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Ichor Holdings, Ltd. Announces Second Quarter 2020 Financial Results

August 03, 2020 16:05:00

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 second quarter 2020 financial results.

Highlights for the second quarter of 2020:

  • Revenues of $222 million, up 59% year-over-year and our fifth consecutive quarter of revenue growth;
  • Net earnings of $0.30 per diluted share on a GAAP basis and $0.54 on a non-GAAP basis; and
  • For the first half of 2020, revenues increased 59% and earnings per share, on a GAAP and non-GAAP basis, increased by over 120% compared to the first half of 2019.

“In light of the constraints placed on our global operations and supply chain as a result of COVID‑19, we are very pleased to report sequential increases in our quarterly revenues, gross margin, operating margin, and earnings per share for the second quarter,” commented Jeff Andreson, chief executive officer of Ichor. “Our foremost priority is to ensure the health and safety of our employees and their families, and our performance in the second quarter is testament to the dedication, commitment, and ingenuity of our workforce in delivering exceptional service to our customers during this unprecedented and challenging time. Our operational capabilities have largely recovered from the significant constraints experienced earlier this year, but we remain vigilant in continuing to take all appropriate actions to protect our people and safely maintain business operations globally.” Mr. Andreson concluded, “Our continued market share gains are evident in our year-to-date revenue growth, which is significantly greater than the rate of growth for the overall industry. At the same time, our year-over-year growth in earnings per share for the first half of 2020 is more than double the rate of our revenue growth, demonstrating strong operational performance and continued execution toward our stated objective to grow earnings faster than revenues.”

 

 

Q2 2020

 

 

Q1 2020

 

 

Q2 2019

 

 

 

(dollars in thousands, except per share amounts)

 

U.S. GAAP Financial Results:

 

Net sales

 

$

221,564

 

 

$

220,028

 

 

$

139,195

 

Gross profit percent

 

 

13.2

%

 

 

13.1

%

 

 

14.0

%

Operating income percent

 

 

4.2

%

 

 

2.5

%

 

 

2.2

%

Net income

 

$

6,811

 

 

$

3,399

 

 

$

336

 

Diluted EPS

 

$

0.30

 

 

$

0.15

 

 

$

0.01

 

 

 

Q2 2020

 

 

Q1 2020

 

 

Q2 2019

 

 

 

(dollars in thousands, except per share amounts)

 

Non-GAAP Financial Results:

 

Net sales

 

$

221,564

 

 

$

220,028

 

 

$

139,195

 

Gross profit percent

 

 

14.0

%

 

 

13.8

%

 

 

14.2

%

Operating income percent

 

 

7.5

%

 

 

7.2

%

 

 

5.9

%

Adjusted net income

 

$

12,569

 

 

$

12,058

 

 

$

5,118

 

Diluted EPS

 

$

0.54

 

 

$

0.52

 

 

$

0.23

 

U.S. GAAP Financial Results Overview

For the second quarter of 2020, revenue was $221.6 million, net income was $6.8 million, and net income per diluted share (“diluted EPS”) was $0.30. This compares to revenue of $220.0 million and $139.2 million, net income of $3.4 million and $0.3 million, and diluted EPS of $0.15 and $0.01, for the first quarter of 2020 and second quarter of 2019, respectively.

Non-GAAP Financial Results Overview

For the second quarter of 2020, non-GAAP net income was $12.6 million and non-GAAP diluted EPS was $0.54. This compares to non-GAAP net income of $12.1 million and $5.1 million, and non-GAAP diluted EPS of $0.52 and $0.23, for the first quarter of 2020 and second quarter of 2019, respectively.

Third Quarter 2020 Financial Outlook

For the third quarter of 2020, we expect revenue to be in the range of $210 million to $240 million. We expect GAAP diluted EPS to be in the range of $0.27 to $0.48 and non-GAAP diluted EPS to be in the range of $0.50 to $0.70.

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.

COVID-19 Pandemic and Market Conditions Update

The COVID‑19 pandemic and related economic repercussions have created, and are expected to continue to create, significant volatility, uncertainty, and turmoil in our industry. While we are currently not subject to any site-wide government shutdowns, “social distancing” guidelines are resulting, and will continue to result in, reduced factory capacity. In addition, an increase in direct costs within our factories associated with employee personal protective equipment (“PPE”), facility cleaning and layout changes, together with increases in logistics costs and employee labor costs, as well as other operating inefficiencies have resulted in, and may continue to result in, lower revenues and operating margins. The extent and duration of these impacts cannot be specifically quantified given the dynamic nature and breadth of the pandemic’s impact on our operations and that of our customers and suppliers.

Balance Sheet and Cash Flow Results

We ended the second quarter of 2020 with cash of $57.0 million, an increase of $15.4 million from the end of the prior quarter, and a decrease of $3.6 million from December 27, 2019. The increase from the end of the prior quarter was primarily due to net proceeds from our credit facilities of $22.8 million, partially offset by capital expenditures of $3.2 million and cash used in operating activities of $4.1 million. The decrease from December 27, 2019 was primarily due to cash used in operating activities of $25.2 million and capital expenditures of $5.7 million, partially offset by net proceeds from our credit facilities of $25.6 million and net proceeds from the issuance of shares under our share-based compensation plans of $1.6 million.

Our cash used in operating activities of $25.2 million for the six months ended June 26, 2020 consisted of net income of $10.2 million and net non-cash charges of $17.5 million, offset by an increase in our net operating assets and liabilities of $52.9 million. Net non-cash charges primarily consisted of depreciation and amortization of $11.7 million and share-based compensation of $5.0 million. The increase in our net operating assets and liabilities was primarily due to an increase in inventories of $22.2 million, an increase in accounts receivable of $20.0 million, and a decrease of accounts payable of $13.7 million. The increase in inventories was primarily due to an increase in purchases to support increased volume, and the increase in accounts receivable was primarily due to increased sales volume during the quarter compared to the fourth quarter of 2019, as well as the timing of second quarter sales being heavily back-end weighted.

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 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 second quarter 2020 results and business outlook on August 3, 2020, 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/ichorholdings20200803. To listen via telephone, please call (877) 407‑0989 (domestic) or +1 (201) 389‑0921 (international), conference ID: 13706824.

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 June 26, 2020, March 27, 2020, and June 28, 2019 were all 13 weeks. References to the first and second quarter of 2020 and the second quarter of 2019 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 third fiscal quarter of 2020, 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 6, 2020, and subsequent filings with the SEC.

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)

 

 

 

June 26,
2020

 

 

December 27,
2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

56,969

 

 

$

60,612

 

Accounts receivable, net

 

 

104,859

 

 

 

84,849

 

Inventories, net

 

 

149,190

 

 

 

127,037

 

Prepaid expenses and other current assets

 

 

6,371

 

 

 

4,449

 

Total current assets

 

 

317,389

 

 

 

276,947

 

Property and equipment, net

 

 

45,631

 

 

 

44,541

 

Operating lease right-of-use assets

 

 

12,019

 

 

 

14,198

 

Other noncurrent assets

 

 

1,116

 

 

 

1,094

 

Deferred tax assets, net

 

 

4,354

 

 

 

4,738

 

Intangible assets, net

 

 

45,357

 

 

 

52,027

 

Goodwill

 

 

173,010

 

 

 

173,010

 

Total assets

 

$

598,876

 

 

$

566,555

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

118,278

 

 

$

131,578

 

Accrued liabilities

 

 

15,974

 

 

 

12,814

 

Other current liabilities

 

 

6,996

 

 

 

5,233

 

Current portion of long-term debt

 

 

8,750

 

 

 

8,750

 

Current portion of lease liabilities

 

 

5,359

 

 

 

5,492

 

Total current liabilities

 

 

155,357

 

 

 

163,867

 

Long-term debt, less current portion, net

 

 

195,413

 

 

 

169,304

 

Lease liabilities, less current portion

 

 

7,038

 

 

 

9,081

 

Deferred tax liabilities

 

 

210

 

 

 

210

 

Other non-current liabilities

 

 

2,668

 

 

 

2,677

 

Total liabilities

 

 

360,686

 

 

 

345,139

 

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; 22,868,999 and 22,618,708 shares outstanding, respectively; 27,306,438 and 27,056,147 shares issued, respectively)

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

248,882

 

 

 

242,318

 

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

 

 

(91,578

)

 

 

(91,578

)

Retained earnings

 

 

80,884

 

 

 

70,674

 

Total shareholders’ equity

 

 

238,190

 

 

 

221,416

 

Total liabilities and shareholders’ equity

 

$

598,876

 

 

$

566,555

 

ICHOR HOLDINGS, LTD.

Consolidated Statement of Operations

(dollars in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

Net sales

 

$

221,564

 

 

$

220,028

 

 

$

139,195

 

 

$

441,592

 

 

$

277,026

 

Cost of sales

 

 

192,302

 

 

 

191,254

 

 

 

119,662

 

 

 

383,556

 

 

 

237,270

 

Gross profit

 

 

29,262

 

 

 

28,774

 

 

 

19,533

 

 

 

58,036

 

 

 

39,756

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,509

 

 

 

3,322

 

 

 

2,634

 

 

 

6,831

 

 

 

5,025

 

Selling, general, and administrative

 

 

13,113

 

 

 

16,618

 

 

 

10,685

 

 

 

29,731

 

 

 

22,443

 

Amortization of intangible assets

 

 

3,336

 

 

 

3,334

 

 

 

3,202

 

 

 

6,670

 

 

 

6,339

 

Total operating expenses

 

 

19,958

 

 

 

23,274

 

 

 

16,521

 

 

 

43,232

 

 

 

33,807

 

Operating income

 

 

9,304

 

 

 

5,500

 

 

 

3,012

 

 

 

14,804

 

 

 

5,949

 

Interest expense

 

 

2,302

 

 

 

2,374

 

 

 

2,762

 

 

 

4,676

 

 

 

5,530

 

Other expense (income), net

 

 

2

 

 

 

(31

)

 

 

7

 

 

 

(29

)

 

 

31

 

Income before income taxes

 

 

7,000

 

 

 

3,157

 

 

 

243

 

 

 

10,157

 

 

 

388

 

Income tax expense (benefit)

 

 

189

 

 

 

(242

)

 

 

(93

)

 

 

(53

)

 

 

(1,466

)

Net income

 

$

6,811

 

 

$

3,399

 

 

$

336

 

 

$

10,210

 

 

$

1,854

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.30

 

 

$

0.15

 

 

$

0.02

 

 

$

0.45

 

 

$

0.08

 

Diluted

 

$

0.30

 

 

$

0.15

 

 

$

0.01

 

 

$

0.44

 

 

$

0.08

 

Shares used to compute net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,836,400

 

 

 

22,737,163

 

 

 

22,395,308

 

 

 

22,786,782

 

 

 

22,332,568

 

Diluted

 

 

23,066,976

 

 

 

23,181,127

 

 

 

22,663,053

 

 

 

23,099,946

 

 

 

22,596,412

 

ICHOR HOLDINGS, LTD.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,811

 

 

$

3,399

 

 

$

336

 

 

$

10,210

 

 

$

1,854

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,925

 

 

 

5,737

 

 

 

5,250

 

 

 

11,662

 

 

 

10,460

 

Share-based compensation

 

 

2,141

 

 

 

2,865

 

 

 

1,475

 

 

 

5,006

 

 

 

2,805

 

Deferred income taxes

 

 

(338

)

 

 

722

 

 

 

(175

)

 

 

384

 

 

 

(172

)

Amortization of debt issuance costs

 

 

241

 

 

 

243

 

 

 

242

 

 

 

484

 

 

 

454

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(17,286

)

 

 

(2,724

)

 

 

12,326

 

 

 

(20,010

)

 

 

(1,284

)

Inventories, net

 

 

(5,469

)

 

 

(16,684

)

 

 

5,698

 

 

 

(22,153

)

 

 

12,633

 

Prepaid expenses and other assets

 

 

1,431

 

 

 

(868

)

 

 

1,701

 

 

 

563

 

 

 

3,058

 

Accounts payable

 

 

(1,337

)

 

 

(12,380

)

 

 

(5,071

)

 

 

(13,717

)

 

 

(4,176

)

Accrued liabilities

 

 

3,706

 

 

 

(568

)

 

 

1,288

 

 

 

3,138

 

 

 

(706

)

Other liabilities

 

 

28

 

 

 

(778

)

 

 

(1,987

)

 

 

(750

)

 

 

(4,266

)

Net cash provided by (used in) operating activities

 

 

(4,147

)

 

 

(21,036

)

 

 

21,083

 

 

 

(25,183

)

 

 

20,660

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(3,195

)

 

 

(2,470

)

 

 

(1,335

)

 

 

(5,665

)

 

 

(6,117

)

Cash paid for intangible assets

 

 

 

 

 

 

 

 

(8,147

)

 

 

 

 

 

(8,147

)

Net cash used in investing activities

 

 

(3,195

)

 

 

(2,470

)

 

 

(9,482

)

 

 

(5,665

)

 

 

(14,264

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of ordinary shares under share-based compensation plans

 

 

308

 

 

 

2,658

 

 

 

495

 

 

 

2,966

 

 

 

2,562

 

Employees' taxes paid upon vesting of restricted share units

 

 

(393

)

 

 

(993

)

 

 

(63

)

 

 

(1,386

)

 

 

(174

)

Repurchase of ordinary shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,599

)

Borrowings on revolving credit facility

 

 

25,000

 

 

 

5,000

 

 

 

 

 

 

30,000

 

 

 

5,000

 

Repayments on revolving credit facility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,000

)

Repayments on term loan

 

 

(2,187

)

 

 

(2,188

)

 

 

(2,188

)

 

 

(4,375

)

 

 

(6,563

)

Net cash provided by (used in) financing activities

 

 

22,728

 

 

 

4,477

 

 

 

(1,756

)

 

 

27,205

 

 

 

(8,774

)

Net increase (decrease) in cash

 

 

15,386

 

 

 

(19,029

)

 

 

9,845

 

 

 

(3,643

)

 

 

(2,378

)

Cash at beginning of period

 

 

41,583

 

 

 

60,612

 

 

 

31,611

 

 

 

60,612

 

 

 

43,834

 

Cash at end of period

 

$

56,969

 

 

$

41,583

 

 

$

41,456

 

 

$

56,969

 

 

$

41,456

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

2,104

 

 

$

2,136

 

 

$

2,500

 

 

$

4,240

 

 

$

5,755

 

Cash paid during the period for taxes, net of refunds

 

$

 

 

$

34

 

 

$

1,517

 

 

$

34

 

 

$

1,624

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures included in accounts payable

 

$

1,191

 

 

$

652

 

 

$

1,170

 

 

$

1,191

 

 

$

1,170

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

 

 

$

328

 

 

$

566

 

 

$

328

 

 

$

566

 

ICHOR HOLDINGS, LTD.

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

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

U.S. GAAP gross profit

 

$

29,262

 

 

$

28,774

 

 

$

19,533

 

 

$

58,036

 

 

$

39,756

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

239

 

 

 

196

 

 

 

181

 

 

 

435

 

 

 

323

 

Other non-recurring expense, net (1)

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

129

 

Contract settlement loss (2)

 

 

 

 

 

1,386

 

 

 

 

 

 

1,386

 

 

 

 

Facility shutdown costs (3)

 

 

1,475

 

 

 

 

 

 

 

 

 

1,475

 

 

 

 

Non-GAAP gross profit

 

$

30,976

 

 

$

30,356

 

 

$

19,740

 

 

$

61,332

 

 

$

40,208

 

U.S. GAAP gross margin

 

 

13.2

%

 

 

13.1

%

 

 

14.0

%

 

 

13.1

%

 

 

14.4

%

Non-GAAP gross margin

 

 

14.0

%

 

 

13.8

%

 

 

14.2

%

 

 

13.9

%

 

 

14.5

%

(1)

 

Included in this amount for all periods presented are 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)

 

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we expect to complete by the end of our 2020 fiscal year. Included in this amount are inventory write-off costs of $1.3 million and severance costs of $0.2 million associated with the affected employees.

ICHOR HOLDINGS, LTD.

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

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

U.S. GAAP operating income

 

$

9,304

 

 

$

5,500

 

 

$

3,012

 

 

$

14,804

 

 

$

5,949

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

3,336

 

 

 

3,334

 

 

 

3,202

 

 

 

6,670

 

 

 

6,339

 

Share-based compensation

 

 

2,141

 

 

 

2,865

 

 

 

1,475

 

 

 

5,006

 

 

 

2,805

 

Other non-recurring expense, net (1)

 

 

195

 

 

 

2,690

 

 

 

496

 

 

 

2,885

 

 

 

1,847

 

Contract settlement loss (2)

 

 

 

 

 

1,386

 

 

 

 

 

 

1,386

 

 

 

 

Facility shutdown costs (3)

 

 

1,536

 

 

 

 

 

 

 

 

 

1,536

 

 

 

 

Non-GAAP operating income

 

$

16,512

 

 

$

15,775

 

 

$

8,185

 

 

$

32,287

 

 

$

16,940

 

U.S. GAAP operating margin

 

 

4.2

%

 

 

2.5

%

 

 

2.2

%

 

 

3.4

%

 

 

2.1

%

Non-GAAP operating margin

 

 

7.5

%

 

 

7.2

%

 

 

5.9

%

 

 

7.3

%

 

 

6.1

%

(1)

 

Included in this amount for the first and second 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 Sarbanes-Oxley (“SOX”) compliance program.

 

 

Included in this amount for the second quarter of 2019 are (i) acquisition-related expenses, comprised primarily of expense associated with a two year retention agreement between the Company and key management personnel of IAN, which we acquired in April 2018 and (ii) costs associated with restructuring and transitioning key leadership roles.

 

 

Included in this amount for the six months ended June 28, 2019 are (i) acquisition-related expenses, comprised primarily of a charge to expense from the extinguishment of an indemnification asset related to our acquisition of Cal‑Weld in 2017 and expense associated with a two year retention agreement between the Company and key management personnel of IAN, (ii) costs incurred in connection with reorganizing our key personnel and leadership, and (iii) costs incurred with implementing a new ERP system.

(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)

 

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we expect to complete by the end of our 2020 fiscal year. Included in this amount are inventory write-off costs of $1.3 million and severance costs of $0.2 million associated with the affected employees.

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

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

U.S. GAAP net income

 

$

6,811

 

 

$

3,399

 

 

$

336

 

 

$

10,210

 

 

$

1,854

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

3,336

 

 

 

3,334

 

 

 

3,202

 

 

 

6,670

 

 

 

6,339

 

Share-based compensation

 

 

2,141

 

 

 

2,865

 

 

 

1,475

 

 

 

5,006

 

 

 

2,805

 

Other non-recurring expense, net (1)

 

 

195

 

 

 

2,690

 

 

 

496

 

 

 

2,885

 

 

 

1,847

 

Contract settlement loss (2)

 

 

 

 

 

1,386

 

 

 

 

 

 

1,386

 

 

 

 

Facility shutdown costs (3)

 

 

1,536

 

 

 

 

 

 

 

 

 

1,536

 

 

 

 

Tax adjustments related to non-GAAP adjustments (4)

 

 

(1,450

)

 

 

(1,616

)

 

 

(391

)

 

 

(3,066

)

 

 

(2,176

)

Non-GAAP net income

 

$

12,569

 

 

$

12,058

 

 

$

5,118

 

 

$

24,627

 

 

$

10,669

 

U.S. GAAP diluted EPS

 

$

0.30

 

 

$

0.15

 

 

$

0.01

 

 

$

0.44

 

 

$

0.08

 

Non-GAAP diluted EPS

 

$

0.54

 

 

$

0.52

 

 

$

0.23

 

 

$

1.07

 

 

$

0.47

 

Shares used to compute diluted EPS

 

 

23,066,976

 

 

 

23,181,127

 

 

 

22,663,053

 

 

 

23,099,946

 

 

 

22,596,412

 

(1)

 

See footnote 1 on preceding table.

(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)

 

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we expect to complete by the end of our 2020 fiscal year. Included in this amount are inventory write-off costs of $1.3 million and severance costs of $0.2 million associated with the affected employees.

(4)

 

Adjusts U.S. GAAP income tax 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

 

 

Six Months Ended

 

 

 

June 26,
2020

 

 

March 27,
2020

 

 

June 28,
2019

 

 

June 26,
2020

 

 

June 28,
2019

 

Net cash provided by (used in) operating activities

 

$

(4,147

)

 

$

(21,036

)

 

$

21,083

 

 

$

(25,183

)

 

$

20,660

 

Capital expenditures

 

 

(3,195

)

 

 

(2,470

)

 

 

(1,335

)

 

 

(5,665

)

 

 

(6,117

)

Free cash flow

 

$

(7,342

)

 

$

(23,506

)

 

$

19,748

 

 

$

(30,848

)

 

$

14,543

 

 

Larry Sparks, CFO 510-897-5200
Claire McAdams, IR & Strategic Initiatives 530-265-9899
IR@ichorsystems.com

Source: Ichor Holdings, Ltd.