Ichor Holdings, Ltd. (NASDAQ: ICHR), a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems for semiconductor capital equipment, today announced first quarter 2021 financial results.

Highlights for the first quarter of 2021:

• Revenues of $265 million, up 20% year-over-year and our eighth consecutive quarter of revenue growth;
• Gross margin of 14.9% on a GAAP basis and 16.1% on a non-GAAP basis;
• Net earnings of $0.51 per diluted share on a GAAP basis and $0.76 on a non-GAAP basis; and
• Cash flow from operations of $26 million and free cash flow of $20 million.

“We are very pleased to report today a record quarter for Ichor, with revenues at the high end of our expectations and increasing 8% over a very strong fourth quarter,” commented Jeff Andreson, chief executive officer of Ichor. “Industry conditions for wafer fab equipment have continued to strengthen for four straight quarters now, and, in turn, we have demonstrated strong execution in a challenging operating environment in order to ramp our business in response to customer demand. In Q1, we again exhibited the operating leverage in our business model, with quarter-on-quarter increases in both gross margin and operating margin, while also delivering another quarter of strong free cash flow generation.” Mr. Andreson concluded, “Our current visibility through the end of 2021 indicates a stronger Q2 compared to Q1, a stronger second half compared to the first half, and continued incremental improvements to our profitability. With industry growth currently expected to continue through both this year and next year, we believe Ichor is extremely well-positioned to continue to deliver strong revenue growth and operational leverage.”

U.S. GAAP Financial Results Overview

For the first quarter of 2021, revenue was $264.6 million, net income was $14.6 million, and net income per diluted share (“diluted EPS”) was $0.51. This compares to revenue of $245.0 million and $220.0 million, net income of $12.5 million and $3.4 million, and diluted EPS of $0.51 and $0.15, for the fourth and first quarter of 2020, respectively.

Non-GAAP Financial Results Overview

For the first quarter of 2021, non-GAAP net income was $21.7 million and non-GAAP diluted EPS was $0.76. This compares to non-GAAP net income of $19.8 million and $12.1 million, and non-GAAP diluted EPS of $0.81 and $0.52, for the fourth and first quarter of 2020, respectively.

Second Quarter 2021 Financial Outlook

For the second quarter of 2021, we expect revenue to be in the range of $270 million to $300 million. We expect GAAP diluted EPS to be in the range of $0.59 to $0.76 and non-GAAP diluted EPS to be in the range of $0.77 to $0.93.

This outlook for non-GAAP diluted EPS excludes known charges related to amortization of intangible assets, share-based compensation expense, tax adjustments related to these non-GAAP adjustments, and non-recurring charges known at the time of providing this outlook. This outlook for non-GAAP diluted EPS excludes any items that are unknown at this time, such as non-recurring tax-related items or other unusual items which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Balance Sheet and Cash Flow Results

We ended the first quarter of 2021 with cash of $242.9 million, a decrease of $10.0 million from the end of the prior quarter. The decrease from the end of the prior quarter was primarily due to payments on long-term debt of $32.2 million, of which $30.0 million was a paydown on our revolving credit facility, and capital expenditures of $5.4 million, partially offset by cash provided by operating activities of $25.6 million and net proceeds from the issuance of shares under our share-based compensation plans of $2.0 million.

Our cash provided by operating activities of $25.6 million for the first quarter of 2021 consisted of net income of $14.6 million, net non-cash charges of $8.8 million, and a decrease in our net operating assets and liabilities of $2.2 million. Net non-cash charges primarily consisted of depreciation and amortization of $5.7 million, share-based compensation of $2.4 million, and deferred taxes of $0.5 million. The increase in our net operating assets and liabilities was primarily due to an increase in accounts payable of $22.1 million, partially offset by increases in inventories and accounts receivable of $9.3 million and $7.7 million, respectively, and a decrease in accrued liabilities of $3.5 million.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results, including non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, and free cash flow. Management uses these non-GAAP metrics to evaluate our operating and financial results. We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective. Non-GAAP gross profit, operating income, and net income are defined as: gross profit, operating income, or net income excluding (1) amortization of intangible assets, share-based compensation expense, and non-recurring expenses, including contract settlement losses and facility shutdown costs, to the extent they are present in gross profit, operating income, and net income; and (2) the tax impacts associated with our non-GAAP adjustments, as well as non-recurring discrete tax items. Non-GAAP diluted EPS is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period. Free cash flow is defined as cash provided by operating activities, less capital expenditures. Tables showing these metrics on a GAAP and non-GAAP basis, with reconciliation footnotes thereto, are included at the end of this press release.

Non-GAAP results have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for our results reported under GAAP. Other companies may calculate non-GAAP results differently or may use other measures to evaluate their performance, both of which could reduce the usefulness of our non-GAAP results as a tool for comparison.

Because of these limitations, you should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP. In addition, in evaluating non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving non-GAAP results and you should not infer from our presentation of non-GAAP results that our future results will not be affected by these expenses or any unusual or non-recurring items.

Conference Call

We will conduct a conference call to discuss our first quarter 2021 results and business outlook on May 4, 2021, at 1:30 p.m. PDT.

To listen to a live webcast of the call, please visit our investor relations website at ir.ichorsystems.com, or go to the live link at webcasts.eqs.com/ichorholdings20210504. To listen via telephone, please call (877) 407-0989 (domestic) or +1 (201) 389-0921 (international), conference ID: 13718578.

After the call, an on-demand replay will be available at the same webcast link.

About Ichor

We are a leader in the design, engineering and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our product offerings include gas and chemical delivery subsystems, collectively known as fluid delivery subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. Our gas delivery subsystems deliver, monitor and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition. Our chemical delivery subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning. We also manufacture precision-machined components, weldments, and proprietary products for use in fluid delivery systems for direct sales to our customers, as well as certain components for internal use in fluid delivery systems and for direct sales to our customers. This vertically-integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively. We are headquartered in Fremont, CA. ichorsystems.com.

We use a 52- or 53-week fiscal year ending on the last Friday in December. The three months ended March 26, 2021, December 25, 2020, and March 27, 2020 were all 13 weeks. References to the first quarter of 2021 and the fourth and first quarter of 2020 relate to the three-month periods then ended.

Safe Harbor Statement

Certain statements in this release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "guidance," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," “look forward,” and similar expressions are used to identify these forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements regarding financial results for our second fiscal quarter of 2021, statements regarding the impacts of the COVID-19 pandemic, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including: (1) dependence on expenditures by manufacturers and cyclical downturns in the semiconductor capital equipment industry, (2) reliance on a very small number of original equipment manufacturers for a significant portion of sales, (3) negotiating leverage held by our customers, (4) competitiveness and rapid evolution of the industries in which we participate, (5) risks associated with weakness in the global economy and geopolitical instability, (6) keeping pace with developments in the industries we serve and with technological innovation generally, (7) designing, developing and introducing new products that are accepted by original equipment manufacturers in order to retain our existing customers and obtain new customers, (8) managing our manufacturing and procurement process effectively, (9) defects in our products that could damage our reputation, decrease market acceptance and result in potentially costly litigation, (10) dependence on a limited number of suppliers, and (11) the impact of the COVID-19 pandemic, any related or unrelated public health threat or fear of such event on economic activity, us and our customers, suppliers, employees, and other business relations, including, but not limited to, demand for our products, workforce availability, and costs to manufacture our products. Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission (the “SEC”), including other risks, relevant factors, and uncertainties identified in the "Risk Factors" section of our Annual Report on Form 10-K filed with the SEC on March 5, 2021.

All forward-looking statements in this press release are based upon information available to us as of the date hereof, and qualified in their entirety by this cautionary statement. We undertake no obligation to update or revise any forward-looking statements contained herein, whether as a result of actual results, changes in our expectations, future events or developments, or otherwise, except as required by law.

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