Ichor (ICHR) - 2020 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended March 27, 2020, were $220,028,000, representing a 59.6% increase from $137,831,000 in the same period of 2019[64]. - Gross profit increased to $28,774,000 with a gross margin of 13.1%, down from 14.7% in the prior year, primarily due to increased operating costs and lower factory utilization related to the COVID-19 pandemic[65][66]. - Operating income rose to $5,500,000, compared to $2,937,000 in the previous year, reflecting improved sales performance despite pandemic-related challenges[59]. - U.S. GAAP net income for Q1 2020 was $3.4 million, compared to $1.5 million in Q1 2019, representing a 124% increase[75]. - Non-GAAP net income for Q1 2020 was $12.1 million, up from $5.6 million in Q1 2019, reflecting a 117% increase[75]. - Non-GAAP diluted EPS for Q1 2020 was $0.52, compared to $0.25 in Q1 2019, marking a 108% increase[75]. Expenses - Research and development expenses increased by 38.9% to $3,322,000, driven by higher employee-related costs and the acquisition of developed technology assets[67]. - Selling, general, and administrative expenses grew by 41.3% to $16,618,000, influenced by executive transition costs and increased employee-related expenses[68]. - Interest expense decreased by 14.2% to $2,374,000, attributed to a reduction in the average interest rate from 4.77% to 4.44% and a decrease in average borrowings[70]. Cash Flow and Indebtedness - Cash used in operating activities during Q1 2020 was $21.0 million, a significant increase from $0.4 million in Q1 2019[80]. - The company ended Q1 2020 with cash of $41.6 million, a decrease of $19.0 million from the previous quarter[78]. - Total indebtedness as of March 27, 2020, was $183.8 million, with $8.8 million due within 12 months[89]. - Cash provided by financing activities in Q1 2020 was $4.5 million, primarily from net proceeds of $2.8 million from credit facilities[83]. Operational Challenges - The company experienced a $1.4 million contract settlement loss, which negatively impacted gross margin by 60 basis points[66]. - The COVID-19 pandemic has led to reduced factory capacity and increased operational costs, creating significant volatility and uncertainty in the industry[60]. - The increase in net operating assets and liabilities was $34.0 million, driven by a $16.7 million increase in inventories[81]. - The company recorded a contract settlement loss of $1.4 million during Q1 2020 due to a mutual settlement in a contract dispute[81]. Future Outlook - The company anticipates that its cash and available credit will be sufficient to meet cash needs for at least the next 12 months[79]. - The company has a global footprint with production facilities in multiple countries, including Malaysia, Singapore, and the U.S., with major customers being Lam Research and Applied Materials[59].