Ultra Clean Holdings Inc (UCTT)

Interest coverage

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 86,700 63,700 41,600 29,400 28,600 72,900 101,000 81,200 112,100 123,300 139,300 178,800 171,600 143,800 129,900 130,300 113,800 80,400 58,100 36,600
Interest expense (ttm) US$ in thousands 19,400 32,300 41,000 49,200 48,800 46,700 43,800 39,300 33,900 29,700 27,200 27,000 24,200 21,400 18,600 15,300 16,900 18,800 21,300 24,200
Interest coverage 4.47 1.97 1.01 0.60 0.59 1.56 2.31 2.07 3.31 4.15 5.12 6.62 7.09 6.72 6.98 8.52 6.73 4.28 2.73 1.51

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $86,700K ÷ $19,400K
= 4.47

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a better ability to cover interest expenses.

Looking at Ultra Clean Holdings Inc's interest coverage over time, we observe fluctuations in the ratio. As of December 31, 2024, the interest coverage ratio stood at 4.47, which suggests the company generated 4.47 times the earnings required to cover its interest expenses. This indicates a strong ability to meet interest payments using its operating income.

However, the trend in the interest coverage ratio shows a decline from the peak in March 2024. The ratio has decreased steadily, dropping to 1.97 by September 30, 2024, and further declining to 0.59 by December 31, 2024. This may raise concerns about the company's ability to service its debt obligations, as the declining ratio indicates a lower margin of safety.

It will be important for stakeholders to monitor the interest coverage ratio closely in future periods to ensure that Ultra Clean Holdings Inc maintains a healthy level of earnings relative to its interest expenses. Declining interest coverage ratios could signal financial strain and potential difficulties in meeting debt obligations.