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Ichor Holdings, Ltd. Announces Second Quarter 2018 Financial Results

August 7, 2018

FREMONT, Calif.--(BUSINESS WIRE)--Aug 7, 2018--Ichor Holdings, Ltd. (NASDAQ: ICHR), a leader in the design, engineering, and manufacturing of critical fluid delivery subsystems for semiconductor capital equipment, today announced financial results for the second quarter of fiscal year 2018.

Highlights for the second quarter of 2018:

Revenues of $249 million, up 56% from the second quarter of 2017; Gross margin on a GAAP basis of 17.6% and 17.8% on a non-GAAP basis, increasing 200 basis points from non-GAAP gross margin during the second quarter of 2017; With net earnings of $1.07 per diluted share on a GAAP basis, our non-GAAP diluted EPS was $1.02, up 70% from the second quarter of 2017; Completed $25 million of share repurchases, and in the third quarter to date, purchased the remaining $20 million under our $50 million Share Repurchase Program.

“We are pleased to report another strong quarter of financial performance for Ichor,” commented Tom Rohrs, Chairman and CEO of Ichor. “We continued to outperform overall semiconductor equipment spending throughout the first half of the year, with revenues up 64% over the first half of 2017, while delivering year-over-year increases in gross margin, operating margin, net income, and cash flows from operations. As expected, our revenues this year will be front-half weighted, given the very robust spending environment for memory devices during the first half, and the moderation of capital expenditures during the third quarter. Our expected decline in revenues during the third quarter is aligned with the forecasts of our customers, who are the global leaders in semiconductor process equipment. Given our variable manufacturing cost structure, we are able to take action to align our expenditures with the current spending environment in order to continue delivering strong profitability. Therefore, this near-term pause in semiconductor capacity expansion is an excellent opportunity for us to demonstrate the resilience of our operating model and the strong profitability we can deliver, even in a down quarter. Our customers have indicated that the September quarter is a near-term trough in revenues, and with the strong results delivered in the first half of the year, we look forward to reporting another record year for Ichor in 2018, with revenue growth outperforming the industry, expanding gross and operating margins, and record earnings.”

U.S. GAAP Financial Results Overview

For the second quarter of 2018, revenue was $249.0 million, net income from continuing operations was $28.0 million, and net income from continuing operations per diluted share (“diluted EPS”) was $1.07. This compares to revenue of $258.0 million and $159.7 million, net income from continuing operations of $16.7 million and $10.5 million, and diluted EPS of $0.63 and $0.40, for the first quarter of 2018 and second quarter of 2017, respectively.

Non-GAAP Financial Results Overview

For the second quarter of 2018, non-GAAP adjusted net income from continuing operations was $26.7 million and non-GAAP adjusted diluted EPS was $1.02. This compares to non-GAAP adjusted net income from continuing operations of $27.5 million and $15.5 million, and non-GAAP adjusted diluted EPS of $1.03 and $0.60, for the first quarter of 2018 and second quarter of 2017, respectively.

Third Quarter 2018 Financial Outloo k

For the third quarter of 2018, we expect revenue to be in the range of $175 to $185 million. We expect GAAP diluted EPS to be in the range of $0.29 to $0.37 and non-GAAP adjusted diluted EPS to be in the range of $0.49 to $0.57.

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

Balance Sheet and Cash Flow Results

We ended the second quarter of 2018 with cash of $63.4 million, a net decrease of $0.4 million from the first quarter of 2018. During the second quarter of 2018, cash flow from operations was $30.9 million, offset by share repurchases of $25.0 million, capital expenditures of $5.1 million, and net cash paid in connection with acquisitions of $1.4 million.

The net decrease in cash of $5.9 million during the six months ended June 29, 2018 from December 29, 2017 was primarily due to cash flow from operations of $30.2 million and proceeds from the issuance of ordinary shares under our share-based compensation plans of $5.8 million, offset by share repurchases of $30.0 million, capital expenditures of $8.8 million, debt modification costs from the refinancing of our credit facilities in February 2018 of $2.1 million, and net cash paid in connection with acquisitions of $1.4 million.

Our cash from operations during the six months ended June 29, 2018 of $30.2 million was due to net income of $44.8 million and net non-cash charges of $12.1 million, partially offset by an increase in our net operating assets and liabilities of $26.7 million, net of acquired assets and liabilities. Non-cash charges primarily consist of depreciation and amortization of $11.6 million and share-based compensation of $5.0 million, partially offset by deferred income taxes of $5.0 million. The increase in our net operating assets and liabilities, net of acquired assets and liabilities, was primarily due to a decrease in accounts payable of $18.2 million and an increase in accounts receivable of $15.0 million, partially offset by a decrease in inventories of $8.2 million.

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this press release also contains non-GAAP financial results, including non-GAAP gross profit, non-GAAP operating income, non-GAAP adjusted net income from continuing operations, and non-GAAP adjusted diluted EPS. These non-GAAP metrics exclude amortization of intangible assets, share-based compensation expense, non-recurring expenses including adjustments to the cost of goods sold, tax adjustments related to those non-GAAP adjustments, and non-recurring discrete tax items including tax impacts from releasing a valuation allowance related to foreign tax credits, to the extent they are present in gross profit, operating income, and net income from continuing operations. A table showing these metrics on a GAAP and non-GAAP basis, with reconciliation footnotes thereto, is included at the end of this press release. Non-GAAP adjusted diluted EPS is defined as non-GAAP adjusted net income from continuing operations divided by weighted average diluted ordinary shares outstanding during the period.

Management uses non-GAAP gross profit, non-GAAP operating income, non-GAAP adjusted net income from continuing operations, and non-GAAP adjusted diluted EPS to evaluate our operating and financial results. We believe the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors’ ability to view our results from management’s perspective. A table presenting the reconciliation of non-GAAP adjusted net income from continuing operations to U.S. GAAP net income from continuing operations is also included at the end of this press release.

Conference Call

We will conduct a conference call to discuss our second quarter 2018 results and business outlook on August 7, 2018, at 1:30 p.m. Pacific time.

To listen to the conference call via the Internet, please visit the investor relations section of our web site at ir.ichorsystems.com. To listen to the conference call via telephone, please call 844-395-9251 (domestic) or 478-219-0504 (international), conference ID: 7777704.

A taped replay of the webcast will be available shortly after the call on our website or by calling 855-859-2056 (domestic) or 404-537-3406 (international), conference ID: 7777704.

About Ichor

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

We use a 52 or 53 week fiscal year ending on the last Friday in December. The three months ended June 29, 2018, March 30, 2018, and June 30, 2017 were all 13 weeks. References to the second and first quarters of 2018 and the second quarter of 2017 relate to the three months ended June 29, 2018, March 30, 2018, and June 30, 2017, respectively.

Safe Harbor Statement

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

Examples of forward-looking statements include, but are not limited to, statements regarding expected revenue, growth, earnings, profitability, and industry trends for the third quarter and second half of 2018, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on management’s current expectations and assumptions regarding Ichor’s business and industry, the economy and other future conditions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including: (1) dependence on expenditures by manufacturers and cyclical downturns in the semiconductor capital equipment industry, (2) reliance on a very small number of original equipment manufacturers for a significant portion of sales, (3) negotiating leverage held by our customers, (4) competitiveness and rapid evolution of the industries in which we participate, (5) risks associated with weakness in the global economy and geopolitical instability, (6) keeping pace with developments in the industries we serve and with technological innovation generally, (7) designing, developing and introducing new products that are accepted by original equipment manufacturers in order to retain our existing customers and obtain new customers, (8) managing our manufacturing and procurement process effectively, (9) defects in our products that could damage our reputation, decrease market acceptance and result in potentially costly litigation, (10) dependence on a limited number of suppliers and (11) the integration of recent acquisitions with Ichor, including the ability to retain customers, suppliers and key employees. Additional information concerning these and other factors can be found in Ichor’s filings with the Securities and Exchange Commission (the “SEC”), including other risks, relevant factors and uncertainties identified in the “Risk Factors” section of Ichor’s Annual Report on Form 10-K filed with the SEC on March 13, 2018, and subsequent filings with the SEC.

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

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