Ultra Clean Holdings, Inc. — Q2 2022 Form 10-Q
Business context and reporting period. UCT supplies semiconductor and display capital-equipment subsystems and components, and provides precision cleaning, coating, and analytical services. The quarter ended July 1, 2022; comparable prior-year quarter ended June 25, 2021. Amounts below are in millions of dollars except per-share data and percentages.
Key financial results
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $608.7 | $515.2 | $1,172.9 | $932.8 |
| Gross profit / margin | $118.4 / 19.5% | $99.9 / 19.4% | $232.2 / 19.8% | $186.8 / 20.0% |
| Operating income (loss) | $(5.5) | $31.9 | $40.3 | $72.3 |
| Net income (loss) attributable to UCT | $(25.1) | $17.1 | $2.8 | $42.1 |
| Diluted earnings (loss) per share | $(0.56) | $0.39 | $0.06 | $0.98 |
| Cash from operating activities | Not stated by quarter | $14.3 | $116.7 |
- Q2 revenue rose 18.1% year over year; first-half revenue rose 25.7%. Products drove most of the increase, reflecting semiconductor demand and a full-period contribution from Ham-Let’s Fluid Solutions business in 2022. Services revenue also increased.
- Q2 product and services gross margins were 17.1% and 35.9%, respectively. Total gross margin was nearly flat year over year in Q2, while first-half margin declined 0.2 percentage points.
- Q2 operating results included a $56.6 million loss on divestitures. Excluding that unusual charge, the reported operating loss would not apply; the filing does not provide a directly comparable adjusted result in this text.
Balance sheet, debt and liquidity
- At July 1, 2022, cash and cash equivalents were $421.4, down from $466.5 at year-end 2021. Cash included approximately $336.3 held in foreign subsidiaries.
- Current assets were $1,111.8 and current liabilities $395.4. Inventory was $405.1, up from $379.2 at December 31, 2021.
- Total bank debt was $557.8, net of $11.5 in unamortized debt issuance costs; the U.S. term loan was $547.2 gross, with a 5.4% interest rate and maturity on August 27, 2025. Cash exceeded reported net bank debt by approximately $136 million.
- Available borrowing capacity was $61.6 under the U.S. revolving facility and $5.2 under the Czech facility. UCT reported compliance with its financial covenants at quarter-end.
- First-half investing cash use was $46.4, including $46.5 of property, plant and equipment purchases in the cash flow statement. Management separately reported capital expenditures of $36.4; the filing text does not explain this difference clearly.
Material changes, outlook and risks
- During Q2, UCT sold two non-core Ham-Let subsidiaries and committed to sell its majority interest in a third subsidiary, with the third sale expected to close in Q3 2022. UCT cited improving capital efficiency and focus on its core semiconductor business. The divestitures generated the $56.6 loss, including write-offs of goodwill, intangible assets and other net assets.
- Management said existing cash, operating cash flow and available revolver capacity should be sufficient for debt service and working-capital needs for at least the next 12 months. No specific revenue or earnings guidance is provided in the filing text.
- Operating cash flow fell to $14.3 for the first half from $116.7 a year earlier, with working-capital changes—including lower accounts payable and higher inventory—contributing to the decline. Capital spending increased.
- Two customers accounted for 63.7% of Q2 revenue: Lam Research (41.0%) and Applied Materials (22.7%). This concentration creates exposure to customer demand and semiconductor-equipment cycles.
- Other risks include higher interest rates on debt, foreign-exchange movements, the ability to meet covenants and obtain future financing, inventory valuation and large purchase commitments ($689.4 for inventories at quarter-end). Management noted a full valuation allowance remained appropriate for U.S. federal and state and certain foreign deferred tax assets.
- The company reported no material changes to previously disclosed risk factors; routine legal proceedings were not expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal controls reported.
Important facts for investors to verify
- Whether the remaining subsidiary divestiture closed as expected and whether further charges or proceeds followed.
- How much of the first-half operating cash flow decline reflects temporary working-capital timing versus sustained cash conversion pressure.
- The reconciliation of reported capital expenditures ($36.4) with cash purchases of property and equipment ($46.5).
- Customer concentration, inventory growth, and the $689.4 inventory purchase commitments relative to future demand and cash needs.
- Interest-rate exposure and covenant headroom under the term loan and revolving facilities.