Ichor (ICHR) 6 Feb 242023 Q4 Earnings call transcript

Good day, ladies and gentlemen. Welcome to Ichor Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Claire McAdams, Investor Relations for Ichor. Please go ahead.

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

materially our results and number beyond contain which press to you are which federal earnings As read are forward-looking These release to and the of call, cause from statements could uncertainties, recognize securities of laws. within to such this please and as risks that statements. our statements both a differ control, forward-looking subject meaning actual the of conference listen you many

risks uncertainties earnings the with XX-K described in report These and out those include in filings Form press our SEC. those our on for spelled and subsequent described fiscal XXXX release, those in annual

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

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

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

today Andreson, turn Greg guidance. will the with prepared details me our will call the then an and with begin line we call our Andreson. questions. the results business, for about are Jeff open update will remarks, and the our Greg provide now our Jeff Jeff? Jeff After On on CFO. Swyt, I'll and CEO; to additional over

Claire, you, and Thank welcome to call. our earnings QX

fourth X% sequential environment. some of movements end expectations demand the quarter. at our to growth provide the QX $XXX otherwise of quarter equates our fourth color upper in This to came revenue like Our a at revenues within within I'd million. on stable from an

free through. we is guidance used flow revenue take our generation, in inventory was to the opportunity elected was expenses. to reduce in drive because growth which during First, essentially above ongoing the upside interest quarter, strong of to midpoint order in levels the levels reduce cash debt the turn to and the of This passed majority

at X margin. the sold inventory We

margin. of number but had financial expectations impact revenue our decision have mix revenue our and so became favorable impact it lower-than-expected carries did negative And the benefits our QX, a a of compared performance, gross largest ongoing had forecast for this this on less to instead, while Further, QX QX our gross mix our margin. improved actually incorporated on

build-to-print revenue on to customers inventory focus our margin our as business, decrease levels. panel Our gas upside to lowest remaining improved business weldment which to in offset business as the reducing both is well during the drive quarter our the as continue

our margin, While cycle. gas the this indicator unfavorable on gross mix off the the business a strength is panel are impact segment in of that shift of an the bottom good did have we coming very

flow headwinds of temporary and our mix, and Interest in guidance, QX midpoint free So a sales and, of debt deploy impact operating below cash profit to given slightly quarter-over-quarter decision our breakeven. higher manufacturing costs. through roughly gross came the witnessed to and in down With total, expense towards inventory low we a margin OpEx the product levels. unfavorable was E&O reducing costs just customer at degree, lesser in continued of combination a performance

in to million free adding still our reduced cash generated million, $XX we cash million by QX, while and During levels debt $X $XX balance. our flow

$X.XX. slightly the net the lower a interest per benefit, lower versus with loss forecast, profit the higher and tax Given was net OpEx expense and share

the many optimistic outlook. to reasons ahead. I'll about growth be to turn There are Now our

to are well WFE First, which positioned means exposure we outperform memory in improved, estimate just as segment. to that to memory XX% spending NAND growth industry within we about the in our XXXX, particular, declined

epi our gas a as WFE, increased market lithography few we silicon segments EUV has have exposure number such memory of over Next, of carbide. last declined years, as and the growing exposure to panels our for

delivery gas providing in ASML leadership our XXXX. of a fiscal EUV XX% for market, the for as customer added we result third a As

anticipate our growth continue in unit to will the line shipment expand years with in EUV sales that We to come.

are well overall such and win market expand positioned also in from we as are benefit next-generation well pursuing platforms exposure our lithography High-NA to areas lithography. as believe We to opportunities the additional of to as share

to panels continue shift We epi qualified and gas next-generation the production silicon market the volume carbide for been on systems. have

estimate grow in Our as design XXXX. wins the for we largest customer million tailwind applications in be double We the growth silicon a continue expect to fourth of in XXXX silicon our will and for manufacturing from carbide revenue X to be delivery opportunities to come, in in EV market anticipate it next X and And the continue the epi carbide growth. to gas strong applications to years. exposure in resulted support to market $XX years our around our to

the inflections are process and XD the highly advanced growing We on seeing of use include also require technology within packaging. accuracy of These delivery gas of repeatability and emergence and certain more and advanced that drivers the dependent architectures, applications system. logic use DRAM the etch of increasing techniques that are new deposition an

reflect certain of We growing recently increased such refreshed use our these applications of ALD, etch, investor the silicon presentation more. as and to etch deep selective

all across to We proliferate providing a continues device have these role adoption multiple fluid applications of to EUV types. delivery as

steps reduce customers the and tool patterns and etch need roughness. create with more deposition line help smooth witnessing are to Our for process

Additionally, which packaging and material opportunities management, better customers are well Ichor's enhance precise components to stress also customer the revealed opportunities increased delivery. offer control defectivity, challenges of growing IMG our uniformly, aerospace require for as enabled as and IMG's historical by of at and film has all improved advanced importance more gas to base defense. in capabilities our medical, selectivity, are of Outside specifically that panel gas process fluid semiconductor, we cross-selling driving of business,

our and base. and technologies proliferate, to add evolve to customer potential new see to we for diversification Ichor revenue expand these and continue opportunities As drivers our and breadth

drive recovery our proprietary for it's All gross growth the initiative build products, of these strong industry next-generation margin our But are expansion most overall including we as our a panel our that within business. to story factors as gas accelerates. about key Ichor's excited revenue

We have applications shipping our qualified now a manufacturer. are to evaluation supporting been device are X and that tools on customers'

Our model higher order our additional develop adjustment can our believe to reflect latest presentation we to slight to in gross investor of products, target we making which the drive of R&D margin includes investments XX%. level in turn a are in north proprietary

our development work that of are on We new of the ability long-term roadmaps. on customers' demand and the These lower products support our Ichor technology proprietary provide customers to both qualifications. periods focused

very focus next-generation our as key and gas are at machine pleased areas. These moving our good components. into new proprietary progress We panel we very qualifications continue the in of our to gas include manufacturers. our qualifications with the panel device make of now progress I'm

over add We expect customer of continue to evaluations customers the work course XXXX. to additional and with multiple

contains the next our panel additional major will which program. expect XX% gross content gas tool In customer months, several to new margin XX% is evaluations. around profile. Our about end-user ship compared today, significant expansion the X a systems for to This support gas Ichor that milestone proprietary for we of will drive panels

and is qualifications begin longer components, to Our systems ramp we estimate our will new to on quarter our and is expect course customer of best over margin but year. positively continue across when XXXX. impact The qualified proprietary the we through inventory late win as hand, production first of In our base. machine gross we this taking the continue the work are

business leverage outlook and rebounds. the to spending WFE for environment more for first Furthermore, will our I'll the revenues the and our sharply mid-single-digit revenues growth be weighted when as model industry remind will the everyone persist industry levels at significant the second tend that Current full year, tend through summary, operating In expectations recover here financial of WFE likely modest more grow. profile today half XXXX, generate half. that towards given business are to these XXXX

Given the also continue of through $XXX our level run visibility, half in around to followed revenue our million first ramp current the second expect by half. a the the beginning we revenue rate

in strong expected in we As million year recovery back million-plus $XXX look level XXXX, the we forward to towards to XXXX. $XXX ramping to look ahead revenues an

earnings We business continue support revenue growth. deliver investments our in to as critical make expect in significant why is increase, future which our to be we of able growth volumes to

further that, it over turn around I'll our provide Greg financial Greg? With details QX to outlook. and to our QX results recap

of last Jeff. acquired charges I the useful and the quarters. the supplement of and intangible is begin, and would the a well that cash amortization today website nonrecurring as non-GAAP our P&L financial measures as share-based of adjustments. results Thanks, These discussed metrics To like section the assets, summarizes GAAP sheet Investors measures. are tax to expense, balance that information There compensation financial of flow items on discrete and impact for emphasize summary a our available exclude non-GAAP several

our million reflected at remaining stable discussed. the $XXX inventory revenues In at customer revenues of upper of compared prior the from were demand quarter, the from and pass-through levels, upside X% in to With Jeff QX guidance majority X up relatively quarter. the of the midpoint fourth guidance end margin, sales as

XXXX. inventory impact the XX.X%, sale was cost margins With of below anticipate we headwinds, higher and expectations. E&O was customer margin move of and mix, significant in We product our the at which the slightly and through continued gross our as some well margin favorable our less manufacturing a improvement no

were and breakeven. QX operating at million for than slightly lower QX our operating expenses was $XX.X QX roughly income

loss million, net income at $X.X net resulting exceeded expense $X.XX. our net per million. our and $X.X was The share was Our forecast non-GAAP benefit interest tax

days. the million cash quarter decreased of operations flow deducting the to strong million flow increase increased DSOs which expenditures, free a cash from inventory our to We accounts cash in sequential $XX $XXX end million in flow X.X. Free turns and drove $XX.X $XX.X generated million Now particularly was $XX was the million balance only to the the at decrease end equivalents At to our the cash during million, million, XX $X $XX million. after totaled for and turning to Inventory given year $X.X receivable, the QX. from quarter sheet. capital quarter, of and

the coverage $XX.X debt we and debt ratio paid X.Xx. at our of During net quarter, stands down currently million

to of a expect in the costs. $XX.X range margins resetting, of $XXX XX% we taxes will of discuss the for range anticipated variable this gross XX.X%. quarter compensation revenues approximately With audit QX improve time, our million first seasonal the $XXX let's of million. expect to QX we million, to other fees reflects operating Now The XXXX. and guidance expenses increase to At our payroll impact be

move level making to remain similar in beyond QX, we As investments as expect a we targeted R&D. are IT at we OpEx and

to QX million. approximately expected be Net for is $X.X interest expense

efforts on we as to Looking our decline rate expect beyond reduction a QX, our favorable debt of expense focused levels reducing anticipated interest continue an in to XXXX. our our as as in result well interest later net

We be purposes, modeling should for million. to XXXX tax interest you a model approximately to do expense or record expect benefit not for For expense QX. $XX

full non-GAAP a the effective are of year, For X%. we tax forecasting rate

questions. are Please we the ready Operator, open line. to take

comes B. Craig first from Ellis [Operator question Our with Securities. Instructions] Riley

I XXXX. wanted gross line in to how clarifying then and item played quarter understanding margin the by just off through those fourth dynamics start the out

you those out through quantify specific arc those -- that understand that gross then we come as just of can Greg, significantly? play factors caused XXXX. So so just the decrease how help margin look were the us model And of to of at the

this. think Greg given in back Jeff. I But I'll it's let Craig, of at chime the magnitude the end.

think I like through to walk it. kind I'd of you

at I elected we think first inventory sell cost. to some of all,

would inventory looked were and some go sell. off had about, Have at we able of to generated that, the in say, we bottom. incremental As piece $X months have we ahead that built million supply, kind of we of our that inventory profit

This side primarily the was so depth seen of component wellness lower than kind of really down. has level orders And a been as our before. had much that the business, we of side mix of

the mix driver. panel that gas So by mix offset was largest the

And to this. of initiatives around talked I staying year, as we've recover and about, driving and that see stuff. help we been you margin out new look us products our this stable the the think we've can supply integrate going key gross look in of the developing that all that of So forward, mix some as are coming we relatively into into gas next kind internal of panels we

past you sure in normalization of like we've see that I come inventory late think the in XX%. been or guys back million higher, recover have up leave will I'm will it maybe fourth the the fourth of we the bigger up $XXX some also we our And reserves what to to some what this than is that's We we this well. which outlook. time, the question we of can kind is again with, seen At as as quarter, quarter and would of see get around or kind around

to So go you're XX%, to answer that kind Hope of question? see from XX% increases we year. your going through calendar as the

follow you've content that's Yes. I And higher a on got to panel comments ]. [ chip that up product. then new tailwind I the be and on wanted And margin fact gross there, going like the much gas to that your

the majority As this Say product of in you existing of product ramp that's how start to that year, panel just understand mix? customer gas ship help newer significant differently, the part mix will programs that can abruptly to how of later now. you right with that can current feather us all

Yes.

question. Another good

these are we through before working share There are them haven't call we're forward. I'll market X first we the and applications had essentially, that applications won qualifications, gains. going As

in this start the of fully that's the content. to inflection. I'll in the see panel with layer XX% qualifications start would Having we kind multiple our that, to components low that happen. digits get year, and of gas as So can of start call -- we're about on these look going to are see panels. year, customers of Craig, It's that really the lot legacy said the kind at qualified single XXXX probably will in work that a We to later revenue I say the them on of gas configured internal

to. today, gas fittings, supply internal that we that's still adding referred The valves, on. of components there's a There's substrates, are and things get can like panels lot that, qualified content, that the I

position during to already So on-order little happen year. won inventory start the our of in slower helps position. and that of of to qualifications. piece dollars, tens We've our kind a some it's are of going going too. as because And of millions But we're They're there's kind a the forward. to in those -- specifically measured see going QX, that us and of moving

So first in before gross margin fully panels you'll integrated to see those gas XXXX. affect the our we get

is Stifel. question from Brian next Our with Chin

Thanks the us little to to clarity here. things ask a to Maybe kind go a to just first just little questions. maybe margin, allowing bit a lay out, few of gain gross for maybe back to

of for XX% upside maybe revenue are XX.X%. only the margin, XX modeling, points. We zeroed that's and the gross out non-GAAP like basis like still is say, QX If was kind

points And still so there's to several hundred basis there kind of understand.

mix, you of So reconcile reserves, is can elements other kind delta? sort there us worse of a way get that inventory the to there higher to

Yes.

the didn't products on beginning said as at achieve I would mix, we mix mix I its is, versus somewhere around that our business, to our challenge. the Obviously, lowest probably quarter. that and the you the we prepared print and think of build at product look -- out didn't set the remarks, higher-margin the margin I gas the mix the of was the say customer when panel X/X

as think basis kind of $X that of or million. XX the points So pass-through,

which right. will other quarter expected, kind of I think where did the we is a and this ramp we to the some internal parts, bit QX. be recover we slower And the between ended the E&O of supply wanted math XX% in headwinds and I quarter, where then of really really again but last little higher than XX%,

and So that color adds for I granularity hope enough you.

second of It that, does. I'll to And an move maybe kind but add-on question. my

goods this then panels will of this customers' have And How still of I look That's basically I worth into given of a the kind see They either sheet, prioritization that. is cash that when for for direction. confidence doing and their drill products, of quarters of a and right you that. is X you of into follow-up inventory. part kind -- you kind destock P&L pass-through, gas down over what to inventory severe of balance terms In inventory. that When that your finished that half? plus in components of mean, tied first that at be is raw But is can gives the of quarter. is what your in rationale and that sort materials maybe flow machine the was excess excess? over definitely moving and But

question. Good

you a think I parts. got couple of

made was this a first, specifically decision saw usage, well around that hand we the on So of to months where parts be beyond year. we the out

a it generate And P&L have We took could of so And cash that. to consume have we hit. would did before a that advantage had down. while wait we pay

some that our bit to a little a time us down debt have while. and value ability and fact taken would around and was that pay So the it money

So will customers of our question your the be burn that around through part what's second our confidence is of down. kind really

by, obviously varies I'll business call segment it ours. of within think it, I kind

I think is Like to going in general, in weldments be and most gas side. right? the panels, components they're machine done, of this

I it to year. degree will through think this even some carry

peak ] inventories half year are turns. inventory way [ Our our two about

clearly we're can So looking inventory burn forward we're carrying excess that down. that ensure we it to

see we get back end little this year we bit get for normalized path just to of a more a may turns, to but beyond So take how there. it the

from is with & question Company. Charles next Our Shi Needham

little kind about a but step-up. not modest because a Applied X actually talked to revenue September for I and $XXX year quite Research stronger of think somewhere QX, uptick why bit your almost that so reason earlier a you -- moderate of about close that's I this can between in of I in modest, of embedded uptick. be X until $XXX And I bit approach -- color asked in expecting for an mean, a is a Lam Any the moderate, expecting year. Are bit that? not I have December, be of -- off, almost customers, going I a they QX. to Are in June seeing and a about run way million, like described recovery, recently Jeff, of you your little you progression, Materials mean, described the you're of Supplier congratulations winning on largest million are question, feel more one around the the way like First award. you much actually a feel quarters. kind the the you it's mean, rating to 'XX you the

yes. yes, Yes,

because talked we're kind -- me Charles, specifically, forward beginning, million. $XXX back a at Let about getting our looking to to we question, good the it's -- during my $XXX maybe million, of comments those

So this is is that don't to of get going $XXX wasn't to the what be really think to I get looking into intent XXXX. I was trying QX, clear, across. million, to just

I still we're in think inventory then through million that lead in our to -- it to going mind because as million we're we're see range, as different between. a that will to QX, have of it's working going kind little somewhere today. parts. longer we be profile Keep maybe of the $XXX our -- visibility are reduction, And time those kind $XXX a be in

gas will of of and any further lead So kind panel those growth. kind kind of

But good with year. be confidence again, to customers I a the growth pretty and is us that's think our I think XXXX, with going

the of occur support year back that would I the has that of their expect of years revenue. in half and our to their So beginning some to

year see position you hope where So our of of we of going. kind helps that kind kind I

I to color. revenue Do as to a looks good level in I Applied likely seems the carrying this revenue mean customers out this the largest be coming inventory. Lam to the want from where in from that the Applied Got it X is Or it. customers your person just the asked Materials, asked more Maybe come of a differential I inventory I be, could their ahead Lam between why slightly Lam? I from versus customers. amount the are relatively Applied your question is other me -- X about terms would see think upside the revenue I -- from better of from of great that year which reason okay. like you largest mean, your really still prior figure Research That's of have

customer profiles. side XD were specifically a we share stuff, Good some largely X where know do I largest question. Probably customer in something high we're into memory would they that I any accelerate well. a level. the is at that, year. level would say then customers business had you remaining at China positioned faster market We signals those very, can't certainly, a comes answer and primarily massive not said But foundry That foundry from And our different NAND. than next see that when very back, fairly of recovery logic, the market. is don't base mean, of in our actually I of around largest view our customer and we getting see Having strong logic. as drop-off in shipments, probably our

too customer So profiles. beyond get I around that, don't want specific to

question next Our of comes Krish Sankar with from the Company. & Cowen TD line

tailwinds would year? behalf few any Robert look calendar Or top if seemed is, on guess seen over But if inventory ramping of expectations component win headwind. I line like had year. of business know this any for story? you on what Krish. if on the the a levels Mertens is last months. just the this design 'XX on the that's a of have first that, And This from color to just the of additional be then I the you sort more change one

in value our I very answer question. forward. the business of quarter-over-quarter first the Good will a in we're machining. going is to would the little chain a probably way that starts go. Maybe for run expect outlooks component half Weldments longer. side higher have, level of the similar We think, I They inventory would seeing

today. components to and somewhere timeframe, kind maybe in 'XX, Our XX%. 'XX there, business, our digits XX% kind of to between of if of our It's you kind of totality of the back ran mid- high little to single probably kind somewhere went a business, XX% of closer running the

that the us XXXX recovery towards need accelerate get that's but occur which help probably will is that and the compound we of that XX%, X.X, design margin new the kind to our and to goal, our component gap panel we of ultimate recover in mix. in our as gross our up So around wins the will gas mix in

of Now some of already wins other millions it's we kind dollars And of back expect help part the just how by it's a and the your of our of significant quarter. is us margin size we've that pretty million would had. kind kind of of north wins, drive we to I question of tens and uptick do probably say to the gross those, to continue going fourth get XX% when of we of $XXX

you shipments, correct? material hear the gas Got later evaluation with and be half that I next And in I then maybe Did you those millions a I then year. it. thinking year. And to just I make one were correctly That's systems of revenues through single-digit next-gen more. that this know low sure the more want helpful. the talked heard just maybe panels. should

to mean correct. will that anything customers, starts qualified hear at success obviously, the -- would did we're that fast they You imagine. if market I I how number and improve, accelerate, move with

Our with next David Securities. question from Steelhead Duley is

bit if just elaborate could a your more was carbide opportunity. on silicon you I little wondering

carbide. next I customers a you up for and now sign one possibility And is the are in opportunities there think customer you in other quarters? silicon new have guys to of outside few epi there

question. Good Dave. Thanks,

is answer the yes. So

not still other early are like some it there there I opportunity an other side, the for initial had we've in but thing, us might call epi think with doing be it, that companies there's stage. processes very discussions deposition out

of and door of our discussions kind the won where of would kind continue that. to weldment foot customer would think we've the that's think bit at the going I I of one inflection silicon of opportunity is carbide. an business. drive we in the initial beyond around those we're probably I particular, little -- we doing a epi pretty it's business, but ongoing. implant And implant bigger that's point to say the And the are small, suppliers, a side in see

I Do because guys? you think, think win you customers those epi X or like, of can further there's X

mean, the starting of discussions -- that we're Well, late X I And answer year. of think probably total the is -- this year, at. start if looking last in kind I there's just kind we're we it's

We haven't gotten really done deep or enough. any evaluations

to box it's conversations XXXX question, out probably gas versus revenue similar stuff. to have customers, to XXXX driver beginning talk our of of be not of the It's the when new can And the obviously we So the what would of what as we supply of is manage can first we our gas see breadth XXXX. of with a we in it's kind generations machining, but company weldments, do. do and panels, And quickly from won of lot we can which multiple their a the tools think initial chain. moving essence, I now that's how forward application, our customer. they

rolling is, about or to I'm ramp OEM this than core a business. behind had little forecast excitement it's guess the half about a for coming bit second in customers more the question ready Are about your the talked I second you there's I if just half. getting in typical, you other ramp large talking Now wondering your just the and

less the it's conversations about XXXX. forecast having would we're I of say QX kind see maybe coming and and of rolling more about the out in the of they growth preparation into that

X our message top So I customers. it's of consistent very out think a

they're get you ramp half? ready telling a back to the So in for

Yes.

comments. Jeff have turn to closing the Andreson over like session. call We end for now reached to the back the I'd question-and-answer of

Thank you.

to to looking the Applied we have we forward of by supplier to an our excellence an won future made noted, for from quite and kind is year contributions recognized the in be award past award company quality a Charles As and today, Materials This honor years. for customer the over XXXX.

that So call great occur. this to their it's thank our these concludes for our for call ongoing awards on again really everybody highly suppliers, this our QX I look our to you on navigate forward to business employees, dedication for call. this and see quarter. our customers, support as joining updating want environment. we scheduled like Operator, us I'd early always our to shareholders, thank continue earnings dynamic May. We to

our Thank you. for today. concludes call This

You this thank may disconnect we at your you lines your for time, and participation.