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FREMONT, Calif.--(BUSINESS WIRE)--Ichor Holdings, Ltd. (NASDAQ: ICHR), a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems for semiconductor capital equipment, today announced first quarter 2021 financial results. Highlights for the first quarter of 2021: We are very pleased to report today a record quarter for Ichor, with revenues at the high end of our expectations and increasing 8% over a very strong fourth quarter, commented Jeff Andreson, chief executive officer of Ichor. Industry conditions for wafer fab equipment have continued to strengthen for four straight quarters now, and, in turn, we have demonstrated strong execution in a challenging operating environment in order to ramp our business in response to customer demand. In Q1, we again exhibited the operating leverage in our business model, with quarter-on-quarter increases in both gross margin and operating margin, while also delivering another quarter of strong free cash flow generation. Mr. Andreson concluded, Our current visibility through the end of 2021 indicates a stronger Q2 compared to Q1, a stronger second half compared to the first half, and continued incremental improvements to our profitability. With industry growth currently expected to continue through both this year and next year, we believe Ichor is extremely well-positioned to continue to deliver strong revenue growth and operational leverage. Q1 2021 Q4 2020 Q1 2020 (dollars in thousands, except per share amounts) U.S. GAAP Financial Results: Net sales $ 264,566 $ 244,966 $ 220,028 Gross margin 14.9 % 14.0 % 13.1 % Operating margin 6.9 % 5.8 % 2.5 % Net income $ 14,638 $ 12,521 $ 3,399 Diluted EPS $ 0.51 $ 0.51 $ 0.15 Q1 2021 Q4 2020 Q1 2020 (dollars in thousands, except per share amounts) Non-GAAP Financial Results: Gross margin 16.1 % 15.8 % 13.8 % Operating margin 10.2 % 10.0 % 7.2 % Net income $ 21,725 $ 19,834 $ 12,058 Diluted EPS $ 0.76 $ 0.81 $ 0.52 U.S. GAAP Financial Results Overview For the first quarter of 2021, revenue was $264.6 million, net income was $14.6 million, and net income per diluted share (diluted EPS) was $0.51. This compares to revenue of $245.0 million and $220.0 million, net income of $12.5 million and $3.4 million, and diluted EPS of $0.51 and $0.15, for the fourth and first quarter of 2020, respectively. Non-GAAP Financial Results Overview For the first quarter of 2021, non-GAAP net income was $21.7 million and non-GAAP diluted EPS was $0.76. This compares to non-GAAP net income of $19.8 million and $12.1 million, and non-GAAP diluted EPS of $0.81 and $0.52, for the fourth and first quarter of 2020, respectively. Second Quarter 2021 Financial Outlook For the second quarter of 2021, we expect revenue to be in the range of $270 million to $300 million. We expect GAAP diluted EPS to be in the range of $0.59 to $0.76 and non-GAAP diluted EPS to be in the range of $0.77 to $0.93. 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 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 2021 with cash of $242.9 million, a decrease of $10.0 million from the end of the prior quarter. The decrease from the end of the prior quarter was primarily due to payments on long-term debt of $32.2 million, of which $30.0 million was a paydown on our revolving credit facility, and capital expenditures of $5.4 million, partially offset by cash provided by operating activities of $25.6 million and net proceeds from the issuance of shares under our share-based compensation plans of $2.0 million. Our cash provided by operating activities of $25.6 million for the first quarter of 2021 consisted of net income of $14.6 million, net non-cash charges of $8.8 million, and a decrease in our net operating assets and liabilities of $2.2 million. Net non-cash charges primarily consisted of depreciation and amortization of $5.7 million, share-based compensation of $2.4 million, and deferred taxes of $0.5 million. The increase in our net operating assets and liabilities was primarily due to an increase in accounts payable of $22.1 million, partially offset by increases in inventories and accounts receivable of $9.3 million and $7.7 million, respectively, and a decrease in accrued liabilities of $3.5 million. 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 managements perspective. Non-GAAP gross profit, operating income, and net income are defined as: gross profit, operating income, or net income excluding (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including 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. Free cash flow is defined as cash provided by 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 2021 results and business outlook on May 4, 2021, at 1:30 p.m. PDT. To listen to a live webcast of the call, please visit our investor relations website at ir.ichorsystems.com, or go to the live link at webcasts.eqs.com/ichorholdings20210504. To listen via telephone, please call (877) 407-0989 (domestic) or +1 (201) 389-0921 (international), conference ID: 13718578. 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 for semiconductor capital equipment. Our 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 manufacture precision-machined components, weldments, and proprietary products for use in fluid delivery systems for direct sales to our customers, as well as certain components for internal use in fluid delivery systems and for direct sales to our customers. This vertically-integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively. We are headquartered in Fremont, CA. ichorsystems.com. We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended March 26, 2021, December 25, 2020, and March 27, 2020 were all 13 weeks. References to the first quarter of 2021 and the fourth and first quarter of 2020 relate to the three-month periods 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," "projects," "plans," "believes," "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 2021, statements regarding the impacts of the COVID-19 pandemic, 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 March 5, 2021. 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) March 26, 2021 December 25, 2020 Assets Current assets: Cash $ 242,946 $ 252,899 Accounts receivable, net 108,674 100,977 Inventories 144,062 134,756 Prepaid expenses and other current assets 7,347 7,082 Total current assets 503,029 495,714 Property and equipment, net 46,849 41,811 Operating lease right-of-use assets 9,378 10,088 Other noncurrent assets 5,800 5,503 Deferred tax assets, net 5,812 6,324 Intangible assets, net 36,454 39,845 Goodwill 174,887 174,887 Total assets $ 782,209 $ 774,172 Liabilities and Shareholders Equity Current liabilities: Accounts payable $ 140,669 $ 116,664 Accrued liabilities 16,992 20,792 Other current liabilities 11,778 10,700 Current portion of long-term debt 8,750 8,750 Current portion of lease liabilities 4,895 5,128 Total current liabilities 183,084 162,034 Long-term debt, less current portion, net 159,576 191,522 Lease liabilities, less current portion 4,804 5,272 Deferred tax liabilities, net 109 109 Other non-current liabilities 3,574 3,546 Total liabilities 351,147 362,483 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; 28,070,251 and 27,907,077 shares outstanding, respectively; 32,507,690 and 32,344,516 shares issued, respectively) 3 3 Additional paid in capital 404,046 399,311 Treasury shares at cost (4,437,439 shares) (91,578 ) (91,578 ) Retained earnings 118,591 103,953 Total shareholders equity 431,062 411,689 Total liabilities and shareholders equity $ 782,209 $ 774,172 ICHOR HOLDINGS, LTD. Consolidated Statement of Operations (dollars in thousands, except per share amounts) (unaudited) Three Months Ended March 26, 2021 December 25, 2020 March 27, 2020 Net sales $ 264,566 $ 244,966 $ 220,028 Cost of sales 225,054 210,616 191,254 Gross profit 39,512 34,350 28,774 Operating expenses: Research and development 3,515 3,261 3,322 Selling, general, and administrative 14,349 13,516 16,618 Amortization of intangible assets 3,391 3,357 3,334 Total operating expenses 21,255 20,134 23,274 Operating income 18,257 14,216 5,500 Interest expense 1,919 1,999 2,374 Other expense (income), net 185 321 (31 ) Income before income taxes 16,153 11,896 3,157 Income tax expense (benefit) 1,515 (625 ) (242 ) Net income $ 14,638 $ 12,521 $ 3,399 Net income per share: Basic $ 0.52 $ 0.52 $ 0.15 Diluted $ 0.51 $ 0.51 $ 0.15 Shares used to compute net income per share: Basic 28,004,248 24,066,287 22,737,163 Diluted 28,729,112 24,370,434 23,181,127 ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended March 26, 2021 December 25, 2020 March 27, 2020 Cash flows from operating activities: Net income $ 14,638 $ 12,521 $ 3,399 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 5,657 6,217 5,737 Share-based compensation 2,415 2,452 2,865 Deferred income taxes 512 (1,751 ) 722 Amortization of debt issuance costs 242 242 243 Loss on sale of asset disposal group 3,575 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net (7,697 ) 3,144 (2,724 ) Inventories (9,306 ) 2,019 (16,684 ) Prepaid expenses and other assets 512 (1,604 ) (868 ) Accounts payable 22,101 9,184 (12,380 ) Accrued liabilities (3,467 ) 3,720 (568 ) Other liabilities 41 418 (778 ) Net cash provided by (used in) operating activities 25,648 40,137 (21,036 ) Cash flows from investing activities: Capital expenditures (5,400 ) (2,010 ) (2,470 ) Cash paid for acquisitions, net of cash acquired (5,035 ) Proceeds from sale of property and equipment 739 Net cash used in investing activities (5,400 ) (6,306 ) (2,470 ) Cash flows from financing activities: Issuance of ordinary shares, net of fees 139,372 Issuance of ordinary shares under share-based compensation plans 2,654 3,223 2,658 Employees' taxes paid upon vesting of restricted share units (667 ) (259 ) (993 ) Borrowings on revolving credit facility 5,000 Repayments on revolving credit facility (30,000 ) Repayments on term loan (2,188 ) (2,187 ) (2,188 ) Net cash provided by (used in) financing activities (30,201 ) 140,149 4,477 Net increase (decrease) in cash (9,953 ) 173,980 (19,029 ) Cash at beginning of period 252,899 78,919 60,612 Cash at end of period $ 242,946 $ 252,899 $ 41,583 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 1,842 $ 1,809 $ 2,136 Cash paid during the period for taxes, net of refunds $ 667 $ 71 $ 34 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 2,273 $ 369 $ 652 Right-of-use assets obtained in exchange for new operating lease liabilities $ 364 $ 314 $ 328 ICHOR HOLDINGS, LTD. Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit (dollars in thousands) (unaudited) Three Months Ended March 26, 2021 December 25, 2020 March 27, 2020 U.S. GAAP gross profit $ 39,512 $ 34,350 $ 28,774 Non-GAAP adjustments: Share-based compensation 306 267 196 Other non-recurring expense, net (1) 106 3,743 Contract settlement loss (2) 1,386 Facility shutdown costs (3) 2,399 332 Fair value adjustment to inventory from acquisitions (4) 211 Non-GAAP gross profit $ 42,534 $ 38,692 $ 30,356 U.S. GAAP gross margin 14.9 % 14.0 % 13.1 % Non-GAAP gross margin 16.1 % 15.8 % 13.8 % (1) Included in this amount for the first quarter of 2021 is primarily a non-recurring settlement charge. Included in this amount for the fourth quarter of 2020 is a $3.6 million loss on the sale of inventories and property and equipment from our Tampa, Florida facility. Additionally, fourth quarter 2020 includes costs associated with restructuring and transitioning key leadership roles. (2) During the first quarter of 2020, we reached a mutual settlement with the counterparty of a contract dispute and, accordingly, recorded a $1.4 million contract settlement loss to cost of sales. (3) Included in this amount for the first quarter of 2021 are write-off costs associated with inventories determined during the quarter to be obsolete and severance costs associated with affected employees of $2.2 million and $0.2 million, respectively. Included in this amount for the fourth quarter of 2020 are severance costs and accelerated depreciation charges associated with property and equipment expected to be abandoned at the time of facility closure of $0.1 million and $0.2 million, respectively. These charges relate to the planned closure of our manufacturing facility in Union City, California, which we ceased operations in shortly after the close of our 2021 first quarter. (4) As part of our purchase price allocation for our acquisition of a precision machining operation in Mexico in December 2020, we recorded acquired-inventory at fair value, resulting in a fair value step-up of $0.2 million. This was subsequently released to cost of sales in the first quarter of 2021 as acquired-inventory was sold. ICHOR HOLDINGS, LTD. Reconciliation of U.S. GAAP Operating Income to Non-GAAP Operating Income (dollars in thousands) (unaudited) Three Months Ended March 26, 2021 December 25, 2020 March 27, 2020 U.S. GAAP operating income $ 18,257 $ 14,216 $ 5,500 Non-GAAP adjustments: Amortization of intangible assets 3,391 3,357 3,334 Share-based compensation 2,415 2,452 2,865 Other non-recurring expense, net (1) 278 4,057 2,690 Contract settlement loss (2) 1,386 Facility shutdown costs (3) 2,510 446 Fair value adjustment to inventory from acquisitions (4) 211 Non-GAAP operating income $ 27,062 $ 24,528 $ 15,775 U.S. GAAP operating margin 6.9 % 5.8 % 2.5 % Non-GAAP operating margin 10.2 % 10.0 % 7.2 % (1) Included in this amount for the first quarter of 2021 are (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley (SOX) compliance program and (ii) a non-recurring settlement charge. Included in this amount for the fourth quarter of 2020 are primarily (i) a $3.6 million loss on the sale of inventories and property and equipment from our Tampa, Florida facility, (ii) non-capitalized costs incurred in connection with our implementation of a new ERP system and a SOX compliance program, and (iii) costs associated with restructuring and transitioning key leadership roles. Included in this amount for the first quarter of 2020 are (i) a $1.8 million bonus payment to our former CEO in connection with his transition to executive chairman, (ii) acquisition-related expenses, comprised primarily of expense associated with a two-year retention agreement between the Company and key management personnel of IAN (the IAN retention agreement), which we acquired in April 2018, and (iii) non-capitalizable costs incurred in connection with our implementation of a new ERP system and a SOX compliance program. (2) See footnote 2 on Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit. (3) Included in this amount for the first quarter of 2021 are write-off costs associated with inventories determined during the quarter to be obsolete and severance costs associated with affected employees of $2.2 million and $0.2 million, respectively. Included in this amount for the fourth quarter of 2020 are severance costs and accelerated depreciation charges associated with property and equipment expected to be abandoned at the time of facility closure of $0.1 million and $0.3 million, respectively. These charges relate to the planned closure of our manufacturing facility in Union City, California, which we ceased operations in shortly after the close of our 2021 first quarter. (4) See footnote 4 on Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit. 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 March 26, 2021 December 25, 2020 March 27, 2020 U.S. GAAP net income $ 14,638 $ 12,521 $ 3,399 Non-GAAP adjustments: Amortization of intangible assets 3,391 3,357 3,334 Share-based compensation 2,415 2,452 2,865 Other non-recurring expense, net (1) 278 4,057 2,690 Contract settlement loss (2) 1,386 Facility shutdown costs (3) 2,510 446 Fair value adjustment to inventory from acquisitions (4) 211 Tax adjustments related to non-GAAP adjustments (5) (1,718 ) (2,999 ) (1,616 ) Non-GAAP net income $ 21,725 $ 19,834 $ 12,058 U.S. GAAP diluted EPS $ 0.51 $ 0.51 $ 0.15 Non-GAAP diluted EPS $ 0.76 $ 0.81 $ 0.52 Shares used to compute diluted EPS 28,729,112 24,370,434 23,181,127 (1) See footnote 1 on Reconciliation of U.S. GAAP Operating Income to Non-GAAP Operating Income. (2) See footnote 2 on Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit. (3) See footnote 3 on Reconciliation of U.S. GAAP Operating Income to Non-GAAP Operating Income. (4) See footnote 4 on Reconciliation of U.S. GAAP Gross Profit to Non-GAAP Gross Profit. (5) 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 Operating Activities to Free Cash Flow (in thousands) (unaudited) Three Months Ended March 26, 2021 December 25, 2020 March 27, 2020 Net cash provided by (used in) operating activities $ 25,648 $ 40,137 $ (21,036 ) Capital expenditures (5,400 ) (2,010 ) (2,470 ) Free cash flow $ 20,248 $ 38,127 $ (23,506 )

Answer: Ichor Holdings, Ltd. Announces First Quarter 2021 Financial Results