Ichor Holdings, Ltd. Announces First Quarter 2018 Financial Results

Ichor Holdings, Ltd. (NASDAQ: ICHR), a leader in the design, engineering, and manufacturing of critical fluid and gas delivery subsystems for semiconductor capital equipment, today announced financial results for the first quarter of fiscal year 2018.

Highlights for the first quarter of 2018:

• Record Revenues and Strong Growth. Revenues set a new quarterly record of $258 million, up 41% quarter-over-quarter and up 74% from the first quarter of 2017;
• Increasing Margins. With GAAP gross margin of 16.5%, non-GAAP gross margin increased 1.2 percentage points from the prior quarter to a record 18.3%. Operating margin was 8.0% on a GAAP basis, and reached a new record of 13.3% on a non-GAAP basis, up 2.1 percentage points from the prior quarter;
• Record Earnings. Net earnings were $0.63 per diluted share on a GAAP basis, and set a new quarterly record of $1.03 per diluted share on an adjusted non-GAAP basis, up 47% quarter-over-quarter and up 81% from the first quarter of 2017.

“We are very pleased to report stronger-than-expected financial results for the first quarter, in which we achieved new records in revenue, gross margin, operating margin, and earnings per share,” commented Tom Rohrs, Chairman and CEO of Ichor. “We continue to outperform industry spending, with revenue growth well outpacing investments in wafer fab equipment, while continuing to deliver on our objective to grow earnings faster than revenues. Our strategic acquisitions are contributing to our strong revenue growth and expanding margins, and our first-quarter profitability is showing solid progress toward our financial model targets.

“We recently announced the acquisition of IAN Engineering, providing us with a key strategic foothold in the rapidly-growing semiconductor equipment market in South Korea,” continued Mr. Rohrs. “We expect IAN will be yet another driver of revenue outperformance beginning in the second half of 2018, and certainly as we look ahead to 2019. Together with our previous acquisitions of Cal-Weld and Talon, as well as our proprietary liquid delivery platform, all of these businesses significantly expand our served markets and provide meaningful opportunities to expand our market share, enabling continued revenue growth and outperformance relative to industry spending.

“Our outlook for 2018 has strengthened since last quarter, both in terms of revenue growth and profitability,” concluded Mr. Rohrs. Our greater market share, higher revenue volume, and increased gross margin are enabling us to make increased investments in manufacturing capacity to support our customers’ increasing demand for our solutions. While the second quarter is expected to moderate slightly from the record first quarter results, our first half revenues at the midpoint will be up 46% over the second half of 2017, and up 64% over the same period last year, and we fully expect full-year revenues to again outpace industry spending, with even higher growth expected in earnings.”

U.S. GAAP Financial Results Overview

For the first quarter of 2018, revenue was $258.0 million, net income from continuing operations was $16.7 million, and net income from continuing operations per diluted share (“diluted EPS”) was $0.63. This compares to revenue of $182.9 million and $148.7 million, net income from continuing operations of $19.2 million and $13.0 million, and diluted EPS of $0.72 and $0.51, for the fourth and first quarters of 2017, respectively.

Non-GAAP Financial Results Overview

For the first quarter of 2018, non-GAAP adjusted net income from continuing operations was $27.5 million and non-GAAP adjusted diluted EPS was $1.03. This compares to non-GAAP adjusted net income from continuing operations of $18.6 million and $14.6 million, and non-GAAP adjusted diluted EPS of $0.70 and $0.57, for the fourth and first quarters of 2017, respectively.

Second Quarter 2018 Financial Outlook

For the second quarter of 2018, we expect revenue to be in the range of $244 to $254 million. We expect GAAP diluted EPS to be in the range of $0.77 to $0.86 and non-GAAP adjusted diluted EPS to be in the range of and $0.91 to $1.00.

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

At March 30, 2018, we had cash of $63.8 million. The net decrease in cash of $5.5 million during the first quarter of 2018 was primarily due to capital expenditures of $3.7 million, net cash used in financing activities of $1.1 million, and net cash used in operating activities of $0.8 million.

We used $0.8 million of cash in operating activities during the first quarter of 2018 due to a net increase of $27.3 million in our net operating assets and liabilities, partially offset by net income of $16.7 million and net non-cash charges of $9.7 million. Non-cash charges primarily consist of $5.8 million in depreciation and amortization and $3.8 million in share-based compensation expense. The increase in net operating assets and liabilities was primarily due to an increase in accounts receivable of $26.4 million, due to increased sales volume and timing of shipments and customer payments during the quarter, and an increase in inventories of $10.5 million, due to increased materials purchases to support demand, partially offset by an increase in accounts payable of $8.7 million. Cash used in investing activities during the first quarter of 2018 of $3.7 million was from capital expenditures to support current and future growth. Net cash used in financing activities was $1.1 million due to share repurchases of $5.0 million and debt issuance costs of $2.1 million in connection with the refinancing of our credit facilities in February 2018, partially offset by $3.4 million in proceeds related to issuances of ordinary shares under our share-based compensation plans and $2.6 million in net borrowing of long-term debt in connection with the refinancing.

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 margin, non-GAAP adjusted net income from continuing operations, and non-GAAP adjusted diluted EPS. These non-GAAP metrics excluded amortization of intangible assets, share-based compensation expense, tax adjustments related to those non-GAAP adjustments, tax benefits from acquisitions, and non-recurring charges, to the extent they are present in gross profit, operating margin, 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 margin, 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 first quarter 2018 results and business outlook on May 8, 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: 6287553.

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: 6287553.

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 March 30, 2018, December 29, 2017, and March 31, 2017 were all 13 weeks. References to the first quarter of 2018, fourth quarter of 2017, and first quarter of 2017 relate to the three months ended March 30, 2018, December 29, 2017, and March 31, 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 outperformance for the second quarter and second half of 2018 and 2019, 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, (9) dependence on a limited number of suppliers and (10) 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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Ichor Holdings, Ltd.
Jeff Andreson, 510-897-5200
CFO
or
Claire McAdams, 530-265-9899
IR
[email protected]