What changed in this filing

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Item 1. Business

2024-02-23 compared with 2023-02-24 · 37 added, 63 removed, 224 unchanged (31% of the section changed)

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All references to 2023, 2022, and 2021, including the quarters thereto, relate to our fiscal periods as so detailed.

Fiscal Period

Period Ending

Weeks in Period

Fiscal Period Period Ending Weeks in Period

Fiscal Year 2023:

December 29, 2023 52

First Quarter

April 1, 2022

Second Quarter

Third Quarter

September 30, 2022

Fourth Quarter

December 30, 2022

First Quarter March 31, 2023 13

Second Quarter June 30, 2023 13

Third Quarter September 29, 2023 13

Fourth Quarter December 29, 2023 13

Fiscal Year 2022:

December 30, 2022 52

First Quarter

March 26, 2021

Second Quarter

June 25, 2021

Third Quarter

September 24, 2021

Fourth Quarter

December 31, 2021

First Quarter April 1, 2022 13

Second Quarter July 1, 2022 13

Third Quarter September 30, 2022 13

Fourth Quarter December 30, 2022 13

Fiscal Year 2021:

December 31, 2021 53

First Quarter

March 27, 2020

Second Quarter

June 26, 2020

Third Quarter

September 25, 2020

Fourth Quarter

December 25, 2020

First Quarter March 26, 2021 13

Second Quarter June 25, 2021 13

Third Quarter September 24, 2021 13

Fourth Quarter December 31, 2021 14

Company Overview

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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 has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.

Outsourcing these subsystems has allowed OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.

We believe that this outsourcing trend has enabled OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us.

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With an aim to provide superior customer service, we have a global footprint with many facilities strategically located in close proximity to our customers.

We have long standing relationships with top tier OEM customers, including Lam Research, Applied Materials, and ASML, which were our three largest customers by sales in 202 2 .

We have long standing relationships with top tier OEM customers, including Applied Materials, Lam Research, and ASML, which were our three largest customers by sales in 2023.

We generated revenue of $811.1 million, $1,280.1 million, and $1,096.9 million in 2023, 2022, and 2021, respectively.

We generated net income of $72.8 million, $70.9 million, and $33.3 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2022, 2021, and 2020, respectively, and $104.9 million, $97.7 million, and $59.0 million on a non-GAAP basis, respectively.

See Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Results for a discussion of non-GAAP net income, an accompanying presentation of the most directly comparable financial measure, GAAP net income, and a reconciliation of the differences between non-GAAP net income and GAAP net income.

We generated net income (loss) of $(43.0) million, $72.8 million, and $70.9 million, calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in 2023, 2022, and 2021, respectively, and $12.3 million, $104.9 million, and $97.7 million on a non-GAAP basis, respectively.

– Management's Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP Results for a discussion of non-GAAP net income, an accompanying presentation of the most directly comparable financial measure, GAAP net income, and a reconciliation of the differences between non-GAAP net income and GAAP net income.

Our Competitive Strengths

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Long History and Strong Relationships with Top Tier Customers

We have established deep relationships with top tier OEMs, including Lam Research, Applied Materials, and ASML.

We have established deep relationships with top tier OEMs, including Applied Materials, Lam Research, and ASML.

Our customers are global leaders by sales in the semiconductor capital equipment industry.

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Capital Efficient and Scalable Business Model

Our business requires modest levels of capital investments to support production capacity and new product development and can fluctuate over time depending on the business outlook and new product strategy and timing of introduction.

Our business requires modest levels of capital investments to support production capacity and new product development and can fluctuate over time depending on business outlook, new product strategy, and timing of introductions.

In 2023, 2022, and 2021, our total capital expenditures were $15.5 million, $29.4 million, and $20.8 million, respectively, representing 1.9%, 2.3%, and 1.9%, of sales, respectively.

In 2022, we significantly increased our precision machining manufacturing capacity, representing approximately 80% of 2022 capital expenditures.

The semiconductor capital equipment market has historically been cyclical.

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Through our acquisition of IMG Companies, LLC, a precision machining and specialty component manufacturing company (together with its subsidiaries, “IMG”), in November 2021, our acquisition of a precision machining operation in December 2020, an intellectual property purchase of developed flow controller technology in 2019, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our product offerings within our served customer base, including entering the market for chemical delivery subsystems for wet process tools where we had only limited engagement in the past.

Using this and our existing engineering capability, we developed a liquid delivery module for use on a wet process equipment system that met the specifications of, and was qualified by, one of our largest customers and a market leader in this space.

Grow Our Total Available Market and Share of the Market with Expanded Product Offerings

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By leveraging our existing customer relationships and strong history of solving these challenges, we believe this will grow market share.

Through our acquisition of a precision machining operation in December 2020, our intellectual property purchase of developed flow controller technology in 2019, our acquisition of a Korean gas panel supplier in 2018, and our acquisitions of a weldment company and a precision machining company in 2017, we significantly expanded our served customer base with expanded product offerings.

The acquisitions allow us to manufacture and assemble the complex plastic and metal products and precision machined components for the semiconductor equipment, including our existing customer base, as well as medical device, and general-industrial industries, while providing us exposure to and growth opportunities in the Korean and Japanese semiconductor capital equipment market.

We have significantly expanded our served customer base with expanded product offerings as a result of our opportunistic acquisitions.

These acquisitions have enabled us to manufacture and assemble the complex plastic and metal products and precision machined components for the semiconductor equipment market, including at our existing customer base, as well as for the medical device, and general-industrial industries, while providing us exposure to and growth opportunities in the Korean and Japanese semiconductor capital equipment market.

Through our acquisition of IMG in November 2021, we have opened up adjacent opportunities within semiconductor capital equipment, including large format machining, hydrogen brazing, and e‑beam and laser welding.

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Gas delivery is among the most technologically complex functions in semiconductor capital equipment and is used to deliver, monitor and control precise quantities of the vapors and gases critical to the manufacturing process.

Our gas delivery systems consist of a number of gas lines, each controlled by a series of mass flow controllers, regulators, pressure transducers, and valves, and an integrated electronic control system.

Our gas delivery systems consist of a number of gas lines, each controlled by a series of mass flow controllers, regulators, pressure transducers, valves, and an integrated electronic control system.

Our gas delivery subsystems are primarily used in equipment for “dry” manufacturing processes, such as etch, chemical vapor deposition, physical vapor deposition, epitaxy, and strip.

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The welded assemblies are used in both wet and dry processes, non-semi applications including aerospace and defense, medical, and general industrial markets.

We offer a wide range of specialty joining technologies including orbital, tungsten inert gas (“TIG”), e‑beam, and laser welding, as well as hydrogen and vacuum brazing.

We offer a wide range of specialty joining technologies including orbital, tungsten inert gas, e‑beam, and laser welding, as well as hydrogen and vacuum brazing.

Precision Machining

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Our business of designing and manufacturing critical systems for semiconductor capital equipment manufacturers operated as a standalone business until 2009 when Celerity sold the business to a private equity fund.

Francisco Partners acquired the business in December 2011 and formed Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia.

Francisco Partners acquired the business in December 2011.

Ichor Holdings, Ltd., an exempt company incorporated in the Cayman Islands, was formed in March 2012 to serve as the parent company as part of a restructuring to accommodate the expansion of our business in Singapore and Malaysia.

We completed the initial public offering of our ordinary shares in December 2016.

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We are dependent upon a small number of customers, as the semiconductor equipment manufacturer market is highly concentrated with five companies accounting for over 70% of all process tool revenues.

For 2022, our two largest customers were Lam Research and Applied Materials, which accounted for a combined 79% of sales, respectively.

For 2023, our three largest customers were Applied Materials, Lam Research, and ASML which accounted for a combined 82% of sales, respectively.

We do not have long-term contracts that require customers to place orders with us in fixed or minimum volumes, and we generally operate on a purchase order basis with customers.

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We use a wide range of components and materials in the production of our gas and chemical delivery systems, including filters, mass flow controllers, regulators, pressure transducers, substrates, and valves.

We obtain components and materials from a large number or sources, including single source and sole source suppliers.

We obtain components and materials from a large number of sources, including single source and sole source suppliers.

We use supplier-consigned material and just-in-time stocking programs for a portion of our inventories to better manage our component inventories and better respond to changing customer requirements.

These approaches enable us to reduce our inventory levels and maintain flexibility in responding to changes in product demand.

These approaches are designed to reduce our inventory levels and maintain flexibility in responding to changes in product demand.

A key part of our strategy is to identify multiple suppliers with a strong global reach that are located within close proximity to our manufacturing locations.

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We have built a team of fluid delivery experts.

As of December 30, 2022, our engineering team consisted of approximately 90 engineers and designers with mechanical, electrical, chemical, systems, and software expertise.

As of December 29, 2023, our engineering team consisted of approximately 140 engineers and designers with chemical, mechanical, electrical, software, and systems expertise.

Our engineers are closely connected with our customers and typically work at our customers’ sites and operate as an extension of our customers’ design team.

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We recognize and value each person’s diverse background and unique skill set and seek to foster an environment that encourages personal growth and professional development.

We continue to extend our commitment to diversity, inclusion, and equity through specific policies, practices, employee and manager training, and dedicated executive leadership.

We are committed to enhancing diversity, inclusion, and equity through specific policies, practices, employee and manager training, and dedicated executive leadership.

Below are details demonstrating our commitment in this area.

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Of our total workforce, approximately 140 are engineers, 110 are engaged in sales and marketing, 1,770 are engaged in manufacturing, and 225 perform executive and administrative functions.

Our employees are not unionized, and we have no participation in works councils.

We have not experienced any material work stoppages at any of our facilities in 2022.

We believe our relationship with our employees to be good.

Total Rewards

As part of our total rewards philosophy, we believe in offering market-competitive compensation and benefits programs for our employees to attract and retain a talented and productive workforce.

As part of our total rewards philosophy, we believe in offering market-competitive compensation and benefits programs for our employees to attract, engage, and retain a talented and productive workforce.

Our programs are designed to be externally competitive, internally fair and equitable, and our pay-for-performance philosophy aims to reward each individual for their contributions while striving for equal pay for work regardless of gender, race, or ethnicity.

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We support our employees in their career development by providing a multi-dimensional approach to learning and development, including internal and external opportunities for professional development.

This includes tuition reimbursement, online training, on the job training, diversity and inclusion training, and managerial coaching.

This includes tuition reimbursement, online training, on the job training, diversity and inclusion training, and managerial coaching and training.

We actively invest in leadership development, cultivating involvement, engagement, and empowerment of our future leaders in an active investment in succession planning and development.

We also believe that maintaining an effective employee review and appraisal process, with regular managerial feedback and coaching, is critical to cultivating a learning organization.

We adopted two employee resource groups in 2022, Ichor Women and Ichor Pride , creating increased employee engagement to grow and foster diverse talent.

In addition, we support employee resource groups to increase employee engagement and to grow and foster talent.

Health and Safety

We are committed to monitoring and maintaining a healthy and safe environment for our employees.

We facilitate “skip level” sessions, periodically survey employees, and use other communication forums to allow employees to express their opinions, concerns, and suggestions to management.

We maintain a professional human resources department and provide a whistleblower hotline available to all employees for communicating concerns, including those involving health and safety.

We take necessary steps to ensure the health and safety of our employees and extended communities by following, and often exceeding, regulatory guidelines from around the world.

We facilitate “skip level” sessions, annually survey employees and use other communication forums to allow employees to express their opinions, concerns, and suggestions to management.

We maintain a professional human resources department and provide a whistleblower hotline for communicating concerns, including those involving health and safety.

We take necessary steps to ensure the health and safety of our employees and extended communities by following regulatory guidelines from around the world.

We promote having our workforce physically co-located at our facilities to support collaboration, which is a company core value.

When necessary, we support remote and hybrid working options for certain office staff.

For all of our facilities, we maintain strict guidelines to uphold the safety of our workforce and business continuity, including health screenings, social distancing protocols, the use of personal protective equipment, and, in certain regions, onsite testing protocols.

We held onsite flu vaccine clinics during 2022 to support employee preventive health and create ease of access.

Community Involvement

We continued our charitable contributions this past year to include educational scholarships specifically earmarked for under-represented minority groups attending college.

We invest in selected local community colleges in the regions where we live and work to support the education and development opportunities supporting the advancement of manufacturing skill sets, such as machinists and welding.

We support local foodbanks, sponsor blood drives, and other local charities in communities in which we operate.

Our environmental, social, and governance (“ESG”) efforts in 2022 were advanced by establishing an ESG council to assist in supporting a sustainable environment for generations to come, cultivating a diverse, equitable, and inclusive employment environment, contributing to the communities where we operate, and upholding the highest code of business ethics and standards.

The council embarked on a five-year roadmap in 2022, with 2022 serving as the year for defining data baselines and communicating policies.

We are a proud member of the Responsible Business Alliance, and we work with our customers and suppliers to support their ESG goals.

Environmental, Health, and Safety Regulations

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We make a variety of information available, free of charge, at our Investor Relations website, ir.ichorsystems.com .

This information includes our Annual Reports on Form 10‑K, our Quarterly Reports on Form 10‑Q, our Current Reports on Form 8‑K, and any amendments to those reports as soon as reasonably practicable after we electronically file those reports with or furnish them to the Securities and Exchange Commission (“SEC”), as well as our Code of Business Ethics and Conduct and other governance documents.

This information includes our Annual Reports on Form 10‑K, our Quarterly Reports on Form 10‑Q, our Current Reports on Form 8‑K, and any amendments to those reports as soon as reasonably practicable after we electronically file those reports with or furnish them to the SEC, as well as our Code of Business Ethics and Conduct and other governance documents.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file documents electronically with the SEC at sec.gov .

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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-K

Item 1. Business