What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-07 · 112 added, 179 removed, 176 unchanged (62% of the section changed)

8 unchanged sentences

However, these words are not the exclusive means of identifying such statements.

These statements are contained in many sections of this report, including those in Part I – Item 2.

These statements are contained in many sections of this report, including in this Part I – Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

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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 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;

our reliance on a very small number of original equipment manufacturer ("OEM") customers for a significant portion of our sales;

our customers’ significant negotiating leverage;

competition in our industry;

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include geopolitical, economic and market conditions, including high inflation, changes to fiscal and monetary policy, high interest rates, currency fluctuations, challenges in the supply chain and any disruptions in the global economy as a result of the conflicts in Ukraine and the Middle East;

dependence on expenditures by manufacturers and cyclical downturns in the semiconductor capital equipment industry;

reliance on a very small number of original equipment manufacturers ("OEMs") for a significant portion of sales;

negotiating leverage held by our customers;

competitiveness and rapid evolution of the industries in which we participate;

keeping pace with developments in the industries we serve and with technological innovation generally;

designing, developing and introducing new products that are accepted by original equipment manufacturers in order to retain our existing customers and obtain new customers;

managing our manufacturing and procurement process effectively;

defects in our products that could damage our reputation, decrease market acceptance and result in potentially costly litigation;

our dependence on a limited number of suppliers;

and other factors set forth in this report, and those set forth in Part I – Item 1A.

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Our chemical delivery systems and subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning.

We also provide precision-machined components, weldments, e‑beam and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products.

We also provide precision-machined components, weldments, e‑beam and laser-welded components, precision vacuum and hydrogen brazing, surface treatment technologies, and other proprietary products.

This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.

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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.

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.

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 to provide growth opportunities for specialized subsystems suppliers like us.

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

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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 29,

2023 September 30,

2022 September 29,

2023 September 30,

Three Months Ended

2024 March 31,

(dollars in thousands, except per share amounts)

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Non-GAAP operating margin 1.2 % 6.1 %

Net income (loss) $ (10,425) $ 29,031 $ (31,086) $ 58,607

Non-GAAP net income $ 2,097 $ 35,354 $ 13,932 $ 83,858

Net loss $ (8,989) $ (5)

Non-GAAP net income (loss) $ (2,712) $ 11,128

Diluted EPS $ (0.30) $ 0.00

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During much of 2022, many of these factors impacted our ability to fulfill high customer demand;

however, the industry entered a cyclical downturn in the fourth quarter of 2022, leading to reductions in spending on semiconductor capital equipment, the primary industry in which we operate, resulting in weakened customer demand in the first three quarters of 2023.

In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this reduced spending environment, including persistent levels of high inflation, higher interest rates, supply chain disruptions, and other macroeconomic uncertainties.

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 2023.

As a result of these programs, we incurred severance charges of $1.1 million, $1.3 million, and $0.8 million in the fourth quarter of 2022 and the first and third quarters of 2023, respectively.

As a result of these programs, we incurred severance charges of $0.9 million and $1.3 million in the first quarter of 2024 and 2023, respectively.

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

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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 and Nine Months Ended September 29, 2023 and September 30, 2022 – Interest expense, net.

An analysis of the changes in our debt-service cost is provided below under the heading Comparison of the Three Months Ended March 29, 2024 and March 31, 2023 – Interest expense, net.

Results of Operations

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The period‑to‑period comparison of results is not necessarily indicative of results for future periods.

Three Months Ended Nine Months Ended

September 29,

2023 September 30,

2022 September 29,

2023 September 30,

Three Months Ended

2024 March 31,

(in thousands)

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Interest expense, net 4,096 4,550

Other expense (income), net 29 (210) 913 (674)

Income (loss) before income taxes (9,989) 29,508 (18,565) 61,638

Income tax expense 436 477 12,521 3,031

Net income (loss) $ (10,425) $ 29,031 $ (31,086) $ 58,607

Other expense, net 239 784

Loss before income taxes (8,076) (540)

Income tax expense (benefit) 913 (535)

Net loss $ (8,989) $ (5)

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 29,

2023 September 30,

2022 September 29,

2023 September 30,

Three Months Ended

2024 March 31,

Net sales 100.0 100.0

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Interest expense, net 2.0 2.0

Other expense (income), net — (0.1) 0.2 (0.1)

Income (loss) before income taxes (5.1) 8.3 (3.1) 6.3

Income tax expense 0.2 0.1 2.1 0.3

Net income (loss) (5.3) 8.2 (5.1) 6.0

Comparison of the Three and Nine Months Ended September 29, 2023 and September 30, 2022

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Other expense, net 0.1 0.3

Loss before income taxes (4.0) (0.2)

Income tax expense (benefit) 0.5 (0.2)

Net loss (4.5) 0.0

Comparison of the Three Months Ended March 29, 2024 and March 31, 2023

Three Months Ended Change

2024 March 31,

2023 Amount %

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Net sales $ 201,383 $ 225,870 $ (24,487) (10.8) %

The decrease in net sales from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to reduced customer demand stemming from reduced spending within the semiconductor capital equipment industry.

The decrease in net sales from the three months ended March 31, 2023 to the three months ended March 29, 2024 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 Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Three Months Ended Change

2024 March 31,

2023 Amount %

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Gross profit $ 22,994 $ 33,240 $ (10,246) (30.8) %

Gross margin 12.2 % 17.9 % -570 bps 13.7 % 16.7 % -300 bps

The decrease in the gross amounts of cost of sales and gross profit from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to the factors mentioned in the commentary above under the heading, “ Net Sales .”

The decrease in gross margin from three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand.

Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by 150bps and 50bps for the three and nine months ended September 29, 2023.

Gross margin 11.4 % 14.7 % -330 bps

The decrease in the gross amounts of cost of sales and gross profit from the three months ended March 31, 2023 to the three months ended March 29, 2024 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 March 31, 2023 to the three months ended March 29, 2024 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand and unfavorable product mix.

Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by 110bps for the three months ended March 29, 2024.

Research and development

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Three Months Ended Change

2024 March 31,

2023 Amount %

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Research and development $ 5,370 $ 4,313 $ 1,057 24.5 %

The increase in research and development expenses from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to increased program costs related to the development of our new products.

The increase in research and development expenses from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to increased employee-related expenses, inclusive of share-based compensation expense, of $0.5 million and professional fees and materials of $0.5 million from program costs related to the development of our new products.

Selling, general, and administrative

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Three Months Ended Change

2024 March 31,

2023 Amount %

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Selling, general, and administrative $ 19,219 $ 20,167 $ (948) (4.7) %

The decrease in selling, general, and administrative expense from the third quarter of 2022 to the third quarter of 2023 was primarily due to reduced employee-related expenses, inclusive of share-based compensation expense, of $1.3 million, a $1.0 million loss accrual recorded in the third quarter of 2022 relating to an expected settlement of an employment-related legal matter, and reduced occupancy-related costs of $0.2 million, partially offset by increased consulting and software costs of $0.7 million.

The decrease in selling, general, and administrative expense from the nine months ended September 30, 2022 to the nine months ended September 29, 2023 was primarily due to reduced employee-related expenses, inclusive of share-based compensation expense, of $4.2 million, loss accruals recorded in the first and third quarters of 2022 relating to an expected settlement of employment-related legal matters totaling $4.1 million, and reduced occupancy-related costs of $0.6 million, partially offset by increased information technology systems and related consulting and software costs of $2.2 million.

The decrease in selling, general, and administrative expense from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to reduced employee-related expenses, inclusive of share-based compensation expense, of $1.4 million, software costs of $0.7 million, and reduced occupancy-related costs of $0.3 million, partially offset by increased professional and consulting fees of $1.5 million.

Amortization of intangible assets

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Three Months Ended Change

2024 March 31,

2023 Amount %

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Amortization of intangible assets $ 2,146 $ 3,966 $ (1,820) (45.9) %

The decrease in amortization expense from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to certain intangible assets becoming fully amortized in 2022.

The decrease in amortization expense from the three months ended March 31, 2023 to the three months ended March 29, 2024 was due to certain intangible assets becoming fully amortized in 2023.

Interest expense, net

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Three Months Ended Change

2024 March 31,

2023 Amount %

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Weighted average borrowings outstanding $ 243,935 $ 302,479 $ (58,544) (19.4) %

Weighted average borrowing rate 7.06 % 3.97 % +309 bps 6.60 % 2.74 % +386 bps

The increase in interest expense, net from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was due to increases in our weighted average borrowing rate, partially offset by decreases in our average amount borrowed.

The increases in our weighted average borrowing rate were primarily due to increased risk-free, short-term borrowing rates as a result of tightening monetary policy, which impacts the Bloomberg Short Term Bank Yield ("BSBY"), the variable component of our borrowing rate under our credit facilities.

The decreases in our average amount borrowed was primarily due to quarterly term loan payments and payments on our revolving credit facilities in the second and third quarters of 2023.

Other expense (income), net

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount % September 29,

2023 September 30,

Weighted average borrowing rate 7.61 % 6.10 % +151 bps

The decrease in interest expense, net from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to a decrease in the weighted average amount borrowed during the first quarter, partially offset by an increase in our weighted average borrowing rate, which was primarily due to increased risk-free, short-term borrowing rates as a result of tightening monetary policy, which impacts the Bloomberg Short Term Bank Yield ("BSBY"), the variable component of our borrowing rate under our credit facilities.

Other expense, net

Three Months Ended Change

2024 March 31,

2023 Amount %

(dollars in thousands)

Other expense (income), net $ 29 $ (210) $ 239 n/m $ 913 $ (674) $ 1,587 n/m

The change in other expense, net from the three and nine months ended September 30, 2022 to the three and nine months ended September 29, 2023 was primarily due to currency exchange rate fluctuations during the quarter related to our local currency payables of our foreign operations.

Income tax expense

Three Months Ended Change Nine Months Ended Change

September 29,

2023 September 30,

2022 Amount September 29,

2023 September 30,

Other expense, net $ 239 $ 784 $ (545) (69.5) %

The change in other expense, net from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to currency exchange rate fluctuations during the quarter related to our local currency payables of our foreign operations.

Income tax expense (benefit)

Three Months Ended Change

2024 March 31,

(dollars in thousands)

Income tax expense $ 436 $ 477 $ (41) $ 12,521 $ 3,031 $ 9,490

Income (loss) before income taxes $ (9,989) $ 29,508 $ (39,497) $ (18,565) $ 61,638 $ (80,203)

Income tax expense (benefit) $ 913 $ (535) $ 1,448

Loss before income taxes $ (8,076) $ (540) $ (7,536)

Effective income tax rate -11.3 % 99.1 %

The decrease in income tax expense from the third quarter of 2022 to the third quarter of 2023 was primarily due to reduced U.S.

tax expense as a result of lower taxable income in the U.S.

year-over-year, partially offset by higher foreign income tax expense.

Because we recorded a valuation allowance against our U.S.

state and federal deferred income taxes, we currently do not record tax benefits on our GAAP U.S.

taxable losses.

The increase in income tax expense from the nine months ended September 30, 2022 to the nine months ended September 29, 2023 was primarily due to recording a valuation allowance against our U.S.

federal and state deferred tax assets, resulting in an $11.1 million charge to income tax expense during the second quarter of 2023.

The increase in income tax expense from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to increased taxable income in foreign jurisdictions in 2024.

Additionally, in the first quarter of 2024, we are unable to benefit from U.S.

pre-tax losses due to a valuation allowance we recorded against our U.S.

state and federal deferred tax assets in the second quarter of 2023.

Non‑GAAP Financial Results

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All non-GAAP adjustments are presented on a gross basis.

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

gross profit, operating income (loss), or net income (loss), respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including 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 (loss), and net income (loss), respectively;

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

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

and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance charges.

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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 29,

2023 September 30,

2022 September 29,

2023 September 30,

Three Months Ended

2024 March 31,

(dollars in thousands)

2 unchanged sentences

Share-based compensation 776 421

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

Other (1) 748 1,287

2 unchanged sentences

Non-GAAP gross margin 12.2 % 15.5 %

(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.

(1) 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 29,

2023 September 30,

2022 September 29,

2023 September 30,

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

Three Months Ended

2024 March 31,

(dollars in thousands, except per share amounts)

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Share-based compensation 2,375 3,637

Settlement loss (1) — 1,046 — 4,146

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

Acquisition costs (3) — — — 296

Transaction-related costs (1) 785 —

Other (2) 867 1,324

2 unchanged sentences

Non-GAAP operating margin 1.2 % 6.1 %

(1) 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.

(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.

(1) Included in this amount are transaction-related costs incurred in connection with our acquisitions pipeline.

(2) 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.

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

All non-GAAP adjustments are presented on a gross basis;

the related income tax effects, including current and deferred income tax expense, are included in the adjustment line under the heading "Tax adjustments related to non-GAAP adjustments".

Three Months Ended Nine Months Ended

September 29,

2023 September 30,

2022 September 29,

2023 September 30,

Three Months Ended

2024 March 31,

(dollars in thousands, except per share amounts)

GAAP net income (loss) $ (10,425) $ 29,031 $ (31,086) $ 58,607

GAAP net loss $ (8,989) $ (5)

Non-GAAP adjustments:

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Share-based compensation 2,375 3,637

Settlement loss (1) — 1,046 — 4,146

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

Acquisition costs (3) — — — 296

Transaction-related costs (1) 785 —

Other (2) 867 1,324

Tax adjustments related to non-GAAP adjustments (3) 104 2,206

Tax expense from valuation allowance (6) — — 11,094 —

Non-GAAP net income $ 2,097 $ 35,354 $ 13,932 $ 83,858

Non-GAAP net income (loss) $ (2,712) $ 11,128

GAAP diluted EPS $ (0.30) $ 0.00

1 unchanged sentence

Shares used to compute non-GAAP diluted EPS 30,010,971 29,412,185

(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.

(1) Included in this amount are transaction-related costs incurred in connection with our acquisitions pipeline.

(2) 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, which are presented on a gross basis, including the impacts of excluding share-based compensation and amortization of intangible assets.

The adjustment reflects income tax benefits generated from U.S.

taxable losses, on a non-GAAP basis, as we do not have a valuation allowance against our U.S.

federal and state deferred tax assets on a non-GAAP basis.

Refer to footnote 6 below.

(6) During the second quarter of 2023, we recorded a valuation allowance of $11.1 million against our U.S.

federal and state deferred tax assets.

The valuation allowance was recorded based on an assessment of available positive and negative evidence, including an estimate of being in a three-year cumulative loss position in the U.S.

by the end of 2023, projections of future taxable income, and other quantitative and qualitative information.

On a non-GAAP basis, we added back the expense associated with our recognition of a valuation allowance against our U.S.

federal and state deferred tax assets, because recording a valuation allowance would not have been appropriate, as we were in, and expect to remain in a three-year cumulative U.S.

(3) Adjusts GAAP income tax expense for the impact of our non-GAAP adjustments, which are presented on a gross basis.

During the second quarter of 2023, we recorded a valuation allowance against our U.S.

federal and state deferred tax assets on a GAAP basis.

In the first quarter of 2024, we determined that the valuation allowance should be recognized against our U.S.

federal and state deferred tax assets on a non-GAAP basis as we were not in a three-year cumulative U.S.

income position on a non-GAAP basis.

Accordingly, from the first quarter of 2024 and forward, tax expense on a GAAP and non-GAAP basis reflects a valuation allowance against our U.S.

federal and state deferred tax assets.

Liquidity and Capital Resources

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We have no significant long-term purchase commitments related to procuring raw materials inventory.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and are therefore subject to prevailing global macroeconomic conditions and financial, business, and other factors, some of which are beyond our control.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance, and our continued access to the capital markets and are therefore subject to prevailing global macroeconomic conditions and financial, business, and other factors, some of which are beyond our control.

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

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(i) sales to our customers and the related changes in our net operating assets and liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable.

Our credit facilities are comprised of a $150.0 million term loan facility and a $250.0 million revolving credit facility, of which $105.0 million remained available to draw on as of September 29, 2023.

Our credit facilities are comprised of a $150.0 million term loan facility and a $250.0 million revolving credit facility, of which $250.0 million remained available to draw on as of March 29, 2024.

Summary of Cash Flows

We ended the third quarter of 2023 with cash and cash equivalents of $75.9 million, a decrease of $10.5 million from the prior year ended December 30, 2022.

The decrease was primarily due to net payments on our credit facilities of $20.6 million and capital expenditures of $13.2 million, partially offset by net cash provided by operating activities of $20.1 million.

We ended the first quarter of 2024 with cash and cash equivalents of $102.1 million, an increase of $22.2 million from the prior year ended December 29, 2023.

The increase was primarily due to net proceeds of $136.7 million from our issuance of 3.8 million ordinary shares in March 2024 in connection with an underwritten public offering and net cash provided by operating activities of $4.8 million, partially offset by net payments on credit facilities of $116.9 million and capital expenditures of $4.5 million.

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

Nine Months Ended

September 29,

2023 September 30,

Three Months Ended

2024 March 31,

(in thousands)

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Cash used in investing activities (4,490) (6,819)

Cash provided by (used in) financing activities (17,356) 10,247

Net decrease in cash $ (10,537) $ (19,032)

Our cash provided by operating activities of $20.1 million during the nine months ended September 29, 2023 consisted of net loss of $31.1 million, offset by net non-cash charges of $48.4 million, consisting primarily of depreciation and amortization of $26.0 million, share-based compensation expense of $12.7 million, and deferred income taxes of $9.4 million, and a decrease in our net operating assets and liabilities of $2.7 million.

Deferred taxes consists primarily of a $11.1 million charge related to a valuation allowance recorded against our U.S.

and state deferred tax assets in the second quarter of 2023.

The decrease in our net operating assets and liabilities of $2.7 million during the nine months ended September 29, 2023 was primarily due to a decrease in accounts receivable and inventories of $33.0 million and $16.8 million, respectively, partially offset by a decrease in accounts payable and accrued and other liabilities of $34.8 million and $20.9 million, respectively.

This compares to cash used in operating activities of $7.3 million during the nine months ended September 30, 2022.

The increase in cash provided by operating activities from the nine months ended September 30, 2022 to the nine months ended September 29, 2023 was primarily due to favorable changes in the balances of accounts receivable and inventories during the nine months ended September 29, 2023 compared to the nine months ended September 30, 2022, partially offset by less aggregate net income (loss) and net non-cash charges and unfavorable changes in the balance of accounts payable and accrued and other liabilities during the nine months ended September 29, 2023 compared to the nine months ended September 30, 2022.

Cash used in investing activities during the nine months ended September 29, 2023 and September 30, 2022 consisted of capital expenditures.

The reduction in capital expenditures from the nine months ended September 30, 2022 to the nine months ended September 29, 2023 was due to reduced factory capacity expansion projects.

Cash used in financing activities during the nine months ended September 29, 2023 consisted of net payment on our credit facilities of $20.6 million, partially offset by net proceeds from share-based compensation activity of $3.3 million.

Cash provided by financing activities during the nine months ended September 30, 2022 consisted of net proceeds from our credit facilities of $9.4 million and net proceeds from share-based compensation activity of $0.9 million.

The change in net payments on, and net proceeds from, our credit facilities relates to fluctuations in cash required for working capital purposes relative to the geographic distribution of available cash during the periods then ended.

The increase in net proceeds from share-based compensation activity from the nine months ended September 30, 2022 to the nine months ended September 29, 2023 was due to increased stock option exercises.

Cash provided by financing activities 21,855 59

Net increase (decrease) in cash $ 22,169 $ (17,633)

Our cash provided by operating activities of $4.8 million during the three months ended March 29, 2024 consisted of net loss of $9.0 million, offset by net non-cash charges of $10.2 million, consisting primarily of depreciation and amortization of $7.6 million and share-based compensation expense of $2.4 million, and a decrease in our net operating assets and liabilities of $3.6 million.

The decrease in our net operating assets and liabilities of $3.6 million during the three months ended March 29, 2024 was primarily due to a decrease in inventories of $5.2 million, an increase in accounts payable of $3.4 million, and a decrease in prepaid expenses and other assets of $1.7 million, partially offset by an increase in accounts receivable of $6.7 million.

Cash used in operating activities was $10.9 million during the three months ended March 31, 2023.

The increase in cash provided by operating activities from the three months ended March 31, 2023 to the three months ended March 29, 2024 was primarily due to favorable changes in the balances of accounts payable and accrued and other liabilities during the three months ended March 29, 2024 compared to the three months ended March 31, 2023, partially offset by less aggregate net income (loss) and unfavorable change in the balances of accounts receivable and inventories during the three months ended March 29, 2024 compared to the three months ended March 31, 2023.

Cash used in investing activities during the three months ended March 29, 2024 and March 31, 2023 consisted of capital expenditures.

The reduction in capital expenditures from the three months ended March 31, 2023 to the three months ended March 29, 2024 was due to reduced factory capacity expansion projects.

Capital expenditures for the three months ended March 29, 2024 were $4.5 million and were used primarily for equipment and information technology upgrades.

Cash provided by financing activities during the three months ended March 29, 2024 consisted of net proceeds of $136.7 million from our issuance of 3.8 million ordinary shares in March 2024 in connection with an underwritten public offering and net proceeds from share-based compensation activity of $2.0 million, partially offset by net payment on our credit facilities of $116.9 million.

Cash provided by financing activities during the three months ended March 31, 2023 consisted of net proceeds from share-based compensation activity of $1.9 million, partially offset by term loan payments of $1.9 million.

The change in net payments on our credit facilities relates to the payoff of our revolving credit facility in the first quarter of 2024.

Critical Accounting Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis