What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-09 · 136 added, 165 removed, 144 unchanged (68% of the section changed)

12 unchanged sentences

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected.

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include geopolitical, economic and market conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain, export restrictions, and any disruptions in European economies as a result of the conflict in Ukraine;

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include economic downturns and market conditions beyond our control, including periods of inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain, export restrictions, and any disruptions in European economies as a result of the conflict in Ukraine;

the quality of global financial markets;

our dependence on expenditures by manufacturers in the semiconductor capital equipment industry;

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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 Part I – Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this report.

For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer below to the section entitled Non-GAAP Financial Results within this report.

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023 April 1,

(dollars in thousands, except per share amounts)

Net sales $ 225,870 $ 293,146

Gross margin 14.7 % 15.0 %

Non-GAAP gross margin 15.5 % 16.0 %

Operating expenses

Operating income

Operating margin 2.1 % 3.6 %

Non-GAAP operating margin 6.1 % 8.4 %

Net income (loss) $ (5) $ 8,039

Non-GAAP net income $ 11,128 $ 20,178

Diluted EPS $ 0.00 $ 0.28

Non-GAAP diluted EPS $ 0.38 $ 0.70

Macroeconomic Conditions and Business Update

We have participated in the continuation of unprecedented demand for semiconductor capital equipment in 2022, driven by increased secular demand for semiconductors, as well as the ever-increasing levels of complexity in the manufacturing thereof.

Macroeconomic factors have, however, created, and may continue to create, volatility and uncertainty in our industry, including persistent levels of high inflation, higher interest rates, foreign currency rate fluctuations, and supply chain challenges.

Additionally, increased controls around exporting goods and services to China may impact the overall size of the semiconductor capital equipment industry going forward, and the conflict in Ukraine has given rise to potential global security issues that may adversely affect international business and economic conditions as well as economic sanctions imposed by the international community that have impacted the global economy.

Regarding the COVID‑19 pandemic, although our factories and operations are currently not directly affected by any restrictions, measures, or shutdowns, increases in positive case rates may change the extent to which our business becomes adversely impacted by such restrictions, measures, or shutdowns on a go-forward basis.

While these challenging macroeconomic conditions may impact business and customers in the near-term, we believe secular demand for semiconductors, both in quantity and performance, and constant technological innovation will drive long-term, sustainable growth in the semiconductor capital equipment industry.

In the first quarter of 2023, customer demand weakened due to overall reductions in spending for semiconductor capital equipment, the primary industry in which we operate.

Many macroeconomic factors may have contributed to this reduced spending environment, including persistent levels of high inflation, higher interest rates, foreign currency rate fluctuations, supply chain disruptions, and reduced consumer confidence.

Additionally, increased export controls for semiconductor-related goods and services shipped to China and delayed business investment in electronic memory capacity had varying levels of unfavorable consequences to our business.

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 and other cost reduction initiatives starting in the fourth quarter of 2022 and continuing through the first quarter of 2023.

As a result of these programs, we incurred severance charges of $1.1 million and $1.3 million in the fourth quarter of 2022 and first quarter of 2023, respectively.

While challenging macroeconomic conditions have impacted our business and customers in the near-term, we believe demand for semiconductors, semiconductor equipment, and our products will return to growth and expect healthy long-term industry growth in the future.

Additionally, increased borrowing rates due to tightening monetary policy have increased our debt-service costs, as the interest on our outstanding indebtedness is variable (refer above to Part I – Item 1.

Financial Statements (Unaudited) – Note 8—Long-Term Debt ).

An analysis of the changes in our debt-service cost is provided below under the heading Comparison of the three months ended March 31, 2023 and April 1, 2022 – Interest expense, net .

Results of Operations

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Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023 April 1,

(in thousands

Net sales $ 225,870 $ 293,146

Cost of sales 192,630 249,214

Gross profit 33,240 43,932

Operating expenses:

5 unchanged sentences

Interest expense, net 4,550 1,532

Other expense (income), net

Income before income taxes

Income tax expense

Other expense, net 784 84

Income (loss) before income taxes (540) 8,849

Income tax expense (benefit) (535) 810

Net income (loss) $ (5) $ 8,039

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

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023 April 1,

Net sales 100.0 100.0

Cost of sales 85.3 85.0

Gross profit 14.7 15.0

Operating expenses:

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Interest expense, net 2.0 0.5

Other expense (income), net

Income before income taxes

Income tax expense

Comparison of the three and nine months ended September 30, 2022 and September 24, 2021

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Other expense, net 0.3 0.0

Income (loss) before income taxes (0.2) 3.0

Income tax expense (benefit) (0.2) 0.3

Net income (loss) — 2.7

Comparison of the three months ended March 31, 2023 and April 1, 2022

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

The increase in net sales from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to strong demand from our customers as a result of continued growth in the global wafer fabrication equipment market, supported by capacity expansions and headcount additions we have made over the last year, as well as incremental revenues from our acquisition of IMG Companies, LLC (“IMG”) in November 2021.

Net sales $ 225,870 $ 293,146 $ (67,276) (22.9) %

The decrease in net sales from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to reduced customer demand stemming from reduced spending within the semiconductor capital equipment industry.

Further detail is provided above under the section entitled Macroeconomic Conditions and Business Update .

Cost of sales, Gross profit, and Gross Margin

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Cost of sales $ 192,630 $ 249,214 $ (56,584) (22.7) %

The increase in the gross amounts of cost of sales and gross profit from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to the factors mentioned in the commentary above under the heading, “ Net Sales .”

The increase in gross margin from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to increased factory utilization and operating leverage, as well as accretive margins from our acquisition of IMG in November 2021, partially offset by increased materials, logistics, and labor costs.

These cost increases are primarily due to investments in our capacity to service strong, present levels of customer demand, inflationary macroeconomic conditions that put pressure on the cost of labor, materials and factory costs, and the impacts of certain supply chain challenges on logistics costs and factory efficiency.

Gross profit $ 33,240 $ 43,932 $ (10,692) (24.3) %

Gross margin 14.7 % 15.0 % -30 bps

The decrease in the gross amounts of cost of sales and gross profit from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to the factors mentioned in the commentary above under the heading, “ Net Sales .”

The decrease in gross margin from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand.

Research and development

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Research and development $ 4,313 $ 4,851 $ (538) (11.1) %

The increase in research and development expenses from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to increased employee-related expense, inclusive of share-based compensation expense, of $0.7 million and $2.3 million, respectively, as we expand our engineering team to design and engineer next generation, high performance solutions for our customers, as well as program costs related to the development of our new products of $0.2 million and $0.4 million, respectively.

The decrease in research and development expenses from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to reduced employee-related expense.

Selling, general, and administrative

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Selling, general, and administrative $ 20,167 $ 23,267 $ (3,100) (13.3) %

The increase in selling, general, and administrative expense from the third quarter of 2021 to the third quarter of 2022 was primarily due to (1) incremental costs from our acquisition of IMG in November 2021 of $3.4 million, primarily consisting of employee-related expenses;

(2) a non-recurring loss accrual recorded in the third quarter of 2022 relating to an expected settlement of an employment-related legal matter of $1.0 million;

(3) increased employee-related expenses, inclusive of share-based compensation expense, of $0.9 million;

(4) increased consulting and professional fees of $0.4 million;

(5) increased depreciation and software service costs of $0.4 million;

and (6) increased travel-related costs of $0.2 million.

The increase in selling, general, and administrative expense from the nine months ended September 24, 2021 to the nine months ended September 30, 2022 was primarily due to (1) incremental costs from our acquisition of IMG in November 2021 of $9.4 million, primarily consisting of employee-related expenses;

(2) increased employee-related expenses, inclusive of share-based compensation expense, of $4.8 million;

(3) non-recurring loss accruals recorded in the first and third quarters of 2022 relating to expected settlements of employment-related legal matters of $4.1 million;

(4) increased consulting and professional fees of $1.7 million;

(5) increased depreciation and software service costs of $1.6 million;

and (6) increased travel-related costs of $0.4 million.

The decrease in selling, general, and administrative expense from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to a $3.1 million loss accrual recorded in the first quarter of 2022 relating to an expected settlement of an employment-related legal matter and reduced employee-related expenses, inclusive of share-based compensation expense, of $0.5 million, partially offset by increased software and IT system costs of $0.5 million.

Amortization of intangible assets

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Amortization of intangibles assets

The increase in amortization expense from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to incremental amortization expense from intangible assets acquired in connection with our acquisition of IMG in November 2021, partially offset by reduced amortization expense from certain intangible assets becoming fully amortized in the fourth quarter of 2021 and the first quarter of 2022.

Amortization of intangible assets $ 3,966 $ 5,349 $ (1,383) (25.9) %

The decrease in amortization expense from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to certain intangible assets becoming fully amortized in 2022.

Interest expense, net

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

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Weighted average borrowings outstanding $ 302,479 $ 294,959 $ 7,520 2.5 %

Weighted average borrowing rate

The increase in interest expense, net from the third quarter of 2021 to the third quarter of 2022 was due to a $140.4 million increase in our average amount borrowed and a 107 basis point increase in our weighted average borrowing rate.

The increase in interest expense, net from the nine months ended September 24, 2021 to the nine months ended September 30, 2022 was due to a $128.0 million increase in our average amount borrowed, partially offset by a 34 basis point decrease in our weighted average borrowing rate.

Our average amount borrowed was primarily the result of drawing $130.0 million on our revolving credit facility in November 2021 to partially fund our acquisition of IMG.

The changes in our weighted average borrowing rate were primarily due to more favorable borrowing terms under our October 2021 amended and restated credit agreement and higher overall prevailing BSBY and LIBOR rates in the second and third quarters of 2022 compared to 2021.

Other Expense (Income), Net

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Weighted average borrowing rate 6.10 % 1.83 % +427 bps

The increase in interest expense, net from the three months ended April 1, 2022 to the three months ended March 31, 2023 was due to an increase in our average amount borrowed and an increase in our weighted average borrowing rate.

The increase in the average amount borrowed was due to a net draw on our revolving credit facility of $15.0 million in the second quarter of 2022, partially offset by quarterly term loan payments.

The increase in our weighted average borrowing rate is due to increased risk-free, short-term borrowing rates as a result of tightening monetary policy, which impacts BSBY, the variable component of our borrowing rate under our credit facilities.

Other expense, net

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Other expense (income), net

The change in other expense (income), net from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to currency exchange rate fluctuations during the quarter, reflecting a strengthening U.S.

Other expense, net $ 784 $ 84 $ 700 833.3 %

The change in other expense, net from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to currency exchange rate fluctuations during the quarter, reflecting a strengthening U.S.

dollar against local currency payables of our foreign operations.

Income Tax Expense

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

Income tax expense (benefit)

Three Months Ended Change

2023 April 1,

2022 Amount %

(dollars in thousands)

Income tax expense

Income before income taxes

Effective income tax rate

The decrease in income tax expense from the three and nine months ended September 24, 2021 to the three and nine months ended September 30, 2022 was primarily due to decreased taxable income in the U.S., partially offset by reduced benefits from share-based compensation activity .

The reduction in benefits from share-based compensation activity was primarily due to RSU awards vesting in 2022 at lower fair values relative to their grant-date fair values.

In 2021, RSU awards vested at higher fair values relative to their grant-date fair values.

Income tax expense (benefit) $ (535) $ 810 $ (1,345) n/m

Income (loss) before income taxes $ (540) $ 8,849 $ (9,389) n/m

Effective income tax rate 99.1 % 9.2 % +8,990 bps

The decrease in income tax expense from the three months ended April 1, 2022 to the three months ended March 31, 2023 was primarily due to decreased taxable income in the U.S.

Non‑GAAP Financial Results

Management uses non-GAAP metrics to evaluate our operating and 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.

Non-GAAP gross margin is defined as non-GAAP gross profit divided by net sales.

Non-GAAP gross profit and non-GAAP net income are defined as:

gross profit or net income excluding, as applicable, (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including settlement losses, facility shutdown costs, and acquisition-related costs and charges, to the extent they are present in gross profit or net income;

and (2) the tax impacts associated with our non-GAAP adjustments, as well as non-recurring discrete tax items.

Non-GAAP gross profit, operating income, and net income are defined as:

gross profit, operating income, or net income (loss), respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income, and net income (loss), respectively;

and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items.

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.

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Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP.

In addition, in evaluating non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving non-GAAP results and you should not infer from our presentation of non-GAAP results that our future results will not be affected by these expenses or any unusual or non-recurring items.

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:

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023 April 1,

(dollars in thousands)

2 unchanged sentences

Share-based compensation 421 551

Facility shutdown costs (1)

Fair value adjustment to inventory from acquisitions (1) — 2,492

Other non-recurring expense, net (3)

Other (2) 1,287 —

Non-GAAP gross profit $ 34,948 $ 46,975

1 unchanged sentence

Non-GAAP gross margin 15.5 % 16.0 %

During the second quarter of 2020, we announced the closure of our manufacturing facility in Union City, California, which we completed in 2021.

Included in this amount for the nine months ended September 24, 2021 are write-off costs associated with inventories determined during the period to be obsolete and severance and other shutdown related charges, partially offset by a gain realized upon the sale of equipment and other fixed assets.

A s part of the purchase price allocations of our acquisitions of IMG Companies, LLC (“IMG”) in November 2021 and a precision machining operation in Mexico in December 2020, we recorded acquired-inventories at fair value, resulting in a fair value step-up.

These amounts represent the release of the step-up to cost of sales as acquired-inventories were sold .

Included in this amount for the nine months ended September 24, 2021 is primarily a non-recurring settlement charge.

The following table presents our unaudited non‑GAAP net income and non-GAAP diluted EPS and a reconciliation from net income, the most comparable GAAP measure, for the periods indicate d:

(1) As part of the purchase price allocation of our acquisition of IMG Companies, LLC (“IMG”) in November 2021, we recorded acquired-inventories at fair value, resulting in a fair value step-up.

This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

(2) Included in this amount are severance costs associated with our global reduction-in-force programs.

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

Three Months Ended

Nine Months Ended

September 30,

September 24,

September 30,

September 24,

2023 April 1,

(dollars in thousands, except per share amounts)

GAAP net income

GAAP operating income $ 4,794 $ 10,465

Non-GAAP adjustments:

1 unchanged sentence

Share-based compensation 3,637 2,897

Facility shutdown costs (1)

Settlement loss (1) — 3,100

1 unchanged sentence

Acquisition costs (3) — 275

Other non-recurring expense, net (5)

Other (4) 1,324 —

Non-GAAP operating income $ 13,721 $ 24,578

GAAP operating margin 2.1 % 3.6 %

Non-GAAP operating margin 6.1 % 8.4 %

(1) During the first quarter of 2022, we recorded a loss accrual of $3.1 million relating to an expected settlement of an employment-related legal matter.

We expect the settlement to be finalized and paid in 2023.

(2) As part of the purchase price allocation of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up.

This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

(3) Included in this amount are transaction-related costs incurred in connection with our acquisition of IMG.

(4) Included in this amount are severance costs associated with our global reduction-in-force programs.

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

Three Months Ended

2023 April 1,

(dollars in thousands, except per share amounts)

GAAP net income (loss) $ (5) $ 8,039

Non-GAAP adjustments:

Amortization of intangible assets 3,966 5,349

Share-based compensation 3,637 2,897

Settlement loss (1) — 3,100

Fair value adjustment to inventory from acquisitions (2) — 2,492

Acquisition costs (3) — 275

Other (4) 1,324 —

Tax adjustments related to non-GAAP adjustments (5) 2,206 (1,974)

2 unchanged sentences

Non-GAAP diluted EPS $ 0.38 $ 0.70

Shares used to compute diluted EPS

See footnote 1 to the reconciliation of U.S.

GAAP gross profit to non-GAAP gross profit above.

During the first and third quarters of 2022, we recorded non-recurring loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters.

We expect the settlements to be finalized and paid within the next 12 months.

See footnote 2 to the reconciliation of U.S.

GAAP gross profit to non-GAAP gross profit above.

Included in this amount are incremental transaction-related costs incurred in connection with our acquisition of IMG in November 2021.

Included in this amount for the nine months ended September 24, 2021 are primarily (i) non-capitalized costs incurred in connection with our implementation of a new ERP system and a Sarbanes-Oxley compliance program and (ii) a non-recurring settlement charge.

GAAP income tax expense (benefit) for impact of our non-GAAP adjustments, as defined, including the impacts of excluding share-based compensation, amortization of intangible assets, and other non-recurring expenses.

This adjustment also excludes the impact of non-recurring discrete tax items.

Shares used to compute non-GAAP diluted EPS 29,412,185 29,023,455

(1) During the first quarter of 2022, we recorded a loss accrual of $3.1 million relating to an expected settlement of an employment-related legal matter.

We expect the settlement to be finalized and paid in 2023.

(2) As part of the purchase price allocation of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up.

This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

(3) Included in this amount are transaction-related costs incurred in connection with our acquisition of IMG.

(4) Included in this amount are severance costs associated with our global reduction-in-force programs.

(5) Adjusts U.S.

GAAP income tax expense for impact of our non-GAAP adjustments, as defined, including the impacts of excluding share-based compensation and amortization of intangible assets.

Additionally, this adjustment excludes the impact of non-recurring discrete tax items.

Liquidity and Capital Resources

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Summary of Cash Flows

We ended the third quarter of 2022 with cash and cash equivalents of $56.5 million, a decrease of $19.0 million from December 31, 2021.

The decrease was primarily due to capital expenditures of $22.5 million and cash used in operating activities of $7.3 million, partially offset by net proceeds from our credit facilities of $9.4 million .

We ended the first quarter of 2023 with cash and cash equivalents of $68.8 million, a decrease of $17.6 million from the prior year ended December 30, 2022.

The decrease of $17.6 million during the first quarter was primarily due to net cash used in operating activities of $10.9 million and capital expenditures of $6.8 million.

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

Nine Months Ended

September 30,

September 24,

Three Months Ended

2023 April 1,

(in thousands)

Cash provided by (used in) operating activities

Cash used in operating activities $ (10,873) $ (36,278)

Cash used in investing activities (6,819) (3,417)

1 unchanged sentence

Net decrease in cash $ (17,633) $ (40,979)

Our cash used in operating activities during the nine months ended September 30, 2022 consisted of an increase in our net operating assets and liabilities of $100.1 million, partially offset by net income of $58.6 million and net non-cash charges of $34.2 million, which consists primarily of depreciation and amortization of $26.7 million and share-based compensation expense of $10.1 million.

The increase in our net operating assets and liabilities of $100.1 million during the nine months ended September 30, 2022 was primarily due to an increase in inventories of $54.5 million, an increase in accounts receivable of $40.3 million, and a decrease in accounts payable of $18.5 million.

The increase in our inventories is primarily driven by elevated purchasing activity pursuant to strong customer demand and certain supply chain component constraints.

The decrease in accounts payable and increase in accounts receivable were primarily due to fluctuations in payment timing to suppliers and from customers, as well as higher revenues in the last two weeks of the third quarter of 2022 compared to the last two weeks of the fourth quarter of 2021.

Cash used in investing activities during the nine months ended September 30 , 2022 consists primarily of capital expenditures.

Cash provided by financing activities during the nine months ended September 30 , 2022 consists of net proceeds from our credit facilities of $9.4 million, including a net draw on our revolving facility of $15.0 million for U.S.

working capital obligations, and net proceeds from share-based compensation activity of $0.9 million .

Our cash used in operating activities of $10.9 million during the first quarter consisted of net loss of $0.0 million, net non-cash charges of $11.2 million, consisting primarily of depreciation and amortization of $8.5 million and share-based compensation expense of $3.6 million, and an increase in our net operating assets and liabilities of $22.1 million.

The increase in our net operating assets and liabilities of $22.1 million during the first quarter was primarily due to a decrease in accounts payable of $43.0 million, which was primarily due to the timing of inventory purchases and receipts, partially offset by a decrease in accounts receivable of $13.6 million and a decrease in inventories of $12.1 million.

Cash used in investing activities during the first quarter of 2023 and 2022 consisted of capital expenditures.

Cash provided by financing activities during the first quarter of 2023 and 2022 consisted of net proceeds from share-based compensation activity of $1.9 million and $0.6 million, respectively, partially offset by term loan payments of $1.9 million.

Critical Accounting Estimates

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis