ICHOR HOLDINGS, LTD. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ICHOR HOLDINGS, LTD. Consolidated Balance Sheets (dollars in thousands, except per share amounts) (unaudited) September 24, 2021 December 25, 2020 Assets Current assets: Cash and cash equivalents $ 128,038 $ 252,899 Marketable securities 98,706 — Accounts receivable, net 121,680 100,977 Inventories 193,930 134,756 Prepaid expenses and other current assets 7,161 7,082 Total current assets 549,515 495,714 Property and equipment, net 53,087 41,811 Operating lease right-of-use assets 8,681 10,088 Other noncurrent assets 7,350 5,503 Deferred tax assets, net 5,341 6,324 Intangible assets, net 29,676 39,845 Goodwill 174,887 174,887 Total assets $ 828,537 $ 774,172 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 137,970 $ 116,664 Accrued liabilities 19,038 20,792 Other current liabilities 13,413 10,700 Current portion of long-term debt 5,625 8,750 Current portion of lease liabilities 4,927 5,128 Total current liabilities 180,973 162,034 Long-term debt, less current portion, net 158,810 191,522 Lease liabilities, less current portion 3,989 5,272 Deferred tax liabilities, net 109 109 Other non-current liabilities 4,000 3,546 Total liabilities 347,881 362,483 Shareholders’ equity: Preferred shares ($ 0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding) — — Ordinary shares ($ 0.0001 par value; 200,000,000 shares authorized; 28,409,734 and 27,907,077 shares outstanding, respectively; 32,847,173 and 32,344,516 shares issued, respectively) 3 3 Additional paid in capital 412,246 399,311 Treasury shares at cost ( 4,437,439 shares) ( 91,578 ) ( 91,578 ) Accumulated other comprehensive loss ( 8 ) — Retained earnings 159,993 103,953 Total shareholders’ equity 480,656 411,689 Total liabilities and shareholders’ equity $ 828,537 $ 774,172 See accompanying notes. 1 ICHOR HOLDINGS, LTD. Consolidated Statements of Operations (dollars in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 Net sales $ 262,855 $ 227,678 $ 809,729 $ 669,270 Cost of sales 219,218 195,172 679,227 578,728 Gross profit 43,637 32,506 130,502 90,542 Operating expenses: Research and development 3,905 3,269 11,469 10,100 Selling, general, and administrative 15,147 13,367 44,195 43,098 Amortization of intangible assets 3,388 3,338 10,169 10,008 Total operating expenses 22,440 19,974 65,833 63,206 Operating income 21,197 12,532 64,669 27,336 Interest expense, net 1,487 2,052 4,997 6,728 Other expense (income), net ( 104 ) 242 103 213 Income before income taxes 19,814 10,238 59,569 20,395 Income tax expense (benefit) 1,277 ( 310 ) 3,529 ( 363 ) Net income $ 18,537 $ 10,548 $ 56,040 $ 20,758 Net income per share: Basic $ 0.65 $ 0.46 $ 1.99 $ 0.91 Diluted $ 0.64 $ 0.45 $ 1.93 $ 0.89 Shares used to compute net income per share: Basic 28,371,644 23,051,994 28,185,564 22,875,186 Diluted 29,024,862 23,347,460 28,961,308 23,199,618 See accompanying notes. 2 ICHOR HOLDINGS, LTD. Consolidated Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 Net income $ 18,537 $ 10,548 $ 56,040 $ 20,758 Other comprehensive loss, net of tax: Unrealized loss on available-for-sale marketable securities 16 — ( 8 ) — Comprehensive income $ 18,553 $ 10,548 $ 56,032 $ 20,758 See accompanying notes. 3 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (dollars in thousands) (unaudited) Additional Treasury Accumulated Total For the three months ending September 24, 2021 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at June 25, 2021 28,326,559 $ 3 $ 408,626 4,437,439 $ ( 91,578 ) $ ( 24 ) $ 141,456 $ 458,483 Ordinary shares issued from exercise of stock options 35,783 — 723 — — — — 723 Ordinary shares issued from vesting of restricted share units 25,900 — ( 696 ) — — — — ( 696 ) Ordinary shares issued from employee share purchase plan 21,492 — 583 — — — — 583 Share-based compensation expense — — 3,010 — — — — 3,010 Other comprehensive loss — — — — — 16 — 16 Net income — — — — — — 18,537 18,537 Balance at September 24, 2021 28,409,734 $ 3 $ 412,246 4,437,439 $ ( 91,578 ) $ ( 8 ) $ 159,993 $ 480,656 Additional Treasury Accumulated Total For the nine months ending September 24, 2021 Ordinary Shares Paid-In Shares Other Comprehensive Retained Shareholders' Shares Amount Capital Shares Amount Income (Loss) Earnings Equity Balance at December 25, 2020 27,907,077 $ 3 $ 399,311 4,437,439 $ ( 91,578 ) $ — $ 103,953 $ 411,689 Ordinary shares issued from exercise of stock options 320,514 — 6,254 — — — — 6,254 Ordinary shares issued from vesting of restricted share units 133,500 — ( 2,614 ) — — — — ( 2,614 ) Ordinary shares issued from employee share purchase plan 48,643 — 1,189 — — — — 1,189 Share-based compensation expense — — 8,106 — — — — 8,106 Other comprehensive loss — — — — — ( 8 ) — ( 8 ) Net income — — — — — — 56,040 56,040 Balance at September 24, 2021 28,409,734 $ 3 412,246 4,437,439 $ ( 91,578 ) $ ( 8 ) $ 159,993 $ 480,656 See accompanying notes. 4 ICHOR HOLDINGS, LTD. Consolidated Statements of Shareholders’ Equity (continued) (dollars in thousands) (unaudited) Additional Treasury Total For the three months ending September 25, 2020 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at June 26, 2020 22,868,999 $ 2 $ 248,882 4,437,439 $ ( 91,578 ) $ 80,884 $ 238,190 Ordinary shares issued from exercise of stock options 262,940 — 3,319 — — — 3,319 Ordinary shares issued from vesting of restricted share units 12,065 — ( 184 ) — — — ( 184 ) Ordinary shares issued from employee share purchase plan 16,668 — 377 — — — 377 Share-based compensation expense — — 2,417 — — — 2,417 Net income — — — — — 10,548 10,548 Balance at September 25, 2020 23,160,672 $ 2 $ 254,811 4,437,439 $ ( 91,578 ) $ 91,432 $ 254,667 Additional Treasury Total For the nine months ending September 25, 2020 Ordinary Shares Paid-In Shares Retained Shareholders' Shares Amount Capital Shares Amount Earnings Equity Balance at December 27, 2019 22,618,708 $ 2 $ 242,318 4,437,439 $ ( 91,578 ) $ 70,674 $ 221,416 Ordinary shares issued from exercise of stock options 385,276 — 5,913 — — — 5,913 Ordinary shares issued from vesting of restricted share units 123,500 — ( 1,570 ) — — — ( 1,570 ) Ordinary shares issued from employee share purchase plan 33,188 — 727 — — — 727 Share-based compensation expense — — 7,423 — — — 7,423 Net income — — — — — 20,758 20,758 Balance at September 25, 2020 23,160,672 $ 2 $ 254,811 4,437,439 $ ( 91,578 ) $ 91,432 $ 254,667 See accompanying notes. 5 ICHOR HOLDINGS, LTD. Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine Months Ended September 24, 2021 September 25, 2020 Cash flows from operating activities: Net income $ 56,040 $ 20,758 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 17,669 18,029 Share-based compensation 8,106 7,423 Deferred income taxes 985 64 Amortization of debt issuance costs 725 726 Gain on sale of asset disposal group ( 504 ) — Other 319 — Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net ( 20,703 ) ( 19,272 ) Inventories ( 59,174 ) ( 10,546 ) Prepaid expenses and other assets 1,720 ( 472 ) Accounts payable 21,234 ( 23,693 ) Accrued liabilities ( 1,448 ) 4,002 Other liabilities ( 558 ) 1,103 Net cash provided by (used in) operating activities 24,411 ( 1,878 ) Cash flows from investing activities: Capital expenditures ( 18,704 ) ( 8,291 ) Purchase of marketable securities ( 105,033 ) — Proceeds from maturities and sales of marketable securities 6,000 — Proceeds from sale of property and equipment 504 — Net cash used in investing activities ( 117,233 ) ( 8,291 ) Cash flows from financing activities: Issuance of ordinary shares under share-based compensation plans 7,137 6,609 Employees' taxes paid upon vesting of restricted share units ( 2,614 ) ( 1,570 ) Borrowings on revolving credit facility — 30,000 Repayments on revolving credit facility ( 30,000 ) — Repayments on term loan ( 6,562 ) ( 6,563 ) Net cash provided by (used in) financing activities ( 32,039 ) 28,476 Net increase (decrease) in cash ( 124,861 ) 18,307 Cash at beginning of period 252,899 60,612 Cash at end of period $ 128,038 $ 78,919 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 4,690 $ 6,426 Cash paid during the period for taxes, net of refunds $ 1,786 $ 179 Supplemental disclosures of non-cash activities: Capital expenditures included in accounts payable $ 441 $ 537 Right-of-use assets obtained in exchange for new operating lease liabilities $ 2,239 $ 328 See accompanying notes. 6 ICHOR HOLDINGS, LTD. Notes to Consolidated Financial Statements (dollar figures in tables in thousands, except per share amounts) (unaudited) Note 1 – Basis of Presentation and Selected Significant Accounting Policies Basis of Presentation These consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All dollar figures presented in tables in the notes to consolidated financial statements are in thousands, except per share amounts. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 25, 2020. Year End We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended September 24, 2021 and September 25, 2020 were both 13 weeks. References to the third quarter of 2021 and 2020 refer to the three-month periods then ended . References to fiscal year 2021 and 2020 refer to our fiscal years ending December 31, 2021 and December 25, 2020, respectively. Fiscal year 2021 and 2020 are 53 and 52 weeks, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analysis for both definite‑lived intangible assets and goodwill. Cash and Cash Equivalents and Marketable Securities Cash and cash equivalents consist of deposits and financial instruments which are readily convertible into cash and have original maturities of 90 days or less at the time of acquisition. Marketable securities consist primarily of highly liquid investments with maturities of greater than 90 days when purchased. We classify our marketable securities as available-for-sale and, accordingly, report them at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss). Any unrealized losses which are considered to be other-than-temporary are recorded in other income (expense), net. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in other income (expense), net. All of our available-for-sale investments are subject to a periodic impairment review. If an available-for-sale debt security’s fair value is less than its amortized cost basis, then we evaluate whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses. Unrealized gains and losses not attributable to credit losses are included, net of tax, in accumulated other comprehensive income (loss). We have no t record an allowance for credit losses during 2021. Revenue Recognition We recognize revenue 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. This amount is recorded as net sales in our consolidated statements of operations. 7 Transaction price – In most of our contracts, prices are generally determined by a customer-issued purchase order and generally remain fixed over the duration of the contract. Certain contracts contain variable consideration, including early-payment discounts and rebates. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal will not occur. Variable consideration estimates are updated at each reporting date. Historically, we have not incurred significant costs to obtain a contract. All amounts billed to a customer relating to shipping and handling are classified as net sales, while all costs incurred by us for shipping and handling are classified as cost of sales . Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within twelve months . Product sales are recognized at a point-in-time, generally upon delivery, as such term is defined within the contract, as that is when control of the promised good has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under ASC 460, Guarantees , and not as a separate performance obligation . Contract balances – Accounts receivable represents our unconditional right to receive consideration from our customers. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer but are generally due within 15‑ 60 days. Historically, we have not incurred significant payment issues with our customers. We had no significant contract assets or liabilities on our consolidated balance sheets in any of the periods presented . Inventories Inventories are stated at the lower of cost or net realizable value. The majority of our inventory values are based upon average costs. On a quarterly basis, we analyze the value of our inventory and periodically record write-downs for estimated excess and obsolete inventory. This analysis is based on estimated future consumption compared to inventory quantities on-hand. The estimate 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. Reversal of these write-downs are recognized only when the related inventory has been scrapped or sold. Accounting Pronouncements Recently Adopted In December 2019, the FASB issued ASU 2019‑12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes , as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses, and exceptions to deferred tax liability recognition related to foreign subsidiary investments. In addition, the ASU requires that entities recognize franchise tax based on an incremental method and requires an entity to evaluate the accounting for step-ups in the tax basis of goodwill as inside or outside of a business combination. We adopted the standard on the first day of 2021, and it did not have a significant impact on our financial statements. Note 2 – Inventories Inventories consist of the following: September 24, 2021 December 25, 2020 Raw materials $ 133,251 $ 88,015 Work in process 50,306 38,184 Finished goods 23,831 21,299 Excess and obsolete adjustment ( 13,458 ) ( 12,742 ) Total inventories $ 193,930 $ 134,756 8 Note 3 – Property and Equipment and Other Noncurrent Assets Property and equipment consist of the following: September 24, 2021 December 25, 2020 Machinery $ 40,480 $ 37,196 Leasehold improvements 32,838 29,616 Computer software, hardware, and equipment 6,620 6,501 Office furniture, fixtures and equipment 982 1,166 Vehicles 90 75 Construction-in-process 13,346 5,483 94,356 80,037 Less accumulated depreciation ( 41,269 ) ( 38,226 ) Total property and equipment, net $ 53,087 $ 41,811 Depreciation expense was $ 2.8 million and $ 3.0 million for the third quarter of 2021 and 2020, respectively, and $ 7.5 million and $ 8.0 million for the nine months ended September 24, 2021 and September 25, 2020, respectively. Cloud Computing Implementation Costs We capitalize implementation costs associated with hosting arrangement that are service contracts. These costs are recorded to prepaid expenses or other noncurrent assets. To-date, these costs are those incurred to implement a new company-wide ERP system. The following table summarizes capitalized cloud computing implementation costs: Capitalized cloud computing implementation costs as of December 25, 2020 $ 4,366 Costs capitalized during the period 2,104 Capitalized costs amortized during the period ( 151 ) Capitalized cloud computing implementation costs as of September 24, 2021 $ 6,319 Note 4 – Intangible Assets Definite‑lived intangible assets consist of the following: September 24, 2021 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Trademarks $ 9,690 $ ( 9,442 ) $ — $ 248 10.0 years Customer relationships 84,169 ( 62,577 ) — 21,592 7.7 years Developed technology 11,047 ( 3,211 ) — 7,836 10.0 years Total intangible assets $ 104,906 $ ( 75,230 ) $ — $ 29,676 December 25, 2020 Gross value Accumulated amortization Accumulated impairment charges Carrying amount Weighted average useful life Trademarks $ 9,690 $ ( 8,717 ) $ — $ 973 10.0 years Customer relationships 84,169 ( 53,946 ) — 30,223 7.8 years Developed technology 11,047 ( 2,398 ) — 8,649 10.0 years Total intangible assets $ 104,906 $ ( 65,061 ) $ — $ 39,845 9 Note 5 – Leases Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We lease facilities under various non-cancellable operating leases expiring through 2026 . In addition to base rental payments, we are generally responsible for our proportionate share of operating expenses, including facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities. As of September 24, 2021, we had zero operating lease executed for which the rental period had not yet commenced. The components of lease expense are as follows: Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 Operating lease cost $ 1,394 $ 1,363 $ 4,166 $ 4,015 Supplemental cash flow information related to leases is as follows: Nine Months Ended September 24, 2021 September 25, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,979 $ 4,096 Supplemental balance sheet information related to leases is as follows: September 24, 2021 September 25, 2020 Weighted-average remaining lease term of operating leases 2.6 years 2.5 years Weighted-average discount rate of operating leases 4.1 % 4.5 % Future minimum lease payments under non-cancelable leases as of September 24, 2021 are as follows: 2021, remaining $ 1,302 2022 4,699 2023 1,736 2024 797 2025 582 Thereafter 289 Total future minimum lease payments 9,405 Less imputed interest ( 489 ) Total lease liabilities $ 8,916 10 Note 6 – Income Taxes Income tax information for the periods reported are as follows: Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 Income tax expense (benefit) $ 1,277 $ ( 310 ) $ 3,529 $ ( 363 ) Income before income taxes $ 19,814 $ 10,238 $ 59,569 $ 20,395 Effective income tax rate 6.4 % - 3.0 % 5.9 % - 1.8 % Our effective tax rate for the three and nine months ended September 24, 2021 differs from the statutory rate primarily due to taxes on foreign income that differ from the U.S. tax rate, including a tax holiday in Singapore, and the impact of share-based compensation activity during the quarter. Our effective tax rate for the three and nine months ended September 25, 2020 differs from the statutory rate primarily due to taxes on foreign income that differ from the U.S. tax rate, including a tax holiday in Singapore, the impact of stock option exercises, and return-to-provision adjustments related to recently filed tax returns. The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $ 3.2 million at September 24, 2021. The related interest and penalties were insignificant. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant. As of September 24, 2021, we were not under examination by tax authorities. Note 7 – Employee Benefit Programs 401(k) Plan We sponsor a 401(k) plan available to employees of our U.S.‑based subsidiaries. Participants may make salary deferral contributions not to exceed 50 % of a participant’s annual compensation or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50 % of a participant’s deferral, up to an annual matching maximum of 4 % of a participant’s annual compensation. Matching contributions were $ 0.5 million and $ 0.5 million for the third quarter of 2021 and 2020, respectively and $ 1.6 million and $ 1.5 million for the nine months ended September 24, 2021 and September 25, 2020, respectively. Note 8 – Long-Term Debt Long‑term debt consists of the following: September 24, 2021 December 25, 2020 Term loan $ 146,563 $ 153,125 Revolving credit facility 19,162 49,162 Total principal amount of long-term debt 165,725 202,287 Less unamortized debt issuance costs ( 1,290 ) ( 2,015 ) Total long-term debt, net 164,435 200,272 Less current portion ( 5,625 ) ( 8,750 ) Total long-term debt, less current portion, net $ 158,810 $ 191,522 On February 15, 2018, we entered into an amended and restated credit agreement (the “2018 Credit Agreement”), which includes a $ 175.0 million term loan and a $ 125.0 million revolving credit facility. We incurred debt issuance costs of $ 2.1 million in connection with the amendment. The amendment did not meet the definition of an extinguishment and was accounted for as a modification. Term loan principal payments of $ 2.2 million are due on a quarterly basis. The 2018 Credit Agreement matures on February 15, 2023 . 11 Interest is charged at either the Base Rate or the Eurodollar rate (as such terms are defined in the credit agreement) at our option, plus an applicable margin. The Base Rate is equal to the higher of i) the Prime Rate, ii) the Federal Funds Rate plus 0.5 %, or iii) the Eurodollar Rate plus 1.00 %. The Eurodollar rate is equal to LIBOR , subject to a 1.00 % floor for the term loan . The applicable margin on Base Rate and Eurodollar Rate loans is 0.75 ‑ 1.50 % and 1.75 ‑ 2.50 % per annum, respectively, depending on our leverage ratio. We are also charged a commitment fee of 0.20 %- 0.35 % on the unused portion of our revolving credit facility . Base Rate interest payments and commitment fees are due quarterly . Eurodollar interest payments are due on the last day of the applicable interest period . At September 24 , 2021 , the term loan and revolving credit facility bore interest at the Eurodollar rate option of 3.00 % and 2.15 %, respectively . Subsequent Event On October 29, 2021, we executed an amended and restated credit agreement to refinance all outstanding indebtedness under our 2018 Credit Agreement. The credit agreement features a $ 150.0 million term loan and a revolving facility allowing for borrowings up to $ 250.0 million. The credit agreement lowers our overall borrowing rate by (i) decreasing the applicable margin, (ii) decreasing the revolving facility commitment fee, and (iii) removing the 1.00 % Eurodollar Rate floor that was associated with the term loan. Under the new credit agreement, the Eurodollar Rate, which was equal to LIBOR, is replaced with the Bloomberg Short-Term Bank Yield Index (‘BSBY’). Additionally, the maturity date is extended to October 2026 , and the maximum permitted leverage ratio is increased to 3.5 x from 3.0 x. Quarterly term loan payments of $ 1.9 million commence on March 31, 2022. The impact of the term loan payment schedule under the new credit agreement has been recognized in these consolidated financial statements, which is reflected in the $ 5.6 million balance of current portion of long-term debt. Note 9 – Share‑Based Compensation The 2016 Omnibus Incentive Plan (the “2016 Plan”) provides for grants of share‑based awards to employees, directors, and consultants. Awards may be in the form of stock options (“options”), tandem and non‑tandem stock appreciation rights, restricted share awards or restricted share units (“RSUs”), performance awards, and other share‑based awards. Forfeited or expired awards are returned to the incentive plan pool for future grants. Awards generally vest over four years , 25 % on the first anniversary of the date of grant and quarterly thereafter over the remaining 3 years. Upon vesting of RSUs, employees may elect to have shares withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows. Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $ 3.0 million and $ 2.4 million for the third quarter of 2021 and 2020, respectively, and $ 8.1 million and $ 7.4 million for the nine months ended September 24, 2021 and September 25, 2020, respectively. Stock Options The following table summarizes option activity: Number of Stock Options Service condition Performance condition Weighted average exercise price per share Weighted average remaining contractual term Aggregate intrinsic value (in thousands) Outstanding, December 25, 2020 1,325,826 65,908 $ 22.22 Granted — — $ — Exercised ( 254,606 ) ( 65,908 ) $ 19.51 Forfeited or expired ( 42,888 ) — $ 20.72 Outstanding, September 24, 2021 1,028,332 — $ 23.13 4.1 years $ 21,900 Exercisable, September 24, 2021 620,681 — $ 22.71 3.6 years $ 13,481 12 Restricted Share Units The following table summarizes RSU activity: Number of Restricted Share Units Service condition Performance condition Market condition Weighted average grant date fair value per share Unvested, December 25, 2020 564,626 — — $ 24.09 Granted 211,224 9,716 14,572 $ 50.12 Vested ( 192,319 ) — — $ 21.13 Forfeited ( 25,931 ) — — $ 27.92 Unvested, September 24, 2021 557,600 9,716 14,572 $ 34.44 Employee Share Purchase Plan The 2017 Employee Stock Purchase Plan (the “2017 ESPP”) grants employees the ability to designate a portion of their base-pay to purchase ordinary shares at a price equal to 85 % of the fair market value of our ordinary shares on the first or last day of each 6 month purchase period. Purchase periods begin on January 1 or July 1 and end on June 30 or December 31, or the next business day if such date is not a business day. Shares are purchased on the last day of the purchase period. During the nine months ended September 24, 2021, 48,643 ordinary shares were purchased by eligible employees under the 2017 ESPP. As of September 24, 2021, approximately 2.3 million ordinary shares remain available for purchase under the 2017 ESPP. Note 10 – Earnings per Share The following table sets forth the computation of basic and diluted earnings per share and a reconciliation of the numerator and denominator used in the calculation: Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 Numerator: Net income $ 18,537 $ 10,548 $ 56,040 $ 20,758 Denominator: Basic weighted average ordinary shares outstanding 28,371,644 23,051,994 28,185,564 22,875,186 Dilutive effect of options 430,713 176,292 510,074 232,026 Dilutive effect of RSUs 221,379 117,623 265,295 91,889 Dilutive effect of ESPP 1,126 1,551 375 517 Diluted weighted average ordinary shares outstanding 29,024,862 23,347,460 28,961,308 23,199,618 Securities excluded from diluted weighted average ordinary shares outstanding (1) 173,000 1,215,000 188,000 1,306,000 Earnings per share: Net income: Basic $ 0.65 $ 0.46 $ 1.99 $ 0.91 Diluted $ 0.64 $ 0.45 $ 1.93 $ 0.89 (1) Represents potentially dilutive options and RSUs excluded from the calculation of diluted weighted average ordinary shares outstanding, because including them would have been antidilutive under the treasury stock method. 13 Note 11 – Fair Value Measurements We measure certain assets and liabilities, including cash equivalents and marketable securities, at fair value. Whenever possible, the fair values of our financial assets and liabilities are determined using quoted market prices of identical securities or quoted market prices of similar securities from active markets. The three levels of inputs that may be used to measure fair value are as follows : • Level 1: Quoted prices in active markets for identical assets. • Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. As of September 24, 2021, assets measured at fair value on a recurring basis were as follows: Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 30,940 $ — $ — $ 30,940 U.S. treasuries 10,000 — — 10,000 Marketable securities: U.S. treasuries 52,604 — — 52,604 Commercial paper — 35,989 — 35,989 Corporate bonds — 10,113 — 10,113 Total assets $ 93,544 $ 46,102 $ — $ 139,646 The difference between amortized cost and fair value of marketable securities, due to unrealized gains and losses, was immaterial and is recorded as a component of accumulated other comprehensive income (loss). We did not have any other-than-temporary unrealized gains or losses at either period-end included in these financial statements . Note 12 – Segment Information Our Chief Operating Decision Maker, the Chief Executive Officer, reviews our results of operations on a consolidated level and executive staff is structured by function rather than by product category. Therefore, we operate in one operating segment. Key resources, decisions, and assessment of performance are also analyzed on a company‑wide level. Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia. Our principal markets include North America, Asia and, to a lesser degree, Europe. Sales by geographic area represent sales to unaffiliated customers. All information on sales by geographic area is based upon the location to which the products were shipped. The following table sets forth sales by geographic area: Three Months Ended Nine Months Ended September 24, 2021 September 25, 2020 September 24, 2021 September 25, 2020 United States of America $ 127,672 $ 125,538 $ 404,553 $ 364,071 Singapore 94,831 73,196 282,369 220,732 Europe 16,430 18,191 56,199 51,686 Other 23,922 10,753 66,608 32,781 Total net sales $ 262,855 $ 227,678 $ 809,729 $ 669,270 Foreign long-lived assets, exclusive of deferred tax assets, were $ 40.1 million and $ 31.5 million at September 24, 2021 and December 25, 2020, respectively . 14