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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere in this report. The following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in the section entitled Item 1A – Risk Factors. For a comparison of our financial condition, results of operations, and cash flows for 2021 to 2020, refer to Part II, Item 7 in our 2021 Annual Report on Form 10‐K, which was filed with the Securities and Exchange Commission on February 28, 2022.

Overview

We are a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems and components for semiconductor capital equipment. Our primary product offerings include gas and chemical delivery systems and subsystems, collectively known as fluid delivery systems and subsystems, which are key elements of the process tools used in the manufacturing of semiconductor devices. Our gas delivery subsystems deliver, monitor, and control precise quantities of the specialized gases used in semiconductor manufacturing processes such as etch and deposition. Our chemical delivery systems and subsystems precisely blend and dispense the reactive liquid chemistries used in semiconductor manufacturing processes such as chemical-mechanical planarization, electroplating, and cleaning. We also provide precision-machined components, weldments, e‐beam and laser-welded components, precision vacuum and hydrogen brazing and surface treatment technologies, and other proprietary products. This vertically integrated portion of our business is primarily focused on metal and plastic parts that are used in gas and chemical systems, respectively.

Fluid delivery subsystems ensure accurate measurement and uniform delivery of specialty gases and chemicals at critical steps in the semiconductor manufacturing processes. Any malfunction or material degradation in fluid delivery reduces yields and increases the likelihood of manufacturing defects in these processes. Most OEMs outsource all or a portion of the design, engineering, and manufacturing of their gas delivery subsystems to a few specialized suppliers, including us. Additionally, many OEMs are outsourcing the design, engineering, and manufacturing of their chemical delivery subsystems due to the increased fluid expertise required to manufacture these subsystems. Outsourcing these subsystems has allowed OEMs to leverage the suppliers’ highly specialized engineering, design, and production skills while focusing their internal resources on their own value-added processes. We believe that this outsourcing trend has enabled OEMs to reduce their costs and development time, as well as provide growth opportunities for specialized subsystems suppliers like us.

We have a global footprint with production facilities in California, Minnesota, Oregon, Texas, Singapore, Malaysia, the United Kingdom, Korea, and Mexico.

The following table summarizes key financial information for the periods indicated. Amounts are presented in accordance with GAAP unless explicitly identified as being a non-GAAP metric. For a description of our non-GAAP metrics and reconciliations to the most comparable GAAP metrics, please refer to Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Results within this Annual Report.

Year Ended

(dollars in thousands, except per share amounts)

Gross margin, non-GAAP 17.0 % 16.7 %

Operating margin 6.7 % 7.4 %

Operating margin, non-GAAP 9.8 % 10.7 %

Diluted EPS, non-GAAP $ 3.62 $ 3.37

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Key Factors Affecting Our Business

Investment in Semiconductor Manufacturing Equipment

The design and manufacturing of semiconductor devices is constantly evolving and becoming more complex in order to achieve greater performance and efficiency. To keep pace with these changes, OEMs need to refine their existing products and invest in developing new products. In addition, semiconductor device manufacturers will continue to invest in new wafer fabrication equipment to expand their production capacity and to support new manufacturing processes.

Outsourcing of Subsystems by Semiconductor OEMs

Faced with increasing manufacturing complexities, more complex subsystems, shorter product lead times, shorter industry spend cycles, and significant capital requirements, outsourcing of subsystems and components by OEMs has continued to grow. In the past two decades, OEMs have outsourced most of their gas delivery systems to suppliers such as us. OEMs have also started to outsource their chemical delivery systems in recent years. Our results will be affected by the degree to which outsourcing of these fluid delivery systems by OEMs continues to grow.

Cyclicality of Semiconductor Capital Equipment Industry

Our business is subject to the cyclicality of the capital expenditures of the semiconductor industry, which drives cyclicality in the semiconductor capital equipment industry in which we operate. In 2022, we derived over 90% of our sales from the semiconductor capital equipment industry. Demand for semiconductor capital equipment can fluctuate significantly based on changes in regulatory intervention and general economic conditions, including consumer spending, demand for semiconductor products, pricing, and other factors. In the past, these fluctuations have resulted in significant variations in the levels of spending within the semiconductor capital equipment industry, and as a result, our results of operations. The cyclicality of the semiconductor industry will continue to impact our results of operations in the future.

Customer Concentration

The number of capital equipment manufacturers for the semiconductor device industry is significantly consolidated, resulting in a small number of large manufacturers. Our customers are a significant component of this consolidation, resulting in our sales being concentrated in a few customers. In 2022, our top two customers were Lam Research and Applied Material, accounting for a combined 79% of sales. Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us in any given period or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share. Although we do not have any long-term contracts that require customers to place orders with us, Lam Research and Applied Materials have been our customers for over a decade.

Acquisitions

In November 2021, we acquired IMG, a California-based leader in precision machining and specialty joining and plating, for approximately $270.0 million. Between 2017 and 2020, we engaged in four separate business combinations for a combined investment of approximately $200.0 million. These acquisitions continue to have a significant impact on our financial position and results of operations. We intend to continue to evaluate opportunistic acquisitions to supplement our organic growth, and any such acquisitions could have a material impact on our business and results of operations.

Macroeconomic Conditions

We participated in the continuation of unprecedented demand for semiconductor capital equipment in 2022, driven by increased secular demand for semiconductors, as well as the ever-increasing levels of complexity in the manufacturing thereof. Macroeconomic factors have, however, created, and may continue to create, volatility and uncertainty in our industry, including persistent levels of high inflation, higher interest rates, foreign currency rate fluctuations, and supply chain challenges. Additionally, increased controls around exporting goods and services to China may impact the overall size of the semiconductor capital equipment industry going forward, and the conflict in Ukraine has given rise to potential global security issues that may adversely affect international business and economic conditions as well as economic sanctions imposed by the international community that have impacted the global economy. Regarding the COVID‐19 pandemic, although our factories and operations are currently not directly affected by any restrictions, measures, or shutdowns, increases in positive case rates may change the extent to which our business becomes adversely impacted by such restrictions, measures, or shutdowns on a go-forward basis. While these challenging macroeconomic conditions may impact business and customers in the near-term, we believe secular demand for semiconductors, both in quantity and performance, and constant technological innovation will drive long-term, sustainable growth in the semiconductor capital equipment industry.

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Components of Our Results of Operations

The following discussion sets forth certain components of our statements of operations as well as significant factors that impact those items.

Sales

We generate sales primarily from the design, manufacture, and sale of subsystems and components primarily for semiconductor capital equipment. Sales are recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our shipping terms are generally “shipping point.” Accordingly, control transfers, and sales are recognized, at the point-in-time of shipment.

Cost of Sales and Gross Profit

Cost of sales consists primarily of purchased materials, direct labor, indirect labor, factory overhead cost, and depreciation expense for our manufacturing facilities and equipment. Our business has a highly variable cost structure with low fixed overhead as a percentage of cost of sales. In addition, our existing global manufacturing plant capacity is scalable, and we are able to adjust to increased customer demand for our products without significant additional capital investment. We operate our business in this manner to avoid having excessive fixed costs during a cyclical downturn while retaining flexibility to expand our production volumes during periods of growth. However, this approach results in a smaller increase in gross margin as a percentage of sales in times of increased demand.

Since the gross margin on each of our products differs, our overall gross margin as a percentage of our sales changes based on the mix of products we sell in any period.

Operating Expenses

Our operating expenses primarily include research and development and sales, general, and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, and share-based compensation. Operating expenses also include overhead costs for facilities, IT, and depreciation. In addition, our operating expenses include amortization expense of acquired intangible assets and certain non-recurring costs, including facility shutdown costs and executive transition-related costs.

Research and development – Research and development expense consists primarily of activities related to product design and other development activities, new component testing and evaluation, and test equipment and fixture development. We expect research and development expense will continue to increase in absolute dollars due to continued development of our own intellectual property and product offerings for existing and new customer markets and increases in our customers’ demand for new product designs.

Selling, general, and administrative – Selling expense consists primarily of salaries and commissions paid to our sales and sales support employees and other costs related to the sales of our products. General and administrative expense consists primarily of salaries and overhead associated with our administrative staff, professional fees, and depreciation and other allocated facility related costs. We expect selling expenses to increase in absolute dollars as we continue to invest in expanding our markets and as we expand our international operations. We expect general and administrative expenses to also increase in absolute dollars due to an increase in employee-related costs, regulatory compliance, and accounting expenses.

Amortization of intangibles – Amortization of intangible assets is related to our finite-lived intangible assets and is computed using the straight-line method over the estimated economic life of the asset.

Interest Expense

Interest expense consists of interest on our outstanding debt under our credit facilities, including amortization of debt issuance costs, and any other indebtedness we may incur in the future. Borrowings under our credit facilities are generally subject to variable interest rates, which fluctuate depending on macroeconomic factors and can result in increased interest expense in periods of rising interest rates.

Other Expense (Income), Net

The functional currency of our international operations is the U.S. dollar. Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on the accompanying consolidated statements of operations. Substantially all of our sales contracts, and most of our agreements with third-party suppliers, provide for pricing and payment in U.S. dollars. Accordingly, these transactions are not subject to material exchange rate fluctuations.

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Income Tax Expense

Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which was extended through 2026. In 2022, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $11.7 million. Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. The majority of our inventories are valued on a standard cost basis, which approximates actual costs on a first-in, first-out basis. The remainder of our inventories are valued on an average cost basis, which approximates actual costs on a first-in, first-out basis. Quarterly, we assess the value of our inventory and periodically write it down for excess quantities or obsolescence to its estimated net realizable value. This assessment is based on estimated future consumption compared to inventory quantities on-hand. The estimate for future consumption is based on how assumptions of historical consumption, recency of purchases, backlog, and other factors indicate future consumption. Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis. During 2022, 2021, and 2020, we wrote down inventory determined to be excessive or obsolete by $5.0 million, $1.9 million, and $4.6 million, respectively. We believe the accounting estimate related to excess and obsolete inventory is a critical accounting estimate because it requires us to make assumptions about future inventory consumption and recoverability of cost, which can be uncertain. Changes in these estimates can have a material impact on our financial statements.

Results of Operations

The following table sets forth our results of operations for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

Year Ended

(in thousands)

Operating expenses:

Other expense (income), net (563 ) 807

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

Year Ended

Operating expenses:

Research and development 1.5 1.4

Selling, general, and administrative 6.9 6.0

Amortization of intangible assets 1.4 1.4

Total operating expenses 9.8 8.8

Operating income 6.7 7.4

Interest expense, net 0.9 0.6

Other expense (income), net 0.0 0.1

Income before income taxes 5.9 6.7

Income tax expense 0.2 0.3

Comparison of 2022 and 2021

Net Sales

Year Ended Change

(dollars in thousands)

The increase in net sales from 2021 to 2022 was primarily due to strong demand from our customers as a result of continued growth in the global wafer fabrication equipment market throughout much of 2022, as well as incremental sales from our acquisition of IMG in November 2021.

Net sales to U.S. customers increased by $38.0 million in 2022 to $572.1 million. On a relative basis, net sales to U.S. customers as a percent of total net sales decreased from 49.6% in 2021 to 44.7% in 2022.

Net sales to international customers increased by $155.1 million in 2022 to $707.9 million. On a relative basis, net sales to international customers as a percent of total net sales increased from 50.4% in 2021 to 55.3% in 2022.

Cost of Sales and Gross Profit

Year Ended Change

(dollars in thousands)

The increase in the gross amounts of cost of sales and gross profit from 2021 to 2022 was primarily due to the factors mentioned in the commentary above under the above heading, Net Sales.

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The 40 basis point increase in gross margin from 2021 to 2022 was primarily due to increased factory utilization and operating leverage, as well as accretive margins from our acquisition of IMG in November 2021, partially offset by increased materials, logistics, and labor costs observed throughout 2022. These cost increases were primarily due to investments in our capacity to service customer demand, inflationary macroeconomic conditions that put pressure on the cost of labor, materials and factory costs, and the impacts of certain supply chain challenges on logistics costs and factory efficiency.

Research and Development

Year Ended Change

(dollars in thousands)

The increase in research and development expenses from 2021 to 2022 was primarily due to increased employee-related expense of $2.6 million, inclusive of increased share-based compensation expense of $0.3 million, as we expand our engineering team to design and engineer next generation, high performance solutions for our customers, as well as increased program costs, including consulting, travel, materials, and fixtures costs, related to the development of our new products.

Selling, General, and Administrative

Year Ended Change

(dollars in thousands)

The increase in selling, general, and administrative expense from 2021 to 2022 was primarily due to (1) incremental costs from our acquisition of IMG in November 2021 of $11.6 million, primarily consisting of employee-related expenses; (2) increased employee-related expenses (excluding IMG) of $5.5 million, which includes $1.4 million in increased share-based compensation expense; (3) loss accruals recorded in the first and third quarters of 2022 relating to expected settlements of employment-related legal matters totaling $4.1 million; (4) increased consulting and professional fees of $2.1 million; (5) increased depreciation expense and amortization of capitalized cloud-computing implementation costs of $1.1 million; (6) increased IT, software, and related services costs of $0.7 million; (7) increased travel costs of $0.6 million; and (8) increased occupancy-related costs of $0.5 million; partially offset by (9) reduced transaction costs associated with our acquisition of IMG of $4.1 million.

Amortization of Intangible Assets

Year Ended Change

(dollars in thousands)

The increase in amortization expense from 2021 to 2022 was primarily due to incremental amortization expense from intangible assets acquired in connection with our acquisition of IMG, partially offset by reduced amortization expense from certain intangible assets becoming fully amortized in the fourth quarter of 2021 and the first quarter of 2022.

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Interest Expense, Net

Year Ended Change

(dollars in thousands)

Weighted average borrowing rate 3.37 % 2.74 % + 63 bps

The increase in interest expense, net from 2021 to 2022 was due to a $116.0 million increase in our average amount borrowed during the year and a 63 basis point increase in our weighted average borrowing rate.

Our average amount borrowed was primarily the result of drawing $130.0 million on our revolving credit facility in November 2021 to partially fund our acquisition of IMG. The year-over-year increase in our weighted average borrowing rate was primarily due to higher overall prevailing short-term borrowing rates in the second half of 2022 compared to 2021, partially offset by a lower overall applicable margin following the amendment and restatement of our credit agreement in October 2021.

Other Expense (Income), Net

Year Ended Change

(dollars in thousands)

Other expense (income), net $ (563 ) $ 807 $ (1,370 ) n/m

The change in other expense (income), net from 2021 to 2022 was primarily due to currency exchange rate fluctuations during the year, reflecting an overall strengthening U.S. dollar against local currency payables of our foreign operations.

Income Tax Expense

Year Ended Change

(dollars in thousands)

Effective income tax rate 3.4 % 3.9 % - 50 bps

The decrease in income tax expense from 2021 to 2022 was primarily due to decreased taxable income in the U.S., partially offset by reduced benefits from share-based compensation activity. The reduction in benefits from share-based compensation activity was primarily due to RSU awards vesting in 2022 at lower fair values relative to their grant-date fair values compared to 2021, in which RSU awards vested at higher fair values relative to their grant-date fair values.

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Non-GAAP Financial Results

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, respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income, and net income; and (2) the tax impacts associated with these 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. Non-GAAP gross margin and non-GAAP operating margin are defined as non-GAAP gross profit and non-GAAP operating income, respectively, divided by net sales.

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

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

The following table presents our unaudited non‐GAAP gross profit and non-GAAP gross margin and a reconciliation from gross profit, the most comparable GAAP measure, for the periods indicated:

Year Ended

(dollars in thousands)

Non-GAAP adjustments:

Facility shutdown costs (1) — 2,611

Fair value adjustment to inventory from acquisitions (2) 2,492 1,652

U.S. GAAP gross margin 16.6 % 16.2 %

Non-GAAP gross margin 17.0 % 16.7 %

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The following table presents our unaudited non‐GAAP operating income and non-GAAP operating margin and a reconciliation from operating income, the most comparable GAAP measure, for the periods indicated:

Year Ended

(dollars in thousands)

Non-GAAP adjustments:

Facility shutdown costs (1) — 2,996

Settlement loss (2) 4,146 —

Fair value adjustment to inventory from acquisitions (3) 2,492 1,652

U.S. GAAP operating margin 6.7 % 7.4 %

Non-GAAP operating margin 9.8 % 10.7 %

The following table presents our unaudited non‐GAAP net income and non-GAAP diluted EPS and a reconciliation from net income, the most comparable GAAP measure, for the periods indicated:

Year Ended

(dollars in thousands, except per share amounts)

Non-GAAP adjustments:

Facility shutdown costs (1) — 2,996

Settlement loss (2) 4,146 —

Fair value adjustment to inventory from acquisitions (3) 2,492 1,652

Loss on extinguishment of debt (6) — 737

Tax adjustments related to non-GAAP adjustments (7) (7,848 ) (9,861 )

U.S. GAAP diluted EPS $ 2.51 $ 2.45

Non-GAAP diluted EPS $ 3.62 $ 3.37

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(7) Adjusts U.S. GAAP income tax expense for impact of our non-GAAP adjustments.

Liquidity and Capital Resources

The following section discusses our liquidity and capital resources, including our primary sources of liquidity and our material cash requirements. Our cash and cash equivalents are maintained in highly liquid and accessible accounts with no significant restrictions.

Material Cash Requirements

Our primary liquidity requirements arise from: (i) working capital requirements, including procurement of raw materials inventory for use in our factories and employee-related costs, (ii) business acquisitions, (iii) interest and principal payments under our credit facilities, (iv) research and development investments and capital expenditures, and (v) payment of income taxes. We have no significant long-term purchase commitments related to procuring raw materials inventory. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and are therefore subject to prevailing global macroeconomic conditions and financial, business, and other factors, some of which are beyond our control.

We believe that our cash and cash equivalents, the amounts available under our credit facilities, and our operating cash flow will be sufficient to fund our business and our current obligations for at least the next 12 months and beyond.

Sources and Conditions of Liquidity

Our ongoing sources of liquidity to fund our material cash requirements are primarily derived from: (i) sales to our customers and the related changes in our net operating assets and liabilities and (ii) proceeds from our credit facilities and equity offerings, when applicable.

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Summary of Cash Flows

We ended 2022 with cash and cash equivalents of $86.5 million, an increase of $11.0 million from 2021, which was primarily due to cash provided by operating activities of $31.5 million and net proceeds from our credit facilities of $7.5 million, partially offset by capital expenditures of $29.4 million.

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

Year Ended

(in thousands)

Our cash provided by operating activities of $31.5 million during the year ended December 30, 2022 consisted of net income of $72.8 million and net non-cash charges of $46.3 million, which consisted primarily of depreciation and amortization of $35.1 million and share-based compensation expense of $13.9 million, partially offset by an increase in our net operating assets and liabilities of $87.6 million. The increase in our net operating assets and liabilities was primarily due to a decrease in accounts payable of $50.2 million and an increase in inventories of $47.5 million, partially offset by a decrease in accounts receivable of $6.7 million.

Cash used in investing activities during 2022 primarily consisted of capital expenditures of $29.4 million.

Cash provided by financing activities during 2022 consisted of net proceeds from our credit facilities of $7.5 million and net proceeds from share-based compensation activity of $1.0 million.

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements upon adoption.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, including changes in currency exchange rates and interest rates.

Foreign Currency Exchange Risk

Substantially all of our sales arrangement with customers, and the significant majority of our arrangements with third-party suppliers, provide for pricing and payment in U.S. dollars and, therefore, are not subject to material exchange rate fluctuations. As a result, we do not expect foreign currency exchange rate fluctuations to have a material effect on our results of operations. However, increases in the value of the U.S. dollar relative to other currencies would make our products more expensive relative to competing products priced in such other currencies, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our foreign suppliers raising their prices in order to continue doing business with us.

We have certain operating expenses that are denominated in currencies of the countries in which our operations are located, and may be subject to fluctuations due to foreign currency exchange rates, particularly the Singapore dollar, Malaysian ringgit, British pound, euro, Korean won, and Mexican peso. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.

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Interest Rate Risk

We had total indebtedness of $302.5 million as of December 30, 2022, exclusive of $1.8 million in debt issuance costs, of which $7.5 million was payable within the next 12 months. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been, nor do we anticipate being exposed to, material risks due to changes in interest rates. As of December 30, 2022, the interest rate on our outstanding debt was based on the Bloomberg Short-Term Bank Yield Index, plus an applicable rate depending on our leverage ratio. A hypothetical 100 basis point change in the interest rate on our outstanding debt would have resulted in a $3.0 million change to interest expense on an annualized basis.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information required to be filed under this Item 8 are presented beginning on page F‐1 in Part IV, Item 15 of this annual report on Form 10‐K and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (the certifying officers), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‐15(e) and 15d‐15(e) under the Securities and Exchange Act, as amended (“the Exchange Act”)) as of December 30, 2022. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on this evaluation, our certifying officers concluded that, because of the material weakness in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 30, 2022.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a‐15(f) and 15d‐15(f) under the Exchange Act). With the participation of our certifying officers, our management, under the oversight of our Board of Directors, evaluated the effectiveness of our internal control over financial reporting as of December 30, 2022, using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).

Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of December 30, 2022 due to the material weakness in internal control over financial reporting, described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The identified material weakness related to ineffective information technology general controls (“ITGCs”) in the areas of user access and program change management over an information technology system (“IT System”) that supports our financial reporting process. We did not have resources within the organization with sufficient levels of information technology knowledge and did not perform risk assessment surrounding the IT System to adequately understand how areas of user access and program change management function within the IT System in order to design and operate ITGCs sufficient to mitigate the identified risks. Our automated and manual business process controls that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results.

Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this Annual Report on Form 10‐K, issued an adverse opinion on the effectiveness of our internal control over financial reporting. KPMG LLP’s report appears on page F-3 of this Annual Report on Form 10‐K.

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Remediation

Management is taking steps to remediate the ITGC deficiency and will continue to take measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include enhancing the existing IT compliance function with resources that have the experience and skillset to understand relevant risks to the IT system in order to develop processes and controls to respond to these risks.

Remediation Efforts Towards Prior Year Material Weaknesses

As discussed in our Annual Report on Form 10‐K filed for the year ended December 31, 2021, management had identified material weaknesses related to ineffective ITGCs in the areas of user access and program change management over certain IT Systems that support our financial reporting processes.

During 2022, we made progress towards remediation of the material weaknesses identified in the prior year. Specifically, management designed and documented ITGC processes and procedures over user access and change management controls and maintained evidence over the operation of these controls. While we have made progress on remediation plans, we require additional time to complete the design and implementation of our remediation plans and to demonstrate the effectiveness of our remediation efforts regarding user access and program change management.

The weakness will not be considered remediated until the applicable controls operate for a sufficient period-of-time and management has concluded, through testing, that the control objective is achieved and are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2023.

Changes in Internal Control Over Financial Reporting

Other than the material weakness identified during the quarter, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a‐15(f) or 15d‐15(f) of the Exchange Act) that occurred during the fourth quarter of December 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. If we cannot provide reliable financial information, our business, operating results, and share price could be negatively impacted.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

Code of Conduct

We have adopted a code of business ethics and conduct (the “Code of Conduct”) that applies to all employees, officers, and directors, including the principal executive officer, principal financial officer, and principal accounting officer. The Code of Conduct is available on our investor relations website at ir.ichorsystems.com. We intend to post all disclosures that are required by law or NASDAQ listing rules regarding any amendment to, or a waiver of, any provision of the Code of Conduct for the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to our Proxy Statement for our 2023 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 30, 2022.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as a part of this report:

(1) Financial Statements.

The following Consolidated Financial Statements are filed as part of this report under Item 8 – Financial Statements and Supplementary Data.

Consolidated Balance Sheets F‐4

Consolidated Statements of Operations F‐5

Consolidated Statements of Shareholders’ Equity F‐7

Consolidated Statements of Cash Flows F‐8

Notes to Consolidated Financial Statements F‐9

ITEM 16. FORM 10-K SUMMARY

Not applicable.

41

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Ichor Holdings, Ltd.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Ichor Holdings, Ltd. and subsidiaries (the Company) as of December 30, 2022 and December 31, 2021, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 30, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 30, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2023 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of excess and obsolete inventory

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company reported inventories of $283.7 million as of December 30, 2022, including an adjustment for excess and obsolete inventory of $17.5 million. The Company states its inventories at the lower of cost or net realizable value. The Company records an adjustment to the cost basis of inventory when evidence exists that the net realizable value of inventory is lower than its cost, which occurs when the Company has excess and/or obsolete inventory. The Company’s model to estimate excess and/or obsolete inventory is based on an analysis of existing inventory quantities on-hand compared to estimated future consumption. Future consumption is estimated based upon assumptions about how historical consumption, recent purchases, backlog and other factors indicate future consumption.

We identified the evaluation of excess and obsolete inventory as a critical audit matter. There was subjective auditor judgement in evaluating whether historical consumption and recent purchases reasonably indicate future consumption used by the Company in their determination that inventory is recorded at the lower of its cost or net realizable value.

F-1

The following are the primary procedures we performed to address the critical audit matter. We evaluated whether historical consumption and recent purchases reasonably indicate future consumption by (1) examining historical write-down trends; (2) inspecting publicly available industry and market information to assess relevant changes to the overall business environment; and (3) selected a sample of inventory items and for each selection we evaluated whether the historical data accurately supported the Company’s estimate of future consumption.

/s/ KPMG LLP

We have served as the Company’s auditor since 2011.

Portland, Oregon

February 24, 2023

F-2

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Ichor Holdings, Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Ichor Holdings, Ltd. and subsidiaries’ (the Company) internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 30, 2022 and December 31, 2021, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 30, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to ineffective information technology general controls (ITGCs) in the areas of user access and program change-management over a certain information technology (IT) system that supports the Company’s financial reporting processes has been identified and included in management’s assessment. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Portland, Oregon

February 24, 2023

F-3

ICHOR HOLDINGS, LTD.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

Assets

Current assets:

Prepaid expenses and other current assets 7,007 8,153

Liabilities and Shareholders’ Equity

Current liabilities:

Current portion of long-term debt 7,500 7,500

Current portion of lease liabilities 9,196 7,633

Lease liabilities, less current portion 31,828 22,354

Deferred tax liabilities, net 29 38

Other non-current liabilities 4,879 4,213

Shareholders’ equity:

See accompanying notes to consolidated financial statements.

F-4

ICHOR HOLDINGS, LTD.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

Year Ended

Operating expenses:

Net income per share:

Shares used to compute net income per share:

See accompanying notes to consolidated financial statements.

F-5

ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity

(dollars in thousands)

Additional Total

Ordinary Shares Paid-In Treasury Shares Retained Shareholders'

Shares Amount Capital Shares Amount Earnings Equity

Ordinary shares issued from employee share purchase plan 33,188 — 727 — — — 727

Share-based compensation expense — — 9,875 — — — 9,875

Share-based compensation expense — — 11,473 — — — 11,473

Ordinary shares issued from exercise of stock options 89,045 — 1,937 — — — 1,937

Ordinary shares issued from employee share purchase plan 42,065 — 929 — — — 929

Share-based compensation expense — — 13,924 — — — 13,924

See accompanying notes to consolidated financial statements.

F-7

ICHOR HOLDINGS, LTD.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended

Cash flows from operating activities:

Amortization of debt issuance costs 465 883 968

(Gain) loss on sale of asset disposal group — (504 ) 3,575

Loss on extinguishment of debt — 737 —

Changes in operating assets and liabilities, net of acquisitions:

Cash flows from investing activities:

Cash paid for acquisitions, net of cash acquired 500 (268,766 ) (5,035 )

Purchase of marketable securities — (115,197 ) —

Proceeds from maturities and sales of marketable securities — 114,713 —

Proceeds from sale of property and equipment — 504 739

Cash flows from financing activities:

Issuance of ordinary shares, net of fees — — 139,372

Debt issuance and modification costs — (1,852 ) —

Repayments on revolving credit facility (10,000 ) (41,753 ) —

Proceeds from term loan — 94,175 —

Supplemental disclosures of cash flow information:

Cash paid during the period for taxes, net of refunds $ 3,285 $ 5,642 $ 250

Supplemental disclosures of non-cash activities:

Capital expenditures included in accounts payable $ 1,543 $ 930 $ 369

See accompanying notes to consolidated financial statements.

F-8

ICHOR HOLDINGS, LTD.

Notes to Financial Statements

(dollar figures in tables in thousands, except per share data)

Note 1 – Organization and Summary of Significant Accounting Policies

Organization and Operations of the Company

Ichor Holdings, Ltd. and Subsidiaries (the “we”, “us”, “our”, “Company”) designs, develops, manufactures, and distributes gas and liquid delivery subsystems and components purchased by capital equipment manufacturers for use in the semiconductor markets. We are headquartered in Fremont, California and have operations in the United States, the United Kingdom, Singapore, Malaysia, Korea, and Mexico.

On December 30, 2011, Ichor Systems Holdings, LLC consummated a sales transaction with Icicle Acquisition Holdings, LLC, a Delaware limited liability company. Shortly after consummation of the sale transaction, Icicle Acquisition Holdings, LLC changed its name to Ichor Holdings, LLC.

In March 2012, Ichor Holdings, LLC completed a reorganization of its legal structure, forming Ichor Holdings, Ltd., a Cayman Islands entity. Ichor Holdings, Ltd. is now the reporting entity and the ultimate parent company of the operating entities.

Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All dollar figures presented in tables in the notes to consolidated financial statements are in thousands, except per share amounts.

Year End

We use a 52‐ or 53‐week fiscal year ending on the last Friday in December. The years ended December 30, 2022, December 31, 2021, and December 25, 2020 were 52 weeks, 53 weeks, and 52 weeks, respectively. All references to 2022, 2021, and 2020 are references to the fiscal years then ended.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods presented. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from the estimates made by management. Significant estimates include inventory valuation, uncertain tax positions, fair value assigned to stock options granted, and impairment analyses for both definite‐lived intangible assets and goodwill.

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of deposits and financial instruments which are readily convertible into cash and have original maturities of 90 days or less at the time of acquisition. Marketable securities consist primarily of highly liquid investments with maturities of greater than 90 days when purchased. We classify our marketable securities as available-for-sale and, accordingly, report them at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss). Any unrealized losses which are considered to be other-than-temporary are recorded in other income (expense), net. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in other income (expense), net.

Available-for-sale investments are subject to a periodic impairment review. If an available-for-sale debt security’s fair value is less than its amortized cost basis, then we evaluate whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses. Unrealized gains and losses not attributable to credit losses are included, net of tax, in accumulated other comprehensive income (loss). We have not recorded an allowance for credit losses in 2022 or 2021.

F-9

Revenue Recognition

We recognize revenue when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. This amount is recorded as net sales in our consolidated statements of operations.

Transaction price – In most of our contracts, prices are generally determined by a customer-issued purchase order and generally remain fixed over the duration of the contract. Certain contracts contain variable consideration, including early-payment discounts and rebates. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal will not occur. Variable consideration estimates are updated at each reporting date. Historically, we have not incurred significant costs to obtain a contract. All amounts billed to a customer relating to shipping and handling are classified as net sales, while all costs incurred by us for shipping and handling are classified as cost of sales.

Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within twelve months. Product sales are recognized at a point-in-time, generally upon delivery, as such term is defined within the contract, as that is when control of the promised good has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under ASC 460, Guarantees, and not as a separate performance obligation.

Contract balances – Accounts receivable represents our unconditional right to receive consideration from our customers. Accounts receivable are carried at invoice price less an estimate for doubtful accounts and estimated payment discounts. Payment terms vary by customer but are generally due within 15–60 days. Historically, we have not incurred significant payment issues with our customers. We had no significant contract assets or liabilities on our consolidated balance sheets in any of the periods presented.

Commitments and Contingencies

We are periodically involved in legal actions and claims that arise as a result of events that occur in the normal course of operations. The ultimate resolution of these actions is not expected to have a material adverse effect on our financial position or results of operations.

Concentrations

Financial instruments that subject us to credit risk consist of accounts receivable, accounts payable, and long-term debt. At December 30, 2022 and December 31, 2021, three and two customers represented, in the aggregate, approximately 70% and 60%, respectively, of the balance of accounts receivable.

We establish an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends, and other information. We require collateral, typically cash, in the normal course of business if customers do not meet the criteria established for offering credit. If the financial condition of our customers were to deteriorate and result in an impaired ability to make payments, additions to the allowance may be required. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded to income when received. Activity and balances related to our allowance for doubtful accounts was not significant during any period presented.

We use qualified manufacturers to supply many components and subassemblies of our products. We obtain the majority of our components from a limited group of suppliers. A majority of the purchased components used in our products are customer specified. An interruption in the supply of a particular component would have a temporary adverse impact on our operating results.

We maintain cash balances at both United States-based and foreign-based commercial banks. Cash balances in the United States exceed amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). The majority of the cash maintained in foreign-based commercial banks is insured by the government where the foreign banking institutions are based. Cash held in foreign-based commercial banks totaled $48.4 million and $41.5 million at December 30, 2022 and December 31, 2021, respectively, and at times exceeds insured amounts. No losses have been incurred as of December 30, 2022 or December 31, 2021 for amounts exceeding the insured limits.

F-10

Fair Value Measurements

We estimate the fair value of financial assets and liabilities based upon comparison of such assets and liabilities to the current market values for instruments of a similar nature and degree of risk. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

There were no changes to our valuation techniques during 2022. We estimate the recorded value of our financial assets and liabilities approximates fair value as of December 30, 2022 and December 31, 2021.

We estimate the value of acquired intangible assets, on a nonrecurring basis, based on an income approach utilizing discounted cash flows. Under this approach, we estimate the future cash flows from our asset groups and discount the income stream to its present value to arrive at fair value. Future cash flows are based on recently prepared operating forecasts. Operating forecasts and cash flows include, among other things, revenue growth rates that are calculated based on management’s forecasted sales projections. A discount rate is utilized to convert the forecasted cash flows to their present value equivalent. The discount rate applied to the future cash flows includes a subject-company risk premium, an equity market risk premium, a beta, and a risk-free rate. As this approach contains unobservable inputs, the measurement of fair value for intangible assets is classified as Level 3.

Inventories

Inventories are stated at the lower of cost or net realizable value. The majority of our inventories are valued on a standard cost basis, which approximates actual costs on a first-in, first-out basis. The remainder of our inventories are valued on an average cost basis, which approximates actual costs on a first-in, first-out basis. Quarterly, we assess the value of our inventory and periodically write it down for excess quantities or obsolescence to its estimated net realizable value. This assessment is based on estimated future consumption compared to inventory quantities on-hand. The estimate for future consumption is based on how assumptions of historical consumption, recency of purchases, backlog, and other factors indicate future consumption. Once the value of inventory is adjusted, the original cost of our inventory, less the write-down, represents its new cost basis.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives:

Estimated useful lives of property & equipment

Machinery 5-10 years

Leasehold improvements 10 years

Computer software, hardware, and equipment 3-5 years

Office furniture, fixtures, and equipment 5-7 years

Vehicles 5 years

Maintenance and repairs that neither add material value to the asset nor appreciably prolong its useful life are charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in selling, general, and administrative expenses on the consolidated statements of operations.

F-11

Leases

We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. If we determine the arrangement is a lease, or contains a lease, at lease inception, we then determine whether the lease is an operating lease or a finance lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is generally consistent with the interest rate we pay on borrowings under our credit facilities, as this rate approximates our collateralized borrowing capabilities over a similar term of lease payments. We utilize the consolidated group incremental borrowing rate for all leases, as we have centralized treasury operations. We have elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. We have elected not to separate lease and non-lease components for any class of underlying asset.

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset (or asset group) may not be recoverable. In analyzing potential impairments, projections of future cash flows from the asset group are used to estimate fair value. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset group, a loss is recognized for the difference between the estimated fair value and the carrying value of the asset group. The projections are based on assumptions, judgments, and estimates of revenue growth rates for the related business; anticipated future economic, regulatory, and political conditions; the assignment of discount rates relative to risk; and estimates of terminal values. During 2022, 2021, and 2020, we did not identify any triggering events that would indicate impairment.

Intangible Assets

We account for intangible assets that have a definite life and are amortized on a basis consistent with their expected cash flows over the following estimated useful lives:

Estimated useful lives of intangible assets

Trademarks 10 years

Customer relationships 6-10 years

Developed technology 7-10 years

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. We first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying a quantitative goodwill impairment test. Under the quantitative test, the fair value of the reporting unit is compared to its carrying value and an impairment loss is recognized for any excess of carrying amount over the reporting unit’s fair value. Fair value of the reporting unit is determined using a discounted cash flow analysis. For purposes of testing goodwill for impairment, we have concluded that we operate as one reporting unit.

We performed a qualitative goodwill assessment at December 30, 2022 and December 31, 2021. This assessment indicated that it was more likely than not our reporting unit’s fair value exceeded its carrying value.

Research and Development Costs

Research and development costs are expensed as incurred.

F-12

Income Taxes

We recognize deferred income taxes using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense for the current year differs from the statutory rate primarily as a result of the impact of foreign operations and discrete tax benefits recorded in connection with our historical acquisitions and stock option exercises.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in our consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. We recognize interest and penalties as a component of income tax expense.

Foreign Operations

The functional currency of our international operations is the U.S. dollar. Transactions denominated in currencies other than the functional currency generate foreign exchange gains and losses that are included in other expense (income), net on our consolidated statements of operations. Substantially all of our sales contracts, and most of our agreements with third-party suppliers, provide for pricing and payment in U.S. dollars. Accordingly, these transactions are not subject to material exchange rate fluctuations.

Accounting Pronouncements Recently Issued

In October 2021, the FASB issued ASU No. 2021‐08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. This ASU is currently not expected to have a material impact on our consolidated financial statements.

F-13

Note 2 – Acquisitions

IMG Companies, LLC

On November 19, 2021 we completed the acquisition, via merger, of IMG Companies, LLC and its subsidiaries (“IMG”), a California-based precision machining, specialty joining, and plating company for an aggregate purchase price of $269.5 million. IMG provides us increased capacity and capabilities in our precision machining business and expands our served customer base with new component and service offerings.

The following table presents the purchase price allocation.

Cash acquired $ 1,234

Accounts receivable 8,559

Prepaid expenses and other current assets 579

Property and equipment 33,067

Operating lease right-of-use assets 14,509

Accounts payable (3,853 )

Accrued expenses (5,620 )

Other current liabilities (2,109 )

Lease liabilities (14,509 )

Total acquisition consideration $ 269,500

We allocated $62.4 million to IMG’s customer relationships and $2.6 million to IMG’s order backlog with weighted average amortization periods of 10 years and 6 months, respectively. Goodwill recognized from the acquisition was primarily attributed to an assembled workforce and expected synergies. In connection with the acquisition, we incurred transaction costs of $0.2 million and $4.4 million in 2022 and 2021, respectively. The fair value adjustment to inventory as part of our purchase price allocation resulted in charges to cost of sales of $2.5 million and $1.4 million during 2022 and 2021, respectively. Total acquisition consideration reflects a $0.5 million reduction for a working capital adjustment that was finalized in 2022, prior to the end of the measurement period.

Our consolidated statement of operations for 2021 includes approximately 6 weeks operating activity of IMG, including sales of $7.3 million.

The following unaudited pro forma consolidated results of operations assume the acquisition was completed on December 26, 2020, the beginning of the earliest period presented. Pro forma adjustments are primarily comprised of preliminary estimates of amortization expense related to acquired intangible assets, incremental interest expense from increased borrowings to fund the acquisition and the elimination of IMG’s historical interest expense, elimination of IMG’s non-recurring management expenses, elimination of a gain on forgiveness of debt, acquired inventory fair value charges, the related income tax effects, and other insignificant management adjustments. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved or of results that may occur in the future.

Year Ended

Net income per share:

Nogales, Mexico Precision Machining Acquisition

On December 1, 2020, we acquired certain operating assets and assumed the operations of a precision machining operation in Nogales, Mexico, which was considered a business combination under ASC 805 – Business Combinations, for an aggregate purchase of $5.0 million. The acquisition adds to our precision machined component manufacturing capacity. In connection with the acquisition, we recorded $2.0 million in tangible operating assets, a $1.2 million customer relationship intangible asset, which will be amortized of a period of 6 years, and $1.9 million in goodwill.

F-14

Note 3 – Inventories

Inventories consist of the following:

The following table presents changes to our excess and obsolete adjustment:

Excess and obsolete adjustment

Charge to cost of sales (4,649 )

Disposition of inventory (276 )

Charge to cost of sales (1,942 )

Disposition of inventory 633

Charge to cost of sales (4,981 )

Disposition of inventory 1,489

Note 4 – Property and Equipment

Property and equipment consist of the following:

Computer software, hardware, and equipment 9,664 8,031

Office furniture, fixtures, and equipment 1,337 1,168

Total property and equipment, net $ 98,055 $ 85,204

Depreciation expense for 2022, 2021, and 2020 was $17.2 million, $11.1 million, and $10.9 million, respectively.

Cloud Computing Implementation Costs

We capitalize implementation costs associated with hosting arrangement that are service contracts. These costs are recorded to prepaid expenses or other noncurrent assets. To-date, these costs are those incurred to implement a new company-wide ERP system. The balance of capitalized cloud computing implementation costs, net of accumulated amortization, was $8.1 million and $11.6 million as of December 30, 2022 and December 31, 2021, respectively, and is included in other assets on our consolidated balance sheets. The related amortization expense was $0.9 million and $0.3 million during 2022 and 2021, respectively, and is included in selling, general, and administrative expense on our consolidated statements of operations.

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Note 5 – Intangible Assets and Goodwill

Definite-lived intangible assets consist of the following:

Future projected annual amortization expense consists of the following:

Future amortization expense

The following tables present the changes to goodwill:

Goodwill

Acquisitions (500 )

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Note 6 – Leases

We lease facilities under various non-cancellable operating leases expiring through 2031. In addition to base rental payments, we are generally responsible for our proportionate share of operating expenses, including facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities. As of December 30, 2022, we had no operating leases executed for which the rental period had not yet commenced.

The components of lease expense are as follows:

Year Ended

Supplemental cash flow information related to leases is as follows:

Year Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 8,164 $ 5,477 $ 5,574

Supplemental balance sheet information related to leases is as follows:

Weighted-average remaining lease term of operating leases 5.3 years 5.8 years

Weighted-average discount rate of operating leases 3.0% 2.4%

Future minimum lease payments under non-cancellable leases as of December 30, 2022 are as follows:

Total future minimum lease payments 44,216

Less imputed interest (3,192 )

Total lease liabilities $ 41,024

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Note 7 – Income Taxes

Income before tax was as follows:

Year Ended

Significant components of income tax expense (benefit) consist of the following:

Year Ended

Current:

Deferred:

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense (benefit) consist of the following:

Year Ended

Effective rate reconciliation:

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Deferred income tax assets and liabilities consist of the following:

Deferred tax assets:

Net operating loss carryforwards 528 816

Capitalized research expenses 3,746 —

Valuation allowance (507 ) (556 )

Deferred tax liabilities:

Property, plant and equipment (7,091 ) (5,928 )

Operating lease right-of-use assets (10,122 ) (7,409 )

Other liabilities (277 ) (129 )

At December 30, 2022, we had federal, state, and foreign net operating loss carryforwards of zero, $2.1 million, and $1.7 million respectively. The state and foreign net operating loss carryforwards, if not utilized, will begin to expire in 2032, and 2029, respectively. At December 30, 2022, we had federal research and development credits of $0.2 million. The federal research and development credits, if not utilized, will begin to expire in 2042.

We have determined the amount of our valuation allowance based on our estimates of taxable income by jurisdiction in which we operate over the periods in which the related deferred tax assets will be recoverable. As of December 30, 2022, we believe it is more-likely-than-not that we will realize our deferred tax assets, with the exception of certain state and foreign net operating loss carryforwards we believe are not likely to be realized within the carryforward period.

In December 2017, the Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted. The 2017 Tax Act included a number of changes including a provision that required capitalization and amortization of research and development costs beginning in 2022. Prior to 2022 research and development costs could be either expensed or capitalized. Accordingly, we began capitalizing research and development costs in 2022.

We were granted a tax holiday for our Singapore operations that is effective through 2026. The net impact of the tax holiday in Singapore as compared to the Singapore statutory rate was a benefit of $11.7 million, $9.7 million, and $5.9 million during 2022, 2021, and 2020, respectively. Our income tax fluctuates based on the geographic mix of earnings and is calculated quarterly based on actual results pursuant to ASC Topic 740‐270.

As of December 30, 2022, we have recognized $3.6 million of unrecognized tax benefits in other non-current liabilities in our consolidated balance sheet. If recognized, $1.8 million of this amount would impact our effective tax rate. We expect a decrease of $0.1 million to the total amount of unrecognized tax benefits within the next twelve months.

Our ongoing practice is to recognize potential accrued interest and penalties related to unrecognized tax benefits within our statements of operations in income tax expense (benefit). At December 30, 2022, other non-current liabilities on our balance sheet included approximately zero and $0.7 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below.

F-19

The following table summarizes the activity related to our unrecognized tax benefits:

Unrecognized tax benefits

Increase related to current year tax positions 378

Increase related to prior year tax positions 484

Decrease in tax positions related to lapse of statute of limitations (232 )

Increase related to current year tax positions 597

Decrease in tax positions related to lapse of statute of limitations (92 )

Increase related to current year tax positions 689

Decrease in tax positions related to lapse of statute of limitations (89 )

We assert indefinite reinvestment of our U.S. and Netherlands unremitted earnings. With regard to these unremitted earnings, we have not, nor do we anticipate the need to repatriate funds from the U.S. to the Netherlands or from the Netherlands to the Cayman entity to satisfy liquidity needs. Determination of the amount of unrecognized withholding tax liability related to the indefinitely reinvested earnings is not practicable.

Our three major filing jurisdictions are the United States, Singapore, and Malaysia. We are no longer subject to U.S. Federal examination for tax years ending before 2017, to state examinations before 2018, or to foreign examinations before 2018. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward. At December 30, 2022, we were not under examination by a tax authority.

Note 8 – Employee Benefit Programs

401(k) Plan

We sponsor a 401(k) plan available to employees of our U.S.‐based subsidiaries. Participants may make salary deferral contributions not to exceed 50% of a participant’s annual compensation or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50% of a participant’s deferral, up to an annual maximum of 4% of a participant’s annual compensation. For 2022, 2021, and 2020, matching contributions were $3.0 million, $2.2 million, and $1.9 million, respectively.

F-20

Note 9 – Long-Term Debt

Long-term debt consists of the following:

Less unamortized debt issuance costs (1,782 ) (2,247 )

Total long-term debt, less current portion, net $ 293,218 $ 285,253

Maturities of long-term debt consist of the following:

The weighted average interest rate across our credit facilities was 3.37%, 2.74%, and 3.75% during 2022, 2021, and 2020, respectively.

On October 29, 2021, we entered into an amended and restated credit agreement, which includes a group of financial institutions as direct lenders underlying the agreement. The credit agreement includes a $150.0 million term loan facility and a $250.0 million revolving credit facility (together, “credit facilities”). Term loan payments of $1.9 million are due on a quarterly basis. The credit agreement matures on October 29, 2026.

Our credit agreement is secured by our tangible and intangible assets and includes customary representations, warranties, and covenants. We are required to maintain a minimum fixed charge coverage ratio of 1.25 : 1 and a maximum leverage ratio of 3.50 : 1.

Interest is charged at either the Base Rate or the Bloomberg Short-Term Bank Yield Index (“BSBY”) Rate (as such terms are defined in the credit agreement) at our option, plus an applicable margin. The Base Rate is equal to the higher of i) the Prime Rate, ii) the Federal Funds Rate plus 0.5%, or iii) the BSBY Rate plus 1.00%. The BSBY Rate is equal to BSBY for a particular tenor matching the respective interest period. The applicable margin on Base Rate and BSBY Rate loans is 0.375‐1.375% and 1.375‐2.375% per annum, respectively, depending on our leverage ratio, which is based on trailing 12‐month EBITDA, as defined in our credit agreement. We are also charged a commitment fee of 0.175%-0.350%, depending on our leverage ratio, on the unused portion of our revolving credit facility. Base Rate interest payments and commitment fees are due quarterly. BSBY rate interest payments are due on the last day of the applicable interest period, or quarterly for applicable interest periods longer than 3 months. At December 30, 2022, our credit facilities bore interest under the BSBY rate option of 5.97%.

Note 10 – Shareholders’ Equity

Public Offering of Shares

On December 14, 2020, we completed an underwritten public offering of 4.6 million ordinary shares with net proceeds of $139.4 million, after deducting the underwriting discount of $1.35 per share and incremental offering expenses of $0.5 million.

F-21

Note 11 – Share-Based Compensation

2016 Plan

In December 2016, we adopted the 2016 Omnibus Incentive Plan (“the 2016 Plan”). The 2016 Plan provides for grants of share‐based awards to employees, directors, and consultants. Under the 2016 Plan, 1,888,000 ordinary shares were reserved for issuance. The number of shares reserved for issuance under the 2016 Plan increases annually beginning in fiscal year 2018 by the lesser of (i) 2% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year or (ii) such amount determined by our Board of Directors. Awards may be in the form of share call options (“options”), restricted share units (“RSUs”), and other share‐based awards. Forfeited or expired awards are returned to the incentive plan pool for future grants.

Share‐based compensation expense across all plans for options, RSUs, and employee share purchase rights was $13.9 million, $11.5 million, and $9.9 million during 2022, 2021, and 2020, respectively.

Stock Options

Options are valued based on the Black-Scholes-Merton model on the date of grant. The risk-free interest rate is based on the U.S. Treasury rates in effect on the date of grant. Estimated volatility is based on the historical volatility of our ordinary shares. Options generally vest over 4 years, with 25% vesting on the first grant-date anniversary and the remaining vesting on a quarterly basis over the remaining 3 years. Options granted under the 2016 Plan have a contractual term of 7 years.

The table below sets forth the weighted average assumptions used to measure the fair value of options granted:

Year Ended

Weighted average expected term -- -- 5 years

Risk-free interest rate -- -- 0.5%

Dividend yield -- -- 0.0%

Volatility -- -- 61.5%

The following table summarizes option activity:

Number of Stock Options

Granted — $ —

Fair value information for options granted and the intrinsic value of options exercised are as follows:

Year Ended

Weighted average grant-date fair value of options granted -- -- $ 12.10

Total intrinsic value of options exercised $ 1,232 $ 11,859 $ 7,292

At December 30, 2022, total unrecognized share-based compensation expense relating to options was $1.1 million, with a weighted average remaining service period of 1.0 years.

F-22

Restricted Share Units

RSUs are valued based on the closing market price of our ordinary shares on the date of grant. RSUs that vest pursuant to a service condition generally vest over 4 years, with 25% vesting on the first grant-date anniversary and the remaining vesting on a quarterly basis over the remaining 3 years. RSUs that vest pursuant to a performance condition are generally earned over 3 years, depending on the achievement of certain financial and non-financial targets, and vest on or around the third grant-date anniversary. RSUs that vest pursuant to a market condition are valued based on a Monte Carlo simulation model and generally earned over 3 years based on a relative total shareholder return model and vest on or around the third grant-date anniversary. Upon vesting of RSUs, employees may elect to have shares withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares were never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows.

The following table summarizes RSU activity:

Number of Restricted Share Units

Fair value information for RSUs granted and vested is as follows:

Year Ended

Total grant-date fair value of shares vested $ 9,644 $ 5,871 $ 4,731

At December 30, 2022, total unrecognized share-based compensation expense relating to RSUs was $24.7 million, with a weighted average remaining service period of 2.7 years.

2017 ESPP

In May 2017, we adopted the 2017 Employee Stock Purchase Plan (the “2017 ESPP”). The 2017 ESPP grants employees the ability to designate a portion of their base-pay to purchase ordinary shares at a price equal to 85% of the fair market value of our ordinary shares on the first or last day of each 6 month purchase period. Purchase periods begin on January 1 or July 1 and end on June 30 or December 31, or the next business day if such date is not a business day. Shares are purchased on the last day of the purchase period. As of December 30, 2022, 2.2 million ordinary shares remained eligible for issuance under the 2017 ESPP.

The table below sets forth the weighted average assumptions used to measure the fair value of 2017 ESPP rights:

Year Ended

Weighted average expected term 0.5 years 0.5 years 0.5 years

Risk-free interest rate 1.4% 0.1% 0.7%

We recognize share-based compensation expense associated with the 2017 ESPP over the duration of the purchase period. We recognized $1.0 million, $0.6 million, and $0.4 million of share-based compensation expense associated with the 2017 ESPP during 2022, 2021, and 2020, respectively. At December 30, 2022, there was no unrecognized share-based compensation expense.

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Note 12 – Segment Information

Our Chief Operating Decision Maker, the Chief Executive Officer, reviews our results of operations on a consolidated level and executive staff is structured by function rather than by product category. Additionally, key resources, decisions, and assessment of performance are analyzed at a company‐wide level. Therefore, we operate in one operating segment.

Foreign operations are conducted primarily through our wholly owned subsidiaries in Singapore and Malaysia, and to a lesser degree, Scotland, Korea, and Mexico. Our principal markets include North America, Asia, and to a lesser degree, Europe.

The following table sets forth sales by geographic area, which represents sales to unaffiliated customers based upon the location to which the products were shipped:

Year Ended

The following table sets forth our two major customers, which comprised 79%, 85%, and 87% of net sales in 2022, 2021, and 2020, respectively:

Year Ended

Foreign long-lived assets, exclusive of deferred tax assets, were $52.8 million and $38.4 million at December 30, 2022 and December 31, 2021, respectively.

Note 13 – Earnings per Share

The following table sets forth the computation of our basic and diluted net income (loss) per share and a reconciliation of the numerator and denominator used in the calculation:

Year Ended

Numerator:

Denominator:

Earnings per share:

Net income:

F-24

EXHIBIT INDEX

The following exhibits are filed with this Form 10‐K or are incorporated herein by reference:

Exhibit Number Description of Exhibit

4.1* Description of Securities of Ichor Holdings, Ltd.

21.1* List of subsidiaries

23.1* Consent of KPMG LLP

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

** Furnished herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 24, 2023 ICHOR HOLDINGS, LTD.

By: /s/ Jeffrey S. Andreson

Jeffrey S. AndresonChief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Name and Title Date

/s/ Iain MacKenzie Lead Independent Director February 24, 2023

Iain MacKenzie