UCT - Ultra Clean Holdings Inc.

02/23/2026 | Press release | Distributed by Public on 02/23/2026 16:26

Annual Report for Fiscal Year Ending December 26, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Annual Report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Forward-looking statements can also be identified by words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "may," "will be," "will continue," "will likely results, and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in "Item 1A - Risk Factors" above. The following discussion should be read in conjunction with the Consolidated Financial Statement and notes thereto included in Item 8 of this report. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Overview
Ultra Clean Holdings, Inc., ("UCT", the "Company" or "We") is a leading developer and supplier of critical subsystems, components, parts, and ultra-high purity cleaning and analytical services primarily for the semiconductor industry. UCT offers its customers an integrated outsourced solution for major subassemblies, improved design-to-delivery cycle times, design for manufacturability, prototyping and part and component manufacturing, as well as tool chamber parts cleaning and coating, and micro-contamination analytical services. We report results for two segments: Products and Services. Our Products segment primarily designs, engineers and manufactures production tools, components and parts, and modules and subsystems for the semiconductor and display capital equipment markets. Products include chemical delivery modules, frame assemblies, gas delivery systems, fluid delivery systems, precision robotics, process modules as well as other high-level assemblies for wafer fabrication equipment ("WFE") and sub-fab support equipment. Our Services segment provides ultra-high purity parts cleaning, process tool part recoating, surface encapsulation and high sensitivity micro contamination analysis primarily for the semiconductor device makers and WFE markets.
We ship a majority of our products and provide most of our services to U.S. registered customers with both domestic and international locations. In addition to U.S. manufacturing and service operations, we manufacture products and provide parts cleaning and other related services in our Asia Pacific, Europe and Middle East ("EMEA") facilities to support local and U.S. based customers. We conduct our operating activities primarily through our subsidiaries.
Over the long-term, we believe the semiconductor market we serve will continue to grow due to multi-year industry demand from a broad range of drivers, such as new process architecture (e.g. gate all around) and memory devices (e.g. high bandwidth memory) necessary for cloud, artificial intelligence ("AI") and machine learning ("ML") applications. We also believe that semiconductor original equipment manufacturers ("OEM") are increasingly relying on partners like UCT to fulfill their expanding capacity requirements. Additionally, our Services business is benefiting as device manufacturers rely on precision cleaning and coating to achieve ever more advanced devices.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure at the date of our Consolidated Financial Statements. On an on-going basis, we evaluate our estimates and judgments, including those related to inventories, income taxes, business combinations, contingent earn-out liabilities and goodwill, intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We consider certain accounting policies related to revenue recognition, inventory valuation, accounting for income taxes, business combinations, valuation of goodwill, intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each.
Revenue Recognition
Our revenues for fiscal years 2025, 2024 and 2023, were highly concentrated with a small number of OEM customers in the semiconductor capital equipment industry. We recognize revenue when promised goods or services (performance obligations) are transferred to a customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We perform the following five steps to determine when to recognize revenue:
1.Identification of the contract(s) with customers - Our standard arrangement for our customers includes a signed purchase order or contract, no right of return of delivered products and no customer acceptance provisions. We assess collectability based on the creditworthiness of the customer and past transaction history. We perform on-going credit evaluations of, and do not require collateral from, our customers.
2.Identification of the performance obligations in the contract - Our performance obligations include delivery of promised goods or services.
3.Determination of the transaction price - The transaction price of our contracts with customers may include both fixed and variable consideration. We include variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We generally invoice our customers upon shipment of goods and completion of services with payment due within 30 to 90 days after issuance.
4.Allocation of the transaction price to the performance obligations in the contract - For contracts that contain multiple performance obligations, we allocate the transaction price to the performance obligations on a relative standalone selling price basis. For contracts with multiple performance obligations, we allocate the contract's transaction price to each performance obligation using the relative standalone selling price of each distinct good or service in the contract.
5.Recognition of revenue when, or as, a performance obligation is satisfied - We recognize revenue from products sold at a point in time when we have satisfied our performance obligation by transferring control of the goods to the customer, which typically occurs at shipment or delivery. Revenue from service agreements is recognized upon completion of the services, which typically occurs upon shipment to the customer.
Inventory Valuation
We write down the carrying value of our inventory to net realizable value for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon inventory age and assumptions about future demand and market conditions. We assess the valuation of all inventories, including raw materials, work-in-process, finished goods and spare parts on a periodic basis.
Obsolete inventory or inventory in excess of our estimated usage is written down to its estimated market value less costs to sell, if less than its cost. The inventory write-downs are established on the basis of obsolete inventory or specifically identified inventory in excess of established usage. Inherent in our estimates of demand and market value in determining inventory valuation are estimates related to economic trends, market conditions, and future demand for our products. If actual demand and market conditions are less favorable than our projections, additional inventory write-downs may be required. If the inventory value is written down to its net realizable value, and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory is not realized until the inventory is sold either as a component of a subsystem or as separate inventory.
Accounting for Income Taxes
The determination of our tax provision is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region and is subject to judgments and estimates. Management carefully monitors the changes in many factors and adjusts the effective tax rate as required.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not more likely than not, we must increase our provision for taxes by recording a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be recoverable. In determining whether the realization of these deferred tax assets may be impaired, we make judgments with respect to whether we are likely to generate sufficient future taxable income to realize these assets. As of December 26, 2025, we maintained a full valuation allowance on our U.S. federal and state and on certain of our foreign deferred tax assets in the amount of $104.2 million as we believe it is more likely than not that these deferred tax assets will not be realized.
In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on the results of our operations and financial position. We believe we have adequately reserved for our uncertain tax positions; however, no assurance can be given that the final tax outcome of these matters will not be different than what we expect. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.
Business Combinations
In accordance with accounting for business combinations, we allocate the purchase price of acquired companies to the identified tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We may engage third-party valuation firms to assist management in reviewing management's identification and determination of the fair values of acquired intangible assets. Such valuations require management to make significant estimates and assumptions. Management makes estimates of fair value based upon assumptions believed to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.
Certain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future operating income thresholds. The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present value calculation are reported in other income (expense). Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.
Goodwill, Intangibles Assets, and Long-lived Assets
Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed.
We evaluate our goodwill for impairment at the reporting unit level on an annual basis, and more frequently if events or changes in circumstances indicate that the carrying amount may exceed its fair value. In addition, we evaluate our identifiable intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
•Significant changes in the manner of our use of the acquired assets or the strategy of our overall business;
•Significant negative changes in revenue of specific products or services;
•Significant negative industry or economic trends; and
•Significant decline in our stock price for a sustained period.
We continually apply judgment when performing these evaluations and continuously monitor for events and circumstances that could negatively impact the key assumptions in determining fair value, including long-term revenue growth projections, projected cash flows, discount rates, recent market valuations from transactions by comparable companies, volatility in our market capitalization and general industry, market and macroeconomic conditions. It is possible that changes in such circumstances, or in the variables associated with the judgments, assumptions and estimates used in assessing fair value, would require us to record a non-cash impairment charge.
During the second quarter of 2025, the Company experienced a sustained decline in the market price of its common stock. As a result, the Company's market capitalization became much closer to, and at times fell below, the carrying value of its net assets. The decline in market capitalization, combined with other factors specific to each reporting unit, such as changes in market conditions and financial performance, was identified as a triggering event under ASC 350, Intangibles-Goodwill and Other, requiring the Company to perform an interim goodwill impairment test.
The Company performed a quantitative goodwill impairment test for each of its four reporting units by comparing the estimated fair value of each reporting unit to its respective carrying value. Based on the results of this assessment performed in the second quarter of 2025, the Company recorded a total goodwill impairment charge of $151.1 million, of
which $77.6 million was attributable to the Fluid Solutions reporting unit and $73.5 million was attributable to the Services reporting unit. As a result, there is no remaining goodwill in the Fluid Solutions reporting unit or in the Services reporting unit. No impairments were identified in the Core Products or Fluid Delivery Systems reporting units, whose fair values remained substantially in excess of their respective carrying values.
In connection with our annual goodwill impairment assessment in the fourth quarter of 2025, the Company performed qualitative impairment assessments for each of the Company's reporting units. The qualitative assessments indicated that it was more likely than not that the fair values of its reporting units exceeded its carrying value and, therefore, did not result in an additional impairment.
Prior to testing goodwill for impairment, the Company evaluated the recoverability of its long-lived assets under ASC 360, Property, Plant, and Equipment, and determined that no impairment of long-lived assets was required.
Results of Operations
Fiscal Year
Our fiscal year is the 52 or 53 week period ending on the Friday nearest December 31. Fiscal 2025, 2024 and 2023 each contained 52 weeks.
A discussion regarding our financial condition and results of operations for fiscal 2025, compared to fiscal 2024, is presented below.
A discussion regarding our financial condition and results of operations for fiscal 2024, compared to fiscal 2023, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, filed with the SEC on February 25, 2025, which is available on the SEC's website at www.sec.gov and our Investor Relations website at www.uct.com/investors.
Discussion of Results of Operations
Revenues
Year Ended
Revenues by Segment
(Dollars in millions)
December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Products $ 1,799.3 (2.9)% $ 1,853.7 23.4% $ 1,501.6
Services 254.7 4.4% 243.9 4.7% 232.9
Total revenues $ 2,054.0 (2.1)% $ 2,097.6 20.9% $ 1,734.5
Products as a percentage of total revenues 87.6 % 88.4 % 86.6 %
Services as a percentage of total revenues 12.4 % 11.6 % 13.4 %
Products revenues decreased by $54.4 million in fiscal year 2025 over fiscal year 2024, primarily driven by lower customer demand, reflecting a slowdown in customer purchasing activity in response to short-term market conditions.
Services revenues increased by $10.8 million in fiscal year 2025 over fiscal year 2024, driven by higher demand across its customer base.
Year Ended
Revenues by Geography
(Dollars in millions)
December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
United States $ 495.4 (12.6)% $ 566.5 7.5% $ 526.8
International 1,558.6 1.8% 1,531.1 26.8% 1,207.7
Total revenues $ 2,054.0 (2.1)% $ 2,097.6 20.9% $ 1,734.5
United States as a percentage of total revenues 24.1 % 27.0 % 30.4 %
International as a percentage of total revenues 75.9 % 73.0 % 69.6 %
Revenues by geographic area are categorized based on the customer's location to which the products were shipped or services were performed.
The decrease in U.S. revenues as a percentage of total revenues in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to a shift in product revenues from U.S. locations to international locations. As a result, international revenues as a percentage of total revenues increased compared to the prior year.
Cost of Revenues
Year Ended
Cost of revenues by Segment
(Dollars in millions)
December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Products $ 1,547.0 (1.4)% $ 1,569.7 21.6% $ 1,290.5
Services 184.1 7.3% 171.6 2.9% 166.7
Total Cost of revenues $ 1,731.1 (0.6)% $ 1,741.3 19.5% $ 1,457.2
Products cost as a percentage of total Products revenues 86.0 % 84.7 % 85.9 %
Services cost as a percentage of total Services revenues 72.3 % 70.4 % 71.6 %
Cost of Products revenues consists of purchased materials, direct labor and manufacturing overhead. Cost of products revenues decreased by $22.7 million for fiscal 2025 compared to fiscal 2024. The decrease was primarily driven by lower sales volume, which led to a $33.3 million reduction in material costs, partially offset by higher overhead costs and restructuring-related costs.
Services Cost of revenues consists of direct labor, overhead and materials such as chemicals, gases and consumables. Cost of services revenues increased by $12.5 million in fiscal 2025 compared to the prior year, driven by higher volumes of service orders and increases in headcount, overtime and employee-related expenses, resulting in an additional $8.8 million of costs, as well as higher overhead costs and restructuring-related activities.
In both segments, costs of revenue increased as a percentage of revenue, primarily due to fixed costs that do not scale with volume.
Gross Margin
Year Ended
Gross Profit by Segment
(Dollars in millions)
December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Products $ 252.3 (11.2)% $ 284.0 34.5% $ 211.1
Services 70.6 (2.4)% 72.3 9.2% 66.2
Gross profit $ 322.9 (9.4)% $ 356.3 28.5% $ 277.3
Gross Margin by Segment
Products 14.0 % 15.3 % 14.1 %
Services 27.7 % 29.6 % 28.4 %
Total Company 15.7 % 17.0 % 16.0 %
Gross profit and gross margins fluctuate with revenue levels, product mix, material costs, and labor costs.
Products gross profit and gross margin decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to higher employee and restructuring-related costs.
Services gross profit decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to higher cost of revenues driven by increased labor and compensation-related costs, as well as higher overhead and restructuring-related costs.
Operating Margin
Year Ended
Operating Profit by Segment
(Dollars in millions)
December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Products $ (46.2) (158.2)% $ 79.4 165.6% $ 29.9
Services (61.2) (618.6)% 11.8 122.6% 5.3
Operating profit $ (107.4) (217.8)% $ 91.2 159.1% $ 35.2
Operating Margin by Segment
Products (2.6 %) 4.3 % 2.0 %
Services (24.0 %) 4.8 % 2.3 %
Total Company (5.2 %) 4.3 % 2.0 %
Operating results for both Products and Services reflected an operating loss and a negative operating margin in fiscal year 2025, compared to operating profit and a positive operating margin in fiscal year 2024. The operating loss was primarily driven by goodwill impairment recorded in the second quarter of fiscal year 2025, consisting of $77.6 million attributable to the Fluid Solutions reporting unit within the Product segment and $73.5 million attributable to the Services segment. The loss was further affected by higher stock-based compensation and severance costs related to restructuring activities, including involuntary separations and a voluntary early retirement program.
Research and Development
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Research and development $ 32.0 13.1% $ 28.3 -% $ 28.3
Research and development as a percentage of total revenues 1.6 % 1.3 % 1.6 %
Research and development expenses consist primarily of activities related to new component testing and evaluation, test equipment and fixture development, product design, the advancement of cleaning and coating and analytical processes, and other product-development activities.
Research and development expenses increased $3.7 million in fiscal year 2025 compared to fiscal year 2024, primarily due to higher personnel costs, including salary-related expenses resulting from compensation adjustments and headcount changes, as well costs associated with involuntary separations and a voluntary early retirement program undertaken as part of the Company's restructuring efforts.
Sales and Marketing
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Sales and marketing $ 61.2 6.8% $ 57.3 10.6% $ 51.8
Sales and marketing as a percentage of total revenues 3.0 % 2.7 % 3.0 %
Sales and marketing expenses consist primarily of salaries and commissions paid to our sales employees, salaries paid to our engineers who partner with sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products.
Sales and marketing expenses increased by $3.9 million in fiscal year 2025 compared to fiscal year 2024, primarily due to higher restructuring costs, including expenses for involuntary separations and a voluntary early retirement program, as well as higher personnel costs and other operating expenses, including travel and office-related costs.
General and Administrative
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
General and administrative $ 186.0 3.6% $ 179.5 10.8% $ 162.0
General and administrative as a percentage of total revenues 9.1 % 8.6 % 9.3 %
General and administrative expenses increased $6.5 million in fiscal year 2025 over fiscal year 2024, primarily driven by increase in stock-based compensation, a separation payment made to the prior CEO, and increased restructuring activities, including both involuntary separations and a voluntary early retirement program.
Impairment of Goodwill
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Impairment of Goodwill $ 151.1 n/m $ - n/m $ -
n/m - not meaningful
Impairment of goodwill represents a non-cash charge of $151.1 million recorded in the second quarter of fiscal 2025, as the fair values of our Fluid Solutions and Services reporting units were determined to be below their carrying amounts.
Interest and Other Income (Expense), net
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Interest income $ 3.9 (18.8)% $ 4.8 17.1% $ 4.1
Interest expense $ (38.3) (17.6)% $ (46.5) (4.7)% $ (48.8)
Other income (expense), net $ (3.9) (122.0)% $ 17.7 n/m $ (1.8)
Interest income decreased $0.9 million in fiscal year 2025 over fiscal year 2024 due to lower interest earning balances.
Interest expense decreased $8.2 million in fiscal year 2025 over fiscal year 2024 due to lower interest rates and reduced amortization of debt issuance costs.
Other income (expense), net, for fiscal year 2025 primarily consisted of unrealized foreign exchange losses of $4.9 million and debt modification-related costs of $1.1 million, partially offset by government grants of $2.2 million. For fiscal year 2024, the Company recognized a $29.0 million gain from the fair value adjustment of the contingent earn-out liability associated with the HIS acquisition, partially offset by foreign exchange losses of $7.6 million and debt modification costs of $4.0 million.
Provision for Income Taxes
Year Ended
(Dollars in millions) December 26,
2025 		Percent Change December 27,
2024 		Percent Change December 29,
2023
Provision for income taxes $ 25.9 (20.8)% $ 32.7 200.0% $ 10.9
Effective tax rate -17.8 % 48.7 % n/m
The change in tax rates in fiscal year 2025 reflects, primarily, changes in the geographic distribution of our worldwide earnings. For fiscal year 2025, our effective tax rate was lower than the federal statutory rate of 21.0% primarily due to the valuation allowance in the U.S., impairment of goodwill and earnings in our foreign subsidiaries subject to local statutory tax rates.
For the year ended December 26, 2025, the Company concluded that a full valuation allowance against its U.S. federal and state net deferred tax assets continues to be necessary. The Company also concluded that some of its foreign deferred tax assets require a valuation allowance. The total U.S. and foreign valuation allowances for deferred tax assets were $88.4 million and $15.8 million, respectively as of December 26, 2025, and $79.1 million and $17.2 million, respectively as of December 27, 2024.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the U.S. The OBBBA includes numerous provisions that affect corporate taxation, including changes to bonus depreciation, the expensing of domestic research costs, and modifications to certain U.S. international tax rules. The Company has analyzed the impacts of the OBBBA and reflected them in the current period. These impacts do not have a material effect on the tax rate for the year ended December 26, 2025. Certain provisions under OBBBA, primarily related to the international provisions, will take effect in future years.
The Organization for Economic Cooperation and Development ("OECD") reached agreement among certain member countries to implement a global minimum tax framework, commonly referred to as Pillar Two, which established a minimum 15 percent income tax rate. Pillar Two did not have a significant impact on the Company's financial statements for fiscal year 2025. This legislation will become effective for us in additional jurisdictions beginning in fiscal 2026, most notably in Singapore and Malaysia where we currently enjoy a low tax rate under certain tax incentives. The higher tax rate in those countries under Pillar Two could have a material and adverse impact on our financial statements beginning in fiscal 2026.
Our ability to realize deferred tax assets depends on our ability to generate sufficient future taxable income. In assessing our future taxable income, we have considered all sources of future taxable income available to realize our deferred tax assets, including the taxable income from future reversals of existing temporary differences, carryforwards, and tax-planning strategies. If changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities, the valuation allowance may need to be adjusted in the future.
The Company in the past has asserted that the earnings of our foreign subsidiaries, with the exception of certain of its subsidiaries in Singapore, are intended to be permanently reinvested. In fiscal year 2025, the Company changed its assertion for the earnings of one of its subsidiaries in China and only considers the earnings accumulated prior to fiscal year 2023 to be permanently reinvested. As of the end of fiscal 2025, the Company has recorded a deferred tax liability of $1.0 million related to accumulated earnings subject to future repatriation. The Company remitted earnings to the U.S. from its subsidiaries in Singapore in 2025. With the possible exception of Singapore and China subsidiaries, the Company has no plans to remit other foreign earnings to the U.S. We may change our intent to reinvest certain of our undistributed foreign earnings indefinitely, which could require us to accrue or pay taxes on some or all of these undistributed earnings.
Liquidity and Capital Resources
Cash and cash equivalents
The followingtable summarizes our cash and cash equivalents:
Year Ended
(In millions) December 26,
2025 		December 27,
2024 		Increase
Total cash and cash equivalents $ 311.8 $ 313.9 $ (2.1)
The decrease in cash and cash equivalents in fiscal year 2025 compared to fiscal year 2024 was primarily due to cash provided by operating activities of $65.6 million, which was offset by cash used in investing and financing activities of $47.0 million and $21.2 million, respectively.
Cash Flows
Year Ended
(In millions) December 26,
2025 		December 27,
2024 		December 29,
2023
Operating activities $ 65.6 $ 65.0 $ 135.9
Investing activities (47.0) (63.5) (119.7)
Financing activities (21.2) 9.8 (69.9)
Effects of exchange rate changes on cash and cash equivalents 0.5 (4.4) 1.9
Net increase (decrease) in cash and cash equivalents $ (2.1) $ 6.9 $ (51.8)
Our primary cash inflows and outflows were as follows:
•Net cash provided by operating activities remained consistent year over year, as changes in working capital and non-cash items were largely offset by changes in net income.
•Cash used in investing activities was $47.0 millionin fiscal year 2025 compared to $63.5 millionin fiscal year 2024. During fiscal year 2025, net cash used for investing activities primarily consisted of $50.3 millionrelated to
purchases of property, plant and equipment, partially offset by an asset-related government grant of $2.9 million. During fiscal year 2024, net cash used in investing activities was $63.5 million for purchases of property, plant and equipment.
•Cash used by financing activities was $21.2 million in fiscal year 2025compared to cash provided of $9.8 million in fiscal year 2024. The $31.0 million increase in net cash used by financing activities was primarily due to the absence of $23.5 million of net cash proceeds from bank borrowings related to a prior-period debt modification, an $8.0 million increase in principal payments on bank borrowings, and a $3.4 million increase in share repurchases, partially offset by a $1.9 million decrease in payment of debt issuance costs.
We believe we have sufficient capital to fund our working capital needs, satisfy our debt obligations, maintain our existing capital equipment, purchase new capital equipment and make strategic acquisitions from time to time. As of December 26, 2025, we had cash and cash equivalents of $311.8 million compared to $313.9 million as of December 27, 2024. Our cash and cash equivalents, cash generated from operations and borrowings under our term loan described below, were our principal sources of liquidity as of December 26, 2025.
In the second quarter of fiscal year 2025, we entered into a factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement. Under the arrangement, we sell certain trade receivables on a non-recourse basis and account for the transaction as a sale of the receivables. The financial institution assumes the full risk of collection, without recourse to the Company in the event of a loss. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. The applicable receivables are removed from our consolidated balance sheet when the cash proceeds are received by us. We utilize this factoring arrangement as part of our financing for working capital. For the fiscal year ended December 26, 2025, we sold accounts receivable totaling $56.4 million under this arrangement.
In addition, Fluid Solutions had a factoring agreement with a financial institution to sell certain accounts receivables under a non-recourse agreement; however, this agreement was cancelled in December 2025 and was not in effect as of year-end. For the fiscal year ended December 26, 2025, accounts receivable totaling $11.6 million were sold under this arrangement.
We anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months. The adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth, the size and number of any acquisitions, the state of the worldwide economy, our ability to meet our financial covenants with our credit facility, the cyclical expansion or contraction of the semiconductor capital equipment industry and the other industries we serve and capital expenditures required to meet possible increased demand for our products.
In order to expand our business or acquire additional complementary businesses or technologies, we may need to raise additional funds through equity or debt financings. If required, additional financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance of equity or convertible debt securities, our stockholders' equity interest will be diluted and these securities might have rights, preferences and privileges senior to those of our current stockholders. We may also require the consent of our new lenders to raise additional funds through equity or debt financings. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us.
As of December 26, 2025, we had undistributed earnings of approximately $596.7 million from our foreign subsidiaries, $577.3 million of which are indefinitely reinvested outside of the U.S. As of December 26, 2025, we have cash of approximately $253.0 million in our foreign subsidiaries.
Borrowing Arrangements
December 26,
2025 		December 27,
2024
(Dollars in millions)
Amount
Weighted-
Average
Interest Rate
Amount
Weighted-
Average
Interest Rate
U.S. Term Loan $ 481.4 7.5 % $ 493.8 8.7 %
Fluid Solutions Debt Facilities - - % 5.9 7.4 %
Debt issuance costs (4.5) (7.2)
$ 476.9 $ 492.5
On April 4, 2024, the Company entered into a Sixth Amendment to the Credit Agreement dated as of August 27, 2018. The amendment (i) extended the maturity date of the term loan and revolving credit facilities by 30 months; (ii) reduced the
interest rate applicable to the term loan facility under the Credit Agreement by 0.25% per annum; and (iii) increased the outstanding amount under the Term Loan of $475.4 million to $500 million. The Company received $67.7 million of additional debt, net of $1.1 million in lender fees, offset by $44.2 million in reduced syndicate positions. The Company capitalized $2.5 million of additional costs related to this amendment, continued to defer previously capitalized costs of $5.2 million and expensed third party transaction costs and the previously capitalized costs of extinguished debt of $3.6 million in the other income (expense), net in the Consolidated Statements of Operations for the fiscal year ended December 27, 2024.
On October 8, 2024, the Company entered a Seventh Amendment further reducing the interest rate applicable to the term loan facility by 0.25% per annum.
On September 15, 2025, the Company entered into the Eighth Amendment, reducing the interest rate applicable to the term loan facility by an additional 0.50% per annum. The amendment did not modify the revolving credit facility.
The Term Loan has a maturity date of February 25, 2028. The Company pays monthly interest payments in arrears and quarterly principal payments of 0.625% of the outstanding principal balance as of September 15, 2025, with the remaining principal paid upon maturity.
The revolving credit facility has an available commitment of $150.0 million and a maturity date of August 27, 2027. The Company pays a quarterly commitment fee in arrears equal to 0.25% of the average daily available commitment outstanding. Outstanding letters of credit reduce the availability of the revolving credit facility and, as of December 26, 2025, the Company had $146.6 million, net of $3.4 million of outstanding letters of credit, available under this revolving credit facility.
The letter of credit facility has an available commitment of $50.0 million and a maturity date of August 27, 2027. The Company pays a quarterly fee in arrears equal to the dollar equivalent of all outstanding letters of credit equal to the applicable margin for the revolving credit facility, and a fronting fee equal to 0.125% of the undrawn and unexpired amount of each letter of credit. As of December 26, 2025, the Company had $3.4 million of outstanding letters of credit and $46.6 million of available commitments remaining under the letter of credit facility.
Under the Credit Agreement, the Company may elect that the Term Loan bear interest at a rate per annum equal to either (a) "ABR" (as defined in the Credit Agreement), plus the applicable margin or (b) the "Term SOFR" (as defined in the Credit Agreement), plus the applicable margin. The applicable margin for the Term Loan is equal to a rate per annum equal to either (i) at any time that the Company's corporate family rating is Ba3 (with a stable outlook) or higher from Moody's and BB- (with a stable outlook) or higher from S&P, (x) 2.50% for such Term SOFR loans and (y) 1.50% for such ABR term loans or (ii) at all other times, (x) 2.75% for such Term SOFR loans and (y) 1.75% for such ABR term loans. Interest on the Term Loan is payable on (1) in the case of such ABR term loans, the last day of each calendar quarter and (2) in the case of such Term SOFR loans, the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
At December 26, 2025, the Company had an outstanding amount under the Term Loan of $481.4 million, gross of unamortized debt issuance costs of $4.5 million. As of December 26, 2025, the interest rate on the outstanding Term Loan was 6.7%.
The Credit Agreement requires the Company to maintain certain financial covenants including a consolidated fixed charge coverage ratio and a consolidated leverage ratio (as defined in the Credit Agreement) as of the last day of any fiscal quarter. The Company currently has no revolving loans outstanding under the Credit Agreement. The Company was in compliance with all financial covenants as of the fiscal year ended December 26, 2025.
The Company maintains credit agreements with a local bank in Czechia and with a financial institution in Israel, which provide for revolving credit facilities of up to 7.0 million euros (approximately $8.2 million) and $5.0 million, respectively.
As of December 26, 2025, the Company's total bank debt was $476.9 million, net of unamortized debt issuance costs of $4.5 million. As of December 26, 2025, the Company had $146.6 million, $5.0 million and $6.5 million available to draw from its credit facilities in the U.S., Israel and Czechia, respectively.
The fair value of the Company's long-term debt was based on Level 2 inputs, and fair value was determined using quoted prices for similar liabilities in inactive markets. The Company's carrying value approximates fair value for the Company's long term-debt.
Capital Expenditures
Capital expenditures were $50.3 million for the fiscal year ended December 26, 2025 and were primarily attributable to the capital invested in our manufacturing facilities worldwide as well as costs associated with the ongoing design and
implementation of our new enterprise resource planning system. For the fiscal year ended December 26, 2025, capital expenditures for our Products and Services segments were $31.7 million and $18.6 million, respectively, representing 1.8% and 7.3% of the respective segment revenues. To maintain our manufacturing capacity and support our strategic growth plans, capital expenditures are typically in the range of 2-4% of annual segment revenues for our Products segment and between 5-10% of annual segment revenues for our Services segment. Ultimately, the amount of capital expenditures is dependent on several factors including, but not limited to, the timing and implementation of capital projects, the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity to service anticipated customer demand, equipment lead times, and the availability of cash flows from operations or financing activities.
Contractual Obligations
We have commitments to various third parties to primarily purchase inventories and property, plant and equipment totaling approximately $443.6 million on December 26, 2025.
In conjunction with the sale of our products in the ordinary course of business, we provide standard indemnification against certain liabilities to our customers, which may include claims of losses by their own customers resulting out of property damages, bodily injuries or deaths, or infringement of intellectual property rights by our products. Our potential liability arising out of intellectual property infringement claims by any third party is generally uncapped.As of December 26, 2025, we have not incurred significant costs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal.
During the periods presented, we do not have unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Recently Issued and Adopted Accounting Pronouncement
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on UCT's Consolidated Financial Statements, see Note 1 of the Notes to Consolidated Financial Statements.
UCT - Ultra Clean Holdings Inc. published this content on February 23, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 23, 2026 at 22:27 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]