Item 1A. Risk Factors
The following risk factors could materially and adversely affect the Company’s business, financial condition or results of operations and cause reputational harm and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.
Industry, Customer and Strategic Risks
The cyclical and highly volatile nature of the industries we serve could harm our operating results.
Our business depends in large part upon capital expenditures by manufacturers in the semiconductor and display industries, which in turn depend upon the current and anticipated market demand for such products. These industries (especially the semiconductor industry) have historically seen recurring periods of over-supply of products that have materially reduced the demand for both the capital equipment and the services required to manufacture such products. We likely will continue to experience fluctuations in customer orders through such cycles. Although some of our business, including the cleaning, coating and analytical services that support the semiconductor chip market, are less susceptible to such fluctuations, recurring slowdowns in the industries we serve have historically had adverse effects on our overall operating results. Demand shifts in these industries are rapid and difficult to predict, and we may not be able to anticipate or respond quickly enough to changes in demand.
Our revenues in periods of increasing demand depends, in part, upon our ability to: (i) timely mobilize our supply chain to maintain component and raw material supply at scale; (ii) optimize our design, as well as mobilize our engineering and
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manufacturing capacity in a timely manner; (iii) expand, as necessary, our manufacturing, cleaning, coating and analytical services capacity; and (iv) maintain our product and service quality as we increase production. We are currently anticipating a period of historically elevated demand, driven by growth in artificial intelligence. During periods of strong demand such as those currently anticipated, competition for critical components, raw materials, and skilled labor intensifies, which may constrain our ability to meet customer requirements. If we fail to timely respond to rapid increases in demand for our products and services, or to effectively manage the corresponding expansion of our manufacturing and service capacity, our customers may divert their purchases of products and services from us to our competitors.
Our ability to remain profitable and mitigate the impact on our business in periods of decreasing demand depends, in part, upon our ability to: (i) maintain the prices, quality and delivery cycles of our products and services while managing costs by optimizing our inventory levels, (ii) reduce or cancel orders from our suppliers, all without compromising our relationships with such suppliers; and (iii) continue to motivate our employees while reducing our fixed and variable costs through various initiatives, which may include reducing our workforce. A sharper-than-expected correction following a demand peak could exacerbate these challenges, particularly if we have meaningfully expanded our cost structure or inventory commitments in response to elevated near-term demand.
The limited visibility we have on the future needs of our customers, combined with the cyclical and volatile nature of the industries we serve, makes future revenues, results of operations and net cash flows difficult to estimate.
We rely on a small number of OEMs and IDMs for a large portion of our revenues, who could stop outsourcing critical subsystems or part cleaning, coating or analytical services, or give market share to our competitors.
A small number of OEM customers have historically accounted for a significant portion of our revenues, and we expect this trend to continue. Our top two customers accounted for 58.7%, 54.5% and 57.4% of our revenues for fiscal years 2025, 2024 and 2023, respectively. Because most of these customers are not contractually obligated to place any orders with us, the success of our Products business largely depends on these OEMs’ own discretion, which discretion is buttressed by the fact that the OEMs generally own, and are therefore free to license as they see fit, the designs and other intellectual property to the products we manufacture for them. And since most of these OEMs are already our customers, any lost revenue resulting from the loss, reduction, cancellation or delay in purchase orders by any one of these customers would be difficult to replace. In the past, we have seen decreases in our business volume for those customers who have taken the manufacturing of our products in-house, given market share to our competitors, or declared bankruptcy.
Our Services business provides parts cleaning, coating and analytical expertise to both IDM and OEM customers. Our IDM business is similarly concentrated in a small number of customers, and we compete with their in-house capabilities, those OEMs who perform cleaning as part of their service contracts, and other providers of cleaning, coating and analytical services. The OEM customer profile of our Services business has significant overlap with our Products business, and we similarly compete against other providers of cleaning, coating and analytical services. Because our cleaning and analytical processes are proprietary to us, our customers may need to go through a new qualification process if they decide to transition to a new service provider.
Consolidation among our customers, or a decision by any one or more of our customers to outsource all or most of manufacturing, assembly, cleaning, coating and analytical services work to a single OEM, may further concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on an even smaller number of customers.
Our customers also exert a significant amount of negotiating leverage over us, which may force us to accept lower operating margins, increased liability risks or changes in our operations in order to retain their business.
Due to their size and level of contribution to our revenue, our largest customers are able to exert significant pressure to seek various concessions in our commercial agreements and individual purchase orders. Our customers often require reduced prices, as well as commitments related to quality, manufacturing and delivery of goods, as a condition to placing purchase orders. This could, among other things, result in reduced operating margins or require capital or other expenditures in order to maintain or expand our market share. Further, many of our customers generally require us to indemnify against certain liabilities, which may include claims of losses by their own customers arising out of property damages, bodily injuries or deaths, or infringement of intellectual property rights by our products. Our potential liability for infringing upon a third party’s intellectual property is generally uncapped, and in some cases, we have self-insured against these risks, such that we do not have a third-party insurer to reimburse us against these losses. Our customers may also pressure us to make other concessions in order to preserve or expand our market share with them. For example, customers may prevent us from moving our manufacturing sites from higher-cost regions to lower-cost regions, all the while seeking price reductions. If we are unable to retain and expand our business on favorable commercial terms, our business will be adversely affected and we may be susceptible to increased liability risk.
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Acquisitions could result in operating and integration difficulties, dilution, margin deterioration, diversion of management’s attention, and other consequences that may materially impact our business.
We have made, and may in the future make, acquisitions of, or significant investments in, businesses that offer complementary products, services, technologies or market access. Our management regularly evaluates potential strategic transactions with its advisors and our Board of Directors in the ordinary course of business. We may not be successful in negotiating the terms or financing for potential acquisitions and our due diligence may fail to identify all of the problems, liabilities or other challenges associated with an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or customer retention issues. In addition, we may not be successful in effectively integrating the acquired business, product or technology into our existing business and operations. The areas where we face risks include:
•management of a larger, more complex and capital intensive combined business, including integrating supply and distribution channels, computer and accounting systems, and other aspects of operations;
•exposure to new operational risks, rules, regulations, worker expectations, customs and practices;
•inability to complete proposed transactions due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee;
•reduction of gross margins and pricing leverage due to the acquired company having the same customer base;
•failure to realize expected returns from acquired businesses;
•reduction in cash balances or increase in debt obligations to finance the acquisition, which may reduce the availability of cash flow for general corporate or other purposes;
•integration of the capabilities of the acquired businesses without reducing the quality of existing products;
•incorporation of different financial and reporting controls, processes, systems and technologies into our existing business environment;
•unforeseen liabilities, expenses, or other losses associated with the acquisitions for which we do not have recourse under their respective agreements;
•the risk of litigation or claims associated with a proposed or completed transaction;
•inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, or environmental, health and safety, anti-corruption, human resource or other policies or practices;
•performance shortfalls as a result of the diversion of management’s attention from the Company’s operations;
•cultural challenges associated with integrating employees from the acquired business into our organization, and incentivization and retention of employees from the businesses we acquire; and
•difficulties associated with the retention and transition of new customers and partners into our existing business.
If we fail to address these risks, we may not be able to realize the anticipated benefits of such acquisitions or investments and incur unanticipated liabilities and substantial costs, materially harming our business in the process.
Our acquisitions could also result in one or more of the following: dilutive issuances of our equity securities, additional debt, contingent liabilities, amortization expenses, impairment charges and restructuring charges, any of which could harm our financial condition. Also, due to prevailing conditions in the credit market and our existing leverage, the financing of any such acquisition may be difficult to obtain, and the terms of any such financing may not be favorable.
We are exposed to risks associated with volatility in the global economy.
We rely heavily on OEM customers for the success of our business. The success of OEMs’ business is, in turn, directly related to the success of IDMs and other chipmakers, whose customers are engaged in consumer-facing businesses. Much of our success, therefore, depends on consumer spending and capital expenditures by retail businesses. Uncertainty regarding the global economy may exacerbate negative trends in business and consumer spending, which may cause, and have caused in the past, our customers to scale back operations, reduce capital expenditures, exit businesses, move capacity to other manufacturers, in-source capacity or file for bankruptcy protection and potentially cease operations. Our customers may then be forced, and have been forced in the past, to push out, cancel or refrain from placing orders for our products or services. These conditions may also similarly affect, and have affected in the past, key suppliers, impairing their ability to timely deliver components or raw materials. We will then be forced to procure components or raw materials from higher-
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cost suppliers or reconfigure the design and manufacture of our products or services, which may eventually lead, and have led in the past, to our failure to fill customer orders. Recent inflationary trends have had, and could continue to have, a negative impact on many aspects of our cost structure.
We have established and, as circumstances may require, intend to expand our operations globally, which exposes us to risks associated with operating in foreign countries.
We generated approximately 75.9% and 73.0% of our revenues in international markets for fiscal years 2025 and 2024, respectively. Depending on market conditions, we intend to further expand our operations in Asia Pacific and EMEA. The carrying amount of our fixed assets in Asia Pacific and EMEA were $120.2 million and $83.0 million, respectively as of December 26, 2025, and $121.0 million and $84.5 million, respectively as of December 27, 2024.
We are exposed to political, economic, legal and other risks associated with operating in Asia and EMEA, including:
•foreign currency exchange fluctuations;
•political, civil, public health and economic instability, such as the one resulting from the conflict between Israel and Hamas-led groups that started in 2023;
•restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments, import/export restrictions and quotas, and customs duties and tariffs;
•uncertainty regarding social, political and trade policies in the United States and abroad;
•timing and availability of export licenses;
•disruptions due to developing domestic infrastructure in countries like China, including transportation and energy;
•difficulties in developing relationships with local suppliers, attracting new international customers, conducting due diligence with respect to business partners in certain international markets, collecting accounts receivables, and staffing and managing distant international subsidiaries and branch operations;
•the burden of complying with foreign and international laws and treaties;
•legal systems potentially subject to undue influence or corruption; and
•potentially adverse tax consequences, including restrictions on the repatriation of earnings to the United States.
Negative or uncertain global conditions could prevent us (and have prevented us in the past) from accurately forecasting demand for our products and services. In addition, a shift in the mix of orders from our customers away from low-cost markets to higher cost markets could adversely affect our operating margins.
Our operations in Asia Pacific and EMEA are subject to U.S. regulations governing equipment export. These laws are complex and require us to obtain export licenses, a failure of which could expose us to fines, penalties and export ban. The U.S. Department of Commerce continually updates and often expands the list of entities, to whom U.S. companies cannot sell certain products or provide certain services without a license from the Department of Commerce. These rules and regulatory changes could have material adverse impact on the result of our operations, and have changed our business forecast in the past.
Over the past several years, some foreign government authorities, including those in China and South Korea, have pursued economic reform policies by promoting local businesses and local economic activity. Without notice, these government authorities may continue or alter these policies to our detriment, including imposition of confiscatory taxation policies, new restrictions on currency conversion, and limitations on sources of supply.
We are subject to various laws and regulations of the countries where we conduct business, including laws and regulations relative to anti-corruption and anti-bribery, antitrust and competition, data privacy, and export regulations. These foreign laws and regulations are constantly evolving and may, in some cases, conflict with each other. Although our compliance policies against unethical business practices apply to all our employees and agents, any violation of these policies by a rogue employee or agent may expose us to enforcement actions under these laws and regulations.
Other changes in U.S. or international social, political, regulatory and economic conditions or laws and policies governing tax laws, foreign trade, manufacturing, and development and investment in the countries where we or our customers operate could also adversely affect our operating results and our business. International trade disputes could result, and have resulted in the past, in increases in tariffs and other trade restrictions and protectionist measures that could adversely impact our operations and reduce the competitiveness of our products relative to local and global competitors.
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We could be adversely affected by risks associated with joint ventures, including those in the Asian markets.
From time to time, we may seek to expand our business through investments in joint ventures with complementary businesses, technologies, services or products, in both new and existing market categories and geographic regions. Our investments in joint ventures are subject to a number of risks, including many of the same risks that we encounter in our acquisition activities. In particular, we participate in a joint venture with Cinos Co., Ltd. (“Cinos Korea”) in South Korea and Cinos Xi’an in China. The success of these joint ventures will continue to demand significant management and capital resources, and effective management of those risks inherent in overseas joint venture operations, including: protection of our intellectual property; economic, political and labor instability; language and cultural differences; contractual enforcement issues; and managing product development, operations and sales activities that are physically far removed from our headquarters and have historically been centralized with local management. In addition, from time to time in the future, our joint venture partners may have economic or business interests that are different from ours. If each joint venture business does not progress according to our plans and anticipated timing, our investment in the joint ventures may not be successful.
The industries in which we participate are highly competitive and rapidly evolving.
We face intense competition from subsystem and component manufacturers in the industries we serve. Increased competition could result, and has resulted in the past, in price reductions, reduced gross margins or loss of market share. Competitors may introduce new products in the markets currently being served by our products. These new products may have better performance, lower prices and achieve broader market acceptance than our products. Further, since our customers generally own the designs and other intellectual property to the products we manufacture on their behalf, we cannot prevent them from licensing such designs and other intellectual property to our competitors for the manufacture of such products. Similarly, while the cleaning and analytical processes we utilize are proprietary to us, OEMs are looking to increase their maintenance services and could create proprietary cleaning processes with competitors, limiting our ability to compete for future business.
Our competitors may have greater financial, technical, manufacturing and marketing resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the development, promotion, sale and support of their products and services, and reduce prices to increase market share. Moreover, there may be merger and acquisition activities among our competitors and potential competitors that may provide our competitors and potential competitors an advantage over us by enabling them to expand their product offerings and service capabilities to meet a broader range of customer needs. Further, if one of our customers develops or acquires the internal capability to develop and produce critical subsystems that we produce, or cleaning, coating and analytical services we provide, the loss of that customer could have a material adverse effect on our business, financial condition and operating results.
If our new products are not accepted by OEMs or other customers or if we are unable to obtain historical margins on our new products, our operating results would be adversely impacted.
We design, develop and market critical subsystems and proprietary cleaning, coating and analytical services to OEMs, IDMs and other customers. The introduction of new products and processes is inherently risky because it is difficult to foresee the adoption of new standards, coordinate our technical personnel and strategic relationships and win acceptance of new products by our customers. We may ultimately not be able to recoup design and development expenditures. For several quarters following their introduction, newly introduced products typically carry lower gross margins than existing products. If any of our new systems or subsystems are not successful in the market, or if we are unable to obtain gross margins on new products that are similar to the gross margins we have historically achieved, our business, operating results and financial condition could be adversely affected.
If we do not keep pace with developments in the industries we serve and with technological innovation generally, our products may not be competitive.
Rapid technological innovation in the markets we serve (for example, the recent proliferation of artificial intelligence) requires us to anticipate and respond quickly to evolving customer requirements and could render our current product or service offerings and technology obsolete. Technological innovations are inherently complex. We believe that our future success will depend upon our ability to timely design, engineer and manufacture products and services that meet the changing needs of our customers. If we are unable to integrate new technical specifications into competitive product and service designs, develop the technical capabilities necessary to manufacture new products or provide new services or make necessary modifications or enhancements to existing products or services, our business prospects could be harmed.
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The timely development of new or enhanced products and services requires us to:
•design innovative and performance-enhancing features to differentiate our products and services;
•identify emerging technological trends, including new standards for our products and services;
•accurately identify and design new products and services to meet market needs;
•timely and efficiently collaborate with OEMs and IDMs to design and develop products and services;
•timely ramp-up production of new products, especially new subsystems, at acceptable yields and costs;
•successfully manage development production cycles; and
•respond effectively to technological changes or product or service announcements by others.
We must achieve design wins to retain our existing customers and to obtain new customers.
New capital equipment typically has a lifespan of several years, and OEMs frequently specify which systems, subsystems, components and instruments are to be incorporated in their equipment. Once incorporated, the OEM will likely maintain that same composition of products for at least several months. IDMs typically establish cleaning, coating, and analytical services as they develop and qualify new chip designs for production. Once a cleaned or coated part has been qualified, the refurbishment processes used to clean or coat the qualified part will likely continue to be used. Accordingly, it is important that our products and services are designed into the new capital equipment and new chip designs (known as a “design win”), to retain our existing customers and to obtain new customers.
We incur technology development and sales expenses with no assurance that our products will ultimately be designed into an OEM’s capital equipment or into an IDM’s manufacturing process. Further, developing new customer relationships, as well as maintaining and increasing our market share with existing customers, requires a substantial investment of our sales, engineering and management resources without any assurance from prospective customers that they will place orders. We believe that OEMs and IDMs often consider long-term relationships in selecting and placing orders, which could mean we may have difficulty achieving design wins from OEMs and IDMs that are not our current customers.
We are exposed to risks related to the adoption and use of artificial intelligence
We are subject to various risks associated with the adoption and utilization of artificial intelligence (“AI”) technologies by both our company and our competitors. While we have implemented strict limitations and guidelines, we permit our employees to use certain AI capabilities in their job functions. The inherent complexity and rapid evolution of AI technology may hinder our ability to effectively implement these capabilities, potentially leading to significant costs without corresponding benefits to our business or customer value. Our AI implementations may result in errors or unintended outcomes due to algorithmic flaws, inadequate training data, or inherent biases, which could expose us to liability and reputational damage. Additionally, we face competitive risks if our adoption of AI or other machine learning technologies is not done timely or as effective as that of our competitors. AI technology also presents unique challenges related to data privacy, cybersecurity, and ethical considerations, which could impact our business operations. The regulatory landscape is continuously evolving, with new laws and regulations being proposed or enacted in various jurisdictions. Compliance with these diverse requirements could increase our operational costs, and any actual or perceived regulatory violations could subject us to enforcement actions, penalties, and reputational harm. The combined effect of these interrelated risks could materially and adversely affect our business operations, financial condition, and competitive position.
Operational Risks
Our dependence on our suppliers may prevent us from delivering an acceptable product on a timely basis.
For many of the components and raw materials we use in our products and services, we rely on both single-source and sole-source suppliers, many of whom have been specifically designated by our customers. If a supplier, who may not be under any long-term supply obligations, fails to provide the necessary volume of components or raw materials in a timely manner at acceptable prices and quality, we would be forced to identify and qualify alternative sources. The process of qualifying new suppliers for complex components and raw materials is lengthy and could delay our production or delivery of services. Fluid Solutions, for example, is susceptible to experiencing sharp price fluctuations in raw materials, which can significantly affect, and has affected in the past, its cost of revenue and could erode profitability and competitiveness. For example, one of our key suppliers was the target of a ransomware attack, which had a negative impact on our ability to procure the necessary volume of components to meet our projected production level.
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We may also experience difficulty in obtaining sufficient quantities of components and raw materials in times of growth in our business. In the past, we have experienced shortages in supplies of various components, such as mass flow controllers, valves and regulators, and certain prefabricated parts, such as sheet metal enclosures, used in the manufacture of our products. Some of the suppliers designated by our customers are also our competitors, which presents a special challenge for us to procure the components in sufficient quantity to meet the customer demand. If we, or our suppliers, are unable to procure sufficient quantities of supplies, components or raw materials, our customers could delay or cancel orders or service contracts.
The manufacturing of our products and the services we provide are highly complex, and if we are not able to manage our manufacturing and procurement process effectively, our business and operating results will suffer.
The manufacturing of our products is a highly complex process. The services we provide are also highly complex, and dependent upon procuring specialty materials necessary to correctly perform such complex services with precision. Both the manufacturing of our products and the services we provide involve the integration of multiple components and require effective management of our supply chain to meet our customers’ design-to-delivery cycle time requirements. Through the course of the manufacturing process, our customers may modify design and system configurations in response to changes in their own customers’ requirements. In order to respond to these modifications and deliver our products in a timely manner, we must effectively manage our manufacturing and procurement processes, the failure of which can lead to a loss of business and reputational damage. We may also be liable for certain damages under our agreements with our customers, if we or our suppliers fail to effectively or timely re-configure manufacturing processes or components in response to these modifications.
Incomplete or unsuccessful implementation and integration of a company-wide enterprise resource planning (“ERP”) system could adversely affect our operating results.
We are continuing to implement and integrate a company-wide ERP system. This process has been and continues to be complex and time-consuming and we expect to incur additional capital outlays and expenses. This ERP system will replace or interface with our existing operating and financial systems, which has been and is a major undertaking from a financial management and personnel perspective. Should the ERP system not be implemented or integrated successfully throughout all our business units on time and within budget, or if the system does not perform in a satisfactory manner, it could be disruptive and adversely affect our operations, including our ability to: (i) report accurate, timely and consistent financial results; (ii) purchase supplies, components and raw materials from our suppliers; and (iii) deliver products and services to customers on a timely basis and to collect our receivables from them. We have teams leading the implementation of the ERP system at most of our locations, and the integration of acquired entities onto our ERP platform. To the extent these teams or key individuals are not retained through the implementation process, the success of our implementation could be compromised and the expected benefits of the ERP system may not be realized.
We may identify material weaknesses in our internal control over financial reporting or otherwise fail to maintain effective internal controls, which could adversely affect our financial reporting, our reputation, operations, and stock price.
Maintaining effective internal controls over financial reporting is essential to providing reliable and timely financial reports and, together with adequate disclosure controls and procedures, detecting and preventing fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires both management and our independent registered public accounting firm to evaluate and report on our internal control over financial reporting. Designing, implementing, maintaining, and continuously improving our internal controls requires significant management attention and company resources. Failure to maintain existing or implement new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations.
Although we have successfully remediated the material weaknesses identified in our Annual Report on Form 10-K for the year ended December 27, 2024, there can be no assurance that additional material weaknesses will not be identified in the future. As our business grows and evolves, our control environment must adapt to changes in our operations, systems, transaction complexity, and regulatory requirements. Failure to identify risks, implement necessary control changes, or maintain existing controls could result in new control deficiencies. If we identify material weaknesses in the future, and are unable to remediate those material weaknesses, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could be adversely affected and could reduce the market’s confidence in our financial statements and harm our stock price.
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We are subject to order and shipment uncertainties and any significant reductions, cancellations or delays in customer orders could cause our revenue to decline and our operating results to suffer.
Forecasting our revenue can be challenging because we generally do not have a material backlog of unfilled orders and because of the short time frame within which we are often required to design, produce or deliver products to our customers. Much of our revenue depends on customer orders that we receive and fulfill in the same quarter. We generally do not have long-term purchase orders or contracts that contain minimum purchase commitments. Instead, we typically plan around non-binding volume forecasts we receive from our customers, and we sometimes order and build component inventory in advance of the receipt of actual customer orders. Customers may cancel order forecasts, change production quantities from forecasted volumes, or delay production for reasons beyond our control, for which we usually are not entitled to compensation. Reductions, cancellations or delays in forecasted orders could cause us to hold inventory longer than anticipated, which could reduce our gross profit, restrict our ability to fund our operations and cause us to incur unanticipated reductions or delays in revenue. Moreover, many of the products we manufacture are custom built for our customers and are therefore not fungible with products we sell to other customers. If we do not obtain orders as we anticipate, we could have excess component inventory for a customized product that we would not be able to sell to another customer, likely resulting in inventory write-offs. In addition, because many of our costs are fixed in the short term, we could experience, and have experienced in the past, deterioration in our gross profit and operating margins when our sales volume declines.
Any significant damage or loss of customer and supplier property held at our facilities could cause our operating results to suffer.
In connection with both our Products and Services businesses, we hold meaningful amounts of property owned by our customers and suppliers at our facilities. This includes customer components and assemblies across our product lines, as well as supplier-owned inventory and materials consigned to us for manufacturing or service operations. We face a number of risks related to safeguarding this third-party property, including the risk of mishandling or damaging customer parts, any of which could be materially harmful for our business.
The results of our operations, financial position and cash flows may suffer if we do not effectively manage our inventory.
Inventory is one of the largest assets on our balance sheet, representing 22.6% of our total assets as of December 26, 2025. Effective management of raw materials, work-in-process and finished goods is imperative to keep inventory costs down and maintain or improve gross margins, all the while meeting changing customer requirements.
The industries we serve have been highly cyclical, which makes accurately forecasting customers’ needs difficult. Although we seek to maintain sufficient inventory of materials to guard against interruptions in supply and meet our customers’ needs, we may experience shortages of certain key materials, particularly in times of high industry demand. We also often face long lead times from our suppliers, which may be longer than the lead times provided to us by our customers. If we underestimate customer demand or if such demand exceeds our manufacturing capacity or available raw materials, we may lose sales opportunities and market share and potentially damage our relationships with customers.
An overestimation of customer demand may result in allocation of resources for products that we may not be able to sell, and we may be forced to hold excess or obsolete inventory. Our products can become obsolete when customers change their specifications, or become excess inventory due to a decrease in demand. Furthermore, if market prices drop below the prices at which we value our inventory, we would need to take a charge for a reduction in inventory values in accordance with the applicable accounting rules. Any unexpected changes in demand or increases in manufacturing costs that cause us to take additional charges for un-saleable, obsolete or excess inventory, or to reduce inventory values, would adversely affect our results of operations.
We hold our inventory at various manufacturing sites around the globe and many of these sites have more than one warehouse. We rely upon our IT systems and internal controls to accurately and timely manage, store and replenish inventory, complete and track customer orders, coordinate sales activities across all of our products, and maintain and report vital data and information. A disruption in our IT systems or a failure of our internal controls could result, and have resulted in the past, in delays in receiving inventory and supplies, delays in filling customer orders, incorrect inventory counts, over or under stocking, and loss of inventory.
Our customers require our products to undergo a lengthy and expensive qualification process. Any delay or failure in this process could result in a material financial harm.
We have had to qualify as a supplier, and maintain that status, for each of our customers. This is often a lengthy process that normally involves customer inspection and approval of our engineering, documentation, manufacturing and quality
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control procedures before the customer will place volume orders. Such qualification requirements limit our ability to quickly add new customers to offset any loss of, or reduction in sales to, existing customers. Moreover, if we fail to maintain our status as a qualified supplier to any of our customers, such customer could cancel its orders or otherwise terminate its relationship with us.
Defects in our products or services could damage our reputation, decrease market acceptance of our products, release hazardous materials, and result in litigation, indemnification liability or unexpected warranty claims.
A number of factors, including design flaws, material and component failures, workmanship issues, contamination in the manufacturing, cleaning, coating or analytical environment, impurities in the materials or chemicals used, equipment failures, and unknown sensitivities to process conditions, such as temperature and humidity, may cause our products to contain undetected errors or defects. Problems with our products may:
•cause delays in product introductions and shipments for us or our customers;
•result in increased costs and diversion of development resources (for design modifications and others);
•cause us to incur increased charges due to unusable inventory;
•result in liability for the unintended release of hazardous materials through the defective products, which can cause serious injury or death;
•create indemnification and warranty claims for rework, replacement or other damages, which can be significant if our products have already been installed in a fabrication facility;
•decrease market acceptance of, or customer satisfaction with, our products; and
•result in lower yields for semiconductor manufacturers.
Our business may be adversely affected by IT disruptions, including by impairing our ability to effectively deliver our products or services, which could cause us to lose customers.
The manufacture and delivery of our products, the provision of our services and our financial reporting depend on the continuing operation of our technology infrastructure and systems, particularly our data center located in California. We face evolving and increasing cybersecurity threats, including ransomware attacks, malware, denial-of-service attacks, social engineering (including phishing), supply chain attacks, and other attempts to gain unauthorized access to our systems and data. Any damage to or failure of our systems could result in interruptions in our ability to manufacture or deliver products or services, or adversely impact our ability to accurately and timely report our financial results. Interruptions could reduce our sales and profits, and our systems could be perceived as unreliable. Our systems and operations are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, hardware or software failures, telecommunications failures, cyber attacks, and similar events. Some of the critical components of our system are not redundant and we currently do not have a backup data center.
Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software attacks, attempts to gain unauthorized access to systems and data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data (our own or that of third parties). Under the supervision of our Chief Information Officer and Chief Information Security Officer, we have adopted certain measures to combat potential cyberattacks and information espionage, including implementation of certain security tools to detect nefarious activities within our system. Yet, given the unpredictability of the timing, nature and scope of such cybersecurity disruptions, and given those cyberattacks targeting those systems outside of our direct control (such as our supply chain's infrastructure), we could experience detrimental impacts on our operations or ability to provide products and services to our customers (such as production downtimes and operational delays), misappropriation, destruction or corruption of confidential information or other data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, and/or reputational harm, any of which could have a material adverse effect on our business.
Frequent or persistent system failures could brand our products or services unattractive to customers, which may be difficult to reverse. Any steps we take to increase the reliability and redundancy of our systems may be expensive, reduce our operating margin and may not be successful in reducing the frequency or duration of unscheduled interruptions.
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Our business is largely dependent on the know-how of our employees, and we generally do not have an intellectual property position that is protected by patents.
Our business is largely dependent upon our design, engineering, manufacturing, chemical processing, analytical and testing know-how. We rely on a combination of trade secrets and contractual confidentiality provisions and, to a much lesser extent, patents, copyrights and trademarks to protect our proprietary rights. Confidentiality agreements with our employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. Accordingly, our intellectual property position is more vulnerable than it would be if it were protected primarily by patents. If we fail to protect our proprietary rights successfully, our competitive position could suffer. We may be required to spend significant resources to monitor and protect our proprietary rights, and, in the event infringement or breach of our proprietary rights occurs, our competitive position in the market may be harmed. In addition, competitors may design around our technology or develop competing technologies and know-how.
The technology labor market is very competitive, and we must hire, promote and retain key personnel.
Our future success depends in part on the continued service of our key executive officers, as well as our research, engineering, sales, manufacturing and administrative personnel, most of whom are not subject to employment or non-competition agreements. In addition, the competition for qualified personnel in the technology industry is intense, and we operate in geographic locations in which labor markets are particularly competitive.
Our business is particularly dependent on expertise which only a limited number of engineers possess. The loss of any of our key employees and officers, including our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, any of our Executive or Senior Vice Presidents or any of our key senior managers, or the failure to attract, promote and retain qualified employees, could adversely affect our business. Also, uncertainty and disruption to our organization as a result of executive management transition could divert the executive management’s attention away from key areas of our business and have a material adverse effect on our business.
Our business is subject to risks from natural disasters, infrastructure failures, and geopolitical conflicts, such as armed conflicts or terrorism.
Our facilities may experience catastrophic losses from natural disasters or other causalities, such as earthquakes, storms, floods, fires, public health epidemics, labor disruptions, power outages, terrorist attacks or political unrest, any of which could disrupt operations, delay production and shipments, and result in significant repair expenses. We have facilities in areas with elevated seismic activity, including Hayward, California, and our Taiwan facilities in Hsinchu and Tainan. We have also experienced fires and extended power outages at our facilities. Our insurance policies do not fully cover losses from earthquakes, other natural disasters, or power loss, leaving us exposed to substantial uninsured costs. Our Fluid Solutions business operations are concentrated in Israel, where key employees, offices and production facilities are located. The region faces ongoing armed conflict and security threats that directly impact our operations. While a phased ceasefire agreement between Israel and Hamas took effect in October 2025, the situation remains fragile with continued violence, miliary activity, and restrictions on movement and commerce. This instability has disrupted and may continue to disrupt our workforce availability, our ability to ship products to customers, and our ability to receive materials from suppliers.
In addition, our suppliers experiencing natural disasters or geopolitical disruptions may not be able to provide sufficient components or raw materials in a timely manner, which can cause disruptions to our operations.
Legal and Regulatory Risks
Growing uncertainties with U.S. trade policies and export regulations with regard to China have adversely impacted and could continue to adversely impact us.
We and our customers have significant operations in China. The extent of the impact of the ongoing trade tension between the United States and China on our sales and operations is difficult to predict. Since December 2024, the U.S. Department of Commerce has significantly expanded export license requirements on certain semiconductor goods and technologies sold to China, and has added over 140 Chinese entities to its Entity List. Although the U.S. and China agreed to temporarily suspend certain export control measures in October 2025, this limited relief does not resolve the underlying regulatory restrictions or uncertainty. These evolving regulations have created ongoing uncertainty for our operations in China, as the full scope and extent of current and future license requirements remain uncertain, and may change over time. Obtaining these export licenses remains difficult for us and/or our customers, and any delays (or denial) in the approval process could disrupt our supply chains and negatively impact production schedules. For example, the utilization rate of our manufacturing subsidiary in China may be negatively impacted if we would not be able to support our customers with goods and services originating out of that location.
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Additionally, tariffs and retaliatory tariffs levied by the United States and China on certain raw materials have in the past increased the cost of materials for our products. If U.S. - China tensions escalate, we may experience additional taxes and tariffs on raw materials sourced from China, which could render our products less competitive and/or profitable.
Third parties may claim we are infringing their intellectual property, which could subject us to litigations or licensing expenses, and we may be prevented from selling our products if any such claims prove successful.
We have in the past and may in the future receive claims that our products, processes or technologies infringe the patents or other proprietary rights of third parties. Any litigation regarding third party patents or other intellectual property rights could be costly and time-consuming and divert our key resources from our business operations. The complexity of the technology involved in our products and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement may also require us to enter into costly license agreements, possibly on terms unacceptable to us. We also may be subject to significant damages or injunctions against the development, manufacture and sale of certain of our products if any such claims prove successful. We also rely on design specifications and other proprietary information provided by our customers to manufacture products for such customers. While many of our customers are contractually obligated to indemnify us for the costs to defend third party claims arising out of our use of the information provided by the customers, the indemnified amount may not be enough to make us whole, or if our customers refuse to honor its obligations, we could end up in costly litigations both to defend against such third-party claims and to enforce our contractual indemnification rights.
We may become involved in litigations and regulatory proceedings, which could require significant attention from our management and result in significant expense to us and disruptions to our business.
In addition to any litigation related to our intellectual property rights, we have been in the past and may in the future be named as a defendant in other lawsuits and regulatory actions relating to our business, such as commercial contract claims, environmental compliance claims, employment claims, class action litigations, and tax examinations, any one of which may expose us to significant damages and reputational harm. The outcome of such litigations and regulatory proceedings is difficult to predict. An unfavorable outcome could have a material adverse effect on our business, including limiting our ability to engage in certain business activities. In addition, such proceedings are often expensive, time-consuming and disruptive to normal business operations and require significant attention from our management. For example, we incurred costs responding to a subpoena received from the SEC related to the material weaknesses identified in our 2022 and 2023 annual reports and the change of our independent auditors.
Any environmental contamination at any of our production facilities could result in substantial liabilities.
Our facilities use substances regulated under various foreign, federal, state and local environmental laws and regulations. We may not always be aware of, or in compliance with, all environmental laws or regulations, and our failure or inability to comply with existing or future environmental requirements could result in significant remediation and other liabilities, imposition of fines, and suspension of our services and products.
Certain regulations related to conflict minerals could adversely impact our business.
We use conflict minerals in manufacturing our products. As a result, we are required to perform ongoing due diligence on our supply chain and publicly disclose the nature and results of such efforts. Our most recent disclosure was filed on Form SD on May 30, 2024, noting that we could not yet determine whether the conflict minerals we source were, directly or indirectly, used to finance or benefit armed groups in the Democratic Republic of Congo and its adjoining countries. There have been and there will be costs associated with complying with these disclosure requirements to determine the sources of conflict minerals used in our products, and potential changes to products, processes or sources of supply as a consequence of such verification activities. Complying with these rules could adversely affect the sourcing, supply and pricing of materials used in our products and result in substantial additional costs. As there may be only a limited number of suppliers offering “conflict free” conflict minerals, we are not certain that we will be able to obtain the conflict minerals from such suppliers in sufficient quantities or at competitive prices. We may also face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products. If we are unable to comply with these disclosure rules (which themselves may be subject to potential re-formulation by the new administration), we could be subject to enforcement actions by the SEC and liability under the Securities Exchange Act of 1934, which could result in material adverse consequences to our business, as well as significant fines and penalties.
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Financial, Tax and Capital Markets Risks
We have significant existing indebtedness; the restrictive covenants under our credit agreement or other limitations on financing may limit our ability to expand or pursue our business strategy; if we are forced to pay our indebtedness prior to its maturity, our financial position could be materially and adversely affected.
As of December 26, 2025, we have gross debt of $481.4 million less unamortized debt costs of $4.5 million.
Our indebtedness could have adverse consequences, including: allotment of a portion of our cash to interest and principal payments, which cash therefore will not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes; and inability to obtain additional financing in the future, if needed. If we are unable to meet our debt obligations as they come due, we could be forced to restructure or refinance such obligations, seek additional equity financing, incur additional debt or sell assets, which we may not be able to do on satisfactory terms, if at all.
Our credit agreement contains certain covenants that restrict our ability to take certain actions, including incurring additional debt, providing guarantees, creating liens, making certain investments, engaging in transactions with affiliates and engaging in certain mergers and acquisitions. We are also required to comply with certain financial covenants, including the maintenance of a maximum consolidated total gross leverage ratio and a minimum fixed charge coverage ratio. Failure to comply with these covenants could result in the acceleration of all of our indebtedness, which could materially and adversely affect our financial health. As long as our indebtedness remains outstanding, the restrictive covenants and mandatory prepayment provisions could impair our ability to expand or pursue our business strategies or obtain additional funding.
Insufficient cash flow from operations could limit our ability to fund capital expenditures, strategic acquisitions, or growth initiatives.
We made capital expenditures of approximately $50.3 million and $63.5 million in fiscal years 2025 and 2024, respectively, primarily for manufacturing facility investments in the United States, Ireland and Malaysia, and for information technology infrastructure improvements, including ERP system upgrades and integration of acquired entities onto our platforms. Our future cash requirements will depend on many factors, including the following capital expenditures: expansion of manufacturing in Malaysia and other locations as part of our strategic growth plan; enhancement of IT systems and cybersecurity infrastructure; manufacturing process changes and facility modifications required to meeting evolving customer requirements; and timing of new product introductions. Our cash requirements will also depend on the following operating and strategic expenditures: integration costs for acquisitions, including IT systems consolidation; product development and engineering investments; and ongoing IT maintenance and cybersecurity operations.
If cash generated from operations is insufficient to fund these requirements, we may need to raise additional capital through public or private equity or debt financing. Such financing may not be available on acceptable terms, or at all. Equity financing would dilute existing stockholders, while debt financing would likely impose restrictive covenants that limit our operational flexibility. Additionally, strategic acquisitions or significant capital expenditures may require consent from our existing lenders under our credit facilities. If we cannot secure adequate financing when needed, we may not be able to develop or enhance products, pursue strategic opportunities, maintain competitive manufacturing capacity, or respond effectively to competitive pressures or changing market conditions.
Our quarterly revenue and operating results could fluctuate significantly from period to period, and this may cause volatility in our common stock price.
Our quarterly revenue and operating results, including our gross margin, have fluctuated significantly in the past, and we expect them to continue to fluctuate in the future for a variety of reasons, which may include:
•the cyclical nature of the industries we serve that frequently oscillates between downturn and growth;
•changes in the timing and size, or cancellation or postponement, of orders by our customers;
•strategic decisions by our customers to terminate their outsourcing relationship with us or give market share to our competitors, which may result from decreased demand for our customers’ products by end customers;
•strategic consolidation by our customers;
•pricing pressure from either our competitors or our customers;
•disruptions or delays in the manufacturing of our products or in the supply of components or raw materials;
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•introduction of new products or services;
•delays in production ramp-up, low yields or other problems experienced at our manufacturing facilities;
•changes in design-to-delivery cycle times;
•inability to reduce our costs quickly, commensurate with reductions in our prices or in response to decreased demand;
•changes in our product and/or service mix;
•write-offs of excess or obsolete inventory;
•one-time expenses or charges associated with failed acquisition negotiations or completed acquisitions;
•inability to control our operating costs consistent with target levels;
•announcements by our competitors of new products, services or technological innovations; and
•geographic mix of customer orders or worldwide earnings.
As a result of the foregoing, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and that these comparisons may not be an accurate indicator of our future performance. Changes in the timing or terms of a small number of transactions could disproportionately affect our operating results in any particular quarter. Moreover, our operating results in one or more future quarters may fail to meet our guidance or the expectations of securities analysts or investors. If this occurs, we would expect to experience an immediate and significant decline in the trading price of our common stock.
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value.
We have a stock repurchase program under which we are authorized to repurchase our common stock. Our repurchase program may be suspended or terminated at any time. Even if our stock repurchase program is fully implemented, it may not enhance long-term stockholder value. Also, the amount, timing, and execution of our stock repurchase programs may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our common stock.
If we were required to impair all or part of our goodwill and/or our acquired intangible assets, our net income and net worth could be materially adversely affected.
We had $114.2 million of goodwill recorded on our Consolidated Balance Sheet as of December 26, 2025. Goodwill represents the excess of cost over the fair market value of net tangible and finite lived, identifiable intangible assets acquired in business combinations. If our market capitalization drops significantly below the amount of net equity recorded on our balance sheet, it could indicate a decline in our value and would require us to further evaluate whether our goodwill has been impaired. During the fourth quarter of each year, we perform an annual review of our goodwill and acquired intangible assets to determine if they have become impaired. We also conduct the same evaluation whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we were required to impair all or a significant part of our goodwill and/or our acquired intangible assets, our financial results could be materially adversely affected.
During the second quarter of 2025, the Company experienced a sustained decline in the market price of its common stock. As a result, the Company’s market capitalization became much closer to, and at times fell below, the carrying value of its net assets. The decline in market capitalization, combined with other factors specific to each reporting unit, such as changes in market conditions and financial performance, was identified as a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim goodwill impairment test.
The Company performed a quantitative goodwill impairment test for each of its four reporting units by comparing the estimated fair value of each reporting unit to its respective carrying value. Based on the results of this assessment, goodwill impairments were identified in the Fluid Solutions and Services reporting units. As a result, the Company recorded a total goodwill impairment charge of $151.1 million during the second quarter of 2025, of which $77.6 million was attributable to the Products segment and $73.5 million was attributable to the Services segment.
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Fluctuations in foreign currency exchange rates may adversely affect our financial condition and results of operations.
The majority of our international revenues are denominated in U.S. Dollars. Many of the costs and expenses associated with our international operations are paid in foreign currencies, including Chinese Renminbi, Singapore Dollars, Japanese Yen, South Korean Won, Israeli New Shekel, Taiwanese Dollars, Malaysian Ringgits, Czech Korunas and Euro, and we expect our exposure to these foreign currencies to increase as we increase production in those regions. Changes in exchange rates among these foreign currencies may affect our revenue, cost of revenues, operating margins and tax.
We use derivative instruments, such as foreign currency forward contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not fully offset the adverse financial effects of unfavorable movements in foreign currency exchange rates over the time the hedges are in place.
Changes in tax rates or tax assets and liabilities could affect results of operations.
As a global company, we are subject to taxation in the United States and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our annual and quarterly tax rates could be affected by numerous factors, including changes in applicable tax laws, the amount and composition of pre-tax income in countries with different tax rates, and valuation of our deferred tax assets and liabilities. Due to economic and political conditions, tax laws and tax rates for income taxes in various jurisdictions may be subject to significant changes. The Organization for Economic Co-operation and Development and the G20 Inclusive Framework on Base Erosion and Profit Shifting have developed Pillar Two proposals that establish a global minimum corporate tax rate of fifteen percent. Several countries in which we operate have adopted legislation implementing these rules, including Singapore and Malaysia where this legislation became effective January 1, 2025. We currently benefit from certain tax incentives in Singapore and Malaysia that result in effective tax rates below fifteen percent in those jurisdictions. The Pillar Two rules may result in additional top-up taxes in these and other jurisdictions, which could increase our overall effective tax rate and adversely affect our financial results.
We are subject to examinations of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. There can be no assurance that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our financial condition and results of operations.
General Risk Factors
The market for our stock is subject to significant fluctuation.
The size of our public market capitalization is relatively small, and the average volume of our shares that are traded is relatively low. The market price of our common stock could be subject to significant fluctuations. Among the factors that could affect our stock price are:
•quarterly variations in our operating results;
•our ability to successfully introduce new products and services and manage new product transitions;
•changes in revenue or earnings estimates or publication of research reports by analysts;
•speculation in the press or investment community;
•strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
•announcements relating to any of our key customers, significant suppliers or the semiconductor manufacturing and capital equipment industry generally;
•the effects of war and terrorist attacks;
•domestic and international economic or political factors unrelated to our performance; and,
•the results of our operations not meeting our guidance or analysts’ expectations.
The stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
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If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that industry analysts publish about us or our business. If any of the analysts issue an adverse opinion regarding our stock, our stock price would likely decline. Similarly, if these analysts cease publishing regular reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We do not currently intend to pay dividends on our common stock and, consequently, our shareholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.
Given our current business plan to invest our earnings to fund our growth, we do not intend on declaring any dividends on UCT’s common stock (which ability to do so is also restricted by the terms of our credit agreement). For the foreseeable future, therefore, any return on our shareholders’ investment will depend exclusively on the capital appreciation of our common stock.
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
At UCT, cybersecurity risk management forms a critical component of UCT’s overall enterprise risk management program. Led by our Chief Information Security Officer (“CISO”), who has over 20 years of experience in information security and technology leadership, and under the oversight of our Board of Directors, we have implemented processes to assess, identify, manage and report cybersecurity risks, which, together with our broader business continuity plans, aim to not only address immediate response to cybersecurity incidents but also ensure swift restoration of critical systems and the maintenance of core business functions in the face of digital threats. Our senior management and information technology (“IT”) security teams devote considerable time and resources to conducting regular evaluations of our systems and implementing necessary enhancements to our security infrastructure to better guard against evolving cybersecurity threats.
Our CISO, reporting directly to our Chief Information Officer (“CIO”), is responsible for designing, developing and implementing our overall information security program that sets forth a governance structure and processes to ensure regular risks assessments and timely reports regarding cybersecurity risks. We actively scan across our information infrastructure for security vulnerabilities inherent in our business as we rely extensively on information and technology systems for managing transactions, tracking financial performance, and storing sensitive data. We also continuously monitor and assess risks associated with the interconnected nature of many of our information and technology systems, such as ERP platforms, supply chain management systems, and electronic payment gateways. In the normal course of our monitoring process, our information security team also regularly conducts penetration testing of our business and information systems in close collaboration with a third-party expert, and promptly remediates identified vulnerabilities to prevent any potential compromise of our systems or data.
Using threat models and intelligence, we regularly assess a range of cyber threats, including hacking attempts, malware attacks, phishing schemes, infrastructure intrusions, and insider threats. In conjunction with our ongoing threat and vulnerability assessments, we evaluate the various ways, and the extent to which, cyberattacks may materially impact our business, including financial loss, regulatory penalties, reputation damage, and litigation risks. In this rapidly evolving cybersecurity environment, we recognize staying informed about emerging cybersecurity threats and industry best practices is an indispensable part of assessing and identifying cybersecurity risks, particularly within the manufacturing sector. Our involvement includes active participation in industry associations, sharing threat intelligence, and collaborating with regulatory bodies and law enforcement. This collaboration strengthens our defenses against potential threats to our financial and information systems.
As part of our ongoing commitment to maintain a robust cybersecurity program to protect all stakeholders, including our customers, investors, employees, and vendors, we have allocated significant resources to improve our IT security. We have deployed various protocols as part of a larger preventive framework against cyber threats, including advanced security technologies and services, firewalls outfitted with cutting-edge capabilities, layers of encryption protocols, Identity and Access Management (“IAM”) controls, security monitoring tools, and multi-factor authentication. Our employees are required to complete cybersecurity best practice training on a regular basis (no less than once a year), the results of which are collected and reported to senior management for further evaluation. We regularly engage third-party experts to assess the effectiveness of our security protocols and infrastructure, to detect potential threats and assist with remediation efforts, and to generally monitor and adapt our cybersecurity protocols to constantly evolving cybersecurity threats.In addition, we have deployed a Third-Party Risk Management (“TPRM”) tool that sends questionnaires to our vendors designed to assess their cybersecurity vulnerabilities. These and other cybersecurity risk management protocols at UCT are being governed by our comprehensive cybersecurity policies, plans and incident response playbooks, to manage both our preventive efforts against cyber threats and quick and effective response protocols in the event of cybersecurity breaches.In the event of an incident, we are prepared to follow the steps outlined in these playbooks, from initial detection to mitigation, as well as notification to all appropriate functions, including senior management and the Board.
Our Board of Directors has the overall oversight responsibility for our risk management, and delegates the cybersecurity and other risks relating to our information controls and security to our Audit Committee.Both the Audit Committee and the full Board regularly receive updates from our management on cybersecurity matters and our ongoing risk management efforts, and actively participate in ongoing discussions. In addition, the Board and the Compensation Committee review and approve the key performance indicators applicable to all management personnel responsible for effectively managing cybersecurity risk management programs at UCT, and engage in regular review of the Company’s performance against those indicators.
We continue to face cybersecurity risks related to our business. While these risks have yet to materially affect us, we cannot guarantee that our ongoing and increasingly robust approach towards cybersecurity will be able to prevent
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cybersecurity incidents that could have a material adverse effect on us. For additional information about cybersecurity risks we face, see the risk factor item “Our business may be adversely affected by IT disruptions, including by impairing our ability to effectively deliver our products or services, which could cause us to lose customers” in Item 1A-Risk Factors.
Item 2. Properties
UCT’s headquarters is located in Hayward, California. This facility provides administrative, sales and support, engineering and technology development and manufacturing operations. This lease expires in 2027.
The Company has manufacturing and engineering facilities in California, Texas, Arizona, Israel, Oregon, China, Malaysia, Singapore, the United Kingdom, Thailand, Philippines and Czechia. The Company has parts cleaning, analytics and engineering facilities in Colorado, Arizona, California, Oregon, Maine, Texas, Ireland, Israel, Taiwan, South Korea, Singapore and China. These facilities have leases that expire on various dates through 2084 and are subject to periodic changes. We also own buildings and land that are located in South Korea, China and the United Kingdom. We believe that our existing facilities are well-maintained and in good operating condition.
Item 3. Legal Proceedings
From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. Although the outcome of the various legal proceedings and claims cannot be predicted with certainty, we have not had a history of outcomes to date that have been material to our consolidated statement of operations and do not believe that any of these proceedings or other claims will have a material adverse effect on our consolidated financial condition or results of operations.
As previously disclosed in our Quarterly Report on Form 10-Q for the quarterly period ended March 28, 2025, on March 24, 2025, a putative securities class action was filed against the Company and certain of its officers in the United States District Court for the Northern District of California, and on August 1, 2025, a derivative suit was filed against the Company's Board of Directors and the Company in the Superior Court of California, County of Alameda. Both lawsuits have been voluntarily dismissed on December 16, 2025 and December 26, 2025, respectively.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Stock Exchange Listing
Our common stock has been traded on the NASDAQ Global Market under the symbol “UCTT” since March 25, 2004. As of February 17, 2026 there were four holders of record of UCTT common stock.
Dividends on Common Stock
To date, we have not declared or paid cash dividends to our UCT stockholders and we do not intend to do so for the foreseeable future in order to retain earnings for use in our business. Our credit facility also limits our ability to pay dividends.
Repurchases of Common Stock
On October 20, 2022, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $150.0 million of the Company’s common stock over a three-year period.
On October 23, 2025, the Board of Directors approved a renewal of the share repurchase program. The renewed program authorizes the Company to repurchase up to $150.0 million of the Company's common stock over a three year period.
This program may be suspended or discontinued at any time and does not obligate the Company to acquire any amount of common stock.
No shares were repurchased under this program for the three months ended December 26, 2025,
Stock Price Performance Graph
The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The following stock performance graph compares the cumulative total stockholder returns during the period from December 25, 2020 to December 26, 2025, of our common stock to the NASDAQ Composite Index, the RDG Semiconductor Composite Index, and the PHLX Semiconductor Index. In addition to the RDG Semiconductor Composite Index, we have added the PHLX Semiconductor Index, which we believe better represents overall semiconductor industry performance. The comparison assumes $100 was invested on December 25, 2020, in our common stock and in each of the foregoing indices. The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance.
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*Assumes $100 invested on December 25, 2020 in stock or index, including reinvestment of dividends.
Indexes calculated on month-end basis.
The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported by the NASDAQ Global Market:
High Low
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Annual Report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Forward-looking statements can also be identified by words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will be,” “will continue,” “will likely results, and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in “Item 1A — Risk Factors” above. The following discussion should be read in conjunction with the Consolidated Financial Statement and notes thereto included in Item 8 of this report. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Overview
Ultra Clean Holdings, Inc., (“UCT”, the “Company” or “We”) is a leading developer and supplier of critical subsystems, components, parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. We report results for two segments: Products and Services. Our Products segment primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. Products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules as well as other high-level assemblies for wafer fabrication equipment (“WFE”) and sub-fab support equipment. Our Services segment provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and WFE markets.
We ship a majority of our products and provide most of our services to U.S. registered customers with both domestic and international locations. In addition to U.S. manufacturing and service operations, we manufacture products and provide parts cleaning and other related services in our Asia Pacific, Europe and Middle East (“EMEA”) facilities to support local and U.S. based customers. We conduct our operating activities primarily through our subsidiaries.
Over the long-term, we believe the semiconductor market we serve will continue to grow due to multi-year industry demand from a broad range of drivers, such as new process architecture (e.g. gate all around) and memory devices (e.g. high bandwidth memory) necessary for cloud, artificial intelligence (“AI”) and machine learning (“ML”) applications. We also believe that semiconductor original equipment manufacturers (“OEM”) are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, our Services business is benefiting as device manufacturers rely on precision cleaning and coating to achieve ever more advanced devices.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Consolidated Financial Statements. On an on-going basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations, contingent earn-out liabilities and goodwill, intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each.
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Revenue Recognition
Our revenues for fiscal years 2025, 2024 and 2023, were highly concentrated with a small number of OEM customers in the semiconductor capital equipment industry. We recognize revenue when promised goods or services (performance obligations) are transferred to a customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We perform the following five steps to determine when to recognize revenue:
1.Identification of the contract(s) with customers – Our standard arrangement for our customers includes a signed purchase order or contract, no right of return of delivered products and no customer acceptance provisions. We assess collectability based on the creditworthiness of the customer and past transaction history. We perform on-going credit evaluations of, and do not require collateral from, our customers.
2.Identification of the performance obligations in the contract – Our performance obligations include delivery of promised goods or services.
3.Determination of the transaction price – The transaction price of our contracts with customers may include both fixed and variable consideration. We include variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We generally invoice our customers upon shipment of goods and completion of services with payment due within 30 to 90 days after issuance.
4.Allocation of the transaction price to the performance obligations in the contract – For contracts that contain multiple performance obligations, we allocate the transaction price to the performance obligations on a relative standalone selling price basis. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the relative standalone selling price of each distinct good or service in the contract.
5.Recognition of revenue when, or as, a performance obligation is satisfied – We recognize revenue from products sold at a point in time when we have satisfied our performance obligation by transferring control of the goods to the customer, which typically occurs at shipment or delivery. Revenue from service agreements is recognized upon completion of the services, which typically occurs upon shipment to the customer.
Inventory Valuation
We write down the carrying value of our inventory to net realizable value for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon inventory age and assumptions about future demand and market conditions. We assess the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis.
Obsolete inventory or inventory in excess of our estimated usage is written down to its estimated market value less costs to sell, if less than its cost. The inventory write-downs are established on the basis of obsolete inventory or specifically identified inventory in excess of established usage. Inherent in our estimates of demand and market value in determining inventory valuation are estimates related to economic trends, market conditions, and future demand for our products. If actual demand and market conditions are less favorable than our projections, additional inventory write-downs may be required. If the inventory value is written down to its net realizable value, and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory is not realized until the inventory is sold either as a component of a subsystem or as separate inventory.
Accounting for Income Taxes
The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates. Management carefully monitors the changes in many factors and adjusts the effective tax rate as required.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not more likely than not, we must increase our provision for taxes by recording a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be recoverable. In determining whether the realization of these deferred tax assets may be impaired, we make judgments with respect to whether we are likely to generate sufficient future taxable income to realize these assets. As of December 26, 2025, we maintained a full valuation allowance on our U.S. federal and state and on certain of our foreign deferred tax assets in the amount of $104.2 million as we believe it is more likely than not that these deferred tax assets will not be realized.
In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
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more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on the results of our operations and financial position. We believe we have adequately reserved for our uncertain tax positions; however, no assurance can be given that the final tax outcome of these matters will not be different than what we expect. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.
Business Combinations
In accordance with accounting for business combinations, we allocate the purchase price of acquired companies to the identified tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We may engage third-party valuation firms to assist management in reviewing management’s identification and determination of the fair values of acquired intangible assets. Such valuations require management to make significant estimates and assumptions. Management makes estimates of fair value based upon assumptions believed to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.
Certain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future operating income thresholds. The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in other income (expense). Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.
Goodwill, Intangibles Assets, and Long-lived Assets
Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed.
We evaluate our goodwill for impairment at the reporting unit level on an annual basis, and more frequently if events or changes in circumstances indicate that the carrying amount may exceed its fair value. In addition, we evaluate our identifiable intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
•Significant changes in the manner of our use of the acquired assets or the strategy of our overall business;
•Significant negative changes in revenue of specific products or services;
•Significant negative industry or economic trends; and
•Significant decline in our stock price for a sustained period.
We continually apply judgment when performing these evaluations and continuously monitor for events and circumstances that could negatively impact the key assumptions in determining fair value, including long-term revenue growth projections, projected cash flows, discount rates, recent market valuations from transactions by comparable companies, volatility in our market capitalization and general industry, market and macroeconomic conditions. It is possible that changes in such circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing fair value, would require us to record a non-cash impairment charge.
During the second quarter of 2025, the Company experienced a sustained decline in the market price of its common stock. As a result, the Company’s market capitalization became much closer to, and at times fell below, the carrying value of its net assets. The decline in market capitalization, combined with other factors specific to each reporting unit, such as changes in market conditions and financial performance, was identified as a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim goodwill impairment test.
The Company performed a quantitative goodwill impairment test for each of its four reporting units by comparing the estimated fair value of each reporting unit to its respective carrying value. Based on the results of this assessment performed in the second quarter of 2025, the Company recorded a total goodwill impairment charge of $151.1 million, of
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which $77.6 million was attributable to the Fluid Solutions reporting unit and $73.5 million was attributable to the Services reporting unit. As a result, there is no remaining goodwill in the Fluid Solutions reporting unit or in the Services reporting unit. No impairments were identified in the Core Products or Fluid Delivery Systems reporting units, whose fair values remained substantially in excess of their respective carrying values.
In connection with our annual goodwill impairment assessment in the fourth quarter of 2025, the Company performed qualitative impairment assessments for each of the Company's reporting units. The qualitative assessments indicated that it was more likely than not that the fair values of its reporting units exceeded its carrying value and, therefore, did not result in an additional impairment.
Prior to testing goodwill for impairment, the Company evaluated the recoverability of its long-lived assets under ASC 360, Property, Plant, and Equipment, and determined that no impairment of long-lived assets was required.
Results of Operations
Fiscal Year
Our fiscal year is the 52 or 53 week period ending on the Friday nearest December 31. Fiscal 2025, 2024 and 2023 each contained 52 weeks.
A discussion regarding our financial condition and results of operations for fiscal 2025, compared to fiscal 2024, is presented below.
A discussion regarding our financial condition and results of operations for fiscal 2024, compared to fiscal 2023, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, filed with the SEC on February 25, 2025, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.uct.com/investors.
Discussion of Results of Operations
Revenues
Year Ended
Products as a percentage of total revenues 87.6 % 88.4 % 86.6 %
Services as a percentage of total revenues 12.4 % 11.6 % 13.4 %
Products revenues decreased by $54.4 million in fiscal year 2025 over fiscal year 2024, primarily driven by lower customer demand, reflecting a slowdown in customer purchasing activity in response to short-term market conditions.
Services revenues increased by $10.8 million in fiscal year 2025 over fiscal year 2024, driven by higher demand across its customer base.
Year Ended
United States as a percentage of total revenues 24.1 % 27.0 % 30.4 %
International as a percentage of total revenues 75.9 % 73.0 % 69.6 %
Revenues by geographic area are categorized based on the customer’s location to which the products were shipped or services were performed.
The decrease in U.S. revenues as a percentage of total revenues in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to a shift in product revenues from U.S. locations to international locations. As a result, international revenues as a percentage of total revenues increased compared to the prior year.
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Cost of Revenues
Year Ended
Products cost as a percentage of total Products revenues 86.0 % 84.7 % 85.9 %
Services cost as a percentage of total Services revenues 72.3 % 70.4 % 71.6 %
Cost of Products revenues consists of purchased materials, direct labor and manufacturing overhead. Cost of products revenues decreased by $22.7 million for fiscal 2025 compared to fiscal 2024. The decrease was primarily driven by lower sales volume, which led to a $33.3 million reduction in material costs, partially offset by higher overhead costs and restructuring-related costs.
Services Cost of revenues consists of direct labor, overhead and materials such as chemicals, gases and consumables. Cost of services revenues increased by $12.5 million in fiscal 2025 compared to the prior year, driven by higher volumes of service orders and increases in headcount, overtime and employee-related expenses, resulting in an additional $8.8 million of costs, as well as higher overhead costs and restructuring-related activities.
In both segments, costs of revenue increased as a percentage of revenue, primarily due to fixed costs that do not scale with volume.
Gross Margin
Year Ended
Gross Margin by Segment
Gross profit and gross margins fluctuate with revenue levels, product mix, material costs, and labor costs.
Products gross profit and gross margin decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to higher employee and restructuring-related costs.
Services gross profit decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to higher cost of revenues driven by increased labor and compensation-related costs, as well as higher overhead and restructuring-related costs.
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Operating Margin
Year Ended
Operating Margin by Segment
Total Company (5.2 %) 4.3 % 2.0 %
Operating results for both Products and Services reflected an operating loss and a negative operating margin in fiscal year 2025, compared to operating profit and a positive operating margin in fiscal year 2024. The operating loss was primarily driven by goodwill impairment recorded in the second quarter of fiscal year 2025, consisting of $77.6 million attributable to the Fluid Solutions reporting unit within the Product segment and $73.5 million attributable to the Services segment. The loss was further affected by higher stock-based compensation and severance costs related to restructuring activities, including involuntary separations and a voluntary early retirement program.
Research and Development
Year Ended
Research and development as a percentage of total revenues 1.6 % 1.3 % 1.6 %
Research and development expenses consist primarily of activities related to new component testing and evaluation, test equipment and fixture development, product design, the advancement of cleaning and coating and analytical processes, and other product-development activities.
Research and development expenses increased $3.7 million in fiscal year 2025 compared to fiscal year 2024, primarily due to higher personnel costs, including salary-related expenses resulting from compensation adjustments and headcount changes, as well costs associated with involuntary separations and a voluntary early retirement program undertaken as part of the Company’s restructuring efforts.
Sales and Marketing
Year Ended
Sales and marketing as a percentage of total revenues 3.0 % 2.7 % 3.0 %
Sales and marketing expenses consist primarily of salaries and commissions paid to our sales employees, salaries paid to our engineers who partner with sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products.
Sales and marketing expenses increased by $3.9 million in fiscal year 2025 compared to fiscal year 2024, primarily due to higher restructuring costs, including expenses for involuntary separations and a voluntary early retirement program, as well as higher personnel costs and other operating expenses, including travel and office-related costs.
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General and Administrative
Year Ended
General and administrative as a percentage of total revenues 9.1 % 8.6 % 9.3 %
General and administrative expenses increased $6.5 million in fiscal year 2025 over fiscal year 2024, primarily driven by increase in stock-based compensation, a separation payment made to the prior CEO, and increased restructuring activities, including both involuntary separations and a voluntary early retirement program.
Impairment of Goodwill
Year Ended
Impairment of Goodwill $ 151.1 n/m $ — n/m $ —
n/m - not meaningful
Impairment of goodwill represents a non-cash charge of $151.1 million recorded in the second quarter of fiscal 2025, as the fair values of our Fluid Solutions and Services reporting units were determined to be below their carrying amounts.
Interest and Other Income (Expense), net
Year Ended
Other income (expense), net $ (3.9) (122.0)% $ 17.7 n/m $ (1.8)
Interest income decreased $0.9 million in fiscal year 2025 over fiscal year 2024 due to lower interest earning balances.
Interest expense decreased $8.2 million in fiscal year 2025 over fiscal year 2024 due to lower interest rates and reduced amortization of debt issuance costs.
Other income (expense), net, for fiscal year 2025 primarily consisted of unrealized foreign exchange losses of $4.9 million and debt modification-related costs of $1.1 million, partially offset by government grants of $2.2 million. For fiscal year 2024, the Company recognized a $29.0 million gain from the fair value adjustment of the contingent earn-out liability associated with the HIS acquisition, partially offset by foreign exchange losses of $7.6 million and debt modification costs of $4.0 million.
Provision for Income Taxes
Year Ended
Effective tax rate -17.8 % 48.7 % n/m
The change in tax rates in fiscal year 2025 reflects, primarily, changes in the geographic distribution of our worldwide earnings. For fiscal year 2025, our effective tax rate was lower than the federal statutory rate of 21.0% primarily due to the valuation allowance in the U.S., impairment of goodwill and earnings in our foreign subsidiaries subject to local statutory tax rates.
For the year ended December 26, 2025, the Company concluded that a full valuation allowance against its U.S. federal and state net deferred tax assets continues to be necessary. The Company also concluded that some of its foreign deferred tax assets require a valuation allowance. The total U.S. and foreign valuation allowances for deferred tax assets were $88.4 million and $15.8 million, respectively as of December 26, 2025, and $79.1 million and $17.2 million, respectively as of December 27, 2024.
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In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S. The OBBBA includes numerous provisions that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications to certain U.S. international tax rules. The Company has analyzed the impacts of the OBBBA and reflected them in the current period. These impacts do not have a material effect on the tax rate for the year ended December 26, 2025. Certain provisions under OBBBA, primarily related to the international provisions, will take effect in future years.
The Organization for Economic Cooperation and Development (“OECD”) reached agreement among certain member countries to implement a global minimum tax framework, commonly referred to as Pillar Two, which established a minimum 15 percent income tax rate. Pillar Two did not have a significant impact on the Company's financial statements for fiscal year 2025. This legislation will become effective for us in additional jurisdictions beginning in fiscal 2026, most notably in Singapore and Malaysia where we currently enjoy a low tax rate under certain tax incentives. The higher tax rate in those countries under Pillar Two could have a material and adverse impact on our financial statements beginning in fiscal 2026.
Our ability to realize deferred tax assets depends on our ability to generate sufficient future taxable income. In assessing our future taxable income, we have considered all sources of future taxable income available to realize our deferred tax assets, including the taxable income from future reversals of existing temporary differences, carryforwards, and tax-planning strategies. If changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities, the valuation allowance may need to be adjusted in the future.
The Company in the past has asserted that the earnings of our foreign subsidiaries, with the exception of certain of its subsidiaries in Singapore, are intended to be permanently reinvested. In fiscal year 2025, the Company changed its assertion for the earnings of one of its subsidiaries in China and only considers the earnings accumulated prior to fiscal year 2023 to be permanently reinvested. As of the end of fiscal 2025, the Company has recorded a deferred tax liability of $1.0 million related to accumulated earnings subject to future repatriation. The Company remitted earnings to the U.S. from its subsidiaries in Singapore in 2025. With the possible exception of Singapore and China subsidiaries, the Company has no plans to remit other foreign earnings to the U.S. We may change our intent to reinvest certain of our undistributed foreign earnings indefinitely, which could require us to accrue or pay taxes on some or all of these undistributed earnings.
Liquidity and Capital Resources
Cash and cash equivalents
The following table summarizes our cash and cash equivalents:
Year Ended
Total cash and cash equivalents $ 311.8 $ 313.9 $ (2.1)
The decrease in cash and cash equivalents in fiscal year 2025 compared to fiscal year 2024 was primarily due to cash provided by operating activities of $65.6 million, which was offset by cash used in investing and financing activities of $47.0 million and $21.2 million, respectively.
Cash Flows
Year Ended
Effects of exchange rate changes on cash and cash equivalents 0.5 (4.4) 1.9
Net increase (decrease) in cash and cash equivalents $ (2.1) $ 6.9 $ (51.8)
Our primary cash inflows and outflows were as follows:
•Net cash provided by operating activities remained consistent year over year, as changes in working capital and non-cash items were largely offset by changes in net income.
•Cash used in investing activities was $47.0 million in fiscal year 2025 compared to $63.5 million in fiscal year 2024. During fiscal year 2025, net cash used for investing activities primarily consisted of $50.3 million related to
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purchases of property, plant and equipment, partially offset by an asset-related government grant of $2.9 million. During fiscal year 2024, net cash used in investing activities was $63.5 million for purchases of property, plant and equipment.
•Cash used by financing activities was $21.2 million in fiscal year 2025 compared to cash provided of $9.8 million in fiscal year 2024. The $31.0 million increase in net cash used by financing activities was primarily due to the absence of $23.5 million of net cash proceeds from bank borrowings related to a prior-period debt modification, an $8.0 million increase in principal payments on bank borrowings, and a $3.4 million increase in share repurchases, partially offset by a $1.9 million decrease in payment of debt issuance costs.
We believe we have sufficient capital to fund our working capital needs, satisfy our debt obligations, maintain our existing capital equipment, purchase new capital equipment and make strategic acquisitions from time to time. As of December 26, 2025, we had cash and cash equivalents of $311.8 million compared to $313.9 million as of December 27, 2024. Our cash and cash equivalents, cash generated from operations and borrowings under our term loan described below, were our principal sources of liquidity as of December 26, 2025.
In the second quarter of fiscal year 2025, we entered into a factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We utilize this factoring arrangement as part of our financing for working capital. For the fiscal year ended December 26, 2025, we sold accounts receivable totaling $56.4 million under this arrangement.
In addition, Fluid Solutions had a factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement; however, this agreement was cancelled in December 2025 and was not in effect as of year-end. For the fiscal year ended December 26, 2025, accounts receivable totaling $11.6 million were sold under this arrangement.
We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months. The adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth, the size and number of any acquisitions, the state of the worldwide economy, our ability to meet our financial covenants with our credit facility, the cyclical expansion or contraction of the semiconductor capital equipment industry and the other industries we serve and capital expenditures required to meet possible increased demand for our products.
In order to expand our business or acquire additional complementary businesses or technologies, we may need to raise additional funds through equity or debt financings. If required, additional financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, our stockholders’ equity interest will be diluted and these securities might have rights, preferences and privileges senior to those of our current stockholders. We may also require the consent of our new lenders to raise additional funds through equity or debt financings. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us.
As of December 26, 2025, we had undistributed earnings of approximately $596.7 million from our foreign subsidiaries, $577.3 million of which are indefinitely reinvested outside of the U.S. As of December 26, 2025, we have cash of approximately $253.0 million in our foreign subsidiaries.
Borrowing Arrangements
Fluid Solutions Debt Facilities — — % 5.9 7.4 %
Debt issuance costs (4.5) (7.2)
On April 4, 2024, the Company entered into a Sixth Amendment to the Credit Agreement dated as of August 27, 2018. The amendment (i) extended the maturity date of the term loan and revolving credit facilities by 30 months; (ii) reduced the
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interest rate applicable to the term loan facility under the Credit Agreement by 0.25% per annum; and (iii) increased the outstanding amount under the Term Loan of $475.4 million to $500 million. The Company received $67.7 million of additional debt, net of $1.1 million in lender fees, offset by $44.2 million in reduced syndicate positions. The Company capitalized $2.5 million of additional costs related to this amendment, continued to defer previously capitalized costs of $5.2 million and expensed third party transaction costs and the previously capitalized costs of extinguished debt of $3.6 million in the other income (expense), net in the Consolidated Statements of Operations for the fiscal year ended December 27, 2024.
On October 8, 2024, the Company entered a Seventh Amendment further reducing the interest rate applicable to the term loan facility by 0.25% per annum.
On September 15, 2025, the Company entered into the Eighth Amendment, reducing the interest rate applicable to the term loan facility by an additional 0.50% per annum. The amendment did not modify the revolving credit facility.
The Term Loan has a maturity date of February 25, 2028. The Company pays monthly interest payments in arrears and quarterly principal payments of 0.625% of the outstanding principal balance as of September 15, 2025, with the remaining principal paid upon maturity.
The revolving credit facility has an available commitment of $150.0 million and a maturity date of August 27, 2027. The Company pays a quarterly commitment fee in arrears equal to 0.25% of the average daily available commitment outstanding. Outstanding letters of credit reduce the availability of the revolving credit facility and, as of December 26, 2025, the Company had $146.6 million, net of $3.4 million of outstanding letters of credit, available under this revolving credit facility.
The letter of credit facility has an available commitment of $50.0 million and a maturity date of August 27, 2027. The Company pays a quarterly fee in arrears equal to the dollar equivalent of all outstanding letters of credit equal to the applicable margin for the revolving credit facility, and a fronting fee equal to 0.125% of the undrawn and unexpired amount of each letter of credit. As of December 26, 2025, the Company had $3.4 million of outstanding letters of credit and $46.6 million of available commitments remaining under the letter of credit facility.
Under the Credit Agreement, the Company may elect that the Term Loan bear interest at a rate per annum equal to either (a) “ABR” (as defined in the Credit Agreement), plus the applicable margin or (b) the “Term SOFR” (as defined in the Credit Agreement), plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum equal to either (i) at any time that the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s and BB- (with a stable outlook) or higher from S&P, (x) 2.50% for such Term SOFR loans and (y) 1.50% for such ABR term loans or (ii) at all other times, (x) 2.75% for such Term SOFR loans and (y) 1.75% for such ABR term loans. Interest on the Term Loan is payable on (1) in the case of such ABR term loans, the last day of each calendar quarter and (2) in the case of such Term SOFR loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
At December 26, 2025, the Company had an outstanding amount under the Term Loan of $481.4 million, gross of unamortized debt issuance costs of $4.5 million. As of December 26, 2025, the interest rate on the outstanding Term Loan was 6.7%.
The Credit Agreement requires the Company to maintain certain financial covenants including a consolidated fixed charge coverage ratio and a consolidated leverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter. The Company currently has no revolving loans outstanding under the Credit Agreement. The Company was in compliance with all financial covenants as of the fiscal year ended December 26, 2025.
The Company maintains credit agreements with a local bank in Czechia and with a financial institution in Israel, which provide for revolving credit facilities of up to 7.0 million euros (approximately $8.2 million) and $5.0 million, respectively.
As of December 26, 2025, the Company’s total bank debt was $476.9 million, net of unamortized debt issuance costs of $4.5 million. As of December 26, 2025, the Company had $146.6 million, $5.0 million and $6.5 million available to draw from its credit facilities in the U.S., Israel and Czechia, respectively.
The fair value of the Company’s long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets. The Company’s carrying value approximates fair value for the Company’s long term-debt.
Capital Expenditures
Capital expenditures were $50.3 million for the fiscal year ended December 26, 2025 and were primarily attributable to the capital invested in our manufacturing facilities worldwide as well as costs associated with the ongoing design and
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implementation of our new enterprise resource planning system. For the fiscal year ended December 26, 2025, capital expenditures for our Products and Services segments were $31.7 million and $18.6 million, respectively, representing 1.8% and 7.3% of the respective segment revenues. To maintain our manufacturing capacity and support our strategic growth plans, capital expenditures are typically in the range of 2-4% of annual segment revenues for our Products segment and between 5-10% of annual segment revenues for our Services segment. Ultimately, the amount of capital expenditures is dependent on several factors including, but not limited to, the timing and implementation of capital projects, the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity to service anticipated customer demand, equipment lead times, and the availability of cash flows from operations or financing activities.
Contractual Obligations
We have commitments to various third parties to primarily purchase inventories and property, plant and equipment totaling approximately $443.6 million on December 26, 2025.
In conjunction with the sale of our products in the ordinary course of business, we provide standard indemnification against certain liabilities to our customers, which may include claims of losses by their own customers resulting out of property damages, bodily injuries or deaths, or infringement of intellectual property rights by our products. Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped. As of December 26, 2025, we have not incurred significant costs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal.
During the periods presented, we do not have unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Recently Issued and Adopted Accounting Pronouncement
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on UCT’s Consolidated Financial Statements, see Note 1 of the Notes to Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, including credit risk, foreign currency exchange rate risk and interest rate risk.
Credit Risk
A substantial majority of our trade receivables are derived from sales to OEMs. We believe the three largest customer gross accounts receivable balances (36.0% as of December 26, 2025) do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience. For more information about the customers that represent our accounts receivable balance and our consideration related to credit losses, see Note 12 of Notes to the Consolidated Financial Statements..
We have adopted credit policies and standards intended to accommodate industry growth and inherent risk. We believe credit risks are moderated by the financial stability of our major customers. We assess credit risk through quantitative and qualitative analysis. From these analyses, we establish shipping and credit limits and determine whether we will seek to use one or more credit support protection devices, such as obtaining a parent guarantee, prepayment or standby letter of credit.
Foreign Currency Exchange Rate Risk
We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies. Historically, the majority of our revenue contracts and arrangements with third party suppliers are denominated in U.S. Dollars. Separately, a portion of our expenses, primarily the cost to manufacture, cost of personnel to deliver technical support on our products and professional services, sales and sales support and research and development, are denominated in foreign currencies.
Revenue resulting from selling in currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations which can affect our operating income. As foreign currency exchange rates vary, operating income may differ from expectations. 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. However, we do not expect foreign currency exchange rate fluctuations to have a material effect on our results of operations.
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Interest Rate Risk
We are exposed to market risk due to changing interest rates under our credit facilities. Our Credit Facility is comprised of a Term B loan and a revolving credit agreement with interest rates as described under Note 6 of Notes to the Consolidated Financial Statements.
At the end of fiscal 2025, the Term B loan had a balance of $481.4 million. A hypothetical 100 basis points increase in our borrowing rates at the end of fiscal 2025, would result in approximately $4.8 million annual increase in interest expense on this existing principal balance.
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 26, 2025 and December 27, 2024 47
Index to Notes to Consolidated Financial Statements 54
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To theBoard of Directors and Stockholders of Ultra Clean Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ultra Clean Holdings, Inc. and its subsidiaries (the “Company”) as of December 26, 2025 and December 27, 2024, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity, and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 26, 2025, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 26, 2025 and December 27, 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2025, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements 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. 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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.
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Critical Audit Matters
The critical audit matters communicated beloware mattersarising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
As described in Notes 1 and 12 to the consolidated financial statements, the Company sells its products and services primarily to customers in the semiconductor capital equipment industry. Revenue is recognized when the Company satisfies performance obligations as evidenced by the transfer of control of the promised goods or services to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s total revenues were $2.1 billion for the year ended December 26, 2025.
The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recording of revenue at the transaction price once control passes to the customer. These procedures also included, among others (i) evaluating certain revenue transactions by either (a) testing the issuance and settlement of invoices and credit memos, tracing transactions not settled to a detailed listing of accounts receivable, and testing the completeness and accuracy of certain data provided by management or (b) testing, on a sample basis, the revenue recognized by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of shipment, and cash receipts, as applicable; and (ii) confirming, on a sample basis, outstanding customer invoice balances as of December 26, 2025 and for confirmations not returned, obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of shipment, and subsequent cash receipts, as applicable.
Interim Goodwill Impairment Assessment – Core Products Reporting Unit
As described in Notes 1 and 5 to the consolidated financial statements, the Company’s goodwill balance was $114.2 million as of December 26, 2025, a significant portion of which relates to the Core Products reporting unit. Management reviews goodwill for impairment annually in the fourth fiscal quarter and whenever events or changes in circumstances indicate that the carrying value exceeds fair value. A quantitative impairment analysis, if necessary, considers the income approach, and significant estimates include revenue growth rates, gross margins, discount rates, and future economic and market conditions. During the second quarter of 2025, the Company experienced a sustained decline in the market price of its common stock. The decline in market capitalization, combined with other factors specific to each reporting unit, was identified as a triggering event, requiring the Company to perform an interim goodwill impairment test by comparing the estimated fair value of each reporting unit to its respective carrying value. Based on the results of this assessment, the Company recorded a goodwill impairment charge of $151.1 million. No impairment was identified in the Core Products reporting unit.
The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Core Products reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to gross margins and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s interim goodwill impairment assessment, including controls over the valuation of the Company’s Core Products reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the income approach used by management; (iii) testing the completeness and accuracy of underlying data used in the income approach; and (iv) evaluating the reasonableness of the significant assumptions used by management related to gross margins and discount rate. Evaluating management’s assumption related to gross margins involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of
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the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income approach and (ii) the reasonableness of the discount rate assumption.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 23, 2026
We have served as the Company’s auditor since 2024.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Ultra Clean Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows of Ultra Clean Holdings, Inc. (the “Company”) for the year ended December 29, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the Company’s consolidated results of operations and its cash flows for the year ended December 29, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit 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 audit provides a reasonable basis for our opinion.
/s/ Baker Tilly US LLP
San Francisco, California
March 6, 2024, except for Note 15 to the consolidated financial statements,
as to which the date is February 25, 2025.
We served as the Company’s auditor from 2015 to 2024.
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Ultra Clean Holdings, Inc.
Consolidated Balance Sheets
(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents $ 311.8 $ 313.9
Prepaid expenses and other current assets 48.2 34.1
Property, plant and equipment, net 324.6 325.9
Deferred tax assets, net 3.5 3.1
Operating lease right-of-use assets 157.2 161.0
Other non-current assets 13.0 9.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank borrowings $ 9.9 $ 16.0
Accrued compensation and related benefits 51.1 50.1
Operating lease liabilities 20.2 18.6
Other current liabilities 24.6 38.4
Bank borrowings, net of current portion 467.0 476.5
Deferred tax liabilities 13.8 16.1
Other liabilities 6.8 6.7
Commitments and contingencies (See Note 9)
Equity:
UCT stockholders’ equity:
Preferred stock — $0.001 par value, 10.0 shares authorized; none outstanding — —
Accumulated other comprehensive loss (8.6) (10.3)
Total UCT stockholders' equity 711.0 873.6
Noncontrolling interests 73.1 62.2
(See accompanying Notes to Consolidated Financial Statements)
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Ultra Clean Holdings, Inc.
Consolidated Statements of Operations
Year Ended
(In millions, except per share amounts)
Revenues:
Cost of revenues:
Operating expenses:
Impairment of goodwill 151.1 — —
Other income (expense), net (3.9) 17.7 (1.8)
Income (loss) before provision for income taxes (145.7) 67.2 (11.3)
Less: Net income attributable to noncontrolling interests 9.6 10.8 8.9
Net income (loss) attributable to UCT $ (181.2) $ 23.7 $ (31.1)
Net income (loss) per share attributable to UCT common stockholders:
Shares used in computing net income (loss) per share:
(See accompanying Notes to Consolidated Financial Statements)
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Ultra Clean Holdings, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Year Ended
(In millions)
Other comprehensive income (loss):
Change in cumulative translation adjustment, net of tax 3.3 (11.3) 1.5
Change in pension net actuarial gain (loss), net of tax (0.2) (1.0) 0.4
Change in fair value of derivatives, net of tax — — (0.4)
Total other comprehensive income (loss) 3.1 (12.3) 1.5
Comprehensive income (loss) attributable to UCT $ (179.5) $ 17.8 $ (30.1)
(See accompanying Notes to Consolidated Financial Statements)
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Ultra Clean Holdings, Inc.
Consolidated Statements of Cash Flows
Year Ended
(In millions)
Cash flows from operating activities:
Amortization of intangible assets 28.1 30.4 24.1
Amortization of debt issuance costs 2.7 3.0 3.9
Impairment of goodwill 151.1 — —
Loss (gain) on sale of property, plant and equipment 0.7 1.2 (0.9)
Change in the fair value of financial instruments (0.1) (29.2) 1.7
Deferred income taxes (2.7) (3.0) (12.4)
Changes in assets and liabilities, net of effects of acquisitions:
Prepaid expenses and other current assets (8.3) (3.2) 12.5
Other non-current assets (1.9) 1.3 —
Accrued compensation and related benefits 1.0 2.4 (5.6)
Income taxes payable (13.5) 1.0 (5.2)
Operating lease assets and liabilities 12.9 2.6 0.4
Other liabilities (4.7) 1.3 (7.9)
Net cash provided by operating activities 65.6 65.0 135.9
Cash flows from investing activities:
Purchases of property, plant and equipment (50.3) (63.5) (75.8)
Acquisition of businesses, net of cash acquired — — (46.1)
Other investing activities 3.3 — 2.2
Net cash used in investing activities (47.0) (63.5) (119.7)
Cash flows from financing activities:
Proceeds from bank borrowings 59.3 67.7 —
Extinguishment of bank borrowings (59.3) (44.2) —
Proceeds from issuance of common stock 2.2 2.0 0.8
Principal payments on bank borrowings (18.2) (10.2) (38.6)
Payment of debt issuance costs (0.6) (2.5) (0.3)
Employees’ taxes paid upon vesting of restricted stock units (1.1) (2.5) (2.2)
Payments of dividends to a joint venture shareholder (0.1) (0.5) (0.2)
Repurchase of shares (3.4) — (29.4)
Net cash provided by (used in) financing activities (21.2) 9.8 (69.9)