ICHOR HOLDINGS, LTD. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Concerning Forward-Looking Statements This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. You should not place undue reliance on these statements. All statements other than statements of historical fact included in this report are forward-looking statements. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. 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 . Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. 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 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 OEMs 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. Risk Factors of our Annual Report on Form 10‑K for the fiscal year ended December 29, 2023 ("2023 Annual Report on Form 10-K") and our other filings with the Securities and Exchange Commission (“SEC”). All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in Part I – Item 1A. Risk Factors to our 2023 Annual Report on Form 10-K, as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated unaudited financial statements and related notes included elsewhere in this report. 14 Overview We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition. 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, 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. Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes. Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes. Most OEMs outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us. 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 suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes. We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico. The following table summarizes key financial information for the periods indicated. 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 below to the section entitled Non-GAAP Financial Results within this report. Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (dollars in thousands, except per share amounts) Net sales $ 211,139 $ 196,761 $ 615,749 $ 607,639 Gross margin 13.2 % 12.2 % 12.4 % 13.7 % Non-GAAP gross margin 13.6 % 13.1 % 12.9 % 14.4 % Operating margin (0.2) % (2.5) % (1.0) % (0.5) % Non-GAAP operating margin 3.0 % 2.2 % 2.2 % 3.9 % Net loss $ (2,776) $ (10,425) $ (16,877) $ (31,086) Non-GAAP net income $ 4,020 $ 2,097 $ 3,127 $ 13,932 Diluted EPS $ (0.08) $ (0.36) $ (0.52) $ (1.07) Non-GAAP diluted EPS $ 0.12 $ 0.07 $ 0.10 $ 0.47 15 Macroeconomic Conditions and Business Update The semiconductor industry is cyclical in nature. 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 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. Results of Operations The following table sets forth our unaudited results of operations for the periods presented. The period‑to‑period comparison of results is not necessarily indicative of results for future periods. Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (in thousands) Net sales $ 211,139 $ 196,761 $ 615,749 $ 607,639 Cost of sales 183,348 172,692 539,407 524,588 Gross profit 27,791 24,069 76,342 83,051 Operating expenses: Research and development 5,872 5,188 17,168 14,689 Selling, general, and administrative 20,227 20,066 59,253 59,733 Amortization of intangible assets 2,077 3,639 6,309 11,565 Total operating expenses 28,176 28,893 82,730 85,987 Operating loss (385) (4,824) (6,388) (2,936) Interest expense, net 1,638 5,136 7,592 14,716 Other expense, net 587 29 876 913 Loss before income taxes (2,610) (9,989) (14,856) (18,565) Income tax expense 166 436 2,021 12,521 Net loss $ (2,776) $ (10,425) $ (16,877) $ (31,086) 16 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 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Net sales 100.0 100.0 100.0 100.0 Cost of sales 86.8 87.8 87.6 86.3 Gross profit 13.2 12.2 12.4 13.7 Operating expenses: Research and development 2.8 2.6 2.8 2.4 Selling, general, and administrative 9.6 10.2 9.6 9.8 Amortization of intangible assets 1.0 1.8 1.0 1.9 Total operating expenses 13.3 14.7 13.4 14.2 Operating loss (0.2) (2.5) (1.0) (0.5) Interest expense, net 0.8 2.6 1.2 2.4 Other expense, net 0.3 0.0 0.1 0.2 Loss before income taxes (1.2) (5.1) (2.4) (3.1) Income tax expense 0.1 0.2 0.3 2.1 Net loss (1.3) (5.3) (2.7) (5.1) Comparison of the Three and Nine Months Ended September 27, 2024 and September 29, 2023 Net sales 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) 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 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 . 17 Gross margin 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) Cost of sales $ 183,348 $ 172,692 $ 10,656 $ 539,407 $ 524,588 $ 14,819 Gross profit $ 27,791 $ 24,069 $ 3,722 $ 76,342 $ 83,051 $ (6,709) Gross margin 13.2 % 12.2 % +100 bps 12.4 % 13.7 % -130 bps 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 Nine Months Ended Change September 27, 2024 September 29, 2023 Amount % September 27, 2024 September 29, 2023 Amount % (dollars in thousands) 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 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 Nine Months Ended Change September 27, 2024 September 29, 2023 Amount % September 27, 2024 September 29, 2023 Amount % (dollars in thousands) Selling, general, and administrative $ 20,227 $ 20,066 $ 161 0.8 % $ 59,253 $ 59,733 $ (480) (0.8) % 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. 18 Amortization of intangible assets 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) 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 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 Nine Months Ended Change September 27, 2024 September 29, 2023 Amount % September 27, 2024 September 29, 2023 Amount % (dollars in thousands) Interest expense, net $ 1,638 $ 5,136 $ (3,498) (68.1) % $ 7,592 $ 14,716 $ (7,124) (48.4) % Weighted average borrowings outstanding $ 131,250 $ 292,630 $ (161,380) (55.1) % $ 169,430 $ 298,553 $ (129,123) (43.2) % 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 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 Nine Months Ended Change September 27, 2024 September 29, 2023 Amount % September 27, 2024 September 29, 2023 Amount % (dollars in thousands) Other expense, net $ 587 $ 29 $ 558 1924.1 % $ 876 $ 913 $ (37) (4.1) % 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. 19 Income tax expense 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 $ 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 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 during the nine months ended September 27, 2024. Non‑GAAP 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. All non-GAAP adjustments are presented on a gross basis. 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) with respect to non-GAAP net income (loss), the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance charges. 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". 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. Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison. 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 other discrete or infrequent charges and gains that are outside of normal business operations. 20 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 Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (dollars in thousands) U.S. GAAP gross profit $ 27,791 $ 24,069 $ 76,342 $ 83,051 Non-GAAP adjustments: Share-based compensation 955 840 2,448 2,352 Other (1) — 774 908 2,061 Non-GAAP gross profit $ 28,746 $ 25,683 $ 79,698 $ 87,464 U.S. GAAP gross margin 13.2 % 12.2 % 12.4 % 13.7 % Non-GAAP gross margin 13.6 % 13.1 % 12.9 % 14.4 % (1) Represents 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 GAAP operating income (loss), the most comparable GAAP measure, for the periods indicated: Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (dollars in thousands) U.S. GAAP operating income (loss) $ (385) $ (4,824) $ (6,388) $ (2,936) Non-GAAP adjustments: Amortization of intangible assets 2,077 3,639 6,309 11,565 Share-based compensation 4,672 4,752 10,985 12,666 Transaction-related costs (1) — — 785 — Other (2) — 793 1,600 2,117 Non-GAAP operating income $ 6,364 $ 4,360 $ 13,291 $ 23,412 U.S. GAAP operating margin (0.2) % (2.5) % (1.0) % (0.5) % Non-GAAP operating margin 3.0 % 2.2 % 2.2 % 3.9 % (1) Represents transaction-related costs incurred in connection with our acquisitions pipeline. (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. 21 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. 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 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (dollars in thousands, except per share amounts) U.S. GAAP net loss $ (2,776) $ (10,425) $ (16,877) $ (31,086) Non-GAAP adjustments: Amortization of intangible assets 2,077 3,639 6,309 11,565 Share-based compensation 4,672 4,752 10,985 12,666 Transaction-related costs (1) — — 785 — Other (2) — 793 1,600 2,117 Tax adjustments related to non-GAAP adjustments (3) 47 3,338 325 7,576 Tax expense from valuation allowance (4) — — — 11,094 Non-GAAP net income (loss) $ 4,020 $ 2,097 $ 3,127 $ 13,932 U.S. GAAP diluted EPS $ (0.08) $ (0.36) $ (0.52) $ (1.07) Non-GAAP diluted EPS $ 0.12 $ 0.07 $ 0.10 $ 0.47 Shares used to compute non-GAAP diluted EPS 33,986,269 29,733,904 32,851,091 29,507,060 (1) Represents transaction-related costs incurred in connection with our acquisitions pipeline. (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. (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. (4) 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. 22 Liquidity and Capital Resources The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements. Our cash and cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions. Material Cash Requirements Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of raw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments, (v) capital expenditures, and (vi) payment of income taxes. We have no significant long-term purchase commitments related to procuring raw materials inventory. Our ability to fund these material cash 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. Sources and Conditions of Liquidity Our ongoing sources of liquidity to fund our material cash requirements are primarily derived from: (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 September 27, 2024. Summary of Cash Flows 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: Nine Months Ended September 27, 2024 September 29, 2023 (in thousands) Cash provided by operating activities $ 30,368 $ 20,058 Cash used in investing activities (13,238) (13,239) Cash provided by (used in) financing activities 19,362 (17,356) Net increase (decrease) in cash $ 36,492 $ (10,537) 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. 23 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 Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are identified and described in our annual consolidated financial statements and the notes included in our 2023 Annual Report on Form 10‑K.