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What changed in ICHOR HOLDINGS, LTD.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ICHOR HOLDINGS, LTD.'s 2023 and 2024 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 2024 report.

+325 added−291 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in ICHOR HOLDINGS, LTD.'s 2024 10-K

325 paragraphs added · 291 removed · 216 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+12 added−22 removed32 unchanged
Biggest changeAs 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.
Biggest changeWhile 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. In addition, we do not believe that the loss or expiration of any single patent or group of related patents would materially affect our business.
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.
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.
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.
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 strive to adhere to strict design tolerances and specifications.
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.
Continue to Improve Our Manufacturing Process Efficiency We continually strive to improve our processes to reduce our manufacturing process cycle time, increase 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 and components.
For example, as semiconductor devices become more complex, atomic layer deposition (“ALD”), etch, and chemical vaper deposition (“CVD”) require more precise gas control, with faster response times, tighter repeatability, and cleaner, more corrosion-resistant systems. By leveraging our existing customer relationships and strong history of solving these challenges, we believe this will grow market share.
For example, as semiconductor devices become more complex, atomic layer deposition (“ALD”), etch, and chemical vapor deposition (“CVD”) require more precise gas control, with faster response times, tighter repeatability, and cleaner, more corrosion-resistant systems. By leveraging our existing customer relationships and strong history of solving these challenges, we believe this will grow market share.
In addition to providing high quality and reliable fluid delivery subsystems, one of our principal strategies is delivering the lead-times that provide our customers the required flexibility needed in their production processes. We have accomplished this by investing in manufacturing systems and processes and an efficient supply chain.
In addition to providing high quality and reliable fluid delivery subsystems and components, one of our principal strategies is delivering the lead-times that provide our customers with the required flexibility needed in their production processes. We have accomplished this by investing in manufacturing systems and processes and an efficient supply chain.
To achieve this goal, we engage with our customers early in their design and development processes and utilize our deep engineering resources and operating expertise, as well as our expanded product portfolio, to jointly create innovative and advanced solutions that meet the current and future needs of our customers.
To achieve this goal, we engage with our customers early in their design and development processes and utilize our deep engineering resources and operating expertise, as well as our expanded product portfolio, to jointly create innovative and advanced solutions that are designed to meet the current and future needs of our customers.
Our close collaboration with them has contributed to our established market position and several key supplier awards. Operational Excellence with Scale to Support the Largest Customers With over 20 years of experience in designing and building fluid delivery systems, we have developed deep capabilities in operations.
Our close collaboration with our global customers has contributed to our established market position and several key supplier awards. Operational Excellence with Scale to Support the Largest Customers With over 20 years of experience in designing and building fluid delivery systems, we have developed deep capabilities in operations.
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.
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 from Ultra Clean Technology, with additional competition from other suppliers.
We have structured our business to minimize fixed manufacturing overhead and operating expenses to enable us to grow net income at a higher rate than sales during periods of growth.
We have structured our business to reduce fixed manufacturing overhead and operating expenses to enable us to grow net income at a higher rate than sales during periods of growth.
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.
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 allows OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.
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.
We believe this approach enables us to design products that meet the precise specifications our customers demand, allows us to be the sole supplier of these subsystems during the initial production ramp, and positions us to be the preferred supplier for the full lifespan of the process tool.
Many of our facilities are located in close proximity to our largest customers to allow us to collaborate with them on a regular basis and to enable us to deliver our products on a just-in-time basis, regardless of order size or the degree of changes in the applicable configuration or specifications.
Many of our facilities are located in close proximity to our largest customers to allow us to collaborate with them on a regular basis and to aid us in delivering our products on a just-in-time basis, regardless of order size or the degree of changes in the applicable configuration or specifications.
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.
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.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file documents electronically with the SEC at sec.gov . The contents of these websites, or the information connected to those websites, are not incorporated into this report.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file documents electronically with the SEC at sec.gov . The contents of these websites, or the information connected to those websites, are not incorporated into this Annual Report on Form 10-K.
We have developed both automated and manual welding processes to support world class workmanship on all types of metals needed to support fluid delivery within the semiconductor market. The welded assemblies are used in both wet and dry processes, non-semi applications including aerospace and defense, medical, and general industrial markets.
We have developed both automated and manual welding processes to support world class workmanship on all types of metals needed to support fluid delivery within the semiconductor market. The welded assemblies are used in both wet and dry processes, as well as non-semiconductor applications including in the aerospace, commercial space, defense, medical device, and general industrial markets.
We operate Class 100 and Class 10,000 clean room facilities for customer-specified testing, assembly, and integration of high-purity gas and chemical delivery systems at our locations in Singapore, Oregon, Texas, and Korea.
We operate clean rooms at our facilities in Singapore, Oregon, Texas, and Korea that meet Class 100 and Class 10,000 standards for customer-specified testing, assembly, and integration of high-purity gas and chemical delivery systems at our locations.
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.
We generated net income (loss) of $(20.8) million, $(43.0) million, and $72.8 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2024, 2023, and 2022, respectively, and $5.9 million, $12.3 million, and $104.9 million on a non-GAAP basis in 2024, 2023, and 2022, respectively.
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.
Fiscal Period Period Ending Weeks in Period Fiscal Year 2024: December 27, 2024 52 First Quarter March 29, 2024 13 Second Quarter June 28, 2024 13 Third Quarter September 27, 2024 13 Fourth Quarter December 27, 2024 13 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 Company Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment.
References to websites in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, the website.
References to websites in this Annual Report on Form 10-K are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, the website. 10 Table of Contents
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 have long standing relationships with top tier OEM customers, including Lam Research, Applied Materials, and ASML which were our largest customers by sales in 2024. We generated revenue of $849.0 million, $811.1 million, and $1,280.1 million in 2024, 2023, and 2022, respectively.
When we compete for new business, we face competition from other suppliers of gas or chemical delivery subsystems, and in some cases with the internal manufacturing groups of OEMs.
Competition The market for our products is very competitive. When we compete for new business, we face competition from other suppliers of gas or chemical delivery subsystems, and in some cases with the internal manufacturing groups of OEMs.
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.
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.
Our industry continues to experience rapid technological change, requiring us to continuously invest in technology and product development and regularly introduce new products and features that meet our customers’ evolving requirements. We have built a team of fluid delivery experts.
Our industry continues to experience rapid technological change, requiring us to continuously invest in technology and product development and regularly introduce new products and features that meet our customers’ evolving requirements. We have built a team of fluid delivery experts. Our engineering team consists of engineers and designers with chemical, mechanical, electrical, software, systems, and manufacturing-engineering expertise.
Our analytical and testing capabilities enable us to evaluate multiple supplier component technologies and provide customers with a wide range of appropriate component and design choices for their gas and chemical delivery systems and other critical subsystems.
Our analytical and testing capabilities enable us to evaluate multiple supplier component technologies and provide customers with a wide range of appropriate component and design choices for their gas and chemical delivery systems and other critical subsystems. These capabilities also help us anticipate technological changes and the requirements in component features for next-generation gas delivery systems and other critical subsystems.
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.
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 2024, two customers with individual sales over 10%, Lam Research and Applied Materials, accounted for a combined 73% of total sales.
A key part of our strategy is to identify multiple suppliers with a strong global reach that are located within close proximity to our manufacturing locations. Technology Development and Engineering We have a long history of engineering innovation and development.
These approaches are designed to reduce our inventory levels and maintain flexibility in responding to changes in product demand. A key part of our strategy is to identify multiple suppliers with a strong global reach that are located within close proximity to our manufacturing locations. Technology Development and Engineering We have a long history of engineering innovation and development.
We anticipate that increased competitive pressures may cause intensified price-based competition and we may have to reduce the prices of our products. In addition, we expect to face new competitors as we enter new markets.
We anticipate that increased competitive pressures may cause intensified price-based competition and we may have to reduce the prices of our products.
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.
Our engineering team works with our customers’ product development teams, providing our customers with technical expertise in fluid delivery system design. 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.
With over two decades of experience developing complex fluid delivery subsystems and meeting the constantly changing production requirements of leading semiconductor OEMs, we have developed expertise in fluid delivery that we offer to our OEM customers.
With over two decades of experience developing complex fluid delivery subsystems and meeting the constantly changing production requirements of leading semiconductor OEMs, we have developed expertise in fluid delivery that we offer to our OEM customers. With an aim to provide superior customer service, we have a global footprint with many facilities strategically located in close proximity to our customers.
Our goal is to be a leading supplier of fluid delivery subsystems and components to OEMs engaged in manufacturing capital equipment to produce semiconductors and to leverage our technology and products to expand the share of our addressable markets.
Outsourcing enables OEMs to reduce their costs and development time, providing growth opportunities for specialized subsystems suppliers like us. Our goal is to be a leading supplier of fluid delivery subsystems and components to OEMs engaged in manufacturing capital equipment to produce semiconductors and to leverage our technology and products to expand the share of our addressable markets.
We believe that the industries we serve have a growing need for the unique expertise we offer in precision machining, fluid mechanics, controls, and the component needed for next generation processes.
Our internally developed proprietary components can be integrated into our existing fluid delivery systems as well as our next generation gas panel. We believe that the industries we serve have a growing need for the unique expertise we offer in precision machining, fluid mechanics, controls, and the component needed for next generation processes.
We engineer within our customers’ processes, design vaults, drawing standards, and part numbering systems. These development efforts are designed to meet specific customer requirements in the areas of subsystem design, materials, component selection, and functionality. The majority of our sales are generated from projects during which our engineers cooperated with our customer early in the design cycle.
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 engineer within our customers’ processes, design vaults, drawing standards, and part numbering systems. These development efforts are designed to meet specific customer requirements in the areas of subsystem design, materials, component selection, and functionality.
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.
We develop intellectual property for our own use in our products, as well as for our customers. Intellectual property developed on behalf of our customers is generally owned exclusively by those customers. 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.
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.
The amount of necessary investment fluctuates over time depending on business outlook, new product strategy, and timing of introductions. In 2024, 2023, and 2022, our total capital expenditures were $17.6 million, $15.5 million, and $29.4 million, respectively, representing 2.1%, 1.9%, and 2.3%, of sales, respectively. The semiconductor capital equipment market has historically been cyclical.
Grow Our Total Available Market and Share of the Market with Expanded Product Offerings We continue to work with our existing core customers on additional opportunities, including machined components, chemical delivery, and proprietary products as a few of our important potential growth areas.
We believe that our early collaborative approach with customers positions us to deliver innovative and dynamic solutions, offer timely deployment and meet competitive cost targets, further increasing our market share. 3 Table of Contents Grow Our Total Available Market and Share of the Market with Expanded Product Offerings We continue to work with our existing customer base on additional opportunities, including machined products, proprietary components, and chemical delivery systems and components as a few of our important potential growth areas.
We also rely on a combination of trade secrets and confidentiality provisions, and to a much lesser extent, copyrights and trademarks, to protect our proprietary rights. We have historically focused our patent protection efforts in the United States.
We continue to invest in securing intellectual property protection for our technology and products and protect our technology by, among other things, filing patent applications. We also rely on a combination of trade secrets and confidentiality provisions, and to a much lesser extent, copyrights and trademarks, to protect our proprietary rights.
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.
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.
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 .
We are not aware of any threatened or pending environmental investigations, lawsuits, or claims involving us, our operations, or our current or former facilities, nor do we expect to incur material capital expenditures related to compliance with regulations during 2025. Available Information Our internet address is ichorsystems.com .
All references to 2023, 2022, and 2021, including the quarters thereto, relate to our fiscal periods as so detailed.
The following table details our fiscal periods included elsewhere in this Annual Report on Form 10-K. All references to 2024, 2023, and 2022, including the quarters thereto, relate to our fiscal periods as so detailed.
Intellectual Property Our success depends, in part, upon our ability to develop, maintain, and protect our technology and products and to conduct our business without infringing the proprietary rights of others. We continue to invest in securing intellectual property protection for our technology and products and protect our technology by, among other things, filing patent applications.
In addition, we expect to face new competitors as we enter new markets. 8 Table of Contents Intellectual Property Our success depends, in part, upon our ability to develop, maintain, and protect our technology and products and to conduct our business without infringing the proprietary rights of others.
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.
These laws and regulations include regulations related to employment, tax, product, anti-bribery, 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.
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.
Expand Our Total Customer Base within Fluid Delivery Market We have expanded our customer base to include a leading lithography system manufacturer and a leading ALD system manufacturer. We continue to actively engage with new customers that are considering outsourcing their gas and chemical delivery needs and we continue to expand our components business.
We provide benefits that are locally competitive, including retirement and savings plans with company contributions, health and welfare plans aimed to provide protection for employees, and in some instances, protection for employees’ families, and we provide a discounted employee stock purchase plan. We invest in wellness programs to promote physical, emotional, and financial well-being.
For key leaders and high-potential employees, we provide equity-based long-term incentives aligned with our strategic objectives. Our benefits portfolio includes locally competitive health and wellness programs, retirement savings plans with company contributions, and a discounted employee stock purchase plan. We also invest in holistic well-being initiatives that support employees’ physical, emotional, and financial health.
ITEM 1. BUSINESS Unless expressly indicated or the context requires otherwise, the terms “Ichor,” “Company,” “we,” “us,” “our,” and similar terms in this report refer to Ichor Holdings, Ltd. and its consolidated subsidiaries. We use a 52- or 53-week fiscal year ending on the last Friday in December. The following table details our fiscal periods included elsewhere in this report.
ITEM 1. BUSINESS Unless expressly indicated or the context requires otherwise, the terms “Ichor,” “Company,” “we,” “us,” “our,” and similar terms in this Annual Report on Form 10-K refer to Ichor Holdings, Ltd. and its consolidated subsidiaries. We were originally incorporated as Celerity, Inc. (“Celerity”) in 1999.
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, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing, and surface treatment technologies, and other proprietary products.
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.
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 expanded our served customer base with expanded product offerings through both internal development and opportunistic acquisitions. This has enabled us to manufacture and assemble the complex products and precision machined components for the semiconductor equipment market, including at our existing customer base, as well as for the commercial space, aerospace, defense, medical device, and general-industrial industries.
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.
Ichor Holdings, Ltd., an exempt limited company incorporated in the Cayman Islands, was formed in March 2012. We completed the initial public offering of our ordinary shares in December 2016. We use a 52- or 53-week fiscal year ending on the last Friday in December.
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.
We obtain components and materials from a large number of sources, including single source and sole source suppliers. 7 Table of Contents We use supplier-consigned material and just-in-time stocking programs for a portion of our inventories to effectively manage our component inventories and better respond to changing customer requirements.
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.
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.
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.
Our focus on operational efficiency and flexibility allows us to reduce manufacturing cycle times in order to respond quickly to customer requests. Capital Efficient and Scalable Business Model Our business requires modest levels of capital investments to support production capacity and new product development.
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.
Historically, we have not paid any claims under these indemnification obligations, and we do not have any pending indemnification claims against us. Human Capital Resources As a global industry leader, we recognize that our success is driven by the talent, dedication, and well-being of our employees.
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.
Machined components are also provided to other critical non‑semiconductor markets, including aerospace and medical device. 6 Table of Contents Customers, Sales, and Marketing We primarily market and sell our products directly to equipment OEMs in the semiconductor equipment market.
We believe that our business is operated in substantial compliance with applicable regulations.
We believe that our business is operated in substantial compliance with applicable laws and regulations. In 2024, compliance with the governmental regulations applicable to us, including environmental regulations, did not have a material effect on our capital expenditures, earnings, or competitive position.
Expand Our Total Customer Base within Fluid Delivery Market We have expanded our customer base and are currently a supplier of gas delivery systems for a leading lithography system manufacturer, a leading ALD system manufacturer, and Korean process tool OEMs. Our acquisition of IMG further expands our total customer base with new customers in medical, aerospace, and defense sectors.
Our acquisition of IMG Companies, LLC and its subsidiaries (“IMG”) in November 2021 further expanded our total customer base with new customers in the medical, aerospace, and defense sectors.
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.
In 2024, we continued our employee cash spot bonus and continuous improvement programs to recognize and reward outstanding contributions. Learning and Development We believe in empowering our employees through continuous learning and career development. Our multi-faceted approach includes tuition reimbursement, digital learning platforms, on-the-job training, and leadership development programs. We invest in preparing the next generation of leaders.
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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.
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We also provide precision-machined components, weldments, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products for the commercial space, aerospace, defense, medical device, and general-industrial industries.
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We employ this approach with three of the largest manufacturers of semiconductor capital equipment in the world.
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The majority of our sales are generated from projects during which our engineers cooperated with our customer early in the design cycle. 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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In addition, our capital efficient model provides us the flexibility to fulfill increased demand and meet changing customer requirements with relatively low levels of capital expenditures. With an aim to provide superior customer service, we have a global footprint with many facilities strategically located in close proximity to our customers.
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As of December 27, 2024, we had 81 granted patents and 95 pending patent applications, of which 38 and 27, respectively, were filed in the U.S. The expiration dates of our granted patents range from 2027 to 2042.
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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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We are committed to being responsible corporate citizens, fostering a workplace that is safe, inclusive, and rewarding. Our employees are the foundation of our company, and our core values of innovation , collaboration , honesty , operational excellence , and reliability define our culture, shape our decisions, and guide our actions.
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We believe that our early collaborative approach with customers positions us to deliver innovative and dynamic solutions, offer timely deployment and meet competitive cost targets, further increasing our market share.
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We embrace diverse backgrounds and perspectives, fostering an environment that supports continuous personal and professional growth. Below, we outline key initiatives that reflect our dedication to sound human capital management practices. Workforce As of December 27, 2024, we employed approximately 1,820 full‑time employees and 560 contingent/temporary workers.
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Through our acquisition of IMG Companies, LLC, a precision machining and specialty component manufacturing company (together with its subsidiaries, “IMG”), in November 2021, our acquisition of a precision machining operation in December 2020, an intellectual property purchase of developed flow controller technology in 2019, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our product offerings within our served customer base, including entering the market for chemical delivery subsystems for wet process tools where we had only limited engagement in the past.
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Our workforce strategy is designed to balance flexibility with stability, allowing us to adapt to evolving business needs and geographic demand. Total Rewards We are committed to attracting, engaging, and retaining top talent by offering competitive and equitable compensation and benefits.
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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 pay-for-performance philosophy aims to ensure that employees are recognized and rewarded based on their contributions, while also upholding our commitment to pay equity across gender, race, and ethnicity. Our compensation structure includes a mix of fixed and variable pay, tailored to business and functional needs.
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Through our acquisition of IMG in November 2021, we have opened up adjacent opportunities within semiconductor capital equipment, including large format machining, hydrogen brazing, and e‑beam and laser welding. Additionally, our acquisition of IMG gave us entrance into new sectors, including medical, aerospace, defense, and scientific research, which require our critical machining and joining expertise.
Added
Our structured performance management framework, which is comprised of goal-setting, quarterly check-ins, and annual evaluations, ensures ongoing growth and alignment with business objectives. In addition, we support employee resource groups that foster connection, inclusion, and a sense of belonging. 9 Table of Contents Health and Safety Providing a safe and engaging work environment is a top priority.
Removed
We have grown through opportunistic acquisitions, which include: • In April 2012, we acquired Semi Scenic UK Limited to provide refurbishment services for legacy tools. • In April 2016, we purchased Ajax-United Patterns & Molds, Inc. for $17.6 million to add chemical delivery subsystem capabilities with existing customers. • In July 2017 we acquired Cal‑Weld, Inc. for $56.2 million to add to our gas delivery subsystem and weldment capabilities. • In December 2017 we acquired Talon Innovations Corporation for $137.8 million to add to our gas delivery subsystem, precision machining, and component manufacturing capabilities. • In April 2018, we acquired IAN Engineering Co., Ltd. for $6.5 million to provide us exposure to and growth opportunities in the Korean semiconductor capital equipment market. • In December 2020, we acquired certain operating assets and assumed the operations of a business in Nogales, Mexico for $5.0 million to increase our precision machined component manufacturing capacity. • In November 2021, we acquired IMG for approximately $270.0 million to increase our precision machining capacity and capabilities with existing customers, as well as increase our served customer base.
Added
Our manufacturing sites implement a “Caught You Safe” program to reinforce a culture of safety. We actively seek employee feedback through annual engagement surveys, skip-level meetings, and open communication forums. Our professional human resources team ensures employees have access to guidance and support, including a confidential whistleblower hotline for reporting concerns.
Removed
We intend to continue to evaluate opportunistic acquisitions to supplement our organic growth. Customers, Sales, and Marketing We primarily market and sell our products directly to equipment OEMs in the semiconductor equipment market. In Japan, we utilize a value-added reseller to market and sell our chemical delivery system.
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In alignment with global regulatory standards, we implement best practices to safeguard the health and well-being of our workforce and communities. Through these initiatives, we remain committed to fostering a high-performing, inclusive, and resilient workforce that drives our company’s long-term success.
Removed
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.
Added
Environmental, Health, and Safety Regulations Our operations and facilities are subject to a variety of federal, state, and local regulatory requirements and laws, as well as foreign laws and regulations.
Removed
Our analytical and testing capabilities also help us anticipate technological changes and the requirements in component features for next-generation gas delivery systems and other critical subsystems. Competition The markets for our products are very competitive.
Added
Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

74 edited+77 added−11 removed107 unchanged
Biggest changeLegal 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.
Biggest changeBusiness 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. 11 Table of Contents 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. • 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.
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.
Furthermore, to the extent any of our customers or counterparties are designated on the Entity List or Unverified List maintained by the BIS, to which BIS may continue to add customers, we could suffer additional disruptions to sales and operations.
To the extent that BIS or other relevant regulators impose additional export restrictions that apply to our business, it will have an adverse impact on our revenues and operations as well.
To the extent that the BIS or other relevant regulators impose additional export restrictions that apply to our business, it will have an adverse impact on our revenues and operations as well.
Difficulties in obtaining capital, uncertain market conditions or reduced profitability may also cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, leading to customers’ reduced research and development funding or capital expenditures and, in turn, lower orders from our customers or additional slow moving or obsolete inventory or bad debt expense for us.
Further, difficulties in obtaining capital, uncertain market conditions or reduced profitability may also cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, leading to customers’ reduced research and development funding or capital expenditures and, in turn, lower orders from our customers or additional slow moving or obsolete inventory or bad debt expense for us.
In addition, quality issues can have various other ramifications, including delays in the recognition of sales, loss of sales, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our reputation, all of which could materially adversely affect our business, financial condition and results of operations.
In addition, quality issues have various other ramifications, including delays in the recognition of sales, loss of sales, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our reputation, all of which could materially adversely affect our business, financial condition and results of operations.
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.
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 continue to result in new or increased legal and regulatory requirements to reduce or mitigate the effects of climate change.
In the future, we may seek to expand our presence in certain foreign markets or enter emerging markets. Evaluating or entering into an emerging market may require considerable management time, as well as start-up expenses for market development before any significant sales and earnings are generated.
In the future, we may seek to expand our presence in certain foreign markets or enter emerging markets. Evaluating or entering an emerging market may require considerable management time, as well as start-up expenses for market development before any significant sales and earnings are generated.
Because of the small number of OEMs in the markets we serve, a number of which are already our customers, it would be difficult to replace lost sales resulting from the loss of, or the reduction, cancellation or delay in purchase orders by, any one of these customers, whether due to a reduction in the amount of outsourcing they do, their giving orders to our competitors, an adverse change to their business or financial condition, their acquisition by an OEM who is not a customer or with whom we do less business, or otherwise.
Because of the small number of OEMs in the markets we serve, a number of which are already our customers, it is difficult to replace lost sales resulting from the loss of, or the reduction, cancellation or delay in purchase orders by, any one of these customers, whether due to a reduction in the amount of outsourcing they do, their giving orders to our competitors, an adverse change to their business or financial condition, their acquisition by an OEM who is not a customer or with whom we do less business, or otherwise.
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.
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 (including uncertainty around increased, new, or retaliatory tariffs and trade restrictions resulting from the current presidential administration), 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.
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.
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.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, our prominent size and scale, the outsourcing of some of our business operations, the ongoing shortage of qualified cyber-security professionals, and the interconnectivity and interdependence of third parties to our systems.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the current global economic and political environment, our prominent size and scale, the outsourcing of some of our business operations to foreign jurisdictions, the ongoing shortage of qualified cyber-security professionals, and the interconnectivity and interdependence of third parties to our systems.
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.
In addition, other factors relating to the operation of our business outside of the U.S. 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; • geopolitical instability; • change in currency controls; and • trade restrictions and changes in taxes and tariffs.
Foreign data protection, privacy, and other laws and regulations, including GDPR, can be more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations, including GDPR, which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change.
Foreign data protection, privacy, and other laws and regulations, including GDPR, can be more restrictive than those in the U.S. These U.S. federal and state and foreign laws and regulations, including GDPR, which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change.
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.
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, Mexican peso and euro.
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.
Further, any future capacity expansion by us or our competitors could also lead to overcapacity and oversaturation 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.
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.
Many of the costs and expenses associated with our Singapore, Malaysian, Korean, U.K., Mexico and European Union operations are paid in Singapore dollars, Malaysian ringgit, Korean won, British pounds, Mexican pesos or euros, respectively, and we expect our exposure to these currencies to increase as we increase our operations in those jurisdictions.
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 impact of any one or more of these factors could materially adversely affect our business, financial condition and results of operations. 24 Table of Contents 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.
In the longer term, if our supply is less reliable due to the BIS Rule, Chinese entities that currently purchase our products may begin to develop their own products instead.
In the longer term, if our supply is less reliable due to the BIS Rules, Chinese entities that currently purchase our products may begin to develop their own products instead.
We cannot, however, ensure that we will be able to successfully introduce, market and cost-effectively manufacture new products, or that we will be able to develop new or enhanced products and processes that satisfy customer needs.
Further, we cannot ensure that we will be able to successfully introduce, market and cost-effectively manufacture new products, or that we will be able to develop new or enhanced products and processes that satisfy customer needs.
Our customers exert a significant amount of negotiating leverage over us, which may require us to accept lower prices and gross margins or take on increased liability risk in order to retain or expand our market share with them.
Our customers exert a significant amount of negotiating leverage over us, which requires us to accept lower prices and gross margins or take on increased liability risk in order to retain or expand our market share with them.
By virtue of our largest customers’ size and the significant portion of our sales that is derived from them, as well as the competitive landscape, our customers are able to exert significant influence and pricing pressure in the negotiation of our commercial arrangements and the conduct of our business with them.
By virtue of our largest customers’ size and the significant portion of our sales that is derived from them, as well as the competitive landscape, our customers exert significant influence and pricing pressure in the negotiation of our commercial arrangements and the conduct of our business with them.
We are subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of customer, employee, and business partner personally identifiable information, including the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and similar effective or proposed state legislation in the United States.
We are subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of customer, employee, and business partner personally identifiable information, including the European Union’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and similar effective or proposed state legislation in the U.S.
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.
Legislators in the U.S. may institute or propose changes to 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.
We may also be subject to liability under our agreements with our customers if we or our suppliers fail to re-configure manufacturing processes or components in response to these modifications. In addition, if we acquire inventory in excess of demand or that does not meet customer specifications, we could incur excess or obsolete inventory charges.
We may also be subject to liability under our agreements with our customers if we or our suppliers fail to re-configure manufacturing processes or components in response to these modifications. In addition, the acquisition of inventory in excess of demand, or that does not meet customer specifications, causes us to incur excess or obsolete inventory charges.
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.
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. Continuing uncertainty regarding the global economy and geopolitical instability continues to pose challenges to our business.
More broadly, if customers do not view us as a reliable supplier because we cannot obtain the necessary licenses, we may lose business opportunities to competitors. In particular, competitors outside the United States whose products are not subject to the BIS Rule may replace us if we cannot obtain licenses in a timely manner.
More broadly, if customers do not view us as a reliable supplier because we cannot obtain the necessary licenses, we may lose business opportunities to competitors. In particular, competitors outside the U.S. whose products are not subject to the BIS Rules may replace us if we cannot obtain licenses in a timely manner.
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.
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, and uncertainty in debt markets, which exacerbates negative trends in business and consumer spending and causes 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.
In addition, we may not be aware of all environmental laws or regulations that could subject us to liability in the United States or internationally.
In addition, we may not be aware of all environmental laws or regulations that could subject us to liability in the U.S. or internationally.
Our international operations and transactions depend upon favorable trade relations between the United States and the foreign countries in which our customers and suppliers have operations.
Our international operations and transactions depend upon favorable trade relations between the U.S. and the foreign countries in which our customers and suppliers have operations.
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.
The semiconductor device industry is subject to cyclical and volatile fluctuations in supply and demand and in the past has experienced significant downturns, including in the fourth quarter of 2022, which often occur in connection with declines in general economic conditions, and which have resulted in significant volatility in the semiconductor capital equipment industry and resulted in weakened customer demand.
Such revisions, expansions or guidance could change the impact of the rules for our business. 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.
Such revisions, expansions or guidance could change the impact of the BIS Rules on our business and require us to apply for additional licenses. If the 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 revenue.
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.
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.
Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes‑Oxley Act. Accordingly, we may incur additional costs to comply with Section 404(b).
Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.
While our customer agreements generally provide for indemnification of us by a customer if we are subjected to litigation for third-party claims of infringement of such customer’s intellectual property, such indemnification provisions may not be sufficient to fully protect us from such claims, or our customers may breach such indemnification obligations to us, which could result in costly litigation to defend against such claims or enforce our contractual rights to such indemnification.
While our customer agreements generally provide for indemnification of us by a customer if we are subjected to litigation for third-party claims of infringement of such customer’s intellectual property, such indemnification provisions may not be sufficient to fully protect us from such claims, or our customers may breach such indemnification obligations to us, which could result in costly litigation to defend against such claims or enforce our contractual rights to such indemnification. 23 Table of Contents From time to time, we may become involved in other litigation and regulatory proceedings, which could require significant attention from our management and result in significant expense to us and disruptions in our business.
None of our employees are unionized, but in various countries, local law requires our participation in works councils. While we have not experienced any material work stoppages at any of our facilities, any stoppage or slowdown could cause material interruptions in manufacturing, and we cannot ensure that alternate qualified personnel would be available on a timely basis, or at all.
While we have not experienced any material work stoppages at any of our facilities, any stoppage or slowdown could cause material interruptions in manufacturing, and we cannot ensure that alternate qualified personnel would be available on a timely basis, or at all.
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.
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.
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.
For 2024, two customers with individual sales over 10%, Lam Research and Applied Materials, accounted for a combined 73% of total 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 2023 and were remediated as of December 29, 2023.
In 2021, we identified material weaknesses related to ineffective information technology general controls in the areas of user access and program change management over certain information technology systems that support our financial reporting processes. Such weaknesses have since been remediated.
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.
As a result, labor disruptions at any of our facilities could materially adversely affect our business, financial condition and results of operations. 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.
We may also be forced to reduce our prices during cyclical downturns without being able to proportionally reduce costs. Our business, financial condition and results of operations depend significantly on expenditures by manufacturers in the semiconductor capital equipment industry. In turn, the semiconductor capital equipment industry depends upon the current and anticipated market demand for semiconductor devices.
When that industry experiences cyclical downturns, demand for our products and services generally decreases, resulting in decreased sales. We may also be forced to reduce our prices during cyclical downturns without being able to proportionally reduce costs. Our business, financial condition and results of operations depend significantly on expenditures by manufacturers in the semiconductor capital equipment industry.
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.
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.
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.
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.
To date, cyber-attacks have not had a material impact on our financial condition, results or business; however, we could suffer material financial or other losses in the future and we are not able to predict the severity of these attacks.
To date, cyber-attacks have not had a material impact on our financial condition, results or business; however, our efforts to maintain the security and integrity of our information technology systems may not be effective and security breaches or disruptions could result in material financial or other losses in the future, especially if we are not able to predict the probability and the severity of these attacks.
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.
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 U.S. • 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. 12 Table of Contents 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.
The semiconductor device industry has also experienced recurring periods of over-supply of products that have had a severe negative effect on the demand for capital equipment used to manufacture such products. We have experienced, and anticipate that we will continue to experience, significant fluctuations in customer orders for our products and services as a result of such fluctuations and cycles.
The semiconductor device industry has also experienced recurring periods of over-supply of products that have had a severe negative effect on the demand for capital equipment used to manufacture such products.
Our customers’ negotiating leverage also can result in customer arrangements that may contain significant liability risk to us. For example, some of our customers require that we provide them indemnification against certain liabilities in our arrangements with them, including claims of losses by their customers caused by our products.
For example, some of our customers require that we provide them indemnification against certain liabilities in our arrangements with them, including claims of losses by their customers caused by our products.
We may in the future receive claims that our products, processes or technologies infringe the patents or other proprietary rights of third parties. In addition, we may be unaware of intellectual property rights of others that may be applicable to our products.
We have received claims, and may in the future, that our products, processes or technologies infringe the patents or other proprietary rights of third parties.
The introduction of new products is inherently risky because it is difficult to foresee the adoption of new standards, coordinate our technical personnel and strategic relationships and win acceptance of new products by OEMs. We attempt to mitigate this risk by collaborating with our customers during their design and development processes.
While we continue to invest in research and development initiatives for new products, the introduction of new products is inherently risky because it is difficult to foresee the adoption of new standards, coordinate our technical personnel and strategic relationships and win acceptance of new products by OEMs.
To the extent that natural disasters or other calamities or causalities should result in delays or cancellations of customer orders, or the delay in the manufacture or shipment of our products, our business, financial condition and results of operations would be materially adversely affected.
To the extent that natural disasters or other calamities or causalities should result in delays or cancellations of customer orders, or the delay in the manufacture or shipment of our products, our business, financial condition and results of operations would be materially adversely affected. 22 Table of Contents 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.
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.
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, which as a novel business model could expose us to new risks.
Any downturns in the semiconductor device industry could have a material adverse effect on our business, financial condition and results of operations. In addition, we must be able to appropriately align our cost structure with prevailing market conditions, effectively manage our supply chain and motivate and retain employees, particularly during periods of decreasing demand for our products.
In addition, we must be able to appropriately align our cost structure with prevailing market conditions, effectively manage our supply chain and motivate and retain employees, particularly during periods of decreasing demand for our products. We may be forced to reduce our prices during periods of decreasing demand.
Any future litigation to enforce patents issued to us, to protect trade secrets or know-how possessed by us or to defend ourselves or to indemnify others against claimed infringement of the intellectual property rights of others could have a material adverse effect on our business, financial condition and results of operations.
Any future litigation to enforce patents issued to us, to protect trade secrets or know-how possessed by us or to defend ourselves or to indemnify others against claimed infringement of the intellectual property rights of others could have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents 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.
Our future success depends in part on the continued service of our key executive officers, as well as our research, engineering, sales and manufacturing personnel, most of whom are not subject to employment or non-competition agreements. Competition for qualified personnel in the technology industry is particularly intense, and we operate in geographic locations in which labor markets are competitive.
Our business will suffer if we are unable to attract, employ and retain highly skilled personnel as our future success depends in part on the continued service of our key executive officers, as well as our research, engineering, sales and manufacturing personnel, most of whom are not subject to employment or non-competition agreements.
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.
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.
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.
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.
We also may be subject to significant damages or injunctions against the development, manufacture and sale of certain of our products if any such claims prove successful. We also rely on design specifications and other intellectual property of our customers in the manufacture of products for such customers.
Claims of intellectual property infringement may also require us to enter into costly license agreements which we may not be able to obtain on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against the development, manufacture and sale of certain of our products if any such claims prove successful.
This could result in significant losses, loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise materially adversely affect our business, financial condition or results of operations. The reliability and capacity of our information technology systems is critical to our operations and the implementation of our growth initiatives.
This could result in significant losses, loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise materially adversely affect our business, financial condition or results of operations. While we have purchased cyber-security insurance, there can be no assurance that the coverage will be sufficient to cover all financial losses.
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.
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.
Our ability to lessen the adverse effect of any loss of, or reduction in sales to, an existing customer through the rapid addition of one or more new customers is limited in part because of these qualification requirements.
Our ability to lessen the adverse effect of any loss of, or reduction in sales to, an existing customer through the rapid addition of one or more new customers is limited because onboarding a new customer is a time-consuming process as our customers generally require that they qualify our engineering, documentation, manufacturing and quality control procedures.
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, noting that BIS could revise or expand the BIS rule in response to public comments and BIS may issue guidance clarifying the scope of the rules.
While we have applied and received licenses from the BIS for our products, we recognize that the BIS could revise or expand the BIS Rules in response to public comments and the BIS may issue guidance clarifying the scope of the BIS Rules.
We may be forced to reduce our prices during periods of decreasing demand. While we operate under a low fixed cost model, we may not be able to proportionally reduce all of our costs if we are required to reduce our prices.
During the fourth quarter of 2022, we initiated labor cost reduction initiatives to better align our resources with the decreased demand environment, which continued through the second quarter of 2024. While we operate under a low fixed cost model, we may not be able to proportionally reduce all of our costs if we are required to reduce our prices.
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.
(including as a result of the 2024 U.S. presidential and congressional elections) and foreign trade, economic and other policies, and rising trade tensions between the U.S. and China, as well as other global events, have significantly increased macroeconomic uncertainty at a global level.
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.
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. 19 Table of Contents 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.
Economic 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.
Economic 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.
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.
For example, the Bureau of Industry and Security (“BIS") has issued multiple rules in the last several years (the "BIS Rules"), most recently on December 2, 2024, that restrict the export of advanced computing and semiconductor manufacturing items when provided for use in certain semiconductor manufacturing activities in China, which have impacted and may continue to impact our sales and operations.
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.
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.
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.
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.
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.
Furthermore, we do not maintain key person life insurance with respect to any of our employees. 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.
Our management team has significant industry experience, substantial institutional knowledge of our business and operations and deep customer relationships, and therefore would be difficult to replace. In addition, our business is dependent to a significant degree on the expertise and relationships which only a limited number of engineers possess.
Competition for qualified personnel in the technology industry is particularly intense, and we operate in geographic locations in which labor markets are competitive. Our management team has significant industry experience, substantial institutional knowledge of our business and operations and deep customer relationships, and therefore would be difficult to replace.
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 price reductions and quality or delivery commitments as conditions to their purchasing from us, which have, among other things, resulted in reduced gross margins in order for us to maintain or expand our market share. Our customers’ negotiating leverage also can result in customer arrangements that contain significant liability risk to us.
Many of these engineers often work at our customers’ sites and serve as an extension of our customers’ product design teams.
In addition, our business is dependent to a significant degree on the expertise and relationships which only a limited number of engineers possess. Many of these engineers often work at our customers’ sites and serve as an extension of our customers’ product design teams.
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.
If we overbuild inventory in a period of decreased demand, or we expand our operations and workforce too rapidly, or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, our operating results may be adversely affected as a result of underutilization of capacity, charges related to excess or obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins.
We do a significant amount of business that would be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products.
Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products.
The complexity of the technology involved in our products and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement may also require us to enter into costly license agreements. However, we may not be able to obtain licenses on terms acceptable to us, or at all.
The complexity of the technology involved in our products, the uncertainty of intellectual property litigation, and the uncertainty of the intellectual property rights of others that may be applicable to our products increase these risks.
Removed
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.
Added
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.
Removed
Because our customers generally require that they qualify our engineering, documentation, manufacturing and quality control procedures, our ability to add new customers quickly is limited. Qualification is a time-consuming process that involves the inspection and approval by a customer of our engineering, documentation, manufacturing and quality control procedures before that customer will place orders with us.
Added
In turn, the semiconductor capital equipment industry depends upon the current and anticipated market demand for semiconductor devices.
Removed
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.
Added
Even as the industry recovers from periods of downturns, inventory digestion at our customers and the relative spending levels within our primary served markets, in particular lower spending levels for deposition and etch equipment, may result in decreased demand from our customers, such as in 2023 and early 2024.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Audit Committee is responsible for reviewing and monitoring our cybersecurity and information security policies and our internal controls regarding cybersecurity and information security. Our Audit Committee receives regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures to cybersecurity incidents.
Biggest changeOur Audit Committee receives regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures to cybersecurity incidents. Our cybersecurity risk management and strategy activities are overseen by executive management, made up of the IT Steering Committee and Chief Information Officer.
Through our cybersecurity risk management program, we have established operational processes to address issues including monitoring and patching of vulnerabilities, regularly updating our information systems, and evaluating new countermeasures made to defend against an evolving landscape of threats. This process is overseen by the Audit Committee of our Board.
Through our cybersecurity risk management program, we have established operational processes to address issues including monitoring and patching of vulnerabilities, regularly updating our information systems, and evaluating new countermeasures made to defend against an evolving landscape of threats. This process is overseen by the Audit Committee of our Board of Directors.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our cybersecurity program is designed from a risk- and compliance-based approach to achieve systemwide resilience and protection across our operations. We regularly assess risks from cybersecurity threats and monitor our information systems for potential vulnerabilities.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our cybersecurity program is designed from a risk- and compliance-based approach to achieve system-wide resilience and protection across our operations. We regularly assess risks from cybersecurity threats and monitor our information systems for potential vulnerabilities.
The IT Steering Committee and Chief Information Officer receive regular updates on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation through the management of, and participation in, the cybersecurity risk management and strategy activities described above, and report to the Audit Committee on any appropriate items.
The IT Steering Committee and Chief Information Officer receive regular updates on cybersecurity matters, results of mitigation efforts and cybersecurity incident response and remediation through the management of, and participation in, the cybersecurity risk management and strategy activities described above, and report to the Audit Committee quarterly on any appropriate items. 31 Table of Contents
Additionally, role-based security training is provided to employees in certain higher-risk positions (including those who handle sensitive information, technology or funds), which is tailored to the heightened cybersecurity risks they face. 31 Table of Contents We have experienced, and may in the future experience, whether directly or through our service providers or other channels, cybersecurity incidents.
Additionally, role-based security training is provided to employees in certain higher-risk positions (including those who handle sensitive information, technology or funds), which is tailored to the heightened cybersecurity risks they face. We have experienced, and may in the future experience, whether directly or through our third-party service providers or other channels, cybersecurity incidents.
We utilize the National Institute of Standards and Technology Cybersecurity Framework to deliver clear and proactive processes, multi-layered defenses, and relevant technologies that are designed to control, audit, monitor, and protect access to sensitive information.
We model our cybersecurity program after the National Institute of Standards and Technology Cybersecurity Framework to deliver clear and proactive processes, multi-layered defenses, and relevant technologies that are designed to control, audit, monitor, and protect access to sensitive information.
Refer to “Item 1A. – Risk Factors” in this annual report on Form 10-K, including, “We may be subject to interruptions or failures in our information technology systems,” for additional discussion on our cybersecurity related risks. Cybersecurity Governance Cybersecurity is an important part of our risk management and strategy activities and an area of focus for our Board and management.
Refer to “Item 1A. – Risk Factors” in this Annual Report on Form 10-K, including, “We may be subject to interruptions or failures in our information technology systems,” for additional discussion on our cybersecurity related risks.
We monitor and assess the success rate of employees reporting phishing scams, and the results inform the development of our security trainings, systems and programs.
To that end, we provide monthly cybersecurity awareness training and regular phishing awareness exercises to our tech-enabled employees. We monitor and assess the success rate of employees reporting phishing scams, and the results inform the development of our security trainings, systems and programs.
Our cybersecurity risk management and strategy activities are overseen by executive management, made up of the IT Steering Committee and Chief Information Officer. Our Chief Information Officer has over 25 years of experience in information technology and security as well as extensive experience working in and leading our information systems and technology function.
Our Chief Information Officer has over 25 years of experience in information technology and security as well as extensive experience working in and leading our information systems and technology function.
Examples of third-party actions include the engagement of a security operations center for real-time monitoring and response to incidents, independent audits, risk assessments and security certifications. We believe cybersecurity awareness is important in helping prevent cyber threats. To that end, we provide annual cybersecurity awareness training and regular phishing awareness exercises to our tech-enabled employees.
Examples of third-party actions include the engagement of a security operations center for real-time monitoring and response to incidents, independent audits, risk assessments and security certifications.
Added
We have established processes to help identify and manage cybersecurity risks associated with the use of these third-party consultants and providers, which include the completion of due diligence before engaging with a third-party and assessments and reviews throughout the relationship. We believe cybersecurity awareness is important in helping prevent cyber threats.
Added
Cybersecurity Governance Cybersecurity is an important part of our risk management and strategy activities and an area of focus for our Board of Directors and management. Our Board of Directors has delegated to the Audit Committee oversight of our cybersecurity and information security policies and our internal controls regarding cybersecurity and information security.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation 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.
Biggest changeLocation Approximate Square Footage Malaysia 271,500 California 271,400 Oregon 157,100 Minnesota 133,300 Singapore 97,700 Mexico 62,900 Texas 47,800 Scotland 37,700 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. 32 Table of Contents
We believe that our existing facilities and equipment are well maintained, in good operating condition, and are adequate to meet our currently anticipated requirements.
ITEM 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.
ITEM 2. PROPERTIES Our principal executive offices are located at 3185 Laurelview Ct., Fremont, California 94538. As of December 27, 2024, our principal manufacturing and administrative facilities, including our executive offices, are comprised of approximately 1,110,400 square feet. All of our facilities are leased, which allows for flexibility as business conditions and geographic demand change.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMARKET 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.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders of Record Our ordinary shares are listed for trading on The NASDAQ Global Select Market under the symbol “ICHR.” As of February 18, 2025, all of our issued ordinary shares were held in “nominee” or “street” name or in our treasury account. 32 Table of Contents Dividends We do not anticipate that we will pay any cash dividends on our ordinary shares for the foreseeable future.
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
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.
ITEM 3. LEGAL PROCEEDINGS We may be subject to various legal claims and proceedings which arise in the ordinary course of our business involving claims incidental to our business, including employment-related claims.
ITEM 3. LEGAL PROCEEDINGS We may be subject to various legal claims and proceedings involving claims incidental to our business, including employment-related claims.
Added
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 changeAdditionally, 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.
Biggest changeOutsourcing these subsystems allows OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes. Outsourcing enables OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us.
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.
The comparison assumes $100 was invested on December 27, 2019 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.
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.
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 Annual Report on Form 10-K.
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 of 1933, as amended or the Exchange Act.
Item 5. – Stock Performance Graph is “furnished” and not “filed” for purposes of Section 18 of 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 regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
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.
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. Recent Sales of Unregistered Securities None. 33 Table of Contents Issuer Purchase of Equity Securities None. ITEM 6. [RESERVED] ITEM 7.
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.
The Stock Price Performance Graph set forth below plots the cumulative total shareholder return on a quarterly basis of our ordinary shares from December 27, 2019 through December 27, 2024, with the cumulative total return of the Nasdaq Composite Index and the PHLX Semiconductor Sector Index over the same period.
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.
For a comparison of our financial condition, results of operations, and cash flows for 2023 to 2022, refer to Part II, Item 7. in our 2023 Annual Report on Form 10‑K, which was filed with the SEC on February 23, 2024.
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.
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.
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
For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to
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.
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.
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.
Most original equipment manufacturers (“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.
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.
We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. 34 Table of Contents 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.
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.
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.
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.
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
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled Item 1A. – Risk Factors.
Added
We also provide precision-machined components, weldments, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products for the commercial space, aerospace, defense, medical device, and general-industrial industries. This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.

Item 7. Management's Discussion & Analysis

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

51 edited+15 added−23 removed24 unchanged
Biggest changeThe 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.
Biggest changeSummary of Cash Flows We ended 2024 with cash and cash equivalents of $108.7 million, an increase of $28.7 million from 2023, which was primarily due to net proceeds of $136.7 million from our issuance of 3.8 million ordinary shares in March 2024 in connection with an underwritten public offering and net cash provided by operating activities of $27.9 million, partially offset by net payments on credit facilities of $120.6 million and capital expenditures of $17.6 million. 44 Table of Contents The following table sets forth a summary of operating, investing, and financing activities for the periods presented: Year Ended December 27, 2024 December 29, 2023 December 30, 2022 (in thousands) Cash provided by operating activities $ 27,880 $ 57,632 $ 31,453 Cash used in investing activities (17,636) (15,496) (28,933) Cash provided by (used in) financing activities 18,470 (48,651) 8,455 Net increase (decrease) in cash $ 28,714 $ (6,515) $ 10,975 Our cash provided by operating activities of $27.9 million during 2024 consisted of net non-cash charges of $46.0 million, which consisted primarily of depreciation and amortization of $30.7 million and share-based compensation expense of $15.6 million, and a decrease in our net operating assets and liabilities of $2.7 million, partially offset by net loss of $20.8 million.
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.
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 share ("EPS") is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period.
Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors and can result in increased interest expense in periods of rising interest rates. Other Expense (Income), Net The functional currency of our international operations is the U.S. dollar.
Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors and can result in increased interest expense in periods of rising interest rates. Other expense, net The functional currency of our international operations is the U.S. dollar.
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.
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. Net sales We generate sales primarily from the design, manufacture, and sale of subsystems and components for semiconductor capital equipment.
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.
Non-GAAP gross profit, operating income, and net income (loss) 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 transaction-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) with respect to non-GAAP net income (loss), the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance charges.
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.
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 2024, we derived over 90% of our sales from the semiconductor capital equipment industry.
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.
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. Operating expenses Our operating expenses primarily include research and development and sales, general, and administrative expenses.
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." Year Ended December 29, 2023 December 30, 2022 (dollars in thousands, except per share amounts) U.S.
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." Year Ended December 27, 2024 December 29, 2023 (dollars in thousands, except per share amounts) 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 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.
Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis. During 2024, 2023, and 2022, we wrote down inventory determined to be excessive or obsolete by $8.6 million, $9.8 million, and $5.0 million, respectively.
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.
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 GAAP.
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.
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 27, 2024 December 29, 2023 (dollars in thousands) U.S.
To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 1 – Organization and Summary of Significant Accounting Policies of our consolidated financial statements in Part IV, Item 15 of this report.
To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 1 – Organization and Summary of Significant Accounting Policies of our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.
Cash used in investing activities during 2023 and 2022 consisted of capital expenditures.
Cash used in investing activities during 2024 and 2023 consisted of capital expenditures.
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.
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 cost reduction initiatives starting in the fourth quarter of 2022, which continued through the second quarter of 2024.
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.
Accordingly, these transactions are not subject to material exchange rate fluctuations. 37 Table of Contents 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 expires in 2026.
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 on Form 10-K.
We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective.
We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective. All non-GAAP adjustments are presented on a gross basis.
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.
Because we have a valuation allowance recorded against our U.S. state and federal deferred income taxes, we did not record tax benefits from our U.S. taxable losses during 2024. 41 Table of Contents Non-GAAP Financial Results Management uses certain non-GAAP metrics to evaluate our operating and financial results.
(6) During the second quarter of 2023, we recorded a valuation allowance of $11.1 million against our U.S. federal and state deferred tax assets.
During the second quarter of 2023, we recorded a valuation allowance against our U.S. federal and state deferred tax assets on a GAAP basis.
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.
Year Ended December 27, 2024 December 29, 2023 Net sales 100.0 100.0 Cost of sales 87.8 87.3 Gross profit 12.2 12.7 Operating expenses: Research and development 2.7 2.5 Selling, general, and administrative 9.3 9.8 Amortization of intangible assets 1.0 1.8 Total operating expenses 13.1 14.1 Operating loss (0.9) (1.3) Interest expense, net 1.1 2.4 Other expense, net 0.1 0.1 Loss before income taxes (2.1) (3.8) Income tax expense 0.3 1.5 Net loss (2.5) (5.3) 39 Table of Contents Comparison of 2024 and 2023 Net sales Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Net sales $ 849,040 $ 811,120 $ 37,920 4.7 % The increase in net sales from 2023 to 2024 was primarily due to increased customer demand stemming from increased spending within the semiconductor capital equipment industry.
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.
In 2024, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $7.1 million. During 2024, we maintained a valuation allowance against our U.S. state and federal deferred tax assets; therefore, we are not recording income tax benefits related to our U.S. GAAP losses.
We believe the accounting estimate related to excess and obsolete inventory is a critical accounting estimate because it requires us to make assumptions about future inventory consumption and recoverability of cost, which can be uncertain. Changes in these estimates can have a material impact on our financial statements.
We believe the accounting estimate related to excess and obsolete inventory is a critical accounting estimate because it requires us to make assumptions about future inventory consumption and recoverability of cost, which can be uncertain.
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.
Other expense, net Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Other expense, net $ 1,148 $ 804 $ 344 42.8 % The change in other expense, net from 2023 to 2024 was primarily due to currency exchange rate fluctuations during the year related to our local currency payables of our foreign operations.
(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.
GAAP gross margin 12.2 % 12.7 % Non-GAAP gross margin 12.7 % 13.4 % (1) Represents severance costs associated with our global reduction-in-force programs. 42 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 27, 2024 December 29, 2023 (dollars in thousands) U.S.
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.
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, (v) payment of income taxes, and (vi) payments associated with our noncancellable leases and related occupancy costs.
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.
Year Ended December 27, 2024 December 29, 2023 (dollars in thousands, except per share amounts) Net sales $ 849,040 $ 811,120 Gross margin 12.2 % 12.7 % Gross margin, non-GAAP 12.7 % 13.4 % Operating margin (0.9) % (1.3) % Operating margin, non-GAAP 2.2 % 2.9 % Net loss $ (20,820) $ (42,985) Net income, non-GAAP $ 5,888 $ 12,257 Diluted EPS $ (0.64) $ (1.47) Diluted EPS, non-GAAP $ 0.18 $ 0.42 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.
The cyclicality of the semiconductor industry will continue to impact our results of operations in the future. Customer Concentration The number of capital equipment manufacturers for the semiconductor device industry is significantly consolidated, resulting in a small number of large manufacturers. Our customers are a significant component of this consolidation, resulting in our sales being concentrated in a few customers.
The cyclicality of the semiconductor industry will continue to impact our results of operations in the future. 35 Table of Contents Customer Concentration The number of capital equipment manufacturers for the semiconductor device industry is significantly consolidated, resulting in a small number of large manufacturers.
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.
Income tax expense Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Income tax expense $ 2,766 $ 11,907 $ (9,141) (76.8 %) Loss before income taxes $ (18,054) $ (31,078) $ 13,024 (41.9 %) Effective tax rate (15.3) % (38.3) % +2,300 bps The decrease in income tax expense from 2023 to 2024 was primarily due to recording a valuation allowance against our U.S. federal and state deferred tax assets in the second quarter of 2023, resulting in an $11.1 million charge to income tax expense.
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.
Year Ended December 27, 2024 December 29, 2023 (in thousands) Net sales $ 849,040 $ 811,120 Cost of sales 745,706 707,724 Gross profit 103,334 103,396 Operating expenses: Research and development 23,018 20,223 Selling, general, and administrative 79,384 79,334 Amortization of intangible assets 8,572 14,734 Total operating expenses 110,974 114,291 Operating loss (7,640) (10,895) Interest expense, net 9,266 19,379 Other expense, net 1,148 804 Loss before income taxes (18,054) (31,078) Income tax expense 2,766 11,907 Net loss $ (20,820) $ (42,985) The following table sets forth our results of operations as a percentage of our total net sales for the periods presented.
We have no significant long-term purchase commitments related to procuring raw materials inventory. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and are therefore subject to prevailing global macroeconomic conditions and financial, business, and other factors, some of which are beyond our control.
Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and are therefore subject to prevailing global macroeconomic conditions, such as interest rates, increased tariffs and retaliatory trade policies, geopolitical events, and financial, business, and other factors, some of which are beyond our control.
Results of Operations The following table sets forth our results of operations for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.
Changes in these estimates can have a material impact on our financial statements. 38 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.
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.
Industry overcapacity and a number of macroeconomic factors may contribute to a reduced spending environment, which combined with increased export controls for advanced semiconductor-related goods and services shipped to China and delayed business investment in electronic memory capacity may have varying levels of unfavorable consequences to our business.
(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.
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.
Liquidity and Capital Resources The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements.
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.
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.
The decrease in our net operating assets and liabilities of $2.7 million during 2024 was primarily due to an increase in accounts payable of $29.1 million, partially offset by an increase in accounts receivable of $19.9 million, a decrease in accrued and other liabilities of $4.6 million, and an increase in inventories of $4.2 million.
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.
GAAP net loss $ (20,820) $ (42,985) Non-GAAP adjustments: Amortization of intangible assets 8,572 14,734 Share-based compensation 15,576 17,338 Transaction-related costs (1) 785 — Other (2) 1,600 2,298 Tax adjustments related to non-GAAP adjustments (3) 175 9,778 Tax expense from valuation allowance (4) — 11,094 Non-GAAP net income $ 5,888 $ 12,257 U.S.
Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, demand for semiconductor products, pricing, and other factors. In the past, these fluctuations have resulted in significant variations in the levels of spending within the semiconductor capital equipment industry, and as a result, our results of operations.
In the past, these fluctuations have resulted in significant variations in the levels of spending within the semiconductor capital equipment industry, and as a result, our results of operations.
On a non-GAAP basis, we added back the expense associated with our recognition of a valuation allowance against our U.S. federal and state deferred tax assets, because recording a valuation allowance would not have been appropriate, as we were, and expect to remain, in a three-year cumulative U.S. income position on a non-GAAP basis.
In the first quarter of 2024, we determined that the valuation allowance should be recognized against our U.S. federal and state deferred tax assets on a non-GAAP basis as we were not in a three-year cumulative U.S. income position on a non-GAAP basis.
However, during a cyclical downturn, fixed costs become a larger percentage of cost of sales, which could result in a decrease to gross margin.
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, during a cyclical downturn, fixed costs become a larger percentage of cost of sales, which could result in a decrease to gross margin.
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.
Research and development Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Research and development $ 23,018 $ 20,223 $ 2,795 13.8 % The increase in research and development expenses from 2023 to 2024 was primarily due to increased material and service costs from our new product development programs of $1.9 million and increased employee-related expenses of $0.8 million, inclusive of share-based compensation expense.
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.
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. 36 Table of Contents Cost of sales, gross profit, and gross margin Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment.
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.
GAAP gross profit $ 103,334 $ 103,396 Non-GAAP adjustments: Share-based compensation 3,360 3,130 Other (1) 908 2,191 Non-GAAP gross profit $ 107,602 $ 108,717 U.S.
The adjustment reflects income tax benefits generated from U.S. taxable losses, on a non-GAAP basis, as we do not have a valuation allowance against our U.S. federal and state deferred tax assets on a non-GAAP basis. Refer to footnote 6 below.
Accordingly, from the first quarter of 2024 and forward, tax expense on a GAAP and non-GAAP basis reflects a valuation allowance against our U.S. federal and state deferred tax assets. Refer to footnote 6 below. (4) During the second quarter of 2023, we recorded a valuation allowance of $11.1 million against our U.S. federal and state deferred tax assets.
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.
Our business has a variable cost structure, with fixed costs comprising a smaller percentage of cost of sales compared to variable costs. 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.
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.
Interest expense, net Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Interest expense, net $ 9,266 $ 19,379 $ (10,113) (52.2 %) Weighted average borrowings outstanding $ 159,427 $ 292,661 $ (133,234) (45.5 %) Weighted average borrowing rate 7.31 % 6.80 % +51 bps The decrease in interest expense, net from 2023 to 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.
(4) Included in this amount are severance costs associated with our global reduction-in-force programs. (5) Adjusts U.S. GAAP income tax expense for the impact of our non-GAAP adjustments, which are presented on a gross basis, including the impacts of excluding share-based compensation and amortization of intangible assets.
Additionally, for 2024, the amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities. 43 Table of Contents (3) Adjusts U.S. GAAP income tax expense for the impact of our non-GAAP adjustments, which are presented on a gross basis.
The increase in net proceeds from share-based compensation activity from 2022 to 2023 was due to increased stock option exercises. Recent Accounting Pronouncements From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).
The increase in cash provided by financing activities from 2023 to 2024 was primarily due to net proceeds from our issuance of shares, partially offset by increased net payments on our credit facilities. Recent Accounting Pronouncements From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements.
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.
GAAP operating loss $ (7,640) $ (10,895) Non-GAAP adjustments: Amortization of intangible assets 8,572 14,734 Share-based compensation 15,576 17,338 Transaction-related costs (1) 785 — Other (2) 1,600 2,298 Non-GAAP operating income $ 18,893 $ 23,475 U.S.
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.
The increase in our weighted average borrowing rate was due to higher applicable margin as a result of higher leverage ratios in 2024 (+29bps) and higher Bloomberg Short-Term Bank Yield ("BSBY") and Secured Overnight Financing Rate ("SOFR") rates as a result of a higher short-term borrowing interest rate macroeconomic environment (+22bps).
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.
Although we do not have any long-term contracts that require customers to place certain order quantities with us, Lam Research and Applied Materials have been our customers for over 20 years. Macroeconomic Conditions The semiconductor industry is cyclical in nature and is impacted by macroeconomic factors in the markets and industries in which we operate.
The reduction in capital expenditures from 2023 to 2022 was due to reduced factory capacity expansion projects. 46 Table of Contents Cash used in financing activities during 2023 consisted of net payments from our credit facilities of $52.5 million, partially offset by net proceeds from share-based compensation activity of $3.8 million.
Cash provided by financing activities during 2024 consisted of net proceeds of $136.7 million from our issues of 3.8 million ordinary shares in March 2024 in connection with an underwritten public offering and net proceeds from share-based compensation activity of $2.4 million, partially offset by net payments on our credit facilities of $120.6 million.
Removed
In 2023, our top three customers were Applied Materials, Lam Research, and ASML, accounting for a combined 82% of sales.
Added
Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, increased tariffs and trade restrictions, demand for semiconductor products, pricing, and other factors.
Removed
Between 2017 and 2020, we engaged in four separate business combinations for a combined investment of approximately $200.0 million. These acquisitions continue to have a significant impact on our financial position and results of operations.
Added
Our customers are a significant component of this consolidation, resulting in our sales being concentrated in a few customers. For 2024, two customers with individual sales over 10%, Lam Research and Applied Materials, accounted for a combined 73% of total sales.
Removed
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.
Added
Such factors include market trends, supply chain shortages, availability of skilled labor, geopolitical tension and retaliatory trade policies, and other factors. The industry entered a cyclical downturn in the fourth quarter of 2022 for the primary semiconductor equipment markets we serve, resulting in weakened customer demand.
Removed
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.
Added
Although the total market for semiconductor capital equipment has experienced year-over-year stability and growth, inventory digestion at our customers and the relative spending levels within the markets we primarily serve, in particular lower spending levels for deposition and etch equipment, has resulted in continued lower demand from our customers over the past two years relative to the total semiconductor capital equipment market, despite incremental growth in demand.
Removed
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.
Added
We are continually monitoring the global trade environment and any changes in tariffs, trade agreements, restrictions or sanctions that may impact us, our manufacturing facilities, or our customers.
Removed
As a result of these programs, we incurred severance charges of $1.1 million and $2.3 million in 2022 and 2023, respectively.
Added
President Trump has issued executive orders directing the U.S. to impose new tariffs on imports from China, temporarily stayed an order imposing new tariffs on Canada and Mexico, issued the imposition of tariffs on imported steel and aluminum products, and may impose additional tariffs on these or other nations.
Removed
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.
Added
Given our manufacturing presence in Mexico, we are currently evaluating the potential impact of potential tariffs on Mexican imports on our business.
Removed
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.
Added
Further detail is provided above under the section entitled "Key Factors Affecting Our Business".
Removed
Net sales to international customers decreased by $178.1 million in 2023 to $529.8 million.
Added
Gross margin Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Cost of sales $ 745,706 $ 707,724 $ 37,982 5.4 % Gross profit $ 103,334 $ 103,396 $ (62) (0.1 %) Gross margin 12.2 % 12.7 % -50 bps The decrease in gross margin from 2023 to 2024 was primarily due to unfavorable sales mix and increased factory labor and overhead costs, partially offset by lower severance costs associated with our global reduction-in-force programs (+20bps) and lower excess and obsolete inventory expense (+10bps).
Removed
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" .
Added
Selling, general, and administrative Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Selling, general, and administrative $ 79,384 $ 79,334 $ 50 0.1 % Selling, general, and administrative expense remained approximately unchanged from 2023 to 2024. 40 Table of Contents Amortization of intangible assets Year Ended Change December 27, 2024 December 29, 2023 Amount % (dollars in thousands) Amortization of intangibles assets $ 8,572 $ 14,734 $ (6,162) (41.8) % The decrease in amortization expense from 2023 to 2024 was primarily due to certain intangible assets becoming fully amortized in the fourth quarter of 2023.
Removed
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.
Added
The reduction in our weighted average borrowings outstanding was primarily due to paying off our revolving credit facility in the first quarter of 2024.
Removed
Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by approximately 60 basis points.
Added
GAAP operating margin (0.9) % (1.3) % Non-GAAP operating margin 2.2 % 2.9 % (1) Represents transaction-related costs incurred in connection with our acquisitions pipeline. (2) Represents severance costs associated with our global reduction-in-force programs, and, for 2024, the amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.
Removed
Selling, 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.
Added
GAAP diluted EPS $ (0.64) $ (1.47) Non-GAAP diluted EPS $ 0.18 $ 0.42 Shares used to compute diluted non-GAAP EPS 33,135,552 29,514,553 (1) Represents transaction-related costs incurred in connection with our acquisition pipeline. (2) Represents severance costs associated with our global reduction-in-force programs.
Removed
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.
Added
We have no significant long-term purchase commitments related to procuring raw materials inventory.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−19 removed4 unchanged
Biggest changeWe have certain operating expenses that are denominated in currencies of the countries in which our operations are located, and may be subject to fluctuations due to foreign currency exchange rates, particularly the Singapore dollar, Malaysian ringgit, British pound, euro, Korean won, and Mexican peso.
Biggest changeConversely, decreases in the value of the U.S. dollar relative to other currencies could result in our foreign suppliers raising their prices in order to continue doing business with us. 45 Table of Contents We have certain operating expenses that are denominated in currencies of the countries in which our operations are located, and may be subject to fluctuations due to foreign currency exchange rates, particularly the Singapore dollar, Malaysian ringgit, British pound, euro, Korean won, and Mexican peso.
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.
A hypothetical 100 basis point change in the interest rate on our outstanding debt would have resulted in a $1.3 million change to interest expense on an annualized basis. ITEM 8.
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.
We have not been, nor do we anticipate being exposed to, material risks due to changes in interest rates. As of December 27, 2024, the interest rate on our outstanding debt was based on SOFR, plus an applicable rate depending on our leverage ratio.
Interest 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.
Interest Rate Risk We had total indebtedness of $129.4 million as of December 27, 2024, exclusive of $0.9 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.
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.
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. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
Removed
Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our foreign suppliers raising their prices in order to continue doing business with us.
Removed
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A.
Removed
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.
Removed
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.
Removed
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).
Removed
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).
Removed
Our internal control over financial reporting is designed to provide reasonable assurance with U.S.
Removed
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.
Removed
Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 29, 2023.
Removed
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.
Removed
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.
Removed
As of December 29, 2023, management has completed the implementation of our remediation efforts of the material weakness described above.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
If we cannot provide reliable financial information, our business, operating results, and share price could be negatively impacted. ITEM 9B.
Removed
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