Ultra Clean Reports First Quarter Financial Results

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Three Months Ended

April 1, 

March 26, 

2022

2021

Revenues:

Product

$

486,831

$

345,616

Services

77,313

72,011

Total revenues

564,144

417,627

Cost of revenues:

Product

399,539

283,569

Services

50,877

47,120

Total cost of revenues

450,416

330,689

Gross profit

113,728

86,938

Operating expenses:

Research and development

6,839

4,208

Sales and marketing

13,797

7,608

General and administrative

47,381

34,712

Total operating expenses

68,017

46,528

Income from operations

45,711

40,410

Interest income

65

98

Interest expense

(6,413)

(3,605)

Other income (expense), net

5

(4,263)

Income before provision for income taxes

39,368

32,640

Provision for income taxes

8,542

7,015

Net income

30,826

25,625

Less: Net income attributable to noncontrolling interests

2,896

628

Net income attributable to UCT

$

27,930

$

24,997

Net income per share attributable to UCT common stockholders:

Basic

$

0.62

$

0.62

Diluted

$

0.61

$

0.60

Shares used in computing net income per share:

Basic

44,927

40,564

Diluted

45,593

41,639

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

April 1, 

December 31,

2022

2021

ASSETS

Current assets:

  Cash and cash equivalents

$

367,004

$

466,455

  Accounts receivable, net of allowance

279,274

250,147

  Inventories

440,341

379,235

  Prepaid expenses and other current assets

36,079

41,260

Total current assets

1,122,698

1,137,097

Property, plant and equipment, net

250,088

242,347

Goodwill

268,521

270,044

Intangibles assets, net

237,644

245,696

Deferred tax assets, net

36,575

37,607

Operating lease right-of-use assets

86,799

83,357

Other non-current assets

9,315

9,242

Total assets

$

2,011,640

$

2,025,390

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Bank borrowings

$

19,489

$

22,071

  Accounts payable

288,121

332,897

  Accrued compensation and related benefits

40,813

46,790

  Operating lease liabilities

17,316

17,299

  Other current liabilities

51,923

50,060

Total current liabilities

417,662

469,117

Bank borrowings, net of current portion

530,892

529,919

Deferred tax liabilities 

54,761

54,889

Operating lease liabilities

68,837

65,923

Other liabilities

13,386

12,894

Total liabilities

1,085,538

1,132,742

UCT stockholders' equity:

  Common stock

517,222

511,628

  Retained earnings

365,347

337,417

  Accumulated other comprehensive gain (loss)

(3,004)

(167)

Total UCT stockholders' equity

879,565

848,878

  Non-controlling interest

46,537

43,770

Total equity

926,102

892,648

Total liabilities and stockholders' equity

$

2,011,640

$

2,025,390

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Fiscal Year Ended

April 1, 

March 26, 

2022

2021

Cash flows from operating activities:

Net income

$

30,826

$

25,625

Adjustments to reconcile net income to net cash provided by operating activities:

      Depreciation and amortization

18,903

11,823

Stock-based compensation

5,596

3,465

Deferred income taxes

1,390

1,236

Change in the fair value of financial instruments and earn-out liability

285

11,639

Gain from insurance proceeds

—

(7,332)

Others

181

101

Changes in assets and liabilities:

Accounts receivable

(29,127)

(22,502)

Inventories

(61,106)

(8,782)

Prepaid expenses and other current assets

4,590

3,018

Other non-current assets

(73)

(1,011)

Accounts payable

(35,887)

43,266

Accrued compensation and related benefits

(5,977)

(3,599)

Operating lease assets and liabilities

(511)

(315)

Income taxes payable

—

2,777

Other liabilities

3,487

6,194

Net cash provided by (used in) operating activities

(67,423)

65,603

Cash flows from investing activities:

Purchases of property, plant and equipment

(28,380)

(6,487)

Proceeds from sale of property and equipment, including insurance proceeds

—

7,332

Net cash provided by (used in) investing activities

(28,380)

845

Cash flows from financing activities:

Proceeds from bank borrowings

—

6,627

Payments on bank borrowings and finance leases

(2,672)

(8,243)

Others

—

(2)

Net cash used in financing activities

(2,672)

(1,618)

Effect of exchange rate changes on cash and cash equivalents

(976)

(847)

Net increase (decrease) in cash and cash equivalents

(99,451)

63,983

Cash and cash equivalents at beginning of period

466,455

200,274

Cash and cash equivalents at end of period

$

367,004

$

264,257

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION 

(Unaudited; dollars in thousands)

GAAP

Non-GAAP

Three Months Ended

Three Months Ended

April 1, 2022

April 1, 2022

Products

Services

Consolidated

Products

Services

Consolidated

Revenues

$

486,831

$

77,313

$

564,144

$

486,831

$

77,313

$

564,144

Gross profit

$

87,292

$

26,436

$

113,728

$

88,426

$

27,459

$

115,885

Gross margin

17.9%

34.2%

20.2%

18.2%

35.5%

20.5%

Income from operations

$

37,573

$

8,138

$

45,711

$

49,476

$

12,157

$

61,633

Operating margin

7.7%

10.5%

8.1%

10.2%

15.7%

10.9%

Three Months Ended

April 1, 2022

Products

Services

Consolidated

Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)

Reported gross profit on a GAAP basis

$

87,292

$

26,436

$

113,728

Amortization of intangible assets (1)

657

1,023

1,680

Stock-based compensation expense (3)

477

—

477

Non-GAAP gross profit

$

88,426

$

27,459

$

115,885

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

17.9%

34.2%

20.2%

Amortization of intangible assets (1)

0.2%

1.3%

0.2%

Stock-based compensation expense (3)

0.1%

—

0.1%

Non-GAAP gross margin

18.2%

35.5%

20.5%

Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)

Reported income from operations on a GAAP basis

$

37,573

$

8,138

$

45,711

Amortization of intangible assets (1)

4,405

3,647

8,052

Restructuring charges (2)

49

—

49

Stock-based compensation expense (3)

5,077

372

5,449

Legal-related costs (4)

2,200

—

2,200

Acquisition related costs (5)

172

—

172

Non-GAAP income from operations

$

49,476

$

12,157

$

61,633

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

7.7%

10.5%

8.1%

Amortization of intangible assets (1)

0.9%

4.7%

1.4%

Restructuring charges (2)

0.0%

0.0%

0.0%

Stock-based compensation expense (3)

1.0%

0.5%

1.0%

Legal-related costs (4)

0.5%

0.0%

0.4%

Acquisition related costs (5)

0.1%

0.0%

0.1%

Non-GAAP operating margin

10.2%

15.7%

10.9%

1    Amortization of intangible assets related to the Company's business acquisitions

2    Represents severance, retention and costs related to facility closures

3    Represents compensation expense for stock granted to employees and directors

4    Represents estimated costs related to legal proceedings

5    Represents costs related to the acquisition of Ham-Let 

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

Three Months Ended

April 1, 

March 26, 

December 31, 

2022

2021

2021

Reconciliation of GAAP Net Income to Non-GAAP Net Income (in thousands)

Reported net income attributable to UCT on a GAAP basis

$

27,930

$

24,997

$

45,470

Amortization of intangible assets (1)

8,052

4,889

9,511

Restructuring charges (2)

49

140

(391)

Stock-based compensation expense (3)

5,449

4,043

4,667

Legal-related costs (4)

2,200

—

2,200

Acquisition related costs (5)

172

1,337

449

Fair value related adjustments (6)

—

11,582

546

Insurance proceeds (7)

—

(7,332)

—

Income tax effect of non-GAAP adjustments (8)

(2,611)

(2,639)

(2,336)

Income tax effect of valuation allowance (9)

2,084

1,140

(2,400)

Non-GAAP net income attributable to UCT

$

43,325

$

38,157

$

57,716

Reconciliation of GAAP Income from operations to Non-GAAP Income from operations (in thousands)

Reported income from operations on a GAAP basis

$

45,711

$

40,410

$

62,732

Amortization of intangible assets (1)

8,052

4,889

9,511

Restructuring charges (2)

49

140

(391)

Stock-based compensation expense (3)

5,449

4,043

4,667

Legal-related costs (4)

2,200

—

—

Acquisition related costs (5)

172

1,337

449

Fair value related adjustments (6)

—

—

546

Non-GAAP income from operations

$

61,633

$

50,819

$

77,514

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

8.1%

9.7%

10.2%

Amortization of intangible assets (1)

1.4%

1.2%

1.5%

Restructuring charges (2)

0.0%

0.0%

-0.1%

Stock-based compensation expense (3)

1.0%

1.0%

0.8%

Legal-related costs (4)

0.4%

—

—

Acquisition related costs (5)

0.1%

0.3%

0.1%

Fair value related adjustments (6)

—

0.0%

0.1%

Non-GAAP operating margin

10.9%

12.2%

12.6%

Reconciliation of GAAP Gross profit to Non-GAAP Gross profit (in thousands)

Reported gross profit on a GAAP basis

$

113,728

$

86,938

$

129,086

Amortization of intangible assets (1)

1,680

1,022

1,681

Restructuring charges (2)

—

6

115

Stock-based compensation expense (3)

477

980

719

Fair value related adjustments (6)

—

—

546

Non-GAAP gross profit

$

115,885

$

88,946

$

132,147

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

20.2%

20.8%

21.0%

Amortization of intangible assets (1)

0.2%

0.3%

0.3%

Restructuring charges (2)

—

0.0%

0.0%

Stock-based compensation expense (3)

0.1%

0.2%

0.1%

Fair value related adjustments (6)

—

—

0.1%

Non-GAAP gross margin

20.5%

21.3%

21.5%

Reconciliation of GAAP Interest and other income (expense) to Non-GAAP Interest and other income (expense) (in thousands)

Reported interest and other income (expense) on a GAAP basis

$

(6,343)

$

(7,770)

$

(7,643)

Fair value related adjustments (6)

—

11,582

—

Insurance proceeds (7)

—

(7,332)

—

Non-GAAP interest and other income (expense)

$

(6,343)

$

(3,520)

$

(7,643)

Reconciliation of GAAP Earnings Per Diluted Share to Non-GAAP Earnings Per Diluted Share

Reported net income on a GAAP basis

$

0.61

$

0.60

$

1.00

Amortization of intangible assets (1)

0.18

0.12

0.21

Restructuring charges (2)

0.00

—

(0.01)

Stock-based compensation expense (3)

0.12

0.10

0.10

Legal-related costs (4)

0.05

—

—

Acquisition related costs (5)

—

0.03

0.01

Fair value related adjustments (6)

—

0.28

0.01

Insurance proceeds (7)

—

(0.18)

—

Income tax effect of non-GAAP adjustments (8)

(0.06)

(0.06)

(0.05)

Income tax effect of valuation allowance (9)

0.05

0.03

(0.05)

Non-GAAP net income

$

0.95

$

0.92

$

1.22

Weighted average number of diluted shares (thousands) on a non-GAAP basis

45,593

41,639

45,525

ULTRA CLEAN HOLDINGS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE

Three Months Ended

April 1, 

March 26, 

December 31, 

2022

2021

2021

(in thousands, except percentages)

Provision for income taxes on a GAAP basis

$

8,542

$

7,015

$

6,303

Income tax effect of non-GAAP adjustments (8)

2,611

2,639

2,336

Income tax effect of valuation allowance (9)

(2,084)

(1,140)

2,400

Non-GAAP provision for income taxes

$

9,069

$

8,514

$

11,039

Income before income taxes on a GAAP basis

$

39,368

$

32,640

$

55,089

Amortization of intangible assets (1)

8,052

4,889

9,511

Restructuring charges (2)

49

140

(391)

Stock-based compensation expense (3)

5,449

4,043

4,667

Legal-related costs (4)

2,200

—

—

Acquisition related costs (5)

172

1,337

449

Fair value related adjustments (6)

—

11,582

546

Insurance proceeds (7)

—

(7,332)

—

Non-GAAP income before income taxes

$

55,290

$

47,299

$

69,871

Effective income tax rate on a GAAP basis

21.7%

21.5%

11.4%

Non-GAAP effective income tax rate

16.4%

18.0%

15.8%

1    Amortization of intangible assets related to the Company's business acquisitions

2    Represents severance, retention and costs related to facility closures

3    Represents compensation expense for stock granted to employees and directors

4    Represents estimated costs related to legal proceedings

5    Represents costs related to the acquisition of Ham-Let 

6    Adjustments related to the fair values of inventories, contingent consideration, purchase obligation and forward hedge contracts

7    Insurance proceeds pertaining to the Cinos fire in 2018

8    Tax effect of items (1) through (7) above based on the non-GAAP tax rate 

9    The Company's GAAP tax expense is generally higher than the Company's non-GAAP tax expense, primarily due to losses in the U.S. with full federal and state valuation allowances. The Company's non-GAAP tax rate and resulting non-GAAP tax expense considers the tax implications as if there was no federal or state valuation allowance position in effect.