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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-23 · 85 added, 110 removed, 251 unchanged (44% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this report.

The following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements.

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in the section entitled Item 1A.

Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled Item 1A.

– Risk Factors.

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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, electron beam (“e‑beam”) and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products for the commercial space, aerospace, defense, medical device, and general-industrial industries.

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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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.

Most original equipment manufacturers (“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 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 allows OEMs to leverage suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes.

Outsourcing enables OEMs to reduce their costs and development time, as well as 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 to Item 7.

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

– Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this Annual Report on Form 10-K.

2024 December 29,

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Operating margin, non-GAAP 2.2 % 2.9 %

Net income (loss) $ (42,985) $ 72,804

Net loss $ (20,820) $ (42,985)

Net income, non-GAAP $ 5,888 $ 12,257

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In 2024, we derived over 90% of our sales from the semiconductor capital equipment industry.

Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, demand for semiconductor products, pricing, and other factors.

Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, increased tariffs and trade restrictions, demand for semiconductor products, pricing, and other factors.

In the past, these fluctuations have resulted in significant variations in the levels of spending within the semiconductor capital equipment industry, and as a result, our results of operations.

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Our customers are a significant component of this consolidation, resulting in our sales being concentrated in a few customers.

In 2023, our top three customers were Applied Materials, Lam Research, and ASML, accounting for a combined 82% of sales.

For 2024, two customers with individual sales over 10%, Lam Research and Applied Materials, accounted for a combined 73% of total sales.

Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share.

Although we do not have any long-term contracts that require customers to place orders with us, Applied Materials, Lam Research, and ASML have been our customers for over a decade.

In November 2021, we acquired IMG, a California-based leader in precision machining and specialty joining and plating, for approximately $270.0 million.

Between 2017 and 2020, we engaged in four separate business combinations for a combined investment of approximately $200.0 million.

These acquisitions continue to have a significant impact on our financial position and results of operations.

We intend to continue to evaluate opportunistic acquisitions to supplement our organic growth, and any such acquisitions could have a material impact on our business and results of operations.

Although we do not have any long-term contracts that require customers to place certain order quantities with us, Lam Research and Applied Materials have been our customers for over 20 years.

Macroeconomic Conditions

The semiconductor industry is cyclical in nature, and matching customer demand can be challenging based on a variety of factors, including market trends, supply chain shortages and related lead times, customer buying patterns, availability of skilled labor, and macroeconomic and other factors.

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 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 and $2.3 million in 2022 and 2023, respectively.

The semiconductor industry is cyclical in nature and is impacted by macroeconomic factors in the markets and industries in which we operate.

Such factors include market trends, supply chain shortages, availability of skilled labor, geopolitical tension and retaliatory trade policies, and other factors.

The industry entered a cyclical downturn in the fourth quarter of 2022 for the primary semiconductor equipment markets we serve, resulting in weakened customer demand.

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 the markets we primarily serve, in particular lower spending levels for deposition and etch equipment, has resulted in continued lower demand from our customers over the past two years relative to the total semiconductor capital equipment market, despite incremental growth in demand.

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.

Industry overcapacity and a number of macroeconomic factors may contribute to a 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 may have varying levels of unfavorable consequences to our business.

We are continually monitoring the global trade environment and any changes in tariffs, trade agreements, restrictions or sanctions that may impact us, our manufacturing facilities, or our customers.

President Trump has issued executive orders directing the U.S.

to impose new tariffs on imports from China, temporarily stayed an order imposing new tariffs on Canada and Mexico, issued the imposition of tariffs on imported steel and aluminum products, and may impose additional tariffs on these or other nations.

Given our manufacturing presence in Mexico, we are currently evaluating the potential impact of potential tariffs on Mexican imports on our business.

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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Sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the promised good has transferred.

Cost of Sales and Gross Profit

Cost of sales, gross profit, and gross margin

Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment.

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Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors and can result in increased interest expense in periods of rising interest rates.

Other Expense (Income), Net

Other expense, net

The functional currency of our international operations is the U.S.

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Income tax expense

Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which is expected to continue through 2026.

Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which expires in 2026.

In 2024, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $7.1 million.

During 2023, we recorded a valuation allowance against our U.S.

During 2024, we maintained a valuation allowance against our U.S.

state and federal deferred tax assets;

therefore, we are unable to record income tax benefits related to our losses under GAAP losses.

therefore, we are not recording income tax benefits related to our U.S.

Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation.

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Total operating expenses 110,974 114,291

Operating income (loss) (10,895) 85,823

Operating loss (7,640) (10,895)

Interest expense, net 9,266 19,379

Other expense (income), net 804 (563)

Income (loss) before income taxes (31,078) 75,330

Other expense, net 1,148 804

Loss before income taxes (18,054) (31,078)

Income tax expense 2,766 11,907

Net income (loss) $ (42,985) $ 72,804

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

Net loss $ (20,820) $ (42,985)

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

December 27, 2024 December 29, 2023

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Total operating expenses 13.1 14.1

Operating income (loss) (1.3) 6.7

Operating loss (0.9) (1.3)

Interest expense, net 1.1 2.4

Other expense (income), net 0.1 0.0

Income (loss) before income taxes (3.8) 5.9

Other expense, net 0.1 0.1

Loss before income taxes (2.1) (3.8)

Income tax expense 0.3 1.5

Net income (loss) (5.3) 5.7

Net loss (2.5) (5.3)

Comparison of 2024 and 2023

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Net sales $ 849,040 $ 811,120 $ 37,920 4.7 %

The decrease in net sales from 2022 to 2023 was primarily due to reduced customer demand stemming from reduced spending within the semiconductor capital equipment industry.

The increase in net sales from 2023 to 2024 was primarily due to increased customer demand stemming from increased spending within the semiconductor capital equipment industry.

Further detail is provided above under the section entitled "Key Factors Affecting Our Business".

Net sales to U.S.

customers decreased by $290.8 million in 2023 to $281.3 million.

On a relative basis, net sales to U.S.

customers as a percent of total net sales decreased from 44.7% in 2022 to 34.7% in 2023.

Net sales to international customers decreased by $178.1 million in 2023 to $529.8 million.

On a relative basis, net sales to international customers as a percent of total net sales increased from 55.3% in 2022 to 65.3% in 2023.

Cost of Sales and Gross Profit

Year Ended Change

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Gross margin 12.2 % 12.7 % -50 bps

The decrease in the gross amounts of cost of sales and gross profit from 2022 to 2023 was primarily due to the factors mentioned in the commentary above under the above heading, " Net Sales" .

The 390 basis point decrease in gross margin from 2022 to 2023 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand, as well as a lower revenue mix from sales of components, due to excess inventory levels at our customers.

Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by approximately 60 basis points.

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

Research and development

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Research and development $ 23,018 $ 20,223 $ 2,795 13.8 %

The increase in research and development expenses from 2022 to 2023 was primarily due to increased materials and professional fees of $1.0 million for program costs related to the development of our new products, partially offset by lower employee related expenses, inclusive of share-based compensation expense, of $0.5 million.

The increase in research and development expenses from 2023 to 2024 was primarily due to increased material and service costs from our new product development programs of $1.9 million and increased employee-related expenses of $0.8 million, inclusive of share-based compensation expense.

Selling, general, and administrative

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Selling, general, and administrative $ 79,384 $ 79,334 $ 50 0.1 %

The decrease in selling, general, and administrative expense from 2022 to 2023 was primarily due to reduced employee-related expenses, inclusive of share-based compensation expense, of $6.0 million, loss accruals recorded in 2022 relating to an expected settlement of employment-related legal matters totaling $4.1 million, and reduced occupancy-related costs of $0.8 million, partially offset by increased information technology systems and related consulting and software costs of $1.7 million.

Selling, general, and administrative expense remained approximately unchanged from 2023 to 2024.

Amortization of intangible assets

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Amortization of intangibles assets $ 8,572 $ 14,734 $ (6,162) (41.8) %

The decrease in amortization expense from 2022 to 2023 was primarily due to certain intangible assets becoming fully amortized in 2023.

The decrease in amortization expense from 2023 to 2024 was primarily due to certain intangible assets becoming fully amortized in the fourth quarter of 2023.

Interest expense, net

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Weighted average borrowing rate 7.31 % 6.80 % +51 bps

The increase in interest expense, net from 2022 to 2023 was due to increases in our weighted average borrowing rate, partially offset by decreases in our average amount borrowed.

The increase in our weighted average borrowing rate was primarily due to an increase in 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, third, and fourth quarters of 2023.

Other Expense (Income), Net

The decrease in interest expense, net from 2023 to 2024 was primarily due to decreases in the weighted average amounts borrowed, partially offset by an increase in our weighted average borrowing rate.

The reduction in our weighted average borrowings outstanding was primarily due to paying off our revolving credit facility in the first quarter of 2024.

The increase in our weighted average borrowing rate was due to higher applicable margin as a result of higher leverage ratios in 2024 (+29bps) and higher Bloomberg Short-Term Bank Yield ("BSBY") and Secured Overnight Financing Rate ("SOFR") rates as a result of a higher short-term borrowing interest rate macroeconomic environment (+22bps).

Other expense, net

Year Ended Change

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(dollars in thousands)

Other expense (income), net $ 804 $ (563) $ 1,367 n/m

The change in other expense (income), net from 2022 to 2023 was primarily due to currency exchange rate fluctuations during the year related to our local currency payables of our foreign operations.

Other expense, net $ 1,148 $ 804 $ 344 42.8 %

The change in other expense, net from 2023 to 2024 was primarily due to currency exchange rate fluctuations during the year related to our local currency payables of our foreign operations.

Income tax expense

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Income tax expense $ 2,766 $ 11,907 $ (9,141) (76.8 %)

Income before income taxes $ (31,078) $ 75,330 $ (106,408) n/m

Effective income tax rate (38.3) % 3.4 % -4,170 bps

The increase in income tax expense from 2022 to 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.

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.

Loss before income taxes $ (18,054) $ (31,078) $ 13,024 (41.9 %)

Effective tax rate (15.3) % (38.3) % +2,300 bps

The decrease in income tax expense from 2023 to 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 2024.

Non-GAAP Financial Results

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We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective.

Non-GAAP gross 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;

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 changes.

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 shares ("EPS") is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period.

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.

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Share-based compensation 3,360 3,130

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

Other (1) 908 2,191

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Non-GAAP gross margin 12.7 % 13.4 %

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

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

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

(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 operating income (loss), the most comparable GAAP measure, for the periods indicated:

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(dollars in thousands)

GAAP operating income (loss) $ (10,895) $ 85,823

GAAP operating loss $ (7,640) $ (10,895)

Non-GAAP adjustments:

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Share-based compensation 15,576 17,338

Settlement loss (1) — 4,146

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

Acquisition costs (3) — 296

Transaction-related costs (1) 785 —

Other (2) 1,600 2,298

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Non-GAAP operating margin 2.2 % 2.9 %

(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 allocations of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up.

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

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

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

(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 2024, the 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 and non-GAAP diluted EPS and a reconciliation from net income (loss), the most comparable GAAP measure, for the periods indicated.

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(dollars in thousands, except per share amounts)

GAAP net income (loss) $ (42,985) $ 72,804

GAAP net loss $ (20,820) $ (42,985)

Non-GAAP adjustments:

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Share-based compensation 15,576 17,338

Settlement loss (1) — 4,146

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

Acquisition costs (3) — 296

Transaction-related costs (1) 785 —

Other (2) 1,600 2,298

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Shares used to compute diluted non-GAAP EPS 33,135,552 29,514,553

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

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

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

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

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

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

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

(3) Adjusts U.S.

GAAP income tax expense for the 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.

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.

Refer to footnote 6 below.

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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, and expect to remain, in a three-year cumulative U.S.

income position on a non-GAAP basis.

Liquidity and Capital Resources

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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 and capital expenditures, and (v) payment of income taxes.

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 are therefore subject to prevailing global macroeconomic conditions, such as interest rates, increased tariffs and retaliatory trade policies, geopolitical events, 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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Summary of Cash Flows

We ended 2023 with cash and cash equivalents of $80.0 million, a decrease of $6.5 million from 2022, which was primarily due to net payments on credit facilities of $52.5 million and capital expenditures of $15.5 million, partially offset by cash provided by operating activities of $57.6 million.

We ended 2024 with cash and cash equivalents of $108.7 million, an increase of $28.7 million from 2023, which 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 $27.9 million, partially offset by net payments on credit facilities of $120.6 million and capital expenditures of $17.6 million.

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

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Net increase (decrease) in cash $ 28,714 $ (6,515) $ 10,975

Our cash provided by operating activities of $57.6 million during 2023 consisted of net loss of $43.0 million, offset by net non-cash charges of $61.7 million, which consisted primarily of depreciation and amortization of $34.6 million, share-based compensation expense of $17.3 million, and deferred income taxes of $9.3 million, and a decrease in our net operating assets and liabilities of $38.9 million.

Deferred taxes consists primarily of $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 $38.9 million was primarily due to a decrease in accounts receivable and inventories of $69.6 million and $37.8 million, respectively, partially offset by a decrease in accounts payable and accrued and other liabilities of $51.0 million and $27.7 million, respectively.

Cash provided by operating activities was $31.5 million during 2022.

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

Our cash provided by operating activities of $27.9 million during 2024 consisted of net non-cash charges of $46.0 million, which consisted primarily of depreciation and amortization of $30.7 million and share-based compensation expense of $15.6 million, and a decrease in our net operating assets and liabilities of $2.7 million, partially offset by net loss of $20.8 million.

The decrease in our net operating assets and liabilities of $2.7 million during 2024 was primarily due to an increase in accounts payable of $29.1 million, partially offset by an increase in accounts receivable of $19.9 million, a decrease in accrued and other liabilities of $4.6 million, and an increase in inventories of $4.2 million.

Cash used in investing activities during 2024 and 2023 consisted of capital expenditures.

The reduction in capital expenditures from 2023 to 2022 was due to reduced factory capacity expansion projects.

Cash used in financing activities during 2023 consisted of net payments from our credit facilities of $52.5 million, partially offset by net proceeds from share-based compensation activity of $3.8 million.

Cash provided by financing activities during 2022 consisted of net proceeds from our credit facilities of $7.5 million and net proceeds from share-based compensation activity of $1.0 million.The change in net payments on, and net proceeds from, our 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 2022 to 2023 was due to increased stock option exercises.

Cash provided by financing activities during 2024 consisted of net proceeds of $136.7 million from our issues 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 $2.4 million, partially offset by net payments on our credit facilities of $120.6 million.

The increase in cash provided by financing activities from 2023 to 2024 was primarily due to net proceeds from our issuance of shares, partially offset by increased net payments on our credit facilities.

Recent Accounting Pronouncements

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Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 1 – Organization and Summary of Significant Accounting Policies of our consolidated financial statements in Part IV, Item 15 of this report.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis