Ichor (ICHR) 9 Nov 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen and welcome to Ichor's Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question and answer session. And instructions will be given at that time.

As a reminder, this conference is being recorded. to Relations host for like Claire today's now Investor McAdams, Ichor. would introduce for your conference, I Please go ahead.

Thank you, third call. today's you for Victoria. Good afternoon quarter and XXXX thank joining conference

results to earnings to press contain XX-K risks our number both actual statements materially those control of to from those many described These and These within cause on for the uncertainties, which and earnings in statements. differ and forward-looking those recognize SEC. of and forward-looking spelled in our of meaning such risks beyond securities could Form described read call, XXXX please report and you annual you As out our press subsequent which a listen include fiscal the uncertainties federal filings in our this release, the statements conference with that subject release are laws. are

uncertainties. risks consider should and those You other forward-looking of all light in and statements

conference Additionally, we providing financial certain non-GAAP will during be call. this measures

release Our most comparable posted reconciliation financial their to and each to measures of financial these earnings measures. a today, website the GAAP provide press IR non-GAAP our supplement financial

will the remarks, over On additional our will turn open with our and me will the Jeff Jeff fourth are for our to an third prepared I'll of After and Jeff? details results now the we call Larry then quarter the provide Larry review CFO. our quarter Jeff update results guidance. and questions. Andreson. today line CEO; call on of a business Sparks, outlook and Andreson, our with begin and

guidance and experienced last similar record $XXX second the call. earning our up end a X% Claire, components continued to million of were Thank from upper to you, and in supply. we revenues QX welcome at improvement quarter, range, the our quarter, QX

as record of fab coming earnings profitability the end per forecast memory then the well increasing of and was reported share. memory in around Since exceeded by export to result, over into primarily declined softness basis XXX CapEx equipment points XXXX. significantly. commentary markets earnings in reduced forecast, centered domestic quarterly call, QX. seen early effectively year targets margin upper wafer of for levels investments gross year. above the our for next improving going restrictions increasingly forecasts and October, our a conservative use billion last improvement WFE semiconductor And have And we The Our initial in in certain in quarter to the manufacturers $X $X.XX expectations $XX billion of China around reductions the

restrictions Our XXXX decline changes have guidance come around impact incorporated and be revenue the for total as the such, above impact expectation unchanged, quarter record the plants. represents year-over-year growth of estimate to of export the revenue We however, build of a our this million third is of these quarter. our QX And guidance. $XX assuming at we in in We the midpoint approximately QX our midpoint our XX% outlook from that X% industry growth,

year, our XXXX. earnings to adjust nearing model late million over yet free turns until demand. reduced several spending levels over in next in And XXXX. $XX began annual revenues many XX% of in downturn, customer operating EBITDA industry focus environment which our last in quarters generated XXXX over and WFE lower our ability flex the a demand XXXX. resulted This the flow decline over in five downturn cash and mid of $XX of our So am you a recall and to continued we and million in record as the are we to end to revenue of sure in variable the expected quarters I

perform will the reasons of business look decline our in a our are at why today, number number there revenues year. a expected next overall WFE than we better we XX% however, As believe

memory customers significant exposure XXXX, year, our our the the First is growth vast then, largest other based in be we our two from for XX% from we sales about of market. in In XXXX, largest revenue additional from customers combined to XX% foundry of growing these has grown less less memory of share the memory the a just acquisition combined estimate the IMG our customers our is market. The our now completely portion our revenues in logic time, memory WFE than from were markets. XX% on from that in total industry. comprise and that of with to to their far over also of the reduction XX%. And our the memory That's a two is of incremental our driven. estimate semiconductor XXXX. At business sales revenue. And independent our occurred customers same today the majority business of sales has exposure XX% And

to for XX% total of year XX% is in to related XX% XXXX. this only estimate that sales we XXXX, in memory So over compared our back

year to revenues grow the next WFE why Consistently XXXX. delivery increasing market. second revenue forecast EUV of shipments own year. and revenues a in system in expect A for business. EUV level The we an to is perform of because higher And serves than EUV next reason expected result our a includes better EUV higher XXXX gas our growing in related continuing build our portion rates

evaluations market Third, of Historically, advantage new and our in resources we have industry gaining more customers to success qualifications. product demand expect taken new to winning invest slowdowns evaluations. in temporary from share benefit product and into

more of open of share, qualifying panel to to progress qualifying areas that global qualify additional moving aggressively and delivery our gain it now in chemical focus make to our our system next visitors. weldment is leveraging components, footprint machining gas generation our Japan, Our internally developed remain

but very our working Beyond these customer serves in with fits stages, carbide began very is gas a solution early that silicon well. opportunities, the on a This delivery we recently capabilities growing market. the

in constrained two reductions the XXXX. late been did in last from why for anticipating our The of of the supply in years, are comprise next as not the demand we customers declines expect WFE on assumes XX% mid majority not we current our for to because same high that as revenues that our couple Therefore, single unconstrained our percentage estimate are Again, our the our as with that we sequential witnessed we different of most today reason of digit to is more XXXX. products this basis, in this investment the XXXX. we levels a backdrop grown XX% logic below dynamic stable Lastly, for to levels declines we of at business foundry shipping time, was of industry our the least XXXX. of Within sales expecting for At in same expect quarters. visibility, have grow of markets, inventory EUV will level impact level memory we be the just through to inventory has also in ahead segment, we component and believe a which levels is at this XXXX. most to

growth we we over markets In profile will the margin non increased to We model semi years. our made few revenues also environment, improvements believe see opportunities from share demonstrate continue in business the last this next our year. gains to for gross and

in the discipline be and outgrow $XXX future of programs dynamic support WFE. to our good we to spending maintained in our summary, believe for business and this R&D highly discretionary billion forecasts well continues capacity and industry. to level through navigating, positioned all have We the of invest we on optimization continue In XXXX environment plus will are Ichor

the markets Over the the past has annual seven guidance, strategic of faster and WFE CAGR net And our record growing seven is M&A. Furthermore, QX and games will outperformance over continued reflects revenues. than grown track primarily within XX% income at be period growth our roughly is share WFE and at an successful years earnings our midpoint XX%. XX%, of our of serve XX%. year strengths This our this demonstrate rate annual

confident expected financial continue the call to And WFE we the which show Larry. I'll our We we in now largest Larry? that, to be with XXXX, by during over turn outgrow to the third will history. industry. to expect our on And that is way, industry's executing are strategies results year strong the

Thanks, Jeff.

to like the There measures investor website is exclude expenses section helpful today amortization recurring impact conference schedule and based and in charges non-GAAP the the of our financial compensation non-GAAP tax These R&D assets, call. adjustments. share very discussed for P&L including results, a discrete metrics measures. summarizing that non-GAAP of items individual during expense, our SG&A would and and as are items you this I First, the reference non of remind for acquired such GAAP operating line intangible

our revenues With points and from leverage. X% higher gross a basis XX% to of last margin $XXX for from XX% XXX were the volume year. About was end at up of record up revenues of than the quarter forecasts the quarter Third of exceeded factory sequential QX. QX increase due expectations QX half and upper million, was

we've XX.X%, With a QX. the of guidance. operating past year higher recovery timing margin than to lower $XX.X the over were basis about and resulting our bit investments increases basis The points shifting and the resulting expenses other incurred operating half due the so. cost than of the the from or some QX forecasts million, up to XXX other QX midpoint was from of of R&D points XXX

our expense interest expectations. $X.X million of result line higher a increased As in with rates, to interest

guidance. $X.XX earnings While rate The our lower lower QX was reflecting have for the the of EPS benefited resulting was the by tax volume gross revised for also share. earnings of high The tax slightly EPS margin cents $X.XX OpEx. full about per rate benefited lower forecast, And about end above the beat the revenue ahead of effective from Our effective driver quarter end XX%. by $X.XX, the of X.X% rate QX at performance year well of expectations at than high lastly, followed range. primary The was

turn balance we'll sheet. to the Now,

and quarter-over-quarter, receivables million million, at days XX four and down XX third $XX.X from and about $XXX flat of million conversion million million. activities returns was expected quarter CapEx for $X QX compared and in up of cash were to cash was the free quarter operating generated working $X million the debt from Cash $XX.X total of DSO QX. million flow. improved quarter Total $XX.X we was remaining in $XX was from about QX. cash As capital Inventory $XXX million end, was at

Now, export the continue I to XX.X% gross QX. guidance from margin and restrictions. $X.XX approximately objective guidance. revenue to $XXX businesses. our This X% about growth earnings quarter million to a this XX quarter as the to slight a programs The is to volumes reflects share. at sequential points aligned decline guidance in by a midpoint With will gross result in revenue of revenue margin million million, a range guidance recent At improvement of our increase as turn our per $XXX to $XXX representing fourth QX QX level, revenue $X.XX our basis about reduction are ongoing compared of components with is we expecting through similar our cost of

expect and we timing slightly to of higher the fees million. QX our Given approximately QX, operating versus $XX.X expenses audit R&D expenses to increase

As we seasonal see are a can order we at also looking some QX reduce offset But typically some year. each these in early in to we reminder, typical increases increases XXXX. costs where of in areas

our the recently increases fourth interest expense in reflecting million interest We will $X.X rates. in quarter, expect be the announced

shares. take QX be lines. million to fully Operator, diluted count to to XX%, in rate tax Our estimate our approximately and open to we're the ready Please be we questions. share XX% expected XX.X is

Thank you.

[Operator question Please be Bolton comes Our with will a go from Needham We session. and Instructions] conducting Quinn Co. ahead. answer question & now first

you down What of is the is I lot expect third Jeff, four basic question that XX%? went down do through of my you might kind or Hey, is and on through XX%, think record think Jeff, you outperformance guess, if Ichor you drivers five WFE outperform given in nice reasons a you the quarter the think went to you XX% next year? results. could and congratulations why Larry, WFE you guess I script?

opportunities, probably -- I'd Thanks, If of a Quinn. today, it. IMG talked helps our shared memory tremendously. that, another or grouping about, on put obviously, question. down we and exposure is better our had to And about on that and some number so. X% EUV buffer say growing probably working We're have with Good I it And acquisition, are like gains. we

so. edge. as pin in strength well both kind I number, leading at seeing and still well. if There and to a we're logic I'd the think or the So, But trailing me of edge say, X% that into foundry probably you so at about had bodes

mentioned as you there's margin goal Larry, But the to Perfect. question to XX to is well basis And through leverage I gross mix, component a or as points cost reduction this improve big product for related know business. activities. is gain the about

how perform sales if mid you are would so in gross And in environment? that XXXX, expect down teens margin to

We'd gross through. flow probably XX% about a margin expect

drop If into more last does the you a in XXXX, a maybe higher machining hopefully revenue drive margins, costs. fixed in we does look share in at it's it have than but little which more increase in a certain and investment bring us downturn, higher slightly our help with because business,

gas it. me, in then evaluations And for that Jeff. on next Got just are panel the maybe generation Lastly, updates Any field? the

XX customer customer They're are talked there. there. moving we out we've Like takes months the usually to Yes. existing and the new One These about, are got along. two months. one one nine

of a than first in probably both these, other. we're So, the one so innings farther or little three the

And get accepted from to these see hopeful the half it. progressing. we'll just next pretty And one will second year they're so, first we're and of of that start revenues

thank queue. back Perfect, get I'll you. in

Quinn. you, Thank

Next with question comes Securities. go Please from Craig ahead. B. Riley Ellis

you. up one on the of on in the execution guys, Thank nice the gross quarter. the to congratulations margin. wanted I follow items, And

The Larry, is see this. question the great So XX%. to

you input think couple of variable the much latter we gross from was minus or look we that was noted increase you How over next trends the the margin ahead? what that both as cost in look as in out for given or reduced quarters, plus pressures chain, that I supply there and volume of And it? item. expect would other

Yes.

So let there. happened describe just what me

this the kind related to if balance regarding overtime completed remaining to probably from I you last of management meeting ship think working of quarters, months other things that that, suppliers, of leverage half product look some XX inside we to of the recovery, and to choosing discussion different being our margin cost I'd actually customers done last had volume over freight alternatives find flexibility the we increases catch-up also our with to them. and support quarter this say then was quarters, of XX% kind some expedites and at we've with of sharing with around customers and And in probably that them. just the And XX%, delivering what improvement kind cost cost of this between organization.

approximately, you take, So, basis are, some that's if we of us we've look which at out XX get that you kind if like you been, where stay where strip continuing that, of that on. we'd round XX.X%, on point trendline to

it'd follow macro the low down question then Jeff, that. drop that nice was helpful? things the of quarter, on it if how would visibility comment see And business? third contour to are quarters. the we you to get sequentially out quarter, just have is next you. One, related talk where it. revenues to couple can always particular conviction whether about the have the might over I unfolding And you grasp a revenues good Got of in the think be Thank from up, be color mid the the you. like about you've just that The you be might singles, second Seems got

confidence Yes. asked level month things. say out visibility would plus, me ago, months that, and I getting would six of you we're into of say plus have of if the nine kind I'd kind said three visibility months I was

call think China a our adjustments. our the we're I down customers. we've working and it's and things, QX of from So from for And QX. me bit little a the still build through be to recovery. all from on hard lot exports we information coordinated make largely think will do of But plans that a through the of shape Obviously,

we'll and So the the just -- maybe think a view of wait have call I then, till better to give you think shape next to we is. what

then, And lastly, it. Got me. just for

on margin of you you business products, we back do as XX talk next out the et things weldments, over but one as particular like we've where the visibility? about some and six come months higher to mix over the thoughts have are look last things happy you of back As just any the custom look that mixing design months, just see cetera. the you not products, how Can with the wanted

specific, machining when share talk it down gas the I'd some more well. and there's that American potentially mute the some think And out margin working of side that would there's to as call in. could I those of We are I'll some get in of TAM those and North some help that in about then large down kind pretty gotten of of what in want some side EUV some things already be if gains we what it of market. on are that the like, qualifications about confident we delivery in I a growing And business. as where Yes, our of don't coming the kind itself us so, We've we gross components we on well. think we outperformance larger upside existing operations. of places. largely, But with you in the if build But say pretty QX. definitely them. And the we're from. still of gives see in environmental operate -- to obviously, we're share percentage tailwinds a execute

much. Got hop it. Thank I'll queue. back in you the very

Craig. Thanks,

Please question Next Krish Cowen. Sankarwith go ahead. from comes

first Have and of my know think on tied just what Krish. out taken question. is is about taking level is the EUV. just This But guess, the business foundry portion Hi. Thanks I think up space to in of and year trying that portion to line for just broken what portion around out or behalf tied logic modeling EUV about you the Robert Burns that you how for on of year, sort with anything this memory. broke specifically? to and I past to the the the next

Yes.

that community. revenue in the go look I at fourth Europe that figure is investment some our of we I the out from customer. sized haven't for third have mean, and of We distribution you can think and largest exposure our

been from those our XX% largest noted both are well. And So, has new as down that customer nicely from of customers concentration, or something are to have the the our other to of as customers. growing XX% we gone -- two

popped haven't customer. They that. sized haven't we above a XX% So

disclosed. not they're So

will that figure framework a So that out. to of give bit a you little

just expense for a of up And quickly of bit next terms mentioned is about the you. you sort run maybe higher? next that rate just quarter, bit, should in into how interest Thank that think it going kind year, just a Okay. we of

I rate. see what see what fourth in have I a we the and can we've reflects floating Well, quarter, all dependent it's Fed to rate about have on quarter. does. we'll up, Larry first think our this mean, the goes If

So a what do go maybe we of naturally up it in because bit say it'll a period with lag, time. you of lock with little for

make Now, whether evaluating year, improvements, we to of we generate into flow is, working makes be through next cash capital expect it will the down that some I'd other debt. as only to going comment pay sense

keep more the So rates for attractive option going perhaps becomes certainly, interest us. if it up,

Appreciate Thank Okay. you. it.

Rob. Thank

Please from go D.A. next Hans Chung The comes Davidson. question ahead. with

my Hi. question. for Thank you taking

commentary the WFE So about regarding outperformance for percentage XXXX. five the to

or done it business to slightly? be that how scores XXXX? does the Does flat maybe So imply imply in that IMG

mean, give it'll think Hans. of I is a IMG, color year-over-year. little XX% That little growth down I'll them, of it. on will bit. for probably slight bit a come maybe a me their Well, be good business around I rest semi. The question, probably of

very it'll level. a think little do a revenue I be see down they'll So muted But bit.

you. expense. And then operating regarding the Thank it. next, Got

to on let's the the model? OpEx? say, So, do Let's we about [ph], see how the about we deleverage think XX%? if say be should how we think Then down XXXX the

XX% on XXXX have offset. invest at travel, as as R&D variable up in remaining discretionary into slightly say, significantly but down, be said, to range to talking, of we're business still try penetrate spending than spending drops kind will of We'll areas, are the spending some I half our that Well, reasonably looking working take furthers that items. as spending that. be in the will go to finalize and of in won't our and I'd our We'll But -- going other new that outlook revenue, through Sox And of plan, the our we're we QX, in focused investment, well. be seasonality think to maintain right we continue around compensation, continue we XX.X in keep it'll Jeff's have QX. that will be as especially less [ph] with now investments to spending we're to it plans R&D if still our which opportunities, controllable to expect ERP for on next to compliance the we going will normal continue second year. the it some now

for So now. that's plan our

levels Yes. discussed approach and more would those view we that after then G&A get align can really revenue what of areas spending. And transactional that Larry would duration are goes, we we that go side then, kind work of certain we'll good do. we've back with to question through of revenue there's I as of we kind that the we components a about And There do moved number And that have other discretionary BPO try say. cycle. into to to we some playbook as of this a a of the manage Obviously, then have to to a prior and call variable that.

Got helpful. it. That's

just still so current supply we headwinds lastly, we regarding decrease chain the the supply the where So dynamics? see trends? chain, do then, And see regarding a where do

Yes.

are constraints would improve I they say again, that chain I think they gone. obviously. not supply

here the sub still where suppliers. rear of working is -- is a issues the all our that's on the it tier at supplier some but they'll improving potentially, are needed still depending some there are is its where we lot. think located supply predictable But and level I head component not we to

advantage here take largely breathing those that a there bit they're caught behind then and us, can a but that get But of out up hope behind of now. and still room be work. there's us would we some So little will

Thank it. Got Great. you.

questions time. are please Andreson at like go back to over closing I turn this the for no further would ahead. to floor There Jeff comments,

Thank their support and this customers quarter. on you as dedication this for environment. continue thank us dynamic joining ongoing for we to I'd suppliers like call our employees, to highly demand business our navigate

New Our activities the City the Conference on XX, in Needham investor upcoming December Summit include York January. and Growth

to look scheduled also earnings early February. Operator, for next call concludes We this forward our our call.

Thank you. This concludes today's conference call.

your day. You a and line for your may disconnect have great Thank participation. you