Ultra Clean Holdings, Inc. 10-Q

ITEM 1. Financial Statements ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 27, 2024 December 29, 2023 (In millions, except par value) ASSETS Current assets: Cash and cash equivalents $ 318.2 $ 307.0 Accounts receivable, net of allowance for credit losses of $ 2.1 and $ 1.0 at September 27, 2024 and December 29, 2023, respectively 228.1 180.8 Inventories 402.6 374.5 Prepaid expenses and other current assets 36.9 30.9 Total current assets 985.8 893.2 Property, plant and equipment, net 327.7 328.3 Goodwill 265.3 265.2 Intangible assets, net 192.4 215.3 Deferred tax assets, net 3.6 3.1 Operating lease right-of-use assets 162.2 151.7 Other non-current assets 10.5 10.9 Total assets $ 1,947.5 $ 1,867.7 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Bank borrowings $ 16.4 $ 17.6 Accounts payable 233.2 192.9 Accrued compensation and related benefits 47.9 47.7 Operating lease liabilities 19.0 18.1 Other current liabilities 42.3 33.7 Total current liabilities 358.8 310.0 Bank borrowings, net of current portion 475.8 461.2 Deferred tax liabilities 18.9 19.0 Operating lease liabilities 155.6 143.0 Other liabilities 16.0 37.3 Total liabilities 1,025.1 970.5 Commitments and contingencies (See Note 9) Equity: UCT stockholders’ equity: Preferred stock — $ 0.001 par value, 10.0 shares authorized; none outstanding — — Common stock — $ 0.001 par value, 90.0 shares authorized; 46.6 and 46.1 shares issued and 45.1 and 44.6 shares outstanding at September 27, 2024 and December 29, 2023, respectively 0.1 0.1 Additional paid-in capital 552.6 541.5 Common shares held in treasury, at cost, 1.5 and 1.5 shares at September 27, 2024 and December 29, 2023, respectively ( 45.0 ) ( 45.0 ) Retained earnings 354.1 346.7 Accumulated other comprehensive loss ( 3.9 ) ( 4.4 ) Total UCT stockholders' equity 857.9 838.9 Noncontrolling interests 64.5 58.3 Total equity 922.4 897.2 Total liabilities and equity $ 1,947.5 $ 1,867.7 (See accompanying Notes to Condensed Consolidated Financial Statements) - 3 - Table of Contents ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (In millions, except per share amounts) Revenues: Product $ 479.0 $ 380.9 $ 1,350.2 $ 1,112.0 Services 61.4 54.1 184.1 177.8 Total revenues 540.4 435.0 1,534.3 1,289.8 Cost of revenues: Product 403.3 329.3 1,141.2 955.5 Services 43.7 40.5 128.6 128.0 Total cost revenues 447.0 369.8 1,269.8 1,083.5 Gross margin 93.4 65.2 264.5 206.3 Operating expenses: Research and development 7.1 7.4 21.2 21.7 Sales and marketing 14.4 12.8 42.9 38.6 General and administrative 46.7 39.3 135.1 115.3 Total operating expenses 68.2 59.5 199.2 175.6 Income from operations 25.2 5.7 65.3 30.7 Interest income 1.1 1.2 3.9 2.5 Interest expense ( 12.0 ) ( 12.3 ) ( 35.8 ) ( 35.9 ) Other income (expense), net ( 4.1 ) ( 2.1 ) 9.3 ( 0.8 ) Income before provision for income taxes 10.2 ( 7.5 ) 42.7 ( 3.5 ) Provision for income taxes 9.9 5.3 28.2 17.1 Net income (loss) 0.3 ( 12.8 ) 14.5 ( 20.6 ) Less: Net income attributable to noncontrolling interests 2.6 1.7 7.1 6.7 Net income (loss) attributable to UCT $ ( 2.3 ) $ ( 14.5 ) $ 7.4 $ ( 27.3 ) Net income (loss) per share attributable to UCT common stockholders: Basic $ ( 0.05 ) $ ( 0.32 ) $ 0.16 $ ( 0.61 ) Diluted $ ( 0.05 ) $ ( 0.32 ) $ 0.16 $ ( 0.61 ) Shares used in computing net income (loss) per share: Basic 45.0 44.8 44.8 44.8 Diluted 45.0 44.8 45.4 44.8 (See accompanying Notes to Condensed Consolidated Financial Statements) - 4 - Table of Contents ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 (In millions) Net income (loss) $ 0.3 $ ( 12.8 ) $ 14.5 $ ( 20.6 ) Other comprehensive income (loss): Change in cumulative translation adjustment, net of tax 6.4 ( 2.1 ) 0.1 ( 3.8 ) Change in pension net actuarial gain, net of tax — ( 0.2 ) — ( 0.4 ) Change in fair value of derivatives, net of tax — — — 0.2 Total other comprehensive income (loss) 6.4 ( 2.3 ) 0.1 ( 4.0 ) Comprehensive income (loss) 6.7 ( 15.1 ) 14.6 ( 24.6 ) Comprehensive income, attributable to noncontrolling interests 5.5 0.6 6.7 8.0 Comprehensive income (loss) attributable to UCT $ 1.2 $ ( 15.7 ) $ 7.9 $ ( 32.6 ) (See accompanying Notes to Condensed Consolidated Financial Statements) - 5 - Table of Contents ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 27, 2024 September 29, 2023 (In millions) Cash flows from operating activities: Net income (loss) $ 14.5 $ ( 20.6 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 34.1 27.9 Amortization of intangible assets 22.9 16.9 Stock-based compensation 12.7 8.7 Amortization of debt issuance costs 2.4 2.9 Change in the fair value of financial instruments ( 21.7 ) ( 0.3 ) Deferred income taxes ( 1.2 ) 0.1 Loss (gain) on sale of property, plant and equipment 1.2 ( 1.1 ) Changes in assets and liabilities: Accounts receivable ( 47.3 ) 83.2 Inventories ( 28.1 ) 65.6 Prepaid expenses and other current assets ( 2.9 ) 7.5 Other non-current assets 0.6 0.8 Accounts payable 46.1 ( 61.2 ) Accrued compensation and related benefits 0.2 ( 11.8 ) Income taxes payable 1.4 ( 8.9 ) Operating lease assets and liabilities 8.1 ( 3.7 ) Other liabilities 4.9 ( 5.4 ) Net cash provided by operating activities 47.9 100.6 Cash flows from investing activities: Purchases of property, plant and equipment ( 46.2 ) ( 59.2 ) Proceeds from sale of equipment — 2.3 Net cash used in investing activities ( 46.2 ) ( 56.9 ) Cash flows from financing activities: Proceeds from bank borrowings 67.7 — Proceeds from issuance of common stock 0.9 — Extinguishment of bank borrowings ( 44.2 ) — Principal payments on bank borrowings ( 10.1 ) ( 34.7 ) Payment of debt issuance costs ( 2.5 ) ( 0.3 ) Employees' taxes paid upon vesting of restricted stock units ( 2.5 ) ( 2.2 ) Payments of dividends to a joint venture shareholder ( 0.5 ) ( 0.1 ) Repurchase of shares — ( 23.7 ) Net cash provided by (used in) financing activities 8.8 ( 61.0 ) Effect of exchange rate changes on cash and cash equivalents 0.7 0.5 Net increase (decrease) in cash and cash equivalents 11.2 ( 16.8 ) Cash and cash equivalents at beginning of period 307.0 358.8 Cash and cash equivalents at end of period $ 318.2 $ 342.0 Supplemental cash flow information: Income taxes paid, net of income tax refunds $ 28.1 $ 26.7 Interest paid $ 33.7 $ 33.0 Non-cash investing and financing activities: Property, plant and equipment purchased included in accounts payable and other liabilities $ 3.9 $ 12.0 (See accompanying Notes to Condensed Consolidated Financial Statements) - 6 - Table of Contents ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Three Months Ended September 27, 2024 Common Stock Treasury shares Shares Amount Additional Paid-in Capital Shares Amount Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity of UCT Noncontrolling Interests Total Equity (In millions) Balance June 28, 2024 45.0 $ 0.1 $ 548.2 1.5 $ ( 45.0 ) $ 356.4 $ ( 7.4 ) $ 852.3 $ 59.4 $ 911.7 Issuance under employee stock plans 0.1 0.0 0.0 — — — — 0.0 — 0.0 Employees' taxes paid upon vesting of restricted stock units 0.0 0.0 ( 0.3 ) — — — — ( 0.3 ) — ( 0.3 ) Stock-based compensation expense — — 4.7 — — — — 4.7 — 4.7 Net income (loss) — — — — — ( 2.3 ) — ( 2.3 ) 2.6 0.3 Dividend payments to a joint venture shareholder — — — — — — — — ( 0.4 ) ( 0.4 ) Other comprehensive income — — — — — — 3.5 3.5 2.9 6.4 Balance September 27, 2024 45.1 $ 0.1 $ 552.6 1.5 $ ( 45.0 ) $ 354.1 $ ( 3.9 ) $ 857.9 $ 64.5 $ 922.4 Nine Months Ended September 27, 2024 Common Stock Treasury shares Shares Amount Additional Paid-in Capital Shares Amount Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity of UCT Noncontrolling Interests Total Equity (In millions) Balance December 29, 2023 44.6 $ 0.1 $ 541.5 1.5 $ ( 45.0 ) $ 346.7 $ ( 4.4 ) $ 838.9 $ 58.3 $ 897.2 Issuance under employee stock plans 0.6 0.0 0.9 — — — — 0.9 — 0.9 Employees' taxes paid upon vesting of restricted stock units ( 0.1 ) 0.0 ( 2.5 ) — — — — ( 2.5 ) — ( 2.5 ) Stock-based compensation expense — — 12.7 — — — — 12.7 — 12.7 Net income — — — — — 7.4 — 7.4 7.1 14.5 Dividend payments to a joint venture shareholder — — — — — — — — ( 0.5 ) ( 0.5 ) Other comprehensive income (loss) — — — — — — 0.5 0.5 ( 0.4 ) 0.1 Balance September 27, 2024 45.1 $ 0.1 $ 552.6 1.5 $ ( 45.0 ) $ 354.1 $ ( 3.9 ) $ 857.9 $ 64.5 $ 922.4 - 7 - Table of Contents Three Months Ended September 29, 2023 Common Stock Treasury shares Shares Amount Additional Paid-in Capital Shares Amount Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity of UCT Noncontrolling Interests Total Equity (In millions) Balance June 30, 2023 44.8 $ 0.1 $ 533.3 1.7 $ ( 39.1 ) $ 365.0 $ ( 9.5 ) $ 849.8 $ 56.4 $ 906.2 Stock-based compensation expense — — 4.0 — — — — 4.0 — 4.0 Net income (loss) — — — — — ( 14.5 ) — ( 14.5 ) 1.7 ( 12.8 ) Other comprehensive loss — — — — — — ( 1.3 ) ( 1.3 ) ( 1.0 ) ( 2.3 ) Balance September 29, 2023 44.8 $ 0.1 $ 537.3 1.7 $ ( 39.1 ) $ 350.5 $ ( 10.8 ) $ 838.0 $ 57.1 $ 895.1 Nine Months Ended September 29, 2023 Common Stock Treasury shares Shares Amount Additional Paid-in Capital Shares Amount Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity of UCT Noncontrolling Interests Total Equity (In millions) Balance December 30, 2022 45.2 $ 0.1 $ 530.8 0.9 $ ( 15.4 ) $ 377.8 $ ( 5.4 ) $ 887.9 $ 49.1 $ 937.0 Issuance under employee stock plans 0.5 0.0 0.0 — — — — 0.0 — 0.0 Employees' taxes paid upon vesting of restricted stock units ( 0.1 ) 0.0 ( 2.2 ) — — — — ( 2.2 ) — ( 2.2 ) Repurchase shares ( 0.8 ) 0.0 — 0.8 ( 23.7 ) — — ( 23.7 ) — ( 23.7 ) Stock-based compensation expense — — 8.7 — — — — 8.7 — 8.7 Net income (loss) — — — — — ( 27.3 ) — ( 27.3 ) 6.7 ( 20.6 ) Dividend payments to a joint venture shareholder — — — — — — — — ( 0.1 ) ( 0.1 ) Other comprehensive income (loss) — — — — — — ( 5.4 ) ( 5.4 ) 1.4 ( 4.0 ) Balance September 29, 2023 44.8 $ 0.1 $ 537.3 1.7 $ ( 39.1 ) $ 350.5 $ ( 10.8 ) $ 838.0 $ 57.1 $ 895.1 - 8 - Table of Contents ULTRA CLEAN HOLDINGS, INC. INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Page 1. Organization and Significant Accounting Policies 10 2. Business Combinations 11 3. Balance Sheet Information 12 4. Fair Value 13 5. Goodwill and Intangible Assets 14 6. Borrowing Arrangements 16 7. Income Tax 17 8. Retirement Plans 17 9. Commitments and Contingencies 18 10. Stockholders' Equity and Noncontrolling Interests 18 11. Employee Stock Plans 18 12. Revenue Recognition 20 13. Leases 21 14. Net Income (Loss) Per Share 22 15. Reportable Segments 22 - 9 - Index to Notes ULTRA CLEAN HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization — Ultra Clean Holdings, Inc., (the “Company” or “UCT”) a Delaware corporation, was founded in November 2002 and became a publicly traded company on the NASDAQ Global Market in March 2004. The Company is a leading developer and supplier of critical subsystems, components, parts, and ultra-high purity cleaning and analytical services, primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. The Company’s Products business primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. Products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules, sub-fab process equipment support racks, as well as other high-level assemblies. The Company’s Services business provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication equipment markets. Basis of Presentation — The unaudited Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q include the accounts of the Company and its majority-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). This financial information reflects all adjustments which are, in the opinion of the Company, normal, recurring and necessary for a fair statement of the results of operations, financial position, and cash flows for the interim periods presented. Certain information and footnote disclosures normally included in our annual financial statements, prepared in accordance with GAAP, have been condensed or omitted from the interim financial statements in this Quarterly Report on Form 10-Q. Therefore, these unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 29, 2023. Fiscal Year — The Company uses a 52-53 week fiscal year ending on the Friday nearest December 31. All references to quarters refer to fiscal quarters and all references to years refer to fiscal years. Principles of Consolidation — The Company’s Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries and all intercompany accounts and transactions have been eliminated upon consolidation. Significant Accounting Policies — There were no changes to the accounting policies disclosed in Note 1, Organization and Significant Accounting Polices of the Company’s Annual Report on Form 10-K for the year ended December 29, 2023 that had a material impact on the Company's condensed consolidated financial statements and related notes. Impairment Testing of Long-Lived Assets and Goodwill — In the second quarter of 2024, the Company conducted an interim impairment test of its long-lived assets and goodwill associated with its HIS Innovations Group (“HIS”) reporting unit due to the presence of an indicator of potential impairment. This indicator included lower-than-expected financial performance. The Company reviewed the HIS asset group’s long-lived assets for impairment by comparing the carrying value to the estimated undiscounted future cash flows expected to be generated by the assets. Based on this assessment, the Company determined that the estimated undiscounted future cash flows exceeded the carrying values of the long-lived assets. Consequently, no impairment loss was recognized in the period. The Company performed a quantitative assessment of goodwill for the HIS reporting unit using the income approach. The income approach involves estimating the future cash flows attributable and discounting these cash flows to their present value using an appropriate discount rate. The fair value of the reporting unit was then compared to its carrying amount, including goodwill. The results of this quantitative assessment indicated that the fair value of the reporting unit exceeded its carrying amount. As a result, the Company concluded that no impairment of goodwill was necessary. Accounting Standards Recently Adopted The Company has not adopted any new accounting standards during the nine months ended September 27, 2024 that have a material impact on the Company’s condensed consolidated financial statements. - 10 - Index to Notes Accounting Standards Not Yet Adopted In November 2023, FASB issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The Company is required to adopt this standard in the fiscal year 2024 for the annual reporting ending December 27, 2024, with retrospective disclosure of prior periods presented. The Company expects this ASU to only impact its disclosures with no impact to its results of operations, cash flows and financial condition. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends the guidance in ASC 740, Income Taxes. ASU No. 2023-09 is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The Company is required to adopt this standard prospectively in fiscal year 2025 for the annual reporting period ending December 26, 2025. The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. 2. BUSINESS COMBINATIONS On October 25, 2023, the Company acquired 100 % of the shares of HIS, a privately held company based in Hillsboro, Oregon. HIS is a leading supplier to the semiconductor sub-fab segment including the design, manufacturing, and integration of components, process solutions, and fully integrated sub-systems. The acquisition strengthens the Company's leadership in developing and supplying critical products to the semiconductor industry, and extends our reach into the sub-fab area. The purchase price of HIS for purposes of the Company’s purchase price allocation was determined to be $ 73.6 million, which includes initial cash consideration of $ 46.5 million and the fair value of potential earn-out payments of approximately $ 27.1 million. These potential earn-out payments represent up to $ 70.0 million of cash consideration that may be payable based on the financial performance of the acquired business during the fiscal years 2023, 2024, and 2025. The fair value of the potential earn-out payments was determined utilizing a Monte Carlo simulation model. The Company has assigned the purchase price of HIS to the tangible assets, liabilities and identifiable intangible assets acquired, based on their estimated fair values. The excess of purchase price over the aggregate fair value was recorded as goodwill. Goodwill associated with the acquisition is primarily attributable to the future technology, market presence and knowledgeable and experienced workforce. The fair value assigned to identifiable intangible assets acquired was determined using the income approach taking into account the Company’s consideration of a number of inputs, including a third-party analysis that was based upon estimates and assumptions provided by the Company. These estimates and assumptions were determined through established and generally accepted valuation techniques and with the assistance of a valuation specialist. During the third quarter of fiscal year 2024, the Company completed the acquisition accounting and the valuation of the fair value of the assets acquired and the liabilities assumed. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition, including all measurement period adjustments: - 11 - Index to Notes (In millions) Amount Cash and cash equivalents $ 0.4 Accounts receivable 5.6 Inventories 11.4 Prepaid expenses and other assets 2.7 Property, plant and equipment 9.3 Purchased intangible assets 51.6 Operating lease right-of-use assets 7.5 Accounts payable ( 8.1 ) Accrued compensation and related benefits ( 0.7 ) Other current liabilities ( 0.9 ) Deferred tax liabilities ( 12.1 ) Operating lease liabilities ( 9.6 ) Total identifiable net assets $ 57.1 Goodwill $ 16.5 The following table summarizes the intangible assets acquired and the useful lives of these assets: Purchased Useful Life Intangible Assets (In years) (In millions) Customer relationships 7 $ 35.2 IP knowhow 5 11.2 Developed technology 5 4.6 Backlog 1 0.6 Total purchased intangible assets $ 51.6 The results of operations for HIS have been included in the Company's condensed consolidated financial statements since the date of the acquisition. In addition, acquisition-related costs of $ 0.6 million and $ 1.0 million were included in the results of operations for the three and nine months ended September 27, 2024, respectively. Acquisition-related costs for the three and nine months ended September 29, 2023 were immaterial . Acquisition costs are included in general and administrative expenses in the Company’s condensed consolidated results of operations. 3. BALANCE SHEET INFORMATION Inventories consisted of the following: (In millions) September 27, 2024 December 29, 2023 Raw materials $ 205.5 $ 197.9 Work in process 133.9 107.2 Finished goods 63.2 69.4 Total $ 402.6 $ 374.5 - 12 - Index to Notes Property, plant and equipment, net, consisted of the following: (In millions) September 27, 2024 December 29, 2023 Land $ 2.2 $ 5.6 Buildings 57.0 57.1 Leasehold improvements 135.5 110.8 Machinery and equipment 220.2 207.4 Computer equipment and software 75.7 72.2 Furniture and fixtures 5.3 5.0 495.9 458.1 Accumulated depreciation ( 204.6 ) ( 170.3 ) Construction in progress 36.4 40.5 Total $ 327.7 $ 328.3 Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value. Refer to Note 1, “Organization and Significant Accounting Policies” for additional information regarding impairment testing of long-lived assets. 4. FAIR VALUE The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following table summarizes, for assets or liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy: Fair Value Measurement at Reporting Date Using Description September 27, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In millions) Other non-current assets: Plan assets $ 0.5 $ — $ — $ 0.5 Other current liabilities: Forward contracts $ 0.5 $ — $ 0.5 $ — Other liabilities: Pension obligation $ 1.6 $ — $ — $ 1.6 Contingent earn-out $ 7.1 $ — $ — $ 7.1 Fair Value Measurement at Reporting Date Using Description December 29, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In millions) Other non-current assets: Plan assets $ 1.3 $ — $ — $ 1.3 Other current liabilities: Forward contracts $ 0.1 $ — $ 0.1 $ — Other liabilities: Pension obligation $ 1.6 $ — $ — $ 1.6 Contingent earn-out $ 29.1 $ — $ — $ 29.1 - 13 - Index to Notes The estimated fair value of foreign currency forward contracts is based upon quoted market prices obtained from independent pricing services for similar derivative contracts and these financial instruments are characterized as Level 2 assets in the fair value hierarchy. The estimated fair value of pension obligation is based on expected years of service and average compensation. The valuation model used to value pension obligation utilizes mortality rate, inflation, interest rate risks and changes in the life expectancy for pensioners. These assumptions are routinely made in the appraisal process by the independent actuary resulting in a Level 3 classification. As of September 27, 2024, the Company's aggregate pension benefit obligations was $ 12.3 million and the fair value of the pension plan assets was $ 11.2 million. The underfunded pension benefit obligations was $ 1.1 million as of September 27, 2024. The Company recognizes the overfunded or underfunded status of defined benefit pension plans, measured as the difference between the fair value of the plan assets and the benefit obligation. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. The Company measures its contingent earn-out liabilities at fair value on a recurring basis using a Monte Carlo simulation model. The significant unobservable inputs used in the model include the forecasted operating profit of the acquired business during each of calendar years 2024 and 2025. Significant increases or decreases to the forecasted results would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in the consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date will be reflected as cash used in operating activities in the consolidated statements of cash flows. For the three and nine months ended September 27, 2024, the Company recorded $( 0.8 ) million of loss and $ 22.0 million of gain, respectively from change in the fair value of contingent earn-out related to the acquisition of HIS. This gain (loss) from change in the fair value was recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. There were no transfers from Level 1 or Level 2. Fair value adjustments were noncash, and therefore did not impact the Company’s liquidity or capital resources. 5. GOODWILL AND INTANGIBLE ASSETS Goodwill The Company’s methodology for allocating the purchase price relating to an acquisition is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the consideration transferred over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. To test goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company concludes it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, the Company does not proceed to perform a quantitative impairment test. If the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative goodwill impairment test will be performed by comparing the fair value of each reporting unit to its carrying value. A quantitative impairment analysis, if necessary, considers the income approach, which requires estimates of the present value of expected future cash flows to determine a reporting unit’s fair value. Significant estimates include revenue growth rates and operating margins used to calculate projected future cash flows, discount rates, and future economic and market conditions. A goodwill impairment charge is recognized for the amount by which the reporting unit’s fair value is less than its carrying value. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results. - 14 - Index to Notes During the three and nine months ended September 27, 2024, there were no changes to the Company's reporting units, and the Company did not recognize any impairment charges or additions to goodwill. Refer to Note 1, “Organization and Significant Accounting Policies” for additional information regarding impairment testing of goodwill. Details of aggregate goodwill of the Company are as follows: (In millions) Products Services Total Balance at September 27, 2024 $ 191.8 $ 73.5 $ 265.3 Intangible Assets Intangible assets are generally recorded in connection with a business acquisition. The Company evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, the Company reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable and evaluates indefinite-lived intangible asset for impairment annually, or more frequently if indicators of potential impairment exist. Management considers such indicators as significant differences in product demand from the estimates, changes in the competitive and economic environment, technological advances, and changes in cost structure. Refer to Note 1, “Organization and Significant Accounting Policies” for additional information regarding impairment testing of intangible assets. Details of intangible assets were as follows: As of September 27, 2024 As of December 29, 2023 (Dollars in millions) Useful Life (In years) Gross Carrying Amount Accumulated Amortization Carrying Value Gross Carrying Amount Accumulated Amortization Carrying Value Customer relationships 6 - 10 $ 207.2 $ ( 112.4 ) $ 94.8 $ 207.2 $ ( 97.5 ) $ 109.7 Recipes 20 73.2 ( 22.4 ) 50.8 73.2 ( 19.5 ) 53.7 Intellectual property/know-how 7 - 15 48.9 ( 21.7 ) 27.2 48.9 ( 18.4 ) 30.5 Tradename 4 - 6 * 32.5 ( 22.7 ) 9.8 32.5 ( 22.1 ) 10.4 Standard operating procedures 20 8.6 ( 2.6 ) 6.0 8.6 ( 2.3 ) 6.3 Developed technology 5 4.6 ( 0.8 ) 3.8 4.6 ( 0.2 ) 4.4 Backlog 1 0.6 ( 0.6 ) — 0.6 ( 0.3 ) 0.3 Total $ 375.6 $ ( 183.2 ) $ 192.4 $ 375.6 $ ( 160.3 ) $ 215.3 * The Company concluded that the asset life of UCT tradename of $ 9.0 million is indefinite and is therefore not amortized but is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company amortizes its intangible assets on a straight-line or accelerated basis over the estimated economic life of the assets. Amortization expense was approximately $ 7.6 million and $ 22.9 million for the three and nine months ended September 27, 2024, respectively, and $ 5.5 million and $ 16.9 million for the three and nine months ended September 29, 2023, respectively. Amortization expense related to recipes, standard operating procedures, developed technology and certain intellectual property/know-how is charged to cost of revenues and the remainder is charged to general and administrative expense. As of September 27, 2024, future estimated amortization expense is expected to be as follows: (In millions) Amortization Expense 2024 (remaining in year) $ 7.5 2025 28.1 2026 27.2 2027 26.9 2028 23.8 Thereafter 69.9 Total $ 183.4 - 15 - Index to Notes 6. BORROWING ARRANGEMENTS On April 4, 2024, the Company entered into a Sixth Amendment (the “Sixth Amendment”) to the Credit Agreement dated as of August 27, 2018 (as amended as of October 1, 2018, March 31, 2021, August 19, 2022, June 29, 2023 and July 27, 2023 (the “Existing Credit Agreement”), and the Existing Credit Agreement as further amended by the Sixth Amendment, the “Credit Agreement”). Pursuant to the Sixth Amendment, the Existing Credit Agreement was amended to, among other things, (i) extend the final maturity date of the term loan and revolving credit facilities under the Credit Agreement by 30 months; (ii) reduce the interest rate applicable to the term loan facility under the Credit Agreement by 0.25 % per annum; and (iii) increase the outstanding amount under the Term Loan of $ 475.4 million to $ 500 million. The Sixth Amendment resulted in the receipts of an additional $ 67.7 million of debt, net of $ 1.1 million related lender fees from new or existing syndicate lenders which was offset by syndicate lenders who reduced their positions by $ 44.2 million. The Company capitalized additional $ 2.5 million of costs related to this amendment and continued to defer previously capitalized costs of $ 5.2 million. The Company expensed the third party transaction costs and the previously capitalized costs of extinguished debt of $ 3.6 million which was included in the other income (expense), net in the Condensed Consolidated Statements of Operations for the three and nine month period ended September 27, 2024. The Company pays monthly interest payments in arrears and quarterly principal payments of 0.625 % of the outstanding principal balance since April 4, 2024, with the remaining principal paid upon maturity. The revolving credit facility has an available commitment of $ 150.0 million and a maturity date of August 27, 2027. The Company pays a quarterly commitment fee in arrears equal to 0.25 % of the average daily available commitment outstanding. Outstanding letters of credit reduce the availability of the revolving credit facility and, as of September 27, 2024, the Company had $ 146.0 million, net of $ 4.0 million of outstanding letters of credit, available under this revolving credit facility. The letter of credit facility has an available commitment of $ 50.0 million and a maturity date of August 27, 2027. The Company pays a quarterly fee in arrears equal to 2.5 % (subject to certain adjustments to the Term Loan) of the dollar equivalent of all outstanding letters of credit, and a fronting fee equal to 0.125 % of the undrawn and unexpired amount of each letter of credit. As of September 27, 2024, the Company had $ 4.0 million of outstanding letters of credit and $ 46.0 million of available commitments remaining under the letter of credit facility. On June 29, 2023, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement to replace the LIBOR-based reference interest rate option with a reference interest option based upon Term SOFR under the Credit Agreement. Under the Credit Agreement, the Company may elect that the Term Loan bear interest at a rate per annum equal to either (a) “ABR” (as defined in the Credit Agreement), plus the applicable margin or (b) the “Eurodollar Rate” (as defined in the Credit Agreement), based on SOFR, plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum to either (i) at any time that the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s and BB- (with a stable outlook) or higher from S&P, (x) 3.25 % for such Eurodollar term loans and (y) 2.25 % for such ABR term loans or (ii) at all other times, (x) 3.50 % for such Eurodollar term loans and (y) 2.50 % for such ABR term loans. Interest on the Term Loan is payable on (1) in the case of such ABR term loans, the last day of each calendar quarter and (2) in the case of such Eurodollar term loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period. At September 27, 2024, the Company had an outstanding amount under the Term Loan of $ 493.8 million, gross of unamortized debt issuance costs of $ 7.7 million. As of September 27, 2024, the interest rate on the outstanding Term Loan was 8.9 %. The Credit Agreement requires the Company to maintain certain financial covenants including a consolidated fixed charge coverage ratio and a consolidated leverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter. The Company currently has no revolving loans outstanding under the Credit Agreement. As of September 27, 2024, the Company was in compliance with the financial covenants contained within the Credit Agreement. The Company has a credit agreement with a local bank in the Czech Republic that provides for a revolving credit facility in the aggregate of up to 7.0 million euros (approximately $ 7.8 million). As of September 27, 2024, no debt was outstanding under this revolving credit facility. Fluid Solutions has credit facilities with various financial institutions in Israel that provides borrowing up to $ 11.0 million. As of September 27, 2024, Fluid Solutions had a $ 6.1 million outstanding balance under these facilities with interest rate of 7.1 %. - 16 - Index to Notes As of September 27, 2024, the Company’s total bank debt was $ 492.2 million, net of unamortized debt issuance costs of $ 7.7 million. As of September 27, 2024, the Company had $ 146.0 million, $ 4.9 million, and $ 7.8 million available to draw from its credit facilities in the U.S., Israel and Czech Republic, respectively. The fair value of the Company’s long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets. The Company’s carrying value approximates fair value for the Company’s long-term debt. 7. INCOME TAX The Company's effective tax rate was 97.1 % and ( 70.7 )% for the three months ended September 27, 2024 and September 29, 2023, respectively, and 66.0 % and ( 488.6 )% for the nine months ended September 27, 2024 and September 29, 2023, respectively. The Company’s income tax provision was $ 9.9 million and $ 5.3 million for the three months ended September 27, 2024 and September 29, 2023, respectively, and $ 28.2 million and $ 17.1 million for the nine months ended September 27, 2024 and September 29, 2023, respectively. The change in respective tax rates reflects, primarily, changes in the geographic mix of worldwide earnings and financial results in jurisdictions which are taxed at different rates and the impact of losses in jurisdictions with full valuation allowances on deferred tax assets. Company management continuously evaluates the need for a valuation allowance and, as of September 27, 2024, concluded that a full valuation allowance on its U.S. federal and state and certain of its foreign deferred tax assets was still appropriate. As of September 27, 2024 and September 29, 2023, the Company’s gross liability for unrecognized tax benefits, excluding interest, was $ 3.1 million and $ 2.7 million, respectively. Increases or decreases to interest and penalties on uncertain tax positions are included in the income tax provision in the Condensed Consolidated Statements of Operations. Although it is possible that some of the unrecognized tax benefits could be settled within the next twelve months, the Company cannot reasonably estimate the outcome at this time. 8. RETIREMENT PLANS Defined Benefit Plans Cinos Korea has a noncontributory defined benefit pension plan covering substantially all of its employees upon their retirement. The Company's entities in Israel also have noncontributory defined benefit pension plans covering their employees upon their retirement. The benefits for these plans are based on expected years of service and average compensation. The net period costs are recognized as employees render the services necessary to earn the postretirement benefits. The Company records annual amounts relating to the pension plan based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current and expected rates of return and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under the plans are reasonable based on its experience and market conditions. As of September 27, 2024, the benefit obligation of the plans was $ 12.3 million and the fair value of the benefit plan assets was $ 11.2 million which are invested in several fixed deposit accounts with financial institutions. As of September 27, 2024, the underfunded balance of the plans of $ 1.1 million has been recorded by the Company and is included in other liabilities. Amounts recognized in accumulated other comprehensive loss and contributed for the three and nine months ended September 27, 2024 were negligible. The Company and its subsidiaries contributed $ 0.1 million during the three and nine months ended September 29, 2023 and recognized $ 0.2 million and $ 0.4 million in accumulated other comprehensive loss for the three and nine months ended September 29, 2023. As of September 27, 2024, the Company's future estimated payment obligations for the respective fiscal years are as follows: - 17 - Index to Notes (In millions) 2024 $ 0.4 2025 1.7 2026 2.5 2027 1.4 2028 1.2 Thereafter 10.8 Total $ 18.0 Employee Savings and Retirement Plan The Company sponsors a 401(k) savings and retirement plan (the “401(k) Plan”) for all U.S. employees who meet certain eligibility requirements. Participants can elect to contribute to the 401(k) Plan, on a pre-tax basis, up to 25 % of their salary to a maximum of the IRS limit. The Company matches 50.0 % of each employee's contribution, up to a maximum of 6 % of the employee's eligible earnings. The Company made $ 0.8 million and $ 2.7 million discretionary employer contributions to the 401(k) Plan for the three and nine months ended September 27, 2024 and $ 0.9 million and $ 2.5 million for the three and nine months ended September 29, 2023. 9. COMMITMENTS AND CONTINGENCIES Commitments The Company leases real estate and equipment under various non-cancelable operating leases. Contingencies From time to time, the Company is subject to various legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. Although the outcome of the various legal proceedings and claims individually or in the aggregate cannot be predicted with certainty, the Company has not had a history of outcomes to date that have been material to the Condensed Consolidated Statements of Operations and does not believe that any of these proceedings or other claims will have a material adverse effect on its consolidated financial condition, results of operations or cash flows. 10. STOCKHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS Treasury Stock On October 20, 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $ 150 million of the Company’s common stock over a three-year period. No shares were repurchased under this program for the three and nine months ended September 27, 2024, and for the three months ended September 29, 2023. For the nine months ended September 29, 2023, approximately 0.8 million shares were repurchased under this program with an aggregate cost of $ 23.7 million. The Company may reissue these treasury shares as part of its stock-based compensation programs. Non-controlling Interests The Company owns part of the outstanding shares of Cinos Korea, a South Korean company that provides outsourced cleaning and recycling of precision parts for the semiconductor industry through its operating facilities in South Korea and through a partial interest in Cinos China. The carrying value of the remaining interest held by another shareholder in Cinos Korea and the remaining interest in Cinos China are presented as noncontrolling interests in the accompanying Condensed Consolidated Financial Statements. The noncontrolling interests were estimated based on the values of Cinos Korea and Cinos China on a 100 % basis. The values were calculated based on the pro-rata portion of total Services earnings before interest expense, taxes, depreciation and amortization contributed by each entity. 11. EMPLOYEE STOCK PLANS Employee Stock Plans - 18 - Index to Notes The Company grants stock awards in the form of restricted stock units (“RSUs”) and performance stock units (“PSUs”) to its employees as part of the Company’s long-term equity compensation plan. These stock awards are granted to employees with a unit purchase price of zero dollars and typically vest over three years , subject to the employee’s continued service with the Company and, in the case of PSUs, subject to achieving certain performance goals and market conditions. The Company also grants common stock to its board members in the form of restricted stock awards (“RSAs”), which vest on the earlier of the next Annual Shareholder Meeting, or 365 days from date of grant. Stock-based compensation expense includes compensation costs related to estimated fair values of awards granted. The estimated fair value of the Company’s equity-based awards is amortized on a straight-line basis over the awards’ vesting period and is adjusted for performance as it relates to PSUs. The following table shows the Company’s stock-based compensation expense included in the Condensed Consolidated Statements of Operations: Three Months Ended Nine Months Ended (In millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Cost of revenues (1) $ 0.5 $ 0.3 $ 1.3 $ 0.9 Research and development 0.1 0.1 0.2 0.2 Sales and marketing 0.4 0.4 1.4 1.1 General and administrative 3.7 3.2 9.8 6.5 Total stock-based compensation $ 4.7 $ 4.0 $ 12.7 $ 8.7 (1) Stock-based compensation expense capitalized in inventory for the three and nine months ended September 27, 2024 and September 29, 2023 were immaterial. For the three and nine months ended September 27, 2024, 27 thousand and 502 thousand RSUs were granted with a weighted average fair value of $ 39.72 and $ 41.37 per share, respectively. For the three and nine months ended September 29, 2023, 14 thousand and 567 thousand RSUs were granted with a weighted average fair value of $ 32.55 and $ 28.41 per share, respectively. For the nine months ended September 27, 2024 and September 29, 2023, 125 thousand and 145 thousand PSUs were granted, respectively. No PSUs were granted for the three months ended September 27, 2024 and September 29, 2023. For the nine months ended September 27, 2024and September 29, 2023, 26 thousand and 37 thousand RSAs were granted, respectively. No RSAs were granted for the three months ended September 27, 2024 and September 29, 2023. The following table summarizes the Company’s combined RSU, PSU and RSA activity for the nine months ended September 27, 2024: (In millions) Number of Shares Aggregate Intrinsic Value Outstanding at December 29, 2023 1.4 $ 46.1 Granted 0.7 Vested ( 0.4 ) Forfeited ( 0.3 ) Outstanding at September 27, 2024 1.4 56.7 Expected to vest at September 27, 2024 1.4 $ 56.7 As of September 27, 2024, approximately $ 29.4 million of unrecognized stock-based compensation cost related to employee and director awards remains to be amortized on a straight-line basis over a weighted average period of 1.9 years, and will be adjusted for subsequent changes in future grants. The total unamortized expense of the Company’s unvested RSAs as of September 27, 2024 was $ 0.8 million. Under the current PSU program, performance goals are set at the time of grant and performance is reviewed at the end of a three-year period. The percentage to be applied to each participant’s target award ranges from zero to 200 %, based upon the extent to which the financial performance goals are achieved. If specific performance threshold levels for the financial goals are met on an annual basis, the amount earned for that element will be applied to one-third of the participant’s PSU award granted to determine the number of total units earned. Recipients of PSU awards generally must remain employed by the Company on a continuous basis through the end of the three-year performance period in order to receive any amount of the PSUs covered by that award. In events such as death, - 19 - Index to Notes disability or retirement, the recipient may be entitled to pro-rata amounts of PSUs as defined in the Plan. Target shares subject to PSU awards do not have voting rights of common stock until earned and issued following the end of the three-year performance period. Employee Stock Purchase Plan The ESPP permits employees to purchase common stock at a discount through payroll withholdings at certain specified dates (purchase period) within a defined offering period. The purchase price is 85 % of the fair market value of the common stock at the end of the purchase period and is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. During the nine months ended September 27, 2024, 42 thousand shares were issued under the ESPP. No shares were issued under the ESPP during the three months ended September 27, 2024. The Company recorded $ 0.2 million and $ 0.5 million of expense related to ESPP for the three and nine months ended September 27, 2024. No shares were issued under the ESPP during the three and nine months ended September 29, 2023. The Company recorded $ 0.2 million and $ 0.3 million of expense related to ESPP for the three and nine months ended September 29, 2023. 12. REVENUE RECOGNITION Revenue is recognized when the Company satisfies the performance obligations as evidenced by the transfer of control of the promised goods or services to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company sells its products and services primarily to customers in the semiconductor capital equipment industry. The Company’s revenues are highly concentrated, and therefore highly dependent upon a small number of customers. Typical payment terms with our customers range from thirty to sixty days . The Company’s Products business segment provides warranty on its products for a period of up to two years and provides for warranty costs at the time of sale based on historical activity. Determination of the warranty reserve requires the Company to make estimates of product return rates and expected costs to repair or replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from these estimates, adjustments to recognize additional cost of revenues may be required in future periods. The warranty reserve is included in other current liabilities on the Condensed Consolidated Balance Sheets and is not considered significant. The Company’s products are manufactured and services provided at the Company's locations throughout the Americas, Asia Pacific and Europe and the Middle East (“EMEA”). Sales to customers are initiated through a purchase order and are governed by our standard terms and conditions, written agreements, or both. Revenue is recognized when performance obligations under the terms of an agreement with a customer are satisfied; generally, this occurs with the transfer of control of the products or when the Company provides the services. Based on the enforceable rights included in our agreements or prevailing terms and conditions, products produced by the Company without an alternative use are not protected by an enforceable right of payment that includes a reasonable profit throughout the duration of the agreement. Consignment sales are recognized in revenue at the earlier of the period that the goods are consumed or after a period of time subsequent to receipt by the customer as specified by terms of the agreement, provided control of the promised goods or services has transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value-add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Certain of our customers may receive cash-based incentives, such as rebates or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. Accruals for unpaid customer rebates of $ 1.8 million and $ 2.0 million as of September 27, 2024 and December 29, 2023, respectively, were netted against accounts receivable. The Company's disaggregated revenues are apportioned by segments within the Company’s Condensed Consolidated Statement of Operations. The Company’s principal markets include America, Asia Pacific and EMEA. The Company's foreign operations are conducted primarily through its subsidiaries in China, Malaysia, Singapore, Israel, Taiwan, South Korea, United Kingdom - 20 - Index to Notes and the Czech Republic. Revenues by geographic area are categorized based on the customer’s location to which the products were shipped or services were performed. The following table sets forth revenue by geographic area: Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Singapore $ 173.9 $ 155.4 $ 500.0 $ 446.5 United States 145.6 125.8 432.7 393.7 China 56.7 26.7 171.2 80.8 Austria 48.9 33.1 131.6 94.9 South Korea 25.3 21.9 73.6 71.9 Taiwan 23.2 20.0 60.3 60.5 Others 66.8 52.1 164.9 141.5 Total $ 540.4 $ 435.0 $ 1,534.3 $ 1,289.8 The Company’s most significant customers (having individually accounted for 10% or more of revenues) and their related revenues as a percentage of total revenues were as follows: Three Months Ended Nine Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Lam Research Corporation 31.2 % 33.0 % 31.4 % 34.5 % Applied Materials, Inc. 21.8 25.7 22.4 22.9 Total 53.0 % 58.7 % 53.9 % 57.4 % Three customers’ accounts receivable balances, Lam Research Corporation, ASML Holding NV and Applied Materials, Inc., were individually greater than 10% of accounts receivable as of September 27, 2024, in the aggregate approximately 35.0 % of the Company's total accounts receivable. Two customers’ accounts receivable balances, Lam Research Corporation and Applied Materials, Inc., were individually greater than 10% of accounts receivable as of December 29, 2023, in the aggregate approximately 26.8 % of total accounts receivable. 13. LEASES The Company leases land, offices, facilities and equipment in locations throughout the United States, Asia Pacific and EMEA. In 2023, the Company entered into a 60-year land lease in Malaysia with the intent of building a manufacturing site. The commencement date of the lease occurred in July 2024 contemporaneous with the Company obtaining control of the identified asset. In the first quarter of 2024, the Company commenced a 10-year lease of manufacturing space in Austin, Texas, with a single 7-year renewal option at lease end. Additionally, the Company’s subsidiary in Czech Republic entered into 8-year lease of additional manufacturing and office space. As a result, $ 21.9 million and $ 16.8 million were recorded at commencement date to operating lease right-of-use assets and to operating lease liabilities, respectively, in the Company’s Condensed Consolidated Balance Sheet . - 21 - Index to Notes 14. NET INCOME (LOSS) PER SHARE The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income (loss) per share: Three Months Ended Nine Months Ended (In millions, except share amounts) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Numerator: Net income (loss) attributable to UCT $ ( 2.3 ) $ ( 14.5 ) $ 7.4 $ ( 27.3 ) Denominator: Shares used in computation — basic: Weighted average common shares outstanding 45.0 44.8 44.8 44.8 Shares used in computation — diluted: Weighted average common shares outstanding 45.0 44.8 44.8 44.8 Effect of potential dilutive securities: Employee stock plans — — 0.6 — Shares used in computing diluted net income (loss) per share 45.0 44.8 45.4 44.8 Net income (loss) per share attributable to UCT — basic $ ( 0.05 ) $ ( 0.32 ) $ 0.16 $ ( 0.61 ) Net income (loss) per share attributable to UCT — diluted $ ( 0.05 ) $ ( 0.32 ) $ 0.16 $ ( 0.61 ) 15. REPORTABLE SEGMENTS The Company prepares financial results based on three operating segments (Products, Services, and HIS) and two reportable segments (Products and Services). The Products and HIS operating segments have been aggregated into the Products reportable segment based upon consistency of economic characteristics, nature of products, similarity of production process, and class of customers. The Company’s Chief Executive Officer (chief operating decision maker) views and evaluates operations based on the results of each of the operating segments. The following table describes each reportable segment: Segment Product or Services Primary Markets Served Geographic Areas Products Assembly Weldments Machining Fabrication Semiconductor Americas Asia Pacific EMEA Services Cleaning Analytics Coating Semiconductor Americas Asia Pacific EMEA The Company uses segment profit or loss as the primary measure of profitability to evaluate operating performance and to allocate capital resources. Segment profit or loss is defined as a segment’s income or loss from continuing operations before other income and income taxes included in the accompanying Condensed Consolidated Statements of Operations. Any intercompany sales and associated profit (and any other intercompany items) are eliminated from segment results. There were no significant intercompany eliminations for the periods presented. - 22 - Index to Notes Segment Data Three Months Ended Nine Months Ended (In millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Revenues: Products $ 479.0 $ 380.9 $ 1,350.2 $ 1,112.0 Services 61.4 54.1 184.1 177.8 Total segment revenues $ 540.4 $ 435.0 $ 1,534.3 $ 1,289.8 Gross margin: Products $ 75.7 $ 51.6 $ 209.0 $ 156.5 Services 17.7 13.6 55.5 49.8 Total segment gross margin $ 93.4 $ 65.2 $ 264.5 $ 206.3 Income from operations: Products $ 22.4 $ 7.7 $ 55.9 $ 27.3 Services 2.8 ( 2.0 ) 9.4 3.4 Total segment income from operations $ 25.2 $ 5.7 $ 65.3 $ 30.7 (In millions) September 27, 2024 December 29, 2023 Assets Products $ 1,670.8 $ 1,617.5 Services 276.7 250.2 Total segment assets $ 1,947.5 $ 1,867.7 Long-lived assets comprised of operating lease right-of-use assets and property, plant and equipment, net, reported based on the location of the asset. The carrying amount of long-lived assets in United States, Malaysia, Israel, South Korea and other foreign countries were $ 176.4 million, $ 83.9 million, $ 75.7 million, $ 51.4 million and $ 102.5 million, respectively as of September 27, 2024, and $ 165.4 million, $ 84.3 million, $ 74.3 million, $ 54.3 million and $ 101.7 million, respectively as of December 29, 2023. - 23 - Table of Contents