What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-05 compared with 2024-08-07 · 110 added, 94 removed, 222 unchanged (48% of the section changed)

47 unchanged sentences

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 Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

(dollars in thousands, except per share amounts)

5 unchanged sentences

Net loss $ (2,776) $ (10,425) $ (16,877) $ (31,086)

Non-GAAP net income (loss) $ 1,819 $ 707 $ (893) $ 11,835

Non-GAAP net income $ 4,020 $ 2,097 $ 3,127 $ 13,932

Diluted EPS $ (0.08) $ (0.36) $ (0.52) $ (1.07)

2 unchanged sentences

The semiconductor industry is cyclical in nature.

The industry entered a cyclical downturn in the fourth quarter of 2022, leading to reductions in spending on semiconductor capital equipment, resulting in weakened customer demand.

The industry entered a cyclical downturn in the fourth quarter of 2022 for the primary markets we serve, leading to reductions in spending on semiconductor capital equipment, which resulted in weakened customer demand.

In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this reduced spending environment, which combined with increased export controls for advanced 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.

Although the total market for semiconductor capital equipment has experienced year-over-year stability and growth, inventory digestion at our customers and the relative spending levels within our primary served markets, in particular lower spending levels for deposition and etch equipment, has resulted in demand from our customers persisting at lower levels over the past year relative to the total semiconductor capital equipment market.

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, continuing through the second quarter of 2024.

Although the total market for semiconductor capital equipment has experienced year-over-year stability and growth, inventory digestion at our customers and the relative spending levels within our primary served markets, in particular lower spending levels for deposition and etch equipment, has resulted in demand from our customers persisting at lower levels over the past two years relative to the total semiconductor capital equipment market.

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 cost reduction initiatives starting in the fourth quarter of 2022, which continued through the second quarter of 2024.

We did not initiate further, or continue, labor cost reduction initiatives in the third quarter of 2024.

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.

2 unchanged sentences

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

(in thousands)

7 unchanged sentences

Total operating expenses 28,176 28,893 82,730 85,987

Operating income (loss) (2,262) (2,906) (6,003) 1,888

Operating loss (385) (4,824) (6,388) (2,936)

Interest expense, net 1,638 5,136 7,592 14,716

4 unchanged sentences

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

Net sales 100.0 100.0 100.0 100.0

6 unchanged sentences

Total operating expenses 13.3 14.7 13.4 14.2

Operating income (loss) (1.1) (1.6) (1.5) 0.5

Operating loss (0.2) (2.5) (1.0) (0.5)

Interest expense, net 0.8 2.6 1.2 2.4

3 unchanged sentences

Net loss (1.3) (5.3) (2.7) (5.1)

Comparison of the Three and Six Months Ended June 28, 2024 and June 30, 2023

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Comparison of the Three and Nine Months Ended September 27, 2024 and September 29, 2023

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

1 unchanged sentence

Net sales $ 211,139 $ 196,761 $ 14,378 7.3 % $ 615,749 $ 607,639 $ 8,110 1.3 %

The increase in net sales from the three months ended June 30, 2023 to the three months ended June 28, 2024 was primarily due to increased customer demand as a result of a stronger semiconductor capital equipment spending environment.

The second quarter of 2023 represented the low-point in our quarterly net sales since the start of the cyclical downturn in the fourth quarter of 2022.

Although net sales were higher on a quarter-on-quarter basis, higher net sales in the first quarter of 2023 compared to the first quarter of 2024 translated into lower net sales for the first half of 2024 compared to the first half of 2023.

The increase in net sales from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to increased customer demand as a result of a stronger semiconductor capital equipment spending environment.

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

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

3 unchanged sentences

Gross margin 13.2 % 12.2 % +100 bps 12.4 % 13.7 % -130 bps

The decrease in gross margin from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to unfavorable sales mix, as well as increased fixed overhead and excess and obsolete inventory expenses.

Increased fixed overhead, including depreciation and occupancy costs, unfavorably impacted gross margin by 50bps for the three and six months ended June 28, 2024, and increased excess and obsolete inventory expense unfavorably impacted gross margin by 40bps and 80bps for the three and six months ended June 28, 2024, respectively.

The increase in gross margin from the third quarter of 2023 to the third quarter of 2024 was primarily due to lower excess and obsolete inventory expense (+120bps), lower severance costs associated with our global reduction-in-force programs (+40bps), partially offset by unfavorable sales mix and higher fixed factory overhead costs (-20bps).

The decrease in gross margin from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to unfavorable sales mix, increased fixed factory overhead costs (-40bps), and increased excess and obsolete inventory expense (-10bps), partially offset by lower severance costs associated with our global reduction-in-force programs (+20bps).

Research and development

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

1 unchanged sentence

Research and development $ 5,872 $ 5,188 $ 684 13.2 % $ 17,168 $ 14,689 $ 2,479 16.9 %

The increase in research and development expenses from the second quarter of 2023 to the second quarter of 2024 was primarily due to increased material and service costs from our new product development programs.

The increase from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to increased material and service costs from our new product development programs of $1.3 million and increased employee-related expenses of $0.5 million, inclusive of share-based compensation expense.

The increase in research and development expenses from the third quarter of 2023 to the third quarter of 2024 was primarily due to increased material and service costs from our new product development programs of $0.5 million and increased employee-related expenses of $0.2 million, inclusive of share-based compensation expense.

The increase from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to increased material and service costs from our new product development programs of $1.7 million and increased employee-related expenses of $0.8 million, inclusive of share-based compensation expense.

Selling, general, and administrative

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

1 unchanged sentence

Selling, general, and administrative $ 20,227 $ 20,066 $ 161 0.8 % $ 59,253 $ 59,733 $ (480) (0.8) %

The increase in selling, general, and administrative expense from the second quarter of 2023 to the second quarter of 2024 was primarily due to increased occupancy costs, the majority of which were the result of a facility exit and consolidation, partially offset by reduced services and professional consulting costs.

The decrease in selling, general, and administrative expense from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to reduced employee-related expense, inclusive of share-based compensation expense, partially offset by increased services and professional consulting costs and increased occupancy costs, the majority of which were the result of a facility exit and consolidation.

Overall, our selling, general, and administrative expenses remained approximately unchanged from the third quarter of 2023 to the third quarter of 2024.

The decrease in selling, general, and administrative expense from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to reduced share-based compensation expense of $2.0 million, partially offset by $0.8 million in transaction-related costs from our acquisitions pipeline and $0.5 million in costs from exiting and consolidating one of our U.S.-based manufacturing facilities incurred during the nine months ended September 27, 2024 only.

Amortization of intangible assets

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

1 unchanged sentence

Amortization of intangible assets $ 2,077 $ 3,639 $ (1,562) (42.9) % $ 6,309 $ 11,565 $ (5,256) (45.4) %

The decrease in amortization expense from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was due to certain intangible assets becoming fully amortized in the second half of 2023.

The decrease in amortization expense from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was due to certain intangible assets becoming fully amortized in the second half of 2023.

Interest expense, net

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

3 unchanged sentences

Weighted average borrowing rate 7.23 % 7.06 % +17 bps 7.43 % 6.60 % +83 bps

The decrease in interest expense, net from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.

The decrease in interest expense, net from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.

Other expense, net

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

1 unchanged sentence

Other expense, net $ 587 $ 29 $ 558 1924.1 % $ 876 $ 913 $ (37) (4.1) %

The change in other expense, net from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 was primarily due to currency exchange rate fluctuations during the periods related to our local currency payables of our foreign operations.

The change in other expense, net from the three and nine months ended September 29, 2023 to the three and nine months ended September 27, 2024 was primarily due to currency exchange rate fluctuations during the periods related to our local currency payables of our foreign operations.

Income tax expense

Three Months Ended Change Six Months Ended Change

2024 June 30,

2023 Amount % June 28,

2024 June 30,

Three Months Ended Change Nine Months Ended Change

September 27,

2024 September 29,

2023 Amount % September 27,

2024 September 29,

2023 Amount %

(dollars in thousands)

Income tax expense $ 942 $ 12,620 $ (11,678) n/m $ 1,855 $ 12,085 $ (10,230) n/m

Loss before income taxes $ (4,170) $ (8,036) $ 3,866 n/m $ (12,246) $ (8,576) $ (3,670) n/m

Income tax expense $ 166 $ 436 $ (270) (61.9) % $ 2,021 $ 12,521 $ (10,500) (83.9) %

Loss before income taxes $ (2,610) $ (9,989) $ 7,379 (73.9) % $ (14,856) $ (18,565) $ 3,709 (20.0) %

Effective income tax rate -6.4 % -4.4 % -200 bps -13.6 % -67.4 % +5,380 bps

The decrease in income tax expense from the three and six months ended June 30, 2023 to the three and six months ended June 28, 2024 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 decrease in income tax expense from the third quarter of 2023 to the third quarter of 2024 was primarily due to decreased foreign taxable income.

The decrease in income tax expense from the nine months ended September 29, 2023 to the nine months ended September 27, 2024 was primarily due to recording a valuation allowance against our U.S.

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

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

state and federal deferred income taxes, we did not record tax benefits from our U.S.

taxable losses in the six months ended June 28, 2024.

taxable losses during the nine months ended September 27, 2024.

Non‑GAAP Financial Results

14 unchanged sentences

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

(dollars in thousands)

8 unchanged sentences

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

Three Months Ended Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

(dollars in thousands, except per share amounts)

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

(dollars in thousands)

GAAP operating income (loss) $ (385) $ (4,824) $ (6,388) $ (2,936)

8 unchanged sentences

(1) Represents transaction-related costs incurred in connection with our acquisitions pipeline.

(2) Represents severance costs associated with our global reduction-in-force programs, and, for the three and six months ended June 28, 2024, $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.

(2) Represents severance costs associated with our global reduction-in-force programs.

Additionally, for the nine months ended September 27, 2024, this amount includes $0.5 million of costs incurred in connection with exiting and consolidating one of our U.S.-based manufacturing facilities.

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

1 unchanged sentence

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 Six Months Ended

2024 June 30,

2023 June 28,

2024 June 30,

Three Months Ended Nine Months Ended

September 27,

2024 September 29,

2023 September 27,

2024 September 29,

(dollars in thousands, except per share amounts)

12 unchanged sentences

(1) Represents transaction-related costs incurred in connection with our acquisitions pipeline.

(2) Represents severance costs associated with our global reduction-in-force programs.

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

22 unchanged sentences

(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 $250.0 million remained available to draw on as of June 28, 2024.

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 September 27, 2024.

Summary of Cash Flows

We ended the second quarter of 2024 with cash and cash equivalents of $114.3 million, an increase of $34.4 million from the prior year ended December 29, 2023.

We ended the third quarter of 2024 with cash and cash equivalents of $116.4 million, an increase of $36.5 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 $30.4 million, partially offset by net payments on credit facilities of $118.8 million and capital expenditures of $13.2 million.

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

Six Months Ended

2024 June 30,

Nine Months Ended

September 27,

2024 September 29,

(in thousands)

3 unchanged sentences

Net increase (decrease) in cash $ 36,492 $ (10,537)

Our cash provided by operating activities of $22.3 million for the six months ended June 28, 2024 consisted of net non-cash charges of $22.3 million, consisting primarily of depreciation and amortization of $15.7 million and share-based compensation expense of $6.3 million, and a decrease in our net operating assets and liabilities of $14.1 million, partially offset by net loss of $14.1 million.

The decrease in our net operating assets and liabilities of $14.1 million during the six months ended June 28, 2024 was primarily due to a decrease in inventories of $14.4 million, partially offset by a decrease in accrued and other liabilities of $3.5 million.

The increase in cash provided by operating activities from the six months ended June 30, 2023 to the six months ended June 28, 2024 was primarily due to favorable changes in the balances of our working capital accounts of $12.7 million, partially offset by a reduction in net income net of non-cash charges of $6.5 million.

Cash used in investing activities during the six months ended June 28, 2024 and June 30, 2023 consisted of capital expenditures.

The reduction in capital expenditures from the six months ended June 30, 2023 to the six months ended June 28, 2024 was due to reduced factory capacity expansion projects.

Cash provided by financing activities during the six months ended June 28, 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 $1.4 million, partially offset by net payment on our credit facilities of $118.8 million.

Cash used in financing activities during the six months ended June 30, 2023 consisted of net payments on our credit facilities of $8.8 million, partially offset by net proceeds from share-based compensation activity of $1.7 million.

Our cash provided by operating activities of $30.4 million for the nine months ended September 27, 2024 consisted of net non-cash charges of $33.9 million, consisting primarily of depreciation and amortization of $22.8 million and share-based compensation expense of $11.0 million, and a decrease in our net operating assets and liabilities of $13.4 million, partially offset by net loss of $16.9 million.

The decrease in our net operating assets and liabilities of $13.4 million during the nine months ended September 27, 2024 was primarily due to an increase in accounts payable of $22.7 million and a decrease in inventories of $6.5 million, partially offset by an increase in accounts receivable of $17.4 million.

Compared to the nine months ended September 29, 2023, higher cash provided by operating activities of $10.3 million in the nine months ended September 27, 2024 was primarily due to $10.7 million in favorable changes in the balances of our working capital accounts.

Cash used in investing activities during the nine months ended September 27, 2024 and September 29, 2023 consisted of capital expenditures.

Cash provided by financing activities during the nine months ended September 27, 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 $1.4 million, partially offset by net payment on our credit facilities of $118.8 million.

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