Ultra Clean Holdings, Inc. 10-Q

ITEM 1. Financial Statements ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 28, 2025 December 27, 2024 (In millions, except par value) ASSETS Current assets: Cash and cash equivalents $ 317.6 $ 313.9 Accounts receivable, net of allowance for credit losses of $ 1.4 and $ 2.1 at March 28, 2025 and December 27, 2024, respectively 217.9 241.1 Inventories 374.6 381.0 Prepaid expenses and other current assets 37.7 34.1 Total current assets 947.8 970.1 Property, plant and equipment, net 328.6 325.9 Goodwill 265.3 265.3 Intangible assets, net 177.6 184.9 Deferred tax assets, net 3.5 3.1 Operating lease right-of-use assets 157.2 161.0 Other non-current assets 11.0 9.6 Total assets $ 1,891.0 $ 1,919.9 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Bank borrowings $ 10.0 $ 16.0 Accounts payable 207.4 212.5 Accrued compensation and related benefits 39.7 50.1 Operating lease liabilities 18.6 18.6 Other current liabilities 37.5 38.4 Total current liabilities 313.2 335.6 Bank borrowings, net of current portion 470.9 476.5 Deferred tax liabilities 16.2 16.1 Operating lease liabilities 146.9 149.2 Other liabilities 7.0 6.7 Total liabilities 954.2 984.1 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 46.6 shares issued and 45.1 and 45.1 shares outstanding at March 28, 2025 and December 27, 2024, respectively 0.1 0.1 Additional paid-in capital 561.3 558.4 Common shares held in treasury, at cost, 1.5 and 1.5 shares at March 28, 2025 and December 27, 2024, respectively ( 45.0 ) ( 45.0 ) Retained earnings 365.4 370.4 Accumulated other comprehensive loss ( 9.8 ) ( 10.3 ) Total UCT stockholders’ equity 872.0 873.6 Noncontrolling interests 64.8 62.2 Total equity 936.8 935.8 Total liabilities and equity $ 1,891.0 $ 1,919.9 (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 March 28, 2025 March 29, 2024 (In millions, except per share amounts) Revenues: Products $ 457.0 $ 418.5 Services 61.6 59.2 Total revenues 518.6 477.7 Cost of revenues: Products 390.3 354.0 Services 44.3 41.1 Total cost revenues 434.6 395.1 Gross margin 84.0 82.6 Operating expenses: Research and development 7.6 7.0 Sales and marketing 14.9 13.7 General and administrative 48.6 44.6 Total operating expenses 71.1 65.3 Income from operations 12.9 17.3 Interest income 1.1 1.4 Interest expense ( 9.9 ) ( 12.2 ) Other income (expense), net 0.8 ( 3.8 ) Income before provision for income taxes 4.9 2.7 Provision for income taxes 7.4 9.9 Net loss ( 2.5 ) ( 7.2 ) Less: Net income attributable to noncontrolling interests 2.5 2.2 Net loss attributable to UCT $ ( 5.0 ) $ ( 9.4 ) Net loss per share attributable to UCT common stockholders: Basic $ ( 0.11 ) $ ( 0.21 ) Diluted $ ( 0.11 ) $ ( 0.21 ) Shares used in computing net income loss per share: Basic 45.1 44.6 Diluted 45.1 44.6 (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 March 28, 2025 March 29, 2024 (In millions) Net loss $ ( 2.5 ) $ ( 7.2 ) Other comprehensive income (loss): Change in cumulative translation adjustment, net of tax 0.6 ( 4.4 ) Total other comprehensive income (loss) 0.6 ( 4.4 ) Comprehensive loss ( 1.9 ) ( 11.6 ) Comprehensive income (loss), attributable to noncontrolling interests 2.6 ( 0.1 ) Comprehensive loss attributable to UCT $ ( 4.5 ) $ ( 11.5 ) (See accompanying Notes to Condensed Consolidated Financial Statements) - 5 - Table of Contents ULTRA CLEAN HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 28, 2025 March 29, 2024 (In millions) Cash flows from operating activities: Net loss $ ( 2.5 ) $ ( 7.2 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 11.7 11.5 Amortization of intangible assets 7.3 7.7 Stock-based compensation 2.9 3.5 Amortization of debt issuance costs 0.6 1.0 Change in the fair value of financial instruments ( 0.1 ) 1.8 Deferred income taxes ( 0.3 ) ( 0.7 ) Changes in assets and liabilities: Accounts receivable 23.1 ( 13.7 ) Inventories 6.4 ( 13.6 ) Prepaid expenses and other current assets ( 0.6 ) ( 0.8 ) Other non-current assets 0.2 0.7 Accounts payable ( 8.5 ) 25.1 Accrued compensation and related benefits ( 10.4 ) ( 10.6 ) Income taxes payable ( 0.7 ) 2.1 Operating lease assets and liabilities 1.4 ( 1.1 ) Other liabilities ( 2.3 ) 4.1 Net cash provided by operating activities 28.2 9.8 Cash flows from investing activities: Purchases of property, plant and equipment ( 12.4 ) ( 18.0 ) Proceeds from sale of equipment — 0.1 Net cash used in investing activities ( 12.4 ) ( 17.9 ) Cash flows from financing activities: Principal payments on bank borrowings ( 12.0 ) ( 4.5 ) Other financing activities ( 0.2 ) — Net cash used in financing activities ( 12.2 ) ( 4.5 ) Effect of exchange rate changes on cash and cash equivalents 0.1 ( 1.4 ) Net increase (decrease) in cash and cash equivalents 3.7 ( 14.0 ) Cash and cash equivalents at beginning of period 313.9 307.0 Cash and cash equivalents at end of period $ 317.6 $ 293.0 Supplemental cash flow information: Income taxes paid, net of income tax refunds $ 8.6 $ 8.1 Interest paid $ 12.7 $ 11.2 Non-cash investing and financing activities: Property, plant and equipment purchased included in accounts payable and other liabilities $ 6.8 $ 7.3 (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 March 28, 2025 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 27, 2024 45.1 $ 0.1 $ 558.4 1.5 $ ( 45.0 ) $ 370.4 $ ( 10.3 ) $ 873.6 $ 62.2 $ 935.8 Stock-based compensation expense — — 2.9 — — — — 2.9 — 2.9 Net income (loss) — — — — — ( 5.0 ) — ( 5.0 ) 2.5 ( 2.5 ) Other comprehensive income — — — — — — 0.5 0.5 0.1 0.6 Balance March 28, 2025 45.1 $ 0.1 $ 561.3 1.5 $ ( 45.0 ) $ 365.4 $ ( 9.8 ) $ 872.0 $ 64.8 $ 936.8 Three Months Ended March 29, 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 Stock-based compensation expense — — 3.5 — — — — 3.5 — 3.5 Net income (loss) — — — — — ( 9.4 ) — ( 9.4 ) 2.2 ( 7.2 ) Other comprehensive loss — — — — — — ( 2.1 ) ( 2.1 ) ( 2.3 ) ( 4.4 ) Balance March 29, 2024 44.6 $ 0.1 $ 545.0 1.5 $ ( 45.0 ) $ 337.3 $ ( 6.5 ) $ 830.9 $ 58.2 $ 889.1 - 7 - Table of Contents ULTRA CLEAN HOLDINGS, INC. INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Page 1. Organization and Significant Accounting Policies 9 2. Balance Sheet Information 10 3. Fair Value 11 4. Goodwill and Intangible Assets 12 5. Borrowing Arrangements 13 6. Income Tax 14 7. Retirement Plans 14 8. Commitments and Contingencies 15 9. Stockholders ’ Equity and Noncontrolling Interests 15 10. Employee Stock Plans 15 11. Revenue Recognition 17 12. Leases 18 13. Net Loss Per Share 19 14. Reportable Segments 19 - 8 - 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 accounting principles generally accepted in the United States of America, or U.S. 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 U.S. 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 27, 2024. 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 27, 2024 that had a material impact on the Company’s condensed consolidated financial statements and related notes. Accounting Standards Recently Adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”). ASU No. 2023-09 enhances the transparency and usefulness of income tax disclosures by requiring consistent categories and greater disaggregation in the rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. The ASU also includes other amendments aimed at improving the effectiveness of income tax disclosures. The Company adopted ASU No. 2023-09 prospectively in the first quarter of fiscal year 2025. The adoption did not have a material impact on the Company’s interim condensed consolidated financial statements but is expected to result in expanded annual income tax disclosures beginning with the Company’s Form 10-K for the fiscal year ending December 26, 2025. Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU No. 2024-03”). ASU No. 2024-03 requires entities to provide disaggregated disclosure of certain expense categories, including but not limited to, inventory purchases, employee compensation, depreciation, amortization, and depletion, within relevant income statement captions. - 9 - Index to Notes In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which confirmed that the guidance in ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The guidance is to be applied prospectively, although retrospective application is allowed. The Company is currently evaluating the impact of ASU 2024-03 and ASU 2025-01 on its financial statement disclosures. 2. BALANCE SHEET INFORMATION Inventories consisted of the following: (In millions) March 28, 2025 December 27, 2024 Raw materials $ 202.2 $ 195.4 Work in process 117.1 130.8 Finished goods 55.3 54.8 Total $ 374.6 $ 381.0 Property, plant and equipment, net, consisted of the following: (In millions) March 28, 2025 December 27, 2024 Land $ 5.7 $ 5.7 Buildings 52.4 52.2 Leasehold improvements 134.8 138.7 Machinery and equipment 223.7 222.4 Computer equipment and software 76.0 78.2 Furniture and fixtures 4.9 4.8 497.5 502.0 Accumulated depreciation ( 213.4 ) ( 214.0 ) Construction in progress 44.5 37.9 Total $ 328.6 $ 325.9 Capitalized interest was not significant for the three months ended March 28, 2025, or for the fiscal year ended December 27, 2024. - 10 - Index to Notes 3. 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 March 28, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In millions) Other liabilities: Pension obligation $ 1.9 $ — $ — $ 1.9 Fair Value Measurement at Reporting Date Using Description December 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 $ 0.1 $ — $ — $ 0.1 Other liabilities: Pension obligation $ 1.7 $ — $ — $ 1.7 Contingent earn-out $ 0.1 $ — $ — $ 0.1 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 March 28, 2025, the Company’s aggregate pension benefit obligations was $ 12.6 million and the fair value of the pension plan assets was $ 10.7 million, resulting in underfunded pension benefit obligations of $ 1.9 million. 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. Prior to March 28, 2025, the Company measured 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 included the forecasted operating profit of the acquired business during the earn-out period ending in calendar year 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. As of March 28, 2025, the Company reassessed the fair value of the contingent earn-out associated with the acquisition of HIS, decreasing the fair value from $ 0.1 million as of December 27, 2024, to zero as of March 28, 2025. The $ 0.1 million decrease was recorded as Other income (expense), net in the Condensed Consolidated Statements of Operations. The change in fair value was primarily due to lower-than-expected financial performance. For the three months ended March 29, 2024, the Company recorded $ 1.3 million loss related to the change in the fair value of contingent earn-out. This amount was also recorded as other income (expense), net in the Condensed Consolidated Statements of Operations. There were no transfers in or out of any level during the three months ended March 28, 2025 and March 29, 2024. Fair value adjustments were noncash, and therefore did not impact the Company’s liquidity or capital resources. - 11 - Index to Notes 4. GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the consideration transferred over the fair value of the tangible and identifiable intangible assets acquired, less the liabilities assumed in a business combination. There were no changes in the carrying amount of goodwill by segment during the three months ended March 28, 2025. Details of aggregate goodwill of the Company are as follows: (In millions) Products Services Total Balance at March 28, 2025 $ 191.8 $ 73.5 $ 265.3 Historically, the Products segment was organized into four reporting units, Fluid Solutions, HIS, Fluid Delivery Systems and Core Products. The Company reevaluated its reporting units and determined that as of December 28, 2024, HIS no longer qualified as a separate reporting unit. As a result, since that date, HIS and Core Products are combined in a single reporting unit. Accordingly, the Company performed the required impairment assessments directly before and immediately after the change in reporting units and concluded that it was not more likely than not that the fair values of any of the Company’s previous or new reporting units were less than their respective carrying amounts. During the three months ended March 28, 2025, the Company did not recognize any impairment charges or additions to goodwill. 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. Details of intangible assets were as follows: As of March 28, 2025 As of December 27, 2024 (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 $ ( 122.2 ) $ 85.0 $ 207.2 $ ( 117.4 ) $ 89.8 Recipes 20 73.2 ( 24.1 ) 49.1 73.2 ( 23.2 ) 50.0 Intellectual property/know-how 7 - 15 48.9 ( 23.9 ) 25.0 48.9 ( 22.8 ) 26.1 Tradename 4 - 6 * 32.5 ( 23.1 ) 9.4 32.5 ( 22.9 ) 9.6 Standard operating procedures 20 8.6 ( 2.8 ) 5.8 8.6 ( 2.7 ) 5.9 Developed technology 5 4.6 ( 1.3 ) 3.3 4.6 ( 1.1 ) 3.5 Total $ 375.0 $ ( 197.4 ) $ 177.6 $ 375.0 $ ( 190.1 ) $ 184.9 * 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 $ 7.3 million and $ 7.7 million for the three months ended March 28, 2025 and March 29, 2024, 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 - 12 - Index to Notes general and administrative expense. As of March 28, 2025, future estimated amortization expense is expected to be as follows: (In millions) Amortization Expense 2025 (remaining in year) $ 20.8 2026 27.2 2027 26.9 2028 23.8 2029 16.2 Thereafter 53.7 Total $ 168.6 5. BORROWING ARRANGEMENTS On October 8, 2024, the Company entered into the Seventh Amendment to its Credit Agreement, originally dated August 27, 2018, as amended. The Seventh Amendment, among other changes, reduced the interest rate on the term loan facility by 0.25 % per annum. The term loan facility has a maturity date of February 25, 2028. The Company pays monthly interest payments in arrears and quarterly principal payments of 0.625 % of the outstanding principal balance since October 8, 2024, with the remaining principal paid upon maturity. The revolving credit facility has aggregate commitments 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 March 28, 2025, the Company had $ 146.4 million, net of $ 3.6 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 on the dollar equivalent of all outstanding letters of credit equal to the applicable margin for the revolving credit facility, and a fronting fee equal to 0.125 % of the undrawn and unexpired amount of each letter of credit. As of March 28, 2025, the Company had $ 3.6 million of outstanding letters of credit and $ 46.4 million of available commitments remaining under the letter of credit facility. 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 “Term SOFR” (as defined in the Credit Agreement), plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum equal 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) 3.00 % for such Term SOFR loans and (y) 2.00 % for such ABR term loans or (ii) at all other times, (x) 3.25 % for such Term SOFR loans and (y) 2.25 % 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 Term SOFR 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 March 28, 2025, the Company had an outstanding amount under the Term Loan of $ 487.5 million, gross of unamortized debt issuance costs of $ 6.6 million. As of March 28, 2025, the interest rate on the outstanding Term Loan was 7.6 %. The Credit Agreement requires the Company to maintain certain financial covenants including a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio as of the last day of any fiscal quarter. The Company currently has no revolving loans outstanding under the Credit Agreement. As of March 28, 2025, the Company was in compliance with the financial covenants contained within the Credit Agreement. The Company maintains credit agreements with a local bank in Czechia and with a financial institution in Israel, which provide for revolving credit facilities of up to 7.0 million euros (approximately $ 7.5 million) and $ 5.0 million, respectively. As of March 28, 2025, there were no borrowings outstanding under these facilities. As of March 28, 2025, the Company’s total bank debt was $ 480.9 million, net of unamortized debt issuance costs of $ 6.6 million. As of March 28, 2025, the Company had $ 146.4 million, $ 5.0 million, and $ 7.5 million available to draw from its credit facilities in the U.S., Israel and Czechia, respectively. - 13 - Index to Notes The fair value of the Company’s long-term debt is based on Level 2 inputs, and was determined using quoted prices for similar instruments in inactive markets. The Company’s carrying value approximates fair value for the Company’s long-term debt. 6. INCOME TAX The Company’s effective tax rate was 151.0 % and 366.7 % for the three months ended March 28, 2025 and March 29, 2024, respectively. The income tax provision was $ 7.4 million and $ 9.9 million for the three months ended March 28, 2025 and March 29, 2024, 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 March 28, 2025, 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 March 28, 2025 and March 29, 2024, the Company’s gross liability for unrecognized tax benefits, excluding interest, was $ 2.4 million and $ 2.9 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. The Organization for Economic Co-operation and Development and the G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Inclusive Framework”) have put forth Pillar Two proposals that ensure a minimal level of taxation. Several countries in which the Company operates have adopted legislation to implement the Inclusive Framework’s global corporate minimum tax rate of fifteen percent. This legislation became effective in certain jurisdictions the Company operates in for the current fiscal year, ending December 26, 2025. Based on the Company’s current analysis of the enacted Pillar Two provisions and transitional safe harbor provisions, Pillar Two will not have a significant impact on the Company's financial statements for fiscal year 2025 7. 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 March 28, 2025, the benefit obligation of the plans was $ 12.6 million and the fair value of the benefit plan assets was $ 10.7 million which are invested in several fixed deposit accounts with financial institutions. As of March 28, 2025, the underfunded balance of the plans of $ 1.9 million has been recorded by the Company and is included in other liabilities. Amounts recognized in accumulated other comprehensive income (loss) and contributions made for the three months ended March 28, 2025 and March 29, 2024 were negligible. As of March 28, 2025, the Company’s future estimated payment obligations for the respective fiscal years are as follows: - 14 - Index to Notes (In millions) 2025 $ 1.6 2026 1.7 2027 2.6 2028 1.3 2029 1.2 Thereafter 11.2 Total $ 19.6 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 discretionary employer contributions of $ 1.0 million to the 401(k) Plan for each of the three months ended March 28, 2025 and March 29, 2024. 8. 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. 9. 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 months ended March 28, 2025 and March 29, 2024. As of March 28, 2025, 1.4 million shares had been repurchased under the program and they are held in treasury stock. The Company records treasury stock using the cost method. 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. 10. EMPLOYEE STOCK PLANS Employee Stock Plans - 15 - 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. The aggregate number of shares authorized for issuance under the plan is 1.3 million. 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 (In millions) March 28, 2025 March 29, 2024 Cost of revenues (1) $ 0.4 $ 0.4 Research and development 0.1 0.1 Sales and marketing 0.5 0.4 General and administrative 1.9 2.6 Total stock-based compensation $ 2.9 $ 3.5 (1) Stock-based compensation expense capitalized in inventory for the three months ended March 28, 2025 and March 29, 2024 were immaterial. For the three months ended March 28, 2025 and March 29, 2024, 51 thousand and 24 thousand RSUs were granted with a weighted average fair value of $ 25.61 and $ 44.21 per share, respectively. No PSUs were granted for the three months ended March 28, 2025 and March 29, 2024. For the three months ended March 28, 2025, 1 thousand RSAs were granted with a weighted fair value of $ 24.96 . No RSAs were granted for the three months ended March 29, 2024. The following table summarizes the Company’s combined RSU, PSU and RSA activity for the three months ended March 28, 2025: (In millions) Number of Shares Aggregate Intrinsic Value Outstanding at December 27, 2024 1.4 $ 52.0 Granted 0.1 Vested 0.0 Forfeited ( 0.4 ) Outstanding at March 28, 2025 1.1 24.9 Expected to vest at March 28, 2025 1.1 $ 24.8 As of March 28, 2025, approximately $ 21.8 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 1.6 years, and will be adjusted for subsequent changes in future grants. The total unamortized expense of the Company’s unvested RSAs as of March 28, 2025 was $ 0.2 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, disability or retirement, the recipient may be entitled to pro-rata amounts of PSUs as defined in the Plan. Target shares - 16 - Index to Notes 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. The aggregate number of shares authorized for issuance under the plan is 1.1 million. The Company recorded $ 0.2 million of expense related to ESPP for each of the three months ended March 28, 2025 and March 29, 2024. No shares were issued under the ESPP during either of these periods. 11. 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. As of March 28, 2025, the total unpaid rebates amounted to $ 2.3 million, of which $ 0.6 million was recorded as a reduction to accounts receivable, and $ 1.7 million was recorded within accounts payable. Accruals for unpaid customer rebates of $ 2.3 million as of December 27, 2024, were netted against accounts receivable. The Company’s disaggregated revenues are apportioned by segments within the Company’s Condensed Consolidated Statement of Operations. Certain services performed by the Company related to products sold to customers are included in Products revenue in the Condensed Consolidated Statement of Operations. These services are not material for any of the periods presented. The Company’s principal markets include Americas, Asia Pacific and EMEA. The Company’s foreign operations are conducted primarily through its subsidiaries in China, Malaysia, Singapore, Israel, Taiwan, South Korea, the United - 17 - Index to Notes Kingdom and the Czechia. 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 (in millions): Three Months Ended March 28, 2025 March 29, 2024 Singapore $ 203.60 $ 157.3 United States 119.8 141.0 China 33.3 54.9 Austria 46.1 37.5 South Korea 29.7 23.6 Malaysia 24.5 7.2 Taiwan 13.3 15.5 Others 48.3 40.7 Total $ 518.6 $ 477.7 The Company’s most significant customers (having individually accounted for 10% or more of revenues) are from Products segment and their related revenues as a percentage of total revenues were as follows: Three Months Ended March 28, 2025 March 29, 2024 Lam Research Corporation 36.1 % 31.4 % Applied Materials, Inc. 22.8 22.7 Total 58.9 % 54.1 % Two customers’ gross accounts receivable balances, Lam Research Corporation and ASML Holding NV, were individually greater than 10% of gross accounts receivable as of March 28, 2025, in the aggregate approximately 26.7 % of the Company’s total gross accounts receivable. Three customers’ gross accounts receivable balances, Applied Materials, Inc., Lam Research Corporation and ASML Holding NV were individually greater than 10% of gross accounts receivable as of December 27, 2024, in the aggregate approximately 41.9 % of total gross accounts receivable. 12. LEASES The Company leases land, offices, facilities and equipment in locations throughout the United States, Asia Pacific and EMEA. - 18 - Index to Notes 13. NET LOSS PER SHARE Potential common shares from employee stock plans totaling 0.3 million and 0.5 million for the three months ended March 28, 2025 and March 29, 2024, respectively, were excluded from the computation of diluted loss per share because their effect would have been antidilutive due to the net loss incurred in those periods. The table below presents the calculation of basic and diluted loss per share: Three Months Ended (In millions, except share amounts) March 28, 2025 March 29, 2024 Numerator: Net loss attributable to UCT $ ( 5.0 ) $ ( 9.4 ) Denominator: Basic weighted average common shares outstanding 45.1 44.6 Diluted weighted average common shares outstanding 45.1 44.6 Net loss per share attributable to UCT: Basic $ ( 0.11 ) $ ( 0.21 ) Diluted $ ( 0.11 ) $ ( 0.21 ) 14. REPORTABLE SEGMENTS The Company’s Chief Executive Officer is the Company’s chief operating decision maker (CODM). The CODM primarily uses income from operations to evaluate each segment’s performance and allocate resources, primarily through periodic budgeting and segment performance reviews. Significant expenses within segment operating profit include cost of revenue, research and development, and selling, general and administrative expenses, which are each separately presented on the Company’s Condensed Consolidated Statements of Operations. The Company’s reportable segments are determined based on the nature of their revenue streams and the Company’s internal organization structure. The Company prepared financial results based on two operating segments (Products and Services) and two reportable segments (Products and Services). The following table describes each 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 CODM uses segment operating profit or loss to evaluate performance and to allocate capital resources. Segment operating profit or loss is defined as a segment’s income or loss from continuing operations before interest and other income (expense), net and provision for income taxes. Any intercompany sales and associated profit (and any other intercompany items) are eliminated from segment results. Segment Data Three Months Ended (In millions) March 28, 2025 March 29, 2024 Revenues: Products $ 457.0 $ 418.5 Services 61.6 59.2 Total segment revenues $ 518.6 $ 477.7 - 19 - Index to Notes Cost of revenues: Products $ 390.3 $ 354.0 Services 44.3 41.1 Total segment cost of revenues $ 434.6 $ 395.1 Operating expenses: Products Research and development $ 5.2 $ 4.6 Sales and marketing 12.0 11.0 General and administrative 39.4 34.2 Total Products operating expenses $ 56.6 $ 49.8 Services Research and development $ 2.4 $ 2.4 Sales and marketing 2.9 2.7 General and administrative 9.2 10.4 Total Services operating expenses $ 14.5 $ 15.5 Total segment operating expenses $ 71.1 $ 65.3 Segment operating profit: Products $ 10.1 $ 14.7 Services 2.8 2.6 Total segment operating profit $ 12.9 $ 17.3 Reconciliation of segment operating profit: Total segment operating profit $ 12.9 $ 17.3 Interest income 1.1 1.4 Interest expense ( 9.9 ) ( 12.2 ) Other income (expense), net 0.8 ( 3.8 ) Income before provision for income taxes $ 4.9 $ 2.7 Expenditures for segment property, plant and equipment Products $ 9.3 $ 11.7 Services 3.2 6.3 Total expenditures for segment assets $ 12.5 $ 18.0 Depreciation and amortization Products $ 12.7 $ 13.1 Services 6.4 6.1 Total depreciation and amortization $ 19.1 $ 19.2 (In millions) March 28, 2025 December 27, 2024 Assets Products $ 1,626.4 $ 1,657.0 Services 264.6 262.9 Total segment assets $ 1,891.0 $ 1,919.9 - 20 - Index to Notes Long-lived assets comprised of operating lease right-of-use assets and property, plant and equipment, net, are 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 $ 176.1 million, $ 83.8 million, $ 75.4 million, $ 49.3 million and $ 101.2 million, respectively as of March 28, 2025, and $ 176.9 million, $ 83.2 million, $ 75.2 million, $ 49.8 million and $ 101.8 million, respectively as of December 27, 2024. - 21 - Table of Contents