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Ichor Holdings, Ltd. Announces First Quarter 2022 Financial Results

Ichor Holdings, Ltd. (NASDAQ: ICHR), a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment, today announced first quarter 2022 financial results.

First quarter 2022 highlights:

  • Record revenues were within our guidance range at $293 million, up 11% year-over-year and up 2% from Q4;
  • Gross margin of 15% on a GAAP basis and 16% on a non-GAAP basis, reflecting additional hiring of direct manufacturing labor to support customer demand as well as increased freight and logistics costs; and
  • Earnings per share of $0.28 and $0.70 on a GAAP and non-GAAP basis, respectively.

“We are pleased to report record first quarter revenues that were within our guidance range,” commented Jeff Andreson, chief executive officer. “Over the last several quarters, we along with the rest of the industry have been expecting supply chain conditions to improve, yet in 2022 to date, availability of components and materials has become even more challenged. In order to better address the continued very strong levels of customer demand, in the first quarter we increased both our hiring activity for direct labor and our overall manufacturing capacity, which while presenting a near-term headwind to gross margin, are critical investments that will enable us to achieve significant increases in revenue output in the coming quarters and years. We are taking a more cautious view of any supply chain improvements through at least mid-year, but still expect to achieve sequential revenue increases as we progress through 2022.”

 

 

Q1 2022

 

 

Q4 2021

 

 

Q1 2021

 

 

 

(dollars in thousands, except per share amounts)

 

U.S. GAAP Financial Results:

 

Net sales

 

$

293,146

 

 

$

287,188

 

 

$

264,566

 

Gross margin

 

 

15.0

%

 

 

16.4

%

 

 

14.9

%

Operating margin

 

 

3.6

%

 

 

5.7

%

 

 

6.9

%

Net income

 

$

8,039

 

 

$

14,859

 

 

$

14,638

 

Diluted EPS

 

$

0.28

 

 

$

0.51

 

 

$

0.51

 

 

 

Q1 2022

 

 

Q4 2021

 

 

Q1 2021

 

 

 

(dollars in thousands, except per share amounts)

 

Non-GAAP Financial Results:

 

Gross margin

 

 

16.0

%

 

 

17.1

%

 

 

16.1

%

Operating margin

 

 

8.4

%

 

 

10.7

%

 

 

10.2

%

Net income

 

$

20,178

 

 

$

26,245

 

 

$

21,725

 

Diluted EPS

 

$

0.70

 

 

$

0.90

 

 

$

0.76

 

U.S. GAAP Financial Results Overview

For the first quarter of 2022, revenue was $293.1 million, net income was $8.0 million, and net income per diluted share (“diluted EPS”) was $0.28. This compares to revenue of $287.2 million and $264.6 million, net income of $14.9 million and $14.6 million, and diluted EPS of $0.51 and $0.51, for the fourth and first quarters of 2021, respectively.

Non-GAAP Financial Results Overview

For the first quarter of 2022, non-GAAP net income was $20.2 million and non-GAAP diluted EPS was $0.70. This compares to non-GAAP net income of $26.2 million and $21.7 million, and non-GAAP diluted EPS of $0.90 and $0.76, for the fourth and first quarters of 2021, respectively.

Second Quarter 2022 Financial Outlook

For the second quarter of 2022, we expect revenue to be in the range of $290 million to $330 million. We expect GAAP diluted EPS to be in the range of $0.45 to $0.73 and non-GAAP diluted EPS to be in the range of $0.68 to $0.94.

This outlook for non-GAAP diluted EPS excludes known charges related to amortization of intangible assets, share-based compensation expense, tax adjustments related to these non-GAAP adjustments, and non-recurring charges known at the time of providing this outlook. This outlook for non-GAAP diluted EPS excludes any items that are unknown at this time, such as non-recurring tax-related items or other unusual or infrequent items which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Balance Sheet and Cash Flow Results

We ended the first quarter of 2022 with cash and cash equivalents of $34.5 million, a decrease of $41.0 million from the prior quarter.

The decrease was primarily due to cash used in operating activities of $36.3 million and capital expenditures of $3.4 million.

Our cash used in operating activities of $36.3 million during the first quarter of 2022 consisted of net income of $8.0 million, net non-cash charges of $12.3 million, primarily consisting of depreciation and amortization of $9.3 million and share-based compensation expense of $2.9 million, and an increase in our net operating assets and liabilities of $56.6 million.

The increase in our net operating assets and liabilities, net of acquisitions, was primarily due to an increase in inventories of $27.7 million, a decrease in accounts payable of $18.2 million, and an increase in accounts receivable of $10.5 million. The increase in our inventories is primarily driven by elevated purchasing activity pursuant to strong customer demand and certain supply chain component constraints. The decrease in accounts payable and increase in accounts receivable were primarily due to fluctuations in payment timing to suppliers and from customers, as well as higher revenues in the last few weeks of the first quarter of 2022 compared to the last few weeks of the fourth quarter of 2021.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results, including non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, and free cash flow. Management uses these non-GAAP metrics to evaluate our operating and financial results. 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. Non-GAAP gross profit, operating income, and net income are defined as: gross profit, operating income, or net income, as applicable, excluding (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including acquisition-related costs and charges, contract settlement losses and facility shutdown costs, to the extent they are present in gross profit, operating income, and net income; and (2) the tax impacts associated with our non-GAAP adjustments, as well as non-recurring discrete tax items. Non-GAAP diluted EPS is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period. Non-GAAP gross margin and non-GAAP operating margin are defined as non-GAAP gross profit and non-GAAP operating income, respectively, divided by net sales. Free cash flow is defined as cash provided by or used in operating activities, less capital expenditures. Tables showing these metrics on a GAAP and non-GAAP basis, with reconciliation footnotes thereto, are included at the end of this press release.

Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP. Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison.

Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP. In addition, in evaluating non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving non-GAAP results and you should not infer from our presentation of non-GAAP results that our future results will not be affected by these expenses or any unusual or non-recurring items.

Conference Call

We will conduct a conference call to discuss our first quarter 2022 results and business outlook today at 1:30 p.m. PT.

To listen to a live webcast of the call, please visit our investor relations website at https://ir.ichorsystems.com, or go to the live link at https://webcast-eqs.com/ichorholdings20220510_en. To listen via telephone, please call (877) 407-0989 (domestic) or +1 (201) 389-0921 (international), conference ID: 13728745.

After the call, an on-demand replay will be available at the same webcast link.

About Ichor

We are a leader in the design, engineering and manufacturing of critical fluid delivery subsystems and components primarily for semiconductor capital equipment, as well as other industries such as defense/aerospace and medical. Our primary product offerings include gas and chemical delivery subsystems, collectively known as fluid delivery 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. Our chemical delivery 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, surface treatment technologies, and other proprietary products. We are headquartered in Fremont, CA. https://ir.ichorsystems.com.

We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended April 1, 2022, December 31, 2021, and March 26, 2021, were 13 weeks, 14 weeks, and 13 weeks, respectively. References to the first quarter of 2022 and the fourth and first quarters of 2021 relate to the three-month periods then ended. Our fiscal years ended December 30, 2022, and December 31, 2021, are 52 weeks and 53 weeks, respectively. References to 2022 and 2021 relate to the fiscal years then ended.

Safe Harbor Statement

Certain statements in this release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "guidance," "expects," "intends," “may,” “will,” "projects," "plans," “predicts,” "believes," “could,” "estimates," "targets," "anticipates," “look forward,” and similar expressions are used to identify these forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements regarding financial results for our second fiscal quarter of 2022, statements regarding the impacts of the COVID-19 pandemic, materials or component shortages from suppliers, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including: (1) dependence on expenditures by manufacturers and cyclical downturns in the semiconductor capital equipment industry, (2) reliance on a very small number of original equipment manufacturers for a significant portion of sales, (3) negotiating leverage held by our customers, (4) competitiveness and rapid evolution of the industries in which we participate, (5) risks associated with weakness in the global economy and geopolitical instability, (6) keeping pace with developments in the industries we serve and with technological innovation generally, (7) designing, developing and introducing new products that are accepted by original equipment manufacturers in order to retain our existing customers and obtain new customers, (8) managing our manufacturing and procurement process effectively, (9) defects in our products that could damage our reputation, decrease market acceptance and result in potentially costly litigation, (10) dependence on a limited number of suppliers, and (11) the impact of the COVID-19 pandemic, any related or unrelated public health threat or fear of such event on economic activity, us and our customers, suppliers, employees, and other business relations, including, but not limited to, demand for our products, workforce availability, and costs to manufacture our products. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission (the “SEC”), including other risks, relevant factors, and uncertainties identified in the "Risk Factors" section of our Annual Report on Form 10-K filed with the SEC on February 28, 2022.

All forward-looking statements in this press release are based upon information available to us as of the date hereof, and qualified in their entirety by this cautionary statement. We undertake no obligation to update or revise any forward-looking statements contained herein, whether as a result of actual results, changes in our expectations, future events or developments, or otherwise, except as required by law.

ICHOR HOLDINGS, LTD.

Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,516

 

 

$

75,495

 

 

$

242,946

 

Accounts receivable, net

 

 

153,534

 

 

 

142,990

 

 

 

108,674

 

Inventories

 

 

263,851

 

 

 

236,133

 

 

 

144,062

 

Prepaid expenses and other current assets

 

 

7,662

 

 

 

8,153

 

 

 

7,347

 

Total current assets

 

 

459,563

 

 

 

462,771

 

 

 

503,029

 

Property and equipment, net

 

 

86,003

 

 

 

85,204

 

 

 

46,849

 

Operating lease right-of-use assets

 

 

34,054

 

 

 

29,790

 

 

 

9,378

 

Other noncurrent assets

 

 

12,110

 

 

 

9,166

 

 

 

5,800

 

Deferred tax assets, net

 

 

8,153

 

 

 

8,116

 

 

 

5,812

 

Intangible assets, net

 

 

84,578

 

 

 

89,927

 

 

 

36,454

 

Goodwill

 

 

335,902

 

 

 

335,902

 

 

 

174,887

 

Total assets

 

$

1,020,363

 

 

$

1,020,876

 

 

$

782,209

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

142,866

 

 

$

159,727

 

 

$

140,669

 

Accrued liabilities

 

 

21,661

 

 

 

19,066

 

 

 

16,992

 

Other current liabilities

 

 

14,185

 

 

 

14,377

 

 

 

11,778

 

Current portion of long-term debt

 

 

7,500

 

 

 

7,500

 

 

 

8,750

 

Current portion of lease liabilities

 

 

7,854

 

 

 

7,633

 

 

 

4,895

 

Total current liabilities

 

 

194,066

 

 

 

208,303

 

 

 

183,084

 

Long-term debt, less current portion, net

 

 

283,495

 

 

 

285,253

 

 

 

159,576

 

Lease liabilities, less current portion

 

 

26,563

 

 

 

22,354

 

 

 

4,804

 

Deferred tax liabilities, net

 

 

38

 

 

 

38

 

 

 

109

 

Other non-current liabilities

 

 

4,372

 

 

 

4,213

 

 

 

3,574

 

Total liabilities

 

 

508,534

 

 

 

520,161

 

 

 

351,147

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares ($0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding)

 

 

 

 

 

 

 

 

 

Ordinary shares ($0.0001 par value; 200,000,000 shares authorized; 28,628,907 and 28,551,160 shares outstanding, respectively; 33,066,346 and 32,988,599 shares issued, respectively)

 

 

3

 

 

 

3

 

 

 

3

 

Additional paid in capital

 

 

420,513

 

 

 

417,438

 

 

 

404,046

 

Treasury shares at cost (4,437,439 shares)

 

 

(91,578

)

 

 

(91,578

)

 

 

(91,578

)

Retained earnings

 

 

182,891

 

 

 

174,852

 

 

 

118,591

 

Total shareholders’ equity

 

 

511,829

 

 

 

500,715

 

 

 

431,062

 

Total liabilities and shareholders’ equity

 

$

1,020,363

 

 

$

1,020,876

 

 

$

782,209

 

ICHOR HOLDINGS, LTD.

Consolidated Statement of Operations

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

Net sales

 

$

293,146

 

 

$

287,188

 

 

$

264,566

 

Cost of sales

 

 

249,214

 

 

 

240,210

 

 

 

225,054

 

Gross profit

 

 

43,932

 

 

 

46,978

 

 

 

39,512

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,851

 

 

 

4,222

 

 

 

3,515

 

Selling, general, and administrative

 

 

23,267

 

 

 

21,662

 

 

 

14,349

 

Amortization of intangible assets

 

 

5,349

 

 

 

4,749

 

 

 

3,391

 

Total operating expenses

 

 

33,467

 

 

 

30,633

 

 

 

21,255

 

Operating income

 

 

10,465

 

 

 

16,345

 

 

 

18,257

 

Interest expense, net

 

 

1,532

 

 

 

1,454

 

 

 

1,919

 

Other expense, net

 

 

84

 

 

 

704

 

 

 

185

 

Income before income taxes

 

 

8,849

 

 

 

14,187

 

 

 

16,153

 

Income tax expense (benefit)

 

 

810

 

 

 

(672

)

 

 

1,515

 

Net income

 

$

8,039

 

 

$

14,859

 

 

$

14,638

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

 

$

0.52

 

 

$

0.52

 

Diluted

 

$

0.28

 

 

$

0.51

 

 

$

0.51

 

Shares used to compute net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,592,629

 

 

 

28,465,870

 

 

 

28,004,248

 

Diluted

 

 

29,023,455

 

 

 

29,045,351

 

 

 

28,729,112

 

ICHOR HOLDINGS, LTD.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,039

 

 

$

14,859

 

 

$

14,638

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,315

 

 

 

8,323

 

 

 

5,657

 

Share-based compensation

 

 

2,897

 

 

 

3,367

 

 

 

2,415

 

Deferred income taxes

 

 

(37

)

 

 

(2,848

)

 

 

512

 

Amortization of debt issuance costs

 

 

117

 

 

 

158

 

 

 

242

 

Loss on extinguishment of debt

 

 

 

 

 

737

 

 

 

 

Other

 

 

 

 

 

165

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(10,544

)

 

 

(12,751

)

 

 

(7,697

)

Inventories

 

 

(27,718

)

 

 

(30,075

)

 

 

(9,306

)

Prepaid expenses and other assets

 

 

(650

)

 

 

(934

)

 

 

512

 

Accounts payable

 

 

(18,209

)

 

 

17,415

 

 

 

22,101

 

Accrued liabilities

 

 

2,182

 

 

 

(5,292

)

 

 

(3,467

)

Other liabilities

 

 

(1,670

)

 

 

(2,263

)

 

 

41

 

Net cash provided by (used in) operating activities

 

 

(36,278

)

 

 

(9,139

)

 

 

25,648

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(3,417

)

 

 

(2,135

)

 

 

(5,400

)

Cash paid for acquisitions, net of cash acquired

 

 

 

 

 

(268,766

)

 

 

 

Purchase of marketable securities

 

 

 

 

 

(10,164

)

 

 

 

Proceeds from maturities and sales of marketable securities

 

 

 

 

 

108,713

 

 

 

 

Net cash used in investing activities

 

 

(3,417

)

 

 

(172,352

)

 

 

(5,400

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of ordinary shares under share-based compensation plans

 

 

1,368

 

 

 

2,527

 

 

 

2,654

 

Employees' taxes paid upon vesting of restricted share units

 

 

(777

)

 

 

(1,002

)

 

 

(667

)

Debt issuance and modification costs

 

 

 

 

 

(1,852

)

 

 

 

Borrowings on revolving credit facility

 

 

 

 

 

137,591

 

 

 

 

Repayments on revolving credit facility

 

 

 

 

 

(11,753

)

 

 

(30,000

)

Proceeds from term loan

 

 

 

 

 

94,175

 

 

 

 

Repayments on term loan

 

 

(1,875

)

 

 

(90,738

)

 

 

(2,188

)

Net cash provided by (used in) financing activities

 

 

(1,284

)

 

 

128,948

 

 

 

(30,201

)

Net decrease in cash

 

 

(40,979

)

 

 

(52,543

)

 

 

(9,953

)

Cash at beginning of period

 

 

75,495

 

 

 

128,038

 

 

 

252,899

 

Cash at end of period

 

$

34,516

 

 

$

75,495

 

 

$

242,946

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

1,395

 

 

$

2,433

 

 

$

1,842

 

Cash paid during the period for taxes, net of refunds

 

$

106

 

 

$

3,856

 

 

$

667

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures included in accounts payable

 

$

2,278

 

 

$

930

 

 

$

2,273

 

Right-of-use assets obtained in exchange for new operating lease liabilities, including those acquired through acquisitions

 

$

6,067

 

 

$

22,404

 

 

$

364

 

ICHOR HOLDINGS, LTD.

Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

U.S. GAAP gross profit

 

$

43,932

 

 

$

46,978

 

 

$

39,512

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

551

 

 

 

437

 

 

 

306

 

Facility shutdown costs (1)

 

 

 

 

 

314

 

 

 

2,399

 

Fair value adjustment to inventory from acquisitions (2)

 

 

2,492

 

 

 

1,441

 

 

 

211

 

Other non-recurring expense, net (3)

 

 

 

 

 

 

 

 

106

 

Non-GAAP gross profit

 

$

46,975

 

 

$

49,170

 

 

$

42,534

 

U.S. GAAP gross margin

 

 

15.0

%

 

 

16.4

%

 

 

14.9

%

Non-GAAP gross margin

 

 

16.0

%

 

 

17.1

%

 

 

16.1

%

(1)

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed in 2021. We incurred write-off costs associated with inventories determined to be obsolete and severance costs associated with affected employees in connection with the closure.

(2)

As part of the purchase price allocations of our acquisitions of IMG Companies, LLC (“IMG”) in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up of $3.9 million and $0.2 million, respectively. These amounts were subsequently released to cost of sales as acquired-inventories were sold.

(3)

Included in this amount for the first quarter of 2021 is primarily a non-recurring settlement charge.

ICHOR HOLDINGS, LTD.

Reconciliation of U.S. GAAP Operating Income to Non-GAAP Operating Income

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

U.S. GAAP operating income

 

$

10,465

 

 

$

16,345

 

 

$

18,257

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

5,349

 

 

 

4,749

 

 

 

3,391

 

Share-based compensation

 

 

2,897

 

 

 

3,367

 

 

 

2,415

 

Facility shutdown costs (1)

 

 

 

 

 

314

 

 

 

2,510

 

Settlement loss (2)

 

 

3,100

 

 

 

 

 

 

 

Fair value adjustment to inventory from acquisitions (3)

 

 

2,492

 

 

 

1,441

 

 

 

211

 

Acquisition costs (4)

 

 

275

 

 

 

4,386

 

 

 

 

Other non-recurring expense, net (5)

 

 

 

 

 

 

 

 

278

 

Non-GAAP operating income

 

$

24,578

 

 

$

30,602

 

 

$

27,062

 

U.S. GAAP operating margin

 

 

3.6

%

 

 

5.7

%

 

 

6.9

%

Non-GAAP operating margin

 

 

8.4

%

 

 

10.7

%

 

 

10.2

%

(1)

See footnote 1 to the reconciliation of U.S. GAAP gross profit to non-GAAP gross profit above.

(2)

During the first quarter of 2022, we recorded a non-recurring loss accrual of $3.1 million relating to a probable settlement of an employment-related legal matter. We expect the tentative settlement and final conclusion of the matter to be formalized and paid within the next 12 months.

(3)

See footnote 2 to the reconciliation of U.S. GAAP gross profit to non-GAAP gross profit above.

(4)

Included in this amount are incremental transaction-related costs incurred in connection with our acquisition of IMG in November 2021.

(5)

Included in this amount for the first quarter of 2021 are primarily (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley compliance program and (ii) a non-recurring settlement charge.

ICHOR HOLDINGS, LTD.

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

U.S. GAAP net income

 

$

8,039

 

 

$

14,859

 

 

$

14,638

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

5,349

 

 

 

4,749

 

 

 

3,391

 

Share-based compensation

 

 

2,897

 

 

 

3,367

 

 

 

2,415

 

Facility shutdown costs (1)

 

 

 

 

 

314

 

 

 

2,510

 

Settlement loss (2)

 

 

3,100

 

 

 

 

 

 

 

Fair value adjustment to inventory from acquisitions (3)

 

 

2,492

 

 

 

1,441

 

 

 

211

 

Acquisition costs (4)

 

 

275

 

 

 

4,386

 

 

 

 

Other non-recurring expense, net (5)

 

 

 

 

 

 

 

 

278

 

Loss on extinguishment of debt (6)

 

 

 

 

 

737

 

 

 

 

Tax adjustments related to non-GAAP adjustments (7)

 

 

(1,974

)

 

 

(3,608

)

 

 

(1,718

)

Non-GAAP net income

 

$

20,178

 

 

$

26,245

 

 

$

21,725

 

U.S. GAAP diluted EPS

 

$

0.28

 

 

$

0.51

 

 

$

0.51

 

Non-GAAP diluted EPS

 

$

0.70

 

 

$

0.90

 

 

$

0.76

 

Shares used to compute diluted EPS

 

 

29,023,455

 

 

 

29,045,351

 

 

 

28,729,112

 

(1)

See footnote 1 to the reconciliation of U.S. GAAP gross profit to non-GAAP gross profit above.

(2)

See footnote 2 to the reconciliation of U.S. GAAP operating income to non-GAAP operating income above.

(3)

See footnote 3 to the reconciliation of U.S. GAAP gross profit to non-GAAP gross profit above.

(4)

See footnote 4 to the reconciliation of U.S. GAAP operating income to non-GAAP operating income above.

(5)

See footnote 5 to the reconciliation of U.S. GAAP operating income to non-GAAP operating income above.

(6)

In October 2021, we entered into an amended and restated credit agreement, which includes a group of financial institutions as direct lenders underlying the agreement. Under the debt modification literature codified in ASC 470, a portion of the refinance was treated as an extinguishment. Accordingly, $0.7 million of existing capitalized deferred issuance costs were written off as a loss on extinguishment of debt.

(7)

Adjusts U.S. GAAP income tax expense (benefit) for impact of our non-GAAP adjustments, as defined, including the impacts of excluding share-based compensation, amortization of intangible assets, and other non-recurring expenses. This adjustment also excludes the impact of non-recurring discrete tax items.

ICHOR HOLDINGS, LTD.

Reconciliation of U.S. GAAP Net Cash Provided by (Used in) Operating Activities to Free Cash Flow

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 1,

2022

 

 

December 31,

2021

 

 

March 26,

2021

 

Net cash provided by (used in) operating activities

 

$

(36,278

)

 

$

(9,139

)

 

$

25,648

 

Capital expenditures

 

 

(3,417

)

 

 

(2,135

)

 

 

(5,400

)

Free cash flow

 

$

(39,695

)

 

$

(11,274

)

 

$

20,248

 

 

Contacts

Larry Sparks, CFO, 510-897-5200

Claire McAdams, IR & Strategic Initiatives, 530-265-9899

ir@ichorsystems.com

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