Ichor (US:ICHR)2024-05-08 13:19Financial Performance - Net sales for the three months ended March 29, 2024, were $201,383 thousand, a decrease of 10.8% from $225,870 thousand in the same period of 2023[61][69]. - Gross margin decreased to 11.4% in Q1 2024 from 14.7% in Q1 2023, primarily due to reduced factory utilization and unfavorable product mix[61][71]. - The company reported a net loss of $8,989 thousand for Q1 2024, compared to a net loss of $5 thousand in Q1 2023[61][66]. - Operating margin for Q1 2024 was (1.9)%, down from 2.1% in Q1 2023, reflecting the impact of reduced sales and increased costs[61][68]. - Non-GAAP gross profit decreased from $34,948 thousand in Q1 2023 to $24,518 thousand in Q1 2024, while non-GAAP gross margin decreased from 15.5% to 12.2%[82]. - Non-GAAP operating income decreased from $13,721 thousand in Q1 2023 to $2,432 thousand in Q1 2024, with non-GAAP operating margin declining from 6.1% to 1.2%[83]. - Non-GAAP net loss increased from $11,128 thousand in Q1 2023 to $2,712 thousand in Q1 2024, with non-GAAP diluted EPS decreasing from $0.38 to $(0.09)[86]. Expenses and Costs - Research and development expenses increased by 24.5% to $5,370 thousand in Q1 2024, driven by higher employee-related expenses and costs related to new product development[61][72]. - Cost of sales decreased by 7.4% to $178,389 thousand in Q1 2024, compared to $192,630 thousand in Q1 2023[61][70]. - Selling, general, and administrative expenses decreased by 4.7% to $19,219 thousand in Q1 2024, mainly due to reduced employee-related expenses[61][73]. - Amortization of intangible assets decreased by $1,820 thousand, or 45.9%, from $3,966 thousand in Q1 2023 to $2,146 thousand in Q1 2024 due to certain intangible assets becoming fully amortized[74]. - Net interest expense decreased by $454 thousand, or 10.0%, from $4,550 thousand in Q1 2023 to $4,096 thousand in Q1 2024, primarily due to a decrease in weighted average borrowings outstanding by $58,544 thousand, or 19.4%[76]. - Other expense, net decreased by $545 thousand, or 69.5%, from $784 thousand in Q1 2023 to $239 thousand in Q1 2024, primarily due to currency exchange rate fluctuations[77]. - Income tax expense increased by $1,448 thousand, from a benefit of $535 thousand in Q1 2023 to an expense of $913 thousand in Q1 2024, due to increased taxable income in foreign jurisdictions[78]. Cash Flow and Liquidity - Cash and cash equivalents increased by $22.2 million from the prior year, totaling $102.1 million as of March 29, 2024, primarily due to net proceeds of $136.7 million from a public offering[93]. - Cash provided by operating activities was $4.8 million in Q1 2024, compared to cash used of $10.9 million in Q1 2023, reflecting favorable changes in accounts payable and accrued liabilities[95]. - The company has $250.0 million available to draw on its revolving credit facility as of March 29, 2024, supporting its liquidity needs[92]. - Cash provided by financing activities included net proceeds of $136.7 million from the issuance of 3.8 million ordinary shares in March 2024, offset by net payments on credit facilities of $116.9 million[99]. - Total indebtedness as of March 29, 2024, was $133.1 million, with $7.5 million due within 12 months, and no material risks anticipated from changes in interest rates[104]. - A hypothetical 100 basis point change in the interest rate on outstanding debt would have resulted in a $0.3 million change to interest expense during the quarter, or $1.3 million on an annualized basis[104]. Market Conditions and Future Outlook - The semiconductor industry is experiencing a cyclical downturn, impacting customer demand and spending on capital equipment[62][63]. - The company initiated labor and cost reduction initiatives starting in Q4 2022, incurring severance charges of $0.9 million in Q1 2024[62]. - Future growth is anticipated as demand for semiconductors and capital equipment is expected to return, driven by the need for increased semiconductor production capacity[63]. Foreign Currency and Risk Management - Foreign currency exchange risks are mitigated as substantially all sales arrangements are priced in U.S. dollars, reducing exposure to material exchange rate fluctuations[102]. - Operating expenses may be subject to fluctuations due to foreign currency exchange rates, particularly in currencies such as the Singapore dollar and euro, but transaction gains and losses have not been material[103]. - The company has not engaged in foreign currency hedging transactions to date[103]. Accounting Policies and Estimates - Critical accounting estimates and assumptions are evaluated on an ongoing basis, with actual results potentially differing from estimates impacting future financial statements[100]. - Significant accounting policies impacting consolidated financial statements are detailed in the 2023 Annual Report on Form 10-K[101].