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What changed in ICHOR HOLDINGS, LTD.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ICHOR HOLDINGS, LTD.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+246 added−268 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in ICHOR HOLDINGS, LTD.'s 2023 10-K

246 paragraphs added · 268 removed · 163 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

43 edited+4 added−13 removed63 unchanged
Biggest changeDemographics As of December 30, 2022, we had approximately 2,280 full‑time employees and 700 contract or temporary workers, which allow flexibility as business conditions and geographic demand change. Of our total workforce, approximately 90 are engineers, 110 are engaged in sales and marketing, 2,635 are engaged in manufacturing, and 145 perform executive and administrative functions.
Biggest changeWe are committed to enhancing diversity, inclusion, and equity through specific policies, practices, employee and manager training, and dedicated executive leadership. Below are details demonstrating our commitment in this area. Demographics As of December 29, 2023, we had approximately 1,690 full‑time employees and 555 contract or temporary workers, which allow flexibility as business conditions and geographic demand change.
Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.
Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems has allowed OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.
In many cases, our early engagement with our customers enables us to be the sole source supplier when the product is initially introduced. Long History and Strong Relationships with Top Tier Customers We have established deep relationships with top tier OEMs, including Lam Research, Applied Materials, and ASML.
In many cases, our early engagement with our customers enables us to be the sole source supplier when the product is initially introduced. Long History and Strong Relationships with Top Tier Customers We have established deep relationships with top tier OEMs, including Applied Materials, Lam Research, and ASML.
This includes tuition reimbursement, online training, on the job training, diversity and inclusion training, and managerial coaching. We actively invest in leadership development, cultivating involvement, engagement, and empowerment of our future leaders in an active investment in succession planning and development.
This includes tuition reimbursement, online training, on the job training, diversity and inclusion training, and managerial coaching and training. We actively invest in leadership development, cultivating involvement, engagement, and empowerment of our future leaders in an active investment in succession planning and development.
We offer a wide range of specialty joining technologies including orbital, tungsten inert gas (“TIG”), e‑beam, and laser welding, as well as hydrogen and vacuum brazing. Precision Machining Precision machining provides us the ability to supply our customers with components used in our gas delivery systems and weldments, while also providing custom machined solutions throughout customers’ equipment.
We offer a wide range of specialty joining technologies including orbital, tungsten inert gas, e‑beam, and laser welding, as well as hydrogen and vacuum brazing. Precision Machining Precision machining provides us the ability to supply our customers with components used in our gas delivery systems and weldments, while also providing custom machined solutions throughout customers’ equipment.
For instance, it can take as little as 20 to 30 days for us to manufacture a gas delivery system with fully evaluated performance metrics after receiving an order. 6 Manufacturing We are ISO 9001 certified or compliant at our manufacturing locations, and our manufactured subsystems and modules adhere to strict design tolerances and specifications.
For instance, it can take as little as 20 to 30 days for us to manufacture a gas delivery system with fully evaluated performance metrics after receiving an order. Manufacturing We are ISO 9001 certified or compliant at our manufacturing locations, and our manufactured subsystems and modules adhere to strict design tolerances and specifications.
Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future. We are not aware of any threatened or pending environmental investigations, lawsuits, or claims involving us, our operations, or our current or former facilities. 9 Available Information Our internet address is ichorsystems.com .
Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future. We are not aware of any threatened or pending environmental investigations, lawsuits, or claims involving us, our operations, or our current or former facilities. Available Information Our internet address is ichorsystems.com .
While many OEMs have outsourced the design and manufacturing of their gas and chemical delivery systems, we would face additional competition if in the future these OEMs elected to develop and build these systems internally. 7 The fluid delivery subsystem market is concentrated , and we face competition , for example, from Ultra Clean Technology, with additional competition from other regional suppliers.
While many OEMs have outsourced the design and manufacturing of their gas and chemical delivery systems, we would face additional competition if in the future these OEMs elected to develop and build these systems internally. The fluid delivery subsystem market is concentrated, and we face competition, for example, from Ultra Clean Technology, with additional competition from other regional suppliers.
Francisco Partners acquired the business in December 2011 and formed Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia. We completed the initial public offering of our ordinary shares in December 2016.
Francisco Partners acquired the business in December 2011. Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, was formed in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia. We completed the initial public offering of our ordinary shares in December 2016.
Supply Chain Management We use a wide range of components and materials in the production of our gas and chemical delivery systems, including filters, mass flow controllers, regulators, pressure transducers, substrates, and valves. We obtain components and materials from a large number or sources, including single source and sole source suppliers.
Supply Chain Management We use a wide range of components and materials in the production of our gas and chemical delivery systems, including filters, mass flow controllers, regulators, pressure transducers, substrates, and valves. We obtain components and materials from a large number of sources, including single source and sole source suppliers.
In 2022, we continued our employee cash spot bonus and continuous improvement programs, which recognize employee contributions to our business. Learning and Development We support our employees in their career development by providing a multi-dimensional approach to learning and development, including internal and external opportunities for professional development.
In 2023, we continued our employee cash spot bonus and continuous improvement programs, which recognize employee contributions to our business. Learning and Development We support our employees in their career development by providing a multi-dimensional approach to learning and development, including internal and external opportunities for professional development.
This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively. Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes.
This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively. 1 Table of Contents Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes.
Fiscal Period Period Ending Weeks in Period Fiscal Year 2022: December 30, 2022 52 First Quarter April 1, 2022 13 Second Quarter July 1, 2022 13 Third Quarter September 30, 2022 13 Fourth Quarter December 30, 2022 13 Fiscal Year 2021: December 31, 2021 53 First Quarter March 26, 2021 13 Second Quarter June 25, 2021 13 Third Quarter September 24, 2021 13 Fourth Quarter December 31, 2021 14 Fiscal Year 2020: December 25, 2020 52 First Quarter March 27, 2020 13 Second Quarter June 26, 2020 13 Third Quarter September 25, 2020 13 Fourth Quarter December 25, 2020 13 Company Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment.
Fiscal Period Period Ending Weeks in Period Fiscal Year 2023: December 29, 2023 52 First Quarter March 31, 2023 13 Second Quarter June 30, 2023 13 Third Quarter September 29, 2023 13 Fourth Quarter December 29, 2023 13 Fiscal Year 2022: December 30, 2022 52 First Quarter April 1, 2022 13 Second Quarter July 1, 2022 13 Third Quarter September 30, 2022 13 Fourth Quarter December 30, 2022 13 Fiscal Year 2021: December 31, 2021 53 First Quarter March 26, 2021 13 Second Quarter June 25, 2021 13 Third Quarter September 24, 2021 13 Fourth Quarter December 31, 2021 14 Company Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment.
Our engineering team acts as an extension of our customers’ product development teams, providing our customers with technical expertise that is outside of their core competencies. Early Engagement with Customers on Product Development We seek to engage with our customers and potential customers very early in their process for new product development.
Our engineering team acts as an extension of our customers’ product development teams, providing our customers with technical expertise that is outside of their core competencies. 2 Table of Contents Early Engagement with Customers on Product Development We seek to engage with our customers and potential customers very early in their process for new product development.
We use supplier-consigned material and just-in-time stocking programs for a portion of our inventories to better manage our component inventories and better respond to changing customer requirements. These approaches enable us to reduce our inventory levels and maintain flexibility in responding to changes in product demand.
We use supplier-consigned material and just-in-time stocking programs for a portion of our inventories to better manage our component inventories and better respond to changing customer requirements. These approaches are designed to reduce our inventory levels and maintain flexibility in responding to changes in product demand.
All references to 2022, 2021, and 2020, including the quarters thereto, relate to our fiscal periods as so detailed.
All references to 2023, 2022, and 2021, including the quarters thereto, relate to our fiscal periods as so detailed.
This information includes our Annual Reports on Form 10‑K, our Quarterly Reports on Form 10‑Q, our Current Reports on Form 8‑K, and any amendments to those reports as soon as reasonably practicable after we electronically file those reports with or furnish them to the Securities and Exchange Commission (“SEC”), as well as our Code of Business Ethics and Conduct and other governance documents.
This information includes our Annual Reports on Form 10‑K, our Quarterly Reports on Form 10‑Q, our Current Reports on Form 8‑K, and any amendments to those reports as soon as reasonably practicable after we electronically file those reports with or furnish them to the SEC, as well as our Code of Business Ethics and Conduct and other governance documents.
We have facilities in the United States, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. Operations Our product cycle engagements begin by working closely with our customers to outline the solution specifications before design and prototyping even begin.
We have facilities in the United States, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. 7 Table of Contents Operations Our product cycle engagements begin by working closely with our customers to outline the solution specifications before design and prototyping even begin.
The acquisitions allow us to manufacture and assemble the complex plastic and metal products and precision machined components for the semiconductor equipment, including our existing customer base, as well as medical device, and general-industrial industries, while providing us exposure to and growth opportunities in the Korean and Japanese semiconductor capital equipment market.
These acquisitions have enabled us to manufacture and assemble the complex plastic and metal products and precision machined components for the semiconductor equipment market, including at our existing customer base, as well as for the medical device, and general-industrial industries, while providing us exposure to and growth opportunities in the Korean and Japanese semiconductor capital equipment market.
We have long standing relationships with top tier OEM customers, including Lam Research, Applied Materials, and ASML, which were our three largest customers by sales in 202 2 . We generated revenue of $1,280.1 million, $1,096.9 million, and $914.2 million in 2022, 2021, and 2020, respectively.
We have long standing relationships with top tier OEM customers, including Applied Materials, Lam Research, and ASML, which were our three largest customers by sales in 2023. We generated revenue of $811.1 million, $1,280.1 million, and $1,096.9 million in 2023, 2022, and 2021, respectively.
We are dependent upon a small number of customers, as the semiconductor equipment manufacturer market is highly concentrated with five companies accounting for over 70% of all process tool revenues. For 2022, our two largest customers were Lam Research and Applied Materials, which accounted for a combined 79% of sales, respectively.
We are dependent upon a small number of customers, as the semiconductor equipment manufacturer market is highly concentrated with five companies accounting for over 70% of all process tool revenues. For 2023, our three largest customers were Applied Materials, Lam Research, and ASML which accounted for a combined 82% of sales, respectively.
As of December 30, 2022, our engineering team consisted of approximately 90 engineers and designers with mechanical, electrical, chemical, systems, and software expertise. Our engineers are closely connected with our customers and typically work at our customers’ sites and operate as an extension of our customers’ design team.
As of December 29, 2023, our engineering team consisted of approximately 140 engineers and designers with chemical, mechanical, electrical, software, and systems expertise. Our engineers are closely connected with our customers and typically work at our customers’ sites and operate as an extension of our customers’ design team.
We generated net income of $72.8 million, $70.9 million, and $33.3 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2022, 2021, and 2020, respectively, and $104.9 million, $97.7 million, and $59.0 million on a non-GAAP basis, respectively.
We generated net income (loss) of $(43.0) million, $72.8 million, and $70.9 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2023, 2022, and 2021, respectively, and $12.3 million, $104.9 million, and $97.7 million on a non-GAAP basis, respectively.
As of December 30, 2022, we had 59 granted patents and 67 pending patent applications, of which 26 and 24 were U.S. patents, respectively. While we consider our patents to be valuable assets, we do not believe the success of our business or our overall operations are dependent upon any single patent or group of related patents.
As of December 29, 2023, we had 74 granted patents and 85 pending patent applications, of which 36 and 27 were U.S. patents, respectively. While we consider our patents to be valuable assets, we do not believe the success of our business or our overall operations are dependent upon any single patent or group of related patents.
Environmental, Health, and Safety Regulations Our operations and facilities are subject to federal, state, and local regulatory requirements and foreign laws and regulations relating to environmental, waste management, and health and safety matters, including those relating to the release, use, storage, treatment, transportation, discharge, disposal, and remediation of contaminants, hazardous substances, and wastes, as well as practices and procedures applicable to the construction and operation of our facilities.
When necessary, we support remote and hybrid working options for certain office staff. 10 Table of Contents Environmental, Health, and Safety Regulations Our operations and facilities are subject to federal, state, and local regulatory requirements and foreign laws and regulations relating to environmental, waste management, and health and safety matters, including those relating to the release, use, storage, treatment, transportation, discharge, disposal, and remediation of contaminants, hazardous substances, and wastes, as well as practices and procedures applicable to the construction and operation of our facilities.
Our gas delivery subsystems are primarily used in equipment for “dry” manufacturing processes, such as etch, chemical vapor deposition, physical vapor deposition, epitaxy, and strip. 4 Chemical Delivery Products and Subsystems Our chemical delivery products and subsystems are used to precisely blend and dispense reactive chemistries and colloidal slurries critical to the specific “wet” front-end process, such as wet clean, electro chemical deposition, and chemical-mechanical planarization (“CMP”).
Chemical Delivery Products and Subsystems Our chemical delivery products and subsystems are used to precisely blend and dispense reactive chemistries and colloidal slurries critical to the specific “wet” front-end process, such as wet clean, electro chemical deposition, and chemical-mechanical planarization (“CMP”).
In 2022, 2021, and 2020, our total capital expenditures were $29.4 million, $20.8 million, and $10.3 million, respectively, representing 2.3%, 1.9%, and 1.1%, of sales, respectively. In 2022, we significantly increased our precision machining manufacturing capacity, representing approximately 80% of 2022 capital expenditures. The semiconductor capital equipment market has historically been cyclical.
In 2023, 2022, and 2021, our total capital expenditures were $15.5 million, $29.4 million, and $20.8 million, respectively, representing 1.9%, 2.3%, and 1.9%, of sales, respectively. The semiconductor capital equipment market has historically been cyclical.
We believe this approach enables us to design products that meet the precise specifications our customers demand, allows us to often be the sole supplier of these subsystems during the initial production ramp, and positions us to be the preferred supplier for the full five to ten-year lifespan of the process tool. 1 The broad technical expertise of our engineering team, coupled with our early customer engagement approach, enables us to offer innovative and reliable solutions to complex fluid delivery challenges.
We believe this approach enables us to design products that meet the precise specifications our customers demand, allows us to often be the sole supplier of these subsystems during the initial production ramp, and positions us to be the preferred supplier for the full five-to ten-year lifespan of the process tool.
In addition, we have agreed to indemnify certain of our customers against claims of infringement of the intellectual property rights of others with respect to our products. Historically, we have not paid any claims under these indemnification obligations, and we do not have any pending indemnification claims against us.
In addition, we have agreed to indemnify certain of our customers against claims of infringement of the intellectual property rights of others with respect to our products.
(“Celerity”) in 1999. Our business of designing and manufacturing critical systems for semiconductor capital equipment manufacturers operated as a standalone business until 2009 when Celerity sold the business to a private equity fund.
Machined components are also provided to other critical non‑semiconductor markets, including aerospace and medical. 6 Table of Contents History We were originally incorporated as Celerity, Inc. (“Celerity”) in 1999. Our business of designing and manufacturing critical systems for semiconductor capital equipment manufacturers operated as a standalone business until 2009 when Celerity sold the business to a private equity fund.
The image below shows a typical wet-process front end semiconductor tool, with a chemical delivery subsystem and corresponding application process module highlighted: Weldments and Specialty Joining Our complete offering of weldments support the delivery of gases through the process tool.
In addition to the chemical delivery subsystem, we also manufacture the process modules that apply the various chemicals directly to the wafer in a process-and application-unique manner to create the desired chemical reaction. 5 Table of Contents The image below shows a typical wet-process front end semiconductor tool, with a chemical delivery subsystem and corresponding application process module highlighted: Weldments and Specialty Joining Our complete offering of weldments support the delivery of gases through the process tool.
Many of these items are used downstream of the gas system and in process critical applications. Our precision machined products can be used in both wet and dry applications and include both small- and large‑format machining applications. Machined components are also provided to other critical non‑semiconductor markets, including aerospace and medical. 5 History We were originally incorporated as Celerity, Inc.
Many of these items are used downstream of the gas system and in process-critical applications. Our precision machined products can be used in both wet and dry applications and include both small- and large‑format machining applications.
Our gas delivery systems consist of a number of gas lines, each controlled by a series of mass flow controllers, regulators, pressure transducers, and valves, and an integrated electronic control system.
Our gas delivery systems consist of a number of gas lines, each controlled by a series of mass flow controllers, regulators, pressure transducers, valves, and an integrated electronic control system. Our gas delivery subsystems are primarily used in equipment for “dry” manufacturing processes, such as etch, chemical vapor deposition, physical vapor deposition, epitaxy, and strip.
We also believe that maintaining an effective employee review and appraisal process, with regular managerial feedback and coaching, is critical to cultivating a learning organization. We adopted two employee resource groups in 2022, Ichor Women and Ichor Pride , creating increased employee engagement to grow and foster diverse talent.
We also believe that maintaining an effective employee review and appraisal process, with regular managerial feedback and coaching, is critical to cultivating a learning organization. In addition, we support employee resource groups to increase employee engagement and to grow and foster talent. Health and Safety We are committed to monitoring and maintaining a healthy and safe environment for our employees.
Conversely, our low fixed cost approach allows us to minimize the impact of cyclical downturns on our net income but results in a lower level of gross margin leverage or improvement as a percentage of sales in times of increased demand.
Conversely, our low fixed cost approach allows us to minimize the impact of cyclical downturns on our net income but results in a lower level of gross margin leverage or improvement as a percentage of sales in times of increased demand. 3 Table of Contents Our Growth Strategy Our objective is to enhance our position as a leader in providing fluid delivery solutions, including subsystems, components, and legacy tool refurbishment, to our customers by leveraging our core strengths.
We continue to actively engage with new customers that are considering outsourcing their gas and chemical delivery needs as well as expanding our components business. 3 Continue to Improve Our Manufacturing Process Efficiency We continually strive to improve our processes to reduce our manufacturing process cycle time, improve our ability to respond to short lead-time and last-minute configuration changes, reduce our manufacturing costs, and improve our inventory efficiency requirements in order to improve profitability and make our product offerings more attractive to new and existing customers.
Continue to Improve Our Manufacturing Process Efficiency We continually strive to improve our processes to reduce our manufacturing process cycle time, improve our ability to respond to short lead-time and last-minute configuration changes, reduce our manufacturing costs, and improve our inventory efficiency requirements in order to improve profitability and make our product offerings more attractive to new and existing customers. 4 Table of Contents Our Products and Services We are a leader in the design, engineering and manufacturing of critical fluid delivery subsystems.
We believe our relationship with our employees to be good. 8 Total Rewards As part of our total rewards philosophy, we believe in offering market-competitive compensation and benefits programs for our employees to attract and retain a talented and productive workforce.
Of our total workforce, approximately 140 are engineers, 110 are engaged in sales and marketing, 1,770 are engaged in manufacturing, and 225 perform executive and administrative functions. Total Rewards As part of our total rewards philosophy, we believe in offering market-competitive compensation and benefits programs for our employees to attract, engage, and retain a talented and productive workforce.
Our engineering team also works directly with our suppliers to help them identify new component technologies and make necessary changes in, and enhancements to, the components that we integrate into our products.
Through this early collaborative process, we become an integral part of our customers’ design and development processes, and we are able to quickly anticipate and respond to our customers’ changing requirements. 8 Table of Contents Our engineering team also works directly with our suppliers to help them identify new component technologies and make necessary changes in, and enhancements to, the components that we integrate into our products.
Health and Safety We are committed to monitoring and maintaining a healthy and safe environment for our employees. We facilitate “skip level” sessions, periodically survey employees, and use other communication forums to allow employees to express their opinions, concerns, and suggestions to management.
We facilitate “skip level” sessions, annually survey employees and use other communication forums to allow employees to express their opinions, concerns, and suggestions to management. We maintain a professional human resources department and provide a whistleblower hotline for communicating concerns, including those involving health and safety.
Human Capital Resources As a globally successful company, we believe that we must be a good corporate citizen and socially responsible, while providing a safe and rewarding environment for our employees, who are our greatest strength. All employees of Ichor are committed to a set of core values that define company culture, represent what we believe, and guide our actions.
Historically, we have not paid any claims under these indemnification obligations, and we do not have any pending indemnification claims against us. 9 Table of Contents Human Capital Resources As a globally successful company, we believe that we must be a good corporate citizen and socially responsible, while providing a safe and rewarding environment for our employees, who are our greatest strength.
Our focus on operational efficiency and flexibility allows us to reduce manufacturing cycle times in order to respond quickly to customer requests and lead-times that are often less than four weeks. 2 Capital Efficient and Scalable Business Model Our business requires modest levels of capital investments to support production capacity and new product development and can fluctuate over time depending on the business outlook and new product strategy and timing of introduction.
Our focus on operational efficiency and flexibility allows us to reduce manufacturing cycle times in order to respond quickly to customer requests, and lead-times that are often less than four weeks.
We promote having our workforce physically co-located at our facilities to support collaboration, which is a company core value. When necessary, we support remote and hybrid working options for certain office staff.
We take necessary steps to ensure the health and safety of our employees and extended communities by following regulatory guidelines from around the world. We promote having our workforce physically co-located at our facilities to support collaboration, which is a company core value.
We recognize and value each person’s diverse background and unique skill set and seek to foster an environment that encourages personal growth and professional development. We continue to extend our commitment to diversity, inclusion, and equity through specific policies, practices, employee and manager training, and dedicated executive leadership. Below are details demonstrating our commitment in this area.
All employees of Ichor are committed to a set of core values that define company culture, represent what we believe, and guide our actions. We recognize and value each person’s diverse background and unique skill set and seek to foster an environment that encourages personal growth and professional development.
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Our Growth Strategy Our objective is to enhance our position as a leader in providing fluid delivery solutions, including subsystems, components, and legacy tool refurbishment, to our customers by leveraging our core strengths.
Added
The broad technical expertise of our engineering team, coupled with our early customer engagement approach, enables us to offer innovative and reliable solutions to complex fluid delivery challenges.
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Using this and our existing engineering capability, we developed a liquid delivery module for use on a wet process equipment system that met the specifications of, and was qualified by, one of our largest customers and a market leader in this space.
Added
Capital Efficient and Scalable Business Model Our business requires modest levels of capital investments to support production capacity and new product development and can fluctuate over time depending on business outlook, new product strategy, and timing of introductions.
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Through our acquisition of a precision machining operation in December 2020, our intellectual property purchase of developed flow controller technology in 2019, our acquisition of a Korean gas panel supplier in 2018, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our served customer base with expanded product offerings.
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We have significantly expanded our served customer base with expanded product offerings as a result of our opportunistic acquisitions.
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Our Products and Services We are a leader in the design, engineering and manufacturing of critical fluid delivery subsystems.
Added
We continue to actively engage with new customers that are considering outsourcing their gas and chemical delivery needs as well as expanding our components business.
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In addition to the chemical delivery subsystem, we also manufacture the process modules that apply the various chemicals directly to the wafer in a process and application-unique manner to create the desired chemical reaction.
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Through this early collaborative process, we become an integral part of our customers’ design and development processes, and we are able to quickly anticipate and respond to our customers’ changing requirements.
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Our employees are not unionized, and we have no participation in works councils. We have not experienced any material work stoppages at any of our facilities in 2022.
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We maintain a professional human resources department and provide a whistleblower hotline available to all employees for communicating concerns, including those involving health and safety. We take necessary steps to ensure the health and safety of our employees and extended communities by following, and often exceeding, regulatory guidelines from around the world.
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For all of our facilities, we maintain strict guidelines to uphold the safety of our workforce and business continuity, including health screenings, social distancing protocols, the use of personal protective equipment, and, in certain regions, onsite testing protocols. We held onsite flu vaccine clinics during 2022 to support employee preventive health and create ease of access.
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Community Involvement We continued our charitable contributions this past year to include educational scholarships specifically earmarked for under-represented minority groups attending college. We invest in selected local community colleges in the regions where we live and work to support the education and development opportunities supporting the advancement of manufacturing skill sets, such as machinists and welding.
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We support local foodbanks, sponsor blood drives, and other local charities in communities in which we operate.
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Our environmental, social, and governance (“ESG”) efforts in 2022 were advanced by establishing an ESG council to assist in supporting a sustainable environment for generations to come, cultivating a diverse, equitable, and inclusive employment environment, contributing to the communities where we operate, and upholding the highest code of business ethics and standards.
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The council embarked on a five-year roadmap in 2022, with 2022 serving as the year for defining data baselines and communicating policies. We are a proud member of the Responsible Business Alliance, and we work with our customers and suppliers to support their ESG goals.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

59 edited+21 added−61 removed112 unchanged
Biggest changeEconomic and Strategic Risks • Our business depends significantly on expenditures by manufacturers in the semiconductor capital equipment industry. • We rely on a very small number of OEM customers for a significant portion of our sales. • Our customers exert a significant amount of negotiating leverage over us. • The industries in which we participate are highly competitive and rapidly evolving. • We are exposed to risks associated with weakness in the global economy and geopolitical instability. • If we do not keep pace with developments in the industries we serve and with technological innovation generally, our products and services may not be competitive. • We must design, develop, and introduce new products that are accepted by OEMs in order to retain our existing customers and obtain new customers. • Acquisitions may present integration challenges, and the goodwill, indefinite-lived intangible assets, and other long-term assets recorded in connection with such acquisitions may become impaired. • We are subject to fluctuations in foreign currency exchange rates. • Our business has been adversely affected by the COVID‑19 pandemic and we continue to face risks related to COVID‑19.
Biggest changeEconomic and Strategic Risks • Our business depends significantly on expenditures by manufacturers in the semiconductor capital equipment industry. • We rely on a very small number of OEM customers for a significant portion of our sales. • Our customers exert a significant amount of negotiating leverage over us. • The industries in which we participate are highly competitive and rapidly evolving. • We are exposed to risks associated with weakness in the global economy and geopolitical instability. • If we do not keep pace with developments in the industries we serve and with technological innovation generally, our products and services may not be competitive. • We must design, develop, and introduce new products that are accepted by OEMs in order to retain our existing customers and obtain new customers. • Acquisitions may present integration challenges, and the goodwill, indefinite-lived intangible assets, and other long-term assets recorded in connection with such acquisitions may become impaired. • We are subject to fluctuations in foreign currency exchange rates. 11 Table of Contents Business and Operational Risks • The manufacturing of our products is highly complex. • Defects in our products could damage our reputation, decrease market acceptance of our products, and result in potentially costly litigation. • We may incur unexpected warranty and performance guarantee claims. • Our dependence on a limited number of suppliers may harm our production output and increase our costs. • We may face supply chain disruptions, manufacturing interruptions or delays. • We are subject to order and shipment uncertainties. • Our customers generally require that they qualify our engineering, documentation, manufacturing and quality control procedures. • We may be subject to interruptions or failures in our information technology systems. • Certain of our customers require that we consult with them in connection with specified fundamental changes in our business. • Our business is largely dependent on the know-how of our employees, and we generally do not have an intellectual property position that is protected by patents. • Our business will suffer if we are unable to attract, hire, integrate, and retain key personnel and other necessary employees, particularly in the highly competitive technology labor market, or if we experience labor disruptions at our facilities. • The technology labor market is very competitive, and labor disruptions could materially adversely affect our business. • Our business is subject to the risks of catastrophic events.
As a publicly traded company, we are required to comply with the SEC’s rules implementing Section 302 and 404 of the Sarbanes‑Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting.
As a publicly traded company, we are required to comply with the SEC’s rules implementing Section 302 and 404 of the Sarbanes‑Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and to provide an annual management report on the effectiveness of controls over financial reporting.
Increased costs of energy or compliance with emissions standards due to legal or regulatory requirements related to climate change may cause disruptions in or increased costs associated with manufacturing our products. 21 Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
Increased costs of energy or compliance with emissions standards due to legal or regulatory requirements related to climate change may cause disruptions in or increased costs associated with manufacturing our products. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
Further, if our competitors obtain proprietary rights to these designs such that we are unable to obtain the designs necessary to manufacture products for our OEM customers, our business, financial condition and results of operations could be materially adversely affected. 12 Certain of our competitors may have or may develop greater financial, technical, manufacturing and marketing resources than we do.
Further, if our competitors obtain proprietary rights to these designs such that we are unable to obtain the designs necessary to manufacture products for our OEM customers, our business, financial condition and results of operations could be materially adversely affected. Certain of our competitors may have or may develop greater financial, technical, manufacturing and marketing resources than we do.
If we are unsuccessful in keeping pace with technological developments for the reasons above or other reasons, our business, financial condition and results of operations could be materially adversely affected. 13 We must design, develop , and introduce new products that are accepted by OEMs in order to retain our existing customers and obtain new customers.
If we are unsuccessful in keeping pace with technological developments for the reasons above or other reasons, our business, financial condition and results of operations could be materially adversely affected. We must design, develop, and introduce new products that are accepted by OEMs in order to retain our existing customers and obtain new customers.
However, our failure to consult with such customers or to satisfactorily respond to their requests in connection with any such fundamental change could constitute a breach of contract or otherwise be detrimental to our relationships with such customers, which could have a material adverse effect on our business, financial condition and results of operations.
However, our failure to consult with such customers or to satisfactorily respond to their requests in connection with any such fundamental change could potentially constitute a breach of contract or otherwise be detrimental to our relationships with such customers, which could have a material adverse effect on our business, financial condition and results of operations.
For example, a recent Bureau of Industry and Security (“BIS”) rule (the “BIS Rule”) restricts the export of products when provided for use in certain semiconductor manufacturing activities in China, has impacted and may continue to impact our sales and operations.
For example, a recent Bureau of Industry and Security (“BIS”) rule (the “BIS Rule”), which restricts the export of products when provided for use in certain semiconductor manufacturing activities in China, has impacted and may continue to impact our sales and operations.
The semiconductor device industry is subject to cyclical and volatile fluctuations in supply and demand and in the past has periodically experienced significant downturns, which often occur in connection with declines in general economic conditions, and which have resulted in significant volatility in the semiconductor capital equipment industry.
The semiconductor device industry is subject to cyclical and volatile fluctuations in supply and demand and in the past has experienced significant downturns, which often occur in connection with declines in general economic conditions, and which have resulted in significant volatility in the semiconductor capital equipment industry.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business, as well as any negative sentiment toward the U.S. as a result of such changes, could adversely affect our business.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business, as well as any negative sentiment toward the United States as a result of such changes, could adversely affect our business.
Increasing concentrations of greenhouse gasses in the Earth’s atmosphere and climate change may produce significant physical effects on weather conditions, such as increased frequency and severity of droughts, storms, floods, and other climatic events. While we maintain disaster recovery plans, they might not adequately protect us.
Increasing concentrations of greenhouse gasses in the Earth’s atmosphere and climate change may produce significant physical effects on weather conditions, such as increased frequency and severity of droughts, storms, floods, extreme temperatures, and other climatic events. While we maintain disaster recovery plans, they might not adequately protect us.
The COVID-19 pandemic, geopolitical instability, including the conflict between Russia and Ukraine, actual and potential shifts in U.S. and foreign trade, economic and other policies, and rising trade tensions between the United States and China, as well as other global events, have significantly increased macroeconomic uncertainty at a global level.
The COVID-19 pandemic, geopolitical instability, including the conflict between Russia and Ukraine, the conflict in the Middle East, actual and potential shifts in U.S. and foreign trade, economic and other policies, and rising trade tensions between the United States and China, as well as other global events, have significantly increased macroeconomic uncertainty at a global level.
Customers may cancel order forecasts, change production quantities from forecasted volumes, change product specifications or delay production for reasons beyond our control. Furthermore, reductions, cancellations or delays in customer order forecasts usually occur without penalty to, or compensation from, the customer.
Customers may cancel order forecasts, change production quantities from forecasted volumes, change product specifications or delay production for reasons beyond our control. Furthermore, reductions, cancellations or delays in customer order forecasts may occur from time to time without penalty to, or compensation from, the customer.
Our facilities could be subject to a catastrophic loss caused by natural disasters, including severe weather, fires, earthquakes or other events, including a terrorist attack, a pandemic, epidemic or outbreak of a disease (including COVID‑19).
Our facilities could be subject to a catastrophic loss caused by natural disasters, including severe weather, fires, earthquakes or other events, including a terrorist attack, a pandemic, epidemic or outbreak of a disease.
As a result, our risk exposure from transactions denominated in non-U.S. currencies is primarily related to the Singapore dollar, Malaysian ringgit, British pound and euro.
As a result, our risk exposure from transactions denominated in non-U.S. currencies is primarily related to the Singapore dollar, Malaysian ringgit, Korean won, British pound and euro.
Any of these conditions or events could have a material adverse effect on our business, financial condition and results of operations. If we do not keep pace with developments in the industries we serve and with technological innovation generally, our products and services may not be competitive.
Any of these conditions or events could have a material adverse effect on our business, financial condition and results of operations. 15 Table of Contents If we do not keep pace with developments in the industries we serve and with technological innovation generally, our products and services may not be competitive.
The impact of any one or more of these factors could materially adversely affect our business, financial condition and results of operations. 20 Changes in U.S. or international trade policy, tariff s , and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.
The impact of any one or more of these factors could materially adversely affect our business, financial condition and results of operations. Changes in U.S. or international trade policy, tariffs, and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.
The current macroeconomic environment is characterized by growing recession risk, high inflation, supply chain challenges, shortages of skilled labor and higher labor costs, high interest rates, foreign currency exchange volatility, volatility in the global capital markets, uncertainty in debt markets, and the slow rate of recovery of many countries from recent recessions, which may exacerbate negative trends in business and consumer spending and may cause certain of our customers to push out, cancel or refrain from placing orders for products or services, which may reduce sales and materially adversely affect our business, financial condition and results of operations.
The current macroeconomic environment is characterized by high inflation, supply chain challenges, shortages of skilled labor and higher labor costs, high interest rates, foreign currency exchange volatility, volatility in the global capital markets, uncertainty in debt markets, and the slow rate of recovery of many countries from recent recessions, which may exacerbate negative trends in business and consumer spending and may cause certain of our customers to push out, cancel or refrain from placing orders for products or services, which may reduce sales, reduce our backlog, increase our inventory and materially adversely affect our business, financial condition and results of operations.
Disruption in supply resulting from natural disasters or other causalities or catastrophic events may result in certain of our suppliers being unable to deliver sufficient quantities of components or raw materials at all or in a timely manner, disruptions in our operations or disruptions in our customers’ operations.
Disruption in supply resulting from natural disasters or other causalities or catastrophic events may result in certain of our suppliers being unable to deliver sufficient quantities of components or raw materials at all or in a timely manner, which could cause disruptions in our operations or disruptions in our customers’ operations.
If we do not obtain orders as we anticipate, we could have excess components for a specific product or finished goods inventory that we would not be able to sell to another customer, likely resulting in inventory write-offs, which could have a material adverse effect on our business, financial condition and results of operations.
If we do not obtain orders as we anticipate, we could have excess components for a specific product or finished goods inventory that we would not be able to sell to another customer, likely resulting in inventory write-offs or selling inventory at lower margins, which could have a material adverse effect on our business, financial condition and results of operations.
Legislators in the U.S. may institute or propose changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
Legislators in the United States may institute or propose changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the United States, economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the United States and other countries where we conduct our business.
This could materially limit our growth, adversely impact our ability to win future business and have a material adverse effect on our business, financial condition and results of operations. 15 Defects in our products could damage our reputation, decrease market acceptance of our products , and result in potentially costly litigation.
This could materially limit our growth, adversely impact our ability to win future business and have a material adverse effect on our business, financial condition and results of operations. 17 Table of Contents Defects in our products could damage our reputation, decrease market acceptance of our products, and result in potentially costly litigation.
Many of the costs and expenses associated with our Singapore, Malaysian, Korean, and U.K. operations are paid in Singapore dollars, Malaysian ringgit, Korean won, British pounds, or euros, respectively, and we expect our exposure to these currencies to increase as we increase our operations in those countries.
Many of the costs and expenses associated with our Singapore, Malaysian, Korean, U.K., and European Union operations are paid in Singapore dollars, Malaysian ringgit, Korean won, British pounds, or euros, respectively, and we expect our exposure to these currencies to increase as we increase our operations in those jurisdictions.
In addition, we may record a portion of the assets we acquire as goodwill, other indefinite-lived intangible assets or finite-lived intangible assets. We do not amortize goodwill, but rather review it for impairment on an annual basis or whenever events or changes in circumstances indicate that its carrying value may not be recoverable.
In addition, we may record a portion of the assets we acquire as goodwill, other indefinite-lived intangible assets or finite-lived intangible assets. We review goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate that its carrying value may not be recoverable.
For 2022, our top two customers accounted for a combined 79% of sales, and we expect that our sales will continue to be concentrated among a very small number of customers. We do not have any long-term contracts that require customers to place orders with us in fixed or minimum volumes.
For 2023, our top three customers accounted for a combined 82% of sales, and we expect that our sales will continue to be concentrated among a very small number of customers. We do not have any long-term contracts that require customers to place orders with us in fixed or minimum volumes.
In 2021, we identified material weaknesses related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over certain information technology systems that support our financial reporting processes. Certain of these material weaknesses continued into fiscal year 2022 and were not remediated as of December 30, 2022.
In 2021, we identified material weaknesses related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over certain information technology systems that support our financial reporting processes. Certain of these material weaknesses continued into 2023 and were remediated as of December 29, 2023.
Certain of our key customers require that we consult with them in connection with specified fundamental changes in our business, including, among other things: • entering into any new line of business; • amending or modifying our organizational documents; • selling all or substantially all of our assets, or merging or amalgamating with a third party; • incurring borrowings in excess of a specific amount; • making senior management changes; and • entering into any joint venture arrangement. 17 These customers do not have contractual approval or veto rights with respect to any fundamental changes in our business.
Certain of our key customers require that we consult with them in connection with specified fundamental changes in our business, including, among other things: • entering into any new line of business; • amending or modifying our organizational documents; • selling all or substantially all of our assets, or merging or amalgamating with a third party; • incurring borrowings in excess of a specific amount; • making senior management changes; and • entering into any joint venture arrangement.
Economic and Strategic Risks Our business depends significantly on expenditures by manufacturers in the semiconductor capital equipment industry, which, in turn, is dependent upon the semiconductor device industry. When that industry experiences cyclical downturns, demand for our products and services is likely to decrease, which would likely result in decreased sales.
Economic and Strategic Risks Our business depends significantly on expenditures by manufacturers in the semiconductor capital equipment industry, which, in turn, is dependent upon the semiconductor device industry. When that industry experiences cyclical downturns, demand for our products and services generally decreases, resulting in decreased sales.
In addition, other factors relating to the operation of our business outside of the United States may have a material adverse effect on our business, financial condition and results of operations in the future, including: • the imposition of governmental controls or changes in government regulations, including tax regulations; • difficulties in enforcing our intellectual property rights; • difficulties in developing relationships with local suppliers; • difficulties in attracting new international customers; • difficulties in complying with foreign and international laws and treaties; • restrictions on the export of technology; • compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act, export control laws and export license requirements; • difficulties in achieving headcount reductions due to unionized labor and works councils; • restrictions on transfers of funds and assets between jurisdictions; • geo-political instability; and • trade restrictions and changes in taxes and tariffs.
In addition, other factors relating to the operation of our business outside of the United States may have a material adverse effect on our business, financial condition and results of operations in the future, including: • the imposition of governmental controls or changes in government regulations, including tax regulations; • difficulties in enforcing our intellectual property rights; • difficulties in developing relationships with local suppliers; • difficulties in attracting new international customers; • difficulties in complying with foreign and international laws and treaties; • restrictions on the export of technology, including those based on positions taken by governmental agencies regarding possible national, commercial or security issues posed by the development, sale or export of certain products and technologies; • compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act, export control laws and export license requirements; • difficulties in achieving headcount reductions due to unionized labor and works councils; • restrictions on transfers of funds and assets between jurisdictions; • geo-political instability; • change in currency controls; and • trade restrictions and changes in taxes and tariffs.
Capital equipment manufacturers need to keep pace with these changes by refining their existing products and developing new products. We believe that our future success will depend upon our ability to design, engineer and manufacture products that meet the changing needs of our current and potential customers.
Capital equipment manufacturers need to keep pace with these changes by refining their existing products and developing new products. We believe that our future success will depend upon our ability to design, engineer and manufacture products that meet the changing needs of our current and potential customers, including potentially through the incorporation or use of software or artificial intelligence technology.
Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attack, a pandemic, epidemic or outbreak of a disease (including COVID‑19), hurricanes, fire, floods and ice and snow storms, could result in damage to and closure of our or our customers’ facilities or the infrastructure on which such facilities rely.
Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attacks, pandemics, epidemics or outbreaks of a disease, hurricanes, fires, floods and ice and snow storms, could result in damage to and closure of our or our customers’ facilities or the infrastructure on which such facilities rely.
In addition, if any of our key executive officers or other key employees were to join a competitor or form a competing company, we could lose customers, suppliers, know-how and key personnel. As of December 30, 2022, we had approximately 2,280 full time employees and 700 contract or temporary workers worldwide.
In addition, if any of our key executive officers or other key employees were to join a competitor or form a competing company, we could lose customers, suppliers, know-how and key personnel. 21 Table of Contents As of December 29, 2023, we had approximately 1,690 full time employees and 555 contract or temporary workers worldwide.
As a result, labor disruptions at any of our facilities could materially adversely affect our business, financial condition and results of operations. Furthermore, we do not maintain key person life insurance with respect to any of our employees.
As a result, labor disruptions at any of our facilities could materially adversely affect our business, financial condition and results of operations. Furthermore, we do not maintain key person life insurance with respect to any of our employees. Our business will suffer if we are unable to attract, employ and retain highly skilled personnel.
A severe outbreak of COVID-19 or another pandemic can disrupt our business and adversely materially impact our financial results. Business and Operational Risks The manufacturing of our products is highly complex, and if we are not able to manage our manufacturing and procurement process effectively, our business, financial condition and results of operations may be materially adversely affected.
Business and Operational Risks The manufacturing of our products is highly complex, and if we are not able to manage our manufacturing and procurement process effectively, our business, financial condition and results of operations may be materially adversely affected.
If we are unable to retain and expand our business with our customers on favorable terms, or if we are unable to achieve gross margins on new products that are similar to or more favorable than the gross margins we have historically achieved, our business, financial condition and results of operations may be materially adversely affected.
If we are unable to retain and expand our business with our customers on favorable terms, or if we are unable to achieve gross margins on new products that are similar to or more favorable than the gross margins we have historically achieved, our business, financial condition and results of operations may be materially adversely affected. 14 Table of Contents The industries in which we participate are highly competitive and rapidly evolving, and if we are unable to compete effectively, our business, financial condition and results of operations could be materially adversely affected.
In addition, regardless of the outcome of any litigation or regulatory proceeding, such proceedings are often expensive, time-consuming and disruptive to normal business operations and require significant attention from our management. As a result, any such lawsuits or proceedings could materially adversely affect our business, financial condition and results of operations.
In addition, regardless of the outcome of any litigation or regulatory proceeding, such proceedings are often expensive, time-consuming and disruptive to normal business operations and require significant attention from our management.
As a result of the foregoing and the cyclicality and volatility of the industries we serve, it is difficult to predict future orders with precision. Occasionally, we order component inventory and build products in advance of the receipt of actual customer orders.
As a result of the foregoing and the cyclicality and volatility of the industries we serve, it is difficult to predict future orders with precision and we may incur unexpected or additional costs to align our business operations with changes in demand. Occasionally, we order component inventory and build products in advance of the receipt of actual customer orders.
If we identify weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by NASDAQ, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we identify weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by NASDAQ, the SEC or other regulatory authorities, which could require additional financial and management resources. 26 Table of Contents We previously identified material weaknesses in our internal control over financial reporting, and if we fail to maintain an effective system of internal controls, disclosure controls, and procedures, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our share price.
Our business will suffer if we are unable to attract, employ and retain highly skilled personnel. 18 Our business is subject to the risks of severe weather, earthquakes, fire, power outages, floods, and other catastrophic events, including weather events resulting from climate change, and to interruption by man-made disruptions, such as terrorism.
Our business is subject to the risks of severe weather, earthquakes, fire, power outages, floods, and other catastrophic events, including weather events resulting from climate change, and to interruption by man-made disruptions, such as terrorism.
Ordinary Share Ownership Risks • Our quarterly sales and operating results fluctuate significantly from period to period, and the price of our ordinary shares may fluctuate substantially. • Our articles of association contain anti-takeover provisions that could adversely affect the rights of our shareholders. • The issuance of preferred shares could adversely affect holders of ordinary shares. • Our shareholders may face difficulties in protecting their interests under the laws of the Cayman Islands compared to the laws of the United States. • There can be no assurance that we will not be a passive foreign investment company for any taxable year. • If a U.S. person is treated as owning at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.
Liquidity and Capital Resources Risks • We have a substantial amount of indebtedness and are subject to restrictive covenants. • We are subject to interest rate risk associated with variable rates on our outstanding indebtedness. • If one or more of our counterparty financial institutions default on their obligations to us or fail, we may incur significant losses. 12 Table of Contents Ordinary Share Ownership Risks • Our quarterly sales and operating results fluctuate significantly from period to period, and the price of our ordinary shares may fluctuate substantially. • Our articles of association contain anti-takeover provisions that could adversely affect the rights of our shareholders. • The issuance of preferred shares could adversely affect holders of ordinary shares. • Our shareholders may face difficulties in protecting their interests under the laws of the Cayman Islands compared to the laws of the United States. • There can be no assurance that we will not be a passive foreign investment company for any taxable year. • If a U.S. person is treated as owning at least 10% of our shares, such person may be subject to adverse U.S. federal income tax consequences.
As a global company, we are subject to the risks of doing business internationally, including periodic foreign economic downturns and political instability, which may adversely affect our sales and cost of doing business in those regions of the world.
As a result, any such lawsuits or proceedings could materially adversely affect our business, financial condition and results of operations. 23 Table of Contents As a global company, we are subject to the risks of doing business internationally, including periodic foreign economic downturns and political instability, which may adversely affect our sales and cost of doing business in those regions of the world.
If BIS denies our license applications or there are delays in issuing licenses, we may have to cease or delay exports, which would cause a reduction in revenues. Furthermore, to the extent any of our customers or counterparties are designated on the Entity List or Unverified List maintained by BIS, we could suffer additional disruptions to sales and operations.
Furthermore, to the extent any of our customers or counterparties are designated on the Entity List or Unverified List maintained by BIS, to which BIS may continue to add customers, we could suffer additional disruptions to sales and operations.
Business and Operational Risks • The manufacturing of our products is highly complex. • Defects in our products could damage our reputation, decrease market acceptance of our products, and result in potentially costly litigation. • We may incur unexpected warranty and performance guarantee claims. • Our dependence on a limited number of suppliers may harm our production output and increase our costs. • We are subject to order and shipment uncertainties. • Our customers generally require that they qualify our engineering, documentation, manufacturing and quality control procedures. • We may be subject to interruptions or failures in our information technology systems. • Certain of our customers require that we consult with them in connection with specified fundamental changes in our business. • Our business is largely dependent on the know-how of our employees, and we generally do not have an intellectual property position that is protected by patents. • The technology labor market is very competitive, and labor disruptions could materially adversely affect our business. • Our business is subject to the risks of catastrophic events. 10 Legal and Regulatory Risks • Our business is subject to a variety of U.S. and international laws, rules, policies, and other obligations regarding privacy, data protection, and other matters. • Third parties have claimed and may in the future claim we are infringing their intellectual property. • From time to time, we may become involved in other litigation and regulatory proceedings. • As a global company, we are subject to the risks of doing business internationally. • Changes in U.S. or international trade policy, tariffs, and import/export regulations may have a material adverse effect on our business. • We are subject to numerous environmental laws and regulations. • Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business. • We previously identified material weaknesses in our internal control over financial reporting, and the failure to maintain an effective system of internal controls and procedures may cause investors to lose confidence in our financial reporting. • Changes in tax laws, tax rates or tax assets and liabilities could materially adversely affect our financial condition and results of operations.
Legal and Regulatory Risks • Our business is subject to a variety of U.S. and international laws, rules, policies, and other obligations regarding privacy, data protection, and other matters. • Third parties have claimed and may in the future claim we are infringing their intellectual property. • From time to time, we may become involved in other litigation and regulatory proceedings. • As a global company, we are subject to the risks of doing business internationally. • Changes in U.S. or international trade policy, tariffs, and import/export regulations may have a material adverse effect on our business. • We are subject to numerous environmental laws and regulations. • Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business. • We previously identified material weaknesses in our internal control over financial reporting, and the failure to maintain an effective system of internal controls and procedures may cause investors to lose confidence in our financial reporting. • Changes in tax laws, tax rates or tax assets and liabilities could materially adversely affect our financial condition and results of operations.
These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices.
These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices. 22 Table of Contents A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR and CCPA, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.
Acquisitions may present integration challenges, and if the goodwill, indefinite-lived intangible assets, and other long-term assets recorded in connection with such acquisitions become impaired, we would be required to record impairment charges, which may be significant.
If any of the new products we develop are not launched or successful in the market, our business, financial condition and results of operations could be materially adversely affected. 16 Table of Contents Acquisitions may present integration challenges, and if the goodwill, indefinite-lived intangible assets, and other long-term assets recorded in connection with such acquisitions become impaired, we would be required to record impairment charges, which may be significant.
We have had some delays in export activity as we analyze available emergency authorizations and assess the new licensing requirements for our business. We anticipate we will need additional licenses from BIS for some of our exports as a result of the BIS Rule, and we are in the process of applying for those licenses.
We have had some delays in export activity as we analyze available emergency authorizations and assess the new licensing requirements for our business.
If we are unable to procure sufficient quantities of components or raw materials from suppliers, our customers may elect to delay or cancel existing orders or not place future orders, which could have a material adverse effect on our business, financial condition and results of operations. 16 We are subject to order and shipment uncertainties, and any significant reductions, cancellations or delays in customer orders could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to procure sufficient quantities of components or raw materials from suppliers, our customers may elect to delay or cancel existing orders or not place future orders, which could have a material adverse effect on our business, financial condition and results of operations. 18 Table of Contents Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand could affect our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.
We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows, or cause an increase in our liabilities.
We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows, or cause an increase in our liabilities. 25 Table of Contents We are subject to numerous environmental laws and regulations, including laws and regulations addressing climate change, which could require us to incur environmental liabilities, increase our manufacturing and related compliance costs or otherwise adversely affect our business.
We are subject to a variety of federal, state, local and foreign laws and regulations governing the protection of the environment or addressing climate change. These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes.
These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials (such as regulations imposed on the use or sale of PFAS or PFAS-containing products) used in our manufacturing processes.
We may be the target of attempted cyber-attacks, computer viruses, malicious code, phishing attacks, denial of service attacks and other information security threats.
We may be the target of attempted cyber-attacks, computer viruses, malicious code, phishing attacks, denial of service attacks and other information security threats. In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cyber-attacks.
Certain of our customers require that we consult with them in connection with specified fundamental changes in our business, and address any concerns or requests such customer may have in connection with a fundamental change.
Any material disruption in our information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have a material adverse effect on our business, financial condition, and results of operations. 20 Table of Contents Certain of our customers require that we consult with them in connection with specified fundamental changes in our business and that we address any concerns or requests such customer may have in connection with a fundamental change.
It may be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with any such changes. As a result of recent trade policy changes in the U.S., there may be greater restrictions and economic disincentives on international trade and a resulting impact on our operations, sales and financial condition.
It may be time-consuming and expensive for us to alter our business operations in order to adapt to or comply with any such changes, and we may face competition from companies that exist in a more favorable legal or regulatory environment than we do who are able to sell products for certain applications to certain customers that we are prohibited from selling to under applicable export controls, for example. 24 Table of Contents As a result of recent trade policy changes in the United States, there may be greater restrictions and economic disincentives on international trade and a resulting impact on our operations, sales and financial condition.
The introduction of new technologies and new market entrants may also increase competitive pressures. We are exposed to risks associated with weakness in the global economy and geopolitical instability. Our business is dependent upon manufacturers of semiconductor capital equipment, whose businesses in turn ultimately depend largely on consumer spending on semiconductor devices.
Our business is dependent upon manufacturers of semiconductor capital equipment, whose businesses in turn ultimately depend largely on consumer spending on semiconductor devices. Continuing uncertainty regarding the global economy continues to pose challenges to our business.
For a detailed summary of these material weaknesses, including our remediation steps, please refer to Item 9A – Controls and Procedures. In addition, we have identified material weaknesses in our internal controls over financial reporting in prior years.
For a detailed summary of these material weaknesses, including our remediation steps, please refer to
If we are not able to timely and appropriately adapt to the changes in our business environment, our business, financial condition and results of operations will be materially adversely affected. 11 We rely on a very small number of OEM customers for a significant portion of our sales.
If we are not able to timely and appropriately adapt to the changes in our business environment, our business, financial condition and results of operations will be materially adversely affected as a result of, for example, underutilization of capacity, charges related to obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins.
A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR and CCPA, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition. 19 Third parties have claimed and may in the future claim we are infringing their intellectual property, which could subject us to litigation or licensing expenses, and we may be prevented from selling our products if any such claims prove successful.
Third parties have claimed and may in the future claim we are infringing their intellectual property, which could subject us to litigation or licensing expenses, and we may be prevented from selling our products if any such claims prove successful.
Foreign currency exchange risks inherent in doing business in foreign countries could have a material adverse effect on our business, financial condition and results of operations. 14 Our business has been adversely affected by the COVID ‑19 pandemic , which may continue to negatively affect our business, financial condition, and operating results .
We have not historically established transaction-based hedging programs. Foreign currency exchange risks inherent in doing business in foreign countries could have a material adverse effect on our business, financial condition and results of operations.
Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate the effects of climate change.
In addition, our operations may be interrupted or restricted by the phase-out or ban of certain substances, materials or processes, which may impact the sourcing, supply and pricing of materials used in manufacturing our products. Concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate the effects of climate change.
The industries in which we participate are highly competitive and rapidly evolving, and if we are unable to compete effectively, our business, financial condition and results of operations could be materially adversely affected. We face intense competition from other suppliers of gas or chemical delivery subsystems, as well as the internal manufacturing groups of OEMs.
We face intense competition from other suppliers of gas or chemical delivery subsystems, as well as the internal manufacturing groups of OEMs.
Accordingly, it is important that our products are designed into the new systems introduced by the OEMs. If any of the new products we develop are not launched or successful in the market, our business, financial condition and results of operations could be materially adversely affected.
Accordingly, it is important that our products are designed into the new systems introduced by the OEMs.
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Liquidity and Capital Resources Risks • We have a substantial amount of indebtedness and are subject to restrictive covenants. • We are subject to interest rate risk associate with variable rates on our outstanding indebtedness.
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Further, any capacity expansion by us or our competitors could also lead to overcapacity in our target markets, which could lead to price erosion that could adversely impact our operating results. 13 Table of Contents We rely on a very small number of OEM customers for a significant portion of our sales.
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Continuing uncertainty regarding the global economy continues to pose challenges to our business.
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The introduction of new technologies and new market entrants may also increase competitive pressures. Additionally, from time to time, governments around the world may provide incentives or make other investments that could benefit and give competitive advantages to our competitors.
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We have not historically established transaction-based hedging programs.
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For example, in August 2022, the U.S. government enacted the CHIPS and Science Act of 2022 to provide financial incentives to the U.S. semiconductor industry. Government incentives, including any that may be offered in connection with the CHIPS Act, may not be available to us on acceptable terms or at all.
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Our business could be adversely affected by the effects of the ongoing COVID-19 global pandemic, the evolution of which continues to be uncertain.
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If our competitors can benefit from such government incentives and we cannot, it could strengthen our competitors’ relative position and have a material adverse effect on our business. We are exposed to risks associated with weakness in the global economy and geopolitical instability.
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Recurring COVID-19 outbreaks around the world, such as those most recently occurring in China following the suspension of China’s zero-COVID policy, have heightened concerns relating to new and potentially more dangerous virus variants, which, if transmitted around the globe, could lead to the re-introduction of restrictions that were in place in 2020, 2021, and to a lesser extent in 2022, or even the adoption of other more strict measures to combat outbreaks.
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Our business depends on our timely supply of equipment, services and related products to meet the changing requirements of our customers, which depends in part on the timely delivery of parts, materials and services from suppliers and contract manufacturers.
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In 2020 and 2021, we experienced adverse impacts to our revenues and operating margins which resulted from reduced factory output stemming from social distancing measures, increased direct costs within our factories associated with employee personal protective equipment, facility cleaning and layout changes, increased logistics costs and employee labor costs, as well as other operating inefficiencies.
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Shortages of parts, materials and services needed to manufacture our products, as well as delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may continue to adversely impact, our manufacturing operations and our ability to meet customer demand.
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In particular, the ongoing COVID‑19 pandemic and general macroeconomic factors have caused a sustained shortage of skilled labor, increased turnover, and labor cost inflation, which may continue to result in increased labor costs and negatively affect our ability to operate our manufacturing facilities and overall business efficiently.
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Ongoing supply chain constraints may continue to increase costs of logistics and parts for our products and may cause us to pass on increased costs to our customers, which may lead to reduced demand for our products and materially and adversely impact our operating results.
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We may face similar effects to our results of operations in the event of a resurgence of COVID-19 into 2023, such as the resurgence of COVID-19 in China in late 2022, which has exacerbated and may continue to exacerbate supply chain disruptions, particularly as China’s national policies relating to COVID-19 are susceptible to unpredictable changes.
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Supply chain disruptions have caused and may continue to cause delays in our equipment production and delivery schedules, which could have an adverse impact on our operating and financial results.
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The COVID-19 pandemic contributed to the current macroeconomic environment and caused significant disruptions and volatility in the global capital markets, which may increase the cost of capital and adversely impact our ability to access capital.
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We may experience supply chain disruptions, significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or services, increased costs, customer order cancellations or reduced demand for our products as a result of: • global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, international trade disputes and new and unchanging regulations for exports of certain technologies to China, where a portion of our supply chain is located, and any retaliatory measures, that adversely impact us or our suppliers; • the failure or inability to accurately forecast demand and obtain quality parts on a cost-effective basis; • volatility in the availability and cost of parts, commodities, energy and shipping related to our products, including increased costs due to high inflation or interest rates or other market conditions; • difficulties or delays in obtaining required import or export licenses and approvals; • shipment delays due to transportation interruptions or capacity constraints; • a worldwide shortage of manufacturing components as a result of sharp increases in demand for semiconductor products in general; • cybersecurity incidents or information technology or infrastructure failures, including those of a third-party supplier or service provider; and • natural disasters, the impacts of climate change or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism or acts of war) in locations where we or our customers or suppliers have manufacturing, research, engineering, or other operations.
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A resurgence of COVID-19 or another pandemic with effects similar to those of COVID-19 may adversely affect our liquidity position as well as our customers’ ability to make timely payments to us or our ability to make timely payments to our suppliers. As the COVID-19 pandemic continues to evolve, its ultimate impact on our business is subject to change.
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If we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may strain our manufacturing and supply chain operations and negatively impact our working capital.
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Any material disruption in our information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have a material adverse effect on our business, and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. P ROPERTIES Our principal executive offices are located at 3185 Laurelview Ct., Fremont, California 94538. As of December 30, 2022, our principal manufacturing and administrative facilities, including our executive offices, are comprised of approximately 833,400 square feet. All of our facilities are leased, which allows for flexibility as business conditions and geographic demand change.
Biggest changeITEM 2. PROPERTIES Our principal executive offices are located at 3185 Laurelview Ct., Fremont, California 94538. As of December 29, 2023, our principal manufacturing and administrative facilities, including our executive offices, are comprised of approximately 865,700 square feet. All of our facilities are leased, which allows for flexibility as business conditions and geographic demand change.
Location Approximate Square Footage California 271,300 Oregon 172,100 Singapore 97,700 Minnesota 80,900 Mexico 62,900 Texas 47,800 Scotland 37,700 Malaysia 31,900 Korea 18,500 Nevada 12,500 We do not anticipate difficulty in either retaining occupancy of any of our facilities through lease renewals prior to expiration or through month-to-month occupancy or replacing them with equivalent facilities.
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 We do not anticipate difficulty in either retaining occupancy of any of our facilities through lease renewals prior to expiration or through month-to-month occupancy or replacing them with equivalent facilities.
We believe that our existing facilities and equipment are well maintained, in good operating condition, and are adequate to meet our currently anticipated requirements.
We believe that our existing facilities and equipment are well maintained, in good operating condition, and are adequate to meet our currently anticipated requirements. 32 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are presently not a party to any material litigation or regulatory proceeding and are not aware of any pending or threatened litigation or regulatory proceeding against us which, individually or in the aggregate, could have a material adverse effect on our business, financial condition, or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeWe are presently not a party to any material litigation or regulatory proceeding and are not aware of any pending or threatened litigation or regulatory proceeding against us which, individually or in the aggregate, could have a material adverse effect on our business, financial condition, or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Holders of Record As of February 21, 2024, all of our issued ordinary shares were held in “nominee” or “street” name or in our treasury account. Dividends We do not anticipate that we will pay any cash dividends on our ordinary shares for the foreseeable future.
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Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our financial condition, results of operations, contractual restrictions (including those under our credit facilities and any potential indebtedness we may incur in the future), restrictions imposed by applicable law, tax considerations, and other factors our Board of Directors deems relevant. 33 Table of Contents Stock Performance Graph The information included under the heading

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our financial condition, results of operations, contractual restrictions (including those under our credit facilities and any potential indebtedness we may incur in the future), restrictions imposed by applicable law, tax considerations, and other factors our Board of Directors deems relevant. 26 Stock Performance Graph The information included under the heading Item 5 – Stock Performance Graph is “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be “soliciting material” subject to Regulation 14A or incorporated by reference in any filing under the Securities Act or the Exchange Act.
Biggest changeItem 5. – Stock Performance Graph is “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be “soliciting material” subject to Regulation 14A or incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act.
Information used in the graph was obtained from the Nasdaq Stock Market, a source believed to be reliable, but we are not responsible for any errors or omissions in such information. ITEM 6. [RESERVED] 27
Information used in the graph was obtained from the Nasdaq Stock Market, a source believed to be reliable, but we are not responsible for any errors or omissions in such information. ITEM 6. [RESERVED] ITEM 7.
The comparison assumes $100 was invested on December 29, 2017 in the ordinary shares of Ichor Holdings, Ltd., in the Nasdaq Composite Index, and in the PHLX Semiconductor Sector Index and assumes reinvestment of dividends, if any. The stock price performance shown on the graph above is not necessarily indicative of future price performance.
The comparison assumes $100 was invested on December 28, 2018 in the ordinary shares of Ichor Holdings, Ltd., in the Nasdaq Composite Index, and in the PHLX Semiconductor Sector Index and assumes reinvestment of dividends, if any. The stock price performance shown on the graph above is not necessarily indicative of future price performance.
Our ordinary shares are listed for trading on the NASDAQ under the symbol “ICHR.” The Stock Price Performance Graph set forth below plots the cumulative total shareholder return on a quarterly basis of our ordinary shares from December 29, 2017 through December 30, 2022, with the cumulative total return of the Nasdaq Composite Index and the PHLX Semiconductor Sector Index over the same period.
Our ordinary shares are listed for trading on the NASDAQ under the symbol “ICHR.” The Stock Price Performance Graph set forth below plots the cumulative total shareholder return on a quarterly basis of our ordinary shares from December 28, 2018 through December 29, 2023, with the cumulative total return of the Nasdaq Composite Index and the PHLX Semiconductor Sector Index over the same period.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Holders of Record As of February 17, 2023, all of our issued ordinary shares were held in “nominee” or “street” name or in our treasury account.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this report.
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Dividends We do not anticipate that we will pay any cash dividends on our ordinary shares for the foreseeable future.
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The following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in the section entitled Item 1A. – Risk Factors.
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For a comparison of our financial condition, results of operations, and cash flows for 2022 to 2021, refer to Part II, Item 7. in our 2022 Annual Report on Form 10‑K, which was filed with the SEC on February 24, 2023. 34 Table of Contents Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment.
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Our primary product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition.
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Our chemical delivery systems and subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning. We also provide precision-machined components, weldments, e‑beam and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products.
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This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively. Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes.
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Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes. Most OEMs outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us.
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Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.
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We believe that this outsourcing trend has enabled OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us. We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. The following table summarizes key financial information for the periods indicated.
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Amounts are presented in accordance with GAAP unless explicitly identified as being a non-GAAP metric. For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

49 edited+27 added−29 removed22 unchanged
Biggest changeSelling, General, and Administrative Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Selling, general, and administrative $ 88,572 $ 65,857 $ 22,715 34.5 % The increase in selling, general, and administrative expense from 2021 to 2022 was primarily due to (1) incremental costs from our acquisition of IMG in November 2021 of $11.6 million, primarily consisting of employee-related expenses; (2) increased employee-related expenses (excluding IMG) of $5.5 million, which includes $1.4 million in increased share-based compensation expense; (3) loss accruals recorded in the first and third quarters of 2022 relating to expected settlements of employment-related legal matters totaling $4.1 million; (4) increased consulting and professional fees of $2.1 million; (5) increased depreciation expense and amortization of capitalized cloud-computing implementation costs of $1.1 million; (6) increased IT, software, and related services costs of $0.7 million; (7) increased travel costs of $0.6 million; and (8) increased occupancy-related costs of $0.5 million; partially offset by (9) reduced transaction costs associated with our acquisition of IMG of $4.1 million.
Biggest changeSelling, General, and Administrative Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Selling, general, and administrative $ 79,334 $ 88,572 $ (9,238) (10.4) % The decrease in selling, general, and administrative expense from 2022 to 2023 was primarily due to reduced employee-related expenses, inclusive of share-based compensation expense, of $6.0 million, loss accruals recorded in 2022 relating to an expected settlement of employment-related legal matters totaling $4.1 million, and reduced occupancy-related costs of $0.8 million, partially offset by increased information technology systems and related consulting and software costs of $1.7 million.
Although we do not have any long-term contracts that require customers to place orders with us, Lam Research and Applied Materials have been our customers for over a decade. Acquisitions In November 2021, we acquired IMG, a California-based leader in precision machining and specialty joining and plating, for approximately $270.0 million.
Although we do not have any long-term contracts that require customers to place orders with us, Applied Materials, Lam Research, and ASML have been our customers for over a decade. Acquisitions In November 2021, we acquired IMG, a California-based leader in precision machining and specialty joining and plating, for approximately $270.0 million.
We expect selling expenses to increase in absolute dollars as we continue to invest in expanding our markets and as we expand our international operations. We expect general and administrative expenses to also increase in absolute dollars due to an increase in employee-related costs, regulatory compliance, and accounting expenses.
We expect selling expenses to increase in absolute dollars as we continue to invest in expanding our markets and as we expand our international operations. We expect general and administrative expenses to also increase in absolute dollars as our business grows, due to an increase in employee-related costs, regulatory compliance, and accounting-related expenses.
Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us in any given period or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share.
Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share.
Cyclicality of Semiconductor Capital Equipment Industry Our business is subject to the cyclicality of the capital expenditures of the semiconductor industry, which drives cyclicality in the semiconductor capital equipment industry in which we operate. In 2022, we derived over 90% of our sales from the semiconductor capital equipment industry.
Cyclicality of Semiconductor Capital Equipment Industry Our business is subject to the cyclicality of the capital expenditures of the semiconductor industry, which drives cyclicality in the semiconductor capital equipment industry in which we operate. In 2023, we derived over 90% of our sales from the semiconductor capital equipment industry.
Non-GAAP gross profit, operating income, and net income are defined as: gross profit, operating income, or net income, respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income, and net income; and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items.
Non-GAAP gross profit, operating income, and net income are defined as: gross profit, operating income (loss), or net income (loss), respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income (loss), and net income (loss), respectively; and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance changes.
Selling, general, and administrative – Selling expense consists primarily of salaries and commissions paid to our sales and sales support employees and other costs related to the sales of our products. General and administrative expense consists primarily of salaries and overhead associated with our administrative staff, professional fees, and depreciation and other allocated facility related costs.
Selling, general, and administrative – Selling expense consists primarily of salaries and commissions paid to our sales and sales support employees and other costs related to the sales of our products. General and administrative expense consists primarily of salaries, professional fees, and overhead associated with our administrative staff.
The following table presents our unaudited non‑GAAP gross profit and non-GAAP gross margin and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated: Year Ended December 30, 2022 December 31, 2021 (dollars in thousands) U.S.
The following table presents our unaudited non‑GAAP gross profit and non-GAAP gross margin and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated: Year Ended December 29, 2023 December 30, 2022 (dollars in thousands) U.S.
Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis. During 2022, 2021, and 2020, we wrote down inventory determined to be excessive or obsolete by $5.0 million, $1.9 million, and $4.6 million, respectively.
Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis. During 2023, 2022, and 2021, we wrote down inventory determined to be excessive or obsolete by $9.8 million, $5.0 million, and $1.9 million, respectively.
Interest Expense Interest expense consists of interest on our outstanding debt under our credit facilities, including amortization of debt issuance costs, and any other indebtedness we may incur in the future.
Interest Expense, Net Interest expense, net of interest income on our cash deposits, consists of interest on our outstanding debt under our credit facilities, including amortization of debt issuance costs, and any other indebtedness we may incur in the future.
Accordingly, these transactions are not subject to material exchange rate fluctuations. 30 Income Tax Expense Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which was extended through 2026.
Accordingly, these transactions are not subject to material exchange rate fluctuations. Income Tax Expense Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which is expected to continue through 2026.
Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, and share-based compensation. Operating expenses also include overhead costs for facilities, IT, and depreciation. In addition, our operating expenses include amortization expense of acquired intangible assets and certain non-recurring costs, including facility shutdown costs and executive transition-related costs.
Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, and share-based compensation. Operating expenses also include overhead costs for facilities, IT, and depreciation. In addition, our operating expenses include amortization expense of acquired intangible assets.
Since the gross margin on each of our products differs, our overall gross margin as a percentage of our sales changes based on the mix of products we sell in any period. Operating Expenses Our operating expenses primarily include research and development and sales, general, and administrative expenses.
Additionally, since the gross margin on each of our products can differ, our overall gross margin as a percentage of our sales can change based on the mix of products we sell in any period. 37 Table of Contents Operating Expenses Our operating expenses primarily include research and development and sales, general, and administrative expenses.
Material Cash Requirements Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of raw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments and capital expenditures, and (v) payment of income taxes.
Our cash and cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions. 45 Table of Contents Material Cash Requirements Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of raw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments and capital expenditures, and (v) payment of income taxes.
( 3 ) Included in this amount for 2022 are severance costs associated with our global reduction-in-force program that began near the end of 2022. 35 The following table presents our unaudited non ‑GAAP operating income and non-GAAP operating margin and a reconciliation from operating income, the most comparable GAAP measure, for the periods indicated: Year Ended December 30, 2022 December 31, 2021 (dollars in thousands) U.S.
(2) Included in this amount are severance costs associated with our global reduction-in-force programs. 43 Table of Contents The following table presents our unaudited non‑GAAP operating income and non-GAAP operating margin and a reconciliation from operating income (loss), the most comparable GAAP measure, for the periods indicated: Year Ended December 29, 2023 December 30, 2022 (dollars in thousands) U.S.
Year Ended December 30, 2022 December 31, 2021 (dollars in thousands, except per share amounts) Net sales $ 1,280,069 $ 1,096,917 Gross margin 16.6 % 16.2 % Gross margin, non-GAAP 17.0 % 16.7 % Operating margin 6.7 % 7.4 % Operating margin, non-GAAP 9.8 % 10.7 % Net income $ 72,804 $ 70,899 Net income, non-GAAP $ 104,863 $ 97,698 Diluted EPS $ 2.51 $ 2.45 Diluted EPS, non-GAAP $ 3.62 $ 3.37 28 Key Factors Affecting Our Business Investment in Semiconductor Manufacturing Equipment The design and manufacturing of semiconductor devices is constantly evolving and becoming more complex in order to achieve greater performance and efficiency.
Year Ended December 29, 2023 December 30, 2022 (dollars in thousands, except per share amounts) Net sales $ 811,120 $ 1,280,069 Gross margin 12.7 % 16.6 % Gross margin, non-GAAP 13.4 % 17.0 % Operating margin (1.3) % 6.7 % Operating margin, non-GAAP 2.9 % 9.8 % Net income (loss) $ (42,985) $ 72,804 Net income, non-GAAP $ 12,257 $ 104,863 Diluted EPS $ (1.47) $ 2.51 Diluted EPS, non-GAAP $ 0.42 $ 3.62 35 Table of Contents Key Factors Affecting Our Business Investment in Semiconductor Manufacturing Equipment The design and manufacturing of semiconductor devices is constantly evolving and becoming more complex in order to achieve greater performance and efficiency.
Sales We generate sales primarily from the design, manufacture, and sale of subsystems and components primarily for semiconductor capital equipment. Sales are recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Sales are recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP. Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison.
Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison. Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP.
Other Expense (Income), Net Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Other expense (income), net $ (563 ) $ 807 $ (1,370 ) n/m The change in other expense (income), net from 2021 to 2022 was primarily due to currency exchange rate fluctuations during the year, reflecting an overall strengthening U.S. dollar against local currency payables of our foreign operations .
Other Expense (Income), Net Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Other expense (income), net $ 804 $ (563) $ 1,367 n/m The change in other expense (income), net from 2022 to 2023 was primarily due to currency exchange rate fluctuations during the year related to our local currency payables of our foreign operations.
GAAP operating income $ 85,823 $ 81,014 Non-GAAP adjustments: Amortization of intangible assets 17,905 14,918 Share-based compensation 13,924 11,473 Facility shutdown costs (1) — 2,996 Settlement loss (2) 4,146 — Fair value adjustment to inventory from acquisitions (3) 2,492 1,652 Acquisition costs (4) 296 4,386 Other (5) 1,144 498 Non-GAAP operating income $ 125,730 $ 116,937 U.S.
GAAP operating income (loss) $ (10,895) $ 85,823 Non-GAAP adjustments: Amortization of intangible assets 14,734 17,905 Share-based compensation 17,338 13,924 Settlement loss (1) — 4,146 Fair value adjustment to inventory from acquisitions (2) — 2,492 Acquisition costs (3) — 296 Other (4) 2,298 1,144 Non-GAAP operating income $ 23,475 $ 125,730 U.S.
The following table sets forth a summary of operating, investing, and financing activities for the periods presented: Year Ended December 30, 2022 December 31, 2021 December 25, 2020 (in thousands) Cash provided by operating activities $ 31,453 $ 15,272 $ 38,259 Cash used in investing activities (28,933 ) (289,585 ) (14,597 ) Cash provided by financing activities 8,455 96,909 168,625 Net increase (decrease) in cash $ 10,975 $ (177,404 ) $ 192,287 Our cash provided by operating activities of $31.5 million during the year ended December 30, 2022 consisted of net income of $72.8 million and net non-cash charges of $46.3 million, which consisted primarily of depreciation and amortization of $35.1 million and share-based compensation expense of $13.9 million, partially offset by an increase in our net operating assets and liabilities of $87.6 million.
The following table sets forth a summary of operating, investing, and financing activities for the periods presented: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 (in thousands) Cash provided by operating activities $ 57,632 $ 31,453 $ 15,272 Cash used in investing activities (15,496) (28,933) (289,585) Cash provided by (used in) financing activities (48,651) 8,455 96,909 Net increase (decrease) in cash $ (6,515) $ 10,975 $ (177,404) Our cash provided by operating activities of $57.6 million during 2023 consisted of net loss of $43.0 million, offset by net non-cash charges of $61.7 million, which consisted primarily of depreciation and amortization of $34.6 million, share-based compensation expense of $17.3 million, and deferred income taxes of $9.3 million, and a decrease in our net operating assets and liabilities of $38.9 million.
GAAP net income $ 72,804 $ 70,899 Non-GAAP adjustments: Amortization of intangible assets 17,905 14,918 Share-based compensation 13,924 11,473 Facility shutdown costs (1) — 2,996 Settlement loss (2) 4,146 — Fair value adjustment to inventory from acquisitions (3) 2,492 1,652 Acquisition costs (4) 296 4,386 Other (5) 1,144 498 Loss on extinguishment of debt (6) — 737 Tax adjustments related to non-GAAP adjustments (7) (7,848 ) (9,861 ) Non-GAAP net income $ 104,863 $ 97,698 U.S.
GAAP net income (loss) $ (42,985) $ 72,804 Non-GAAP adjustments: Amortization of intangible assets 14,734 17,905 Share-based compensation 17,338 13,924 Settlement loss (1) — 4,146 Fair value adjustment to inventory from acquisitions (2) — 2,492 Acquisition costs (3) — 296 Other (4) 2,298 1,144 Tax adjustments related to non-GAAP adjustments (5) 9,778 (7,848) Tax expense from valuation allowance (6) 11,094 — Non-GAAP net income $ 12,257 $ 104,863 U.S.
In 2022, our top two customers were Lam Research and Applied Material, accounting for a combined 79% of sales.
In 2023, our top three customers were Applied Materials, Lam Research, and ASML, accounting for a combined 82% of sales.
GAAP gross profit $ 211,864 $ 177,480 Non-GAAP adjustments: Share-based compensation 2,056 1,384 Facility shutdown costs (1) — 2,611 Fair value adjustment to inventory from acquisitions (2) 2,492 1,652 Other (3) 933 106 Non-GAAP gross profit $ 217,345 $ 183,233 U.S.
GAAP gross profit $ 103,396 $ 211,864 Non-GAAP adjustments: Share-based compensation 3,130 2,056 Fair value adjustment to inventory from acquisitions (1) — 2,492 Other (2) 2,191 933 Non-GAAP gross profit $ 108,717 $ 217,345 U.S.
(2) During the first and third quarters of 2022, we recorded loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters. We expect the settlements to be finalized and paid within 12 months.
GAAP operating margin (1.3) % 6.7 % Non-GAAP operating margin 2.9 % 9.8 % (1) During the first and third quarters of 2022, we recorded non-recurring loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters.
Year Ended December 30, 2022 December 31, 2021 (in thousands) Net sales $ 1,280,069 $ 1,096,917 Cost of sales 1,068,205 919,437 Gross profit 211,864 177,480 Operating expenses: Research and development 19,564 15,691 Selling, general, and administrative 88,572 65,857 Amortization of intangible assets 17,905 14,918 Total operating expenses 126,041 96,466 Operating income 85,823 81,014 Interest expense, net 11,056 6,451 Other expense (income), net (563 ) 807 Income before income taxes 75,330 73,756 Income tax expense 2,526 2,857 Net income $ 72,804 $ 70,899 31 The following table sets forth our results of operations as a percentage of our total sales for the periods presented.
Year Ended December 29, 2023 December 30, 2022 (in thousands) Net sales $ 811,120 $ 1,280,069 Cost of sales 707,724 1,068,205 Gross profit 103,396 211,864 Operating expenses: Research and development 20,223 19,564 Selling, general, and administrative 79,334 88,572 Amortization of intangible assets 14,734 17,905 Total operating expenses 114,291 126,041 Operating income (loss) (10,895) 85,823 Interest expense, net 19,379 11,056 Other expense (income), net 804 (563) Income (loss) before income taxes (31,078) 75,330 Income tax expense 11,907 2,526 Net income (loss) $ (42,985) $ 72,804 39 Table of Contents The following table sets forth our results of operations as a percentage of our total sales for the periods presented.
For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this Annual Report.
Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this Annual Report.
Liquidity and Capital Resources The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements. Our cash and cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions .
Liquidity and Capital Resources The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements.
Year Ended December 30, 2022 December 31, 2021 Net sales 100.0 100.0 Cost of sales 83.4 83.8 Gross profit 16.6 16.2 Operating expenses: Research and development 1.5 1.4 Selling, general, and administrative 6.9 6.0 Amortization of intangible assets 1.4 1.4 Total operating expenses 9.8 8.8 Operating income 6.7 7.4 Interest expense, net 0.9 0.6 Other expense (income), net 0.0 0.1 Income before income taxes 5.9 6.7 Income tax expense 0.2 0.3 Net income 5.7 6.5 Comparison of 2022 and 2021 Net Sales Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Net sales $ 1,280,069 $ 1,096,917 $ 183,152 16.7 % The increase in net sales from 2021 to 2022 was primarily due to strong demand from our customers as a result of continued growth in the global wafer fabrication equipment market throughout much of 2022, as well as incremental sales from our acquisition of IMG in November 2021.
Year Ended December 29, 2023 December 30, 2022 Net sales 100.0 100.0 Cost of sales 87.3 83.4 Gross profit 12.7 16.6 Operating expenses: Research and development 2.5 1.5 Selling, general, and administrative 9.8 6.9 Amortization of intangible assets 1.8 1.4 Total operating expenses 14.1 9.8 Operating income (loss) (1.3) 6.7 Interest expense, net 2.4 0.9 Other expense (income), net 0.1 0.0 Income (loss) before income taxes (3.8) 5.9 Income tax expense 1.5 0.2 Net income (loss) (5.3) 5.7 Comparison of 2023 and 2022 Net Sales Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Net sales $ 811,120 $ 1,280,069 $ (468,949) (36.6) % The decrease in net sales from 2022 to 2023 was primarily due to reduced customer demand stemming from reduced spending within the semiconductor capital equipment industry.
In 2022, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $11.7 million. Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.
Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation. 38 Table of Contents Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP.
The increase in our net operating assets and liabilities was primarily due to a decrease in accounts payable of $50.2 million and an increase in inventories of $47.5 million, partially offset by a decrease in accounts receivable of $6.7 million. Cash used in investing activities during 2022 primarily consisted of capital expenditures of $29.4 million.
The decrease in our net operating assets and liabilities of $38.9 million was primarily due to a decrease in accounts receivable and inventories of $69.6 million and $37.8 million, respectively, partially offset by a decrease in accounts payable and accrued and other liabilities of $51.0 million and $27.7 million, respectively. Cash provided by operating activities was $31.5 million during 2022.
Sources and Conditions of Liquidity Our ongoing sources of liquidity to fund our material cash requirements are primarily derived from: (i) sales to our customers and the related changes in our net operating assets and liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable. 37 Summary of Cash Flows We ended 2022 with cash and cash equivalents of $86.5 million, an increase of $11.0 million from 2021, which was primarily due to cash provided by operating activities of $31.5 million and net proceeds from our credit facilities of $7.5 million, partially offset by capital expenditures of $29.4 million.
Sources and Conditions of Liquidity Our ongoing sources of liquidity to fund our material cash requirements are primarily derived from: (i) sales to our customers and the related changes in our net operating assets and liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable.
( 2 ) As part of the purchase price allocations of our acquisitions of IMG in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up. These amounts represent the release of the step-up to cost of sales as acquired-inventories were sold.
(2) As part of the purchase price allocations of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold. (3) Included in this amount are transaction-related costs incurred in connection with our acquisition of IMG.
Research and Development Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Research and development $ 19,564 $ 15,691 $ 3,873 24.7 % The increase in research and development expenses from 2021 to 2022 was primarily due to increased employee-related expense of $2.6 million, inclusive of increased share-based compensation expense of $0.3 million, as we expand our engineering team to design and engineer next generation, high performance solutions for our customers, as well as increased program costs, including consulting, travel, materials, and fixtures costs, related to the development of our new products .
Research and Development Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Research and development $ 20,223 $ 19,564 $ 659 3.4 % The increase in research and development expenses from 2022 to 2023 was primarily due to increased materials and professional fees of $1.0 million for program costs related to the development of our new products, partially offset by lower employee related expenses, inclusive of share-based compensation expense, of $0.5 million.
Our business has a highly variable cost structure with low fixed overhead as a percentage of cost of sales. In addition, our existing global manufacturing plant capacity is scalable, and we are able to adjust to increased customer demand for our products without significant additional capital investment.
Our existing global manufacturing plant capacity is scalable, and we are able to adjust to increased customer demand for our products without significant additional capital investment. We operate our business in this manner to avoid having excessive fixed costs during a cyclical downturn, while retaining flexibility to expand our production volumes during periods of growth.
(3) As part of the purchase price allocations of our acquisitions of IMG in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up. These amounts represent the release of the step-up to cost of sales as acquired-inventories were sold.
(2) As part of the purchase price allocation of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold. (3) Included in this amount are transaction-related costs incurred in connection with our acquisition of IMG.
Amortization of Intangible Assets Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Amortization of intangibles assets $ 17,905 $ 14,918 $ 2,987 20.0 % The increase in amortization expense from 2021 to 2022 was primarily due to incremental amortization expense from intangible assets acquired in connection with our acquisition of IMG, partially offset by reduced amortization expense from certain intangible assets becoming fully amortized in the fourth quarter of 2021 and the first quarter of 2022 . 33 Interest Expense , Net Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Interest expense, net $ 11,056 $ 6,451 $ 4,605 71.4 % Weighted average borrowings outstanding $ 303,036 $ 187,028 $ 116,008 62.0 % Weighted average borrowing rate 3.37 % 2.74 % + 63 bps The increase in interest expense, net from 2021 to 2022 was due to a $116.0 million increase in our average amount borrowed during the year and a 63 basis point increase in our weighted average borrowing rate.
Amortization of Intangible Assets Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Amortization of intangibles assets $ 14,734 $ 17,905 $ (3,171) (17.7) % The decrease in amortization expense from 2022 to 2023 was primarily due to certain intangible assets becoming fully amortized in 2023. 41 Table of Contents Interest Expense, Net Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Interest expense, net $ 19,379 $ 11,056 $ 8,323 75.3 % Weighted average borrowings outstanding $ 292,661 $ 303,036 $ (10,375) (3.4 %) Weighted average borrowing rate 6.80 % 3.37 % + 343 bps The increase in interest expense, net from 2022 to 2023 was due to increases in our weighted average borrowing rate, partially offset by decreases in our average amount borrowed.
(3) As part of the purchase price allocations of our acquisitions of IMG in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up. These amounts represent the release of the step-up to cost of sales as acquired-inventories were sold.
GAAP gross margin 12.7 % 16.6 % Non-GAAP gross margin 13.4 % 17.0 % (1) As part of the purchase price allocation of our acquisition of IMG in November 2021, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.
Cash provided by financing activities during 2022 consisted of net proceeds from our credit facilities of $7.5 million and net proceeds from share-based compensation activity of $1.0 million. Recent Accounting Pronouncements From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements.
Cash provided by financing activities during 2022 consisted of net proceeds from our credit facilities of $7.5 million and net proceeds from share-based compensation activity of $1.0 million.The change in net payments on, and net proceeds from, our facilities relates to fluctuations in cash required for working capital purposes relative to the geographic distribution of available cash during the periods then ended.
Non-GAAP diluted EPS is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period. Non-GAAP gross margin and non-GAAP operating margin are defined as non-GAAP gross profit and non-GAAP operating income, respectively, divided by net sales.
All non-GAAP adjustments are presented on a gross basis; the related income tax effects, including current and deferred income tax expense, are included in the adjustment line under the heading "Tax adjustments related to non-GAAP adjustments." Non-GAAP diluted earnings per shares ("EPS") is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period.
Macroeconomic factors have, however, created, and may continue to create, volatility and uncertainty in our industry, including persistent levels of high inflation, higher interest rates, foreign currency rate fluctuations, and supply chain challenges.
In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this reduced spending environment, including persistent levels of high inflation, higher interest rates, supply chain disruptions, and other macroeconomic uncertainties.
Our shipping terms are generally “shipping point.” Accordingly, control transfers, and sales are recognized, at the point-in-time of shipment. Cost of Sales and Gross Profit Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment.
Cost of Sales and Gross Profit Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment. Our business has a variable cost structure, with fixed costs comprising a smaller percentage of cost of sales compared to variable costs.
Included in this amount are costs and charges directly related to the facility closure. ( 2 ) During the first and third quarters of 2022, we recorded loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters. We expect the settlements to be finalized and paid within 12 months.
GAAP diluted EPS $ (1.47) $ 2.51 Non-GAAP diluted EPS $ 0.42 $ 3.62 Shares used to compute diluted non-GAAP EPS 29,514,553 28,963,031 (1) During the first and third quarters of 2022, we recorded non-recurring loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters.
The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income, the most comparable GAAP measure, for the periods indicated: Year Ended December 30, 2022 December 31, 2021 (dollars in thousands, except per share amounts) U.S.
(4) Included in this amount are severance costs associated with our global reduction-in-force programs. 44 Table of Contents The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income (loss), the most comparable GAAP measure, for the periods indicated.
Cost of Sales and Gross Profit Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Cost of sales $ 1,068,205 $ 919,437 $ 148,768 16.2 % Gross profit $ 211,864 $ 177,480 $ 34,384 19.4 % Gross margin 16.6 % 16.2 % + 40 bps The increase in the gross amounts of cost of sales and gross profit from 2021 to 2022 was primarily due to the factors mentioned in the commentary above under the above heading, Net Sales . 32 The 40 basis point increase in gross margin from 2021 to 2022 was primarily due to increased factory utilization and operating leverage, as well as accretive margins from our acquisition of IMG in November 2021, partially offset by increased materials, logistics, and labor costs observed throughout 2022.
On a relative basis, net sales to international customers as a percent of total net sales increased from 55.3% in 2022 to 65.3% in 2023. 40 Table of Contents Cost of Sales and Gross Profit Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Cost of sales $ 707,724 $ 1,068,205 $ (360,481) (33.7 %) Gross profit $ 103,396 $ 211,864 $ (108,468) (51.2 %) Gross margin 12.7 % 16.6 % -390 bps The decrease in the gross amounts of cost of sales and gross profit from 2022 to 2023 was primarily due to the factors mentioned in the commentary above under the above heading, " Net Sales" .
Income Tax Expense Year Ended Change December 30, 2022 December 31, 2021 Amount % (dollars in thousands) Income tax expense $ 2,526 $ 2,857 $ (331 ) -11.6 % Income before income taxes $ 75,330 $ 73,756 $ 1,574 2.1 % Effective income tax rate 3.4 % 3.9 % - 50 bps The decrease in income tax expense from 2021 to 2022 was primarily due to decreased taxable income in the U.S., partially offset by reduced benefits from share-based compensation activity.
Income Tax Expense Year Ended Change December 29, 2023 December 30, 2022 Amount % (dollars in thousands) Income tax expense $ 11,907 $ 2,526 $ 9,381 371.4 % Income before income taxes $ (31,078) $ 75,330 $ (106,408) n/m Effective income tax rate (38.3) % 3.4 % -4,170 bps The increase in income tax expense from 2022 to 2023 was primarily due to recording a valuation allowance against our U.S. federal and state deferred tax assets, resulting in an $11.1 million charge to income tax expense during the second quarter of 2023.
Net sales to U.S. customers increased by $38.0 million in 2022 to $572.1 million. On a relative basis, net sales to U.S. customers as a percent of total net sales decreased from 49.6% in 2021 to 44.7% in 2022. Net sales to international customers increased by $155.1 million in 2022 to $707.9 million.
Further detail is provided above under the section entitled "Key Factors Affecting Our Business". Net sales to U.S. customers decreased by $290.8 million in 2023 to $281.3 million. On a relative basis, net sales to U.S. customers as a percent of total net sales decreased from 44.7% in 2022 to 34.7% in 2023.
We intend to continue to evaluate opportunistic acquisitions to supplement our organic growth, and any such acquisitions could have a material impact on our business and results of operations.
We intend to continue to evaluate opportunistic acquisitions to supplement our organic growth, and any such acquisitions could have a material impact on our business and results of operations. 36 Table of Contents Macroeconomic Conditions The semiconductor industry is cyclical in nature, and matching customer demand can be challenging based on a variety of factors, including market trends, supply chain shortages and related lead times, customer buying patterns, availability of skilled labor, and macroeconomic and other factors.
While these challenging macroeconomic conditions may impact business and customers in the near-term, we believe secular demand for semiconductors, both in quantity and performance, and constant technological innovation will drive long-term, sustainable growth in the semiconductor capital equipment industry. 29 Components of Our Results of Operations The following discussion sets forth certain components of our statements of operations as well as significant factors that impact those items.
Components of Our Results of Operations The following discussion sets forth certain components of our statements of operations as well as significant factors impacting those items. Sales We generate sales primarily from the design, manufacture, and sale of subsystems and components for semiconductor capital equipment.
Removed
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this report.
Added
During much of 2022, many of these factors impacted our ability to fulfill high customer demand; however, the industry entered a cyclical downturn in the fourth quarter of 2022, leading to reductions in spending on semiconductor capital equipment, the primary industry in which we operate, resulting in weakened customer demand in 2023.
Removed
The following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in the section entitled Item 1A – Risk Factors.
Added
Additionally, increased export controls for semiconductor-related goods and services shipped to China and delayed business investment in electronic memory capacity had varying levels of unfavorable consequences to our business.
Removed
For a comparison of our financial condition, results of operations, and cash flows for 2021 to 2020, refer to Part II, Item 7 in our 2021 Annual Report on Form 10‑K, which was filed with the Securities and Exchange Commission on February 28, 2022.
Added
To help mitigate these impacts and to better align our resources and cost structure with current and expected future levels of business, we initiated labor and other cost reduction initiatives starting in the fourth quarter of 2022 and continuing through 2023.
Removed
Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our primary product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices.
Added
As a result of these programs, we incurred severance charges of $1.1 million and $2.3 million in 2022 and 2023, respectively.
Removed
Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition. Our chemical delivery systems and subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning.
Added
While challenging macroeconomic conditions have impacted and will continue to impact our business and customers in the near term, we believe demand for semiconductors, semiconductor capital equipment, and our products will return to growth, fueled by the long-term growing need for more semiconductor productive capacity and enhanced process technologies.
Removed
We also provide precision-machined components, weldments, e‑beam and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products. This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.
Added
Sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the promised good has transferred.
Removed
Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes. Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes.
Added
However, during a cyclical downturn, fixed costs become a larger percentage of cost of sales, which could result in a decrease to gross margin.
Removed
Most OEMs outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us. Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems.
Added
In 2023, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $5.0 million. During 2023, we recorded a valuation allowance against our U.S. state and federal deferred tax assets; therefore, we are unable to record income tax benefits related to our losses under GAAP losses.
Removed
Outsourcing these subsystems has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes. We believe that this outsourcing trend has enabled OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us.
Added
Net sales to international customers decreased by $178.1 million in 2023 to $529.8 million.
Removed
We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. The following table summarizes key financial information for the periods indicated. Amounts are presented in accordance with GAAP unless explicitly identified as being a non-GAAP metric.
Added
The 390 basis point decrease in gross margin from 2022 to 2023 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand, as well as a lower revenue mix from sales of components, due to excess inventory levels at our customers.
Removed
Macroeconomic Conditions We participated in the continuation of unprecedented demand for semiconductor capital equipment in 2022, driven by increased secular demand for semiconductors, as well as the ever-increasing levels of complexity in the manufacturing thereof.
Added
Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by approximately 60 basis points.
Removed
Additionally, increased controls around exporting goods and services to China may impact the overall size of the semiconductor capital equipment industry going forward, and the conflict in Ukraine has given rise to potential global security issues that may adversely affect international business and economic conditions as well as economic sanctions imposed by the international community that have impacted the global economy.
Added
The increase in our weighted average borrowing rate was primarily due to an increase in risk-free, short-term borrowing rates as a result of tightening monetary policy, which impacts the Bloomberg Short Term Bank Yield ("BSBY"), the variable component of our borrowing rate under our credit facilities.
Removed
Regarding the COVID‑19 pandemic, although our factories and operations are currently not directly affected by any restrictions, measures, or shutdowns, increases in positive case rates may change the extent to which our business becomes adversely impacted by such restrictions, measures, or shutdowns on a go-forward basis.
Added
The decreases in our average amount borrowed was primarily due to quarterly term loan payments and payments on our revolving credit facilities in the second, third, and fourth quarters of 2023.
Removed
We operate our business in this manner to avoid having excessive fixed costs during a cyclical downturn while retaining flexibility to expand our production volumes during periods of growth. However, this approach results in a smaller increase in gross margin as a percentage of sales in times of increased demand.
Added
Because we recorded a valuation allowance against our U.S. state and federal deferred income taxes, we currently do not record tax benefits on our GAAP U.S. taxable losses. 42 Table of Contents Non-GAAP Financial Results Management uses certain non-GAAP metrics to evaluate our operating and financial results.
Removed
On a relative basis, net sales to international customers as a percent of total net sales increased from 50.4% in 2021 to 55.3% in 2022.
Added
Non-GAAP gross margin and non-GAAP operating margin are defined as non-GAAP gross profit and non-GAAP operating income, respectively, divided by net sales. Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP.
Removed
These cost increases were primarily due to investments in our capacity to service customer demand, inflationary macroeconomic conditions that put pressure on the cost of labor, materials and factory costs, and the impacts of certain supply chain challenges on logistics costs and factory efficiency.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+19 added−0 removed5 unchanged
Biggest changeTo date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions . 38 Interest Rate Risk We had total indebtedness of $302.5 million as of December 30, 2022, exclusive of $1.8 million in debt issuance costs, of which $7.5 million was payable within the next 12 months.
Biggest changeInterest Rate Risk We had total indebtedness of $250.0 million as of December 29, 2023, exclusive of $1.3 million in debt issuance costs, of which $7.5 million was payable within the next 12 months. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations.
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.
As of December 30, 2022, the interest rate on our outstanding debt was based on the Bloomberg Short-Term Bank Yield Index, plus an applicable rate depending on our leverage ratio. A hypothetical 100 basis point change in the interest rate on our outstanding debt would have resulted in a $3.0 million change to interest expense on an annualized basis .
A hypothetical 100 basis point change in the interest rate on our outstanding debt would have resulted in a $2.5 million change to interest expense on an annualized basis. ITEM 8.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been, nor do we anticipate being exposed to, material risks due to changes in interest rates.
We have not been, nor do we anticipate being exposed to, material risks due to changes in interest rates. As of December 29, 2023, the interest rate on our outstanding debt was based on the BSBY, plus an applicable rate depending on our leverage ratio.
Added
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary financial information required to be filed under this Item 8 are presented beginning on page F‑1 in Part IV, Item 15 of this annual report on Form 10‑K and are incorporated herein by reference. 47 Table of Contents ITEM 9.
Added
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A.
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CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (the certifying officers), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of December 29, 2023.
Added
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
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Based on this evaluation, our certifying officers concluded that our disclosure controls and procedures were effective as of December 29, 2023. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act).
Added
With the participation of our certifying officers, our management, under the oversight of our Board of Directors, evaluated the effectiveness of our internal control over financial reporting as of December 29, 2023, using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).
Added
Our internal control over financial reporting is designed to provide reasonable assurance with U.S.
Added
GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of the financial statements in accordance with GAAP and that our receipts and expenditures are being made in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
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Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 29, 2023.
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Remediation of Prior Years' Material Weaknesses As disclosed in Item 9A. – Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, we identified a material weakness related to ITGCs in the areas of user access and program change management over an information technology system (“IT System”) that supports our financial reporting process.
Added
We did not have resources within the organization with sufficient levels of information technology knowledge and did not perform risk assessment surrounding the IT System to adequately understand how areas of user access and program change management function within the IT System in order to design and operate ITGCs sufficient to mitigate the identified risks.
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As of December 29, 2023, management has completed the implementation of our remediation efforts of the material weakness described above.
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During the fiscal year ended December 29, 2023, we implemented our material weakness remediation plan that included: (i) modification of business and IT user roles to restrict system change access for key setup and configurations related to the operation of automated system controls; (ii) implementation of a technology tool to approve, monitor and review changes by business users to certain setup and maintenance activities which can have a material impact on the operation of automated system controls; and (iii) enhanced our internal control function with additional resources and developed and provided training for control owners and operators including the principles and requirements of the control activities. 48 Table of Contents During the fourth quarter of 2023, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective.
Added
As a result we have concluded the material weakness has been remediated as of December 29, 2023. Our independent registered public accounting firm, KPMG, LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included in Item 8. - Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Added
Changes in Internal Control Over Financial Reporting Other than the changes in connection with our implementation of the material weakness remediation plan discussed above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) or 15d‑15(f) of the Exchange Act) that occurred during the fourth quarter of December 29, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Added
Inherent Limitations on Effectiveness of Controls and Procedures A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.
Added
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Added
If we cannot provide reliable financial information, our business, operating results, and share price could be negatively impacted. ITEM 9B.
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OTHER INFORMATION During the fourth quarter of 2023, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (each as defined in Item 408 of Regulation S-K).

Other ICHR 10-K year-over-year comparisons