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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 2022 to 2021, refer to Part II, Item 7. in our 2022 Annual Report on Form 10‐K, which was filed with the SEC on February 24, 2023.

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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 13.4 % 17.0 %

Operating margin (1.3) % 6.7 %

Operating margin, non-GAAP 2.9 % 9.8 %

Diluted EPS, non-GAAP $ 0.42 $ 3.62

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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 2023, 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 2023, our top three customers were Applied Materials, Lam Research, and ASML, accounting for a combined 82% of sales. Our customers often require reduced prices or other pricing, quality, or delivery commitments as a condition to their purchasing from us or increasing their purchase volume, which can, among other things, result in reduced gross margins in order to maintain or expand our market share. Although we do not have any long-term contracts that require customers to place orders with us, Applied Materials, Lam Research, and ASML have been our customers for over a decade.

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.

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Macroeconomic Conditions

The semiconductor industry is cyclical in nature, and matching customer demand can be challenging based on a variety of factors, including market trends, supply chain shortages and related lead times, customer buying patterns, availability of skilled labor, and macroeconomic and other factors. During much of 2022, many of these factors impacted our ability to fulfill high customer demand; however, the industry entered a cyclical downturn in the fourth quarter of 2022, leading to reductions in spending on semiconductor capital equipment, the primary industry in which we operate, resulting in weakened customer demand in 2023. In particular, industry overcapacity and a number of macroeconomic factors may have contributed to this reduced spending environment, including persistent levels of high inflation, higher interest rates, supply chain disruptions, and other macroeconomic uncertainties. Additionally, increased export controls for semiconductor-related goods and services shipped to China and delayed business investment in electronic memory capacity had varying levels of unfavorable consequences to our business. To help mitigate these impacts and to better align our resources and cost structure with current and expected future levels of business, we initiated labor and other cost reduction initiatives starting in the fourth quarter of 2022 and continuing through 2023. As a result of these programs, we incurred severance charges of $1.1 million and $2.3 million in 2022 and 2023, respectively.

While challenging macroeconomic conditions have impacted and will continue to impact our business and customers in the near term, we believe demand for semiconductors, semiconductor capital equipment, and our products will return to growth, fueled by the long-term growing need for more semiconductor productive capacity and enhanced process technologies.

Components of Our Results of Operations

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

Sales

We generate sales primarily from the design, manufacture, and sale of subsystems and components 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. Sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the promised good has transferred.

Cost of Sales and Gross Profit

Cost of sales 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 variable cost structure, with fixed costs comprising a smaller percentage of cost of sales compared to variable costs. 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, during a cyclical downturn, fixed costs become a larger percentage of cost of sales, which could result in a decrease to gross margin. Additionally, since the gross margin on each of our products can differ, our overall gross margin as a percentage of our sales can change based on the mix of products we sell in any period.

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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.

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, professional fees, and overhead associated with our administrative staff. 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 as our business grows, due to an increase in employee-related costs, regulatory compliance, and accounting-related 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, Net

Interest expense, net of interest income on our cash deposits, 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.

Income Tax Expense

Income tax expense consists primarily of taxes on our taxable income related to our domestic and foreign operations, offset by the benefit of our tax holiday in Singapore, which is expected to continue through 2026. In 2023, the tax benefit resulting from our Singapore tax holiday, compared to the Singapore statutory tax rate, was approximately $5.0 million. During 2023, we recorded a valuation allowance against our U.S. state and federal deferred tax assets; therefore, we are unable to record income tax benefits related to our losses under GAAP losses. Income tax is also impacted by certain withholding taxes, stock option and restricted share unit (“RSU”) activity, and credit generation.

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Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. 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 2023, 2022, and 2021, we wrote down inventory determined to be excessive or obsolete by $9.8 million, $5.0 million, and $1.9 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 804 (563)

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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 2.5 1.5

Selling, general, and administrative 9.8 6.9

Amortization of intangible assets 1.8 1.4

Total operating expenses 14.1 9.8

Operating income (loss) (1.3) 6.7

Interest expense, net 2.4 0.9

Other expense (income), net 0.1 0.0

Income (loss) before income taxes (3.8) 5.9

Income tax expense 1.5 0.2

Net income (loss) (5.3) 5.7

Net Sales

Year Ended Change

(dollars in thousands)

The decrease in net sales from 2022 to 2023 was primarily due to reduced customer demand stemming from reduced spending within the semiconductor capital equipment industry. Further detail is provided above under the section entitled "Key Factors Affecting Our Business".

Net sales to U.S. customers decreased by $290.8 million in 2023 to $281.3 million. On a relative basis, net sales to U.S. customers as a percent of total net sales decreased from 44.7% in 2022 to 34.7% in 2023.

Net sales to international customers decreased by $178.1 million in 2023 to $529.8 million. On a relative basis, net sales to international customers as a percent of total net sales increased from 55.3% in 2022 to 65.3% in 2023.

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Cost of Sales and Gross Profit

Year Ended Change

(dollars in thousands)

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

The 390 basis point decrease in gross margin from 2022 to 2023 was primarily due to reduced factory utilization as a result of lower volume due to reduced customer demand, as well as a lower revenue mix from sales of components, due to excess inventory levels at our customers. Additionally, increased excess and obsolete inventory expense unfavorably impacted gross margin by approximately 60 basis points.

Research and Development

Year Ended Change

(dollars in thousands)

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

Selling, General, and Administrative

Year Ended Change

(dollars in thousands)

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

Amortization of Intangible Assets

Year Ended Change

(dollars in thousands)

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

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Interest Expense, Net

Year Ended Change

(dollars in thousands)

Weighted average borrowing rate 6.80 % 3.37 % + 343 bps

The increase in interest expense, net from 2022 to 2023 was due to increases in our weighted average borrowing rate, partially offset by decreases in our average amount borrowed. The increase in our weighted average borrowing rate was primarily due to an increase in risk-free, short-term borrowing rates as a result of tightening monetary policy, which impacts the Bloomberg Short Term Bank Yield ("BSBY"), the variable component of our borrowing rate under our credit facilities. The decreases in our average amount borrowed was primarily due to quarterly term loan payments and payments on our revolving credit facilities in the second, third, and fourth quarters of 2023.

Other Expense (Income), Net

Year Ended Change

(dollars in thousands)

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

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

Income Tax Expense

Year Ended Change

(dollars in thousands)

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

The increase in income tax expense from 2022 to 2023 was primarily due to recording a valuation allowance against our U.S. federal and state deferred tax assets, resulting in an $11.1 million charge to income tax expense during the second quarter of 2023. Because we recorded a valuation allowance against our U.S. state and federal deferred income taxes, we currently do not record tax benefits on our GAAP U.S. taxable losses.

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Non-GAAP Financial Results

Management uses certain 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 (loss), or net income (loss), respectively, excluding (1) amortization of intangible assets, share-based compensation expense, and discrete or infrequent charges and gains that are outside of normal business operations, including acquisition-related costs, contract and legal settlement gains and losses, facility shutdown costs, and severance costs associated with reduction-in-force programs, to the extent they are present in gross profit, operating income (loss), and net income (loss), respectively; and (2) the tax impacts associated with these non-GAAP adjustments, as well as non-recurring discrete tax items, including deferred tax asset valuation allowance changes. All non-GAAP adjustments are presented on a gross basis; the related income tax effects, including current and deferred income tax expense, are included in the adjustment line under the heading "Tax adjustments related to non-GAAP adjustments." Non-GAAP diluted earnings per shares ("EPS") is defined as non-GAAP net income divided by weighted average diluted ordinary shares outstanding during the period. Non-GAAP gross 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:

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

U.S. GAAP gross margin 12.7 % 16.6 %

Non-GAAP gross margin 13.4 % 17.0 %

(1)As part of the purchase price allocation of our acquisition of IMG in November 2021, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

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

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

Year Ended

(dollars in thousands)

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

Non-GAAP adjustments:

Settlement loss (1) — 4,146

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

Acquisition costs (3) — 296

U.S. GAAP operating margin (1.3) % 6.7 %

Non-GAAP operating margin 2.9 % 9.8 %

(1)During the first and third quarters of 2022, we recorded non-recurring loss accruals of $3.1 million and $1.0 million, respectively, relating to expected settlements of employment-related legal matters.

(2)As part of the purchase price allocations of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

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

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

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The following table presents our unaudited non‐GAAP net income and non-GAAP diluted EPS and a reconciliation from net income (loss), the most comparable GAAP measure, for the periods indicated. All non-GAAP adjustments are presented on a gross basis; the related income tax effects, including current and deferred income tax expense, are included in the adjustment line under the heading "Tax adjustments related to non-GAAP adjustments."

Year Ended

(dollars in thousands, except per share amounts)

Non-GAAP adjustments:

Settlement loss (1) — 4,146

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

Acquisition costs (3) — 296

Tax adjustments related to non-GAAP adjustments (5) 9,778 (7,848)

Tax expense from valuation allowance (6) 11,094 —

U.S. GAAP diluted EPS $ (1.47) $ 2.51

Non-GAAP diluted EPS $ 0.42 $ 3.62

(2)As part of the purchase price allocation of our acquisition of IMG, we recorded acquired-inventories at fair value, resulting in a fair value step-up. This amount represents the release of the step-up to cost of sales as acquired-inventories were sold.

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

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

(5)Adjusts U.S. GAAP income tax expense for the impact of our non-GAAP adjustments, which are presented on a gross basis, including the impacts of excluding share-based compensation and amortization of intangible assets. The adjustment reflects income tax benefits generated from U.S. taxable losses, on a non-GAAP basis, as we do not have a valuation allowance against our U.S. federal and state deferred tax assets on a non-GAAP basis. Refer to footnote 6 below.

(6)During the second quarter of 2023, we recorded a valuation allowance of $11.1 million against our U.S. federal and state deferred tax assets. The valuation allowance was recorded based on an assessment of available positive and negative evidence, including an estimate of being in a three-year cumulative loss position in the U.S. by the end of 2023, projections of future taxable income, and other quantitative and qualitative information. On a non-GAAP basis, we added back the expense associated with our recognition of a valuation allowance against our U.S. federal and state deferred tax assets, because recording a valuation allowance would not have been appropriate, as we were, and expect to remain, in a three-year cumulative U.S. income position on a non-GAAP basis.

Liquidity and Capital Resources

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.

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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.

Summary of Cash Flows

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

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 $57.6 million during 2023 consisted of net loss of $43.0 million, offset by net non-cash charges of $61.7 million, which consisted primarily of depreciation and amortization of $34.6 million, share-based compensation expense of $17.3 million, and deferred income taxes of $9.3 million, and a decrease in our net operating assets and liabilities of $38.9 million. Deferred taxes consists primarily of $11.1 million charge related to a valuation allowance recorded against our U.S. and state deferred tax assets in the second quarter of 2023.

The decrease in our net operating assets and liabilities of $38.9 million was primarily due to a decrease in accounts receivable and inventories of $69.6 million and $37.8 million, respectively, partially offset by a decrease in accounts payable and accrued and other liabilities of $51.0 million and $27.7 million, respectively.

Cash provided by operating activities was $31.5 million during 2022. The increase in cash provided by operating activities from 2022 to 2023 was primarily due to favorable changes in the balances of accounts receivable and inventories during 2023 compared to 2022, partially offset by less aggregate net income (loss) and net non-cash charges and unfavorable changes in the balance of accrued and other liabilities during 2023 compared to 2022.

Cash used in investing activities during 2023 and 2022 consisted of capital expenditures. The reduction in capital expenditures from 2023 to 2022 was due to reduced factory capacity expansion projects.

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Cash used in financing activities during 2023 consisted of net payments from our credit facilities of $52.5 million, partially offset by net proceeds from share-based compensation activity of $3.8 million. Cash provided by financing activities during 2022 consisted of net proceeds from our credit facilities of $7.5 million and net proceeds from share-based compensation activity of $1.0 million.The change in net payments on, and net proceeds from, our facilities relates to fluctuations in cash required for working capital purposes relative to the geographic distribution of available cash during the periods then ended. The increase in net proceeds from share-based compensation activity from 2022 to 2023 was due to increased stock option exercises.

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”).

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.

Interest Rate Risk

We had total indebtedness of $250.0 million as of December 29, 2023, exclusive of $1.3 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 29, 2023, the interest rate on our outstanding debt was based on the BSBY, 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 $2.5 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.

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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 Exchange Act) as of December 29, 2023. 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 our disclosure controls and procedures were effective as of December 29, 2023.

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 29, 2023, using the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Our internal control over financial reporting is designed to provide reasonable assurance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of the financial statements in accordance with GAAP and that our receipts and expenditures are being made in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 29, 2023.

Remediation of Prior Years' Material Weaknesses

As disclosed in Item 9A. – Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 30, 2022, we identified a material weakness related to 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.

As of December 29, 2023, management has completed the implementation of our remediation efforts of the material weakness described above. During the fiscal year ended December 29, 2023, we implemented our material weakness remediation plan that included: (i) modification of business and IT user roles to restrict system change access for key setup and configurations related to the operation of automated system controls; (ii) implementation of a technology tool to approve, monitor and review changes by business users to certain setup and maintenance activities which can have a material impact on the operation of automated system controls; and (iii) enhanced our internal control function with additional resources and developed and provided training for control owners and operators including the principles and requirements of the control activities.

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During the fourth quarter of 2023, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective. As a result we have concluded the material weakness has been remediated as of December 29, 2023. Our independent registered public accounting firm, KPMG, LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included in Item 8. - Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

Other than the changes in connection with our implementation of the material weakness remediation plan discussed above, 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 29, 2023 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

During the fourth quarter of 2023, none of our directors or officers (as defined in Section 16 of the Exchange Act), adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (each as defined in Item 408 of Regulation S-K).

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

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 2024 General Meeting to be filed with the SEC within 120 days after the close of the year ended December 29, 2023.

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 on our investor relations website 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

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

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBIT 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‐6

Consolidated Statements of Cash Flows F‐7

Notes to Consolidated Financial Statements F‐8

(2)Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

(3)Exhibits. Exhibits are listed on the Exhibit Index at the end of this report.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

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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 29, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2023, 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 29, 2023 and December 30, 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 2024 expressed an unqualified opinion 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 23, 2024

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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 29, 2023 and December 30, 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2023, 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 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 29, 2023, 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 29, 2023, 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 23, 2024 expressed an unqualified 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.

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Evaluation of excess and obsolete inventory

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company reported inventories of $245.9 million as of December 29, 2023, including an adjustment for excess and obsolete inventory of $28.4 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 reasonably indicates future consumption used by the Company in their determination that inventory is recorded at the lower of its cost or net realizable value.

The following are the primary procedures we performed to address the critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s excess and obsolete inventory process, including the determination of the assumptions used to predict future consumption of inventory. We evaluated whether historical consumption reasonably indicates 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 23, 2024

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ICHOR HOLDINGS, LTD.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

Assets

Current assets:

Prepaid expenses and other current assets 8,804 7,007

Liabilities and Shareholders’ Equity

Current liabilities:

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

Current portion of lease liabilities 9,463 9,196

Lease liabilities, less current portion 28,187 31,828

Deferred tax liabilities, net 1,169 29

Other non-current liabilities 4,303 4,879

Shareholders’ equity:

See accompanying notes to consolidated financial statements.

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ICHOR HOLDINGS, LTD.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

Year Ended

Operating expenses:

Net income (loss) per share

Shares used to compute Net income (loss) per share:

See accompanying notes to consolidated financial statements.

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ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity

(dollars in thousands)

Shares Amount Shares Amount

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

Share-based compensation expense — — 17,338 — — — 17,338

See accompanying notes to consolidated financial statements.

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ICHOR HOLDINGS, LTD.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended

Cash flows from operating activities:

Amortization of debt issuance costs 465 465 883

Loss on extinguishment of debt — — 737

Gain on sale of asset disposal group — — (504)

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)

Purchase of marketable securities — — (115,197)

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

Proceeds from sale of property and equipment — — 504

Cash flows from financing activities:

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

Borrowings on revolving credit facility — 25,000 137,591

Proceeds from term loan — — 94,175

Net cash provided by (used in) financing activities (48,651) 8,455 96,909

Supplemental disclosures of cash flow information:

Cash paid during the period for taxes, net of refunds $ 3,877 $ 3,285 $ 5,642

Supplemental disclosures of non-cash activities:

Capital expenditures included in accounts payable $ 625 $ 1,543 $ 930

See accompanying notes to consolidated financial statements.

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ICHOR HOLDINGS, LTD.

Notes to Consolidated 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 also provide precision-machined components, weldments, electron beam (“e‐beam”) and laser-welded components, precision vacuum and hydrogen brazing, and surface treatment technologies, and other proprietary products. 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 29, 2023, December 30, 2022, and December 31, 2021 were 52 weeks, 52 weeks, and 53 weeks, respectively. All references to 2023, 2022, and 2021 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, including valuation allowance on deferred tax assets, 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.

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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 2023, 2022, or 2021.

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 12 months. Product sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the promised good has transferred. 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 to 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 concentration risk consist of accounts receivable, accounts payable, and long-term debt. At December 29, 2023 and December 30, 2022, three customers represented, in the aggregate, approximately 63% and 70%, 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.

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We maintain cash balances at global systematically important banks ("G-SIBs") in both United States and internationally. 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 $59.7 million and $48.4 million at December 29, 2023 and December 30, 2022, respectively, and at times exceeds insured amounts. No losses have been incurred as of December 29, 2023 or December 30, 2022 for amounts exceeding the insured limits.

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:

▪Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date

▪Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability

▪Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date

There were no changes to our valuation techniques during 2023. We estimate the recorded value of our financial assets and liabilities approximates fair value as of December 29, 2023 and December 30, 2022.

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

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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.

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 2023, 2022, and 2021, we did not identify any triggering events that would indicate impairment.

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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

Customer relationships 6-10 years

Developed technology 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 29, 2023 and December 30, 2022. 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.

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.

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.

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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 November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the effect that the adoption of this ASU may have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU is intended to enhance the transparency, decision usefulness, and effectiveness of income tax disclosures. The ASU requires a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. The ASU also requires a public entity to provide a qualitative description of the states and local income tax category and the net amount of income taxes paid, disaggregated by federal, state, and foreign taxes as well as by individual jurisdictions. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. We are currently evaluating the effect that the adoption of this ASU may have on our consolidated financial statements.

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

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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 of operating activity of IMG, including sales of $7.3 million.

The following table is the unaudited pro forma consolidated results of operations. 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:

Note 3 – Inventories

Inventories consist of the following:

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

Excess and obsolete adjustment

Charge to cost of sales (1,942)

Disposition of inventory 633

Charge to cost of sales (4,981)

Disposition of inventory 1,489

Charge to cost of sales (9,784)

Disposition of inventory (1,113)

Note 4 – Property and Equipment

Property and equipment consist of the following:

Computer software, hardware, and equipment 10,316 9,664

Office furniture, fixtures, and equipment 1,320 1,337

Total property and equipment, net $ 92,755 $ 98,055

Depreciation expense for 2023, 2022, and 2021 was $18.8 million, $17.2 million, and $11.1 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 $8.1 million as of December 29, 2023 and December 30, 2022, respectively, and is included in other assets on our consolidated balance sheets. The related amortization expense was $1.1 million, $0.9 million, and $0.3 million during 2023, 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:

Futureamortizationexpense

The following tables present the changes to goodwill:

Goodwill

Acquisitions (500)

Acquisitions —

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 29, 2023, we had no operating leases executed for which the rental period had not yet commenced.

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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 $ 9,494 $ 8,164 $ 5,477

Supplemental balance sheet information related to leases is as follows:

Weighted-average remaining lease term of operating leases 4.6 years 5.3 years

Weighted-average discount rate of operating leases 3.4% 3.0%

Future minimum lease payments under non-cancellable leases as of December 29, 2023 are as follows:

Total future minimum lease payments 40,754

Less imputed interest (3,104)

Total lease liabilities $ 37,650

Note 7 – Income Taxes

Income (loss) before tax was as follows:

Year Ended

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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 8,092 528

Interest carryforwards 4,099 —

Capitalized research expenses 7,096 3,746

Deferred tax liabilities:

Property, plant and equipment (6,743) (7,091)

Operating lease right-of-use assets (9,149) (10,122)

At December 29, 2023, we had federal and state net operating loss carryforwards of $31.1 million, $25.1 million, respectively. The federal net operating losses may be carried forward indefinitely to offset up to 80% of taxable income in any given year. The state net operating loss carryforwards, if not utilized, will begin to expire in 2032. At December 29, 2023, we had federal research and development credits of $1.7 million, which, if not utilized, will begin to expire in 2028. At December 29, 2023, we had foreign tax credits of $1.3 million, which, if not utilized, will begin to expire in 2032.

Income tax expense for the current year differs from the statutory rate primarily as a result of the valuation allowance, impact of foreign operations and discrete tax benefits recorded in connection with our historical acquisitions and stock option exercises. We have determined the amount of our valuation allowance of $11.1 million 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 29, 2023, we determined it is not more-likely-than-not that our U.S. entities will generate sufficient taxable income to offset reversing deductible timing differences and to fully utilize carryforward tax attributes. Accordingly, we have recorded a valuation allowance against U.S. federal and state deferred tax assets, net of deferred tax liabilities related to indefinite-lived intangible assets for which no future realization can be expected.

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. Beginning with the 2022 tax year, the research and development costs have been capitalized according to these provisions.

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 $5.0 million, $11.7 million, and $9.7 million during 2023, 2022, and 2021, 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.

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As of December 29, 2023, we have recognized $3.1 million of unrecognized tax benefits in other non-current liabilities in our consolidated balance sheet. If recognized, $3.1 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 12 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. During 2023, we recognized a net decrease of approximately $0.2 million in potential interest and penalties associated with uncertain tax positions in the statements of operations. At December 29, 2023, other non-current liabilities on our balance sheet included approximately zero and $0.5 million of interest and penalties, respectively, associated with uncertain tax positions, which are excluded from the unrecognized tax benefits table below.

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

Unrecognizedtax benefits

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)

Increase related to current year tax positions 488

Decrease in tax positions related to lapse of statute of limitations (10)

Decrease in tax positions related to settlements (916)

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 2019, or to foreign examinations before 2019. 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 29, 2023, 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 2023, 2022, and 2021, matching contributions were $2.7 million, $3.0 million, and $2.2 million, respectively.

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Note 9 – Long-Term Debt

Long-term debt consists of the following:

Less unamortized debt issuance costs (1,317) (1,782)

Total long-term debt, less current portion, net $ 241,183 $ 293,218

Maturities of long-term debt consist of the following:

The weighted average interest rate across our credit facilities was 6.80%, 3.37%, and 2.74% during 2023, 2022, and 2021, 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 29, 2023, our credit facilities bore interest under the BSBY rate option of 7.58%.

Note 10 – Share-Based Compensation

2016 Plan

In December 30, 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.

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Share‐based compensation expense across all plans for options, RSUs, and employee share purchase rights was $17.3 million, $13.9 million, and $11.5 million during 2023, 2022, and 2021, 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 following table summarizes option activity:

Number of Stock Options

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

Year Ended

Total intrinsic value of options exercised $ 3,041 $ 1,232 $ 11,859

At December 29, 2023, total unrecognized share-based compensation expense relating to options was $0.1 million, with a weighted average remaining service period of 0.4 years.

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.

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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 $ 11,550 $ 9,644 $ 5,871

At December 29, 2023, total unrecognized share-based compensation expense relating to RSUs was $31.7 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 29, 2023, 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 5.1% 1.4% 0.1%

We recognize share-based compensation expense associated with the 2017 ESPP over the duration of the purchase period. We recognized $0.9 million, $1.0 million, and $0.6 million of share-based compensation expense associated with the 2017 ESPP during 2023, 2022, and 2021, respectively. At December 29, 2023, there was no unrecognized share-based compensation expense.

Note 11 – 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.

ICHR US Equity

ICHR · 10-K · period ended 2023-12-29

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

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

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

ICHR US Equity☆

ICHR · 10-K · period ended 2023-12-29

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

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

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

ICHR US Equity