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 2019
financial results.
Highlights for the first quarter of 2019:
- Revenues of $138 million;
- Gross margin of 14.7% on a GAAP basis and 14.9% on a non-GAAP basis;
-
Net earnings of $0.07 per diluted share on a GAAP basis and $0.25 on a
non-GAAP basis.
“Our first quarter results were aligned with our forecast, and performed
favorably compared to industry declines in wafer fab equipment
spending,” commented Tom Rohrs, Chairman and CEO of Ichor. “We continued
to demonstrate the resiliency of our variable operating model, reporting
continued strong profits during the current spending environment of
significantly curtailed investments in the memory segment. Our modest
sequential revenue decline of just 2.5% from the fourth quarter
indicates that the majority of inventory corrections are behind us and
that our market share gains began to contribute to our revenues early in
2019. With similar revenue levels expected in the second quarter, we
continue to expect revenues to be stronger in the second half of the
year, given our key customer positions supporting leading-edge
technology investments as well as the incremental contribution of our
market share gains increasing as we progress through the year. Ichor is
well-positioned to continue delivering strong profits during this
challenging business environment, while executing on our strategy to
expand our market share within our served markets.”
| Q1 2019 | Q4 2018 | Q1 2018 | ||||||||||
| (in thousands, except per share amounts and percentages) | ||||||||||||
| U.S. GAAP Financial Results: | ||||||||||||
| Net sales | $ | 137,831 | $ | 141,402 | $ | 258,029 | ||||||
| Gross profit percent | 14.7 | % | 15.2 | % | 16.5 | % | ||||||
| Operating income percent | 2.1 | % | 4.2 | % | 8.0 | % | ||||||
| Net income | $ | 1,518 | $ | 3,485 | $ | 16,721 | ||||||
| Diluted EPS | $ | 0.07 | $ | 0.15 | $ | 0.63 | ||||||
| Q1 2019 | Q4 2018 | Q1 2018 | ||||||||||
| (in thousands, except per share amounts and percentages) | ||||||||||||
| Non-GAAP Financial Results: | ||||||||||||
| Net sales | $ | 137,831 | $ | 141,402 | $ | 258,029 | ||||||
| Gross profit percent | 14.9 | % | 15.3 | % | 18.3 | % | ||||||
| Operating income percent | 6.4 | % | 7.5 | % | 13.3 | % | ||||||
| Adjusted net income | $ | 5,551 | $ | 7,280 | $ | 27,450 | ||||||
| Diluted EPS | $ | 0.25 | $ | 0.32 | $ | 1.03 | ||||||
U.S. GAAP Financial Results Overview
For the first quarter of 2019, revenue was $137.8 million, net income
was $1.5 million, and net income per diluted share (“diluted EPS”) was
$0.07. This compares to revenue of $141.4 million and $258.0 million,
net income of $3.5 million and $16.7 million, and diluted EPS of $0.15
and $0.63, for the fourth and first quarters of 2018, respectively.
Non-GAAP Financial Results Overview
For the first quarter of 2019, non-GAAP adjusted net income was
$5.6 million and non-GAAP adjusted diluted EPS was $0.25. This compares
to non-GAAP adjusted net income of $7.3 million and $27.5 million, and
non-GAAP adjusted diluted EPS of $0.32 and $1.03, for the fourth and
first quarters of 2018, respectively.
Second Quarter 2019 Financial Outlook
For the second quarter of 2019, we expect revenue to be in the range of
$133 to $143 million. We expect GAAP diluted EPS to be in the range of
$(0.03) to $0.05 and non-GAAP adjusted diluted EPS to be in the range of
$0.20 to $0.26.
This outlook for non-GAAP adjusted 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 adjusted 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 2019 with cash of $31.6 million. The net
decrease of $12.2 million from December 28, 2018 was primarily due to
net payments on long-term debt of $7.4 million, capital expenditures of
$4.8 million, share repurchases of $1.6 million, and cash used in
operations of $0.4 million, partially offset by net proceeds from the
issuance of ordinary shares under our share-based compensation plans of
$2.0 million.
Our cash used in operations during the first quarter of 2019 of
$0.4 million was due to net income of $1.5 million and net non-cash
charges of $6.8 million, partially offset by an increase in our net
operating assets and liabilities of $8.7 million. Non-cash charges
primarily consist of depreciation and amortization of $5.2 million and
share-based compensation of $1.3 million. The increase in our net
operating assets and liabilities was primarily due to an increase in
accounts receivable, net of $13.6 million and a decrease in accrued and
other liabilities of $4.3 million, partially offset by a decrease in
inventories of $6.9 million, a decrease in prepaid expenses and other
assets of $1.4 million, and an increase in accounts payable of
$0.9 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 adjusted net income, and non-GAAP adjusted
diluted EPS. These non-GAAP metrics exclude amortization of intangible
assets, share-based compensation expense, non-recurring expenses
including adjustments to the cost of goods sold, tax adjustments related
to those non-GAAP adjustments, and non-recurring discrete tax items
including tax impacts from releasing a valuation allowance related to
foreign tax credits, to the extent they are present in gross profit,
operating income, and net income. A table showing these metrics on a
GAAP and non-GAAP basis, with reconciliation footnotes thereto, is
included at the end of this press release. Non-GAAP adjusted diluted EPS
is defined as non-GAAP adjusted net income divided by weighted average
diluted ordinary shares outstanding during the period.
Management uses non-GAAP gross profit, non-GAAP operating income,
non-GAAP adjusted net income, and non-GAAP adjusted diluted EPS 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. A table presenting the reconciliation of non-GAAP adjusted
net income to U.S. GAAP net income is also included at the end of this
press release.
Conference Call
We will conduct a conference call to discuss our first quarter 2019
results and business outlook on May 7, 2019, at 1:30 p.m. PDT.
To listen to the conference call via the Internet, please visit the
investor relations section of our web site at ir.ichorsystems.com.
To listen to the conference call via telephone, please call 844-395-9251
(domestic) or 478-219-0504 (international), conference ID: 6069628.
A taped replay of the webcast will be available shortly after the call
on our website or by calling 855-859-2056 (domestic) or 404-537-3406
(international), conference ID: 6069628.
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. We also manufacture 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. www.ichorsystems.com.
We use a 52 or 53 week fiscal year ending on the last Friday in
December. The three months ended March 29, 2019, December 28, 2018, and
March 30, 2018 were all 13 weeks. References to the first quarter of
2019, the fourth quarter of 2018, and the first quarter of 2018 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 expected revenue, growth, earnings, profitability,
and industry trends for the second quarter of 2019, as well as any other
statement that does not directly relate to any historical or current
fact. Forward-looking statements are based on management’s current
expectations and assumptions regarding Ichor’s business and industry,
the economy and other future conditions, 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. Accordingly, you are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date they
are made. 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 integration of recent acquisitions with Ichor,
including the ability to retain customers, suppliers and key employees.
Additional information concerning these and other factors can be found
in Ichor’s filings with the Securities and Exchange Commission (the
“SEC”), including other risks, relevant factors and uncertainties
identified in the “Risk Factors” section of Ichor’s Annual Report on
Form 10-K filed with the SEC on March 8, 2019, 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 Ichor’s 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 29, |
December 28, | |||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 31,611 | $ | 43,834 | ||||
| Accounts receivable, net | 53,897 | 40,287 | ||||||
| Inventories, net | 114,171 | 121,106 | ||||||
| Prepaid expenses and other current assets | 5,936 | 6,348 | ||||||
| Total current assets | 205,615 | 211,575 | ||||||
| Property and equipment, net | 43,945 | 41,740 | ||||||
| Operating lease right-of-use assets | 16,797 | — | ||||||
| Other noncurrent assets | 901 | 906 | ||||||
| Deferred tax assets, net | 1,363 | 1,363 | ||||||
| Intangible assets, net | 53,758 | 56,895 | ||||||
| Goodwill | 173,010 | 173,010 | ||||||
| Total assets | $ | 495,389 | $ | 485,489 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 64,691 | $ | 64,300 | ||||
| Accrued liabilities | 7,413 | 9,556 | ||||||
| Other current liabilities | 4,488 | 5,148 | ||||||
| Current portion of long-term debt | 8,750 | 8,750 | ||||||
| Current portion of lease liabilities | 5,148 | — | ||||||
| Total current liabilities | 90,490 | 87,754 | ||||||
| Long-term debt, less current portion, net | 184,954 | 192,117 | ||||||
| Lease liabilities, less current portion | 12,062 | — | ||||||
| Deferred tax liabilities | 3,969 | 3,966 | ||||||
| Other non-current liabilities | 2,234 | 3,326 | ||||||
| Total liabilities | 293,709 | 287,163 | ||||||
| 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; 22,370,129 and 22,234,508 shares outstanding, respectively; 26,807,568 and 26,574,037 shares issued, respectively) |
2 | 2 | ||||||
| Additional paid in capital | 231,793 | 228,358 | ||||||
|
Treasury shares at cost (4,437,439 and 4,339,529 shares, respectively) |
(91,578 | ) | (89,979 | ) | ||||
| Retained earnings | 61,463 | 59,945 | ||||||
| Total shareholders’ equity | 201,680 | 198,326 | ||||||
| Total liabilities and shareholders’ equity | $ | 495,389 | $ | 485,489 | ||||
|
ICHOR HOLDINGS, LTD. Consolidated Statement of Operations (dollars in thousands, except per share amounts) (unaudited) |
|||||||||||
| Three Months Ended | |||||||||||
|
March 29, |
December 28, |
March 30, |
|||||||||
| 2019 | 2018 | 2018 | |||||||||
| Net sales | $ | 137,831 | $ | 141,402 | $ | 258,029 | |||||
| Cost of sales | 117,608 | 119,953 | 215,430 | ||||||||
| Gross profit | 20,223 | 21,449 | 42,599 | ||||||||
| Operating expenses: | |||||||||||
| Research and development | 2,391 | 2,203 | 2,452 | ||||||||
| Selling, general, and administrative | 11,758 | 9,432 | 15,711 | ||||||||
| Amortization of intangible assets | 3,137 | 3,833 | 3,879 | ||||||||
| Total operating expenses | 17,286 | 15,468 | 22,042 | ||||||||
| Operating income | 2,937 | 5,981 | 20,557 | ||||||||
| Interest expense | 2,768 | 2,627 | 2,504 | ||||||||
| Other expense (income), net | 24 | (181 | ) | 241 | |||||||
| Income before income taxes | 145 | 3,535 | 17,812 | ||||||||
| Income tax expense (benefit) | (1,373 | ) | 50 | 1,091 | |||||||
| Net income | $ | 1,518 | $ | 3,485 | $ | 16,721 | |||||
| Net income per share: | |||||||||||
| Basic | $ | 0.07 | $ | 0.15 | $ | 0.64 | |||||
| Diluted | $ | 0.07 | $ | 0.15 | $ | 0.63 | |||||
| Shares used to compute net income per share: | |||||||||||
| Basic | 22,269,827 | 22,768,704 | 26,030,298 | ||||||||
| Diluted | 22,536,209 | 23,014,317 | 26,734,710 | ||||||||
|
ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) (unaudited) |
||||||||
| Three Months Ended | ||||||||
| March 29, | March 30, | |||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 1,518 | $ | 16,721 | ||||
|
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Depreciation and amortization | 5,210 | 5,752 | ||||||
| Share-based compensation | 1,330 | 3,791 | ||||||
| Deferred income taxes | 3 | (127 | ) | |||||
| Amortization of debt issuance costs | 212 | 333 | ||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable, net | (13,610 | ) | (26,350 | ) | ||||
| Inventories | 6,935 | (10,470 | ) | |||||
| Prepaid expenses and other assets | 1,357 | 370 | ||||||
| Accounts payable | 895 | 8,731 | ||||||
| Accrued liabilities | (1,994 | ) | (974 | ) | ||||
| Other liabilities | (2,279 | ) | 1,439 | |||||
| Net cash used in operating activities | (423 | ) | (784 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (4,782 | ) | (3,668 | ) | ||||
| Net cash used in investing activities | (4,782 | ) | (3,668 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of ordinary shares under share-based compensation plans | 2,067 | 3,409 | ||||||
| Employees’ taxes paid upon vesting of restricted share units | (111 | ) | — | |||||
| Repurchase of ordinary shares | (1,599 | ) | (5,000 | ) | ||||
| Debt issuance and modification costs | — | (2,092 | ) | |||||
| Borrowings on revolving credit facility | 5,000 | 7,162 | ||||||
| Repayments on revolving credit facility | (8,000 | ) | — | |||||
| Repayments on term loan | (4,375 | ) | (4,535 | ) | ||||
| Net cash used in financing activities | (7,018 | ) | (1,056 | ) | ||||
| Net decrease in cash | (12,223 | ) | (5,508 | ) | ||||
| Cash at beginning of year | 43,834 | 69,304 | ||||||
| Cash at end of quarter | $ | 31,611 | $ | 63,796 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | 3,255 | $ | 1,297 | ||||
| Cash paid during the period for taxes | $ | 107 | $ | 230 | ||||
| Supplemental disclosures of non-cash activities: | ||||||||
| Capital expenditures included in accounts payable | $ | 958 | $ | 834 | ||||
|
ICHOR HOLDINGS, LTD.
Reconciliation of U.S. GAAP Net Income to Non-GAAP Adjusted Net (dollars in thousands, except per share amounts) (unaudited) |
||||||||||||
| Three Months Ended | ||||||||||||
|
March 29, |
December 28, |
March 30, |
||||||||||
| 2019 | 2018 | 2018 | ||||||||||
| Net income | $ | 1,518 | $ | 3,485 | $ | 16,721 | ||||||
| Non-GAAP adjustments: | ||||||||||||
| Amortization of intangible assets | 3,137 | 3,833 | 3,879 | |||||||||
| Share-based compensation (1) | 1,330 | 1,300 | 3,791 | |||||||||
| Other non-recurring expense, net (2) | 1,351 | (556 | ) | 1,439 | ||||||||
| Tax adjustments related to non-GAAP adjustments | (1,785 | ) | (782 | ) | (2,904 | ) | ||||||
| Fair value adjustment to inventory from acquisitions (3) | — | — | 4,524 | |||||||||
| Non-GAAP adjusted net income | $ | 5,551 | $ | 7,280 | $ | 27,450 | ||||||
| Non-GAAP adjusted diluted EPS | $ | 0.25 | $ | 0.32 | $ | 1.03 | ||||||
| Shares used to compute diluted EPS | 22,536,209 | 23,014,317 | 26,734,710 | |||||||||
| (1) |
Of the $1.3 million in total share-based compensation expense, $0.1 million and $0.1 million represent the cost of sales and research and development components, respectively. |
|
| (2) |
Included in this amount for the first quarter of 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 key management personnel of IAN, which we acquired in April 2018, (ii) costs incurred in connection with reorganizing our key personnel and leadership, and (iii) costs incurred with implementing a new ERP system. |
|
|
Included in this amount for the fourth quarter of 2018 are (i) a gain on the extinguishment of an earn-out liability recorded in connection with our acquisition of IAN which will not be paid, (ii) acquisition-related expenses, comprised primarily of expense associated with a two year retention agreement between key management personnel of IAN, and (iii) costs incurred in connection with reorganizing our key personnel and leadership. |
||
|
Included in this amount for the first quarter of 2018 are (i) separation benefits for our former CFO that became effective in January 2018 and (ii) acquisition-related expenses. |
||
| (3) |
As part of our purchase price allocation for our acquisition of Talon in December 2017, we recorded acquired-inventory at fair value, resulting in a fair value step-up of $6.2 million. This amount was subsequently charged to cost of sales as acquired-inventory was sold. |
|
|
ICHOR HOLDINGS, LTD.
U.S. GAAP and Non-GAAP Summary Consolidated Statements of (in thousands) (unaudited) |
|||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||
| March 29, 2019 | December 28, 2018 | March 30, 2018 | |||||||||||||||||||||
| U.S. GAAP | Non-GAAP | U.S. GAAP | Non-GAAP | U.S. GAAP | Non-GAAP | ||||||||||||||||||
| Net sales | $ | 137,831 | $ | 137,831 | $ | 141,402 | $ | 141,402 | $ | 258,029 | $ | 258,029 | |||||||||||
| Cost of sales (1) | 117,608 | 117,363 | 119,953 | 119,714 | 215,430 | 210,776 | |||||||||||||||||
| Gross profit | 20,223 | 20,468 | 21,449 | 21,688 | 42,599 | 47,253 | |||||||||||||||||
| Operating expenses (2) | 17,286 | 11,713 | 15,468 | 11,130 | 22,042 | 13,063 | |||||||||||||||||
| Operating income | 2,937 | 8,755 | 5,981 | 10,558 | 20,557 | 34,190 | |||||||||||||||||
| Interest expense | 2,768 | 2,768 | 2,627 | 2,627 | 2,504 | 2,504 | |||||||||||||||||
| Other expense (income), net | 24 | 24 | (181 | ) | (181 | ) | 241 | 241 | |||||||||||||||
| Income before income taxes | 145 | 5,963 | 3,535 | 8,112 | 17,812 | 31,445 | |||||||||||||||||
| Income tax expense (benefit) (3) | (1,373 | ) | 412 | 50 | 832 | 1,091 | 3,995 | ||||||||||||||||
| Net income | $ | 1,518 | $ | 5,551 | $ | 3,485 | $ | 7,280 | $ | 16,721 | $ | 27,450 | |||||||||||
| (1) |
Non-GAAP cost of sales excludes (i) share-based compensation expense (see footnote 1 on page 8), (ii) impacts from a step up in the fair value of acquired inventory in connection with our acquisition of Talon (see footnote 3 on page 8), and (iii) other net non-recurring expenses (see footnote 2 on page 8). |
|
| (2) |
Non-GAAP operating expenses excludes (i) amortization of intangible assets, (ii) share-based compensation expense (see footnote 1 on page 8), an (iii) other net non-recurring expenses (see footnote 2 on page 8). |
|
| (3) |
Non-GAAP income tax expense excludes the tax impacts of our non-GAAP adjustments. |
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