ichr-20240927

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission File Number: 001-37961

_________________________________________________________________________________________________________________________

ICHOR HOLDINGS, LTD.

(Exact Name of Registrant as Specified in its Charter)

_________________________________________________________________________________________________________________________


Cayman Islands						Not Applicable
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
3185 Laurelview Ct. Fremont, California						94538
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (510) 897-5200

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, par value $0.0001	ICHR	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non‑accelerated filer

Small reporting company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes o No x

As of November 1, 2024, the registrant had 33,733,340 ordinary shares, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Shareholders' Equity	3
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24
ITEM 4.	CONTROLS AND PROCEDURES	25

PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	25
ITEM 1A.	RISK FACTORS	25
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25
ITEM 4.	MINE SAFETY DISCLOSURES	25
ITEM 5.	OTHER INFORMATION	26
ITEM 6.	EXHIBITS	27

	SIGNATURES	28

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

ICHOR HOLDINGS, LTD.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 27, 2024		December 29, 2023
Assets
Current assets:
Cash and cash equivalents	$	116,447	$	79,955
Accounts receivable, net	84,150		66,721
Inventories	239,359		245,885
Prepaid expenses and other current assets	7,105		8,804
Total current assets	447,061		401,365
Property and equipment, net	89,283		92,755
Operating lease right-of-use assets	35,136		36,611
Other noncurrent assets	14,675		11,912
Deferred tax assets, net	3,366		3,148
Intangible assets, net	50,979		57,288
Goodwill	335,402		335,402
Total assets	$	975,902	$	938,481
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	80,963	$	60,490
Accrued liabilities	17,338		14,871
Other current liabilities	6,899		6,638
Current portion of long-term debt	7,500		7,500
Current portion of lease liabilities	10,239		9,463
Total current liabilities	122,939		98,962
Long-term debt, less current portion, net	122,782		241,183
Lease liabilities, less current portion	26,090		28,187
Deferred tax liabilities, net	1,169		1,169
Other non-current liabilities	5,647		4,303
Total liabilities	278,627		373,804
Shareholders’ equity:
Preferred shares ($0.0001 par value; 20,000,000 shares authorized; 0 shares issued and outstanding)	—		—
Ordinary shares ($0.0001 par value; 200,000,000 shares authorized; 33,724,917 and 29,435,398 shares outstanding, respectively; 38,162,356 and 33,872,837 shares issued, respectively)	3		3
Additional paid in capital	601,056		451,581
Treasury shares at cost (4,437,439 shares)	(91,578)		(91,578)
Retained earnings	187,794		204,671
Total shareholders’ equity	697,275		564,677
Total liabilities and shareholders’ equity	$	975,902	$	938,481

The accompanying notes are an integral part of these consolidated financial statements.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Net sales	$	211,139	$	196,761	$	615,749	$	607,639
Cost of sales	183,348		172,692		539,407		524,588
Gross profit	27,791		24,069		76,342		83,051
Operating expenses:
Research and development	5,872		5,188		17,168		14,689
Selling, general, and administrative	20,227		20,066		59,253		59,733
Amortization of intangible assets	2,077		3,639		6,309		11,565
Total operating expenses	28,176		28,893		82,730		85,987
Operating loss	(385)		(4,824)		(6,388)		(2,936)
Interest expense, net	1,638		5,136		7,592		14,716
Other expense, net	587		29		876		913
Loss before income taxes	(2,610)		(9,989)		(14,856)		(18,565)
Income tax expense	166		436		2,021		12,521
Net loss	$	(2,776)	$	(10,425)	$	(16,877)	$	(31,086)
Net loss per share
Basic	$	(0.08)	$	(0.36)	$	(0.52)	$	(1.07)
Diluted	$	(0.08)	$	(0.36)	$	(0.52)	$	(1.07)
Shares used to compute Net loss per share:
Basic	33,700,246		29,297,347		32,419,762		29,132,879
Diluted	33,700,246		29,297,347		32,419,762		29,132,879

The accompanying notes are an integral part of these consolidated financial statements.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity

(in thousands, except share amounts)

(unaudited)


For the three months ending September 27, 2024	Ordinary Shares			Additional Paid-In Capital		Treasury Shares			Retained Earnings		Total Shareholders' Equity
	Shares	Amount				Shares	Amount
Balance at June 28, 2024	33,629,331	$	3	$	595,881	4,437,439	$	(91,578)	$	190,570	$	694,876

Ordinary shares issued from exercise of stock options	7,309	—		170		—	—		—		170
Ordinary shares issued from vesting of restricted share units	43,290	—		(953)		—	—		—		(953)
Ordinary shares issued from employee share purchase plan	44,987	—		1,286		—	—		—		1,286
Share-based compensation expense	—	—		4,672		—	—		—		4,672
Net loss	—	—		—		—	—		(2,776)		(2,776)
Balance at September 27, 2024	33,724,917	$	3	$	601,056	4,437,439	$	(91,578)	$	187,794	$	697,275


For the three months ending September 29, 2023	Ordinary Shares			Additional Paid-In Capital		Treasury Shares			Retained Earnings		Total Shareholders' Equity
	Shares	Amount				Shares	Amount
Balance at June 30, 2023	29,241,561	$	3	$	441,883	4,437,439	$	(91,578)	$	226,995	$	577,303
Ordinary shares issued from exercise of stock options	90,247	—		1,602		—	—		—		1,602
Ordinary shares issued from vesting of restricted share units	43,580	—		(553)		—	—		—		(553)

Share-based compensation expense	—	—		4,752		—	—		—		4,752
Net loss	—	—		—		—	—		(10,425)		(10,425)
Balance at September 29, 2023	29,375,388	$	3	$	447,684	4,437,439	$	(91,578)	$	216,570	$	572,679

The accompanying notes are an integral part of these consolidated financial statements.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Shareholders’ Equity

(in thousands, except share amounts)

(unaudited)


For the nine months ending September 27, 2024	Ordinary Shares			Additional Paid-In Capital		Treasury Shares			Retained Earnings		Total Shareholders' Equity
	Shares	Amount				Shares	Amount
Balance at December 29, 2023	29,435,398	$	3	$	451,581	4,437,439	$	(91,578)	$	204,671	$	564,677
Ordinary shares issued, net of transaction costs	3,833,334	—		136,738		—	—		—		136,738
Ordinary shares issued from exercise of stock options	149,640	—		3,670		—	—		—		3,670
Ordinary shares issued from vesting of restricted share units	225,505	—		(4,225)		—	—		—		(4,225)
Ordinary shares issued from employee share purchase plan	81,040	—		2,307		—	—		—		2,307
Share-based compensation expense	—	—		10,985		—	—		—		10,985
Net loss	—	—		—		—	—		(16,877)		(16,877)
Balance at September 27, 2024	33,724,917	$	3	$	601,056	4,437,439	$	(91,578)	$	187,794	$	697,275


For the nine months ending September 29, 2023	Ordinary Shares			Additional Paid-In Capital		Treasury Shares			Retained Earnings		Total Shareholders' Equity
	Shares	Amount				Shares	Amount
Balance at December 30, 2022	28,861,949	$	3	$	431,415	4,437,439	$	(91,578)	$	247,656	$	587,496
Ordinary shares issued from exercise of stock options	215,009	—		4,452		—	—		—		4,452
Ordinary shares issued from vesting of restricted share units	200,809	—		(2,882)		—	—		—		(2,882)
Ordinary shares issued from employee share purchase plan	97,621	—		2,033		—	—		—		2,033
Share-based compensation expense	—	—		12,666		—	—		—		12,666
Net loss	—	—		—		—	—		(31,086)		(31,086)
Balance at September 29, 2023	29,375,388	$	3	$	447,684	4,437,439	$	(91,578)	$	216,570	$	572,679

The accompanying notes are an integral part of these consolidated financial statements.

ICHOR HOLDINGS, LTD.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended
	September 27, 2024		September 29, 2023
Cash flows from operating activities:
Net loss	$	(16,877)	$	(31,086)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	22,768		26,036
Share-based compensation	10,985		12,666
Deferred income taxes	(218)		9,388
Amortization of debt issuance costs	349		349



Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(17,429)		32,971
Inventories	6,526		16,760
Prepaid expenses and other assets	3,060		8,610
Accounts payable	22,746		(34,756)
Accrued liabilities	2,845		(7,106)
Other liabilities	(4,387)		(13,774)
Net cash provided by operating activities	30,368		20,058
Cash flows from investing activities:
Capital expenditures	(13,238)		(13,239)




Net cash used in investing activities	(13,238)		(13,239)
Cash flows from financing activities:
Issuance of ordinary shares, net of fees	136,738		—
Issuance of ordinary shares under share-based compensation plans	5,599		6,151
Employees' taxes paid upon vesting of restricted share units	(4,225)		(2,882)


Repayments on revolving credit facility	(115,000)		(15,000)

Repayments on term loan	(3,750)		(5,625)
Net cash provided by (used in) financing activities	19,362		(17,356)
Net increase (decrease) in cash	36,492		(10,537)
Cash at beginning of period	79,955		86,470
Cash at end of period	$	116,447	$	75,933
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	9,201	$	15,132
Cash paid during the period for taxes, net of refunds	$	1,804	$	3,852
Supplemental disclosures of non-cash activities:
Capital expenditures included in accounts payable	$	569	$	145
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,671	$	3,103

The accompanying notes are an integral part of these consolidated financial statements.

ICHOR HOLDINGS, LTD.

Notes to Consolidated Financial Statements

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

(unaudited)


Note 1 – Basis of Presentation and Selected Significant Accounting Policies

Basis of Presentation

These consolidated unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). All intercompany balances and transactions have been eliminated upon consolidation. All dollar figures presented in tables in the notes to the consolidated financial statements are in thousands, except per share amounts. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the U.S. Securities and Exchange Commission's rules and regulations for interim reporting. These consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 29, 2023.

Year End

We use a 52- or 53-week fiscal year ending on the last Friday in December. Our fiscal years ending December 27, 2024 and December 29, 2023 are each 52 weeks. References to 2024 and 2023 relate to the fiscal years then ended, respectively. The three-month periods ended September 27, 2024 and September 29, 2023 are each 13 weeks. References to the third quarter of 2024 and 2023 relate to the three-month periods then ended.

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents consist of deposits and financial instruments which are readily convertible into cash and have original maturities of 90 days or less at the time of acquisition.

Fair Value of Financial Instruments

The carrying values of our financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and long-term debt, net of unamortized debt issuance costs, approximate fair value.

Revenue Recognition

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

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

Performance obligations – Substantially all of our performance obligations pertain to promised goods (“products”), which are primarily comprised of fluid delivery subsystems, weldments, and other components. Most of our contracts contain a single performance obligation and are generally completed within 12 months. Product sales are recognized at a point-in-time, upon "delivery," as such term is defined within the contract, which is generally at the time of shipment, as that is when control of the product has transferred. Products are covered by a standard assurance warranty, generally extended for a period of one to two years depending on the customer, which promises that delivered products conform to contract specifications. As such, we account for such warranties under Accounting Standards Codification ("ASC") Topic 460, Guarantees, and not as a separate performance obligation.

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

Public Offering of Shares

In March 2024, we completed an underwritten public offering of 3.8 million ordinary shares, which included the exercise in full of the underwriters' option to purchase additional ordinary shares. We received net proceeds from the offering of approximately $136.7 million, after deducting the underwriting discount of $1.59 per share and incremental offering expenses of $0.9 million.

Accounting Pronouncements Recently Issued

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

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


Note 2 – Inventories

Inventories consist of the following:


	September 27, 2024		December 29, 2023
Raw materials	$	188,553	$	190,027
Work in process	44,898		36,849
Finished goods	39,908		47,449
Excess and obsolete adjustment	(34,000)		(28,440)
Total inventories	$	239,359	$	245,885


Note 3 – Property and Equipment and Other Noncurrent Assets

Property and equipment consist of the following:


	September 27, 2024		December 29, 2023
Machinery	$	118,387	$	113,529
Leasehold improvements	47,815		46,129
Computer software, hardware, and equipment	9,054		10,316
Office furniture, fixtures, and equipment	1,327		1,320
Vehicles	395		396
Construction-in-process	8,858		4,216
	185,836		175,906
Less accumulated depreciation	(96,553)		(83,151)
Total property and equipment, net	$	89,283	$	92,755

Depreciation expense was $5.2 million and $4.9 million for the third quarter of 2024 and 2023, respectively. Depreciation expense was $15.6 million and $13.7 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.

Cloud Computing Implementation Costs

We capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded to prepaid expenses or other noncurrent assets. To date, these costs have been those incurred to implement a new company-wide enterprise resource planning system. The balance of capitalized cloud computing implementation costs, net of accumulated amortization, was $10.0 million and $8.1 million as of September 27, 2024 and December 29, 2023, respectively, and is included in other noncurrent assets on our consolidated balance sheets. The related amortization expense, which is included in selling, general, and administrative expense on our consolidated statements of operations, was $0.3 million and $0.3 million for the third quarter of 2024 and 2023, respectively, and $0.8 million and $0.8 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.


Note 4 – Intangible Assets

Definite‑lived intangible assets consist of the following:


	September 27, 2024
	Gross value		Accumulated amortization		Accumulated impairment charges		Carrying amount		Weighted average useful life
Customer relationships	$	73,142	$	(26,784)	$	—	$	46,358	9.9 years
Developed technology	11,047		(6,426)		—		4,621		10.0 years
Total intangible assets	$	84,189	$	(33,210)	$	—	$	50,979


	December 29, 2023
	Gross value		Accumulated amortization		Accumulated impairment charges		Carrying amount		Weighted average useful life
Customer relationships	$	105,542	$	(53,680)	$	—	$	51,862	8.7 years
Developed technology	11,047		(5,621)		—		5,426		10.0 years
Total intangible assets	$	116,589	$	(59,301)	$	—	$	57,288


Note 5 – Leases

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and liabilities, we use the non-cancelable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

We lease facilities under non-cancelable operating leases that expire at various dates during the years 2024 through 2031. In addition to base rental payments, we are generally responsible for our proportionate share of operating expenses, including facility maintenance, insurance, and property taxes. As these amounts are variable, they are not included in lease liabilities.

The components of lease expense are as follows:


	Three Months Ended				Nine Months Ended
	September 27, 2024		September 29, 2023		September 27, 2024		September 29, 2023
Operating lease cost	$	2,603	$	2,384	$	7,587	$	7,188

Supplemental cash flow information related to leases is as follows:


	Nine Months Ended
	September 27, 2024		September 29, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,404	$	6,953

Supplemental balance sheet information related to leases is as follows:


	September 27, 2024	December 29, 2023
Weighted-average remaining lease term of operating leases	4.2 years	4.6 years
Weighted-average discount rate of operating leases	4.1%	3.4%

Future minimum lease payments under non-cancelable leases are as follows as of September 27, 2024:


2024, remaining	$	2,537
2025	10,252
2026	9,732
2027	8,883
2028	4,270
Thereafter	3,944
Total future minimum lease payments	39,618
Less imputed interest	(3,289)
Total lease liabilities	$	36,329


Note 6 – Income Taxes

Income tax information for the periods reported is as follows:


	Three Months Ended						Nine Months Ended
	September 27, 2024			September 29, 2023			September 27, 2024			September 29, 2023
Income tax expense	$	166		$	436		$	2,021		$	12,521
Loss before income taxes	$	(2,610)		$	(9,989)		$	(14,856)		$	(18,565)
Effective income tax rate	(6.4)		%	(4.4)		%	(13.6)		%	(67.4)		%

Our effective tax rate for the three and nine months ended September 27, 2024 differs from the statutory rate primarily due to taxes on foreign income that differs from the U.S. tax rate, including a tax holiday in Singapore from which we will benefit through 2026, and a valuation allowance against U.S. deferred tax assets.

Our effective tax rate for the three and nine months ended September 29, 2023 differs from the statutory rate primarily due to a valuation allowance recorded against our U.S. federal and state deferred tax assets, as well as taxes on foreign income that differ from the U.S. tax rate, including a tax holiday in Singapore from which we will benefit through 2026. We recorded an $11.1 million valuation allowance in the second quarter of 2023 based on an assessment of available positive and negative evidence, including an estimate of being in a three-year cumulative loss position in the U.S. by the end of 2023, projections of future taxable income, and other quantitative and qualitative information. We intend to maintain a full valuation allowance on our U.S. federal and state net deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of the valuation allowance.

The ending balance for the unrecognized tax benefits for uncertain tax positions was approximately $4.4 million as of September 27, 2024, of which $0.5 million relates to estimated interest and penalties. The uncertain tax positions that are reasonably possible to decrease in the next twelve months are insignificant.

As of September 27, 2024, we were under examination by California tax authorities.


Note 7 – Employee Benefit Programs

401(k) Plan

We sponsor a 401(k) plan available to employees of our U.S.‑based subsidiaries. Participants may make salary deferral contributions not to exceed 50% of a participant’s annual compensation or the maximum amount otherwise allowed by law. Eligible employees receive a discretionary matching contribution equal to 50% of a participant’s deferral, up to an annual matching maximum of 4% of a participant’s annual compensation. Matching contributions were $0.6 million and $0.7 million for the third quarter of 2024 and 2023, respectively, and $2.0 million and $2.2 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.


Note 8 – Long-Term Debt

Long‑term debt consists of the following:


	September 27, 2024		December 29, 2023
Term loan	$	131,250	$	135,000
Revolving credit facility	—		115,000
Total principal amount of long-term debt	131,250		250,000
Less unamortized debt issuance costs	(968)		(1,317)
Total long-term debt, net	130,282		248,683
Less current portion	(7,500)		(7,500)
Total long-term debt, less current portion, net	$	122,782	$	241,183

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

As of September 27, 2024, interest is charged at either the Base Rate or the Bloomberg Short-Term Bank Yield (“BSBY”) Rate (as such terms are defined in the credit agreement) at our option, plus an applicable margin. The Base Rate is equal to the higher of i) the Prime Rate, ii) the Federal Funds Rate plus 0.5%, or iii) the BSBY Rate plus 1.00%. The BSBY Rate is equal to BSBY for a particular tenor matching the respective interest period. The applicable margin on Base Rate and BSBY Rate loans is 0.375% to 1.375% and 1.375% to 2.375% per annum, respectively, depending on our leverage ratio, which is based on trailing 12-month Consolidated EBITDA, as defined in our credit agreement. We are also charged a commitment fee of 0.175% to 0.350%, depending on our leverage ratio, on the unused portion of our revolving credit facility. Base Rate interest payments and commitment fees are due quarterly. BSBY Rate interest payments are due on the last day of the applicable interest period, or quarterly for applicable interest periods longer than three months. As of September 27, 2024, our credit facilities bore interest under the BSBY rate option at 7.19%.


Note 9 – Share‑Based Compensation

The 2016 Omnibus Incentive Plan provides for grants of share‑based awards to employees, directors, and consultants. Awards may be in the form of stock options (“options”), tandem and non‑tandem stock appreciation rights, restricted share awards or restricted share units (“RSUs”), performance awards, and other share‑based awards. Forfeited or expired awards are returned to the incentive plan pool for future grants. Awards generally vest over four years, 25% on the first anniversary of the date of grant and quarterly thereafter over the remaining three years. Upon vesting of RSUs, shares are withheld to cover statutory minimum withholding taxes. Shares withheld are not reflected as an issuance of ordinary shares within our consolidated statements of shareholders’ equity, as the shares are never issued, and the associated tax payments are reflected as financing activities within our consolidated statements of cash flows.

Share‑based compensation expense across all plans for options, RSUs, and employee share purchase rights was $4.7 million and $4.8 million for the third quarter of 2024 and 2023, respectively, and $11.0 million and $12.7 million for the nine months ended September 27, 2024 and September 29, 2023, respectively.

Stock Options

The following table summarizes option activity:


	Number of Stock Options
	Service condition	Weighted average exercise price per share		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding, December 29, 2023	582,163	$	24.36
Granted	—	$	—
Exercised	(149,640)	$	24.52
Forfeited or expired	(639)	$	21.76
Outstanding, September 27, 2024	431,884	$	24.30	1.2 years	$	3,285
Exercisable, September 27, 2024	431,884	$	24.30	1.2 years	$	3,285

Restricted Share Units

The following table summarizes RSU activity:

Number of RSUs

Service
condition

SEC Form 10-Q filed by Ichor Holdings