Ultra Clean Reports Record Fourth Quarter and Full Year 2021 Financial Results

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

Twelve Months Ended

December 31,

December 25,

December 31,

December 25,

2021

2020

2021

2020

Revenues:

Product

$

533,859

$

299,495

$

1,803,939

$

1,131,151

Services

81,277

70,133

297,676

267,431

Total revenues

615,136

369,628

2,101,615

1,398,582

Cost of revenues:

Product

433,933

247,103

1,478,764

934,716

Services

52,117

44,880

192,874

172,105

Total cost of revenues

486,050

291,983

1,671,638

1,106,821

Gross profit

129,086

77,645

429,977

291,761

Operating expenses:

Research and development

7,771

3,987

24,508

14,829

Sales and marketing

14,090

6,569

48,178

25,128

General and administrative

44,493

33,915

171,618

130,434

Total operating expenses

66,354

44,471

244,304

170,391

Income from operations

62,732

33,174

185,673

121,370

Interest income

156

179

427

875

Interest expense

(6,634)

(3,758)

(24,183)

(16,852)

Other income (expense), net

(1,165)

(2,512)

(7,601)

(5,722)

Income before provision for income taxes

55,089

27,083

154,316

99,671

Provision for income taxes

6,303

4,349

27,931

19,281

Net income

48,786

22,734

126,385

80,390

Less: Net income attributable to noncontrolling interests

3,316

180

6,940

2,785

Net income attributable to UCT

$

45,470

$

22,554

$

119,445

$

77,605

Net income per share attributable to UCT common stockholders:

Basic

$

1.01

$

0.56

$

2.75

$

1.93

Diluted

$

1.00

$

0.55

$

2.69

$

1.89

Shares used in computing net income per share:

Basic

44,886

40,521

43,498

40,198

Diluted

45,525

41,353

44,351

41,074

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands)

December 31,

December 25,

2021

2020

ASSETS

Current assets:

  Cash and cash equivalents

$

466,455

$

200,274

  Accounts receivable, net of allowance

250,147

145,539

  Inventories

379,235

180,385

  Prepaid expenses and other current assets

41,260

18,895

Total current assets

1,137,097

545,093

Property, plant and equipment, net

242,347

159,150

Goodwill

270,044

171,132

Intangibles assets, net

245,696

160,519

Deferred tax assets, net

37,607

23,513

Operating lease right-of-use assets

83,357

37,821

Other non-current assets

9,242

5,315

Total assets

$

2,025,390

$

1,102,543

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Bank borrowings

$

22,071

$

7,361

  Accounts payable

332,897

121,328

  Accrued compensation and related benefits

46,790

34,532

  Operating lease liabilities

17,299

11,721

  Other current liabilities

50,060

26,335

Total current liabilities

469,117

201,277

Bank borrowings, net of current portion

529,919

261,619

Deferred tax liabilities

54,889

33,571

Operating lease liabilities

65,923

31,050

Other liabilities

12,894

23,812

Total liabilities

1,132,742

551,329

Equity:

UCT stockholders' equity:

  Common stock

511,628

309,589

  Retained earnings

337,417

217,972

  Accumulated other comprehensive gain (loss)

(167)

5,087

Total UCT stockholders' equity

848,878

532,648

  Noncontrolling interest

43,770

18,566

Total equity

892,648

551,214

Total liabilities and stockholders' equity

$

2,025,390

$

1,102,543

ULTRA CLEAN HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Fiscal Year Ended

December 31,

December 25,

2021

2020

Cash flows from operating activities:

Net income

$

126,385

$

80,390

Adjustments to reconcile net income to net cash provided by operating activities (excluding assets acquired and liabilities assumed):

      Depreciation and amortization

70,877

46,635

Stock-based compensation

15,765

12,743

Deferred income taxes

(3,200)

375

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

12,438

7,653

Gain from insurance proceeds

(7,332)

—

Others

220

(2,402)

Changes in assets and liabilities:

Accounts receivable

(52,975)

(32,693)

Inventories

(125,120)

(8,017)

Prepaid expenses and other current assets

(3,397)

1,243

Other non-current assets

(800)

(106)

Accounts payable

172,524

(12,559)

Accrued compensation and related benefits

1,795

9,696

Operating lease assets and liabilities

(1,141)

(1,111)

Income taxes payable

8,851

2,785

Other liabilities

(1,827)

(7,354)

Net cash provided by operating activities

213,063

97,278

Cash flows from investing activities:

Purchases of property, plant and equipment

(59,342)

(36,427)

Proceeds from sale of property and equipment, including insurance proceeds

7,738

6,601

Settlement of forward contracts in conjunction with the acquisition of Ham-Let

(10,448)

—

Acquisition of business, net of cash acquired

(344,707)

—

Net cash used in investing activities

(406,759)

(29,826)

Cash flows from financing activities:

Proceeds from bank borrowings

415,168

76,690

Proceeds from issuance of common stock

193,536

604

Payments on bank borrowings and finance leases

(131,712)

(105,475)

Payments of debt issuance costs

(8,899)

—

Payment of contingent earn-out

—

(1,428)

Employees' taxes paid upon vesting of restricted stock units

(7,262)

(1,500)

Net cash provided by (used in) financing activities

460,831

(31,109)

Effect of exchange rate changes on cash and cash equivalents

(954)

1,400

Net increase in cash and cash equivalents

266,181

37,743

Cash and cash equivalents at beginning of period

200,274

162,531

Cash and cash equivalents at end of period

$

466,455

$

200,274

ULTRA CLEAN HOLDINGS, INC.

REPORTABLE SEGMENTS

GAAP TO NON-GAAP RECONCILIATION

(Unaudited; dollars in thousands)

GAAP

Non-GAAP

Three Months Ended

Three Months Ended

December 31, 2021

December 31, 2021

Products

Services

Consolidated

Products

Services

Consolidated

Revenues

$

533,859

$

81,277

$

615,136

$

533,859

$

81,277

$

615,136

Gross profit

$

99,926

$

29,160

$

129,086

$

101,964

$

30,183

$

132,147

Gross margin

18.7%

35.9%

21.0%

19.1%

37.1%

21.5%

Income from operations

$

52,391

$

10,341

$

62,732

$

63,007

$

14,507

$

77,514

Operating margin

9.8%

12.7%

10.2%

11.8%

17.9%

12.6%

Three Months Ended

December 31, 2021

Products

Consolidated

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

Reported gross profit on a GAAP basis

$

99,926

$

29,160

$

129,086

Amortization of intangible assets (1)

658

1,023

1,681

Restructuring charges (2)

115

—

115

Stock-based compensation expense (3)

719

—

719

Fair value related adjustments (4)

546

—

546

Non-GAAP gross profit

$

101,964

$

30,183

$

132,147

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

18.7%

35.9%

21.0%

Amortization of intangible assets (1)

0.1%

1.2%

0.3%

Restructuring charges (2)

0.0%

—

0.0%

Stock-based compensation expense (3)

0.2%

—

0.1%

Fair value related adjustments (4)

0.1%

—

0.1%

Non-GAAP gross margin

19.1%

37.1%

21.5%

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

Reported income from operations on a GAAP basis

$

52,391

$

10,341

$

62,732

Amortization of intangible assets (1)

5,795

3,716

9,511

Restructuring charges (2)

(415)

24

(391)

Stock-based compensation expense (3)

4,241

426

4,667

Fair value related adjustments (4)

546

—

546

Acquisition related costs (5)

449

—

449

Non-GAAP income from operations

$

63,007

$

14,507

$

77,514

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

9.8%

12.7%

10.2%

Amortization of intangible assets (1)

1.1%

4.6%

1.5%

Restructuring charges (2)

-0.1%

0.1%

-0.1%

Stock-based compensation expense (3)

0.8%

0.5%

0.8%

Fair value related adjustments (4)

0.1%

0.0%

0.1%

Acquisition related costs (5)

0.1%

0.0%

0.1%

Non-GAAP operating margin

11.8%

17.9%

12.6%

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 acquisition fair value adjustments related to inventories

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

Twelve Months Ended

December 31,

December 25,

September 24,

December 31,

December 25,

2021

2020

2021

2021

2020

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

Reported net income attributable to UCT on a GAAP basis

$

45,470

$

22,554

$

31,880

$

119,445

$

77,605

Amortization of intangible assets (1)

9,511

4,950

9,512

33,423

19,799

Restructuring charges (2)

(391)

1,003

1,580

1,301

4,573

Stock-based compensation expense (3)

4,667

3,760

4,324

16,758

12,899

Fair value related adjustments (4)

546

3,266

2,288

22,999

7,624

Acquisition related costs (5)

449

1,024

105

9,984

1,024

Insurance proceeds (6)

—

—

—

(7,332)

—

Gain on the sale of property (7)

—

—

—

—

(1,352)

Income tax effect of non-GAAP adjustments (8)

(2,336)

(2,521)

(2,760)

(12,804)

(8,200)

Income tax effect of valuation allowance (9)

(2,400)

(525)

1,828

2,332

994

Non-GAAP net income attributable to UCT

$

55,516

$

33,511

$

48,757

$

186,106

$

114,966

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

Reported income from operations on a GAAP basis

$

62,732

$

33,174

$

50,584

$

185,673

$

121,370

Amortization of intangible assets (1)

9,511

4,950

9,512

33,423

19,799

Restructuring charges (2)

(391)

1,003

1,580

1,301

4,433

Stock-based compensation expense (3)

4,667

3,760

4,324

16,758

12,899

Fair value related adjustments (4)

546

—

2,388

10,117

—

Acquisition related costs (5)

449

1,024

105

9,984

1,024

Gain on the sale of property (7)

—

—

—

—

(1,352)

Non-GAAP income from operations

$

77,514

$

43,911

$

68,493

$

257,256

$

158,173

Reconciliation of GAAP Operating margin to Non-GAAP Operating margin

Reported operating margin on a GAAP basis

10.2%

9.0%

9.1%

8.8%

8.7%

Amortization of intangible assets (1)

1.5%

1.3%

1.7%

1.6%

1.4%

Restructuring charges (2)

-0.1%

0.3%

0.4%

0.0%

0.3%

Stock-based compensation expense (3)

0.8%

1.0%

0.8%

0.8%

0.9%

Fair value related adjustments (4)

0.1%

0.0%

0.4%

0.5%

0.0%

Acquisition related costs (5)

0.1%

0.3%

0.0%

0.5%

0.1%

Gain on the sale of property (7)

0.0%

0.0%

0.0%

0.0%

-0.1%

Non-GAAP operating margin

12.6%

11.9%

12.4%

12.2%

11.3%

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

Reported gross profit on a GAAP basis

$

129,086

$

77,645

$

114,070

$

429,977

$

291,761

Amortization of intangible assets (1)

1,681

1,023

1,680

6,063

4,090

Restructuring charges (2)

115

242

684

1,005

988

Stock-based compensation expense (3)

719

696

534

2,649

2,112

Fair value related adjustments (4)

546

—

2,388

10,117

—

Non-GAAP gross profit

$

132,147

$

79,606

$

119,356

$

449,811

$

298,951

Reconciliation of GAAP Gross margin to Non-GAAP Gross margin

Reported gross margin on a GAAP basis

21.0%

21.0%

20.6%

20.5%

20.9%

Amortization of intangible assets (1)

0.3%

0.3%

0.3%

0.3%

0.3%

Restructuring charges (2)

0.0%

0.0%

0.2%

0.0%

0.0%

Stock-based compensation expense (3)

0.1%

0.2%

0.1%

0.1%

0.2%

Fair value related adjustments (4)

0.1%

0.0%

0.4%

0.5%

0.0%

Non-GAAP gross margin

21.5%

21.5%

21.6%

21.4%

21.4%

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

$

(7,643)

$

(6,091)

$

(8,233)

$

(31,357)

$

(21,699)

Restructuring charges (2)

—

—

—

—

140

Fair value related adjustments (4)

—

3,266

(100)

12,882

7,624

Insurance proceeds (6)

—

—

—

(7,332)

—

Non-GAAP interest and other income (expense)

$

(7,643)

$

(2,825)

$

(8,333)

$

(25,807)

$

(13,935)

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

Reported net income on a GAAP basis

$

1.00

$

0.55

$

0.70

2.69

1.89

Amortization of intangible assets (1)

0.21

0.12

0.21

0.75

0.48

Restructuring charges (2)

(0.01)

0.02

0.03

0.03

0.11

Stock-based compensation expense (3)

0.10

0.09

0.10

0.38

0.32

Fair value related adjustments (4)

0.01

0.08

0.05

0.52

0.19

Acquisition related costs (5)

0.01

0.02

—

0.23

0.02

Insurance proceeds (6)

—

—

—

(0.16)

—

Gain on the sale of property (7)

—

—

—

-

(0.03)

Income tax effect of non-GAAP adjustments (8)

(0.05)

(0.06)

(0.06)

(0.29)

(0.20)

Income tax effect of valuation allowance (9)

(0.05)

(0.01)

0.04

0.05

0.02

Non-GAAP net income

$

1.22

$

0.81

$

1.07

$

4.20

$

2.80

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

45,525

41,353

45,404

44,351

41,074

ULTRA CLEAN HOLDINGS, INC.

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

Three Months Ended

Twelve Months Ended

December 31,

December 25,

September 24,

December 31,

December 25,

2021

2020

2021

2021

2020

(in thousands, except percentages)

Provision for income taxes on a GAAP basis

$

6,303

$

4,349

$

8,392

27,931

19,281

Income tax effect of non-GAAP adjustments (8)

2,336

2,521

2,760

12,804

8,200

Income tax effect of valuation allowance (9)

2,400

525

(1,828)

(2,332)

(994)

Non-GAAP provision for income taxes

$

11,039

$

7,395

$

9,324

$

38,403

$

26,487

Income before income taxes on a GAAP basis

$

55,089

$

27,083

$

42,351

154,316

99,671

Amortization of intangible assets (1)

9,511

4,950

9,512

33,423

19,799

Restructuring charges (2)

(391)

1,003

1,580

1,301

4,573

Stock-based compensation expense (3)

4,667

3,760

4,324

16,758

12,899

Fair value related adjustments (4)

546

3,266

2,288

22,999

7,624

Acquisition related costs (5)

449

1,024

105

9,984

1,024

Insurance proceeds (6)

—

—

—

(7,332)

—

Gain on the sale of property (7)

—

—

(100)

—

(1,352)

Non-GAAP income before income taxes

$

69,871

$

41,086

$

60,060

$

231,449

$

144,238

Effective income tax rate on a GAAP basis

11.4%

16.1%

19.8%

18.1%

19.3%

Non-GAAP effective income tax rate

15.8%

18.0%

15.5%

16.6%

18.4%

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

5    Represents costs related to acquisitions

6    Insurance proceeds pertaining to the Cinos fire in 2018

7    Represents gain realized on the sale of land in South Korea

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.