Ichor (ICHR) 7 May 242024 Q1 Earnings call transcript

Good day, ladies and gentlemen, and welcome to Ichor's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I'd now like to introduce your host for today's conference, Claire McAdams, Investor Relations for Ichor. Please go ahead.

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

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

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

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

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

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

Jeff Jeff? call Andreson. now turn over to the I'll

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

final not were components slightly compared prior $XXX of weighted as cost. QX increased growth due shipments within a high at than panels XX.X% QX components combination particularly Revenue to quarter to with mix end compared versus to As the QX, margin weeks shipping earlier our the of to revenue our market. favorable was expectations similar about highly much equipment overall in we our expectation at our QX to million, mix The decreased the businesses. volume higher-margin from QX expected, fab gross relatively sequentially quarter loaded of for as forecast of our sequential X/X revenues QX components, was X in and demand a but wafer and back-end less levels the reflecting for of had stable environment QX were revenues. quite quarter. gas mix our of

in At and the same initiatives. delivery a gas quarter margin In delays integration rates associated in strategy reduction EUV ramp QX, with gross achieved of drive margin improvement late proprietary products. greater aligned time, at our leading-edge our QX. revenue profile with continued order with a we we remain sequential cost in We uptick strategies, our driving content these in begin slowing as improvement witnessed costs lodging. track further to through proprietary of we components execution for with our but to of on continued similar margin levels that the are With expected build was expansion gross we higher-than-expected expectations,

Greg of will as the for profit a change as the tax well a guidance earnings in as below cover gross combination of quarter Our in impact provision because came shortly.

flexibility we objectives. of transaction, equity our as ratio half. leverage vastly company's expenses net an cutting strategic leverage completed future execute well believe improving our of $XXX significantly earnings interest yielded and by over We early expected With capital to the as offering this balance revolver, our paid overall that March entire We structure have the improved proceeds down in against we million. and

as QX level. up similar current at be in for million Expectations XXXX, guidance that outlook stable industry Now remained I'll is from well baseline delays that as carbide as stable Within turn year. for has given of EUV digests Ichor midpoint baseline gas past be few to fairly build the a a a to slower-than-expected expected continues our some because business over in certain panel the of our demand years system year-to-date. midyear, rate bit have the capacity relatively for in areas, industry which softness landscape the to an leading-edge through slowed silicon isolated overall below of $XXX is slightly XXXX the revenue couple our modestly namely logic. the WFE in installed to order The

we the stronger That in our for normalized in profile And for limited to XXXX remains said, optimistic the in our in being months the the in new begins NAND and focused as return stages visibility times a demand of market. reports serving X early the systems demand an technology yet upgrades. spending to are meaningful the recovery remain year-to-date volumes seeing not market very this chain. recent improvement approximately current the lead visibility, that will advance to revenue improvement environment. second supply indicate build half remains We chiefly on is a with uptick in The given

the ECD and in inflections, and emergence and as delivery of systems. applications more. that repeatability market, to include gate-all-around other such drivers semiconductor strong etch, demand, a of technology characteristic ALD, of in In meaningful growth strong use such applications high-bandwidth new XXXX. process selective are markets, highly NAND forward for etch, etch on the year look memory end silicon intensity us increasing dependent Given and a and the These the deep more deposition an require of NAND improvement as we accuracy driving the fluid

XXXX, delivery deployment while move rate delivery expect pace all increase in role we as have the gas for a deployments a current fluid resulted XXXX, EUV expected the to significant of We And applications. of has into well. litho as build a these we in in providing for slowing

seeing well as customers gains and markets. in semiconductors, our defense, business, are as base overall forecast improvement IMG's IMG aerospace share commercial specifically for well the we also in Outside incremental as ahead within certain the demand as

diversification potential our add continue As each and increase for continue these expand, opportunities base. to see revenue of and to breadth applications markets customer our to and we Ichor to

expansion growth to about strong enabled overall drive recovery a new But within business, to revenue gross build of the margin we this our our industry period initiative key demand accelerates. products excited Ichor's most and next-generation our that us factors as penetrating products, our panel these for proprietary gas are it's the into including as story of progress make market. has steady muted our All

I'm shipped pleased our to the some gas gas recorded over next-generation have to revenue first midyear, field QX. have manufacturers. By shipped we will our on with installed device of report most that initial next-generation in tools customers' we of panels and XX evaluation that shipments supporting panels our during

XX% contains expansion of to significant evaluations compared gross will around about gas Our drive months X new margin panel today, content which about proprietary XX% These our tool profile. iCore take complete to typically

Difficulty] [Technical

improved as XX from well factory basis as QX, revenue repeating quarter. this events XX.X%, sequentially pass-through by the points to not efficiencies driven

were points While expenses our was proprietary in costs million due customer from trough, below product QX up shy to due of produced XXX and as operating labor-related versus for gross for $X.X slightly resetting income and were forecast QX margins benefits mix and to basis our the to million. forecast less forecast QX improved of we about QX higher taxes and operating internally came meaningfully products. the compared at $XX.X favorable well as

our to was was non-GAAP per approximately benefit. a and the expense $X.XX impact our within higher elimination income above profits to share change of $X.X loss expense U.S. and on ability $X.XX. interest tax $XXX,XXX our international our The quarter. a net tax net forecast was resulting million, . The recognize net due Our at EPS had the loss

during increased the increase capital end Inventory loaded free Accounts of the inventory At the million $XXX revenue receivable Now $X.X after the neutral. to of from of $X.X $XXX roughly turning increased XX profile QX. $X.X deducting due flow from totaled quarter, $X operations our million equivalents back-end and were and the quarter cash $XX was sheet. million balance to end cash decreased a in million to to from million. our generated and days. our cash expenditures, year-end quarter We turns flow the quarter, and DSOs million, the million

million. net proceeds equity of $XXX were proceeds of the down to The that we $XXX used During completed balance. quarter, pay million our revolver an raised offering

has to coverage an debt total outstanding of balance net million, improved our currently and Our ratio X.Xx. debt $XXX

second Now With of XXXX. to expect the a of range $XXX for to the million, $XXX our will quarter let's range million we anticipated of XX.X% revenues in to guidance XX.X%. our improve discuss gross margins

We be expect expenses QX. approximately flat QX to operating $XX.X or to million roughly

operating expected to expenses the for the approximately remain expect $X.X to remainder million. decline for level year. is We . interest to Net of QX at expense similar

applicable continue with beyond well net the as we balance leverage our ratio the interest the to term improvement and our of decline a Looking expect associated expense as loan of ratio. QX, leverage spreads result declining to as

net to interest model approximately of should be full million. For $X for modeling you year purposes, expense XXXX the

tax a in We record expect QX $XXX,XXX. expense of to

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

EPS the Finally, XX our for higher guidance QX million share shares. count reflects of

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

And with we'll Instructions] question first take from [Operator today Brian Stifel. our Chin

China maybe OEM I or been that your maybe least to on China, just spending material you can growing that clarification. questions. China. exposure have Ichor the Maybe just customers, of guess, since Maybe this U.S. at firstly of then a are year? first, few a you in of have I that asked sort just maybe whether aware do case? I Historically, confirm topic we're if larger based sense not OEMs through indirectly is semi sustaining having And the is any equipment

directly we No, to the Jeff. OEMs. sell it's don't Brian, China

we sell to So of any guys. or AMAC Naor, those don't

a China So not we have do channel.

seeing part pretty Second we think in China is what I still your are China? of question was strong.

going the but and those of these to a I are decent that start be the by levels, it's year-over-year. in offset half to memory first to bit bandwidth of levels to but are slower, remain quarter-on-quarter be and back other continue high going grow of think that some to might good indications going relatively half. areas I little are or some at mean, kind

So will half in we at China today. don't second kind our levels view same the of stay is the think

per a of a either in revenue or business of of for on sort sort maybe was kind maybe of various half up you're how to quarter ramps sort of kind how this Got of dynamics of guiding and kind kind interesting, level of when it. hodge that sort of And it maybe kind thought reported and of kind first bit the sustain mentioned follow-up, at podge sort XXX outlook. my it goes half could impact I second maybe you maybe XXX. of high-level of

over seems maybe to be maybe QX, still travel about a I being of there's to sort next on kind not the like right, maybe or not situation. the quarters of a gross -- maybe like like couple layer of the will of through sort sort dynamic little Is of of binary able that maybe What a -- to But some off kind of customers inventory potential burn terms of that margin to you maybe a of bit way maybe this what think they XXX few that's what sort exists that? through mix, inventory almost still of as right they're normalized some in if XXX the next way OEM burns out working outcome the capture about So revenue is But to off. think of kind a of quarters? and it. larger with layer, work [indiscernible] think, your that still right

take a All now. good question it Brian. right. going to X on right That's parts, I'm with

about year. think think I What the an second is our this of not the at to I year. absolutely you to the not we of end we the much maybe I as way seen stage. flat the half but to we're We're and through be same have months at So timing to X tell don't now going us is as would give would it's an indication XXXX wanted through really the yet, is inflection year we're you anticipated of clear customers

we the fourth So of on biggest up an have that our still view when is, effect timing will year, year-on-year. The quarter. XXXX is

with are inventory question Second really we the your part burn around of is off. where

through machining largely some year to end and with go then we'll the probably burned off. components our of the impact to is needing think weldment be Largest through second. I of the still business,

now I running we've going panels stuff, last gas through are did. say, something flat year, kind that quarters, we think more X normalized, would they and from been like I for of

of panel. kind pile I range gas gas most I be there's things have in So just of of falls something a been of a and are think out forecast those needs of normal the to don't up panels whether think reconfigured.

business. side So the all of it's component in the

the in similar out, once about margin behind effect headwinds accrete thinking is that, as we And to margin will gross continue have It inflect, cost these we the quarter-over-quarter on margin. start is and than said generally margin, the we from kind that. efficiencies cutting just margin. big A the as the on factories typically like worked of get having know, we not going levels. our we'll kind of outpace this, XX%. totality you we've like describing say, see Now guidance a some in gross that we'll about that fourth gross an that as at our finished we QX, had in revenue of seeing up. -- gross levels our of qualifications of we the better regardless and be the you're will revolt even I revenue And the But margin get quarter, little levels. come learning But curve and bit might the would at view of our revenue that things and things up portion accrete

mean, I relatively cost I drive think, initiatives margin. view is you of on call, last from view to we intact our our So the the gross gave

Riley come question from Craig Ellis Securities. next with . B. Our will

the by response in so start far, color wanted Brian's just made to Jeff, guys. question. I that comment up a on All to you following

equally point of have regard of X ago, weldments, that you're seeing as to businesses, about think the you much the as in where in with you we about impacting back greater the having et months that 'XX an are be we all those and is not panels, So which on gas where might thought inflection is of as or it cetera, could half? impact

they're our pretty as XX, margin the close bring impact But incremental they'll Well, the margin to but side still I I mean inflect. more per to through ones X/X business to -- going see integration. think of drive I basis. we biggest well be chemical gas is component know to then revenue of be recovery the panels and don't need number, business our the gross a would or exact in a on because that

the are see. those so kind we I that drivers, And of think,

kind call, it really of And would I our think I months mentioned visibility. visibility, is X good with, I

I visibility other the normal industry after are seeing and pulled think and largely there there's it's because the where where really well visibility. kind understood, not has that, times the areas pockets back of and we're lead

sure. Yes,

Got of that it. just is some cyclical effect. So a

than of Okay. XXX tracking And Greg, first just thought gross then, to in year. margins. our half versus turning expectations, we're around basis we the points the lower

and about incremental we at item think there margins? you or half do steady second maybe a have Jack Are to but step-up fairly the we mix XX% it that as way more we hard of I item referred half a Or that to execute about is thinking give to? gains XX% and us back any that seeing margin, cost gross think, can can As can either trends. admittedly, how the XQ, beyond look business the we trend time you in think

so as we're as Jeff to flow-through expect we said, incremental Okay. revenue, we XX% is we still the expect that and Craig, drive believe driving see. to where right,

continue will that move as the we year. through So

we're now, other The all that is, half of incremental in year. the our improvements But start flow-through How should talked is model. the much as Jeff we've working proprietary is what the about, some will that. thing of to margin second got drive still side you for through XX%

necessarily the QX, but learning cutting the were of quickly say But the internal to year. fabricated generation we're I'll I'd what enter existing too panels we follow kind our call proprietary new our we business, exception revenue -- Craig, gas not just was in very is similar, of integrating is now . of panel we with products curve it. we of they'll these some kind as gas just new I our, view maybe down parts. overcome tracking on, expected and our of that think to it, into low

Our Sankar with come TD Krish next will question Cowen. from

last closest of last year to of they've compare had for quarters. Just when growing revenues contrast been couple or reported I couple them. your of evening, a the is One kind

are lined. more carbide? have simple EM top large Or flat kind have as guys you been something U.S. semi-cap on there Is silicon they You the OEMs? of more as delta exposure, with tiny cap semi fundamentally the is going

Well, and I that, of said don't but we want largely, I overlap would much deviation compete. this was see some obviously, where I upside his to speak we to don't my around Having revenue competitors, guess, base XX%. as China say another a or different have it required I gas that well. chase recently as for don't services I call subfab don't channel kind is you The a it business well. delivery business we I'd of,

much we see are don't see share really overlap see, line is, we play, where it. question think I So don't as seeing don't the as bottom if I people we but we shifts,

So a -- and profiles are so little the bit different because businesses apples-to-apples. not just the are

this you just get then to for can spoke like to Jeff. and to I'm a it, a figure given kind can tool build-out your delays of I'm year leading how just ship profile? customer And just it, gets EUV the out you of just you talk it us the of edge. you EV of kind time when curious, year ASM when about curious when booking talk they and Because when to line? order through the mechanics Got kind you versus the compared ship next to

quarter. -- X deliver about tool they about before But know don't a -- recognition we've reduction can end. to the probably going we seen about modest we tool. down the go revenue on half of not -- And And I'm the about some quarter-over-quarter, when the talk silicon then We it's quarter carbide them. about I it be to before UV. months again, being then their report point little entry within a the see, the midpoint kind did of X other a bit we're from ship We in months by and shipped half

they've I have of down they build and taken with comments. think been some their then plans, And straightforward their pretty

through And is all so it XXXX. that seeing going us. just to And we're into flows

year a EUV as out us I now. sets right for in growth it good to look up So XXXX

now other the now this years. is And we've had relationship X we're or probably thing X doing for

up get and pick as increase are content I subassemblies tool kind each EUV on think other we well. that that, we're starting things like helping the of to us

Got if one just it. And it. Got it final in. can question, I squeeze

products, kind of to you [indiscernible] If panel still gas question, inventories and of machining pretty be the high is machining stickiest relents, at normalized, market I'm spoke panel you would to guessing on kind Brian's lower it's of inventory side which gas are about high. say share I'm just the the more your if or is sticky you look where could compared probably but pretty curious, are how fungible. share to market and kind

that on thoughts be helpful. your would Just

weldments take of Yes. combinations addressable fairly of more qualification machining, sticky. I market highly bit are fungible. weldment weldments it and Those more the think it's portions it skilled. sophisticated I TIG long of We little little long a a When mean sticky the within call be honest. But run, less a orbital to would sticky. I in say nothing subassemblies certain to period. are and comes in with

view panels, market XXs, in shop, we sticky would of still have you percentage as fairly around So run. of that share, globally. ourselves the somewhere long machine obviously, kind low say, largest market XXs, with share a And I once the gas becomes

X rare, pretty are the years new as fairly in. come last have that's entrants sticky well. X So And maybe in

with Our D.A. from question Davidson. come will Diffely next Tom

a side. a appreciate the clarification first on Greg, question. the Maybe, cost ask chance I to

expediting, caused was For the it the cost the Was material components, it quarter? cost? variance in this what

was, So say, not. on it mix the of component within side, customer Tom, I the a more so really, would mix there,

about Well, half... that was

of of We're and things customer the in the components. with on that components. fees It's not inside more any seeing Yes. chain of About on mix now about miss like expediting. half the market Not supply from that. the the

doing Specifically you're not just getting -- smaller lot as when quantities, in much you're starting up, you're to so machining, you're throughput. ramp not

it's cost learning unit you curve. down. the So will a average get, to almost lower equates as like per the more And volume the come

just coming So didn't -- thought and gates. could out what we we of hit we the

type that And of do look when those biggest is difference Okay. forward, you margin the is That's you then market the have you the between machining, helpful. for going ultimately? fittings, a any of you precision products at weldment's X? And proprietary think which there

would the might probably get least more XXs. and into ubiquitous say you They're XXs parts. sophisticated the low I of the in low types from

markets So components today like measured the the not and address them. and things in off I in that. we are say billions range is kind machining that like that from far precision and things would that of

that are big the flow say the it's in But So be the that we the but conference components ones needle new into are opportunities. today mentioned help stuff, manufacture definitely on stages the also the term. can long they're move in qualifications. gas Individually, because I are there existing of in to obviously, the term, controllers stuff, is so I'd the going new most on near the early call the those going going panels

you you start And needed but start And for inventories you That's look to about then how run helpful. before point you at gas you that at see off, need when to revenue Okay. building talked what and do to inventory far some finally, panel? do that?

that gas EUV we but will I way mean, smaller, the are Well, much, lead think about our lead say much when weeks, volumes times burn to largely our the because gas delivery, panels. business longest X obviously. weeks is are that X is to when for contractual longer the for They're inflect than they the times. the I see start inventory would we have gone Tom, it, component know maybe

us that's the So fairly sideways And component of we the first on the it running year. for side first. usually see still in half

Ross from Needham Company. Cole come will question next with Our &

behalf of Shi. Charles On

historical case largest Or OEMs do point to think year. restocking will had they this you past? you X inventory to the management want to buffer have in the a might levels? want maintain So that the you wait second of higher that in to that's think reach you still than inventory those until expect not back still in companies past, the get the Do a normal they half the mentioned that

I levels -- to of their know say I don't higher what that alleviate would buffers. know buffers, should it. levels do carrying I need of we're which

So to we've safety like births and able added stock be to handle things that.

think I their so inventory in normalization, those ordering. be get through they'll once that pockets particular . And they back of lead our business time component normal to

Craig-Hallum Our question come next with Group. from will Schwab Christian Capital

Great. Would you the rate the when the with down? you kind that on bit your recovery XXXX? starts able gain systems a say of have workforce utilization delivery your fact and that little being share elevated hope that you're market -- gas in to keeping if on leaned of Or you're

as I XX% in would that of we such say it we we have range. XX% rightsized burst our leave the can workforce, to X but think as enough

pockets, the -- direct address workforce we've some get a I'll we that we do excess still such lot. have So when quite it, capacity we lowered labor to keep those. our, and call We

and And are would component tougher acquire on ramp. then those sets you to because as the skill say so -- I side definitely

material given NAND whole my a lost such of and I of of That your recovery, or am PCs, to Perfect. NAND money of make me for the have it great that losing kind then smartphones that regarding situation a more think just back question, I in 'XX out the you lot Do of finally mean future NAND that that NAND makes And in consolidated investment. coming be last almost a thinking And a see seems get they are is, substantial a an that about is unprecedented wrong? need to marketplace improvement Okay. weighted, right? money business they improvement that sense. a by manufacturers kind to guess that it 'XX. there'll material in order if to kind in or without increase we I in

you're think right. largely No, I

NAND think be XXXX. I will customer well storage will inflecting position NAND begins Ichor, I've inflect in to is I'm the in and -- that very they new And used view as with because of as also think share is all our largest near market but soon generative expert I our NAND the this, stuff. I on beneficial had AI it think of inflect. that that as and the call to need not AI the largest the the

as So Obviously, that's and DRAM the seeing like things that that. some NAND helping well. I think with on side we're strengthening

too, about WFE a litho the at the pretty close, but think history, you less time I being of of it's first of [indiscernible]. and side, -- this I So engineering the levels. lowest side get of it. in kind material than half forever, for mean the And say guys being significant I percentage you're to say don't and but time, right. is would And want recently, its talked all I somebody

a And position ASPs bigger are have on tools. significantly than obviously, that we while process there, the so

percentage tool. a their than of process So lower much . a content is

Jeff There are Andreson the now turn no at closing time. will comments. this questions to I further call over for

in earnings their quarter. for I'd customers like for and investors with Riley, to forward suppliers, to to all opportunity want call conferences, joining our during investors dedication of for this the support. employees, our thank the ongoing look on We declare on I early Craig-Hallum directly August. several Summit you B. to us QX updating scheduled and call look taking meet is early feel including the to reach Operator, later month thank CEO to upcoming July. concludes forward you investor We place this out up Please and our our us. call. with that to follow Cowen conference free and

for you. participation. you call. conclude This Thank your does today's Thank conference

disconnect. now may You