ICHOR HOLDINGS LTD
For the period ended Sep 27, 2024. Filed Nov 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 27, 2024 · Filed Nov 5, 2024
ICHR$30.97+10.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-28; filed 2024-08-07.
0001628280-24-035410
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-27; filed 2024-11-05.
0001628280-24-045122
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 67 previous paragraphs and 69 current paragraphs.
47 unchanged; 17 reworded; 5 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
The increase in gross margin from the third quarter of 2023 to the third quarter of 2024 was primarily due to lower excess and obsolete inventory expense (+120bps), lower severance costs associated with our global reduction-in-force programs (+40bps), partially offset by unfavorable sales mix and higher fixed factory overhead costs (-20bps).
Current report
The decrease in gross margin from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to unfavorable sales mix, increased fixed factory overhead costs (-40bps), and increased excess and obsolete inventory expense (-10bps), partially offset by lower severance costs associated with our global reduction-in-force programs (+20bps).
Current report
Overall, our selling, general, and administrative expenses remained approximately unchanged from the third quarter of 2023 to the third quarter of 2024.
Current report
The decrease in selling, general, and administrative expense from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to reduced share-based compensation expense of $2.0 million, partially offset by $0.8 million in transaction-related costs from our acquisitions pipeline and $0.5 million in costs from exiting and consolidating one of our U.S.-based manufacturing facilities incurred during the nine months ended September 27, 2024 only.
Current report
The decrease in income tax expense from the third quarter of 2023 to the third quarter of 2024 was primarily due to decreased foreign taxable income.
Removed paragraphs (3)
Previous report
The decrease in gross margin from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to unfavorable sales mix, as well as increased fixed overhead and excess and obsolete inventory expenses. Increased fixed overhead, including depreciation and occupancy costs, unfavorably impacted gross margin by 50bps for the three and six months ended June 28, 2024, and increased excess and obsolete inventory expense unfavorably impacted gross margin by 40bps and 80bps for the three and six months ended June 28, 2024, respectively.
Previous report
The increase in selling, general, and administrative expense from the second quarter of 2023 to the second quarter of 2024 was primarily due to increased occupancy costs, the majority of which were the result of a facility exit and consolidation, partially offset by reduced services and professional consulting costs.
Previous report
The decrease in selling, general, and administrative expense from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to reduced employee-related expense, inclusive of share-based compensation expense, partially offset by increased services and professional consulting costs and increased occupancy costs, the majority of which were the result of a facility exit and consolidation.
Reworded paragraphs (17)
Previous wording
The semiconductor industry is cyclical in nature. The industry entered a cyclical downturn in the fourth quarter of 2022, leading to reductions in spending on semiconductor capital equipment, resulting in weakened customer demand. In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this 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 had varying levels of unfavorable consequences to our business. 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 our primary served markets, in particular lower spending levels for deposition and etch equipment, has resulted in demand from our customers persisting at lower levels over the past year relative to the total semiconductor capital equipment market. 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, continuing through the second quarter of 2024.
Current wording
The semiconductor industry is cyclical in nature. The industry entered a cyclical downturn in the fourth quarter of 2022 for the primary markets we serve, leading to reductions in spending on semiconductor capital equipment, which resulted in weakened customer demand. In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this 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 had varying levels of unfavorable consequences to our business. 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 our primary served markets, in particular lower spending levels for deposition and etch equipment, has resulted in demand from our customers persisting at lower levels over the past two years relative to the total semiconductor capital equipment market. 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. We did not initiate further, or continue, labor cost reduction initiatives in the third quarter of 2024.
Previous wording
Comparison of the Three and Six Months Ended June 28, 2024 and June 30, 2023
Current wording
Comparison of the Three and Nine Months Ended September 27, 2024 and September 29, 2023
Previous wording
The increase in net sales from the three months ended June 30, 2023 to the three months ended June 28, 2024 was primarily due to increased customer demand as a result of a stronger semiconductor capital equipment spending environment. The second quarter of 2023 represented the low-point in our quarterly net sales since the start of the cyclical downturn in the fourth quarter of 2022. Although net sales were higher on a quarter-on-quarter basis, higher net sales in the first quarter of 2023 compared to the first quarter of 2024 translated into lower net sales for the first half of 2024 compared to the first half of 2023. Further detail is provided above under the section entitled Macroeconomic Conditions and Business Update.
Current wording
The increase in net sales from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to increased customer demand as a result of a stronger semiconductor capital equipment spending environment. Further detail is provided above under the section entitled Macroeconomic Conditions and Business Update.
Previous wording
The increase in research and development expenses from the second quarter of 2023 to the second quarter of 2024 was primarily due to increased material and service costs from our new product development programs.
Current wording
The increase in research and development expenses from the third quarter of 2023 to the third quarter of 2024 was primarily due to increased material and service costs from our new product development programs of $0.5 million and increased employee-related expenses of $0.2 million, inclusive of share-based compensation expense.
Previous wording
The increase from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to increased material and service costs from our new product development programs of $1.3 million and increased employee-related expenses of $0.5 million, inclusive of share-based compensation expense.
Current wording
The increase from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to increased material and service costs from our new product development programs of $1.7 million and increased employee-related expenses of $0.8 million, inclusive of share-based compensation expense.
Previous wording
The decrease in amortization expense from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was due to certain intangible assets becoming fully amortized in the second half of 2023.
Current wording
The decrease in amortization expense from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was due to certain intangible assets becoming fully amortized in the second half of 2023.
Previous wording
The decrease in interest expense, net from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.
Current wording
The decrease in interest expense, net from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.
Previous wording
The change in other expense, net from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to currency exchange rate fluctuations during the periods related to our local currency payables of our foreign operations.
Current wording
The change in other expense, net from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to currency exchange rate fluctuations during the periods related to our local currency payables of our foreign operations.
Previous wording
The decrease in income tax expense from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 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. 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 in the six months ended June 28, 2024.
Current wording
The decrease in income tax expense from the nine months ended September 29, 2023 to the nine months ended September 27, 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. 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 the nine months ended September 27, 2024.
Previous wording
(2)Represents severance costs associated with our global reduction-in-force programs, and, for the three and six months ended June 28, 2024, $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.
Current wording
(2)Represents severance costs associated with our global reduction-in-force programs. Additionally, for the nine months ended September 27, 2024, this amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.
Previous wording
(2)Represents severance costs associated with our global reduction-in-force programs, and, for the three and six months ended June 28, 2024, $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.
Current wording
(2)Represents severance costs associated with our global reduction-in-force programs. Additionally, for the nine months ended September 27, 2024, this amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.
Previous wording
We ended the second quarter of 2024 with cash and cash equivalents of $114.3 million, an increase of $34.4 million from the prior year ended December 29, 2023. The increase 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 $22.3 million, partially offset by net payments on credit facilities of $118.8 million and capital expenditures of $7.3 million.
Current wording
We ended the third quarter of 2024 with cash and cash equivalents of $116.4 million, an increase of $36.5 million from the prior year ended December 29, 2023. The increase 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 $30.4 million, partially offset by net payments on credit facilities of $118.8 million and capital expenditures of $13.2 million.
Previous wording
Our cash provided by operating activities of $22.3 million for the six months ended June 28, 2024 consisted of net non-cash charges of $22.3 million, consisting primarily of depreciation and amortization of $15.7 million and share-based compensation expense of $6.3 million, and a decrease in our net operating assets and liabilities of $14.1 million, partially offset by net loss of $14.1 million.
Current wording
Our cash provided by operating activities of $30.4 million for the nine months ended September 27, 2024 consisted of net non-cash charges of $33.9 million, consisting primarily of depreciation and amortization of $22.8 million and share-based compensation expense of $11.0 million, and a decrease in our net operating assets and liabilities of $13.4 million, partially offset by net loss of $16.9 million.
Previous wording
The decrease in our net operating assets and liabilities of $14.1 million during the six months ended June 28, 2024 was primarily due to a decrease in inventories of $14.4 million, partially offset by a decrease in accrued and other liabilities of $3.5 million.
Current wording
The decrease in our net operating assets and liabilities of $13.4 million during the nine months ended September 27, 2024 was primarily due to an increase in accounts payable of $22.7 million and a decrease in inventories of $6.5 million, partially offset by an increase in accounts receivable of $17.4 million.
Previous wording
The increase in cash provided by operating activities from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to favorable changes in the balances of our working capital accounts of $12.7 million, partially offset by a reduction in net income net of non-cash charges of $6.5 million.
Current wording
Compared to the nine months ended September 29, 2023, higher cash provided by operating activities of $10.3 million in the nine months ended September 27, 2024 was primarily due to $10.7 million in favorable changes in the balances of our working capital accounts.
Previous wording
Cash used in investing activities during the six months ended June 28, 2024 and June 30, 2023 consisted of capital expenditures. The reduction in capital expenditures from the six months ended June 30, 2023 to the six months ended June 28, 2024 was due to reduced factory capacity expansion projects.
Current wording
Cash used in investing activities during the nine months ended September 27, 2024 and September 29, 2023 consisted of capital expenditures.
Previous wording
Cash provided by financing activities during the six months ended June 28, 2024 consisted of 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 proceeds from share-based compensation activity of $1.4 million, partially offset by net payment on our credit facilities of $118.8 million. Cash used in financing activities during the six months ended June 30, 2023 consisted of net payments on our credit facilities of $8.8 million, partially offset by net proceeds from share-based compensation activity of $1.7 million.
Current wording
Cash provided by financing activities during the nine months ended September 27, 2024 consisted of 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 proceeds from share-based compensation activity of $1.4 million, partially offset by net payment on our credit facilities of $118.8 million. Cash used in financing activities during the nine months ended September 29, 2023 consisted of net payments on our credit facilities of $20.6 million, partially offset by net proceeds from share-based compensation activity of $3.3 million.