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 fourth quarter and fiscal year 2023 financial results.

Fourth quarter 2023 highlights:

• Revenues of $203 million, at the upper end of the guidance range communicated in November;
• Gross margin of 10.0% on a GAAP basis and 10.4% on a non‑GAAP basis;
• Earnings per share ("EPS") of $(0.40) on a GAAP basis and $(0.06) on a non-GAAP basis;
• $38 million of cash flow from operations; and
• $32 million reduction in total debt outstanding during the quarter.

"Within a relatively stable demand environment, revenues at the upper end of guidance exceeded our expectations; however, product and customer mix became less favorable, resulting in a temporary setback in our strategies to deliver consistent improvement in gross margins," commented Jeff Andreson, chief executive officer. "We anticipate our revenues will continue at similar levels through mid-2024, during which time we expect to drive meaningful improvements in gross margins and profitability. Looking forward, we are encouraged by early indications of an improvement in overall fab investment levels as we progress through the year. Within the currently challenging business environment, we continue to focus our R&D investments on new products that will drive gross margin accretion and strong operating leverage as revenue levels rebound. We are engaged with multiple customers in various stages of tool evaluations, qualifications, and design wins that we anticipate will enable Ichor to outperform overall industry growth as spending levels improve, and we look forward to delivering improved year-over-year financial performance, both for this year as well as the expected strong growth year for our industry in 2025."

For the fourth quarter of 2023, revenue was $203.5 million, net loss was $11.9 million, and net loss per diluted share (“diluted EPS”) was $0.40. This compares to revenue of $196.8 million and $301.7 million, net income (loss) of $(10.4) million and $14.2 million, and diluted EPS of $(0.36) and $0.49, for the third quarter of 2023 and fourth quarter of 2022, respectively.

For 2023, revenue was $811.1 million, net loss was $43.0 million, and diluted EPS was $(1.47). This compares to revenue of $1,280.1 million, net income of $72.8 million, and diluted EPS of $2.51 for 2022.

For the fourth quarter of 2023, non-GAAP net loss was $1.7 million and non-GAAP diluted EPS was $(0.06). This compares to non-GAAP net income of $2.1 million and $21.0 million, and non-GAAP diluted EPS of $0.07 and $0.72, for the third quarter of 2023 and fourth quarter of 2022, respectively.

For 2023, non-GAAP net income was $12.3 million and non-GAAP diluted EPS was $0.42. This compares to non-GAAP net income of $104.9 million, and non-GAAP diluted EPS of $3.62 for 2022.

For the first quarter of 2024, we expect revenue to be in the range of $190 million to $210 million. We expect GAAP diluted EPS to be in the range of $(0.24) to $(0.14) and non-GAAP diluted EPS to be in the range of $(0.05) to $0.05.

This outlook for non‑GAAP diluted EPS excludes amortization of intangible assets of approximately $2.1 million and share-based compensation expense of approximately $3.9 million, as well as the related income tax effects. Non-GAAP diluted EPS should be considered in addition to, but not as a substitute for, our financial information presented in accordance with GAAP.

We ended the fourth quarter of 2023 with cash and cash equivalents of $80.0 million, an increase of $4.0 million from the prior quarter, and a decrease of $6.5 million from 2022.

The increase of $4.0 million in the fourth quarter was primarily due to net cash provided by operating activities of $37.6 million, partially offset by net payments on our credit facilities of $31.9 million.

The decrease of $6.5 million in 2023 was primarily due to net payments on our credit facilities of $52.5 million and capital expenditures of $15.5 million, partially offset by cash provided by operating activities of $57.6 million.

Our cash provided by operating activities of $57.6 million in 2023 consisted of net loss of $43.0 million and net non-cash charges of $61.7 million, which consisted primarily of depreciation and amortization of $34.6 million, share-based compensation expense of $17.3 million, and deferred income taxes of $9.3 million.

The decrease in our net operating assets and liabilities of $38.9 million in 2023 was primarily due to a decrease in accounts receivable and inventories of $69.6 million and $37.8 million, respectively, partially offset by a decrease in accounts payable and accrued and other liabilities of $51.0 million and $27.7 million, respectively.

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 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 (loss), or net income (loss), respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income (loss), and net income (loss), respectively; and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including the impact of deferred tax asset valuation allowances. All non-GAAP adjustments are presented on a gross basis; the related income tax effects, including current and deferred income tax expense, are included in the adjustment line under the heading "Tax adjustments related to non-GAAP adjustments." Non-GAAP diluted 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 other discrete or infrequent charges and gains that are outside of normal business operations.

We will conduct a conference call to discuss our fourth quarter and fiscal year 2023 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://www.webcast-eqs.com/ichor020624/en.

To listen via telephone, please call (877) 407‑0989 (domestic) or +1 (201) 389‑0921 (international), conference ID: 13743811. After the call, an on-demand replay will be available at the same webcast link.

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-month periods ended December 29, 2023, September 29, 2023, and December 30, 2022 were each 13 weeks. References to the fourth quarter of 2023, third quarter of 2023, and fourth quarter of 2022 relate to the three-month periods then ended. Our fiscal years ended December 29, 2023 and December 30, 2022 are each 52 weeks. References to 2023 and 2022 relate to the fiscal years then ended.

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “contemplate,” “designed,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “intend,” “may,” “outlook,” “plan,” “predict,” “project,” “see,” “seek,” “target,” “would” and similar expressions or variations or negatives of these words are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words".

Examples of forward-looking statements include, but are not limited to, statements regarding our outlook for our first fiscal quarter of 2024, statements regarding the current business environment, revenue levels in 2024, manufacturers’ investment in water fabrication equipment, our investment in research and development of new products, acquiring new business, and company and industry growth and performance in 2024 and 2025, as well as any other statement that does not directly relate to any historical fact. Such forward-looking statements are based on our management’s current expectations about future events as of the date hereof and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Our actual results and outcomes could differ materially from those included in these forward-looking statements as a result of various factors, including, but not limited to: (1) geopolitical, economic and market conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, currency fluctuations, challenges in the supply chain and any disruptions in the global economy as a result of the conflicts in Ukraine and the Middle East, (2) dependence on expenditures by manufacturers and cyclical downturns in the semiconductor capital equipment industry, (3) reliance on a very small number of original equipment manufacturers for a significant portion of sales, (4) negotiating leverage held by our customers, (5) competitiveness and rapid evolution of the industries in which we participate, (6) risks associated with weakness in the global economy and geopolitical instability, (7) keeping pace with developments in the industries we serve and with technological innovation generally, (8) designing, developing and introducing new products that are accepted by original equipment manufacturers in order to retain our existing customers and obtain new customers, (9) managing our manufacturing and procurement process effectively, (10) defects in our products that could damage our reputation, decrease market acceptance and result in potentially costly litigation, and (11) our dependence on a limited number of suppliers. 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 for the year ended December 30, 2022 and any other periodic reports that we may file 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.

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