense was **$8.9 million** in 2019, **$7.7 million** in 2018, and **$3.6 million** in 2017[331](index=331&type=chunk) - Property and equipment are stated at cost, less accumulated depreciation, computed using the straight-line method over estimated useful lives (e.g., machinery **5-10 years**, leasehold improvements **10 years**)[297](index=297&type=chunk) [Note 5 – Intangible Assets and Goodwill](index=64&type=section&id=Note%205%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) Definite-Lived Intangible Assets (December 27, 2019, in thousands) | Category | Gross Value | Accumulated Amortization | Carrying Amount | Weighted Average Useful Life | | :-------------------- | :---------- | :----------------------- | :-------------- | :------------------------- | | Trademarks | $9,690 | $(7,750) | $1,940 | 10.0 years | | Customer relationships | $82,986 | $(42,621) | $40,365 | 7.8 years | | Developed technology | $11,047 | $(1,325) | $9,722 | 10.0 years | | **Total intangible assets** | **$103,723** | **$(51,696)** | **$52,027** | | - Acquired a developed technology asset for **$8.1 million** in Q2 2019 with a **10-year** useful life[332](index=332&type=chunk) Future Projected Annual Amortization Expense (in thousands) | Year | Amortization Expense | | :--- | :------------------- | | 2020 | $13,394 | | 2021 | $13,394 | | 2022 | $9,578 | | 2023 | $8,360 | | 2024 | $1,917 | | Thereafter | $5,384 | | **Total** | **$52,027** | Goodwill (in thousands) | Period | Goodwill | | :-------------------- | :------- | | Balance at Dec 30, 2016 | $77,093 | | Balance at Dec 29, 2017 | $169,399 | | Balance at Dec 28, 2018 | $173,010 | | Balance at Dec 27, 2019 | $173,010 | - Goodwill is reviewed for impairment annually, with a qualitative assessment performed at December 27, 2019, and December 28, 2018, indicating fair value exceeded carrying value[303](index=303&type=chunk) [Note 6 – Leases](index=65&type=section&id=Note%206%20%E2%80%93%20Leases) - Leases facilities under non-cancellable operating leases expiring through **2024**[334](index=334&type=chunk) - Operating lease cost for 2019 was **$5.42 million**[335](index=335&type=chunk) - Weighted-average remaining lease term for operating leases is **3.1 years**, with a weighted-average discount rate of **4.5%**[336](index=336&type=chunk) Future Minimum Lease Payments (as of December 27, 2019, in thousands) | Year | Amount | | :--- | :----- | | 2020 | $5,492 | | 2021 | $4,892 | | 2022 | $4,108 | | 2023 | $1,109 | | 2024 | $122 | | **Total future minimum lease payments** | **$15,723** | | Less imputed interest | $(1,150) | | **Total lease liabilities** | **$14,573** | [Note 7 – Income Taxes](index=66&type=section&id=Note%207%20%E2%80%93%20Income%20Taxes) - The 2017 Tax Act reduced the U.S. corporate income tax rate from **35% to 21%**, resulting in a **$5.9 million** increase in income tax benefit for 2017[339](index=339&type=chunk)[341](index=341&type=chunk) - Recognized a provisional income tax expense of **$0.7 million** in 2017 related to the one-time transition tax on foreign earnings, adjusted to **$0.6 million** i

Ichor Holdings, Ltd. (NASDAQ:ICHR) Q4 2019 Earnings Conference Call February 5, 2020 5:00 PM ET Company Participants Claire McAdams - Investor Relations Jeff Andreson - Chief Executive Officer Larry Sparks - Chief Financial Officer Conference Call Participants Mitch Steves - RBC Capital Market Sidney Ho - Deutsche Bank Craig Ellis - B. Riley & Company Karl Ackerman - Cowen & Company Patrick Ho - Stifel Tom Diffely - D.A. Davidson Gus Richard - Northland Securities Operator Good day, ladies and gentlemen, an ...

Investor Presentation 22nd Annual Needham Growth Conference January 14, 2020 Define. Create. Enable. Experts in critical systems engineering and manufacturing l Proprietary ichor Safe Harbor and Non-GAAP Financial Measures This Presentation and the accompanying oral presentation include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as anended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding Ichor Holdings, Ltd. and its subsidiarie ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 2019 OR ☐ 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 ICHOR HOLDINGS, LTD. (Exact Name of Registrant as Specified in its Charter) Cayman Islands Not Applicable ( State ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 2019 OR ☐ 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 ICHOR HOLDINGS, LTD. (Exact Name of Registrant as Specified in its Charter) Cayman Islands Not Applicable ( State or o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (Exact Name of Registrant as Specified in its Charter) Cayman Islands Not Applicable ( State or other jurisdiction of incorporation or organization) 3185 Laurelview Ct. Fremont, CA 94538 (I.R.S. Employer Identification No.) Registrant's telephone number, including area code: (510) 897‑5200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securit ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10‑K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 28, 2018 or ☐ 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 ICHOR HOLDINGS, LTD. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation) Cay ...