# ICHOR HOLDINGS, LTD. (ICHR) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ICHOR HOLDINGS, LTD.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1652535/000162828025006992/ichr-20241227.htm
Accession: 0001628280-25-006992
Filing date: 2025-02-21
Report date: 2024-12-27
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ICHR/
All MD&A years: /company/ICHR/mda/
Previous year: /company/ICHR/mda/fy2023/ (FY 2023)
Next year: /company/ICHR/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled Item 1A. – Risk Factors. For a comparison of our financial condition, results of operations, and cash flows for 2023 to 2022, refer to Part II, Item 7. in our 2023 Annual Report on Form 10‑K, which was filed with the SEC on February 23, 2024.

Overview

We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our primary product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and 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 systems and 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, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products for the commercial space, aerospace, defense, medical device, and general-industrial industries. This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.

Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes. Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes. Most original equipment manufacturers (“OEMs”) outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us. Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems allows OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes. Outsourcing enables OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us.

We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico.

34

Table of Contents

The following table summarizes key financial information for the periods indicated. Amounts are presented in accordance with GAAP unless explicitly identified as being a non-GAAP metric. For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this Annual Report on Form 10-K.

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["","(dollars in thousands, except per share amounts)"],["Net sales","$","849,040","","","$","811,120"],["Gross margin","12.2","%","","12.7","%"],["Gross margin, non-GAAP","12.7","%","","13.4","%"],["Operating margin","(0.9)","%","","(1.3)","%"],["Operating margin, non-GAAP","2.2","%","","2.9","%"],["Net loss","$","(20,820)","","","$","(42,985)"],["Net income, non-GAAP","$","5,888","","","$","12,257"],["Diluted EPS","$","(0.64)","","","$","(1.47)"],["Diluted EPS, non-GAAP","$","0.18","","","$","0.42"]]
[[/GREPCENT_TABLE]]

Key Factors Affecting Our Business

Investment in Semiconductor Manufacturing Equipment

The design and manufacturing of semiconductor devices is constantly evolving and becoming more complex in order to achieve greater performance and efficiency. To keep pace with these changes, OEMs need to refine their existing products and invest in developing new products. In addition, semiconductor device manufacturers will continue to invest in new wafer fabrication equipment to expand their production capacity and to support new manufacturing processes.

Outsourcing of Subsystems by Semiconductor OEMs

Faced with increasing manufacturing complexities, more complex subsystems, shorter product lead times, shorter industry spend cycles, and significant capital requirements, outsourcing of subsystems and components by OEMs has continued to grow. In the past two decades, OEMs have outsourced most of their gas delivery systems to suppliers such as us. OEMs have also started to outsource their chemical delivery systems in recent years. Our results will be affected by the degree to which outsourcing of these fluid delivery systems by OEMs continues to grow.

Cyclicality of Semiconductor Capital Equipment Industry

Our business is subject to the cyclicality of the capital expenditures of the semiconductor industry, which drives cyclicality in the semiconductor capital equipment industry in which we operate. In 2024, we derived over 90% of our sales from the semiconductor capital equipment industry. Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, increased tariffs and trade restrictions, demand for semiconductor products, pricing, and other factors. In the past, these fluctuations have resulted in significant variations in the levels of spending within the semiconductor capital equipment industry, and as a result, our results of operations. The cyclicality of the semiconductor industry will continue to impact our results of operations in the future.

35

Table of Contents

Customer Concentration

The number of capital equipment manufacturers for the semiconductor device industry is significantly consolidated, resulting in a small number of large manufacturers. Our customers are a significant component of this consolidation, resulting in our sales being concentrated in a few customers. For 2024, two customers with individual sales over 10%, Lam Research and Applied Materials, accounted for a combined 73% of total sales. Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share. Although we do not have any long-term contracts that require customers to place certain order quantities with us, Lam Research and Applied Materials have been our customers for over 20 years.

Macroeconomic Conditions

The semiconductor industry is cyclical in nature and is impacted by macroeconomic factors in the markets and industries in which we operate. Such factors include market trends, supply chain shortages, availability of skilled labor, geopolitical tension and retaliatory trade policies, and other factors. The industry entered a cyclical downturn in the fourth quarter of 2022 for the primary semiconductor equipment markets we serve, resulting in weakened customer demand. 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 the markets we primarily serve, in particular lower spending levels for deposition and etch equipment, has resulted in continued lower demand from our customers over the past two years relative to the total semiconductor capital equipment market, despite incremental growth in demand. 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.

Industry overcapacity and a number of macroeconomic factors may contribute to a 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 may have varying levels of unfavorable consequences to our business. We are continually monitoring the global trade environment and any changes in tariffs, trade agreements, restrictions or sanctions that may impact us, our manufacturing facilities, or our customers. President Trump has issued executive orders directing the U.S. to impose new tariffs on imports from China, temporarily stayed an order imposing new tariffs on Canada and Mexico, issued the imposition of tariffs on imported steel and aluminum products, and may impose additional tariffs on these or other nations. Given our manufacturing presence in Mexico, we are currently evaluating the potential impact of potential tariffs on Mexican imports on our business.

While challenging macroeconomic conditions have impacted and will continue to impact our business and customers in the near term, we believe demand for semiconductors, semiconductor capital equipment, and our products will return to growth, fueled by the long-term growing need for more semiconductor productive capacity and enhanced process technologies.

Components of Our Results of Operations

The following discussion sets forth certain components of our statements of operations as well as significant factors impacting those items.

Net sales

We generate sales primarily from the design, manufacture, and sale of subsystems and components for semiconductor capital equipment. Sales are recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the promised good has transferred.

36

Table of Contents

Cost of sales, gross profit, and gross margin

Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment. Our business has a variable cost structure, with fixed costs comprising a smaller percentage of cost of sales compared to variable costs. Our existing global manufacturing plant capacity is scalable, and we are able to adjust to increased customer demand for our products without significant additional capital investment. We operate our business in this manner to avoid having excessive fixed costs during a cyclical downturn, while retaining flexibility to expand our production volumes during periods of growth. However, during a cyclical downturn, fixed costs become a larger percentage of cost of sales, which could result in a decrease to gross margin. Additionally, since the gross margin on each of our products can differ, our overall gross margin as a percentage of our sales can change based on the mix of products we sell in any period.

Operating expenses

Our operating expenses primarily include research and development and sales, general, and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, and share-based compensation. Operating expenses also include overhead costs for facilities, IT, and depreciation. In addition, our operating expenses include amortization expense of acquired intangible assets.

Research and development – Research and development expense consists primarily of activities related to product design and other development activities, new component testing and evaluation, and test equipment and fixture development. We expect research and development expense will continue to increase in absolute dollars due to continued development of our own intellectual property and product offerings for existing and new customer markets and increases in our customers’ demand for new product designs.

Selling, general, and administrative – Selling expense consists primarily of salaries and commissions paid to our sales and sales support employees and other costs related to the sales of our products. General and administrative expense consists primarily of salaries, professional fees, and overhead associated with our administrative staff. We expect selling expenses to increase in absolute dollars as we continue to invest in expanding our markets and as we expand our international operations. We expect general and administrative expenses to also increase in absolute dollars as our business grows, due to an increase in employee-related costs, regulatory compliance, and accounting-related expenses.

Amortization of intangibles – Amortization of intangible assets is related to our finite-lived intangible assets and is computed using the straight-line method over the estimated economic life of the asset.

Interest expense, net

Interest expense, net of interest income on our cash deposits, consists of interest on our outstanding debt under our credit facilities, including amortization of debt issuance costs, and any other indebtedness we may incur in the future. Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors and can result in increased interest expense in periods of rising interest rates.

Other expense, net

The functional currency of our international operations is the U.S. dollar. Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on the accompanying consolidated statements of operations. Substantially all of our sales contracts, and most of our agreements with third-party suppliers, provide for pricing and payment in U.S. dollars. Accordingly, these transactions are not subject to material exchange rate fluctuations.

37

Table of Contents

Income tax expense

Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which expires in 2026. In 2024, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $7.1 million. During 2024, we maintained a valuation allowance against our U.S. state and federal deferred tax assets; therefore, we are not recording income tax benefits related to our U.S. GAAP losses. Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. The majority of our inventories are valued on a standard cost basis, which approximates actual costs on a first-in, first-out basis. The remainder of our inventories are valued on an average cost basis, which approximates actual costs on a first-in, first-out basis. Quarterly, we assess the value of our inventory and periodically write it down for excess quantities or obsolescence to its estimated net realizable value. This assessment is based on estimated future consumption compared to inventory quantities on-hand. The estimate for future consumption is based on how assumptions of historical consumption, recency of purchases, backlog, and other factors indicate future consumption. Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis. During 2024, 2023, and 2022, we wrote down inventory determined to be excessive or obsolete by $8.6 million, $9.8 million, and $5.0 million, respectively. We believe the accounting estimate related to excess and obsolete inventory is a critical accounting estimate because it requires us to make assumptions about future inventory consumption and recoverability of cost, which can be uncertain. Changes in these estimates can have a material impact on our financial statements.

38

Table of Contents

Results of Operations

The following table sets forth our results of operations for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["","(in thousands)"],["Net sales","$","849,040","","","$","811,120"],["Cost of sales","745,706","","","707,724"],["Gross profit","103,334","","","103,396"],["Operating expenses:"],["Research and development","23,018","","","20,223"],["Selling, general, and administrative","79,384","","","79,334"],["Amortization of intangible assets","8,572","","","14,734"],["Total operating expenses","110,974","","","114,291"],["Operating loss","(7,640)","","","(10,895)"],["Interest expense, net","9,266","","","19,379"],["Other expense, net","1,148","","","804"],["Loss before income taxes","(18,054)","","","(31,078)"],["Income tax expense","2,766","","","11,907"],["Net loss","$","(20,820)","","","$","(42,985)"]]
[[/GREPCENT_TABLE]]

The following table sets forth our results of operations as a percentage of our total net sales for the periods presented.

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["Net sales","100.0","","","100.0"],["Cost of sales","87.8","","","87.3"],["Gross profit","12.2","","","12.7"],["Operating expenses:"],["Research and development","2.7","","","2.5"],["Selling, general, and administrative","9.3","","","9.8"],["Amortization of intangible assets","1.0","","","1.8"],["Total operating expenses","13.1","","","14.1"],["Operating loss","(0.9)","","","(1.3)"],["Interest expense, net","1.1","","","2.4"],["Other expense, net","0.1","","","0.1"],["Loss before income taxes","(2.1)","","","(3.8)"],["Income tax expense","0.3","","","1.5"],["Net loss","(2.5)","","","(5.3)"]]
[[/GREPCENT_TABLE]]

39

Table of Contents

Comparison of 2024 and 2023

Net sales

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Net sales","$","849,040","","","$","811,120","","","$","37,920","","","4.7","%"]]
[[/GREPCENT_TABLE]]

The increase in net sales from 2023 to 2024 was primarily due to increased customer demand stemming from increased spending within the semiconductor capital equipment industry. Further detail is provided above under the section entitled "Key Factors Affecting Our Business".

Gross margin

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Cost of sales","$","745,706","","","$","707,724","","","$","37,982","","","5.4","%"],["Gross profit","$","103,334","","","$","103,396","","","$","(62)","","","(0.1","%)"],["Gross margin","12.2","%","","12.7","%","","","","-50","bps"]]
[[/GREPCENT_TABLE]]

The decrease in gross margin from 2023 to 2024 was primarily due to unfavorable sales mix and increased factory labor and overhead costs, partially offset by lower severance costs associated with our global reduction-in-force programs (+20bps) and lower excess and obsolete inventory expense (+10bps).

Research and development

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Research and development","$","23,018","","","$","20,223","","","$","2,795","","","13.8","%"]]
[[/GREPCENT_TABLE]]

The increase in research and development expenses from 2023 to 2024 was primarily due to increased material and service costs from our new product development programs of $1.9 million and increased employee-related expenses of $0.8 million, inclusive of share-based compensation expense.

Selling, general, and administrative

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Selling, general, and administrative","$","79,384","","","$","79,334","","","$","50","","","0.1","%"]]
[[/GREPCENT_TABLE]]

Selling, general, and administrative expense remained approximately unchanged from 2023 to 2024.

40

Table of Contents

Amortization of intangible assets

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Amortization of intangibles assets","$","8,572","","","$","14,734","","","$","(6,162)","","","(41.8)","%"]]
[[/GREPCENT_TABLE]]

The decrease in amortization expense from 2023 to 2024 was primarily due to certain intangible assets becoming fully amortized in the fourth quarter of 2023.

Interest expense, net

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Interest expense, net","$","9,266","","","$","19,379","","","$","(10,113)","","","(52.2","%)"],["Weighted average borrowings outstanding","$","159,427","","","$","292,661","","","$","(133,234)","","","(45.5","%)"],["Weighted average borrowing rate","7.31","%","","6.80","%","","","","+51","bps"]]
[[/GREPCENT_TABLE]]

The decrease in interest expense, net from 2023 to 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate. The reduction in our weighted average borrowings outstanding was primarily due to paying off our revolving credit facility in the first quarter of 2024. The increase in our weighted average borrowing rate was due to higher applicable margin as a result of higher leverage ratios in 2024 (+29bps) and higher Bloomberg Short-Term Bank Yield ("BSBY") and Secured Overnight Financing Rate ("SOFR") rates as a result of a higher short-term borrowing interest rate macroeconomic environment (+22bps).

Other expense, net

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Other expense, net","$","1,148","","","$","804","","","$","344","","","42.8","%"]]
[[/GREPCENT_TABLE]]

The change in other expense, net from 2023 to 2024 was primarily due to currency exchange rate fluctuations during the year related to our local currency payables of our foreign operations.

Income tax expense

[[GREPCENT_TABLE]]
[["","Year Ended","","Change"],["","December 27, 2024","","December 29, 2023","","Amount","","%"],["","(dollars in thousands)"],["Income tax expense","$","2,766","","","$","11,907","","","$","(9,141)","","","(76.8","%)"],["Loss before income taxes","$","(18,054)","","","$","(31,078)","","","$","13,024","","","(41.9","%)"],["Effective tax rate","(15.3)","%","","(38.3)","%","","","","+2,300","bps"]]
[[/GREPCENT_TABLE]]

The decrease in income tax expense from 2023 to 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 2024.

41

Table of Contents

Non-GAAP Financial Results

Management uses certain 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. All non-GAAP adjustments are presented on a gross basis. Non-GAAP gross profit, operating income, and net income (loss) 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 transaction-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) with respect to non-GAAP net income (loss), the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance charges. 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 earnings per share ("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.

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.

The following table presents our unaudited non‑GAAP gross profit and non-GAAP gross margin and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["","(dollars in thousands)"],["U.S. GAAP gross profit","$","103,334","","","$","103,396"],["Non-GAAP adjustments:"],["Share-based compensation","3,360","","","3,130"],["Other (1)","908","","","2,191"],["Non-GAAP gross profit","$","107,602","","","$","108,717"],["U.S. GAAP gross margin","12.2","%","","12.7","%"],["Non-GAAP gross margin","12.7","%","","13.4","%"]]
[[/GREPCENT_TABLE]]

(1)Represents severance costs associated with our global reduction-in-force programs.

42

Table of Contents

The following table presents our unaudited non‑GAAP operating income and non-GAAP operating margin and a reconciliation from operating income (loss), the most comparable GAAP measure, for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["","(dollars in thousands)"],["U.S. GAAP operating loss","$","(7,640)","","","$","(10,895)"],["Non-GAAP adjustments:"],["Amortization of intangible assets","8,572","","","14,734"],["Share-based compensation","15,576","","","17,338"],["Transaction-related costs (1)","785","","","\u2014"],["Other (2)","1,600","","","2,298"],["Non-GAAP operating income","$","18,893","","","$","23,475"],["U.S. GAAP operating margin","(0.9)","%","","(1.3)","%"],["Non-GAAP operating margin","2.2","%","","2.9","%"]]
[[/GREPCENT_TABLE]]

(1)Represents transaction-related costs incurred in connection with our acquisitions pipeline.

(2)Represents severance costs associated with our global reduction-in-force programs, and, for 2024, the amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.

The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income (loss), the most comparable GAAP measure, for the periods indicated. 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."

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023"],["","(dollars in thousands, except per share amounts)"],["U.S. GAAP net loss","$","(20,820)","","","$","(42,985)"],["Non-GAAP adjustments:"],["Amortization of intangible assets","8,572","","","14,734"],["Share-based compensation","15,576","","","17,338"],["Transaction-related costs (1)","785","","","\u2014"],["Other (2)","1,600","","","2,298"],["Tax adjustments related to non-GAAP adjustments (3)","175","","","9,778"],["Tax expense from valuation allowance (4)","\u2014","","","11,094"],["Non-GAAP net income","$","5,888","","","$","12,257"],["U.S. GAAP diluted EPS","$","(0.64)","","","$","(1.47)"],["Non-GAAP diluted EPS","$","0.18","","","$","0.42"],["Shares used to compute diluted non-GAAP EPS","33,135,552","","29,514,553"]]
[[/GREPCENT_TABLE]]

(1)Represents transaction-related costs incurred in connection with our acquisition pipeline.

(2)Represents severance costs associated with our global reduction-in-force programs. Additionally, for 2024, the amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.

43

Table of Contents

(3)Adjusts U.S. GAAP income tax expense for the impact of our non-GAAP adjustments, which are presented on a gross basis. During the second quarter of 2023, we recorded a valuation allowance against our U.S. federal and state deferred tax assets on a GAAP basis. In the first quarter of 2024, we determined that the valuation allowance should be recognized against our U.S. federal and state deferred tax assets on a non-GAAP basis as we were not in a three-year cumulative U.S. income position on a non-GAAP basis. Accordingly, from the first quarter of 2024 and forward, tax expense on a GAAP and non-GAAP basis reflects a valuation allowance against our U.S. federal and state deferred tax assets. Refer to footnote 6 below.

(4)During the second quarter of 2023, we recorded a valuation allowance of $11.1 million against our U.S. federal and state deferred tax assets. The valuation allowance was recorded based on an assessment of available positive and negative evidence, including an estimate of being in a three-year cumulative loss position in the U.S. by the end of 2023, projections of future taxable income, and other quantitative and qualitative information.

Liquidity and Capital Resources

The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements. Our cash and cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions.

Material Cash Requirements

Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of raw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments and capital expenditures, (v) payment of income taxes, and (vi) payments associated with our noncancellable leases and related occupancy costs. We have no significant long-term purchase commitments related to procuring raw materials inventory. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and are therefore subject to prevailing global macroeconomic conditions, such as interest rates, increased tariffs and retaliatory trade policies, geopolitical events, and financial, business, and other factors, some of which are beyond our control.

We believe that our cash and cash equivalents, the amounts available under our credit facilities, and our operating cash flow will be sufficient to fund our business and our current obligations for at least the next 12 months and beyond.

Sources and Conditions of Liquidity

Our ongoing sources of liquidity to fund our material cash requirements are primarily derived from: (i) sales to our customers and the related changes in our net operating assets and liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable.

Summary of Cash Flows

We ended 2024 with cash and cash equivalents of $108.7 million, an increase of $28.7 million from 2023, which 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 $27.9 million, partially offset by net payments on credit facilities of $120.6 million and capital expenditures of $17.6 million.

44

Table of Contents

The following table sets forth a summary of operating, investing, and financing activities for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 27, 2024","","December 29, 2023","","December 30, 2022"],["","(in thousands)"],["Cash provided by operating activities","$","27,880","","","$","57,632","","","$","31,453"],["Cash used in investing activities","(17,636)","","","(15,496)","","","(28,933)"],["Cash provided by (used in) financing activities","18,470","","","(48,651)","","","8,455"],["Net increase (decrease) in cash","$","28,714","","","$","(6,515)","","","$","10,975"]]
[[/GREPCENT_TABLE]]

Our cash provided by operating activities of $27.9 million during 2024 consisted of net non-cash charges of $46.0 million, which consisted primarily of depreciation and amortization of $30.7 million and share-based compensation expense of $15.6 million, and a decrease in our net operating assets and liabilities of $2.7 million, partially offset by net loss of $20.8 million.

The decrease in our net operating assets and liabilities of $2.7 million during 2024 was primarily due to an increase in accounts payable of $29.1 million, partially offset by an increase in accounts receivable of $19.9 million, a decrease in accrued and other liabilities of $4.6 million, and an increase in inventories of $4.2 million.

Cash used in investing activities during 2024 and 2023 consisted of capital expenditures.

Cash provided by financing activities during 2024 consisted of net proceeds of $136.7 million from our issues 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 $2.4 million, partially offset by net payments on our credit facilities of $120.6 million. The increase in cash provided by financing activities from 2023 to 2024 was primarily due to net proceeds from our issuance of shares, partially offset by increased net payments on our credit facilities.

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 1 – Organization and Summary of Significant Accounting Policies of our consolidated financial statements in Part IV, Item 15 of this Annual Report on Form 10-K.